An Increased Number of Companies Are Investing in Advanced Manufacturing

question 29

Essay

An increased number of companies are investing in advanced manufacturing systems.
Required:
A. Many proposed advanced manufacturing systems have a negative net present value when discounted-cash-flow analysis is used. Explain several causes of this situation.
B. Two major benefits of advanced systems are greater flexibility in the manufacturing process and improvements in product quality. Explain how these benefits can create problems when performing discounted-cash-flow analysis.

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Definitions:

EOQ

Economic Order Quantity; a formula used in inventory management to determine the ideal order size that minimizes total inventory holding costs and ordering costs.

Inventory Value

The total cost or market value of all the goods and materials held by a company as part of its inventory at a specific point in time.

Service Level

A measure of the quality of a service provided, often defined by the percentage of customer demand met without delay.

Standard Deviation

A numerical indicator that calculates the degree of spread or deviation of a data set values from their average.