MODEL FOR AN ALERT UNDER GETTING OEE INTO OLD SHOES OF MC PRICING MECHANISM

The model for updating marginal cost pricing by overall equipment effectiveness (OEE) indexes as well as P*A*Q under existing market tough competition. Motivation/Background: When production capacity is constant and the AC curve is higher than the MC curve, AC pricing can be employed. Because of market competition, businesses producing in small quantities and low diversity use MC pricing. To reduce the risk to profit, a novel cost pricing mechanism can be adopted by using the unit DC of MC to correspond to the OEE under Areeda-Turner Rule. Method: The correspondence of the OEE with the unit direct cost (DC) is deduced and verified in this paper by calculating the quotient found by dividing the OEE indexes by unit DC as conditional as Bill of Material (BOM) cost. Results: Research findings revealed a positive alert for timely updating pricing between average cost (AC) pricing and marginal cost (MC) pricing. Conclusions: This approach reflects the dynamic game in a timely manner. The OEE comprises the performance, availability, and quality indexes. These three indexes reconcile the unit DC pricing, and using MC in optimization of marginal revenue (MR). In practice, shop floor management measures key indexes of idleness and loss; the objective is to eliminate laggard and static pricing problem. This realizes dynamic examination of cost difference of the BOM cost pool. One case study is employed to explain the MC pricing strategy in industry.