Title: Development and validation of an equipment cost efficiency framework for integrating financial and operational performance assessment in manufacturing: a case study

Authors: Chen Fung Liew; Joshua Prakash; Kok Seng Ong

Addresses: Faculty of Engineering and Green Technology, Universiti Tunku Abdul Rahman, Jalan Universiti Bandar Barat, 31900 Kampar, Perak, Malaysia ' Faculty of Engineering and Green Technology, Universiti Tunku Abdul Rahman, Jalan Universiti Bandar Barat, 31900 Kampar, Perak, Malaysia ' Faculty of Engineering and Green Technology, Universiti Tunku Abdul Rahman, Jalan Universiti Bandar Barat, 31900 Kampar, Perak, Malaysia

Abstract: Overall equipment effectiveness (OEE) measures the effectiveness of equipment in terms of availability, performance and quality but not financially. The OEE increment has little meaning to the organisations' management without quantifying financial achievement. Although the high investment can sustain OEE, organisations gain no financial benefit by having such equipment that operates at high OEE. This study introduced a new metric, namely, equipment cost efficiency (ECE) metric, which relates the OEE to costs of equipment, maintenance and improvement by comparing the difference of cost per good quantity between the current and 85% world-class OEE. To increase the practicality of the ECE metric, it is integrated into a framework, namely, ECE framework, which provides systematic problem-solving steps to increase the ECE metric. Application of the ECE framework in a tyre flap manufacturer in Malaysia demonstrated that the OEE and ECE metric were improved by 16.4% and 66.8%, respectively.

Keywords: overall equipment effectiveness; OEE; equipment cost efficiency; ECE; equipment acquisition cost; operating cost; maintenance cost; improvement cost.

DOI: 10.1504/IJPQM.2023.129616

International Journal of Productivity and Quality Management, 2023 Vol.38 No.3, pp.388 - 412

Received: 24 Mar 2021
Accepted: 11 Jun 2021
Published online: 17 Mar 2023 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article