Evaluation of advanced manufacturing technologies using Taguchi's loss functions

Abstract

PurposeThe purpose of this paper is to provide a tool for decision makers to consider both tangible and intangible factors while making decisions regarding investment in advanced manufacturing technologies (AMT).Design/methodology/approachTraditional financial approaches are often used for evaluation of advanced technologies. However, the difficulty arises when the result of financial techniques cannot provide a conclusive recommendation for a technology adoption. The current research is an attempt to address this issue by including factors that allow distinction between technology alternatives with similar financial results. This task is accomplished in a two step process. First, a process is developed for identifying all potential benefits associated with adoption of an AMT. These are the benefits that were not measurable for inclusion in the financial analysis. Second, a mechanism is developed for quantifying these benefits to be used for ranking of the technology alternatives. This task is done by soliciting decision maker's input on importance of the benefits, required benefit goals, and his/her perception of how well each technology meets the benefit goals. This information is then used in Taguchi's loss functions to assign ranks to technology alternatives.FindingsInvesting in new technologies is the only way for manufacturers to survive in today's competitive market. Thus, there is a need by these manufacturers to have access to a decision model that will help them with their investment decisions.Practical implicationsThe procedure proposed here helps companies to rank the technology alternatives and identify the best technology for adoption.Originality/valueThe identification of intangible benefits associated with adoption of a new technology and use of Taguchi's loss function to quantify these benefits.