Measuring the financial impact of equipment performance improvement: ISB and IEB metrics
Purpose: Equipment performance helps the manufacturing sector achieve operational and financial improvements despite process variations. However, the literature lacks a clear index or metric to quantify the monetary advantages of enhanced equipment performance. Thus, the paper presents two innovati...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald
2022
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| Subjects: | |
| Online Access: | https://repository.londonmet.ac.uk/7691/1/PDF_Proof%283%29.PDF |
| _version_ | 1825625717031829504 |
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| author | Luis Alejandro, Gólcher-Barguil Nadeem, Simon Peter Garza-Reyes, Jose Arturo Samadhiya, Ashutosh Kumar, Anil |
| author_facet | Luis Alejandro, Gólcher-Barguil Nadeem, Simon Peter Garza-Reyes, Jose Arturo Samadhiya, Ashutosh Kumar, Anil |
| author_sort | Luis Alejandro, Gólcher-Barguil |
| collection | LMU |
| description | Purpose:
Equipment performance helps the manufacturing sector achieve operational and financial improvements despite process variations. However, the literature lacks a clear index or metric to quantify the monetary advantages of enhanced equipment performance. Thus, the paper presents two innovative monetary performance measures to estimate the financial advantages of enhancing equipment performance by isolating the effect of manufacturing fluctuations such as product mix price, direct and indirect characteristics, and cost changes.
Design/methodology/approach:
The research provides two measures, ISB (Improvement Saving Benefits) and IEB (Improvement Earning Benefits), to assess equipment performance improvements. The effectiveness of the metrics is validated through a three stages approach, namely: (1) experts' binary opinion, (2) sample, and (3) actual cases. The relevant data may be collected through accounting systems, purpose-built software, or electronic spreadsheets.
Findings:
The findings suggest that both measures provide an effective cost-benefit analysis of equipment performance enhancement. The measure ISB indicates savings from performance increases when equipment capacity is greater than product demand. IEB is utilised when equipment capacity is less than product demand. Both measurements may replace the unitary cost variation, which is subject to manufacturing changes.
Practical implications:
Manufacturing businesses may utilise the ISB and IEB metrics to conduct a systematic analysis of equipment performance and to appreciate the financial savings perspective in order to emphasise profitability in the short and long term.
Originality:
The study introduces two novel financial equipment performance improvement indicators that distinguish the effects of manufacturing variations. Manufacturing variations cause cost advantages from operational improvements to be misrepresented. There is currently no approach for manufacturing organisations to calculate the financial advantages of enhancing equipment performance while isolating production irregularities. |
| first_indexed | 2024-07-09T04:05:04Z |
| format | Article |
| id | oai:repository.londonmet.ac.uk:7691 |
| institution | London Metropolitan University |
| language | English |
| last_indexed | 2024-07-09T04:05:04Z |
| publishDate | 2022 |
| publisher | Emerald |
| record_format | eprints |
| spelling | oai:repository.londonmet.ac.uk:76912024-05-28T01:58:15Z https://repository.londonmet.ac.uk/7691/ Measuring the financial impact of equipment performance improvement: ISB and IEB metrics Luis Alejandro, Gólcher-Barguil Nadeem, Simon Peter Garza-Reyes, Jose Arturo Samadhiya, Ashutosh Kumar, Anil 330 Economics 650 Management & auxiliary services Purpose: Equipment performance helps the manufacturing sector achieve operational and financial improvements despite process variations. However, the literature lacks a clear index or metric to quantify the monetary advantages of enhanced equipment performance. Thus, the paper presents two innovative monetary performance measures to estimate the financial advantages of enhancing equipment performance by isolating the effect of manufacturing fluctuations such as product mix price, direct and indirect characteristics, and cost changes. Design/methodology/approach: The research provides two measures, ISB (Improvement Saving Benefits) and IEB (Improvement Earning Benefits), to assess equipment performance improvements. The effectiveness of the metrics is validated through a three stages approach, namely: (1) experts' binary opinion, (2) sample, and (3) actual cases. The relevant data may be collected through accounting systems, purpose-built software, or electronic spreadsheets. Findings: The findings suggest that both measures provide an effective cost-benefit analysis of equipment performance enhancement. The measure ISB indicates savings from performance increases when equipment capacity is greater than product demand. IEB is utilised when equipment capacity is less than product demand. Both measurements may replace the unitary cost variation, which is subject to manufacturing changes. Practical implications: Manufacturing businesses may utilise the ISB and IEB metrics to conduct a systematic analysis of equipment performance and to appreciate the financial savings perspective in order to emphasise profitability in the short and long term. Originality: The study introduces two novel financial equipment performance improvement indicators that distinguish the effects of manufacturing variations. Manufacturing variations cause cost advantages from operational improvements to be misrepresented. There is currently no approach for manufacturing organisations to calculate the financial advantages of enhancing equipment performance while isolating production irregularities. Emerald 2022-05-29 Article PeerReviewed text en cc_by_nc_nd_4 https://repository.londonmet.ac.uk/7691/1/PDF_Proof%283%29.PDF Luis Alejandro, Gólcher-Barguil, Nadeem, Simon Peter, Garza-Reyes, Jose Arturo, Samadhiya, Ashutosh and Kumar, Anil (2022) Measuring the financial impact of equipment performance improvement: ISB and IEB metrics. Benchmarking: an International Journal, 30 (7). pp. 2408-2431. ISSN 1463-5771 https://doi.org/10.1108/BIJ-09-2021-0559 10.1108/BIJ-09-2021-0559 10.1108/BIJ-09-2021-0559 |
| spellingShingle | 330 Economics 650 Management & auxiliary services Luis Alejandro, Gólcher-Barguil Nadeem, Simon Peter Garza-Reyes, Jose Arturo Samadhiya, Ashutosh Kumar, Anil Measuring the financial impact of equipment performance improvement: ISB and IEB metrics |
| title | Measuring the financial impact of equipment performance improvement: ISB and IEB metrics |
| title_full | Measuring the financial impact of equipment performance improvement: ISB and IEB metrics |
| title_fullStr | Measuring the financial impact of equipment performance improvement: ISB and IEB metrics |
| title_full_unstemmed | Measuring the financial impact of equipment performance improvement: ISB and IEB metrics |
| title_short | Measuring the financial impact of equipment performance improvement: ISB and IEB metrics |
| title_sort | measuring the financial impact of equipment performance improvement isb and ieb metrics |
| topic | 330 Economics 650 Management & auxiliary services |
| url | https://repository.londonmet.ac.uk/7691/1/PDF_Proof%283%29.PDF |
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