Equipment replacement decisions and lean manufacturing

Traditional manufacturing systems are built on the principle of economies of scale. Here, the large fixed costs of production are depreciation-intensive because of huge capital investments made in high-volume operations. These fixed costs are spread over large production batch sizes in an effort to minimize the total unit costs of owning and operating the manufacturing system. As an alternative to batch-and-queue, high-volume, and inflexible operations, the principles of the Toyota Production System (TPS) and lean manufacturing have been widely adopted in recent years in the US [1-4]. In this paper, we illustrate an equipment replacement decision problem within the context of lean manufacturing implementation. In particular, we demonstrate how the value stream mapping (VSM) suite of tools can be used to map the current state of a production line and design a desired future state. Further, we provide a roadmap for how VSM can provide necessary information for analysis of equipment replacement decision problems encountered in lean manufacturing implementation. (C) 2002 Elsevier Science Ltd. All rights reserved.