Economic evaluation in decision models
Description
Decision models presented in Supply Chain (SC) and Operations Management articles are often based on an economic criterion to find the best possible solution. Thus, the solution's relevance depends on the significance of the cost information used. This paper aims to provide a set of methodological precautions for economic evaluation in decision models. It reviews 12 selected illustrative decision models to highlight the extent to which the authors justify and make explicit their economic functions. The paper explains that when cost information is not appropriate for the decisions under consideration, the solution provided by the model may be irrelevant. It highlights three methodological issues related to the causality of costs, their traceability and the consideration of opportunity costs. We conclude with methodological propositions for improving the relevance of economic evaluation in decision models.