MTEI Seminar by Prof. Suzanne de Treville, University of Lausanne
Event details
| Date | 06.02.2015 |
| Hour | 11:00 › 12:00 |
| Speaker | Prof. Suzanne de Treville, University of Lausanne |
| Location | |
| Category | Conferences - Seminars |
"Gaining competitiveness from lead time: A quantitative-finance approach"
Abstract
When do short lead times warrant a cost premium? Decision makers have struggled to quantify the benefits of short lead times in spite of the general agreement that they enhance competitiveness. This lack of methodology has contributed to waves of offshoring that have extended supply chains. We take a quantitative-finance approach to valuing lead time, showing that the value of lead time is low when demand is sufficiently predictable to allow forecasting, and when residual values are high. When demand volatility is high and residual value is low, the value of time increases dramatically, often enough to compensate for the cost of cutting lead time. The calculator that we have developed has recently been released US-wide by the Department of Commerce as part of the Obama administration's push to encourage domestic manufacturing. We are also beginning a major project with the Groupement Suisse de l'Industrie Méchanique with the objective of using demand volatility to create enough value to permit maintaining production in Switzerland, made more urgent by the recent elimination of the Euro cap.
Abstract
When do short lead times warrant a cost premium? Decision makers have struggled to quantify the benefits of short lead times in spite of the general agreement that they enhance competitiveness. This lack of methodology has contributed to waves of offshoring that have extended supply chains. We take a quantitative-finance approach to valuing lead time, showing that the value of lead time is low when demand is sufficiently predictable to allow forecasting, and when residual values are high. When demand volatility is high and residual value is low, the value of time increases dramatically, often enough to compensate for the cost of cutting lead time. The calculator that we have developed has recently been released US-wide by the Department of Commerce as part of the Obama administration's push to encourage domestic manufacturing. We are also beginning a major project with the Groupement Suisse de l'Industrie Méchanique with the objective of using demand volatility to create enough value to permit maintaining production in Switzerland, made more urgent by the recent elimination of the Euro cap.
Practical information
- General public
- Free