Economic evaluation for the optimal introduction of flexible manufacturing technology under rivalry

Abstract

Unless procedures for the economic evaluation of flexible manufacturing technology are revamped, much of U.S. industry could repeat the experience of American automobile and steel companies from the recent past. The dynamic character of flexible manufacturing technology in terms of associated developments in microelectronics, a trend toward equipment modularity, and the increasing diversity of relevant markets make flexible manufacturing especially vulnerable to the weaknesses of conventional procedures for the justification of capital expenditures. Building on the work of V. Smith, M.I. Kamien and N.L. Schwartz, this paper presents optimization models from which economically reasonable plans can be derived for the implementation of flexible manufacturing technology. Although the assumptions of these models are not focused on the situation of a specific plant, model implications and the overall perspectives here on the economic evaluation of flexible system options should provide general guidance for manufacturing planners.