Dynamic investment appraisal: Economic analysis of mobile production concepts in the process industry

摘要

Due to technological developments new small-scale mobile production concepts have become available in the processing industry. These novel production concepts have mobility as an attribute and the profitability of the production concepts depends, amongst others, on how well this attribute can be exploited as an important part of the cash flows of these concepts may depend on optimal location choice in volatile markets. Current investment appraisal techniques do not take the effect of these dynamics into account and therefore typically disregard the value of mobility, which may lead to the underestimation of the novel production concepts' value and consequently prohibits their deployment. In this paper we combine an agent-based model simulation with a net present value calculation to account for these dynamics in the appraisal of these new production concepts. The agent-based model uses a q-learning algorithm to simulate an existing dynamic world scale market in which we introduce the new production concepts and let them compete with the existing industry. During the simulation, we measure the cash flows of the production concepts, which are used in the net present value calculation to appraise the concepts. We illustrate the approach with a case study in which we appraise a stationary and mobile production concept. We show that quality of investment decisions may be improved with a simulation that is able to capture the dynamics of mobile production concepts. Future work will focus on removing some of the current limitations and on introducing lead times in the simulation to enable the valuation of the new production concepts' shorter time to market.