Including equipment flexibility in break-even analysis: two examples

The experiences of a medium-sized facility that produces a variety of customized low-volume parts for a manufacturer of hydraulic fittings are used to illustrate the simple decision-making tool called cost-volume-flexibility break-even analysis (CVFBA). CVFBA explicitly considers manufacturing flexibility and provides a mechanism by which the trade-offs between cost advantages and flexibility advantages can easily be considered. Through these real applications, it is shown that CVFBA is a more appropriate tool than the more popular cost-volume break-even analysis (CVBA) for manufacturers with a strategic commitment to the enhancement of manufacturing flexibility accompanied by the desire to reduce manufacturing costs.