Development and validation of an equipment cost efficiency framework (ECEF) for improving operational and financial performance of production resources

Liew, Chen Fung (2024) Development and validation of an equipment cost efficiency framework (ECEF) for improving operational and financial performance of production resources. PhD thesis, UTAR.

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Abstract

This thesis investigates the limitations of relying solely on the overall equipment effectiveness (OEE) metric to evaluate equipment performance in manufacturing environments, emphasising the need for financial quantification. Current OEE assessments, while effective operationally, lack a comprehensive financial perspective, leaving high OEE devoid of meaningful significance to management without corresponding financial benefits. A systematic review of financial metrics reveals that equipment acquisition cost and maintenance cost are more relevant to OEE than profit, revenue, and operating cost. Notably, improvement cost, crucial for OEE enhancement, is often overlooked. To address these gaps, the study proposes evaluating OEE’s financial impact in terms of equipment acquisition cost, maintenance cost, and improvement cost. Additionally, it introduces the equipment cost efficiency (ECE) metric within a comprehensive framework, providing a systematic problem-solving approach. Real-world case studies in diverse manufacturing environments, including a medical device manufacturer, a tyre flap manufacturer, and a semiconductor manufacturer, showcase the effectiveness of the ECE framework. Implementation results in a 15.3% increase in OEE and 77.7% improvement in the ECE metric for the medical device manufacturer, a 20.2% increase in OEE and a 74.3% improvement in the ECE metric for the tyre flap manufacturer, and a 21.6% increase in OEE and a 56.4% improvement in the ECE metric for the semiconductor manufacturer. The research broadens OEE to encompass both operational and financial performance, challenging traditional metrics like profit, revenue, and operating cost as relevant OEE indicators. Instead, the study advocates for ECE as a metric that quantifies equipment acquisition and maintenance cost wastage. This approach bridges the operational-financial gap, enhancing decision-making, cost optimisation, and resource allocation in manufacturing operations. The ECE framework emerges as a valuable tool for organisations seeking to improve equipment efficiency and financial outcomes.

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