Companies have only limited resources to carry out value-adding activities. In order to achieve high qualityrequirements, the goal-oriented and efficient handling of failure incidents is a competence that must beemphasized. However, the activities associated with this represent an additional effort that consumes part ofthe resources available. For this reason, it is important to optimally coordinate the value-adding processes ofservice creation on the one hand and the processes of failure management on the other. Accordingly, theobjective of this paper is to program a simulation model for an optimized failure management in manualassembly, which transforms the failure management from traditionally experience-based to model-based. Toachieve this objective, the consideration of the interactions between the failure management process andoperational activities during the production process is essential. However, in current literature, interactionsbetween production and failure management still lack detailed descriptions. Thus, both disciplines are oftenconsidered and optimized in isolation. Therefore, an advanced System Dynamics Model representing manualassembly processes with 23 elementsinvolved is constructed and applied to indicate the interactions betweenproduction and failure management. This enables the optimized configuration of the failure managementactivities depending on the circumstances to be taken into account. According to the generated model, ageneric process module is programmed and test runs are performed to assess the model behaviour’splausibility. The programmed System Dynamics model is implemented and validated in a use case of amanual assembly line consisting of two assembly stations. For this purpose, the generated process model islinked to the production chain of the use case and parameterized accordingly. This procedure demonstratesthat the model can be used to derive general recommendations for action in order to realize an optimizeddesign of failure management activities.