Strategic process flexibility under lifecycle demand

The better utilization of production resources has been a concern in the automotive industry over decades. Though costly itself, increasing process flexibility across the entire production network is seen as a particularly efficient approach for managing the mismatch between available production capacities and time-varying product demands. On the demand side model-based support for flexibility strategies has mainly been derived from improved absorption of instabilities brought about by demand uncertainty. In this paper we include a second source of demand dynamics, namely fluctuating demand along the product lifecycles, which has a non-negligible impact on both strategic planning and evaluation of flexibility in a production network. Built on a stochastic programming approach and numerical studies, our analysis suggests that the benefits of flexible configurations might be substantially misjudged if product lifecycles are not considered. Specifically, the benefit of a (semi-)flexible configuration hinges critically on the lifecycle phase of the different products manufactured in the network. However, our results also indicate that prominent flexibility strategies like chaining plants remain robust even when lifecycles are included in the analysis.