27505038 Production and Operations Management Slides

8/6/2019 27505038 Production and Operations Management Slides

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Production and Operations

Management


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Figure 1: General Model of Operations Management

Input

Transformed

Resources

Materials

Information

Customers

Facilities

StaffInput

Transforming

Resources

Input

Operations

strategy

Design Improvement

Planning/

control

operations

strategic objectives

operations competitive

Role and position

Goodsand

servicesOutput

ENVIRONMENT

ENVIRONMENT


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Definitions

Operations function: arrangement of resources for

production of goods and services

Operations managers: staff of the organisation

Operations management: brings out activities,

decisions and responsibilities of operations

managers

Organisational Structure

Major functions: operations, marketing, accounting

and finance,product/service development

Support functions: human resource, purchasing,en ineerin / technical


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Activities of Operations Management

All parts of organisation are operations

Operations managers have:

Indirect responsibility for some activities, and

Direct responsibility for some activities

Indirect responsibilities are

To inform other functions about opportunities and constraints

provided by the operations capabilities

To discuss with other functions modifications in all plans forbenefit to all

To encourage other functions to suggest ways in which

operations function can improve its service to the rest of the

organisation


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Continued

Direct responsibilities are:

Understanding operations strategic objectives;Developing operations strategy for organisation;

Designing operations products, services and processes;

Planning and controlling the operation;Improving performance of operation

Performance characteristics/parameters/objectives: 5 in all

Quality of goods and services

Speed of delivery to customers

Dependability of delivery

Flexibility of operation to change

Cost of producing goods and services


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Figure 2: The Transformation ModelTransformation Process Model: used to describe nature of operations

CustomerOutputInput

InputTransformed

Resources

Materials

InformationCustomers

Facilities

Staff

Input

Transforming

Resources

The

Transformation

Process

ENVIRONMENT

ENVIRONMENT


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Types of operationsOperations as a function

Operations as an activity

Four important measures to distinguish different operations:

the volume of their output

the variety of their output

the variation in the demand for their output

the degree of customer contactwhich is involved in

producing the output

Table 1: High-and-low volume operationsHigh-volume operations Low-volume operations

TV manufacture, Fast-food restaurant Aircraft manufacture, Taxi

Routine surgery, Theme park Studio, High-class restaurant


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Table 2: High-and-low variety operations

igh-variety operations Low-variety operations

Customised birthday cake Mass production of birthdaycakes

Made-to-measure suitmanufacture

Off-the-peg suit manufacture

Tax consultancy advice Financial audits

Department store Jeans shop


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Table 3: High and low variation in demand operations

igh-variation operations Low-variation operations

Electricity utility Bread bakery

Financial audits by accountingcompanies

Consultancy advice byaccounting companies

Firework manufacturer Shopping mall security

Police and emergency services Frozen food transport

distributionUnderground metro network Cosmetic surgery unit

Maternity unit


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Table 4: High-, low- and mixed-customer

contact operationsigh-contact

operations

Mixed-, high- and

low-contactoperations

Low-contact

operations

Health care service Computer field

servicing

Most manufacturing

Dentist Bank branches Bank back officeoperations

Music teacher University Distance-learning

college

Barber, Hairdresser Estate agent Dental technicians

Cook at your table

restaurant

Bistro-style

restaurant

Prepackaged

sandwich maker


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Table 5: Typology of Operations

easures Implications

Volume-low Low repetition; each staff performs more of job; lesssystematisation; high unit costs

Volume-high High repetition; capital intensive; specialisation;systematisation; low unit costs

Variety-low Well defined; routine; standardised; regular; low unitcost

Variety-high Flexible; complex; match customer needs; high unitcost

Variation in demand-low Stable; routine; predictable; high utilisation; low unitcosts

Variation in demand-high Changing capacity; anticipation; flexibility; In touchwith demand; high unit cost

Customer contact-low Time lag between production and consumption;standardised; low contact skills; high staffutilisation;centralisation; low unit costs

Customer contact-high Short waiting tolerance; satisfaction governed by

customer perception; customer contact skillsneeded;received variety is high; high unit cost


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The operations system hierarchy

Consists of:

Macrooperations andMicro operations, e.g. TVbroadcasting operations

Macro comprises micro operations

Hierarchy of operations has 2 important implications:

Linkage of micro operations to form internal

customer - internal supplierrelationships

View all parts of the organisation as operations,

requiring operations management

Internal customers/suppliers versus External

customers/su liers


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Strategic Role and Objectives of Operations

Roles: there are 3 in number (Skinner, 1985 at Harvard U)

as asupportto business strategy

as the implementerof business strategy

as the driverof business strategy

Operations Contribution (assess ability to play roles,Hayes

& Wheelwright, 1984 at Harvard U, later Prof Chase, 1991, U

of Southern California) developed Four-Stage model

Stage1: Internal neutrality (necessary evil)

Stage2: External neutrality (best practices from competitors,support)

Stage3: Internally supportive (excel, credible ops strategy,

implementer)

Stage4: Externally supportive (provide competitive success,proactive, driver)


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The Five Performance Objectives

1) Speed advantage

2) Quality advantage

3) Dependability advantage

4) Flexibility advantage

5) Cost advantageStrategy Hierarchy

(Figure 3)

Operations strategy HRM strategy

Micro operations

strategy

Finance strategy

R&D strategy

Micro operations

strategy

Micro operations

strategy

Business strategy

Marketing strategy


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Operations Strategy FormulationOutline framework for developing operations strategy: 2 areHill Methodology,

and Platts-Gregory procedure

HILL METHODOLOGY(Hill, 1993 of London Business School): largely connected

with manufacturing, 5-steps:

Step1: Corporate objectives (growth, profit, ROI, etc.)- ops strategy to be seen in terms

of contribution to Corp-objectives

Step2: Marketing strategy (product/service markets and segments, range, mix,

volumes, standardisation/customisation, innovation, leader or follower) how Mar-

strategy made which Ops-strategy must satisfy (p/s markets etc) and provide (r, m, v,

s/c)

Step3: How do products and services win orders? Mar-strategy translates into

competitive factors, which are important to operations to win orders. Competitive

factors are distinguished as order-winning (key to competitive stance), qualifying

(to be eligible for customer consideration), and less important (no influence upon

customers). Some of the factors are price, quality, delivery speed and dependability,

product/service range, product/service design, brand image, etc

Step4: Process choice (conforming to volume/variety analysis, structural

characteristics defined, like process technology, capacity, size, location, role of

inventory, etc.)


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Figure 4: Product/Service Life Cycle

Sales

Volume Introduction Growth Maturity Decline

Product/Service

first introduced

to market

Slow growth

in sales

Product/Service

gains market

acceptance

Rapid growth in

sales volume

Market needs

start to be

fulfilled

Sales slow down

and level off

Market needs

largely met

Sales decline

gure : ec o e yc e on rgan sa on


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gure : ec o e yc e on rgan sa on

Introduction Growth Maturity Decline

Volume Low Rapid growth High and level Declining

Sales volume

Customers Innovators Early adoptors Bulk of market Laggards

Competitors Few/None Increasing no. Stable no. Declining no.

Variety of

Product/service

designs

Possible high

Customisation

Or frequent

Design changes

Increasingly

standardised

Emerging

dominant

types

Possible move

to commodity

standardisa-

tion

Likely order

winners

Likely qualifiers

Dominant ops

Performanceobjectives

Availability of

quality p/s

Low price,

Dependable

supplyLow price

Quality, Range Price, Range Range, Quality Dependable supply

Product/servicecharacteristics,

performance

Flexibility,

Quality

Speed, Quality,

Dependability

Cost,

Dependability

Cost


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Figure 6: Design in Operations Management

Screening

Concept generation

Preliminary design

Evaluation/improvement

Prototyping/Final design

Network design

Layout and

Flow

Process

TechnologyJob design

Design of

Products and ServicesDesign of Processes


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Features of Design Activity and (Figure 7)Purpose: to satisfy needs of customers

Applies to:products and services; systems and processesDesigning is: a transformation process

Starts and Ends: concept and specifications

Percentage of final product

cost committed by the

design

Percentage of design

Costs incurred

100%

0%

Start of the design activity Finish of the design activity

Figure 7: Choices for Designer


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Table 6: Impact of product/service and

process design on performance objectiveserformance

Objective

Influence of good product/service

design

Influence of good process

design

Quality Can provide resources capableof producing to designspecifications

Speed Can specify products which can bemade quickly (using modular design),or services with less delays

Can move inputs through eachstage of process without delays

Dependability Help make each stage of processpredictable by using standardisedpredictable processes

Can provide technology/staffwho are themselvesdependable

Flexibility Can allow for variations thus giving arange of products/services to beoffered to customers

Can provide resources whichcan be changed quickly tocreate a range of product orservice

CostCan reduce cost of each component

part and assembly also

Ensures resources utilise

efficient, low cost processes

Can eliminate potential fail points

& error-prone aspects of product

or service


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Figure 8:Design as a transformation

process

Transformed

resources

Technical information

Market information

Time information

Test and design equipment

Design and technical staff

Transforming

resources

The design

activityFinished

DesignsInput Output


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Continued and Figure 9

In addition to technical information, two types of information

important in all types of design activity:

Volume,Time, or duration associated with each part of product/service or

process

Certaintyregarding

the final

design

Concept

Choice and

Evaluation Screens

Time

Large no. of design options

Certainty regarding the

first design

Figure 9: Final design specification


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Figure 10: Identifying and Evaluating OptionsEvaluating options: worth of each option on some design criteria

Feasibility (can we do it?); do we have skills, organisational

capacity, financial resources?

Acceptability (do we want to do it?); does option satisfy

performance criteria? Does it give satisfactory return?

Vulnerability (do we want to take the risk?); do we understand

consequences of adopting options? For a pessimist what could go

wrong? Consequences? (called downside risk of options)

Start of design activity Finish of design activity

The difficulty and

cost of changing

the design


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Performance objectives and Four Cs of designPerformance objectives of design are:High qualityProduced speedily

Produced on dependable basis

Produced flexibly, and

Produced at low cost

Four Cs (nature of design in all aspects of OperationsManagement)

Creativity; not existing before

Complexity; overall configuration, performance to components,

materials, appearance, methods of manufacture

Compromise; balancing performance versus cost, appearance

versus use,materials versus durability

Choice; many possible solutions


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Figure 11: Process Types in Manufacturing and

ServicesPosition of an operation on the volume-variety continuum

General approaches to managing transformation are

calledprocess types

In Manufacturing, these are

Project processesJobbing processes

Batch processes

Mass ProcessesContinuous processes

VolumeLow High

High

Low

Variety

Batch

Mass

Continuous

Project

Jobbing

Figure 11


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Details: Process Types in Manufacturing

Project:discrete, highly customised products, timescale long, lowvolume and high variety, activities ill-defined and uncertain, each

job has well-defined start and finish, transforming well-organised,e.g. shipbuilding, flyovers, installing computer system

Jobbing: volume low-variety high, most jobs one-off, small jobs,degree of repetition low, e.g. specialist toolmakers, bespoke tailors

Batch: like jobbing but variety less, more than one product, morerepetitive jobs than above, e.g. machine tool manufacturing, frozen

foods, auto component parts, production of clothing

Mass: high volume-low variety, repetitive and predictable, e.g. automanufacture plant, autos in large numbers with several thousand

variants (option of engine size, colour, extra equipment, etc), most

consumer durables- TV plant, CD production

Continuous: higher volume-lower variety, endless flow, inflexible,capital-intensive, e.g. medicines, electricity, petrochemical refinery


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Table 7: Volume-Variety effect on Design ParametersVolume Variety Quality

means--

Speed

means--

Dependability means-

Flexibilitymeans--

Costmeans-

LOW HIGH Specifi-performance

Negotiatedwaiting time

On-timedelivery

P/Sflexibility

Variable

Architect'practice

Bespoketailor

Fast foodrestaurant

Documentprocessing

Electricityutility

HIGH LOW Confor-mance tostandard

Instantdelivery

Avail-ability

Volumeflexibility

Constant


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Table 8: Volume-Variety affect Design ActivityVolume Variety Design

emphasis

in design

Product/Servic

eStandardisation

Location Flow Processtechnology

StaffSkills

Low

High

High

Low

Product/S

ervicedesign

Processdesign

Low

High

Can be

decentralised

Usuallycentralised

Intermittent

Continuous

General

purpose

Dedicated

Task

System


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Figure 12: Process Types in Service Operations

Professional services

Service shops

Mass services

ProfessionalServices

Service Shops

Mass Service

Volume

Low High

High

Low

Variety


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Details: Process types in Services

Professional services:high-contact organisation, high levels of

customisation, service process highly adaptable, staff spends timewith customers in front office, contact staff given considerable

discretion, ratio of staff to customer high, people-based rather than

equipment-based, emphasis on process (how service delivered)

rather than product (what is delivered), e.g. consultants, lawyers,

architects, doctors surgeries, auditors

Service shops: contact, customisation, volumes of customers, staffdiscretion in-between, e.g. banks, high street shops, holiday tour

operators, schools, restaurants, hotels and travel agents

Mass service: limited contact, customisation, equipment-based,product orientated, most value added in the back office, little

judgement applied by front-office staff, e.g. supermarkets, rail

network, airport, library, telecom service, TV station, police service,

enquiry desk at a utility


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Figure 13: Product-Process MatrixIn both manufacturing and service operations because of overlap,

organisations have a choice of what type of process to employ.

Choice affects operation in terms of cost and flexibility

Manufacturing

operations

process types

Service

operations

process types

None

None

Volume

Variety

high low

low high

Project

Jobbing

Batch

Mass

Continuous

Professional

service

Service

shop

Mass

service

The natural line of fit of process to

volume/variety characteristics (lowest cost position)

More process

flexibility

than needed

hence high

cost

Less

process

flexibility

than neededhence high

cost

Figure 13:Deviating from

the natural

diagonal on the

product-process

matrix hasconsequences

for cost and

flexibility

(Hayes and

Wheelwright

Model)


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Design of ProcessesNetwork design: why design the whole network?

It helps a co to understand how it can compete effectively

It helps to identify particularly significant links in the network

It helps the co to focus on its long-term position in the network

Figure 14: Total and Immediate Supply Networks

The Operation

Supply side Demand side

2nd tier supplier 1st tier supplier 1st tier customers 2nd tier customers

Fi 15 O ti N t k f


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Figure 15: Operations Network for a

plastic homewares manufacturer

Chemical Co

Paper

Supplier

InkSupplier

Plastic

Stockist

Printer

Wholesaler

Retailer

RetailerPlastic

Homewares

manufacturer

Flow of goods

Flow of information

Figure 16: for a Shopping Mall

Cleaning

Materials

Supplier

Equipment

Supplier

Recruitment

Agency

Security

Services

Cleaning

Services

Retail

CustomersRetailers

Shopping

Mall

Maintenance

Services


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LocationImportance of Location: Lord Seif, the boss of Marks &Spencer, has this to say, There are three important things in

retailing location, location and location

Examples are, retailing, fire service station, factory, petrol pump

Reasons for location decisions: stimuli are

Changes in demandfor goods and services;Changes insupply of inputs to the operation

Aim : to achieve an appropriate balance between the 3 objectives

Objectives: areThespatially variable costs of the operation

Theservice the operation is able to provide to its customers

The revenue potential of the operation

Fi 17 S l id d D d id


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Figure 17: Supply-side and Demand-side

factors in Location Decisions

The

operation

Supply-sideFactors

Which vary in

such a way as to

influence cost

as location varies

Labour costsLand costsEnergy costsTransportation costsCommunity factors

Demand-side

Factors

Labour skillsSuitability of siteImageConvenience for customers

(e.g. speed and dependability)

Which vary in such a

way as to influence

customer/service/revenue

as location varies


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Levels of Location DecisionChoosing the area of the country or region;

Choosing the specific site within the area

Location Techniques: quantitative methods, they are

Weighted-scoring methodand Centre-of-gravity method

Weighted-scoring method: procedure involves three steps

Identifying the criteria to be used to evaluate the various locations

Establishing the relative importance of each criterion and giving

weighting factors to them

Rating each location according to each criterion. The scale of the

score is arbitrary

Choosing the region / country in which to locate the operation;

Centre-of-gravity method: is to find a location which minimises

transportation costs


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Example 1:An Indian company which prints and makes specialist packaging

materials for the pharmaceutical industry has decided to build a

new factory somewhere in the Benelux countries so as to provide a

speedy service for its customers in continental Europe. In order to

choose a site it has decided to evaluate all options against a number

of criteria. These criteria are listed. After consultation with its

property agents the company identifies three sites which seem to bebroadly acceptable. These are known as sitesA,B, and C. the coalso investigates each site and draws up the weighted score table

shown shown in table 9. Remember that the scores shown are those

which the manager has given as an indication of how each site meetsthe companys needs specifically.

Table 9 indicates that location Chas the highest total weighted scoreand therefore would be the preferred choice


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Table 9: Weighted score method for the three sites

Criteria Importanceweighting

ScoresSites

A B C

Cost of the site 4 80 65 60

Local taxes 2 20 50 80

Skills availability 1 80 60 40

Access to motorways, etc 1 50 60 40Access to airport 1 20 60 70

Potential for expansion 1 75 40 55

Total weighted score 585 580 605*

*Preferred option

*Preferred option


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Centre-of-Gravity Method

Example 2: A company which operates four out-of-town garden

centres had decided to keep all its stocks of products in a singlewarehouse. Each garden centre, instead of keeping large stocks of

products, will fax its orders to the warehouse staff who will then

deliver replenishment stocks to each garden centre as necessary. The

location of each garden centre is shown in the map in figure 18. A

reference grid is superimposed over the map. The centre-of-gravity

coordinates of the lowest cost location for the warehouse, x and y,

are given by the formulae:

x = > xi Vi and y = > yi Vi

> Vi > Vi

Where xi = the coordinate or source of destination i

yi = the coordinate or source of destination i

Vi =the amount to be shipped to or from source/destination i


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Continued and Figure 18

Each of the garden centres is of a different size and has different

sales volumes in terms of the number of truck loads of products soldeach week (shown in table 10)

x

6

5

4

3

2

1

D

C

B

A

y

Table 10: Weekly demand levels (in truck loads) at


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Table 10: Weekly demand levels (in truck loads) at

each of the four garden centre

So the minimum cost location for the warehouse is at (5.34, 1.14). Inreality, optimum location might also be influenced by other factors

such as the transportation network. Poor access, or in a residential

area, or in the middle of a lake, adjustments will have to be made.

Garden Centre Sales per week (Truck loads)

A 5

B 10

C 12

D 8

Total 35


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Layout and Flow

Importance of layout decision: first time right, changing is

difficultLayout is lengthy and difficult task because of physical size

of transforming resources

Re-layout of an existing operation can disrupt its smooth

running, leading to consumer dissatisfaction or lost production

If layout is wrong, it can lead to over-long or confused flow

patterns, inventory of materials, customer queues building up

in the operation, customers inconvenienced, long processtimes, inflexible operations,unpredictable flow and high cost

Starting point is understanding operations strategic

objectives (figure 19)


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Figure 19: Facilities Layout Decision

Volume and

Variety

Strategic

Performance

objectives

Process type

Flow of operations transformed resources

Basic layout type

Project process

Jobbing processBatch process

Mass process

Continuous process

Professional

Service shops

Mass service

Fixed position layout

Process layout

Cell layout

Product layout

Detailed design of

layout

Physical position of

all transforming

resources

Decision 2

Decision 3

Decision 1

Table 11: Relationship between process


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Table 11: Relationship between process

types and basic layout typesManufacturing

process types

Project processes

Jobbing processes

Batch processes

Mass processes

Continuous processes

Basic layout types

Fixed position layout

Process layout

Cell layout

Product layout

Service process types

Professional services

Service shopsMass services


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Basic Layout Types

Fixed position layout: equipment, machinery, plant and peoplemove;

effectiveness tied up with scheduling of access to the site;

reliability of deliveries;

e. g. motorway construction, open-heart surgery, shipbuilding,

mainframe computer maintenance, high-class service restaurant.Process layout: similar processes (or processes with similar needs)are located together;

convenient for the operation to group them together;

utilisation of transforming resources is improved;

flow pattern complex;

e.g. hospital, supermarket, library, machine parts of aircraft engine

Figure 20: Process layout in a Library


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Figure 20: Process layout in a Library

showing path of just one customer

To journal stack

Counter staffStoreroom Copying area

Referencecollection

Study desks

Enquiries

Loan books in subject order

On-line and CD-RO

access room

Entrance

Exit

Reference

section


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Figure 21: Process Layout by Department

Manufacturing

Receiving

departmentShipping

Order-picking

area

Finished goods

inventory

Materials inventory

storage area

Represents the flow of materials through the

production process


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Continued

Product layout: involves locating transforming resources entirelyfor the convenience of the transformed resources

each customer, product, or information follows pre-arranged route

sequence of activities required matches sequence of processes laid;

transformed resources flow along a line of processes;

this type also called flow or line layout;easy to control, predictable, clear, less supervision, ease of ppc;

predominantly standardised requirements of product and services;

use of more expensive, fixed position, materials-handling equipment

such as overhead conveyors, less labour cost and training;

use of specialised equipment to a particular product/service;

difficult to change over to other product/services;

e.g. automobile assembly, mass-immunisation programme, self-

service cafeteria


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Figure 22: Product-Focused Production

Raw

materials

1 Components 3 Subassemblies 5 Assemblies 7Finished

Products

2 4

Raw

materials Components

Purchased components

and Subassemblies6

Product or material flow

Production Operations

Assemblies

SubassembliesComponents

Continued


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ContinuedFlexible layout: include flexible manufacturing systems (FMS)and cellular manufacturing systems

process layout in which flow of product can be altered ti permitflexibility in product processing;

fully/partially computer system that permits rapid changeover to

accommodate different products;

hybrid between process and product layouts;FMS layout designs are product orientated- flow is along sequence

of work centres as in assembly line;

process orientated- work centre activities can be routed by using

the department layout;figure 23 shows layout and routing of materials which can permit

flexibility- WIP can travel to any work cell in any order;

developments in material handling (AGV, robots) have developed

flexible layouts


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Figure 23: Flexible Manufacturing Layout

Incoming

materials or

parts requiring

processing atone or more of

the work cells

Work

CellA

Work

CellB

Work

CellC

Possible routes

of AGV with

The WIP

Finished productready for

shipping

Cellular Layout


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y

Cellular layout design: groups processes into work cells

subset of Group Technology

GT code number system defines the products various materialproduction processes used to help identify and create cells

capable of producing a limited variety of finished products that

share similar product characteristics

one product or many productsconfigurations can be U or C or S

used as implementation strategy for JIT production purposes

In JIT operation where flexibility is important, entire plants can

focus on production of singleproduct family (a group of productsthat share share similar production requirements, inventory

components, or both. Because parts with similar characteristics are

made in similar ways,the parts in a part families are typically made

on the same machines with similar tooling.)


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Group Technology

Cellular manufacturingis a subset of the broader group

technology concept, in which:a coding system is developed for the parts made in a factory;

each part receives a multidigit code that describes the physical

characteristics of the part;

using code, production activities are simplified in following way;easier to determine route for parts because production steps are

obvious from its code;

no of parts designs can be reduced because of part standardisation;

new design accesses database to identify similar parts;

part families have parts with similar characteristics;

some part families assigned to cells for production, usually one part

to a cell.


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Figure 24: Cellular Layout for Cell A, Product X

X

Y,Z

X,Y,Z

Exit cell A

finished or on toEnter cell A

X,Y,Z

Y,Z

Y

X,Y,Z

ZX,Z

X

Finishing

workWorker

Worker

RobotWorker

Worker

Route of

AGV as

Product

Undergoesprocessing

27505038 Production and Operations Management Slides

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