Processes, Technology, and CapacityProcesses, Technology, and Capacity

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Lecture OutlineLecture Outline

Process Planning Process Analysis Process Innovation Technology Decisions Capacity Decisions

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Process PlanningProcess Planning

Process a group of related tasks with specific inputs and

outputs Process design

tasks need to be done and coordinated among functions, people, and organizations

Process planning converts designs into workable instructions for

manufacture or delivery Process strategy

an organization’s overall approach for physically producing goods and services

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Process Selection

Projects one-of-a-kind production of a product to customer order

Batch production systems process many different jobs through the system in

groups or batches Mass production

produces large volumes of a standard product for a mass market

Continuous production used for very-high volume commodity products

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PROJECTPROJECT BATCHBATCH

Types of Processes

Type of product

Type of customer

MASSMASS CONTCONT..

Product demand Infrequent Very stable

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PROJECTPROJECT BATCHBATCH

Types of Processes (cont.)

Demand volume

No. of different products

Infinite variety

MASSMASS CONTCONT..

Production system

Long-term project

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PROJECTPROJECT BATCHBATCH

Types of Processes (cont.)

Equipment

Primary type of work

MASSMASS CONTCONT..

Worker skills

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PROJECTPROJECT BATCHBATCH

Types of Processes (cont.)

Advantages

Dis-advantages

Non-repetitive, small customer base, expensive

MASSMASS CONTCONT..

ExamplesConstruction, shipbuilding, spacecraft

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Cost Fixed costs

constant regardless of the number of units produced Variable costs

vary with the volume of units produced Revenue

price at which an item is sold Total revenue

is price times volume sold Profit

difference between total revenue and total cost

Process Selection with Process Selection with Break-Even AnalysisBreak-Even Analysis

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Process Selection with Process Selection with Break-Even Analysis (cont.)Break-Even Analysis (cont.)

Total cost Total cost = fixed cost + total variable cost= fixed cost + total variable costTC = TC = ccff + + vcvcvv

Total revenue =Total revenue = volume x price volume x priceTR = TR = vpvp

Profit Profit = total revenue - total cost= total revenue - total costZ = TR – TC = Z = TR – TC = vpvp - ( - (ccff + + vcvcvv))

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Process Selection with Process Selection with Break-Even Analysis (cont.)Break-Even Analysis (cont.)

Solving for Break-Even Volume

TRTR = TC= TCvpvp = = ccff + + vcvcvv

vpvp - - vcvcvv = = ccff

vv((p - cp - cvv)) = = ccff

vv ==

ccff

p p -- c cvv

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Break-Even Analysis: ExampleBreak-Even Analysis: Example

Fixed costFixed cost = = ccff = $2,000 = $2,000

Variable costVariable cost = = ccvv = $5 per raft = $5 per raft

PricePrice = = pp = $10 per raft = $10 per raft

Break-even point isBreak-even point is

v v = = = rafts= = = raftsccff

p p - - ccvv

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Break-Even Analysis: GraphBreak-Even Analysis: Graph

Total cost line

Total revenue

line

Break-even point400 Units

$3,000 —

$2,000 —

$1,000 —

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Process SelectionProcess Selection

Below , chooseBelow , chooseAbove , chooseAbove , choose

$2,000 + $5$2,000 + $5vv = $10,000 + $2= $10,000 + $2vv==

vv = rafts= rafts

Process AProcess A Process BProcess B

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Process Process Selection: Selection: GraphGraph

Example 4.2Example 4.2

| | | |1000 2000 3000 4000 Units

$20,000 —

$15,000 —

$10,000 —

$5,000 —

Total cost of process A

Total cost of process B

Choose process A

Choose process B

Point of indifference = 2,667 Units

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Process Planning and Analysis Tools

Process Planning: set of documents that detail manufacturing and service delivery specifications assembly charts operations sheets quality-control check-sheets process flow chart process map

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Sesame seed top bunSesame seed top bun

Beef pattyBeef pattySaltSaltCheeseCheese

LettuceLettuceSauceSauceOnionsOnions

Middle bunMiddle bun

Beef pattyBeef pattySaltSaltCheeseCheese

LettuceLettuceSauceSauceOnionsOnionsPicklesPickles

Bottom bunBottom bun

WrapperWrapper

SASA

SASA

First-layer assemblyFirst-layer assembly

Second-layer assemblySecond-layer assembly

Completed Big MacCompleted Big Mac

Assembly Chartfor a Big Mac

Assembly Chartfor a Big Mac

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Part name Crevice Tool

Part No. 52074

Usage Hand-Vac

Assembly No. 520

Oper. No. Description Dept. Machine/Tools Time

10 Pour in plastic bits 041 Injection molding 2 min

20 Insert mold 041 #076 2 min

30 Check settings 041 113, 67, 650 20 min& start machine

40 Collect parts & lay flat 051 Plastics finishing 10 min

50 Remove & clean mold 042 Parts washer 15 min

60 Break off rough edges 051 Plastics finishing 10 min

An Operations Sheet for a Plastic Part

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Process Analysis

Process flowcharts Symbolic representation of processes Incorporate

nonproductive activities (inspection, transportation, delay, storage)

productive activities (operations)

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Process Flowchart Process Flowchart SymbolsSymbols

OperationsOperations

InspectionInspection

TransportationTransportation

DelayDelay

StorageStorage

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Place order

Drink

Eat salad or soup

Eat dinner

Receives check

Gives payment to waiter

Collect change, leave tip

Fill in tip amount

Give order to waiter

Prepare dinner order

Prepare soup or salad order

Give order to waiter

Is order complete?

Give soup or salad order to chef

Give dinner order to chef

Get drinks for customer

Deliver salad or soup order to customer

Deliver dinner to customer

Deliver check to customer

Receive payment for meal

Cash or Credit?

Bring change to customer

Run credit card through

Return credit slip to customer

Collect tip

YY

NN

CreditCredit

CashCash

CustomerCustomer WaiterWaiter Salad Chef Salad Chef Dinner Chef Dinner Chef

A Process Map of

Restaurant Service

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Technology Decisions

Financial justification of technology Purchase cost Operating Costs Annual Savings Revenue Enhancement Replacement Analysis Risk and Uncertainty Piecemeal Analysis

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A Technology Primer

Computer-aided design (CAD)

Group technology (GT)

Computer-aided engineering (CAE)

Collaborative product commerce (CPC)

Computer-aided design (CAD)

Group technology (GT)

Computer-aided engineering (CAE)

Collaborative product commerce (CPC)

Creates and communicates designs electronically

Classifies designs into families for easy retrieval and modification

Tests functionality of CAD designs electronically

Facilitates electronic communication and exchange of information among designers and suppliers

Product Technology

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Standard for exchange of product model data (STEP)

Computer-aided design and manufacture (CAD/CAM)

Computer aided process (CAPP)

E-procurement

Standard for exchange of product model data (STEP)

Computer-aided design and manufacture (CAD/CAM)

Computer aided process (CAPP)

E-procurement

Set standards for communication among different CAD vendors; translates CAD data into requirements for automated inspection and manufacture

Electronic link between automated design (CAD) and automated manufacture (CAM)

Generates process plans based on database of similar requirements

Electronic procurement of items from e-marketplaces, auctions, or company websites

Process Technology

A Technology Primer (cont.)

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Computer numerically control (CNC)

Flexible manufacturing system (FMS)

Robots

Conveyors

Computer numerically control (CNC)

Flexible manufacturing system (FMS)

Robots

Conveyors

Machines controlled by software code to perform a variety of operations with the help of automated tool changers; also collects processing information and quality data

A collection of CNC machines connected by an automated material handling system to produce a wide variety of parts

Manipulators that can be programmed to perform repetitive tasks; more consistent than workers but less flexible

Fixed-path material handling; moves items along a belt or overhead chain; “reads” packages and diverts them to different directions; can be very fast

Manufacturing Technology

A Technology Primer (cont.)

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Automatic guided vehicle (AGV)

Automated storage and retrieval system (ASRS)

Process Control

Computer-integrated manufacturing (CIM)

Automatic guided vehicle (AGV)

Automated storage and retrieval system (ASRS)

Process Control

Computer-integrated manufacturing (CIM)

A driverless truck that moves material along a specified path; directed by wire or tape embedded in floor or by radio frequencies; very flexible

An automated warehouse—some 26 stores high—in which items are placed in a carousel-type storage system and retrieved by fast-moving stacker cranes; controlled by computer

Continuous monitoring of automated equipment; makes real-time decisions on ongoing operation, maintenance, and quality

Automated manufacturing systems integrated through computer technology; also called e-manufacturing

Manufacturing Technology

A Technology Primer (cont.)

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Business – to –Business (B2B)

Business – to –Customer (B2C)

Internet

Intranet

Extranet

Business – to –Business (B2B)

Business – to –Customer (B2C)

Internet

Intranet

Extranet

Electronic transactions between businesses usually over the Internet

Electronic transactions between businesses and their customers usually over the Internet

A global information system of computer networks that facilitates communication and data transfer

Communication networks internal to an organization; can be password (i.e., firewall) protected sites on the Internet

Intranets connected to the Internet for shared access with select suppliers, customers, and trading partners

Information Technology

A Technology Primer (cont.)

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Bar Codes

Radio Frequency Identification tags (RFID)

Electronic data interchange (EDI)

Extensive markup language (XML)

Enterprise resource planning (ERP)

Bar Codes

Radio Frequency Identification tags (RFID)

Electronic data interchange (EDI)

Extensive markup language (XML)

Enterprise resource planning (ERP)

A series of vertical lines printed on most packages that identifies item and other information when read by a scanner

An integrated circuit embedded in a tag that can send and receive information; a twenty-first century bar code with read/write capabilities

A computer-to-computer exchange of business documents over a proprietary network; very expensive and inflexible

A programming language that enables computer – to - computer communication over the Internet by tagging data before its is sent

Software for managing basic requirements of an enterprise, including sales & marketing, finance and accounting, production & materials management, and human resources

Information Technology

A Technology Primer (cont.)

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Supply chain management (SCM)

Customer relationship management (CRM)

Decision support systems (DSS)

Expert systems (ES)

Artificial intelligence (AI)

Supply chain management (SCM)

Customer relationship management (CRM)

Decision support systems (DSS)

Expert systems (ES)

Artificial intelligence (AI)

Software for managing flow of goods and information among a network of suppliers, manufacturers and distributors

Software for managing interactions with customers and compiling and analyzing customer data

An information system that helps managers make decisions includes a quantitative modeling component and an interactive component for what-if analysis

A computer system that uses an expert knowledge base to diagnose or solve a problem

A field of study that attempts to replicate elements of human thought in computer processes; includes expert systems, genetic algorithms, neural networks, and fuzzy logic

Information Technology

A Technology Primer (cont.)

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Capacity Decisions

Capacity maximum

capability to produce rated

capacity is theoretical

effective capacity includes efficiency and utilization

Capacity utilization percent of available time spend

working Capacity efficiency

how well a machine or worker performs compared to a standard output level

Capacity load standard hours of work assigned

to a facility Capacity load percent

ratio of load to capacity

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Capacity Expansion Strategies

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Capacity Decisions (cont.)

Capacity increase depends on volume and certainty of anticipated demand strategic objectives costs of expansion and operation

Best operating level % of capacity utilization that minimizes unit costs

Capacity cushion % of capacity held in reserve for unexpected

occurrences

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Economies of ScaleEconomies of Scale

it costs less per unit to produce high levels of output fixed costs can be spread over a larger number of

units production or operating costs do not increase

linearly with output levels quantity discounts are available for material

purchases operating efficiency increases as workers gain

experience

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Diseconomies of Scale

Occur above a certain level of output Diseconomies of Distribution Diseconomies of Bureaucracy Diseconomies of Confusion Diseconomies of Vulnerability

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Best Operating Level for a Hotel