Investment and Management Decisions in Aluminium Melting: A Total Cost of Ownership Model and Practical Applications

Andrea Bacchetti, Stefano Bonetti, Marco Perona and Nicola Saccani
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Andrea Bacchetti: RISE, Laboratory of Research and Innovation for Smart Enterprises, Department of Mechanical and Industrial Engineering, University of Brescia, 25121 Brescia BS, Italy
Stefano Bonetti: RISE, Laboratory of Research and Innovation for Smart Enterprises, Department of Mechanical and Industrial Engineering, University of Brescia, 25121 Brescia BS, Italy
Marco Perona: RISE, Laboratory of Research and Innovation for Smart Enterprises, Department of Mechanical and Industrial Engineering, University of Brescia, 25121 Brescia BS, Italy
Nicola Saccani: RISE, Laboratory of Research and Innovation for Smart Enterprises, Department of Mechanical and Industrial Engineering, University of Brescia, 25121 Brescia BS, Italy

Sustainability, 2018, vol. 10, issue 9, 1-36

Abstract: The well-established Total Cost of Ownership (TCO) concept has been applied to several durable goods industries, including machinery. However, none of the existing TCO models explicitly focus on such highly energy-intensive equipment as metal melting furnaces. In this paper, an application of the TCO concept to aluminium melting furnaces is explored. A TCO model is created and tested through seven case studies in the aluminium die casting industry. Results indicate that the capital expenditure (CAPEX) incurred by the sample companies accounts for only 3–5% of a furnace TCO. Moreover, the melting technology implemented in the furnace highly impacts its TCO, as both the furnace’s thermal efficiency and melting loss (i.e., the fraction of aluminium burnt during the melting process) significantly affect the costs incurred. Moreover, the sample furnaces’ cost effectiveness clearly relies on scale. This evaluation leads to identify technological and managerial levers to reduce a furnace TCO, e.g., by adopting energy-efficient furnaces and by installing centralized, large-sized furnaces to pursue scale economies.

Keywords: Total Cost of Ownership (TCO); empirical model; case studies; melting furnaces; aluminium die casting (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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