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Manufacturing Processes
Operations ManagementDr. Ron Tibben-Lembke
Break-Even AnalysisGiven a fixed cost, how many do we
have to make to break even? A: buy units @ $200 B: Make on lathe: $80,000 + $75
each C: Machining Center: $200,000 +
$15 eachWhich is the cheapest way?
Break-Even Analysis If we only sell 1, which is cheapest? If we sell a gazillion, which is
cheapest?
Break-Even
Volume
Tota
l Cos
ts Outsource
Draw Lowest Fixed Cost Line
Break-Even
Volume
Tota
l Cos
ts Outsource
Lathe
Add Next-Lowest Cost
Break-Even
Volume
Tota
l Cos
ts Outsource
Lathe
Machining Center
Break-Even
Volume
Tota
l Cos
ts Outsource
Lathe
Machining Center
Outsource Lathe
MachiningCenter
Break-Even Analysis When does Lathe become cheaper? 80,000 + 75*x = 200*x 80,000 = 125*x x = 640
Break-Even Analysis
Volume
Tota
l Cos
ts Outsource
Lathe
Machining Center
Outsource Lathe
MachiningCenter
640
Break-Even Analysis When does Machining Center become
cheaper? 80,000 + 75*x = 200,000 + 15*x 120,000 = 60*x x = 2,000
Break-Even Analysis
Volume
Tota
l Cos
ts Outsource
Lathe
Machining Center
Outsource Lathe
MachiningCenter
640 2,000
Break-Even Analysis
How much do sales have to grow to make an investment pay off?
Fixed costs = $10,000Direct labor = $1.50 / unitMaterial = $0.75 / unitSales price = $4.00How many units must sell to break
even?
Break-Even Analysis
How to measure the value of a dollar saved tomorrow?
Can you say “Net Present Value?”
Break-Even Analysis
How to measure the value of a dollar saved tomorrow?
Can you say “Net Present Value?”I knew you could.
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.)
Process Strategy
Variety
Low
Medium
High
VolumeLow Medium High
project
Manufacturing Cell
Workcenter
AssemblyLine Continuous
Process
Process Strategy
Variety
Low
Medium
High
VolumeLow Medium High
Process Focus (job shops)
Repetitive (cars, motorcycles)
Product Focus (steel, glass)
Process Focus (Job Shop)Low volume, high variety, “do it all”“Job shop” environment (e.g. Kinko’s)High amount of flexibilityEach job is differentRelatively high cost per unitVery high flexibility
Process Selection / EvolutionProducts 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
Design for Manufacturing -Before
Design for Manufacturing-After
Designing the SystemHow do we decide where to put
things?
Layout TypesProject or Fixed-position layoutProcess-oriented layoutProduct-oriented layout Office layoutWarehouse layoutRetail/service layout
Project or Fixed-Position
Design is for stationary project Workers & equipment come to siteComplicating factors
Limited space at site Changing material needs
Examples Ship building Highway construction
Process-Oriented Layout
Design places departments with large flows of material or people together
Dept. areas have similar processes e.g., All x-ray machines in same area
Used with process-focused processesExamples
Hospitals Machine shops
Process-Oriented Layout Floor Plan
Office
Tool Room
Drill Presses
Table Saws
© 1995 Corel Corp.
© 1995 Corel Corp.
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
Construct ‘from-to-matrix’Determine space needs for each dept.Develop initial schematic diagramDetermine layout cost, Xij • Cij
By trial-and-error, improve initial layoutPrepare detailed plan
Includes factors besides cost
Process-Oriented Layout Steps
Process-Oriented ExampleYou work in facilities engineering. You want to find the cost of this layout. The cost of moving 1 load between adjacent dept. is $1. The cost between nonadjacent dept. is $2.
60 ft.
40 ft.Dept. 1 Dept. 2 Dept. 3
Dept. 4 Dept. 5 Dept. 6
There are 6! or 720 possibilities! Clearly, we can’t look at them all.
50 100 0 0 20
30 50 10 0
20 0 100
50 0
0
From-to-Matrix
5
1 2 3 4 5 6Department
Dept.
1234
6
Number of Trips
20
100
50 30
50
50
10
20
Schematic Diagram & CostDept. Dept. Cost
1 3 $ 2001 2 $ 501 6 $ 404 2 $ 504 3 $ 404 5 $ 502 5 $ 102 3 $ 303 6 $ 100
Total Cost $570
1 2 3
64 5100
20
30
50 100
50
50
10
20
Schematic Diagram & CostDept. Dept. Cost
1 2 $ 501 3 $ 1001 6 $ 204 2 $ 504 3 $ 404 5 $ 502 5 $ 102 3 $ 603 6 $ 100
Total Cost $480
2 1 3
64 5
100
Product-Oriented Layout
Facility organized around productDesign minimizes line imbalance
Delay between work stationsTypes: Fabrication line; assembly lineExamples
Auto assembly line Brewery Paper manufacturing.
Cellular Layout (Work Cells)Special case of process-oriented
layoutConsists of different machines brought
together to make a productMay be temporary or permanentExample: Assembly line set up to
produce 3000 identical parts in a job shop
Work Cell Floor Plan
Office
Tool RoomWork Cell
Saws Drills
Work Cell Advantages
Reduces:InventoryFloor spaceDirect labor costs
Increases:Equipment utilizationEmployee participationQuality
Work Cell Layout+ Facilitates cross-training+ Can easily adjust production volumes+ Easy to incorporate into JIT-- Requires higher volumes to justify-- May require more capital for
equipment
Office Layout Example
Relationship Chart
12
3
Ordinary closeness: President (1) & costing (2)
Absolutely necessary: President (1) & secretary (4)
4
I = Important; U = Unimportant
1 PresidentO
2 Costing UA A
3 Engineering IO
4 President’s Secretary
Relationship Chart
A
OE
OU
UU
UU
U
IO
II
IO
UU
UU
UU
UO
UU
I
IU
UEU
IUE
UUA
UA
II
U
U
E
U
34
21
8765
910
1 23 4 5
67 8 9
10
Assembly-Line Balancing
Assembly-Line BalancingSituation: Assembly-line production.Many tasks must be performed, and
the sequence is flexibleParts at each station same timeTasks take different amounts of timeHow to give everyone enough, but not
too much work for the limited time.
Product-Oriented Layout
Belt Conveyor
Operations
A
Precedence Diagram
Draw precedence graph (times in seconds)
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
Cycle Time 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
C = 800 min / 32 = 25 min 800 min = 13:20C =
Production Time in each day
Required output per day (in units)
Number of WorkstationsGiven required cycle time, find out the
theoretical minimum number of stations
Nt = 97 / 25 = 3.88 = 4 (must round up)
Nt =Sum of task times (T)
Cycle Time (C)
AssignmentsAssign tasks by choosing tasks:
with largest number of following tasks OR by longest time to complete
Break ties by using the other rule
Number of Following TasksNodes # afterC 6D 5A 4B,E,F 3G,H 2I 1
Choose C first, then, if possible,add D to it, then A, if possible.
A
Precedence Diagram
Draw precedence graph (times in seconds)
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
Number of Following TasksNodes # afterA 4B,E,F 3G,H 2I 1
A could not be added to firststation, so a new station must becreated with A.
B, E, F all have 3 stations after,so use tiebreaker rule: time.B = 5E = 8F = 3 Use E, then B, then F.
A
Precedence Diagram
E cannot be added to A, but E can be added to C&D.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
Next priority B can be added to A.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
Next priority B can be added to A.Next priority F can’t be added to either.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
Number of Following TasksNodes #
afterG,H 2
I 1
G and H tie on number coming after. G takes 15, H is 12, so G goes first.
A
Precedence Diagram
G can be added to F.H cannot be added.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
I is next, and can be added to H, but J cannot be added also.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
Calculate EfficiencyWe know that at least 4 workstations
will be needed. We needed 5.
= 97 / ( 5 * 25 ) = 0.776We are paying for 125 minutes of
work, where it only takes 97.
Efficiencyt =Sum of task times (T)
Actual # WS * Cycle Time
A
Precedence Diagram
Try choosing longest activities first.A is first, then G, which can’t be added to A.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
H and I both take 12, but H has more coming after it, then add I.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
D is next, followed by E, so we combine them, but we could have combined E&G. We’ll try that later.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
J is next, all alone, followed by C and B.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
F is last. We end up with 6 workstations.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
Go back and try combining G and E instead of D and E.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
J is next, all alone. C is added to D, and B is added to A.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Can we do better?
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
A
Precedence Diagram
F can be added to C&D. Five WS again.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
Reduced CTEfficiency = 97/100 = 0.97. Much
better.If we set CT = 20, we can produce 3
units per hour. Goal of 32 units can be produced in 20
* 32 = 640 minutes.Significant savings over original 800
minutes.
A
Can we do better?
If we have to use 5 stations, we can get a solution with CT = 20.
C
FD
B
E
H
G
I J20
515
125 10
8
3
7
12
Calculate EfficiencyWith 5 WS at CT = 20
= 97 / ( 5 * 20 ) = 0.97We are paying for 100 minutes of
work, where it only takes 97.
Efficiencyt =Sum of task times (T)
Actual # WS * Cycle Time
Output and Labor Costs With 20 min CT, and 800 minute workday Output = 800 min / 20 min/unit = 40 Don’t need to work 800 min Goal 25 units: 25 * 20 = 500 min/day 5 workers * 500 min = 2,500 labor min. We were trying to achieve
4 stations * 800 min = 3,200 labor min. Significant labor cost savings
Handling Long TasksLong 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
Warehouse Layout Design balances space (cube)
utilization & handling cost Similar to process layout
Items moved between dock & various storage areas
Optimum layout depends onVariety of items
storedNo. items picked
© 1995 Corel Corp.
Warehouse Flow
Receiving Shipping
Warehouse Layout
Try to organize storage in such a way that order pickerscan move through the product in a logical and timely manner.
Warehouse Layout
Fastest near the frontFastest within easy reachBulk storage vs. Single item pickingSerpentine vs. oval picking orderRestocking: frequency, safety stock
Cross-Docking
Transferring goods from incoming trucks at receiving docks to outgoing trucks at shipping docks
Avoids placing goods into storage
In-comingOutgoing
© 1984-1994 T/Maker Co.© 1995 Corel Corp.
Retail/Service Layout
Design maximizes product exposure to customers, profitability per square foot
Decision variables Store flow pattern Allocation of (shelf) space to products
Types Grid design Free-flow design
Video
Retail/Service Layout Grid Design
Office Carts Check-out
Grocery StoreMeatBread
Milk
Retail/Service Layout Free-Flow Design
Feature
Display Table
Trans.Counter
Apparel Store
Retail Store Flow Guidelines
“Prisoner” aisles make you enter store in a particular route, and pass by certain displays
Often contain less profitable (for the store) brands
“Decompression Zone” people walk past first rows of items before settling into shopping mode.
Retail Store Flow Guidelines
Bakery, coffee shop, restaurant spread aromas by entrance to stimulate taste buds
Siren song of the Starbucks (Safeway)
Food samplers throughout store do same
Retail Store Flow Guidelines
Frequently purchased items at far sides of stores so you have to go through entire store (produce or meat).
Profitable sections like produce placed where you keep running into them
Milk
Meat
Produce
Retail Store Flow Guidelines
Major items in middle of aisles so you have to walk down into middle of aisle (Cereal, peanut butter)
‘Power items’ on both sides of aisle so you have to look at both sides
Cereal
PeanutButter
Retail Store Flow Guidelines
Quality of produce section important in customer decisions about which stores to visit, so produce is often prominently displayed upon entrance
People like to see what they’re looking for, not read signs
Cereal
PeanutButter
produce
Retail Store Flow Guidelines
End caps for high-visibility sale items
Large quantities of inventory serve as “psychic stock”
If there is a lot of it, it must be on sale
Stimulates sales
© 1995
Corel Corp.
Retail Store Flow Guidelines Eliminate cross-over
aisles: less wasted floor
space, you have to look at
more items, the more time you
spend in the store, the more you will buy.
Shelf Space Planogram
Computerized tool for shelf-space management
Generated from store’s scanner data on sales
Often supplied by manufacturer Example: P&G
2 ft.
5 facings
VO-5
VO-5
VO-5
SUA
VE
SUA
VE
VO-5
PER
T
PER
T
PER
T
PER
T
PER
TVO
-5
Shelf PlacementCompanies prefer to be at eye-level or
at child-reaching levelClose to leading brands or high-draw
items: snack foods next to the peanut butter or across from the cereal:
Lots of kids visit the area
Slotting Fees Manufacturer pays retailer to get a product into a
store 35,000 new grocery products per year Grocery stores often stock 30,000 items Impossible to evaluate all new products to choose
the best new ones Slotting fees guarantee grocer profits on a product,
help balance risk of trying unknown product. Grocery is a narrow margin business, slotting fees
can represent a significant revenue source.
Slotting Fees Senate Small Business Committee held
hearings on them in 2000. Industry refused to cooperate with GAO. Growers of produce (not just brand names)
now getting involved and complaining. Small businesses claim they can’t afford the
big payments big companies can make. Advocates say small companies can “put
their money where their mouths are” just like anyone else
Perimeter Items People follow perimeter pattern Sale items on end – everyone sees Half of a store’s profit comes from items on
the perimeter Breakfast cereal brings in the most dollars
per square foot Manufacturer incentives increase
profitability of soft drinks “Anchors” at ends of a section: milk and
butter at opposite ends of dairy case