Economic Life of Capital Equipments in a Cellular Manufacturing System

Abstract

This paper is aimed to investigate the economic life of the capital equipment in a cellular manufacturing system (CMS). The capital equipment is prone to degradation during the usage and this degradation can be measured by increase in the operation and maintenance (O&M) costs. Economic life refers to the optimal replacement age of the equipment in which the total discounted costs is at its minimum value. To our best knowledge, the traditional cell formation methods are built on the principle of economy of scale without considering the economic life and discounted costs of the capital equipment. On the other hand, due to a known drawback of the CMSs of imbalance cell utilization (Rheault, 1995), resulting from the unbalance workload distributed between machines within the cells, the machines within different cells have various degradation rates and consequently different economic lives. A mathematical programming-based approach is used to form the cells considering the life cycle costs of the machines and material handling equipment over a long horizon. The performance of the proposed model is verified by a comprehensive numerical example.