Evaluation of the conversion from central storage to decentralized storages in cellular manufacturing environments using activity-based costing

Most of the production systems, which are arranged according to cellular manufacturing, have still been using central storage sites as a continuation of their past habits and they have been supplying materials and parts to the manufacturing cells from these sites. This both violates the independence of the cells from the entire production system in terms of facilities and prevents the reduction of both materials and parts transportation. The structure with mini-storage facilities, which are located very close to the cells and serve in connection with the cells in a decentralized manner, has many benefits in comparison with the structure of the central storage. However, estimating the economic value of the decentralized approach is not easy because of the difficulties of measuring non-value adding activities. In order to provide decision support for conversion to the decentralized mini-storages, a methodology based on an activity-based costing (ABC) model was developed. The methodology was also evaluated with an example.