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The Economics of Speed

Assessing the Financial Impact of the Just-in-Time Concept in the Chemical-Pharmaceutical Industry

Willem Vaessen

A central and unresolved issue in modern manufacturing remains the economics of speed. This thesis addresses this issue by critically examining the introduction of the just-in-time concept in the chemical-pharmaceutical industry. To this end, it develops a framework for assessing the impact of JIT and then applies it to an actual case in the industry. This framework consists of two complementary methods: ProfiSEE - a novel and successful workbench for visual interactive simulation modeling, and QED - a rough-cut financial model. The outstanding feature of QED is that it translates common measures of speed into measures of financial performance such as ROA. A comparative analysis of a classical capacity-oriented operation and its JIT counterpart provides important insights into the impact of managerial decisions and external factors on these measures of business performance. We learn why manufacturing strategies should focus on speed and time-based criteria.
Contents: A conceptual framework - Visual interactive simulation in the process industry - Rough-cut financial modeling - The role and logic of QED - Industrial case study - Financial analysis of CLASSIC vs JIT operation - Strategic implications, a managerial dilemma, industry trends.