Traditional methods of economic analysis to justify equipment selection and use are based on several methods such as the Net Present Value, Break-Even Analysis, Pay-Back Period, Return on Investment, among others. However, with the introduction of automation, Flexible Manufacturing Systems (FMS), and Computer Integrated Manufacturing Systems (CIMS), such economic analyses have often resulted in decisions that management did not like to support but did not have much choice to avoid on account of pressure from manufacturing engineers, design engineers and others in the operations areas. The real problem of equipment selection and justification lies in the methodologies used. This paper presents a unique approach to equipment justification by applying Sumanth's TOTAL PRODUCTIVITY MODEL, whereby the anticipated impact of the proposed equipment on profitability is assessed from the point of total productivity and the five partial productivities. Then, only if the equipment increases the total productivity level beyond its break even point, the equipment is selected or justified. This method offers a non-traditional approach to justifying and selecting equipment in all types of environment. A numerical example is presented by using LOTUS 1-2-3TM on an IBM PC. Advantages and limitations to this approach are discussed to provide a balanced perspective on the important issue of equipment selection and justification.
ASJC Scopus subject areas
- Computer Science(all)