1. Processes, Technology, and Capacity

2. Lecture Outline Process Planning Process Analysis Process Innovation
Technology Decisions
Capacity Decisions

3. Process Planning Process Process design Process planning
a group of related tasks with specific inputs and outputs
Process design
tasks need to be done and coordinated among functions, people, and organizations
Process planning
converts designs into workable instructions for manufacture or delivery
Process strategy
an organization’s overall approach for physically producing goods and services

4. Process Selection Projects Batch production Mass production
one-of-a-kind production of a product to customer order
Batch production
systems process many different jobs through the system in groups or batches
Mass production
produces large volumes of a standard product for a mass market
Continuous production
used for very-high volume commodity products

5. Types of Processes PROJECT BATCH MASS CONT. Type of product
Type of customer
Product demand
Infrequent
Very stable

6. Types of Processes (cont.)
PROJECT
BATCH
MASS
CONT.
Demand volume
No. of different products
Infinite variety
Production system
Long-term project

7. Types of Processes (cont.)
PROJECT
BATCH
MASS
CONT.
Equipment
Primary type of work
Worker skills

8. Types of Processes (cont.)
PROJECT
BATCH
MASS
CONT.
Advantages
Dis-advantages
Non-repetitive, small customer base, expensive
Examples
Construction, shipbuilding, spacecraft

9. Process Selection with Break-Even Analysis
Cost
Fixed costs
constant regardless of the number of units produced
Variable costs
vary with the volume of units produced
Revenue
price at which an item is sold
Total revenue
is price times volume sold
Profit
difference between total revenue and total cost

10. Process Selection with Break-Even Analysis (cont.)
Total cost = fixed cost + total variable cost
TC = cf + vcv
Total revenue = volume x price
TR = vp
Profit = total revenue - total cost
Z = TR – TC = vp - (cf + vcv)

11. Process Selection with Break-Even Analysis (cont.)
Solving for Break-Even Volume
TR = TC
vp = cf + vcv
vp - vcv = cf
v(p - cv) = cf
v = cf
p - cv

12. Break-Even Analysis: Example
Fixed cost = cf = $2,000
Variable cost = cv = $5 per raft
Price = p = $10 per raft
Break-even point is
v = = = rafts cf
p - cv

13. Break-Even Analysis: Graph
Total cost line
Total revenue line
Break-even point
400 Units
$3,000 —
$2,000 —
$1,000 —

14. Process Selection Below , choose Above , choose Process A Process B
$2,000 + $5v = $10,000 + $2v =
v = rafts
Process A Process B
Below , choose
Above , choose

15. Process Selection: Graph
| | | |
Units
$20,000 —
$15,000 —
$10,000 —
$5,000 —
Total cost of process A
Total cost of process B
Choose process A
Choose process B
Point of indifference = 2,667 Units
Process Selection: Graph
Example 4.2

16. Process Planning and Analysis Tools
Process Planning: set of documents that detail manufacturing and service delivery specifications
assembly charts
operations sheets
quality-control check-sheets
process flow chart
process map

17. Assembly Chart for a Big Mac Sesame seed top bun Beef patty Salt
Cheese
Lettuce
Sauce
Onions
Middle bun
Pickles
Bottom bun
Wrapper SA
First-layer assembly
Second-layer assembly
Completed Big Mac
Assembly Chart
for a Big Mac

18. An Operations Sheet for a Plastic Part
Part name Crevice Tool
Part No
Usage Hand-Vac
Assembly No. 520
Oper. No. Description Dept. Machine/Tools Time
10 Pour in plastic bits 041 Injection molding 2 min
20 Insert mold 041 #076 2 min
30 Check settings , 67, min & start machine
40 Collect parts & lay flat 051 Plastics finishing 10 min
50 Remove & clean mold 042 Parts washer 15 min
60 Break off rough edges 051 Plastics finishing 10 min
An Operations Sheet for a Plastic Part

19. Process Analysis Process flowcharts
Symbolic representation of processes
Incorporate
nonproductive activities (inspection, transportation, delay, storage)
productive activities (operations)

20. Process Flowchart Symbols
Operations
Inspection
Transportation
Delay
Storage

21. A Process Map of Restaurant Service
Place order
Drink
Eat salad or soup
Eat dinner
Receives check
Gives payment to waiter
Collect change, leave tip
Fill in tip amount
Give order to waiter
Prepare dinner order
Prepare soup or salad order
Is order complete?
Give soup or salad order to chef
Give dinner order to chef
Get drinks for customer
Deliver salad or soup order to customer
Deliver dinner to customer
Deliver check to customer
Receive payment for meal
Cash or Credit?
Bring change to customer
Run credit card through
Return credit slip to customer
Collect tip Y N
Credit
Cash
Customer Waiter Salad Chef Dinner Chef
A Process Map of
Restaurant Service

22. Technology Decisions Financial justification of technology
Purchase cost
Operating Costs
Annual Savings
Revenue Enhancement
Replacement Analysis
Risk and Uncertainty
Piecemeal Analysis

23. A Technology Primer Product Technology Computer-aided design (CAD)
Group technology (GT)
Computer-aided engineering (CAE)
Collaborative product commerce (CPC)
Creates and communicates designs electronically
Classifies designs into families for easy retrieval and modification
Tests functionality of CAD designs electronically
Facilitates electronic communication and exchange of information among designers and suppliers

24. A Technology Primer (cont.)
Process Technology
Standard for exchange of product model data (STEP)
Computer-aided design and manufacture (CAD/CAM)
Computer aided process (CAPP)
E-procurement
Set standards for communication among different CAD vendors; translates CAD data into requirements for automated inspection and manufacture
Electronic link between automated design (CAD) and automated manufacture (CAM)
Generates process plans based on database of similar requirements
Electronic procurement of items from e-marketplaces, auctions, or company websites

25. A Technology Primer (cont.)
Manufacturing Technology
Computer numerically control (CNC)
Flexible manufacturing system (FMS)
Robots
Conveyors
Machines controlled by software code to perform a variety of operations with the help of automated tool changers; also collects processing information and quality data
A collection of CNC machines connected by an automated material handling system to produce a wide variety of parts
Manipulators that can be programmed to perform repetitive tasks; more consistent than workers but less flexible
Fixed-path material handling; moves items along a belt or overhead chain; “reads” packages and diverts them to different directions; can be very fast

26. A Technology Primer (cont.)
Manufacturing Technology
Automatic guided vehicle (AGV)
Automated storage and retrieval system (ASRS)
Process Control
Computer-integrated manufacturing (CIM)
A driverless truck that moves material along a specified path; directed by wire or tape embedded in floor or by radio frequencies; very flexible
An automated warehouse—some 26 stores high—in which items are placed in a carousel-type storage system and retrieved by fast-moving stacker cranes; controlled by computer
Continuous monitoring of automated equipment; makes real-time decisions on ongoing operation, maintenance, and quality
Automated manufacturing systems integrated through computer technology; also called e-manufacturing

27. A Technology Primer (cont.)
Information Technology
Business – to –Business (B2B)
Business – to –Customer (B2C)
Internet
Intranet
Extranet
Electronic transactions between businesses usually over the Internet
Electronic transactions between businesses and their customers usually over the Internet
A global information system of computer networks that facilitates communication and data transfer
Communication networks internal to an organization; can be password (i.e., firewall) protected sites on the Internet
Intranets connected to the Internet for shared access with select suppliers, customers, and trading partners

28. A Technology Primer (cont.)
Information Technology
Bar Codes
Radio Frequency Identification tags (RFID)
Electronic data interchange (EDI)
Extensive markup language (XML)
Enterprise resource planning (ERP)
A series of vertical lines printed on most packages that identifies item and other information when read by a scanner
An integrated circuit embedded in a tag that can send and receive information; a twenty-first century bar code with read/write capabilities
A computer-to-computer exchange of business documents over a proprietary network; very expensive and inflexible
A programming language that enables computer – to - computer communication over the Internet by tagging data before its is sent
Software for managing basic requirements of an enterprise, including sales & marketing, finance and accounting, production & materials management, and human resources

29. A Technology Primer (cont.)
Information Technology
Supply chain management (SCM)
Customer relationship management (CRM)
Decision support systems (DSS)
Expert systems (ES)
Artificial intelligence (AI)
Software for managing flow of goods and information among a network of suppliers, manufacturers and distributors
Software for managing interactions with customers and compiling and analyzing customer data
An information system that helps managers make decisions includes a quantitative modeling component and an interactive component for what-if analysis
A computer system that uses an expert knowledge base to diagnose or solve a problem
A field of study that attempts to replicate elements of human thought in computer processes; includes expert systems, genetic algorithms, neural networks, and fuzzy logic

30. Capacity Decisions Capacity Capacity utilization
maximum capability to produce
rated capacity is theoretical
effective capacity includes efficiency and utilization
Capacity utilization
percent of available time spend working
Capacity efficiency
how well a machine or worker performs compared to a standard output level
Capacity load
standard hours of work assigned to a facility
Capacity load percent
ratio of load to capacity

31. Capacity Expansion Strategies

32. Capacity Decisions (cont.)
Capacity increase depends on
volume and certainty of anticipated demand
strategic objectives
costs of expansion and operation
Best operating level
% of capacity utilization that minimizes unit costs
Capacity cushion
% of capacity held in reserve for unexpected occurrences

33. Economies of Scale
it costs less per unit to produce high levels of output
fixed costs can be spread over a larger number of units
production or operating costs do not increase linearly with output levels
quantity discounts are available for material purchases
operating efficiency increases as workers gain experience

34. Diseconomies of Scale Occur above a certain level of output
Diseconomies of Distribution
Diseconomies of Bureaucracy
Diseconomies of Confusion
Diseconomies of Vulnerability

35. Best Operating Level for a Hotel