Evaluation of the Dynamic Impacts of Lead Time Reduction on Finance Based on Open Queueing

Dominik Gläßer, Boualem Rabta, Gerald Reiner, Arda Alp

Publication: Chapter in book/Conference proceedingChapter in edited volume

Abstract

The basic principles of rapid modelling based on queueing theory, that provide the theoretical foundations for lead time reduction, are well known in research. We are globally observing an underinvestment in lead time reduction at top management levels. In particular, the maximization of resource utilization is still a wide-spread aim for managers in many companies around the world. This is due to inappropriate performance measurement systems as well as compensation systems for managers which neglect the monetary effects of lead time reduction. Therefore, we developed a model based on open queueing networks to evaluate the financial impacts of lead time reduction. Illustrated by an empirical case from the polymer industry, we will demonstrate the impact of performance measures on financial measures. That is why we will take into consideration efficiency performance measures (work in process, lead time, etc.) as well as effectiveness performance measure (e.g., customer satisfaction, retention rate). Based on our evaluation model, we will be able to investigate different scenarios to reduce lead time for the given case and evaluate these, based on the developed overall performance measurement model, i.e., optimization of the batch size, resource pooling, de/increase in the number of resources. In particular, we achieved a 75% lead time reduction and a 11% overall cost reduction (resource costs, setup costs, WIP costs, penalty costs, inventory costs) without changing the whole production layout or making high investments. KeywordsQueueing Networks-Rapid Modelling-Manufacturing Systems-Lead Time Reduction-Financial Evaluation
Original languageEnglish
Title of host publicationRapid Modelling and Quick Response – Intersection of Theory and Practice
Editors Gerald Reiner
Place of PublicationLondon
PublisherSpringer
Pages145 - 161
ISBN (Print)978-1-84996-524-8
DOIs
Publication statusPublished - 2010

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 102009 Computer simulation
  • 502052 Business administration
  • 502012 Industrial management
  • 211
  • 502017 Logistics
  • 502032 Quality management

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