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To present theories for total cost of ownership (TCO) methodology in assembly system trade‐off analysis and to show benefits of the methodology as a decision support in system selection.

The developed TCO methodology is a combination of factory simulation, system performance and loss factor evaluation using overall equipment efficiency, system life cycle costing, and assembled unit cost analysis including cost of bad quality and rework.

The purchase price of equipment is just one cost element in the comparison. TCO shows how important it is to analyse all the cost, direct and indirect, incurred throughout the life cycle of an equipment, including acquisition and installation, operations and maintenance, and end‐of‐life management. TCO methodology pinpoints costs that could be easily underestimated, such as quality and rework as well as all the costs of running the system.

The methodology is partially based on semiconductor industry standards and other asset comparison methodology, which are now integrated and applied also for electromechanical final assembly. Development continues.

The methodology is useful in system integrator and end‐user collaboration, where both can use similar formulae in system evaluation and trade‐off analysis. Integration to component‐based simulation adds system visualisation and simulation analysis and combines system configuration with cost analysis into a tool for the sales engineer.

Integration of different analysis methods improves the quality of decisions. The TCO methodology is a systematic way to analyse system cost and performance issues. With proper use of the TCO methodology it is possible to justify investments to automation and modular re‐configurable hardware.