A decentralized approach to estimate activity-based costs and near-optimal resource allocation in flexible manufacturing systems

Flexible manufacturing systems (FMSs) can apply the efficiencies of large-scale production to small batch production. The coordination of FMS activities is a complex task; this paper presents a decentralized pricing mechanism that can be used to estimate the activity-based costs and manage the activities of the FMS efficiently. The pricing mechanism described in this paper does not require systemwide information to compute prices; instead, the pricing mechanism samples and uses the demand information at each CNC machine to compute rental prices at that machine. We derive the theoretical formula for rental prices supporting the optimal performance and propose simulation studies to estimate the rental prices for real-time price changes in a decentralized manner. Results from a preliminary simulation study indicate that stable rental prices can be estimated and significant improvements can be realized by using the pricing mechanism.