Investment risk assessment in plastic injection molding machine replacement

Abstract

The purpose of this research is to assess investment risk in plastic injection machine replacement in a company that its production cost is increasing continuously which causes company to lose competitive advantage and profit margin. Under the given research requirements, the machine replacement analysis is conducted by comparing existing production system with new production system in various aspects consisting of economic life cycle analysis, cost of quality analysis, incremental B/C ratio analysis, feasibility study and risk assessment of new production system. The results of these analysis show that it is appropriate to replace the existing system with the new one. The payback period of the new production system is about 10 months with 747 million baht of net present value. In addition, risks that might affect the new production system are identified and evaluated. By using Pareto technique, 3 critical risks out of 14 preliminary identified risks have been determined. They are raw material price fluctuation, product price fluctuation and market recession. Then the risk team has generated 4 preventive action plans which are skill training, communication between the company and its customers as well as its raw material suppliers and cross-department meeting. Although the preventive action plans have been generated, the risk management has to be monitored and controlled continuously.