Economic feasibility analysis of flexible material handling systems: A case study in the apparel industry

Flexible material handling systems (MHS) have been widely used to enhance productivity involved with product proliferation, and thus far, only fixed-track MHSs such as Eton systems in the apparel industry are commonly used. This paper explores the economic feasibility of a flexible MHS using free-ranging automated guided vehicles (AGV) with a local positioning system (LPS) for the apparel industry. A component-based and modified activity-based costing methodology is proposed to estimate the additional cost of adopting flexible MHSs, and then the internal rate of return (IIR) and payback periods are applied to evaluate the project economic performance. Results show that adopting flexible MHSs has a promising IIR which is larger than 30%. (C) 2011 Elsevier B.V. All rights reserved.