Process Selection and Facility Layout Chapter 6 MIS 373: Basic Operations Management

Learning Objectives After this lecture, students will be able to Compare the four basic processing types Describe product layouts and their main advantages and disadvantages Describe process layouts and their main advantages and disadvantages Develop simple product layouts Develop simple process layouts MIS 373: Basic Operations Management

Process Selection Process selection Deciding on the way production of goods or services will be organized Occurs when: Planning of new products or services Technological changes in product or equipment Competitive pressure MIS 373: Basic Operations Management

Process Selection and System Design Forecasting (demand) Product and Service Design Technological Change Capacity Planning Process Selection Facilities and Equipment Layout Work Design MIS 373: Basic Operations Management

Process Strategy Key aspects of process strategy: Capital Intensity The mix of equipment and labor that will be used by the organization Process flexibility The degree to which the system can be adjusted to changes in processing requirements due to such factors as Product and service design changes Volume changes Changes in technology MIS 373: Basic Operations Management

New Process Strategy HBR 12/6/12 Three Examples of New Process Strategy There are three fundamental ways that companies can improve their processes in the coming decade: expand the scope of work managed by a company to include customers, suppliers, and partners; Shift to global, virtual, cross-organizational teams of specialized entities that are knitted together to serve customers To keep such a multiparty system from degenerating into chaos, virtual process teams must have aligned goals and support systems. target the increasing amount of knowledge work; and Big data analytics Crowdsourcing, e.g., innocentive.com, TopCoder.com & Heritage Health Prize HBR : Using the Crowd as an Innovation Partner reduce cycle times to durations previously considered impossible Agile processes Managers must speed the flow of information so that decisions can be made faster at all levels, from top to bottom. http://blogs.hbr.org/2012/12/in-my-last-post-i-1/

Process Selection Process choice is demand driven: Variety: How much? Equipment flexibility: To what degree? Volume: Expected output? Process Types MIS 373: Basic Operations Management

Process Selection Process choice is demand driven: Variety How much? Equipment flexibility To what degree? Volume Expected output? Process Types Job shop Small scale e.g., doctor, tailor Batch Moderate volume e.g., bakery Repetitive/assembly line High volumes of standardized goods or services e.g., automobiles Continuous Very high volumes of non- discrete goods e.g., petroleum products MIS 373: Basic Operations Management

Types of Processing Job Shop Batch Repetitive/ Assembly Continuous Description Customized goods or services Semi- standardized Standardized Highly standardized goods or services Advantages Able to handle a wide variety of work Flexibility; easy to add or change products or services Low unit cost, high volume, efficient Very efficient, very high volume Disadvantages Slow, high cost per unit, complex planning and scheduling Moderate cost moderate complexity Low flexibility, high cost of downtime Very rigid, lack of variety, costly to change, very high cost of downtime MIS 373: Basic Operations Management

Product-Process Matrix Flexibility/Variety Opportunity costs Volume Out of pocket costs The diagonal represents the “ideal” match Hybrid process are possible (e.g., job-shop & batch) Process choice may change as products goes through its life-cycles MIS 373: Basic Operations Management

Process Choice Effects Activity/ Function Projects Job Shop Batch Repetitive Continuous Cost estimation Simple to complex Difficult Somewhat routine Routine Cost per unit Very high High Moderate Low Equipment used Varied General purpose Special purpose Fixed costs Variable costs Very low Labor skills Low to high Marketing Promote capabilities capabilities; semi-standardized goods and services standardized goods and services Scheduling Complex, subject to change Complex Moderately complex Project: used for work that is none routine with a unique set of objective to be accomplished in a limited time frame, e.g., launching a new product, publishing a book MIS 373: Basic Operations Management

Product and Service Profiling Product or service profiling Linking key product or service requirements to process capabilities Key dimensions relate to Range of products or services that can be processed Expected order sizes Expected frequency of schedule changes MIS 373: Basic Operations Management

Discussion Work with a partner and match the following products or services with the best process Products/Services Processes Ice-cream manufacturer Job-shop Automatic carwash Batch Steel Repetitive Books Ice-cream manufacturer Batch Automatic carwash Repetitive Steel Continuous Books Airlines Surgery Job-shop Movie theater Sugar TVs Beer Flour Continuous Airlines Surgery Movie theater Sugar Tips: Think in terms of those key dimensions: Range of products or services that can be processed Expected order sizes Expected frequency of schedule changes Beer Flour

Technology Technological Innovation Technology The discovery and development of new or improved products, services, or processes for producing or providing them Technology The application of scientific discoveries to the development and improvement of products and services and/or the processes that produce or provide them Process technology includes methods, procedures, and equipment used to produce goods and provide services. RFID, online banking, 3D printing, … MIS 373: Basic Operations Management

Facilities Layout Layout The configuration of departments, work centers, and equipment, with particular emphasis on movement of work (customers or materials) through the system Facilities layout decisions arise when: Designing new facilities Re-designing existing facilities The basic objective of layout design is to facilitate a smooth flow of work, material, and information through the system. MIS 373: Basic Operations Management

Basic Layout Types Product layout Process layout Fixed position layout Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow Process layout Layout that can handle varied processing requirements Fixed position layout Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed Combination layouts MIS 373: Basic Operations Management

Used for Repetitive Processing Repetitive or Continuous Product Layouts Product layout Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow How? Raw materials or customer Finished item Station 2 3 4 Material and/or labor 1 Used for Repetitive Processing Repetitive or Continuous MIS 373: Basic Operations Management

Product Layouts Although product layouts often follow a straight line, a straight line is not always the best, and layouts may take an L, O, S, or U shape. Why? L: O: S: U: more compact, increased communication facilitating team work, minimize the material handling Image source: mdcegypt.com MIS 373: Basic Operations Management

Non-repetitive Processing: Process Layouts Layouts that can handle varied processing requirements Dept. A Dept. B Dept. D Dept. C Dept. F Dept. E Used for Intermittent processing Job Shop or Batch MIS 373: Basic Operations Management

Product Layouts Advantages High rate of output Low unit cost Labor specialization Low material handling cost per unit High utilization of labor and equipment Established routing and scheduling Routine accounting, purchasing, and inventory control Disadvantages Creates dull, repetitive jobs Poorly skilled workers may not maintain equipment or quality of output Fairly inflexible to changes in volume or product or process design Highly susceptible to shutdowns Preventive maintenance, capacity for quick repair and spare-parts inventories are necessary expenses Individual incentive plans are impractical MIS 373: Basic Operations Management

Process Layouts Advantages Can handle a variety of processing requirements Not particularly vulnerable to equipment failures General-purpose equipment is often less costly and easier and less costly to maintain It is possible to use individual incentive systems Disadvantages In-process inventories can be high Routing and scheduling pose continual challenges Equipment utilization rates are low Material handling is slow and less efficient Complicates supervision Special attention necessary for each product or customer Accounting, inventory control, and purchasing are more complex MIS 373: Basic Operations Management

Fixed Position Layouts Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed E.g., farming, firefighting, road building, home building, remodeling and repair, and drilling for oil MIS 373: Basic Operations Management

Combination Layouts Some operational environments use a combination of the three basic layout types: Hospitals Supermarket Shipyards Some organizations are moving away from process layouts in an effort to capture the benefits of product layouts MIS 373: Basic Operations Management

Line Balancing Line balancing The process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements Goal: Obtain task grouping that represent approximately equal time requirements since this minimizes idle time along the line and results in a high utilization of equipment and labor Why is line balancing important? It allows us to use labor and equipment more efficiently. To avoid fairness issues that arise when one workstation must work harder than another. Input Tasks sequencing (precedence diagram) Tasks time Operating time MIS 373: Basic Operations Management

Precedence Diagram Precedence diagram A diagram that shows elemental tasks and their precedence requirements Task Duration (min) Immediate predecessor a Select material 0.1 - b Make petals 1.0 c Select rhinestones 0.7 d Glue rhinestones 0.5 b, c e Package 0.2 MIS 373: Basic Operations Management

Cycle Time Cycle time The maximum time allowed at each workstation to complete its set of tasks on a unit Minimum Cycle Time = longest task time = 1.0 min Maximum Cycle time = Σt = sum of task time = 2.5 min MIS 373: Basic Operations Management

Output rate of a line Cycle time = Operating time per day Cycle time also establishes the output rate of a line Cycle time = Operating time per day Desired output rate Output rate = Operating time per day Cycle time MIS 373: Basic Operations Management

How Many Workstations are Needed? The required number of workstations is a function of: Desired output rate The ability to combine tasks into a workstation (theoretical) Minimum number of stations Nmin= ∑ t Cycle time where Nmin = theoretical minimum number of stations ∑ t = sum of task times MIS 373: Basic Operations Management

How Many Workstations are Needed? The required number of workstations is a function of: Desired output rate The ability to combine tasks into a workstation (theoretical) Minimum number of stations Q: Why this is a theoretical value? A: There are often scraps or idle times. Example: 4 tasks, each require 6 hours to finish A station can handle 8 hours amount of tasks a day. You will need 4 stations to complete all tasks, instead of 3. Nmin = (6+6+6+6) / 8 = 3 Nmin= ∑ t Cycle time where Nmin = theoretical minimum number of stations ∑ t = sum of task times MIS 373: Basic Operations Management

Designing Product Layouts Some Heuristic (Intuitive, may not result in optimal solution) Rules: Assign tasks in order of most following tasks Count the number of tasks that follow Assign tasks in order of greatest positional weight. Positional weight is the sum of each task’s time and the times of all following tasks. MIS 373: Basic Operations Management

Example: Assembly Line Balancing Arrange tasks (shown in the figure) into three workstations Assume the cycle time of each workstation is 1.2 min. Assign tasks in order of the most number of followers Break tie using greatest positional weight MIS 373: Basic Operations Management

Assign tasks in order of the most number of followers Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 a, c 2 3 Start with CT (1.2 min. in this example) MIS 373: Basic Operations Management

Assign tasks in order of the most number of followers Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 a, c a 1.1 2 3 MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 a, c c, b a 2 3 MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 a, c c, b a b 0.1 2 3 Break tie using greatest positional weight MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b 2 3 MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b - 2 3 Can’t assign c to this workstation because the workstation doesn’t have enough time (0.1) to complete c (0.7). MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b - 2 0.5 3 Start with CT (1.2 min. in this example) MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b - 2 0.5 d 3 MIS 373: Basic Operations Management

Revised Time Remaining Station Idle Time Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b - 2 0.5 d 0.0 3 e 1.0 Start with CT (1.2 min. in this example) MIS 373: Basic Operations Management

Idle time per cycle =0.1+0.0+1.0=1.1 Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b - 2 0.5 d 0.0 3 e 1.0 Idle time per cycle =0.1+0.0+1.0=1.1 MIS 373: Basic Operations Management

Layout a & b c & d e (0.1+1.0) (0.7+0.5) (0.2) Task Duration (min) Immediate predecessor a Select material 0.1 - b Make petals 1.0 c Select rhinestones 0.7 d Glue rhinestones 0.5 b, c e Package 0.2 MIS 373: Basic Operations Management

Measuring Effectiveness Balance delay (percentage of idle time) Percentage of idle time of a line Efficiency Percentage of busy time of a line Balance Delay = Idle time per cycle × 100% Nactual × Cycle time where Nactual = actual number of stations Efficiency = 100% − Balance Delay MIS 373: Basic Operations Management

Example: Measuring Effectiveness Workstation Time Remaining Eligible Assign Task Revised Time Remaining Station Idle Time 1 1.2 1.1 0.1 a, c c, b c a b - 2 0.5 d 0.0 3 e 1.0 Percentage of idle time = [(0.1 + 0 + 1.0) ÷ (3 × 1.2)] × 100% = 30.55% Efficiency = 100% – 30.55% = 69.45% MIS 373: Basic Operations Management

Exercise Problems (Textbook page 267) Using the information contained in the table shown, do each of the following: Draw a precedence diagram. Assuming an eight-hour workday, compute the cycle time needed to obtain an output of 400 units per day. Determine the minimum number of workstations required. Assign tasks to workstations using this rule: Assign tasks according to greatest number of following tasks. In case of a tie, use the tiebreaker of assigning the task with the longest processing time first. Compute the resulting percent idle time and efficiency of the system

Exercise Solution 1. Draw a precedence diagram

Exercise Solution 2. Assuming an eight-hour workday, compute the cycle time needed to obtain an output of 400 units per day Cycle time = Operating time per day = 480 minutes per day = 1.2 minutes per cycle Desired output rate 400 units per day

1.2 minutes per cycle time per station Exercise Solution 3. Determine the minimum number of workstations required Nmin= ∑ t = Cycle time where Nmin = theoretical minimum number of stations ∑ t = sum of task times 3.8 minutes per unit 1.2 minutes per cycle time per station = 3.17 stations ( round to 4)

Exercise Solution 4. Assign tasks to workstations using this rule: Assign tasks according to greatest number of following tasks. In case of a tie, use the tiebreaker of assigning the task with the longest processing time first.

Exercise Solution 5. Compute the resulting percent idle time and efficiency of the system Percent idle time = Idle time per cycle = 1.0 min. × 100% Nactual × Cycle time 4 × 1.2 min. = 20.83%

Designing Process Layouts The main issue in designing process layouts concerns the relative placement of the departments Measuring effectiveness key objectives in designing process layouts are to minimize: transportation cost distance time MIS 373: Basic Operations Management

Information Requirements In designing process layouts, the following information is required: A list of work stations (departments) to be arranged and their dimensions A projection of future work flows between the pairs of work centers The distance between locations - and the cost per unit of distance to move loads between them The amount of money to be invested in the layout A list of any special considerations The location of key utilities, access and exit points, etc. MIS 373: Basic Operations Management

Designing Process Layouts Minimize Transportation Costs Goal: Assign departments 1, 2, 3 to locations A, B, C in a way that minimizes transportation costs. Heuristic: Assign departments with the greatest interdepartmental work flow first to locations that are closet to each other. A B C MIS 373: Basic Operations Management

Example: Minimize Transportation Costs Distance 40 Location From\To A B C - 20 40 30 Trip A-B 20 B-C 30 A-C 40 A B C Closest 30 20 Place dept. 1&3 in A&B Work flow Department From\To 1 2 3 - 30 170 100 Pair Work flow 1-3 170 2-3 100 1-2 30 Highest work flow MIS 373: Basic Operations Management

Example: Minimize Transportation Costs 40 Place departments 1&3 in A&B (2 options) 2&3 have higher work flow than 1&2 (100>30) 2&3 should be located closer than 1&2 C closer to B than to A (30<40) Solution: 1 3 A B C 3 1 A B C A B C 30 20 Trip A-B 20 B-C 30 A-C 40 Pair Work flow 1-3 170 2-3 100 1-2 30 1 3 2 30 170 100 A B C MIS 373: Basic Operations Management

Closeness Ratings Allows the considerations of multiple qualitative criteria Input from management or subjective analysis Indicates the relative importance of each combination of department pairs Muther’s grid MIS 373: Basic Operations Management

Closeness Ratings Muther’s grid X O A U E I A Absolutely necessary E Very important I Important O Ordinary importance U Unimportant X Undesirable Dept. 1 Dept 2. Dept 3. Dept 4. Dept. 5 Dept 6. X O A U E I Suppose this is the floor plan of your company, how would you arrange the six departments? MIS 373: Basic Operations Management

Closeness Ratings: Example 1. List critical departments (either A or X): Dept. 1 Dept 2. Dept 3. Dept 4. Dept. 5 Dept 6. X O A U E I A 1-2 1-3 2-6 3-5 4-6 5-6 X 1-4 3-6 3-4 MIS 373: Basic Operations Management

Closeness Ratings: Example 2. Form a cluster of A links (beginning with the department that appears most frequently) A 1-2 1-3 2-6 3-5 4-6 5-6 Dept. 1 Dept 2. Dept 3. Dept 4. Dept. 5 Dept 6. X O A U E I 4 2 6 5 3. Take the remaining A links in order and add them to this cluster where possible (rearranging as necessary) Form separate clusters for departments that do not link with the main cluster. 4 2 6 1 5 3 MIS 373: Basic Operations Management

Closeness Ratings: Example 4. Graphically portray the X links Dept. 1 Dept 2. Dept 3. Dept 4. Dept. 5 Dept 6. X O A U E I X 1-4 3-6 3-4 1 4 3 6 5. Adjust A cluster as necessary. (in this case, the A cluster also satisfies the X cluster). 4 2 6 1 5 3 MIS 373: Basic Operations Management

Closeness Ratings: Example 4 Dept. 1 Dept 2. Dept 3. Dept 4. Dept. 5 Dept 6. X O A U E I 2 6 1 5 1 3 4 3 6 6. Fit cluster into arrangement (e.g., 2x3) may require some trial and error. Departments are considered close not only when they touch side to side but also when they touch corner to corner. 1 2 6 3 5 4 7. Check for possible improvements MIS 373: Basic Operations Management

Key Points Process choice is demand driven. Process type and layout are a function of expected demand volume and the degree of customization that will be needed. Each process type and layout type has advantages and limitations that should be clearly understood when making process selection and layout decisions. Line balancing helps improving the efficiency of product layouts whereas Muther’s grid helps deciding process layouts MIS 373: Basic Operations Management