Abstract
The well-established Total Cost of Ownership (TCO) concept has been applied to several durable goods industries, including machinery. However, none of the existing TCO models explicitly focus on such highly energy-intensive equipment as metal melting furnaces. In this paper, an application of the TCO concept to aluminium melting furnaces is explored. A TCO model is created and tested through seven case studies in the aluminium die casting industry. Results indicate that the capital expenditure (CAPEX) incurred by the sample companies accounts for only 3–5% of a furnace TCO. Moreover, the melting technology implemented in the furnace highly impacts its TCO, as both the furnace’s thermal efficiency and melting loss (i.e., the fraction of aluminium burnt during the melting process) significantly affect the costs incurred. Moreover, the sample furnaces’ cost effectiveness clearly relies on scale. This evaluation leads to identify technological and managerial levers to reduce a furnace TCO, e.g., by adopting energy-efficient furnaces and by installing centralized, large-sized furnaces to pursue scale economies.
Highlights
Aluminium die casting producers incur high costs in the utilization of melting furnaces, especially the cost of energy consumed [1,2]
Tower furnaces are the most numerous category in the sample, but their Total Cost of Ownership (TCO) is slightly variable, perhaps because it is computed over three medium-sized companies with multiple furnaces
The new TCO model developed in this paper, fed with the empirical data collected in the aluminium furnaces case studies, provides some noteworthy findings for selecting, acquiring and reducing operational costs of melting furnaces in the aluminium die casting industry
Summary
Aluminium die casting producers incur high costs in the utilization of melting furnaces, especially the cost of energy consumed [1,2]. The cost effect of such levers can be measured through the computation of the “Total Cost of Ownership” (TCO) of melting furnaces. The currently utilised die casting process was invented in the late 1830s and has been established since the early twentieth century as a high-rate manufacturing process of non-ferrous components with extremely smooth surfaces and excellent dimensional accuracy [14]. Owing to these characteristics, aluminium die casting accounts for a remarkable worldwide output of 11 million tons of components per year, which equals 59% of the global production of non-ferrous die castings [15]
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