Simulation-Based Feasibility Assessment Under Demand Uncertainty: Linking Forecasting Outputs to Discounted-Cash-Flow Robustness (#1410)

Authors

Valiente, Enrique

Rojas, Mariana

Redondo, Eduardo

Abstract

This paper presents a scenario-based decision-support workflow to assess the feasibility of vertically integrating high-density polyethylene (HDPE) cap production (PCO-type beverage closures) into an existing PET bottle manufacturing operation in Paraguay under demand uncertainty. The approach links (i) monthly demand forecasting, (ii) technical and operational feasibility assessment through a shift-level stochastic production–inventory simulation that represents cycle-time variability and cycle-based preventive maintenance, and (iii) discounted-cash-flow appraisal derived from replication-level operational outputs. Demand projections instantiate discrete market-coverage scenarios, which are evaluated via repeated replications to obtain distributions of throughput, utilization, inventory/service indicators, and cost drivers. Financial performance is computed from scenario-specific cash flows using Net Present Value (NPV), Internal Rate of Return (IRR), and discounted payback, and complemented with a bisection-based critical-value analysis that estimates selling-price floors and resin-cost ceilings consistent with . The case study shows that higher coverage increases average financial metrics over the evaluated range, while distributional results highlight increased variability and downside exposure as operation approaches effective capacity, underscoring the value of risk-aware feasibility assessment.