Transcript Chapter 5: Process & Capacity Design
© 1997 Prentice-Hall, Inc.
Principles of Operations Management
Process & Capacity Design Chapter 5
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Learning Objectives
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Describe the types of process strategies
Compare technological alternatives
State how to select a process strategy
Define capacity
Explain how to manage existing capacity
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Thinking Challenge
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Consider McDonald’s restaurants. Fact #1 : Franchisees of McDonald’s have to go to ‘Hamburger U.’ They protest, ‘But, I’ve been in the restaurant business 20 years – I know the restaurant business!’ ‘Yes, but you don’t know
OUR
business.’
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McDonald’s over 95 billion served
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Thinking Challenge
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Fact #2 : A typical McDonald’s restaurant is run by unskilled teenagers, whose mothers can’t even get them to make their beds in the morning.
What do these facts & your own experiences suggest about McDonald’s operations?
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Alone Group Class McDonald’s over 95 billion served
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Process Decisions
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Involve determining how to produce a product or provide a service
Objective
Meet or exceed customer requirements
Meet cost & managerial goals
Has long-run effects
Product & volume flexibility
Costs & quality
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Types of Process Strategies
The strategies are often classified as: Process Focused Repetitive Focused Product Focused Continuum
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Process-Focused Strategy
Facilities are organized by process
Similar processes are together
Example: All drill presses are together
Low volume, high variety products
‘Jumbled’ flow Product A
Other names
Intermittent process
Job shop
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Oper.
1 Product B 2 3
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Process-Focused Strategy Pros & Cons
Advantages
Greater product flexibility
More general purpose equipment
Lower initial capital investment
Disadvantages
More highly trained personnel
More difficult production planning & control
Low equipment utilization (5% to 25%)
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Product-Focused Strategy
Facilities are organized by product
High volume, low variety products
Other names
Line flow production
Continuous production Oper.
Products A & B 1 2 3
Where found
Discrete unit manufacturing
Continuous process manufacturing
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Product-Focused Strategy Pros & Cons
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Advantages
Lower variable cost per unit
Lower but more specialized labor skills
Easier production planning & control
Higher equipment utilization (70% to 90%)
Disadvantages
Lower product flexibility
More specialized equipment
Usually higher capital investment
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Repetitive-Focused Strategy
Facilities often organized by assembly lines
Characterized by
modules
Parts & assemblies made previously
Modules combined for many output options
Other names
Assembly line
Production line
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Basis of Comparison
Thinking Challenge: Compare & Contrast
Process Strategy
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Alone Group Class
Technology Alternatives
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General purpose machines
Numerical control machines
Process control
Robots
Automated guided vehicles (AGV)
Flexible manufacturing systems (FMS)
Computer-integrated mfg. (CIM)
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General Purpose Machines (GPM)
Machines capable of performing many different operations
Manually operated
Found in process focused facilities
Low volume production Router
© 1995 Corel Corp.
Manual Lathe
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Numerical Control (NC)
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Used in computer aided mfg. (CAM)
Using computers to program, direct, & control machines
Computer numerical control (CNC) machine
Programmable by operator at machine
Has own memory
Numerical control (NC) machine
Repeat operations by reading punch paper or magnetic tape
Direct numerical control (DNC) machine
Has own memory
Connected to computer running many machines
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Process Control
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Use of information technology to control physical process
Example: Measure thickness of wallboard
Found in product & repetitive-focused facilities
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Actual avg.
Planned avg.
Process limits
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Robots
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Machines that hold, move, or grasp items
Perform monotonous or dangerous tasks
Used when speed, accuracy, or strength are needed
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Automated Guided Vehicles (AGV)
Material handling machines
Used to move parts & equipment in manufacturing
May be used to deliver mail & meals in service facilities
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Flexible Manufacturing Systems (FMS)
Using automated machines (DNC) & materials handling equipment together
Often connected to centralized computer
Also called automated work cell Auto Tool Chg.
Machine 1 Robot or AGV Computer Auto Tool Chg.
Machine 2
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Computer-Integrated Manufacture (CIM)
Mfg. system that combines CAM with engineering (CAD), & production & inventory control
Computer-aided design (CAD) creates code to run DNC machines CAD DNC CAM
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Top Mgmt AGV PIC Robots
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Production Process & Technology Alternatives
# Different Products or Parts High General Purpose, NC, CNC CIM Flexible Mfg. System Dedicated Automation Low Low High Volume of Products or Parts
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Factors Affecting Process Alternatives
Production flexibility
Product volume
Product variety
Technology
Cost
Human resources
Quality
Reliability
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These factors reduce the number of alternatives!
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Process Investment Evaluation
Long-term factors
Fit with company strategic plan
Competitive advantage
Product life cycle
Operating factors (e.g., scrap, training)
Financial return
Break-even analysis
Cash flow analysis (IRR, NPV)
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Break-Even Analysis
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Technique for evaluating process & equipment alternatives
Objective: Find the point ($ or units) at which total cost equals total revenue
Assumptions
Revenue & costs are related linearly to volume
All information is known with certainty
No time value of money
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Facility Planning
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Facility planning answers:
How much
long-range capacity is needed
When
more capacity is needed
Where
facilities should be located (location)
How
facilities should be arranged (layout)
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Capacity
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Maximum output of a system in a given period (general definition)
May be units, hours, dollars, sq. ft. etc.
Example: Tons of steel per month
Effective capacity : Maximum output given standards, product mix, etc.
Rated capacity : Maximum usable output given utilization & efficiency
RC = (Capacity)(Utilization)(Efficiency)
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Capacity Definition Thinking Challenge
How would you define capacity for the following firms (e.g., steel mill, tons of steel per day):
Beer brewery
Auto plant
Restaurant
Warehouse
Grocery store Alone Group Class
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Utilization
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Measure of planned or actual capacity usage of a facility, work center, or machine Utilization
Expected capacity Capacity
Planned hours to be used Total hours available
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Efficiency
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Measure of how well a facility or machine is performing when used Efficiency
Actual output Effective capacity
Actual output in units Standard output in units
Average actual time Standard time
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Utilization Example
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You’re owner of a small florist shop. Normally, your shop is open 8 hr./day Monday to Friday , & 4 hr.
on Saturday . During the summer, you’re closed on Monday & Saturday . What is your capacity, expected capacity, & utilization during the summer?
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Utilization Thinking Challenge
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Alone You’re operations manager of a paper company. Given the expensive machinery, full capacity is 3 shifts , 7 days per week. Since demand is slow, you’ve scheduled 3 shifts , 6 days per week. What is your capacity, expected capacity, & utilization?
Group Class
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Rated Capacity Thinking Challenge
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Alone The standard rate of output of a paper mfg. machine is 1800 ft./min . Records show that the actual average rate is 1710 ft./min . Present utilization is 85.7% . The plant was designed to make 92,000 tons of paper per year. What is the rated capacity?
Group Class
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Forecast Demand Compute Rated Capacity Compute Needed Capacity
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Capacity Planning Process
Develop Alternative Plans Evaluate Capacity Plans Select Best Capacity Plan Quantitative Factors (e.g., Cost) Qualitative Factors (e.g., Skills) Implement Best Plan
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Managing Existing Capacity
Demand Management
Vary prices Capacity Management
Vary staffing
Vary promotion
Change lead times (e.g., backorders)
Change equipment & processes Change methods
Offer complementary
products Redesign the product for faster processing
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Conclusion
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Described the types of process strategies
Compared technological alternatives
Stated how to select a process strategy
Defined capacity
Explained how to manage existing capacity
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