Integrating Carbon Credits with Life Cycle Costing for Economic Sustainability in SMEs

Adoption of smart and environmentally-friendly manufacturing interventions often introduce financial uncertainties to small- to medium-sized enterprises (SMEs). To assess their economic sustainability, a life cycle costing approach is used in this paper to calculate the net present value (NPV) of a CNC milling process using three scenarios. A business-as-usual scenario and the use of tool condition monitoring (TCM) have been defined, and the NPV has been calculated and compared using Monte-Carlo simulations (N=5000) in MATLAB R2022a. Furthermore, a modern approach of life cycle costing is proposed, which allows the calculation of the NPV based upon the carbon credits accumulated by the factory through resource conservation and eco-friendly interventions. The results indicate that the use of smart manufacturing technologies help in the reduction of machine downtime and offer a net present value 49% higher than the business-as-usual scenario. Future work can be conducted by considering the smart manufacturing technologies from a systems perspective and analyzing their holistic economic and environmental performance.