Evaluating the ‘Intangible’ Benefits of Flexible Manufacturing Systems by Use of Discounted Cash Flow Algorithms within a Comprehensive Computer Program

Abstract

The range of benefits of flexible manufacturing systems (FMS), previously quoted as ‘intangibles’, is critically discussed and it is shown that contrary to established opinion the factors comprising the ‘intangibles’ can, in fact, be quantified. The paper then goes on to consider the principles involved when financially evaluating a proposed system and it is demonstrated that by incorporating accepted accounting procedures within a comprehensive computer program, professional engineers can readily carry out a detailed evaluation which will prove acceptable to company accountants. Subsequently, the paper then shows that although considerable data are needed to quantify precisely the benefits of FMS, most of this information already exists ‘in-house’, while the rest can be generated from technical design simulations, performed after the financial evaluation programs have identified areas for optimum FMS investment within a company. The net result of these procedures is that FMS evaluations can be more accurately performed than studies relating to other major capital projects normally encountered in engineering.