Valuation of strategic production decisions

The value chains in industry need to be competitively organised to enable them to meet market expectations. This involves identifying the critical strategic decisions for production and subjecting them to a valuation process to establish their economic effectiveness. It is obvious that strategic production decisions include many valuation problems. In the first place, a production system is a widely branching value chain with many interrelations. Changes in one area have effects in other areas. Secondly, in production, one never makes an isolated strategic decision. It will always be a bundle of interconnected measures. To tackle both problems at once, it might be useful to represent the production processes by a model, based on Petri nets. With their help one can achieve an overall schematic representation of linked production processes, in which the input data can be derived from the case in point. The model is capable of evaluating alternative production strategies. Real situations and potential decisions can be represented. Their effect on the production system will be calculated and an economic analysis provided. The data output from the model can be combined with external data from market sources so that a process value indicator (PVI) is derived. The PVI is then a performance indicator for both current and potential production systems. Its value can be used mathematically as an aggregated figure in valuation and decision-making.