Process Selection

And

Capacity Planning

Lecture-5Dr. Biswajit Sarkar

Dept. of Industrial & Management EngineeringHanyang University

South Korea

Books Reference

• 1. Analysis of Manufacturing Systems

by J. E. Rooda and J. Vervoort

• 2. Production/ Operations Management by William J. Stevenson, IRWIN publisher, ISBN 0-256-13900-8

Content

• 1. Make or Buy

• Types of Processing

• Match the Process and the Product

• Automation

• Computer-Aided Manufacturing (CAM)

• 2. Operations Strategy

• 3. Capacity Planning

– Importance of Capacity Decisions

– Defining and Measuring Capacity

– Determinants of Effective Capacity

– Determining Capacity Requirements

– Developing Capacity Alternatives

Make or Buy

• The very first step in process planning is to consider

whether to make or buy some or all of a product or to

subcontract some or all of a service.

• A manufacturer might decide to buy certain parts rather than

make them; sometimes all parts are purchased, with the

manufacturer simply performing assembly operations.

Many firms contract out services and some contract for

repair services.

• If a decision is made to buy or contract, this lessens or

eliminates the need for process selection. In make or buy

decisions, a number of factors are usually considered.

Make or Buy

• Available capacity lf an organization has available capacity,

it often makes sense to produce an item or perform a service

in house. The additional costs would be relatively small

compared with those required to buy items or subcontract

services.

• Expertise If a firm lacks the skill to do a job adequately,

buying might be a reasonable alternative.

• Quality considerations Firms that specialize can usually

offer higher quality than an organization can obtain itself.

Conversely, special quality requirements or the ability to

closely monitor quality may cause a firm to perform the

work itself.

Make or Buy• The nature of demand When demand for an item is high and

steady, the organization is often better off doing the work itself.

However, wide fluctuations in demand or small orders are

usually better handled by others who are able to combine orders

from multiple sources, which results in higher volume and tends

to offset individual buyer fluctuations.

• Cost Any cost savings achieved from buying or making must be

weighed against the preceding factors. Cost savings might come

from the item itself or from transportation cost savings.

• Special Cases A firm might choose to perform part of the work

itself and let others handle the rest in order to maintain

flexibility and to hedge against loss of a subcontractor. This

provides a bargaining tool in negotiations with contractors if the

firm decides later to take over the operation entirely.

Process Selection

Process

SelectionProduct and

Service

Design

Forecasting Capacity Planning

Facilities and

Equipment

Layout

Work Design

• Continuous processing systems produce large volumes of one highly

standardized item. There is little or no processing variety. Sugar is

produced by a continuous processing system.

• Repetitive /assembly operations can be thought of as semi-continuous

because they tend to involve long runs of one or a few similar items.

The output of these operations is fairly standard, involving very little

processing variety. Automobiles, for example, are produced in

repetitive systems.

• Batch processing is sometimes referred to as an intermittent

processing system because many jobs are performed with frequent

shifting from one job to another.

• Intermittent systems tend to have a high to moderate processing

variety range. Many food items are produced by batch systems. Job

shops are also considered as intermittent processing systems because

small quantities are produced.

Process Selection

• Projects are a special type of processing that is employed to handle

a non-routine job encompassing a complex set of activities.

• Continuous and intermittent processing systems have some key

differences which affect how these systems are managed. The

following sections highlight these key differences.

• Continuous and Semi Continuous Processing High volumes of

standardized output are produced by continuous processing systems.

The ultimate continuous processing systems produce a single product

such as flour or sugar. Generally, these products are measured on

a continuous basis rather than counted as discrete units. Industries that

use continuous processing are sometimes referred to as Process

Industries. Products of process industries inc1ude plastics, chemicals,

petroleum, grain, steel, liquid, and powder detergents. Operations are

made around the clock to avoid costly shutdowns and start-ups. The

output of these systems is highly uniform (standardized).

Process Selection

• Semi-continuous processing systems produce output that allows for

some variety; products are highly similar but not identical. Examples

include automobiles, televisions, computers, calculators, cameras, and

video equipment. Typically, these products are produced in discrete

units. This form of processing is often referred to as repetitive/

assembly operations.

• The standardized output of these systems gives itself to standardized

methods and equipment as the division of labour, skill requirements of

workers are usually low. Equipment tends to be specialized, which

tends to make it expensive than more general-purpose equipment, but

the high volumes of output result in a low cost per unit.

• Products of these systems are made for inventory rather than customer

order. Examples in the service sector include programs for mass calcul

ations, automatic car washes, mechanical harvesters, mail service, and

fast-food operations. Applications in services are less plentiful because

services tend to be more customized on a per-unit basis.

Process Selection

• Intermittent Processing When systems handle a variety of processing

requirements, intermittent processing is used. Volume is much lower

than from continuous systems. Intermittent systems are regarded as

general-purpose equipment that can fulfill a variety of handling

requirements, semiskilled or skilled workers who operate the

equipment, and a narrower span of supervision than for most

continuous systems.

• One form of intermittent processing occurs when batches of similar

items are processed in the same manner (e.g., food processing). A

canning factory might process a variety of vegetables; one run may be

sliced carrots, the next green beans, and the next corn or beets. All

might follow a similar process of washing, sorting, slicing, cooking,

and packing, but the equipment needs to be cleaned and adjusted

between runs.

Process Selection

• Another form of intermittent processing is done by a job shop, which

is designed to handle a greater variety of job requirements than batch

processing. Lot sizes vary from large to small, even a single unit.

What distinguishes the job shop operation from batch processing is

that the job requirements often vary considerably from job to job.

This means that the sequence of processing steps and the job content

of the steps also vary considerably.

• An auto repair shop is an example of a job shop. Large repair shops

may have specialists who deal in one kind of repair (e.g., brake jobs),

but cars are still handled one at a time. For large jobs processing many

of a single item or a few of many items, there is usually so much

variety among successive jobs that the batch processing described for

the canning factory would be too restrictive. Differences in job

processing requirements add routing and scheduling complexities, as

well as a frequent need to adjust equipment settings or make other

alterations for successive jobs. Processing cost per unit is generally hi

gher than it is under continuous or semi-continuous processing.

Process Selection

• Examples of intermittent processing are textbook publication,

bakeries, health care systems, and educational systems.

• In some cases, the outputs are made for inventory (clothing,

automobile tires); in others, they are designed to meet customer needs

(health care) or specifications (special tools, parts, or equipment).

Marketing efforts in these systems are often directed toward

promoting system processing capabilities or customized services.

• Projects To handle complex jobs consisting of unique sets of activities

that must be completed in a limited time span, projects are set up.

Examples include large or unusual construction projects, new product

development or promotion, space missions, and disaster relief efforts.

Because of their limited life spans and the non-repetitive nature of

activities, these systems differ considerably from continuous and

intermittent processing systems.

Process Selection

Match the Process and the Product • A key concept in process selection is the need to match product

requirements with process capabilities. The difference between

success and failure in production can be traced to choice of process.

Products range from highly customized to highly standardized.

• Generally, volume requirements tend to increase as standardization

increases; customized products tend to be low volume, and

standardized products tend to be high volume. These factors should be

considered in determining which process to use.

• Certain processes are more agreeable to low-volume, customized

products, while others are more suited to moderate-variety products,

and still others to higher volume, highly standardized products. By

matching product requirements with process choices, producers

can achieve the greatest degree of efficiency in their operations.

Process selection?

Product Variety

High Moderate Low Very Low

Equipmentflexibility

High Moderate Low Very Low

High Volume

Job Shop

Moderate Volume

Batch

Low Volume

Repetitive Assemble

Very Low Volume

Continuous Flow

Match the Process and the Product

Match the Process and the Product • Notice that the examples all line up along the diagonal of the table.

This is the most efficient alignment.

• If a producer chooses some other combination (e.g., assembly line for

a customized product or service), he or she would find that the highly

customized requirements of the various products are in direct conflict

with the more uniform requirements needed to effectively operate in

the assembly-line mode.

• Similarly, a job shop arrangement (machines and personnel are

capable of handling a wide variety of processing requirements)

would be wasted on a highly standardized product; equipment and

personnel need to be highly specialized.

• For new products, decision makers should make every attempt to

achieve a matching of product and process requirements.

Match the Process and the Product • For an ongoing operation, a manager should examine existing process

es in light of the table to see how well processes and products are

matched. Poor matches suggest the potential for improvement,

perhaps with a substantial increase in efficiency and lowering of cost.

• Another consideration is that products and services often go through

life cycles that begin with low volume but which increase as products

or services become better known. When that happens, a manager must

know when to shift from one type of process (e.g., job shop) to the

next (e.g., batch).

• Of course, some operations remain at a certain level (e.g., magazine

publishing), while others increase (or decrease as markets become

saturated) over time. Again, it is important for a manager to assess his

or her products and services and make a judgment on whether to plan

for changes in processing over time.

Automation• Automation is the substitution of machinery for human labor. The

machinery includes sensing and control devices that enable it to

operate automatically. A key question in process planning is whether

to automate. If the decision is made to automate, the next question is

how much. Autonation can range from factories that are completely

automated to a single automated operation.

• Automation offers a number of advantages over human labor. It has

low variability; it is difficult for a human to perform a task in exactly

the same way, in the same amount of time, and on a repetitive basis.

In a production setting, variability is detrimental to quality and to

meeting schedules. Moreover, machines do not get bored or distracted,

nor do they go out on strike, ask for higher wages, or file labor

grievances.

Automation• Automation is frequently touted as a strategy necessary for

competitiveness. However, it also has certain disadvantages and

limitations compared to human labor. To begin with, automation can

be costly. Technology is expensive; usually it requires high volumes

of output to offset high costs. In addition, automation is much less flex

ible than humans. Once a process has been automated, there is

substantial reason for not changing it. Moreover, workers sometimes

fear automation because it might cause them to lose their jobs.

• The issue of whether to automate or the degree to which automation

should be used must be carefully examined so that decision makers

clearly understand all the ramifications. Also, much thought and

careful planning are necessary to successfully integrate automation

into a production system. Otherwise, it can lead to major problems.

GM invested heavily in automation in the 1980s only to find its costs

increasing while flexibility and productivity took a nosedive. Its

market had shrunk while GM was increasing its capacity!

Computer-Aided Manufacturing (CAM)• Computer- aided manufacturing (CAM) refers to the use of computers

in process control, ranging from robots to automated quality control.

These systems replace human functions with machine functions. They

have the advantage of reducing labor; handling dangerous, dirty, or

boring tasks; and yielding high, consistent quality. Such equipment

can be very expensive.

• Numerically controlled (N/C) machines are programmed to follow

a set of processing instructions based on mathematical relationships

that tell the machine the details of the operations to be performed. The

instructions are stored on a device such as a floppy disk, magnetic

tape, or microprocessor. Although N/C machines have been used for

many years, they are an important part of new approaches to

manufacturing. Individual machines may have their own computer;

this is referred to as computerized numerical control (CNC).

Or one computer may control a number of N/C machines, which is

referred to as direct numerical control (DNC).

Flexible Manufacturing System (FMS)• A flexible manufacturing system (FMS) is a group of machines that

include supervisory computer control, automatic material handling,

and possibly robots or other automated processing equipment.

Re-prograrnrnable controllers enable these systems to produce

a variety of similar products. Systems may range from three or four

machines to more than a dozen. They are designed to handle

intermittent processing requirements with some of the benefits of

automation and some of the flexibility of individual, or stand-alone,

machines (e.g., N/C machines). Flexible manufacturing systems offer

reduced labor costs and more consistent quality compared with more

traditional manufacturing methods, lower capital investment and

higher flexibility than "hard" automation, and relatively quick

changeover time. Flexible manufacturing systems appeal to managers,

who hope to achieve both the flexibility of job shop processing and

the productivity of repetitive processing systems.

Flexible Manufacturing System (FMS)

• FMS also has certain limitations. One is that this type of

system can handle a relatively narrow range of part variety,

thus, it must be used for a family of similar parts, which all

require similar machining.

• FMS requires longer planning and development times than

more conventional processing equipment because of its

increased complexity and cost.

• Industries sometimes prefer a gradual approach to

automation, and FMS represents a sizable chunk of

technology.

Q & A

Thanks For Your Kind Attention