Assembly line automation gets more significance to cope up with increasing needs of latest technology machines which are used in industry and society. This paper presents a computationally efficient 2D computer vision based approach to recognize the machine parts and detect damaged parts on the assembly line. The image acquisition system which is part of the assembly line setup acquires data from the moving machine parts in line. Captured machine part image data undergoes image preprocessing techniques like background subtraction, binarization, scaling, and noise and holes removal to transform the data suitable for further processing. Then a contour of the machine parts are extracted and normalized by equal part area method to describe the shape. It gives important clues for machine part shape recognition and defect identification. For experimental purpose a model shape for each machine part is developed, the shape recognition and defect detection are performed with only reference to the model shape. The defects in the machine part such as damage, cracks are identified by the similarity measure between model shape and the data extracted from machine part of the assembly line. The detection and identification of defects at the early stage will helps smooth production process, saves production cost and time.