Abstract:The unit cost of a product is one of the most important dimensions for companies to generate a competitive advantage. There are several standardized procedures to calculate that cost. One of these procedures is the standard cost. However, this method determines the cost of a product based on certain conditions of demand, efficiency, economic environment, and other factors, which means that, whenever any of those conditions change, the unit cost of the product also changes.
Simulation modeling is a tool that contributes significantly to determining the unit cost of a product whenever any of the conditions listed above present variations through the production planning process.
The objective of this paper is to present a methodology to determine the probability distribution of the unit cost of a product through simulation from the beginning of the capacity requirement planning process (CRP) to its distribution to the final client. This probability distribution will help companies to support the decision-making process by knowing not only the unit cost expected value, but also the pessimistic value of the cost, with their respective associated probabilities.