Resource Overall Equipment Cost Loss indicator to assess equipment performance and product cost

Purpose This paper aims to overcome the inability of both comparing loss costs and accounting for production resource losses of Overall Equipment Effectiveness (OEE)-related approaches. Design/methodology/approach The authors conducted a literature review about the studies focusing on approaches combining OEE with monetary units and/or resource issues. The authors developed an approach based on Overall Equipment Cost Loss (OECL), introducing a component for the production resource consumption of a machine. A real case study about a smart multicenter three-spindle machine is used to test the applicability of the approach. Findings The paper proposes Resource Overall Equipment Cost Loss (ROECL), i.e. a new KPI expressed in monetary units that represents the total cost of losses (including production resource ones) caused by inefficiencies and deviations of the machine or equipment from its optimal operating status occurring over a specific time period. ROECL enables to quantify the variation of the product cost occurring when a machine or equipment changes its health status and to determine the actual product cost for a given production order. In the analysed case study, the most critical production orders showed an actual production cost about 60% higher than the minimal cost possible under the most efficient operating conditions. Originality/value The proposed approach may support both production and cost accounting managers during the identification of areas requiring attention and representing opportunities for improvement in terms of availability, performance, quality, and resource losses.