Process Selection Chapter 3, Part 2

Intermittent Operations Intermittent operations: processes used to produce a variety of products with different processing requirements at lower volumes Project processes: used to make one-of-a-kind items to customer specifications Batch processes: used to make small quantities of products in batches based on customer orders or specifications Also called job shops

Repetitive Operations Repetitive operations: Processes used to make one product or a few standardized products in high volume Line process – also called an assembly line or flow shop May have assemble-to-order options Continuous process: operates continuously, produces a high volume of a fully standardized product Some firms use more than one type of process See Figure 3.6, page 67

Effects of Higher Volume (Economies of Scale) When volume increases product standardization usually increases product flexibility decreases more efficient processes can often be used automation is more likely to be cost-effective costs per unit decrease

Ways to Get More Product Flexibility when Volume is High Assemble-to-order Flexible manufacturing system Just-in-time

Making Low-Volume Goods Project or batch process More product variety – may be customized products Production based on customer orders General purpose equipment Higher skilled labor Higher work in process inventory Lower fixed costs Higher variable costs Make-to-order or assemble-to- order inventory policy Low vertical integration Making High-Volume Goods Line or continuous process Limited product variety Production based on a sales forecast Special purpose equipment Labor is usually less skilled Lower work in process inventory Higher fixed costs Lower variable costs Assemble-to-order or make-to- stock inventory policy High vertical integration

Vertical Integration Vertical integration is the degree to which a firm chooses to perform a variety of operations in the supply chain Backward integration means moving closer to primary raw materials (natural resources) Forward integration means moving closer to customers

Fixed and Variable Costs Fixed costs do not change with volume in the short term Examples: facilities, equipment, staff overhead Variable costs change with volume in the short term. Examples: labor, materials

Outsourcing Outsourcing means purchasing goods or services, rather than making them Offshore outsourcing means purchasing goods or services outside the country where they will be sold or used to produce a good or service Decisions about whether to produce or outsource are called make-or-buy decisions

Considerations in Make-or-Buy Decisions Strategic impact Will outsourcing help or hurt the firm's ability to achieve its strategic goals? Outsourcing non-core activities allows the firm to concentrate on its core competency It is usually not wise to outsource a core competency Your capabilities vs. supplier capabilities Available capacity Expertise to produce the good or service Quality Timely production or delivery (speed) Fixed and variable costs

Process Choice and Layout Intermittent operations usually use a process (department) layout: workers & equipment are grouped by function Different products may take different paths through the production process Repetitive operations use a product layout: workers & equipment are grouped in the order in which they will be needed

Process Choice and Inventory Policy

Process Design Tools Process flow analysis is a tool used to analyze and document the sequence of steps within a total process. Usually first step in process reengineering. Process reengineering is the fundamental rethinking and radical redesign of a process to bring about dramatic improvements in performance Cost Quality Time Flexibility Both operations processes and business processes can be re- engineered. Re-engineer a process before you automate it or computerize it.

Process Flow in a Pizza Restaurant

Automatic Identification of Objects Magnetic stripes are used on credit cards and vending cards Bar codes identify goods and packages Radio frequency identification (RFID) uses memory chips with tiny radio antennas to broadcast the location of goods to a wireless receiver RFID can identify goods inside a box. Useful in retailing and distribution Wal-Mart is requiring its top 100 vendors to supply RFID tags on all goods.

Vision Systems Vision systems are computer systems with artificial intelligence that can "see" objects Often built into robots. Used for sorting and positioning parts Used for inspection. Suspect parts can be inspected by a second vision system or by a person Can recognize images of hands, etc.

Biometrics: Automatic Identification of People Used to identify people and grant access to facilities, work areas, equipment, etc. Include a vision system, database, and artificial intelligence. Stored image of some portion of each user's body. May use hand, finger, or iris (colored part of eye). Vision system develops and stores images. Artificial intelligence compares body part of person seeking access with stored image.

Computer-Aided Design & Engineering Computer-aided design (CAD): use of computer software to design products Similar software is used to make animated films Computer-aided engineering (CAE): use of computer software to evaluate and improve product designs Specialized CAD/CAE software is used by architects and landscape architects

Advantages of CAD and CAE Marketing: Firms can design better products and get them to market faster Finance: CAD and CAE reduce design costs, production costs, and the number of major product and process changes needed Operations: It is easier to make the product and to maintain good quality. General: Easier to use concurrent engineering, value engineering, design for manufacturing, and to involve suppliers in product design.

Data Flow in Manufacturing Technology Computer aided design (CAD) Computer aided engineering (CAE) Product design data Final design? No Yes Final design data Computer aided process planning (CAPP) Manufacturing instructions Computer aided manufacturing (CAM) Finished goods

Computer Aided Manufacturing (CAM) CAM is the use of a computer to program and control re-programmable manufacturing equipment A traditional robot is a mechanical arm with a power supply and a computer that controls the movements of the arm

Uses of Robots Monotonous work, such as assembly line work Work that is hard or unhealthy for people, such as painting or nuclear plant cleanup Work that requires great precision Making integrated circuits Surgery – guided by a surgeon Products: Robot vacuum cleaners, lawn mowers, toys, assistants for disabled people

Flexible Manufacturing System (FMS) System that links flexible manufacturing cells and/or robot assembly lines under control of a central computer Includes materials handling Usually includes automated inspection

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 7s-20 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Advantages of FMS Technology Fast response - short manufacturing lead time High product flexibility High quality Very efficient if total production volume is high

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 7s-20 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Advantages of FMS Technology Low unit costs Very little direct labor Less material waste Very low work in process inventory

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 7s-20 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Disadvantages of FMS Technology High capital cost - need high total product volume to justify investment Expertise required to design and maintain the system

Computer Integrated Manufacturing (CIM) CAD, CAE and CAPP Flexible Manufacturing System Production planning and inventory management Purchasing Common databases and control systems for all these functions Provides product flexibility, cost savings, and short manufacturing lead times