Activity‐based approach to justification of advanced factory management systems

Looks at the literature to date which has indicated some successful cases of using traditional economic analysis techniques in justifying factory automation. Points out, however, that strategic implications and integration effects of factory control systems are beyond the scope of currently available justification schemes. Presents a new approach to justification of advanced factory management systems, namely activity‐based costing (ABC). Introduces frameworks of typical advanced factory management systems and briefly discusses basic concepts, definitions and current applications of ABC. Enumerates the need for this new justification approach, the hierarchy of factory operating expenses and steps to implement ABC in acquiring advanced factory management systems. Concludes with a case study example to illustrate the application of this new approach.