An integrated model for part-operation allocation and investments in CNC technology

This study addresses the issue of investment appraisal of new technology, specifically computer numerical control (CNC) machine tools in conjunction with optimal allocation of parts and operations on CNC machines as the investments take place. Part-operation allocation is the allocation of parts and operations to either the conventional machines or to the new technology as they are acquired. It is shown that part allocation is an important consideration in the assessment of profitability from investments in CNC technology. A mixed integer programming model is presented to (1) determine the optimal allocation of parts and operations to conventional machines and to new CNC machine tools; and (2) determine the optimal investment sequence and timing of investments in CNC machine tools. The optimality criterion is based on a maximization of net present value (NPV) over a specified planning horizon. The application of the model is illustrated using a numerical example, and the implications for industrial practice are also indicated.