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Development and validation of an equipment cost efficiency framework for integrating financial and operational performance assessment in manufacturing: a case study

Author

Listed:
  • Chen Fung Liew
  • Joshua Prakash
  • Kok Seng Ong

Abstract

Overall equipment effectiveness (OEE) measures the effectiveness of equipment in terms of availability, performance and quality but not financially. The OEE increment has little meaning to the organisations' management without quantifying financial achievement. Although the high investment can sustain OEE, organisations gain no financial benefit by having such equipment that operates at high OEE. This study introduced a new metric, namely, equipment cost efficiency (ECE) metric, which relates the OEE to costs of equipment, maintenance and improvement by comparing the difference of cost per good quantity between the current and 85% world-class OEE. To increase the practicality of the ECE metric, it is integrated into a framework, namely, ECE framework, which provides systematic problem-solving steps to increase the ECE metric. Application of the ECE framework in a tyre flap manufacturer in Malaysia demonstrated that the OEE and ECE metric were improved by 16.4% and 66.8%, respectively.

Suggested Citation

  • Chen Fung Liew & Joshua Prakash & Kok Seng Ong, 2023. "Development and validation of an equipment cost efficiency framework for integrating financial and operational performance assessment in manufacturing: a case study," International Journal of Productivity and Quality Management, Inderscience Enterprises Ltd, vol. 38(3), pages 388-412.
    • Handle: RePEc:ids:ijpqma:v:38:y:2023:i:3:p:388-412
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