New Production Modelling

Le temps c'est de I'argent.

New production modelling is a source of a lot of work for A/L managers:

  • new contracts production modelling;
  • commission and cost modelling;
  • perequation modelling;
  • future strategies modelling.


16.1.1 The general case

Usually A/L managers will use these kinds of hypotheses when they try to model new productions:

  • Constant outstanding: for example, the stock of the existing contracts will stay the same during the next 3 years.
  • Budgetary outstanding: for example, the stock of existing contracts will increase by 5% during the next 3 years.
  • Constant new production: for example, the new production of contracts will be of 1 billion each year during the next 3 years.

Unfortunately, those hypotheses numbers are not compatible with quantitative modelling. The demand deposit model gave us an example of new production modelling. There is a link in many countries between the new customer production and:

  • the operating cost disbursed to acquire new customers;
  • the promotional campaigns;
  • the perequation.

Companies are often afraid of providing a quantitative model of the new production: this modelling shows sometimes to the business lines (or to the Commercial Department) how much the company has lost in badly driven (financially speaking) marketing campaigns.

Nevertheless, quantitative modelling of new customer/contract production follows this simple rule:

The Economic value produced at time t does not depend ...

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