Economic justification of modern computer-based factory automation equipment: A status report

Abstract

This paper provides a status report on the economic justification of modern computer-based factory automation equipment. Such equipment, although offering improved productivity and flexibility, is nevertheless oftentimes difficult to justify using traditional discounted cash flow evaluation methodologies. In this paper, we first establish and explain four different categories into which most of the literature on this subject generally falls. We then present the results of interviews with executives in manufacturing companies that have experienced varying degrees of success in justifying automation. During these interviews, we sought to determine how the automation was justified as well as the difficulties encountered. Finally, we consolidate the information obtained from our examination of the literature and our interviews, and we synthesize a set of options available to todays manager attempting to justify the introduction of automation systems. We present these options in terms of immediate, near-term and long-term managerial alternatives.