Economic evaluation in decision models: challenges and a methodological guide
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 understand their economic functions. The paper emphasizes that when cost information is not appropriate for the decisions under consideration, the solution provided by the model may be irrelevant. According to the decision level of the model, its perimeter and degree of certainty, the paper highlights three methodological challenges related to the causality of costs, their traceability, and the consideration of opportunity costs. We conclude with methodological guide for improving the relevance of economic evaluation in decision models.