Focused factories: a Bayesian framework for estimating non-product related investment

Abstract

Focused factories are one of the new manufacturing trends for automotive suppliers. A key requirement for these suppliers is the ability to accurately estimate both product and non-product related investment in these facilities to quote profitable business. We propose a systematic Bayesian framework to estimate non-product related investment in focused factories. Our approach incorporates uncertainty in the activity-based costing method and applies Monte Carlo simulation process to generate distributions of investment for the cost centres, and for the different project phases in setting up a facility. A Bayesian-updating procedure is introduced to improve parameter estimations as new information becomes available with experience in setting up these facilities. Our approach is deployed at a leading global automotive tier-one supplier, Visteon Corporation. The efficacy of the Visteon-focused factory cost model is validated using subject matter experts as well as by comparing the model results with estimates from the typical current process.

Keywords:

• focused factory
• activity-based costing
• capital investment
• Monte Carlo simulation
• Bayesian updating
• automotive