Processes and facility selection Operations Management Dr. Ron Lembke

Process Strategies Design Produce Assemble Deliver MTS ATO MTO Price / Quality / Speed? Decoupling Point Make to Stock – ready on the shelf – Breyer’s Assemble to Order – parts waiting for an order – DQ Make to Order – Raw Materials waiting – Cold Stone Design Produce Assemble Deliver MTS ATO MTO

Make to Stock Processing Finished Materials Goods Storable products, most efficient processes, high-volume production Customers perceive delivery as instantaneous Harder to do with services: bus system, airline flights?

Make to Order Processing Finished Good Materials Stock Processing Materials Finished Good Demand is known. Longer Lead Time. No stockpile of finished goods. Delivered directly to consumer Customizable product, or where Freshness is important Services more likely MTO. Costs higher.

Assemble to Order Combination of MTS, MTO, benefits of both Stock Processing Stock Processing Finished Good Materials WIP subassemblies Combination of MTS, MTO, benefits of both Offer variety to customer, but quick delivery Efficiencies of MTS, work ahead on components during slow times Pre-cooked burgers, French fries

Remanufacturing Re-use components Can be ATO?

Process Strategy Variety Volume Process Focus (job shops) High Repetitive (cars, motorcycles) Medium Product Focus (steel, glass) Low Low Medium High Volume

Process Focus (Job Shop) Low volume, high variety, “do it all” “Job shop” environment (e.g. Kinko’s) High amount of flexibility Each job is different Relatively high cost per unit Very high flexibility

Process Selection / Evolution Products tend to move through the four stages over life cycle. Unit costs decrease as standardization increases, and production increases. Flexibility decreases as volume, standardization increase

Process Strategy Variety Volume project Manufacturing Cell Workcenter High Manufacturing Cell Workcenter Assembly Line Medium Continuous Process Low Low Medium High Volume

Process Flow Structures Job Shop - low standardization, every order is a different product, new design Batch Shop - Stable line of products, produced in batches Assembly Line - Discrete parts moving from workstation to workstation Continuous Flow - Undifferentiated flow of product (beer, paper, etc.)

Assembly-Line Balancing Situation: Assembly-line production. Many tasks must be performed, and the sequence is flexible Parts at each station same time Tasks take different amounts of time How to give everyone enough, but not too much work for the limited time.

Chipotle Production Line- Experience Meat Salsa Cheese/ Lettuce Beans & Rice 29 29 29 Sour Cream /Guacamole Warm Tortilla 44 29 29 Order Wrap Tortilla 44 67 Cashier 94

Chipotle Production Line- Experience Meat Salsa Cheese/ Lettuce Beans & Rice 29 29 29 Sour Cream /Guacamole Warm Tortilla 44 29 29 125 174 Order Wrap Tortilla 44 67 CT = 174 sec TH = 60*60 sec/hr = 20.7/hr 174 sec Cashier 94

Chipotle Production Line- Experience Meat Salsa Cheese/ Lettuce Beans & Rice 29 29 29 Sour Cream /Guacamole Warm Tortilla 44 29 29 145 154 Order Wrap Tortilla 44 67 CT = 154 sec TH = 60*60 sec/hr = 23.4/hr 154 sec Cashier 94 Increase (23.4-20.7)/20.7 = 13%

Chipotle Production Line- Efficient Probability Beans & Rice Meat Salsa Cheese/ Lettuce Sour Cream /Guacamole 29 Warm Tortilla 44 29 29 73 87 29 29 73 Order Wrap Tortilla 44 67 CT = 94 sec TH = 60*60 sec/hr = 38.3/hr 154 sec 94 Cashier

Target Cycle Times – 4 Stations Ord44 Mt 29 SC&G 29 Ch&L 29 Wrap 67 Pay 94 B&R 44 Tlla 29 Sls 29 73 125 102 CT = 125 Ord44 Mt 29 SC&G 29 Ch&L 29 Wrap 67 Pay 94 B&R 44 Tlla 29 Sls 29 117 96 87 CT = 117

Target Cycle Times- 5 Stations 73 67 87 CT = 94 Mt 29 Sls 29 Ch&L 29 B&R 44 Tlla 29 SC&G 29 Wrap 67 Ord44 Pay 94

Cycle Time Production Time in each day CT = = The more units you want to produce per hour, the less time a part can spend at each station. Cycle time = time spent at each spot D =400 units, OT = 12 hrs – 30 min setup, 90 min delivery = 10 hrs CT = 10 hrs/400 units = 0.025 hrs/unit 0.025 hrs * 60 min/hr = 1.5 min = 90 sec CT = Production Time in each day Required output per day (in units) = OT D

Number of Workstations Given required cycle time, find out the theoretical minimum number of stations Theoretical Minimum # Workstations = ST / CT = 325/90 = 3.611 = 4 (Always round up) Nt = Sum of task times (T) Cycle Time (C)

Scenario 1c- Precedence Diagram (times in seconds) D 60 A 30 I 60 C 45 E 20 H 10 B 60 G 10 F 30

Scenario 1c D A I C E H B G F (times in seconds) A&B candidates B is longer, so it gets chosen C can’t be considered yet, A has to be done before C D 60 A 30 I 60 C 45 E 20 H 10 B 60 G 10 F 30

Scenario 1c A&C one station, C next candidate, AB 90 sec C start of new position D,E,F next possibilities D 60 D too big to add with C F can work, added to C A 30 I 60 C 45 E 20 H 10 B 60 G 10 F 30

Scenario 1c D A I C E H B G F C&F now combined D, E, G eligible D,E too big, G will fit D 60 H now eligible, but too big A 30 I 60 C 45 E 20 H 10 B 60 G 10 F 30

Scenario 1c D A I C E H B G F CFG combined D, E, H eligible D biggest I not eligible until E & H done E biggest H can be added D 60 A 30 I 60 C 45 E 20 H 10 B 60 G 10 F 30

Scenario 1c D A I C E H B G F DEH combined I is finally eligible, But can’t be added to DEH D 60 A 30 I 60 C 45 E 20 H 10 B 60 G 10 F 30

Scenario 1c A B C D E F G H I Summary I is finally eligible, But can’t be added to DEH Summary A 30 B 60 C 45 D E 20 F G 10 H I 4 stations Longest time 90 sec Efficiency = 325 4 ∗ 90 =0.9028=90.3%

Scenario 1d A 30 B 60 C 45 D E 20 F G 10 H I A, B C, F, G D, E, H I Efficiency = ST / (CT * N) = 325 / (4*90) = 90.3% Balance Delay = 1 – 0.903 = 0.0972 = 10% Theoretical Minimum # Workstations = ST / CT = 325/90 = 3.611 = 4 (Always round up)

Precedence Requirements B A G 5 20 15 E I J C D 8 7 H 12 5 F 10 12 3 Why not put J with F&G? AB CDE HI FG J

Legal arrangements A C F D B E H G I J CT = maximum of workstation times A C F D B E H G I J 20 5 15 12 10 8 3 7 AC|BD|EG|FH|IJ = max(25,15,23,15,19) = 25 ABG|CDE|FHI|J = max(40,23,27,7) = 40 C|ADB|FG|EHI|J = max(5,35,18,32,7) = 35 AC BD EG FH IJ

Handling Long Tasks Long tasks make it hard to get efficient combinations. Consider splitting tasks, if physically possible. If not: Parallel workstations use skilled (faster) worker to speed up

Process Layout + Allows specialization - focus on one skill + Allows economies of scale - worker can watch several machines at once + High level of product flexibility -- Encourages large lot sizes -- Difficult to incorporate into JIT -- Makes cross-training difficult

Process Layout 8! = 8 * 7 * 6 * 5 * 4 * 3 *2 * 1 = 40,320 possible arrangements Rectilinear (taxi-cab) distances Minimize load-distance total

Process Example High Rack 1 10 HR2, 10 HR3, 30 Staging Staging Area 30 HR1, 30 HR2, 30 HR3, 50 Tent, 50 Soft Tent Storage 50 Staging Soft Goods Storage 50 Staging Administrative Office none Tool Crib none

Process Example High Rack 1 High Rack 2 High Rack 3 Admin Offices Soft Goods Tool Crib Tents Staging

Process Example Cost 10*2+10+10+30*2 +30*2+30 + 50 + 50 = 290 10 High 10*2+10+10+30*2 +30*2+30 + 50 + 50 = 290 10 High Rack 1 High Rack 2 High Rack 3 Admin Offices 10 10 30 30 30 Soft Goods Tool Crib Tents Staging 50 50

REL Diagram Rating Points A 100 E 50 I 25 O 5 U 0 Z -100 High Rack Storage 3 Staging Area Soft Goods Storage Tool Crib Administrative Office Tent Storage High Rack Storage 1 High Rack Storage 2 A E U X I

REL chart A X U E HR1 HR2 HR3 Office Tent Staging Soft Tools 5A (100) + E(50) + 2X(-100) = 350

REL chart A U E U HR1 HR2 Tent Office HR3 Staging Tools Soft 5A (100) + E(50) = 600

Fixed-Position Design is for stationary project Workers & equipment come to site Limited space at site Changing material needs Ship building (18,400 TEU, 2014) Highway construction

Summary Production Process selection very important Strategic considerations – decoupling Volume / Variety tradeoffs Maturation of processes over life cycle Little’s Law: FT = TH * INV