Facilities Location and Process Design

FACILITIES LOCATION AND PROCESS DESIGN
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INTRODUCTION
Learning objectives After studying this lesson, you should be able to: Describe the concepts of requirement of facilities Identify the various factors to be considered for selection of layout. Distinguish among the alternative patterns of plant layout Discuss the various factors influencing the choice of an initial layout and its subsequent modification 1.1 INTRODUCTION The entrepreneur conducts the detailed analysis comprising of technical, financial, economic and market study before laying down a comprehensive business plan. For implementation of this plan, he has to take various crucial decisions namely location of business, layout (the arrangement of physical facilities), designing the product, production planning and control and maintaining good quality of product. Investment in analyzing the aspects of plant location and the appropriate plant layout can help an entrepreneur achieve economic efficiencies in business operations. These decisions lay the foundation of the business of small entrepreneurs. 1.2 LOCATIONAL ANALYSIS Locational analysis is a dynamic process where entrepreneur analyses and compares the appropriateness or otherwise of alternative sites with the aim of selecting the best site for a given enterprise. It consists the following: (a) Demographic Analysis: It involves study of population in the area in terms of total population (in no.), age composition, per capita income, educational level, occupational structure etc.
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(b) Trade Area Analysis: It is an analysis of the geographic area that provides continued clientele to the firm. He would also see the feasibility of accessing the trade area from alternative sites. (c) Competitive Analysis: It helps to judge the nature, location, size and quality of competition in a given trade area. (d) Traffic analysis: To have a rough idea about the number of potential customers passing by the proposed site during the working hours of the shop, the traffic analysis aims at judging the alternative sites in terms of pedestrian and vehicular traffic passing a site. (e) Site economics: Alternative sites are evaluated in terms of establishment costs and operational costs under this. Costs of establishment is basically cost incurred for permanent physical facilities but operational costs are incurred for running business on day to day basis, they are also called as running costs. 1.3 SIGNIFICANCE From the discussion above, we have already learnt that location of a plant is an important entrepreneurial decision because it influences the cost of production and distribution to a great extent. In some cases, you will find that location may contribute to even 10% of cost of manufacturing and marketing. Therefore, an appropriate location is essential to the efficient and economical working of a plant. A firm may fail due to bad location or its growth and efficiency may be restricted. 1.4 PLANT LAYOUT The efficiency of production depends on how well the various machines; production facilities and employees amenities are located in a plant. Only the properly laid out plant can ensure the smooth and rapid movement of material, from the raw material stage to the end product stage. Plant layout encompasses new layout as well as improvement in the existing layout. It may be defined as a technique of locating machines, processes and plant services within the factory so as to achieve the right quantity and quality of output at the lowest possible cost of manufacturing. It involves a judicious arrangement of production facilities so that workflow is direct. 1.5 DEFINITION A plant layout can be defined as follows: Plant layout refers to the arrangement of physical facilities such as machinery, equipment, furniture etc. with in the factory building in such a manner so as to have quickest flow of material at the lowest cost and with the least amount of handling in processing the product from the receipt of material to the shipment of the finished product.
According to Riggs, the overall objective of plant layout is to design a physical arrangement that most economically meets the required output quantity and quality. According to J. L. Zundi, Plant layout ideally involves allocation of space and arrangement of equipment in such a manner that overall operating costs are minimized. 1.6 IMPORTANCE Plant layout is an important decision as it represents long-term commitment. An ideal plant layout should provide the optimum relationship among output, floor area and manufacturing process. It facilitates the production process, minimizes material handling, time and cost, and allows flexibility of operations, easy production flow, makes economic use of the building, promotes effective utilization of manpower, and provides for employees convenience, safety, comfort at work, maximum exposure to natural light and ventilation. It is also important because it affects the flow of material and processes, labour efficiency, supervision and control, use of space and expansion possibilities etc. 1.7 LAYOUT OBJECTIVES An efficient plant layout is one that can be instrumental in achieving the following objectives: (a) Proper and efficient utilization of available floor space (b) To ensure that work proceeds from one point to another point without any delay (c) Provide enough production capacity. (d) Reduce material handling costs (e) Reduce hazards to personnel (f) Utilise labour efficiently (g) Increase employee morale (h) Reduce accidents (i) Provide for volume and product flexibility (j) Provide ease of supervision and control (k) Provide for employee safety and health (l) Allow ease of maintenance (m) Allow high machine or equipment utilization (n) Improve productivity
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1.8 GENERAL PRINCIPLES Plant layout is often a compromise between a number of factors such as: The need to keep distances for transfer of materials between plant/storage units to a minimum to reduce costs and risks; The geographical limitations of the site; Interaction with existing or planned facilities on site such as existing roadways, drainage and utilities routings; Interaction with other plants on site; The need for plant operability and maintainability; The need to locate hazardous materials facilities as far as possible from site boundaries and people living in the local neighbourhood; The need to prevent confinement where release of flammable substances may occur; The need to provide access for emergency services; The need to provide emergency escape routes for on-site personnel; The need to provide acceptable working conditions for operators.
The most important factors of plant layout as far as safety aspects are concerned are those to: Prevent, limit and/or mitigate escalation of adjacent events (domino); Ensure safety within on-site occupied buildings; Control access of unauthorized personnel; Facilitate access for emergency services.
1.9 TYPES OF LAYOUT The plant layout facilitates the arrangement of machines, Equipment and other physical facilities in a planned manner within the factory premises. An entrepreneur must possess an expertise to lay down a proper layout for new or existing plants. It differs from plant to plant, from location to location and from industry to industry. But the basic principles governing plant layout are more or less same. As far as small business is concerned, it requires a smaller area or space and can be located in any kind of building as long as the space is available and it is convenient. Plant layout for Small Scale business is closely linked with the factory building and built up area.
From the point of view of plant layout, we can classify small business or unit into three categories: 1. Manufacturing units 2. Traders 3. Service Establishments 1. Manufacturing units In case of manufacturing unit, plant layout may be of four types: (a) Product or line layout (b) Process or functional layout (c) Fixed position or location layout (d) Combined or group layout 1.10 PRODUCT OR LINE LAYOUT Under this, machines and equipments are arranged in one line depending upon the sequence of operations required for the product. The materials move form one workstation to another sequentially without any backtracking or deviation. Under this, machines are grouped in one sequence. Therefore materials are fed into the first machine and finished goods travel automatically from machine to machine, the output of one machine becoming input of the next, e.g. in a paper mill, bamboos are fed into the machine at one end and paper comes out at the other end. The raw material moves very fast from one workstation to other stations with a minimum work in progress storage and material handling. The grouping of machines should be done keeping in mind the following general principles. a. All the machine tools or other items of equipments must be placed at the point demanded by the sequence of operations b. There should no points where one line crossed another line. c. Materials may be fed where they are required for assembly but not necessarily at one point. d. All the operations including assembly, testing packing must be included in the line
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1.11 ADVANTAGES OF PRODUCT LAYOUT a. Smooth and uninterrupted operations b. Continuous flow of work c. Lesser investment in inventory and work in progress d. Optimum use of floor space e. Shorter processing time or quicker output f. Less congestion of work in the process g. Simple and effective inspection of work and simplified production control h. Lower cost of manufacturing per unit 1.12 DISADVANTAGES Product layout suffers from following drawbacks: a. High initial capital investment in special purpose machine b. Heavy overhead charges c. Breakdown of one machine will hamper the whole production process d. Lesser flexibility as specially laid out for particular product. 1.13 SUITABILITY Product layout is useful under following conditions: 1) Mass production of standardized products 2) Simple and repetitive manufacturing process 3) Operation time for different process is more or less equal 4) Reasonably stable demand for the product 5) Continuous supply of materials Therefore, the manufacturing units involving continuous manufacturing process, producing few standardized products continuously on the firms own specifications and in anticipation of sales would prefer product layout e.g. chemicals, sugar, paper, rubber, refineries, cement, automobiles, food processing and electronics etc.
1.14 PROCESS LAYOUT In this type of layout machines of a similar type are arranged together at one place. E.g. Machines performing drilling operations are arranged in the drilling department, machines performing casting operations be grouped in the casting department. Therefore the machines are installed in the plants, which follow the process layout. Hence, such layouts typically have drilling department, milling department, welding department, heating department and painting department etc. The process or functional layout is followed from historical period. It evolved from the handicraft method of production. The work has to be allocated to each department in such a way that no machines are chosen to do as many different job as possible i.e. the emphasis is on general purpose machine. The work, which has to be done, is allocated to the machines according to loading schedules with the object of ensuring that each machine is fully loaded. 1.15 ADVANTAGES Process layout provides the following benefits a) Lower initial capital investment in machines and equipments. There is high degree of machine utilization, as a machine is not blocked for a single product b) The overhead costs are relatively low c) Change in output design and volume can be more easily adapted to the o ut pu t of variety of products d) Breakdown of one machine does not result in complete work stoppage e) Supervision can be more effective and specialized f) There is a greater flexibility of scope for expansion. 1.16 DISADVANTAGES Product layout suffers from following drawbacks a. Material handling costs are high due to backtracking b. More skilled labour is required resulting in higher cost. c. Time gap or lag in production is higher d. Work in progress inventory is high needing greater storage space e. More frequent inspection is needed which results in costly supervision
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1.17 SUITABILITY Process layout is adopted when 1. Products are not standardized 2. Quantity produced is small 3. There are frequent changes in design and style of product 4. Job shop type of work is done 5. Machines are very expensive Thus, process layout or functional layout is suitable for job order production involving non-repetitive processes and customer specifications and non- standardized products, e.g. tailoring, light and heavy engineering products, made to order furniture industries, jewelry. 1.18 FIXED POSITION OR LOCATION LAYOUT In this type of layout, the major product being produced is fixed at one location. Equipment labour and components are moved to that location. All facilities are brought and arranged around one work center. This type of layout is not relevant for small scale entrepreneur. 1.19 ADVANTAGES Fixed position layout provides the following benefits a) It saves time and cost involved on the movement of work from one workstation to another. b) The layout is flexible as change in job design and operation sequence can be easily incorporated. c) It is more economical when several orders in different stages of progress are being executed simultaneously. d) Adjustments can be made to meet shortage of materials or absence of workers by changing the sequence of operations. 1.20 DISADVANTAGES Fixed position layout has the following drawbacks a. Production period being very long, capital investment is very heavy b. Very large space is required for storage of material and equipment near the product.
c. As several operations are often carried out simultaneously, there is possibility of confusion and conflicts among different workgroups. Suitability: The fixed position layout is followed in following conditions 1. Manufacture of bulky and heavy products such as locomotives, ships, boilers, generators, wagon building, aircraft manufacturing, etc. 2. Construction of building, flyovers, dams. 3. Hospital, the medicines, doctors and nurses are taken to the patient (product). 1.21 COMBINED LAYOUT Certain manufacturing units may require all three processes namely intermittent process (job shops), the continuous process (mass production shops) and the representative process combined process [i.e. miscellaneous shops]. In most of industries, only a product layout or process layout or fixed location layout does not exist. Thus, in manufacturing concerns where several products are produced in repeated numbers with no likelihood of continuous production, combined layout is followed. Generally, a combination of the product and process layout or other combination are found, in practice, e.g. for industries involving the fabrication of parts and assembly, fabrication tends to employ the process layout, while the assembly areas often employ the product layout. In soap, manufacturing plant, the machinery manufacturing soap is arranged on the product line principle, but ancillary services such as heating, the manufacturing of glycerin, the power house, the water treatment plant etc. are arranged on a functional basis. 1.22 TRADERS When two outlets carry almost same merchandise, customers usually buy in the one that is more appealing to them. Thus, customers are attracted and kept by good layout i.e. good lighting, attractive colours, good ventilation, air conditioning, modern design and arrangement and even music. All of these things mean customer convenience, customer appeal and greater business volume. The customer is always impressed by service, efficiency and quality. Hence, the layout is essential for handling merchandise, which is arranged as per the space available and the type and magnitude of goods to be sold keeping in mind the convenience of customers. There are three kinds of layouts in retail operations today. 1. Self service or modified self service layout 2. Full service layout 3. Special layouts
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The self-service layouts, cuts down on sales clerks time and allow customers to select merchandise for themselves. Customers should be led through the store in a way that will expose them to as much display area as possible, e.g. Grocery Stores or department stores. In those stores, necessities or convenience goods should be placed at the rear of the store. The use of color and lighting is very important to direct attention to interior displays and to make the most of the stores layout. All operations are not self-service. Certain specialty enterprises sell to fewer numbers of customers or higher priced product, e.g. Apparel, office machines, sporting goods, fashion items, hardware, good quality shoes, jewelry, luggage and accessories, furniture and appliances are all examples of products that require time and personal attention to be sold. These full service layouts provide area and equipment necessary in such cases. Some layouts depend strictly on the type of special store to be set up, e.g. TV repair shop, soft ice cream store, and drive-in soft drink stores are all examples of business requiring special design. Thus, good retail layout should be the one, which saves rent, time and labour. 1.23 SERVICES CENTERS AND ESTABLISHMENT Services establishments such as motels, hotels, restaurants, must give due attention to client convenience, quality of service, efficiency in delivering services and pleasing office ambience. In todays environment, the clients look for ease in approaching different departments of a service organization and hence the layout should be designed in a fashion, which allows clients quick and convenient access to the facilities offered by a service establishment. 1.24 FACTORS INFLUENCING LAYOUT While deciding his factory or unit or establishment or store, a small-scale businessman should keep the following factors in mind: a) Factory building: The nature and size of the building determines the floor space available for layout. While designing the special requirements, e.g. air conditioning, dust control, humidity control etc. must be kept in mind.
b) Nature of product: product layout is suitable for uniform products whereas process layout is more appropriate for custom-made products. c) Production process: In assembly line industries, product layout is better. In job order or intermittent manufacturing on the other hand, process layout is desirable.
d) Type of machinery: General purpose machines are often arranged as per process layout while special purpose machines are arranged according to product layout
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Repairs and maintenance: Machines should be so arranged that adequate space is available between them for movement of equipment and people required for repairing the machines. Human needs: Adequate arrangement should be made for cloakroom, washroom, lockers, drinking water, toilets and other employee facilities, proper provision should be made for disposal of effluents, if any. Plant environment: Heat, light, noise, ventilation and other aspects should be duly considered, e.g. paint shops and plating section should be located in another hall so that dangerous fumes can be removed through proper ventilation etc. Adequate safety arrangement should also be made.Thus, the layout should be conducive to health and safety of employees. It should ensure free and efficient flow of men and materials. Future expansion and diversification may also be considered while planning factory layout.
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1.25 DYNAMICS OF PLANT LAYOUT Plant layout is a dynamic rather than a static concept meaning thereby if once done it is not permanent in nature rather improvement or revision in the existing plant layout must be made by keeping a track with development of new machines or equipment, improvements in manufacturing process, changes in materials handling devices etc. But, any revision in layout must be made only when the savings resulting from revision exceed the costs involved in such revision. Revision in plant layout may become necessary on account of the following reasons: a) Increase in the output of the existing product b) Introduction of a new product and diversification c) Technological advancements in machinery, material, processes, product d) design, fuel etc. e) Deficiencies in the layout unnoticed by the layout engineer in the beginning. 1.26 APPLICABILITY OF PLANT LAYOUT Plant layout is applicable to all types of industries or plants. Certain plants require special arrangements which, when incorporated make the layout look distinct from the types already discussed above. Applicability of plant layout in manufacturing and service industries is discussed below. In case of the manufacturing of detergent powder, a multistorey building is specially constructed to house the boiler. Materials are stored and poured into the boiler at different stages on different floors. Other facilities are also provided around the boiler at different stations. Another applicability of this layout is the manufacture of talcum powder. Here machinery is arranged vertically i.e. from top to bottom. Thus,
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material is poured into the first machine at the top and powder comes out at the bottom of the machinery located on the ground floor. Yet another applicability of this layout is the newspaper plant, where the time element is of supreme importance, the accomplishment being gapped in seconds. Here plant layout must be simple and direct so as to eliminate distance, delay and confusion. There must be a perfect coordination of all departments and machinery or equipments, as materials must never fail. Plant layout is also applicable to five star hotels as well. Here lodging, bar, restaurant, kitchen, stores, swimming pool, laundry, shaving saloons, shopping arcades, conference hall, parking areas etc. should all find an appropriate place in the layout. Here importance must be given to cleanliness, elegant appearance, convenience and compact looks, which attract customers. Similarly plant layout is applicable to a cinema hall, where emphasis is on comfort, and convenience of the cinemagoers. The projector, screen, sound box, fire fighting equipment, ambience etc. should be of utmost importance. A plant layout applies besides the grouping of machinery, to an arrangement for other facilities as well. Such facilities include receiving and dispatching points, inspection facilities, employee facilities, storage etc. Generally, the receiving and the dispatching departments should be at either end of the plant. The storeroom should be located close to the production, receiving and dispatching centers in order to minimize handling costs. The inspection should be right next to other dispatch department as inspections are done finally, before dispatch. The maintenance department consisting of lighting, safety devices, fire protection, collection and disposal of garbage, scrap etc. should be located in a place which is easily accessible to all the other departments in the plant. The other employee facilities like toilet facilities, drinking water facilities, first aid room, cafeteria etc. Can be a little away from other departments but should be within easy reach of the employees. Hence, there are the other industries or plants to which plant layout is applicable. 1.27 MODEL CLASSIFICATION Model: Definition A Model is a selected simplified representation of the essential or relevant entities (modules) of some specific reality and their characteristics (fields, factors, features). In other words A model is an idealization of part of the real world that helps in the analysis of a problem. Classification The basic types of Models are:
-Iconic -Analogue - Symbolic Iconic: Definition An Iconic Model is a look-alike representation of some specific entity (e.g. a house) Classification Iconic Models can be represented in: - Two Dimensions : e.g. photos, drawings, etc. - Three Dimensions : e.g. scale model Remark: A scale model can be a: - reduction (scaled down, e.g. the model of a building) - reproduction (same scale, e.g. copy model, prototype or working model) - enlargement (scaled up, e.g. the model of an atom) of some specific entity Analogue Definition: An Analogue Model is the representation of entities of a system by analogue entities pertaining to the model (e.g. through diagrams). Classification An Analogue Model can be built through: - Two Dimensional Visualization : Charts, Graphs, Diagrams (e.g. the colour coding of a geographical chart for representing different altitudes) - Three Dimensional Visualization : Analogue Devices (e.g. the flow of water in pipes to represent the flow of electricity in wires or the flow of resources in an economic system) Symbolic Definition: A Symbolic Model is the representation of entities of a system through symbols.
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Symbols can be: - mathematical - logical - ad-hoc Remark A Symbolic Model is used whenever the reality is: - too complex or too abstract to be portrayed through an iconic or analogue model - the factors of the system (variables) can be represented by symbols that can be manipulated in a meaningful and fruitful way 1.28. CRITERION SELECTION The important considerations for selecting a suitable location are given as follows: a. b. c. d. e. Natural or climatic conditions. Availability and nearness to the sources of raw material. Transport costs-in obtaining raw material and also distribution or marketing finished products to the ultimate users. Access to market: small businesses in retail or wholesale or services should be located within the vicinity of densely populated areas. Availability of Infrastructural facilities such as developed industrial sheds or sites, link roads, nearness to railway stations, airports or sea ports, availability of electricity, water, public utilities, civil amenities and means of communication are important, especially for small scale businesses. Availability of skilled and non-skilled labour and technically qualified and trained managers. Banking and financial institutions are located nearby. Locations with links: to develop industrial areas or business centers result in savings and cost reductions in transport overheads, miscellaneous expenses. Strategic considerations of safety and security should be given due importance. Government influences: Both positive and negative incentives to motivate an entrepreneur to choose a particular location are made available. Positive includes cheap overhead facilities like electricity, banking transport, tax relief, subsidies and liberalization. Negative incentives are in form of restrictions for setting up
f. g. h. i. j.
industries in urban areas for reasons of pollution control and decentralization of industries. k. Residence of small business entrepreneurs want to set up nearby their homelands one study of locational considerations from small-scale units revealed that the native place or homelands of the entrepreneur was the most important factor. Heavy preference to homeland suggests that small-scale enterprise is not freely mobile. Low preference for Government incentives suggests that concessions and incentives cannot compensate for poor infrastructure.
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1.29 MODEL VALIDATION Model verification and validation (V&V) are essential parts of the model development process if models to are be accepted and used to support decision making. One of the very first questions that a person who is promoting a model is likely to encounter is has your model been validated? If the answer to this critical question is No Experience has shown that the model is unlikely to be adopted or even tried out in a real-world setting Often the model is sent back to the drawing board The challenge then becomes one of being able to say yes to this critical question
MODEL VERIFICATION: Does the model perform as intended? Verification is done to ensure that: The model is programmed correctly The algorithms have been implemented properly The model does not contain errors, oversights, or bugs
Verification ensures that the specification is Complete and that mistakes have not been made in implementing the model Verification does not ensure the model:
Solves an important problem Meets a specified set of model requirements Correctly reflects the workings of a real world process
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Practical Verification No computational model will ever be fully verified, guaranteeing 100% error-free implementation A high degree of statistical certainty is all that can be realized for any model as more cases are tested Statistical certainty is increased as important cases are tested In principle, a properly structured testing program increases the level of certainty for a verified model to acceptable levels Exercise model for all possible cases Automated testing process
Model verification proceeds as more tests are performed, errors are identified, and corrections are made to the underlying model, often resulting in retesting requirements to ensure code integrity The end result of verification is technically not a verified model, but rather a model that has passed all the verification tests!
1.30 QUESTIONS ABOUT MODEL VALIDATION How can the model be validated if Controlled experiments cannot be performed on the system, for example, if only a single historical data set exists? The real-world system being modeled does not exist? The model is not deterministic (has random elements)? How can agent-based models be validated? Agent behaviors and interaction mechanisms Adaptive agent behaviors of emergent organizations
1.31 MODEL VALIDATION Does the model represent and correctly reproduce the behaviors of the real world system? Validation ensures that the model meets its intended requirements in terms of the methods employed and the results obtained The ultimate goal of model validation is to make the model useful in the sense that the model addresses the right problem, provides accurate information about the system being modeled, and to makes the model actually used
The World of Model validation Agent Behavior Validation Data Validation Theory Validation Requirements Validation Process Validation Face Validity Veridicality Validation of Emergent Structures and Processes Calibration Practical Validation Validation exercises amount to a series of attempts to invalidate a model One recently proposed V&V technique, Active Nonlinear Tests (ANTs), explicitly formulates a series of mathematical test designed to break the model
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Presumably, once a model is shown to be invalid, the model is salvageable with further work and results in a model having a higher degree of credibility and confidence The end result of validation Technically not a validated model, but rather a model that has passed all the validation tests A better understanding of the models capabilities, limitations, and appropriateness for addressing a range of important questions
Establishing Credibility Unlike physical systems, for which there are well-established procedures for model validation, no such guidelines exist for social modeling In the case of models that contain elements of human decision making, validation becomes a matter of establishing credibility in the model
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Verification and validation work together by removing barriers and objections to model use The task is to establish an argument that the model produces sound insights and sound data based on a wide range of tests and criteria that stand in for comparing model results to data from the real system The process is akin to developing a legal case in which a preponderance of evidence is compiled about why the model is a valid one for its purported use
1.32 PATHWAYS TO VALIDATION Cases Exploration of critical cases Exhaustive exploration of cases
Using models as exploratory e-laboratories Rapid prototyping
Multiple models Maximally diverse model ensembles Using subject matter experts Evaluation Role playing, participatory simulation
Computational simulations as a special cases of analytical modeling
Validation Case Study: Deregulated Electric Power Markets Data Checking the currency of the data with the original data sources Cross-checking data with third parties having a vested interest in the data
Subject Matter Experts (SME) Model was developed by a team of experienced domain experts Independent electric utility SMEs provided critical industry experience
Participatory Simulation Ability to place themselves in the positions of agents in the deregulated markets
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Replication of Special Cases Model runs constructed to replicate special case for the previously validated regulated power market
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Comprehensive Model Cases for the Agent Parameter and Strategy Space Not possible to draw general conclusions from only a handful of model runs: non-linear, dynamic aspects of the agent behaviors and interactions Extensive cases verified expected model behaviors and discovered model unexpected model behaviors Unexpected cases created focal points for further model runs and in-depth analysis Comprehensive testing of plausible agent strategies Extensive use of data visualization techniques
Model-to- model validation Validation of the simplified DC model to the complete and validated AC model was done by comparing results for extensive number of cases
Validation Case Study: Deregulated Electric Power Markets Lessons All model results and the answers to the obvious questions pertaining to the model results had to be explainable in plain English or they would not be useful to decision makers The model validation phase ended up taking as long as the model development phase. In the end, however, it was generally accepted that the model was a valid one for answering a wide range of important questions pertaining to electric power deregulation
The Challenge of Validating Theory Theory validation relates to the technical details of the model and how it relates to the relevant disciplines, knowledgeable expertise and underlying theories V&V is required at multiple scales Agent-to-agent interactions
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Organizations Society and culture
Validation of theory What theory is used in the models How the theory is used in the models How the theories are combined in the models
1.33 DESIGNING PROCESS Design Design is the process by which the needs of the customer or the marketplace are transformed into a product satisfying these needs. It is usually carried out a designer or engineer but requires help from other people in the company. Design essentially is an exercise in problem solving. Typically, the design of a new product consists of the following stages:
1.34 TYPICAL STEPS A design process may include a series of steps followed by designers. Depending on the product or service, some of these stages may be irrelevant, ignored in real-world situations in order to save time, reduce cost, or because they may be redundant in the situation.
Typical stages of the design process include: Pre-production design Design brief - a statement of design goals Analysis - analysis of current design goals Research - investigating similar design solutions in the field or related topics Specification - specifying requirements of a design solution for a product or service. Problem solving - conceptualizing and documenting design solutions Presentation - presenting design solutions Design during production Development - continuation and improvement of a designed solution Testing - in-situ testing a designed solution Post-production design feedback for future designs Implementation - introducing the designed solution into the environment Evaluation and conclusion - summary of process and results, including constructive criticism and suggestions for future improvements Redesign - any or all stages in the design process repeated (with corrections made) at any time before, during, or after production
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The development of a new product may also require the development of a prototype to prove that new technologies work before committing resources to full-scale manufacture. The traditional view of the design to manufacture process is that it is a sequential process, the outcome of one stage is passed on to the next stage. This tends to lead to iteration in the design. I.e. having to go back to an earlier stage to correct mistakes. This can make products more expensive and delivered to the marketplace late. A better approach is for the designer to consider the stages following design to try and eliminate any potential problems. This means that the designer requires help from the other experts in the company for example the manufacturing expert to help ensure that any designs the designer comes up with can be made. So what factors might a designer have to consider in order to eliminate iteration? Manufacture - Can the product be made with our facilities? Sales - Are we producing a product that the customer wants?
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Purchasing - Are the parts specified in stock, or do why have to order them? Cost - Is the design going to cost too much to make? Transport - Is the product the right size for the method of transporting? Disposal - How will the product be disposed at the end of its life?
1.35 DESIGN BRIEF The design brief is typically a statement of intent. ie. We will design and make a Formula One racing car. Although it states the problem, it isnt enough information with which to start designing. Product Design Specification (PDS) This is possibly the most important stage of the design process and yet one of the least understood stage. It is important that before you produce a solution there is a true understanding of the actual problem. The PDS is a document listing the problem in detail. It is important to work with the customer and analyse the marketplace to produce a list of requirements necessary to produce a successful product. The designer should constantly refer back to this document to ensure designs are appropriate. To produce the PDS it is likely that you will have to research the problem and analyse competing products and all important points and discoveries should be included in your PDS. Concept Design Using the PDS as the basis, the designer attempts to produce an outline of a solution. A conceptual design is a usually an outline of key components and their arrangement with the details of the design left for a later stage. For example, a concept design for a car might consist of a sketch showing a car with four wheels and the engine mounted at the front of the car. The exact details of the components such as the diameter of the wheels or the size of the engine are determined at the detail design stage. However, the degree of detail generated at the conceptual design stage will vary depending on the product being designed. It is important when designing a product that you not only consider the product design specification but you also consider the activities downstream of the design stage. Downstream activities typically are manufacture, sales, transportation etc. By considering these stages early, you can eliminate problems that may occur at these stages. This stage of the design involves drawing up a number of different viable concept designs which satisfy the requirements of the product outlined in the PDS and then evaluating them to decide on the most suitable to develop further. Hence, concept design can be seen as a two-stage process of concept generation and concept evaluation
Concept generation Typically, designers capture their ideas by sketching them on paper. Annotation helps identify key points so that their ideas can be communicated with other members of the company. There are a number of techniques available to the designer to aid the development of new concepts. One of the most popular is brainstorming. This technique involves generating ideas, typically in small groups, by saying any idea that comes into your head no matter how silly it may seem. This usually sparks ideas from other team members. By the end of a brainstorming session there will be a list of ideas, most useless, but some may have the potential to be developed into a concept. Brainstorming works better if the members of the team have different areas of expertise. Concept evaluation Once a suitable number of concepts have been generated, it is necessary to choose the design most suitable for to fulfil the requirements set out in the PDS. The product design specification should be used as the basis of any decision being made. Ideally a multifunction design team should perform this task so that each concept can be evaluated from a number of angles or perspectives. The chosen concept will be developed in detail. One useful technique for evaluating concepts to decide on which one is the best is to use a technique called matrix evaluation With matrix evaluation a table is produced listing important the features required from a product - usually this list is drawn up from the important features described in the product design specification. The products are listed across the table. The first concept is the benchmark concept. The quality of the other concepts are compared against the benchmark concept for the required features, to help identify if the concept is better, worse than, or is the same as the benchmark concept. The design with the most better than is likely to be the best concept to develop further. Most people who use the matrix technique will assign points, rather than simple, better, worse, same, so that it is easier to identify which concepts are the best. It is also likely that some features of the design will be more important than others so a weighting is used. 1.36 DESIGN AND ENGINEERING Engineering is often viewed as a more rigorous form of design. Contrary views suggest that design is a component of engineering aside from production and other operations which utilize engineering. A neutral view may suggest that both design and engineering simply overlap, depending on the discipline of design. The American Heritage Dictionary
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defines design as: To conceive or fashion in the mind; invent, and To formulate a plan, and defines engineering as: The application of scientific and mathematical principles to practical ends such as the design, manufacture, and operation of efficient and economical structures, machines, processes, and systems. [4][5]. Both are forms of problem-solving with a defined distinction being the application of scientific and mathematical principles. How much science is applied in a design is a question of what is considered science. Along with the question of what is considered science, there is social science versus natural science. Design and production The relationship between design and production is one of planning and executing. In theory, the plan should anticipate and compensate for potential problems in the execution process. Design involves problem-solving and creativity. In contrast, production involves a routine or pre-planned process. A design may also be a mere plan that does not include a production or engineering process, although a working knowledge of such processes is usually expected of designers. In some cases, it may be unnecessary and/or impractical to expect a designer with a broad multidisciplinary knowledge required for such designs to also have a detailed knowledge of how to produce the product. Design and production are intertwined in many creative professional careers, meaning problem-solving is part of execution and the reverse. As the cost of rearrangement increases, the need for separating design from production increases as well. For example, a highbudget project, such as a skyscraper, requires separating (design) architecture from (production) construction. A Low-budget project, such as a locally printed office party invitation flyer, can be rearranged and printed dozens of times at the low cost of a few sheets of paper, a few drops of ink, and less than one hours pay of a desktop publisher. This is not to say that production never involves problem-solving or creativity, nor design always involves creativity. Designs are rarely perfect and are sometimes repetitive. The imperfection of a design may task a production position (e.g. production artist, construction worker) with utilizing creativity or problem-solving skills to compensate for what was overlooked in the design process. Likewise, a design may be a simple repetition (copy) of a known preexisting solution, requiring minimal, if any, creativity or problemsolving skills from the designer. Process design Process design (in contrast to design process) refers to the planning of routine steps of a process aside from the expected result. Processes (in general) are treated as a product of design, not the method of design. The term originated with the industrial designing of chemical processes. With the increasing complexities of the information age, consultants
and executives have found the term useful to describe the design of business processes as well as manufacturing processes. Detail design In this stage of the design process, the chosen concept design is designed in detailed with all the dimensions and specifications necessary to make the design specified on a detailed drawing of the design. It may be necessary to produce prototypes to test ideas at this stage. The designer should also work closely with manufacture to ensure that the product can be made. SUMMARY The efficiency of production depends on how well the various machines; production facilities and amenities are located in a plant. An ideal plant layout should provide the optimum relationship among the output, floor area and manufacturing process. An efficient plant layout is one that aims at achieving various objectives like efficient utilization of available floor space, minimizes cost, allows flexibility of operation, provides for employees convenience, improves productivity etc. The entrepreneurs must possess the expertise to lay down a proper layout for new or existing plants. It differs from one plant to another. But basic principles to be followed are more or less same. From the point of view of plant layout, we can classify small business into three categories i.e. (a) manufacturing units (b) traders (c) service establishments. Designing of layout is different in all above three categories e.g. manufacturing unit may follow one of Product, Process, and fixed position or combined layout, as the case may be. Traders might go either for self- service or full service or special layouts whereas service establishments such as motels, hotels, and restaurants must give due attention to customer convenience, quality of service, efficiency in delivering the service etc. While deciding for layout for factory or unit or store, a small entrepreneur has to consider the factors like the nature of the product, production process, size of factory building, human needs etc. Plant layout is applicable to all types of industries or plants. At the end, the layout should be conducive to health and safety of employees. It should ensure free and efficient flow of men and materials. Future expansion and diversification may also be considered while planning factory layout.
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REVIEW QUESTIONS 1. 2. 3. 4. 5. 6. 7. 8. Enumerate the factors that will influence the layout decision? Discuss how the location constraint will affect the layout design? Define the plant layout. What are the various factors influencing the layout of a mall? What are the principles for planning the layout of an existing factory? Explain process layout? State its advantages and disadvantages in brief Distinguish between product layout and process layout? Explain the suitability of fixed position layout
9 Write about any two types of plant layout, Compare them. 10 What is plant layout? Discuss the objectives and advantages of a good layout
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PLANT LAYOUT
2.1 PLANT LAYOUT PROBLEMS The objective of the Plant Layout Problem is to design an efficient layout for an existing plant. A layout is defined efficient if not only the Net Present Value of layout costs, but also service, safety and working conditions are optimized. This all has to be done while considering quantitative and qualitative criteria. The econometric most interesting part the Plant Layout Problem is the minimization of the distance dependent costs and moving costs. The biggest part of the distance dependent costs can be attributed to the variable internal transport costs. Minimizing variable internal transport costs can therefore be translated to minimizing the frequency of transport between plant areas (like machine areas or storage areas) times the cost per unit of transport times the distance between plant areas. This implies that the location of all areas should be chosen so that variable internal layout costs are minimized. The problem of determining the optimal location of areas in a plant falls in the class of the Quadratic Set Covering (QSC) problems. Because of the large amount of possible area shapes and locations in a plant, there are no computationally feasible optimal or hybrid algorithms available for the QSC problem. However, relaxing the problem by restricting plant area shapes and locations, gives the opportunity to design two hybrid solution methods for the particular problem studied in the thesis. The first method, called the Quadratic Set Covering (QSC) Approach, relaxes the problem by assigning (part of) squared blocks to areas and by relaxing restrictions. A reduced gradient method and quasi Newton algorithm are used to solve the layout problem for a local optimum. Using several tricks, the global optimum among the local optima, is searched for. A proof for global optimality of this relaxed layout, however, can not be provided. The locally optimal relaxed layout is then transformed into a feasible one by
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reintroducing the restrictions. With the help of an improvement algorithm the feasible layout is improved. Finally, the system provides the user the possibility to adjust the layout interactively. Layouts produced by the QSC Approach can not be proven to be globally optimal and computation time is too high for producing alternative layouts quickly. For this reason a second algorithm, called the Branch & Bound Hybrid Construction Algorithm, is designed. To decrease computation time, the area shapes and locations were restricted even more than for the QSC Approach. A Branch & Bound algorithm produces the global optimal layout among all feasible relaxed layouts. By applying the feasibility and improvement algorithm to the global optimal and alternative relaxed layouts and by making interactive changes, several good layouts are found. To choose the layout to be implemented in a real life situation, the layouts produced by both methods have to be compared on qualitative criteria. Plant layout procedures: Standardisation of operating procedures: Medium and large companies should appoint an officer responsible for various operational processes Small businesses may not be able to justify the appointment of a full time officer, but could designate someone on a part time basis Safe operations and safety management require systems to address:
o
Operating procedures and systems of work, including housekeeping and maintenance Training of operators eg in operator hygiene, use of protective clothing Emergency procedures Accident prevention Environmental monitoring
o o o o
Training of operators Experience should undertake training Training should cover: Housekeeping and maintenance Need schedules for regular:
o o
cleaning maintenance
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Good Operator hygiene Operators must observe basic rules of hygiene: Emergency procedures To ensure prompt and appropriate response, site-specific emergency procedures Safety analysis To identify possible malfunctions and their consequences Safety goals Identification of failure cases Safety procedures for personnel Individuals at most risk: hazardous waste Careless or untrained, or working conditions poor Safety procedures needed for all aspects Information needed for all personnel on their own responsibilities Worker accidents Accident prevention - general guidelines Heavy articles should be stored on a firm base Transport accident prevention - guidelines Appropriate hazard and warning labels should be used All tailgates, closures and the cargo must be secured Drivers should not exceed a set number of hours per day Trucks should be provided with first-aid equipment and an appropriate fire extinguisher for the load, and training should be provided for its use
Medical surveillance Medical examinations to check:
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o o o
Overall fitness and strength Heart condition Pulmonary function
Environmental monitoring Worker protection Basic requirement: Additional equipment: Respiratory protection For example, collection vehicles regularly experience fires, and and collection crews are exposed to chemicals and sharp objects when handling wastes. Landfill workers and scavengers are also exposed to numerous risks, including those from chemical residues in household wastes. Sitesafetyrecommendations The health and safety of both the plant employees and the public are of prime importance. 2.2 PLANT LAYOUT The plants layout is a fundamental contributor to site safety. The careful design of process flow lines, storage areas and work spaces contributes to safe working. Care must also be taken in the positioning of equipment to ensure that safety is not jeopardised. Well-designed work spaces can minimise accidents. A good layout can also facilitate keeping the workplace clean and well-organised, which in turn reduces risks. Appropriate work areas should be restricted to authorised personnel. These include storage areas, support services and decontamination points. Operating procedures and systems of work The adoption of standardised working procedures, which are set out in a manual to which employees have access, can make an important contribution to site safety. Working procedures should be established for every function on the site. The procedures adopted should have been previously tested, reviewed and revised by competent safety professionals. These standardised procedures should be frequently
verified and their use monitored. The equipment used should be modern and wellmaintained, and frequently tested. Employees should be made aware of the standardised operating procedures and how to use the equipment correctly. They should also be encouraged to consult the manual whenever appropriate eg for unfamiliar procedures, or when any changes to equipment or procedures have been made. The manual should contain detailed information of specific plant activities, such as maintenance procedures, transfer and pumping of wastes, and processing of waste. It should include a summary of the potential hazards associated with the activity; the necessary safety precautions such as clothing, decontamination and emergency procedures; and detailed instructions for each procedure. It is the responsibility of managers to ensure that operators adhere to these procedures, and to regularly update manuals to improve or change information. Plant safety and training officer Medium-sized and large companies should appoint a safety and training officer with responsibility to:

NOTES
perform regular safety audits; identify site deficiencies in operating procedures that might result in dangerous incidents; ensure that operators are properly trained and that they have adequate protection (impervious clothing, breathing apparatus, etc) which they have been trained to use.
Small businesses may not be able to justify the appointment of a full time officer, but could designate someone on a part time basis. Trainingofoperators Operators should be trained to perform their work tasks as well as possible, and to perform plant functions in a responsible manner, following at all times a specified system of working. Training must cover routine working procedures, including safety aspects, and also emergency procedures. Training should be provided for both new and experienced staff. Whenever there is a change in working practices, in materials being handled, or in equipment, additional training must be provided.
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Training must be supported by written material to which personnel can refer: this may be the working procedures manual or additional topic briefing sheets may be provided. Training must be regularly updated. Lack of experience or training can cause severe accidents, such as the mixing of chemicals which could result in explosions or fires. Housekeepingandmaintenance Good housekeeping is essential to prevent the uncontrolled dispersion of hazardous chemicals. As has been stated, a well designed plant layout will greatly assist in keeping the areas clean and reducing risk. A planned and regular routine of cleaning and maintenance is also important. Immediate clean-up of spills should be undertaken, using established procedures. Adsorbent material should be readily to hand. Fire prevention measures should also be undertaken, and the appropriate fire-fighting equipment available and properly maintained. Storm water must be diverted from storage and processing areas. Lack of good maintenance can result in pollution to the environment or in hazard to the operators. Operator hygiene Operators should be trained to observe basic rules of hygiene, such as changing out of dirty overalls and use of washing facilities before entering the canteen or leaving the site. Smoking, eating and ingesting alcohol should be prohibited in all work areas. Keep hands away from the face, minimising eye contact with liquid and solid chemicals and reducing the risk of ingestion. Emergency procedures Each site should have in place a set of emergency procedures to enable prompt response in the event of an incident. These should allow for the evacuation of the site where necessary. The procedures should be practised so that all concerned are aware of their responsibilities and of what must be done by whom. The site should be provided with fire-fighting and first aid equipment, and the condition and effectiveness of the latter should be frequently checked. Also hydrants, emergency showers, protective clothing and breathing apparatus should be maintained and checked for performance.
Procedures for action in the event of a spill or fire should be clearly displayed at relevant points. Portable fire extinguishers and materials for absorbing or neutralising spills must be to hand. 2.3 SAFETY ANALYSIS Safety analysis is a technique used for identifying possible malfunctions and their consequences, as well as identifying possible actions to reduce the risks. Risk minimising actions might include improvements to operating procedures, redesign of the site to improve the process flow or construction of safer storage areas. Safety analysis involves the steps shown on the slide. Safety goals The goals were translated into quantitative fatality risk levels: Individual risk for nearest neighbours:. Collective risk for community: probability inversely proportional to the number of facilities. Occupational risk (employees) As a supplement to the quantitative goals, good standard practice goals were established to cover factors which have a general background effect on failure probabilities. These included safe systems of work, operating procedures and maintenanceschedules. 2.4 IDENTIFICATION OF FAILURE CASES The first step towards conducting a risk analysis is to complete a list that covers all possible accidents. Three methods may be used:
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The check-list method: this method consists of a list of failure cases derived from the experience of previous accidents. An inventory of materials and their intrinsic hazards (health hazards or physical hazards) is reviewed. The possible ways of migration are then analysed (leaks, spills, volatilisation, etc). The hazard and operability study: this method consists of a detailed examination of the facility design, to enable any necessary changes to be made to aspects of the physical structure and design that may be seen as a hazard for the employees. The fault-tree analysis: this method consists of building a tree of each failure case and identifying all the components that could cause the incident before and after it happens.
Safety procedures for personnel Individuals at most risk from exposure to hazardous wastes are those involved in handling the materials during collection, storage, transportation, treatment and disposal.
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To prevent the exposure of these workers to hazardous agents via inhalation, ingestion or absorption through skin contact, safety procedures should be introduced as part of the site safety programme. The risks associated with hazardous wastes are increased if the people handling the waste are not careful, are untrained or if the working conditions are poor. Safety procedures for personnel should cover protection, personal hygiene, medical surveillance and environmental monitoring. All personnel should be given information regarding the risks involved with different types of wastes and different procedures, including details of routes of exposure, methods of avoidance and measures to be taken in case of exposure. Personnel should be made aware of the consequences of not following safety procedures and their own responsibilities. Employer responsibilities include keeping employees up to date with any changes in procedures or waste composition in advance of those changes. Discussion: A blank job safety analysis is provided for trainers to use as a basis for further discussion. Training Training for workers should be conducted by experienced personnel. Training should be provided for all workers at the start of their employment, and should be updated, particularly when any changes are proposed. Training sessions should be supported by written information which workers can refer to after the course. Training should address all aspects of the working environment including use of reference manuals on standard procedures, use of equipment and emergency systems. It is important to recognise that training is an ongoing process, not a single event. Worker accidents Loading, unloading and sorting of hazardous wastes are the work stages that most commonly cause accidents, as the slide shows. Lifting, moving or opening of barrels cause a large number of injuries (about 30%), and stumbling, slipping or knocking against objects is also common and causes about 25% of the injuries. Accidents also happen during cleaning of the tanks, using tank hoses and when the wrong compounds are added to a tank. Occupational accidents resulting from contact with hazardous wastes and other dangerous products have the highest Kinney figures (Kinney is a mathematical risk evaluation system where risk=chance x frequency x severity. See handout.) They also have the most serious effects on human health.
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Accident rates tend to be higher in spring and summer, in countries having seasons, because hazardous wastes are most collected during this time, and in the dark periods of the winter, because of the lack of light. For countries with no seasons, darker periods are most propitious for accidents. 2.5 ACCIDENT PREVENTION GENERAL GUIDELINES The some of the general guidelines which influence worker safety. Crucial among these is the correct early identification of the waste, as without this, later handling, storage and transport decisions cannot be soundly based. Transport accident prevention - guidelines The transport safety measure should be adopted during loading and unloading of hazardous material. The following additional points should be noted:
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If any Reactive hazardous material groups should be placed in different parts of the truck. Empty containers should be provided for hazardous materials in broken and leaking containers. The lifting equipment should include a container to catch spills. Explosions can occur as a result of the build up of static electricity during loading and unloading of inflammable products. The way to limit the risk is to earth the connection during the loading or unloading process.
Medical surveillance Personnel working with hazardous material should be given regular medical examinations to assess overall fitness and strength, heart condition, pulmonary function, allergies, asthma, vision, hepatic and renal functions. An immunisation programme should be administered where appropriate. Vaccination programmes for the workers and any population at risk of exposure to wounds or specific biological hazards (eg rabies, hepatitis, tetanus) should be put in place. Provision of good nutrition, and use of traditional immune boosters (eg herbs and vitamins reputed to increase immunity, such as vitamins C and E, ginseng, garlic, echinacea) will help to maintain general health and to deal with high levels of stress to which workers may be exposed. Information should be provided to workers on this. Necessary first aid equipment and relevant antidotes to toxic substances should always be close at hand. Skilled personnel, including staff first-aiders and safety representatives should be designated and made known to personnel.
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Environmentalmonitoring Monitoring of employee health is not on its own sufficient. The monitoring of the environment is also necessary where ever handling of hazardous material takes place. This is to ensure that any contamination is detected and remedial action taken. Monitoring of the environment should include air monitoring, surface and groundwater sampling and soil sampling. Monitoring should be carried out by competent personnel, and by the use of techniques ranging from relatively simple ones using detector tubes and hand-held pumps to highly sophisticated operations, which require professionally qualified personnel to operate equipment and to interpret the findings. Good housekeeping practices eg keeping the work place clean and well-organised, contributestositesafetyandemployeehealth.Promptandeffectivecleanupofspills should also be a part of the regime. These measures are low cost (or without any cost) but can make a significant contribution. 2.6 WORKER PROTECTION Workers must be protected from harm, and there are a number of ways to do this, depending on the potential hazard. At the very least, it is important to observe and enforce simple protective measures like the wearing of overalls, gloves, hard hats and safe footwear. These are suitable for use in an environment where there is no contact with harmful materials eg general warehouse and should always be used. For workers in storage or handling area eg emptying drums, additional protection will be required. The changing temperatures and seasons should be taken into account when clothing is provided. In hot climates, workers may be reluctant to wear additional clothing or protective headgear. More specialised protective clothing and equipment is available in a wide assortment of forms, including fully-encapsulating body suits. Chemical protective clothing comes in a variety of materials, offering a range of protection against a number of chemicals. For emergency personnel, selection of which kinds of protective clothing and equipment to use will depend on the specific chemical and on the specific tasks to be performed. The properties of the chemical must be assessed together with the properties of the clothing material and the capabilities of the equipment. Operators must always be trained in the use of protective clothing.
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2.7 WHAT IS FLOW ANALYSIS? Considers the operations, transportations, inspections, delays, and storages required as a part moves from receiving to shipping in a plant. What are the goals of Flow Analysis?

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to minimize distance traveled to minimize backtracking to minimize cross-traffic to eliminate unnecessary steps in the process to combine steps in the process to minimize production costs
What plant flow analysis techniques are used?

Process charts Flow diagrams Operations charts Process Charts

o o o o o
operations transportations storages inspections delays
Analysis of Process Charts

Can I eliminate this step? Can I automate this step? Can I combine this step with another? Can I change the routing to reduce distances traveled? Can I move workstations closer together? Can I justify production aids to increase effectiveness? How much does this part cost to produce?
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Flow Diagram Graphical diagram which shows the path traveled by each part from receiving to stores to fabrication of each part to final assembly to packout to warehousing to shipping. Analysis of Flow Diagrams Is there cross-traffic?

results in congestion and safety hazards eliminated through proper placement of equipment, services and departments
Is there backtracking?

costs three times as much as correct flow eliminated through proper location of operations
Are transport distances excessive?

distance traveled costs money excessive material handling can degrade quality
Operations Charts Graphically show the raw material, the buyouts, the fabrication sequence, the assembly sequence, the equipment needs, the time standards, and a glimpse of plant layout. The flow process chart combines the operations chart with the process chart. Effective tools for summarizing plant activities. Summary of Flow Analysis Provides critical information to layout designer including operation requirements, material handling needs, storage needs, inspection requirements, and delay reasons. With this information, the designer is challenged to eliminate as many steps as possible, combine steps, eliminate backtracking and cross-traffic, reduce distance traveled, reduce production costs, improve quality and increase safety Plant layout procedure This note is intended to provide guidance on laying out machines in a factory, based upon decisions about the type of manufacturing process to be accommodated. Laying out a factory involves deciding where to put all the facilities, machines, equipment and staff in the manufacturing operation.
Layout determines the way in which materials and other inputs (like people and information) flow through the operation. Relatively small changes in the position of a machine in a factory can affect the flow of materials considerably. This in turn can affect the costs and effectiveness of the overall manufacturing operation. Getting it wrong can lead to inefficiency, inflexibility, large volumes of inventory and work in progress, high costs and unhappy customers. Changing a layout can be expensive and difficult, so it is best to get it right first time. The first decision is to determine the type of manufacturing operation that must be accommodated. This depends on product volume and variety. At one extreme, the factory will produce a wide variety of bespoke products in small volumes, each of which is different (this is called a jobbing operation). At the other extreme it will produce a continuous stream of identical products in large volumes. Between the extremes, the factory might produce various sized batches of a range of different products. 2.8 BASIC LAYOUT TYPES As discussed in the earlier chapter once the type of operation has been selected (jobbing, batch or continuous) the basic layout type needs to be selected. There are three basic types: Process layout Cell layout Product layout
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Jobbing operations (high variety/low volume) tend to adopt a process layout. Batch operations (medium variety and volume) adopt either a cell or process layout. Continuous operations (low variety/high volume) adopt a product layout. 1. Process layout
In process layout, similar manufacturing processes (cutting, drilling, wiring, etc.) are located together to improve utilisation. Different products may require different processes so material flow patterns can be complex. An example is machining parts for aircraft engines. Some processes (such as heat treatment) need specialist support (e.g. fume extraction), while other processes (e.g. machining centres) need technical support from machine setters/operators. So the factory will be arranged with heat treatment together in one location and machining centres in another. Different products will follow different routes around the factory.
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2.
Cell layout
In cell layout, the materials and information entering the operation are pre-selected to move to one part of the operation (or cell) in which all the machines to process these resources are located. After being processed in the cell, the part-finished products may go on to another cell. In effect the cell layout brings some order to the complexity of flow that characterises process layout. An example is specialist computer component manufacture. The processing and assembly of some types of computer components may need a dedicated cell for manufacturing parts to the quality requirements of a particular customer. 3. Product layout
Product layout involves locating the machines and equipment so that each product follows a pre-arranged route through a series of processes. The products flow along a line of processes, which is clear, predictable and relatively easy to control. An example is automobile assembly, where almost all variants of the same model require the same sequence of processes. Another is paper making. Although different types of paper can be manufactured, all types have the same processing requirements. First the wood chips are combined with chemicals, water and steam in the cooking process to form pulp. The pulp is then put together through a cleaning process before being refined to help the fibres lock together. The mixing process combines the refined pulp with more water, fillers, chemicals and dyes, after which it is spread on a fine flexible wire or plastic mesh. This is shaken from side to side as it moves along to lock the fibres into the sheet of paper and to drain away the water. The press rollers squeeze more water out of the paper and press the fibres closer together. The drying process continues to reduce the water content in the paper before finally it is wound onto large reels. It makes sense then to locate these processes in the order that they are required (cooking, then cleaning, then mixing, spreading, shaking, squeezing, drying and winding) and to let materials flow through them in a predictable manner. 2.9 SELECTING A LAYOUT TYPE Table 1 shows some of the more significant advantages and disadvantages of each layout type. One significant difference is their association with fixed and variable costs. Process layouts tend to have relatively low fixed costs but high variable costs, as each product is different. By contrast, product layouts have high fixed costs to set up the manufacturing lines, then low variable costs for producing large volumes of the same product. Hence if volume is high and variability low, product layout is likely to be the best option.
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Table 1: Advantages and disadvantages of different layout types
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2.10 DETAILED DESIGN OF THE LAYOUT Once the basic layout type has been decided, the next step is to decide on the detailed design of the layout to determine: The exact location of all facilities, plant, equipment and staff that constitute the work centres of the operation. The space to be devoted to each work centre. The tasks that will be undertaken by each work centre.
General objectives The general objectives of detailed design of factory layouts are: Inherent safety. Dangerous processes should not be accessible without authorisation. Fire exits should be clearly marked with uninhibited access. Pathways should be clearly defined and not cluttered. Length of flow. The flow of materials and information should be channelled by the layout to fit best the objectives of the operation. This generally means minimising the distance travelled by materials. Clarity of flow. All flow of materials should be clearly signposted, for example using clearly marked routes. Staff comfort. The layout should provide for a well ventilated, well lit and, where possible, pleasant working environment. Management coordination. Supervision and communication should be assisted by the location of staff and communication equipment. Accessibility. All machines, plant and equipment should be easily accessible for cleaning and maintenance.
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Use of space. All layouts should make best use of the total space available (including height as well as floor space). This usually means minimising the space for a particular process. Long-term flexibility. Layouts need to be changed periodically. Future needs (such as expansion) should be taken into account when designing the layout.
2.11 DETAILED DESIGN IN PROCESS LAYOUT The detailed design of process layouts is complex, because of the complex workflow patterns that are associated with this layout to ensure a very wide variety of products can be made. Optimal solutions are difficult to achieve and most process layouts are designed through intuition, common sense and systematic trial and error. To design a process layout, the designer needs to know: The area required by each work centre. The constraints on the shape of the area allocated for each work centre. The degree and direction of flow between each work centre (for example number of journeys, number of loads, cost of flow per distance travelled). The desirability of work centres being close together.
The degree and direction of flow are usually shown on a flow record chart, like that in Figure 1(a), which records in this case the number of loads per day transported between work centres. If the direction of flow between work centres makes little difference to the layout, then the information can be collapsed as shown in Figure 1(b). In some operations, the cost of moving materials between different work centres varies considerably. For example in Figure 1(c) the unit cost of moving a load between the five work centres is shown. The unit cost of moving loads from work centre B is slightly higher than from most other centres, perhaps because products need careful handling between these operations. Combining the unit cost and flow data gives the cost per distance travelled data shown in Figure 1(d). Minimising the distance between B and C and between B and E would reduce the overall costs of production with this process layout.
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Figure 1: Collecting information in process layout The general approach to determining the location of work centres in a process layout is as follows: 1. Collect information relating to the work centres and flow between them. 2. Draw up a schematic layout showing the work centres and the flow between them, putting the work centres with the greatest flow closest to each other. 3. Adjust the schematic layout to take into account the constraints of the area into which the layout must fit. 4. Draw the layout showing the actual work centre areas and distances that materials must travel. Calculate the effectiveness measure of the layout either as total distance travelled or as the cost of movement. 5. Check to see if exchanging any two work centres will reduce the total distance travelled or the cost of movement. If so, make the exchange and return to step 4. If not, make this the final layout.
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Figure 2 shows a schematic layout for the operation described in Figure 1. The thickest lines represent the highest daily cost of movement.
Figure 2 Preliminary schematic layout Figure 3 shows this schematic adjusted to fit the building geometry.
Figure 3 Adjusted schematic layout The effectiveness of different layouts is calculated as Fij Dij C ij Where: Fij is the flow in loads between work centre i and work centre j Dij is the distance between work centre i and work centre j Cij is cost per distance travelled between work centre i and work centre j
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For the layout schematic shown in Figure 3, the cost effectiveness is 1073/day and it is clear that these costs can be minimised by situating A and E as close to D as is practicable. From this schematic, the actual plant layout can be drawn, taking into account the space needed for each process and any storage space needed for inventory. 2.12 DETAILED DESIGN IN CELL LAYOUT Cells are a compromise between the flexibility of process layout and the simplicity of product layout (covered next). They are best used when a predictable variety of products have to be produced. The detailed design involves deciding the extent and nature of the cells to be used and which resources to allocate to which cells. The extent and nature of cells depends primarily on the processing resources to be located in each cell. A cell might include for example two machines that are frequently needed to perform a given transformation (like a milling machine and a drill, for facing and drilling metal blocks); alternatively a cell might provide all specialist equipment and services needed to perform specialised heat treatment. The detailed design of cell layouts is difficult, because cells are a compromise between process and product layout. In process layout, the focus is on the location of various processes in the factory. With product layout, the focus is on the requirements of the product. Cell layout must consider both. One method is to find which processes naturally group together. This involves examining each process and asking which other processes might also be needed for a typical product. For example, when making furniture, if all parts that need holes drilling in them also need those holes to be countersunk, then it makes sense to locate drilling and countersinking machines in the same cell. Another method is to design the cells around product families. The families indicate the characteristics of similar products, such as size, shape and material that determine their processing requirements. Cells can then be designed to co-locate the necessary processes for different product families. A popular method of allocating tasks and machines to cells is production flow analysis, which examines both product requirements and process grouping simultaneously. In Figure 4(a) a manufacturing operation has grouped the products it makes into eight product families for example, the products in family 1 require machines 2 and 5. In this state the matrix does not exhibit any natural groupings. However, if the order of the rows and columns is changed to move the crosses as close as possible to the diagonal of the matrix that goes from top left to bottom right, then a clearer pattern emerges (Figure 4(b)). This shows that the machines could be conveniently grouped together in three cells, identified as cells A, B and C, with each cell covering a distinct group of product families.
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This analysis rarely results in a totally clean division between cells. In this case, product family 8 (allocated to cell A) needs processing by machine 3, which has been allocated to cell B. There are three ways of dealing with this: Purchase another machine the same as machine 3 and put it in cell A. This solves the problem but requires investing capital in a new machine that might be under utilised. Send products in family 8 to cell B after they have been processed in cell A. This avoids the need to purchase another machine but it results in more complex materials flow. If there are several product families that have this problem, devise a special cell for them including all necessary machines to tackle their processing needs. This involves extra capital expenditure, but removes the problem product families from the rest of the operation, leaving it with a more predictable and ordered flow.
(a) Basic product family and machine data
(b) Machines and product families reorganised into cells
Figure 4 Using production flow analysis to allocate machines to cells
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2.13 DETAILED DESIGN IN PRODUCT LAYOUT Product layout involves arranging the various manufacturing processes to fit the sequence required by the product. Detailed design involves allocating work tasks to locations. The decisions to be made are: What cycle time is needed? How many processing stages are needed? How should variation in time taken for different tasks be dealt with? How should the layout be balanced? How should the stages be arranged?
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Cycle time The cycle time of a product layout is the time between completed products emerging from the operation. Cycle time is a vital factor in the design of product layouts and influences most other detailed design decisions. It is calculated by considering the likely demand for the products over a period and the amount of production time available in that period. For example, suppose a factory is to process wooden doors. The number of doors to be processed is 160 per week and the time available to process the doors is 40 hours per week. Cycle time for the layout = time available / number to be processed In this case, cycle time = 40/160 = hour = 15 minutes. Therefore the factory layout must be capable of processing one completed wooden door every fifteen minutes. Number of stages The next decision concerns the number of processing stages, where a processing stage is a distinct period of time to carry out part of the door manufacture. The number of such stages can be anything between one and several hundred, depending on the cycle time required and the quantity of work involved in making the product. The latter quantity is called the total work content of the product. The larger the total work content and the smaller the required cycle time, the more stages will be necessary. For example, suppose the factory calculated that the average work content to manufacture a wooden door is 60 minutes. The number of stages needed to process a wooden door every 15 minutes is then calculated as follows: Number of stages = total work content / required cycle time In this case, number of stages = 60/15 = 4 stages. If this number had not been a whole number, then it would have been necessary to round up to the next largest whole
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number, since it is difficult (but not impossible) to hire fractions of people to staff the stages. Task-time variation At the moment we can imagine a line of four stages, each contributing a quarter of the total work content in processing the door. In practice of course, the flow would not be so regular. Each stage might on average take 15 minutes, but this time would vary for each door processed because: Products being processed along the line might be a little different, for example different models of the same basic door. Products might require slightly different treatment, for example it may take longer to plane the surface of one door than another because of the quality of the wood. There are usually slight variations in the physical coordination and effort of the person, or the performance of the machine undertaking the task.
This variation can make the flow of work along the line irregular, which in turn can lead to work-in-progress queues at the stages and lost processing time. This reduces efficiency and may require additional resources (such as more staff time or more storage space) at additional cost to compensate for this variation. Balancing work time allocation The most problematic, detailed design decision in product layout is ensuring the equal allocation of tasks to each stage in the line. This is called line balancing. In the doorprocessing example, we have assumed that 15 minutes of work content has been allocated equally to the four stations. This is nearly always impossible to achieve in practice and some imbalance in the work allocation between stages will inevitably result. This will increase the effective cycle time of the line. The effectiveness of line balancing is measured by balancing loss. This is the time wasted through the unequal allocation of work as a percentage of the total time invested in processing the product. In Figure 5, the work allocations in a four-stage line are illustrated. The total amount of time invested in producing each product is four times the cycle time. When the work is equally allocated between the stages the total time invested in each product is 4 x 15 minutes = 60 minutes. However when work is unequally allocated as illustrated, the time invested is 20 x 4 = 80 minutes. Hence 20 minutes (25%) of the total is wasted.
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Figure 5 Balancing loss Balancing techniques There are a number of techniques to help with line balancing. Most common is the precedence diagram. Each element of the total work content is represented by a circle. The circles are connected by arrows that show the ordering of the elements. Two rules apply when building the diagram: The circles that represent the elements are drawn as far to the left as possible. None of the arrows should be vertical.
The general approach to balancing elements is to allocate elements to the first stage, starting from the left, in order of the columns until the work allocated to the stage is as close to, but less than, the cycle time. When that stage is as full of work as possible, move on to
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the next stage and so on until all work elements are allocated. When more than one element could be chosen, select elements using these rules: Choose the largest that will fit into the time remaining in the stage. Choose the element with the most followers: that is the one with the highest number of subsequent elements that can only be allocated after that element has been allocated.
2.14 EXAMPLE CAKE FACTORY A cake factory has been contracted to supply a supermarket chain with a speciality cake. The required volumes warrant a special production line to perform the finishing, decorating and packing of the cake. The elements and the precedence diagram for the job are shown in Figure 6.
Figure 6: Element listing and precedence diagram for speciality cake production
The initial order from the supermarket is for 5,000 cakes a week and the number of hours worked by the factory is 40 per week. From this we can calculate: Required cycle time = 40 hours x 60 minutes / 5000 = 0.48 minutes Required number of stages = 1.68 mins (total work content) / 0.48 mins = 3.5 stages In practice this means that four stages will be needed. Working from the left on the precedence diagram, elements A and B can be allocated to stage 1 (since they total 0.42 minutes, which is lower than the cycle time of 0.48 minutes). Allocating element C to stage 1 would exceed the cycle time, so it is allocated to stage 2. In fact only element C can be allocated to stage 2, because including element D would again exceed the cycle time. Element D is therefore allocated to stage 3. Either element E or element F can also be allocated to stage 3, but not both. Following the largest element rule, element E is chosen. The remaining elements are allocated to stage 4. Figure 7 shows the final allocation and the balancing loss of the line.
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Idle time every cycle = (0.48 0.42) + (0.48 0.36) + (0.48 0.42) = 0.24 minutes Proportion of idle time per cycle = 0.24 / (4 x 0.48) = 12.5% Figure 7: Allocation of elements to stages and balancing loss for speciality cake
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Arranging the stages All the stages do not have to be laid out in a sequential single line. Some elements can usually be arranged in parallel. For example with the wooden door example, four stages must work on the task to achieve a cycle time of one door every 15 minutes. But these stages can be arranged in one line of four, 15-minute sequence steps, or in two parallel lines each of two, 30-minute stages, or in four parallel lines of single, 60-minute stages. This leads to a decision on whether the layout should be arranged as a single, long-thin line, as several, short-fat parallel lines, or somewhere in between (note that long means the number of stages in the line, while fat means the amount of work allocated to each stage). The advantages of each extreme are as follows. Advantages of the long-thin arrangement Controlled flow of materials. Simple materials handling, especially if products are heavy or large. Lower capital requirements, because fewer machines will be needed. More efficient operation, since each person and machine will have high utilisation on productive work.
Advantages of the short-fat arrangement Higher mix flexibility. If several types of product must be produced, each stage or line could specialise in different types. Higher volume flexibility. As volume varies, stages can be closed down or started up as required, whereas long-thin lines would need rebalancing every time the cycle time changes. Higher robustness. If one stage breaks down, parallel stages are unaffected, whereas a long-thin line would stop operating completely. Less monotonous work, because tasks are repeated less often.
The shape of the line If the line has some sequential flow between stages, the designer must also decide on the shape of the line. In Japanese factories, curved lines are commonly used, in U shapes for shorter lines or serpentine shapes for longer lines (Figure 8).
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Advantages are
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Staffing flexibility and balance. The U-shape enables one person to tend several workstations adjacent or across the U without much walking. This opens up options for balancing work among operators: when demand grows, more labour can be added until each station has an operator. Rework. When the line bends around itself, it is easy to return bad work to an earlier station for rework without disruption or the need to travel far. Handling. From a centre position in the U, a handler (human or vehicle) can deliver materials conveniently. Passage. Long straight lines make crossing the line difficult. This can hinder the rest of the operation. Curved lines reduce this problem. Teamwork. A semicircular arrangement brings team members into contact with each other more easily.
Figure 8: Arrangement of stages
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UNIT III
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PLANT LOCATION
Learning Objectives:

By learning this unit, the learner will: Understand the importance of location Be able to analyse the options on location Identify the influencing factors and Gather the knowledge on decisions making
3.1 LOCATIONS STRATEGY AND ITS IMPORTANCE As you all know, selection implies choice and choice presumes the existence of various options available to a decision maker. Choosing where to locate new manufacturing facilities, service outlets, or branch offices is a strategic decision. The location of a businesss facilities has a significant impact on the companys operating costs, the prices it charges for goods and services, and its ability to compete in the marketplace. Analyzing location patterns to discover a firms underlying strategy is fascinating. For example, Why does McDonald locate restaurants in a posh area? Why do competing new-car sales showrooms cluster near one another? McDonalds target customers are those in high-income group. In contrast, managers of new-car showrooms deliberately locate near one another because customers prefer to do their comparison-shopping in one area. In each case, managements location decision reflects a particular strategy.
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There are strategic impacts of location decisions. We will first consider the most important trend in location patterns- the globalization of operations. 3.2 GLOBALIZATION The term globalization describes businesses deployment of facilities and operations around the world. Worldwide exports now account for more than 30 percent of worldwide gross national product, up from 12 percent in 1962. Globalization also results in more exports to and imports from other countries, often called offshore sales and imports. Globalization of services is also widespread. The value of world trade in services is roughly 20 percent of total world trade. Banking, law, information services, airlines, education, consulting, and restaurant services are particularly active globally. For example, McDonalds opened 220 restaurants in foreign countries other than USA in just one year. Steel Authority of India (SAIL) hired Silver Spring, Maryland, consulting firm to design and implement quality systems for its five major steel plants. The question that emerges from the ongoing discussion forces us to analyze as to what globalization is all about. Many see it as a primarily economic phenomenon, involving the increasing interaction, or integration, of national economic systems through the growth in international trade, investment and capital flows. However, one can also point to a rapid increase in cross-border social, cultural and technological exchange as part of the phenomenon of globalisation. The sociologist, Anthony Giddens, defines globalisation as a decoupling of space and time, emphasising that with instantaneous communications, knowledge and culture can be shared around the world simultaneously. Globalisation can also be defined as a process in which geographic distance becomes a factor of diminishing importance in the establishment and maintenance of cross border economic, political and socio-cultural relations Left critics of globalisation define the word quite differently, presenting it as worldwide drive toward a globalised economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments. 3.3 REASONS FOR GLOBALIZATION There are four developments, which have spurred the trend toward globalization. These are:

Improved transportation and communication technologies Opened financial systems Increased demand for imports Reduced import quotas and other trade barriers.
3.4 DISADVANTAGES OF GLOBALIZATION Operations in other countries can have disadvantages. A firm may have to give up proprietary technology if it turns over some of its component manufacturing to offshore suppliers or if suppliers need the firms technology to achieve desired quality and cost goals. There may be political risks. Each nation can exercise its sovereignty over the people and property within its borders. The extreme case is nationalization, in which a government may take over a firms assts without paying compensation. Also, a firm may alienate customers back home if jobs are lost to offshore operations. Employee skills may be lower in foreign countries, requiring additional training time. Korean firms moved much of their sports shoe production to low-wage Indonesia and China, but they still manufacture hiking shoes and in-line roller skate in Korea because of the greater skills required. In view of the issues that we have just discussed, it becomes imperative to understand the intricacies involved in Managing global operations. We would now focus on these issues. 3.5 MANAGING GLOBAL OPERATIONS When a firm sets up facilities abroad it involve some added complexities in its operation. Global markets impose new standards on quality and time. Managers should not think about domestic markets first and then global markets later, rather it could be think globally and act locally. Also, thy must have a good understanding of their competitors. Some other important challenges of managing multinational operations include other languages and customs, different management style, unfamiliar laws and regulations, and different costs. In general Managing global operations would focus on the following key issues:1. To acquire and properly utilize the following concepts and those related to Global Operations, Supply Chain, Logistics, etc. 2. To associate global historical events to key drivers in Global Operations from different perspectives 3. To develop criteria for conceptualization and evaluation of different Global Operations. 4. To associate success and failure cases of Global Operations to Political, Social, Economical and Technological environments 5. To envision trends in Global Operations 6. To develop an understanding of the world vision regardless of their country of origin, residence or studies in a respectful way of perspectives of people from different races, studies, preferences, religion, politic affiliation, place of origin, etc.
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Let us see what factors in general, affect the location decisions. 3.6 FACTORS AFFECTING LOCATION DECISIONS Facility location is the process of determining a geographic site for a firms operations. Managers of both service and manufacturing organizations must weigh many factors when assessing the desirability of a particular site, including proximity to customers and suppliers, labour costs, and transportation costs. Location factors can be divided into two categories: Dominant factors, and Secondary factors
Dominant factors are those derived from competitive priorities (cost, quality, time, and flexibility) and have a particularly strong impact on sales or costs. Secondary factors also are important, but management may downplay or even ignore some of them if other factors are more important. Let us consider the issue of why firms choose to locate new factories and describes the main factors for their location choice. While location conditions are widely seen as the differences among locations that exist for all industries, location factors refer to the specific importance that is attached to such differences by individual firms when choosing locations for specific factors. Let us examine the key location factors:Eleven location conditions can be distinguished:

Transportation facilities Materials Markets Labor External Economies Energy Community Infrastructure Capital, Land Environment and Government policy
Location conditions are complex and each comprises a different characteristic of a tangible (i.e. Freight rates, production costs) and non-tangible (i.e. reliability, Frequency security, quality) nature.
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By now, you must have realized that location conditions are hard to measure. Tangible cost based factors such as wages and products costs can be quantified precisely into what makes locations better to compare. On the other hand non tangible features which refer to such characteristics as reliability, availability and security can only be measured along an ordinal or even nominal scale. Other non tangible features like the percentage of employees that are unionized can be measured as well. Generally speaking companies prefer location with low taxes and low wages rather than such where high taxes and wages are charged. But by taking these two factors under considerations low taxes are likely to imply low levels of community services and poor quality supplies of industrial land. While low wages may imply low skills and low purchasing power. To sum this up non-tangible features are very important for business location decisions. Let us consider the effect of factors such as: Materials, markets and transportation Factories which produce products for different markets usually are threatened by transportation costs. These costs include procurement costs, i.e. the costs considered for bringing raw materials or semi products to the company. On the other hand the finished products needs to be distributed to the markets, which incurs distribution costs. Therefore locations near inputs lower procurement costs and locations near markets lower distribution costs. Transportation costs comprise direct freight charges, while transfer costs refer to both direct costs and indirect costs such as insurance costs and losses resulting from damage in transit. Basically transportation costs are determined by physical characteristics like value of product and quantity of goods on the one hand and are determined also by freight rates on the other hand. Consequently, average transport costs decline significantly with distance. All of us have a fair bit of idea about labor as an important constituent in the overall scheme of things. Let us see how. 3.6.1 Labor Labor costs comprise wages and non-wage benefits, like contributions to medical plans, vacation time and pay, and pension schemes. Labor costs vary by industry, country, region, unionized and non-unionized sectors. Tremendous differences in labor costs can be seen between countries with high wages like developed countries on the on hand, and developing countries like China, India and so on, on the other hand. But even among high developed countries labor costs can vary. So American and other strong companies are threatened by the highest manufacturing wages among the developed countries while wages and labor costs in Canada or the UK are much lower. This is mainly because of strong influence of the unions in the US and Europe compared to other countries. Even though there are large differences in wages and salaries among countries, Europe, and the US as labor expensive countries have prospered and most of this has occured within recent decades. This fact leads us to another important intangible characteristics of skilled labor. In a country with high taxes and wages you usually will find sophisticated
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infrastructure and educational system and therefore skilled workers. By focusing on China, India and the US we can recognize how low wages do not necessarily mean high competitiveness and high living standards. The main figure which determines competitiveness is productivity. Another factor of immense importance that all of you must consider is: 3.6.2 External economies of scale External economies of scale can be described as urbanization and locational economies of scale. It refers to advantages of a company by setting up operations in a large city while the second one refers to the settling down among other companies of related Industries. In the case of urbanization economies, firms derive from locating in larger cities rather than in smaller ones in a search of having access to a large pool of labor, transport facilities, and as well to increase their markets for selling their products and have access to a much wider range of business services. Location economies of scale in the manufacturing sector have evolved over time and have mainly increased competition due to production facilities and lower production costs as a result of lower transportation and logistical costs. This led to manufacturing districts where many companies of related industries are located more or less in the same area. The emergence of agglomeration like in the case of the Manufacturing belt in the United States can be explained like this: At the beginning of this century the great bulk of manufacturing was located in relatively small area in the Northeast of the United States. Even though wages were lower in the south of the United States and there were more mineral resources in West and Midwest, companies kept staying within the belt as a result of location economies of scale. Each manufacturing facility stayed there because of having advantages of being near other manufacturers. However this did not only take place in the US but other countries as well such as Germany in the Ruhr area or in Japan - Toyota city. As large corporations have realized that inventories and warehouses have become a major cost factor, they have tried reducing inventory costs by launching Just in Time production system (the so called Kaban System).This high efficient production system was one main factor in the Japanese car industry for being so successful. Just in time ensures to get spare parts from suppliers within just a few hours after ordering. To fulfill these criteria corporations have to be located in the same area increasing their market and service for large corporations. Power or energy, as all of us are aware is the commodity that makes the world go round. 3.6.3 Energy Energy sources were a significant factor of location before the Industrial Revolutions. Companies needed access to water energy, electricity for their operations. Now electricity
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and other energy sources like oil can be transformed and shipped very easily and cheaply and therefore Energy as being a main factor of location has decreased in its meaning. Friends, all of us are a part of the community and society in general. Thus, the factors given below also assume grave significance. 3.6.4 Community infrastructure and amenity All manufacturing activities require access to a community infrastructure, most notably economic overhead capital, such as roads, railways, port facilities, power lines and service facilities and social overhead capital like schools, universities and hospitals. These factors are also needed to be considered by location decisions as infrastructure is enormously expensive to build and for most manufacturing activities the existing stock of infrastructure provides physical restrictions on location possibilities. But on the other hand it is worth to mentioning that existing infrastructure does not cause industry to occur. 3.6.5 Capital Another issue which we need to examine is the: Capital By looking at capital as a location condition, it is important to distinguish the physiology of fixed capital in buildings and equipment from financial capital. Fixed capital costs as building and construction costs vary from region to region. But on the other hand buildings can also be rented and existing plants can be expanded. Financial capital is highly mobile and does not very much influence decisions. For example, large Multinational Corporations such as Coca-Cola operate in many different countries and can raise capital where interest rates are lowest and conditions are most suitable. Capital becomes a main factor when it comes to venture capital. In that case young, fast growing ( or not) high tech firms are concerned which usually have not many fixed assets. These firms particularly need access to financial capital and also skilled educated employees (i.e. Silicon Valley). Let us now focus our attention to the conduct of operations of MNCs and see how these have an important bearing on the decisions at hand:3.7 MULTINATIONAL COMPANIES OR MNC A MNC is a company which has substantial direct investment in foreign countries, not just an export business (International company). Being a MNC means that active management is required at any company and holding outlets in a passive financial portfolio. The main relation between a Multinational Corporation and an International company is that each subsidiary could be run as its own independent company. By definition of the United Nations a Multinational company is an enterprise: a. which comprises entities in two or more countries, regardless of the legal form and fields of activity of those entity. b.
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which operates under a system of decision making permitting different policies and a common strategy through one or more decision making centers. c. In which the entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the activities of the others, and, in particular, to share knowledge, resources, and responsibilities with others. In this context let us answer the following basic questions:What motivates companies to expand their operations internationally? Let us probe deeply. Motivations for Internationalization We can classify these as follows:Traditional Motivations One of the earliest reasons why companies moved abroad was the need to secure key supplies, especially minerals, energy, and scarce raw material resources. Another strong trigger of internationalization could be described as a market seeking behavior. This motivation was particularly strong in companies for which their home markets have become too small and especially for companies who wanted to use economies of scale. Expenses for Research and Development for new High Tech products are so high and the life time so short that companies are forced to meet a sales quota of a certain amount and therefore their home markets have become small. Another traditional and important trigger of internationalization was the desire to access low cost factors of production as cheap labor or lower cost capital (perhaps through a government investment subsidy). 3.8 MULTINATIONAL COMPANIES AND NATIONAL STATES It is generally argued that over the last few decades Multinational companies have become extremely powerful and the influence of the home country in which MNC operates have decreased over time. MNC are very important for Host countries because they employee many people and increase GDP of the country. Therefore Host countries try to attract MNC by offering subsidies when they start their operations and providing infrastructure and as well as tax allowances. MNC work in many countries and have really spread out their home. This means they do not necessarily belong to one host country but they are at home everywhere where they have a headquarters.
The power of MNC is rooted because of their technological and managerial expertise and complexity, their financial resources, international marketing channels and differentiated products, reinforced by powerful advertising campaigns. The power of the host country government is related to the size of the domestic markets, resources and skilled labor pools, the availability of infrastructure and the political stability in the country. 3.9 DOMINANT FACTORS IN MANUFACTURING Factors dominating location decisions for new manufacturing plants can be broadly classified in six groups. They are listed in the order of their importance as follows. 1. Favorable labour climate 2. Proximity to markets 3. Quality of life 4. Proximity to suppliers and resources 5. Proximity to the parent companys facilities 6. Utilities, axes, and real estate costs Let us consider each of these factors one by one. Favorable labor climate A favorable labor climate may be the most important factor in location decisions for labour-intensive firms in industries such as textiles, furniture, and consumer electronics. Labour climate includes wage rates, training requirements, attitudes toward work, worker productivity, and union strength. Many executives consider weak unions or al low probability of union organizing efforts as a distinct advantage. Proximity to markets After determining where the demand for goods and services is greatest, management must select a location for the facility that will supply that demand. Locating near markets is particularly important when the final goods are bulky or heavy and outbound transportation rates are high. For example, manufacturers of products such as plastic pipe and heavy metals all emphasize proximity to their markets. Quality of life Good schools, recreational facilities, cultural events, and an attractive lifestyle contribute to quality of life. This factor is relatively unimportant on its own, but it can make the difference in location decisions.
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Proximity to suppliers and resources In many companies, plants supply parts to other facilities or rely on other facilities for management and staff support. These require frequent coordination and communication, which can become more difficult as distance increases. Utilities, taxes, and real estate costs Other important factors that may emerge include utility costs (telephone, energy, and water), local and state taxes, financing incentives offered by local or state governments, relocation costs, and land costs. Other factors There are some other factors needed to be considered, including room for expansion, construction costs, accessibility to multiple modes of transportation, the cost of shuffling people and materials between plants, competition from other firms for the workforce, community attitudes, and many others. For global operations, firms are emphasizing local employee skills and education and the local infrastructure. 3.10 DOMINANT FACTORS IN SERVICES The factors considered for manufacturers are also applied to service providers, wit one important addition the impact of location on sales and customer satisfaction. Customers usually look about how close a service facility is, particularly if the process requires considerable customer contact. Proximity to customers Location is a key factor in determining how conveniently customers can carry on business with a firm. For example, few people would like to go to remotely located dry cleaner or supermarket if another is more convenient. Thus the influence of location on revenues tends to be the dominant factor. Transportation costs and proximity to markets For warehousing and distribution operations, transportation costs and proximity to markets are extremely important. With a warehouse nearby, many firms can hold inventory closer to the customer, thus reducing delivery time and promoting sales. Location of competitors One complication in estimating the sales potential at different location is the impact of competitors. Management must not only consider the current location of competitors but also try to anticipate their reaction to the firms new location. Avoiding areas where competitors are already well established often pays. However, in some industries, such as
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new-car sales showrooms and fast-food chains, locating near competitors is actually advantageous. The strategy is to create a critical mass, whereby several competing firms clustered in one location attract more customers than the total number who would shop at the same stores at scattered locations. Recognizing this effect, some firms use a follow the leader strategy when selecting new sites. 3.11 SITE-SPECIFIC FACTORS Retailers also must consider the level of retail activity, residential density, traffic flow, and site visibility. Retail activity in the area is important, as shoppers often decide on impulse to go shopping or to eat in a restaurant. Traffic flows and visibility are important because businesses customers arrive in cars. Visibility involves distance from the street and size of nearby buildings and signs. High residential density ensures nighttime and weekend business when the population in the area fits the firms competitive priorities and target market segment. Well, you have been following very clearly and must have understood the issues that were discussed. The best way, is through a small case study or case-let, as it is commonly referred to. So, here we go again. POM in practice The Radisson Hotels International, with headquarters in Minneapolis, Minnesota, had become by 1995 one of the worlds fastest-growing upscale hotel companies. Its global expansion program was adding one new location every 10 days, on average. In 1991, it opened the four-star Radisson Slavjansksya Hotel in Moscow, which has become a very successful hospitality oasis for Western business travelers. However, opening the Slavjanskaya forced Radisson to weather many storms and deal with every conceivable managerial challenge. Multiple Languages There is great diversity in the language of the hotels managers, employees, supplies, and customers. Most of the managers are expatriates, and most of the employees are Russians. The customer mix is American (55 percent), Western Europe (20 percent), Eastern European (15 percent), Asian (5 percent), and Russian (5 percent) Different Norms and Customs Russian standards of service quality were much lower than those expected by management. To attain and maintain top service quality, employees had to participate in intensive training. Employee attitudes toward work and ethical norms also were different. For example, employees often missed work because of sick leaves, maternal leaves, and vacations. Russian laws allow 24-day vacations and sick leaves of up to four months with
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pay, which can be renewed by returning to work for only a few days. Security requirements were demanding, with theft being commonplace. Once the entire payroll was lost in a Russian bank. On another occasion, about 500 of the 600 champagne glasses were missing. The nearby train station was said to be controlled by gangs who offered protection to the vendors. Some 70 security guards were employed, many more than at a typical Radisson hotel. Workforce Management Staffing and training issues arose unexpectedly. For example, the Russian employees were offended by being rotated through various jobs to gain wider experience, viewing rotation as a lack of confidence in their abilities. They believed that Americans were too quick to punish and too slow to understand cultural differences. An important hiring requirement was that the applicant had smiled sometime during the interview and had expressed a willingness to reject bribes. The notion of linking pay and bonuses with performance was a radically new idea to Russian employees. Unfamiliar Laws and Regulations Communist-era job-for-life laws were still in effect, and firing an employee was difficult. The housekeeping people were paid for 8 hours per day, regardless of the actual hours worked. Tax laws were extremely complicated and sometimes were changed retroactively. Russian employees were paid in rubles at a time when inflation was 18 percent per month. Unexpected Cost Mix Labour productivity was low relative to a comparable Western hotel, but salary rates were even lower. The net result was a savings because salaries accounted for only 13.5 percent of total costs, in contrast to the 35 percent in the United States. However, local suppliers were unreliable and procurement costs were quite high. About 93 percent of all products were imported from the West shipped to Helsinki or St. Petersburg and then trucked to Moscow. This importing process was slowed by problems with customs, Russian fuel, truck breakdowns, and the need for expediting payments. These uncertainties and delays created unusually large inventories. The infrastructure, including mail, telephone, banking, and city services, also was inadequate. For example, hot water came from cityrun water heating plants. Because this source wasnt always reliable, Slavjanskaya had to pay for the construction of a second hot water pipe to guarantee both heat and hot water. Let us consider another small case.
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3.12 POM IN PRACTICE Call centers are frequently mistaken for telemarketing operations, when in fact they are not. Most are inbound facilities that take reservations and orders or provide customer service. The industry has boomed during the last decade as more firms decided to outsource such customer service processes. Texas leads the United States in the number of new centers over the past decade its number of call centers doubled in the last decade. By one estimate, 113 centers located there in the 1990s compared with 81 in Florida, the runner-up. In the past, the vast majority of call centers went to the states large metropolitan areas, but now smaller cities such as Big Spring, McAllen, and Brownsville are getting in on the act. Two dominant factors favouring small Texan cities are their ample supply of inexpensive labour and the incentives that thy are tossing in to land the companies. Before Denverbased StarTek opened a call center in Big Spring, a West Texas town of 23,000 where unemployment had been about 6 percent, a job fair attracted 1,200 applicants. Employees started at $6.50 per hour, far less than what would be paid in a bigger city. To seal the deal, Big Springs gave StarTek $2.3 million in interest-free loans. Smaller cities are more likely to get state funds for this type of economic development because the call centers are such an economic-development bonanza for them. In larger cities, companies usually do not qualify for incentives unless they make a substantial capital investment-and many do not, choosing to lease office space. The smaller cities need the jobs more. Call centers employ several hundred people, bringing jobs and a level of technical training and giving smaller cities a foot in the door to the new high-tech economy. Particularly if labour stays in short supply, call centers could be the first step for smaller cities to draw other burgeoning business, such as the distribution centers for e-commerce companies. Other factors that favour Texas are the central time zone (making it convenient to reach markets on both coasts), the availability of advanced telecommunications structures (such as fiber-optic lines and digital switching systems), and the favourable regulatory climate. It is a one-party-consent state, meaning customers do not need to be notified if their conversations are being recorded; getting permission slows down the calling process. And the state also does not levy excise or sales taxes on out-of-state long distance calls, as some states do. Border cities also offer a supply of bilingual workers to take calls from Spanish-speaking customers. This advantage is particularly important as more companies expand their markets into Latin America. 3.13 LOCATION SELECTION MODELS In this unit , we are continuing on different factors affecting location choices and how to apply load distance and center of gravity method for selecting single-site location problem.
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Decisions regarding site selection Management must first decide whether to expand on site, build another facility, or relocate to another site. The advantages of building a new plant or moving to a new retail or office space are that the firm does not have to rely on production from a single plant, can hire new and possibly more productive labour, can modernize with new technology, and can reduce transportation costs. Most firms that choose to relocate are small. They tend to be single-location companies overcrowded for space and needing to redesign their production processes and layouts. Before selecting a site, several issues must be examined from different angles and their relative merits and de-merits should be properly examined. Let us now turn our attention to:Comparing several sites The process of selecting a new facility location involves a series of steps. 1. Identify the important location factors and categorize them as dominant or secondary 2. Consider alternative regions; then narrow the choices to alternative communities and finally to specific sites 3. Collect data on the alternatives from location consultants, state development agencies, city planning departments, chambers of commerce, land developers, electric power companies, banks, and on-site visits. 4. Analyze the data collected, beginning with the quantitative factors- factors that can be measured in rupees, such as annual transportation costs or taxes. These rupees values may be broken into separate cost categories (e.g., inbound and outbound transportation, labour, construction, and utilities) and separate revenue sources (e.g., sales, stock or bond issues, and interest income). These financial factors can then be converted to a single measure of financial merit and used to compare two or more sites. 5. Consider qualitative factors pertaining to each site into the evaluation. A qualitative factor is one that cannot be evaluated in rupees terms, such as quality of life or community attitudes. To merge quantitative and qualitative factors, some managers review the expected performance of each factor, while others assign each factor a weight of relative importance and calculate a weighted score for each site, using a preference matrix. What is important in one situation may be unimportant or less important in another. The site with the highest weighted score is best. 3.14 PROBLEM Let us look at an example on calculation of weighted scores in a preference matrix. Let us assume that a new medical facility, Health-Care, is to be located in Delhi. The
location factors, weights, and scores (1 = poor, 5 = excellent) for one potential site is shown in the following table. The weights in this case add up to 100 percent. A weighted score will be calculated for each site. What is the weighted score for this site? Location factor weight score Total patient km per month 25 4 Facility utilization 25 3 Average time per emergency trip 25 3 Land and construction costs 15 1 Employee preferences 10 1 Solution The weighted score for this particular site is calculated by multiplying each factors weight by its score and adding the results: 510115325325425++++=oreweightedsc = 100 + 75+ 75+ 15+50 = 315 The total weighted score of 315 can be compared with the total weighted scores for other sites being evaluated. Based on it, proper decisions could be made. Now, we examine the concept of what is known as, the load-distance model. 3.15 LOAD-DISTANCE METHOD The load-distance method is a mathematical model used to evaluate locations based on proximity factors. The objective is to select a location that minimizes the total weighted loads moving into and out of the facility. The distance between two points is expressed by assigning the points to grid coordinates on a map. An alternative approach is to use time rather than distance. 3.16 DISTANCE MEASURES Suppose that a new warehouse is to be located to serve Delhi. It will receive inbound shipments from several suppliers, including one in Ghaziabad. If the new warehouse were located at Gurgaon, what would be the distance between the two facilities? If shipments travel by truck, the distance depends on the highway system and the specific route taken. Computer software is available for calculating the actual mileage between any two locations
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in the same county. However, for load-distance method, a rough calculation that is either Euclidean or rectilinear distance measure may be used. Euclidean distance is the straight-line distance, or shortest possible path, between two points. The point A on the grid represents the suppliers location in Ghaziabad, and the point B represents the possible warehouse A(50,185) y B(175, 100) x location at Gurgaon. The distance between points A and B is the length of the hypotenuse of a right triangle, or d
AB =
()()22ybyaxbxa+ = distance between points A and B
where dAB
X = x-coordinate of point A
a
Y = y-coordinate of point A
a
X = x-coordinate of point B
b
Y = y-coordinate of point B
b 0
Rectilinear distance measures distance between two points with a series of 90 turns as city blocks. Essentially, this distance is the sum of the two dashed lines representing the base and side of the triangle . The distance traveled in the x-direction is the absolute value of the difference in x-coordinates. Adding this result to the absolute value of the difference in the y-coordinates gives D = |x x | + |y y |
AB A B A B
3.17 CALCULATING A LOAD-DISTANCE SCORE Suppose that a firm planning a new location wants to select a site that minimizes the distances that loads, particularly the larger ones, must travel to and from the site. Depending on the industry, a load may be shipments from suppliers, between plants, or to customers, or it may be customers or employees traveling to or from the facility. The firm seeks to
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minimize its load-distance, generally by choosing a location so that large loads go short distances. To calculate a load-distance for any potential location, we use either of the distance measures and simply multiply the loads flowing to and from the facility by the distances traveled. These loads may be expressed as tones or number of trips per week. This calls for a practical example to appreciate the relevance of the concept. Let us visit a new Health-Care facility, once again. Example- calculating load-distance scores The new Health-Care facility is targeted to serve seven census tracts in Delhi. The coordinates for the center of each census tract, along with the projected populations, measured in thousands. Customers will travel from the seven census tract centers to the new facility when they need health care. Two locations being considered for the new facility are at (5.5, 4.5) and (7, 2), which are the centers of census tracts C and F. If we use the population as the loads and use rectilinear distance, which location is better in terms of its total load-distance score? Solution We want to calculate the load-distance score for each location. Using the coordinates from figure. , we calculate the load-distance score for each tract.
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Summing the scores for all tracts gives a total load-distance score of 239 when the facility is located at (5.5, 4.5) versus a load-distance score of 168 at location (7, 2). Therefore, the location in census tract F is a better location. We now start with the Center of gravity method for selecting location. 3.18 CENTER OF GRAVITY Center of gravity is based primarily on cost considerations. This method can be used to assist managers in balancing cost and service objectives. The center of gravity method takes into account the locations of plants and markets, the volume of goods moved, and transportation costs in arriving at the best location for a single intermediate warehouse. The center of gravity is defined to be the location that minimizes the weighted distance between the warehouse and its supply and distribution points, where the distance is weighted by the number of tones supplied or consumed. The first step in this procedure is to place the locations on a coordinate system. The origin of the coordinate system and scale used are arbitrary, just as long as the relative distances are correctly represented. This can be easily done by placing a grid over an ordinary map. The center of gravity is determined by formulae. Cx=iiWidixWi Cy=iiWidiyWi Where Cx = x-coordinate of the center of gravity Cy = y-coordinate of the center of gravity Dix = x-coordinate of location i Diy = y-coordinate of location I An Example Activity: Finding the center of gravity Remember the example we discussed previously. Can you find the target areas center of gravity for the Health-Care medical facility. Try using your understanding of the concept. Once you are through, tally your solution with that given below.
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Solution To calculate the center of gravity, we start with the following information, where population is given in thousands Census Tract (x, y) population (l) lx ly
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Next we find Cx and Cy. Cx = 453.5 / 68 = 6.67 Cy = 205.5 / 68 = 3.02 The center of gravity is (6.67, 3.02), which is not necessarily optimal. It is in the general vicinity of location (7, 2), which was found best from the load-distance score. Using the center of gravity as starting point, managers can now search in its vicinity for the optimal location. Its that time of the lecture again. You got it. Good. So, here is a case study 3.19 AN APPLICATION OF WAREHOUSE LOCATION TO BLOODMOBILE OPERATIONS Bloodmobile staging areas are warehouses or garages where bloodmobiles are provisioned, repaired, and maintained between blood collections. The American Red Cross wanted to examine the effects of proposed site changes for their operations. The total distance traveled each year to collect blood was determined to be a useful criterion function for assessing proposed sites. The proposals considered were either a single central site or a combined of a central site with substitutes having limited facilities.
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In the course of the study, several questions were considered1. What is the present collection pattern for the existing site? 2. If each collection point were assigned to the nearest staging area, what would be the effect on distance traveled? 3. How does distance change if a new configuration of staging areas is used? 4. What is the minimum possible distance that must be traveled? This problem was attacked by using facility-location techniques that have proven to be useful in locating warehouses. The objective function to be minimized was Min+2/ 1]2)(2)[(ypyixpxiwi Where Wi is the fraction of the total number of trips made to collection site I; xi, yi are the coordinates of collection sit I; and xp, yp are the coordinates of the proposed bloodmobile staging area. The term in brackets represents the straight-line distance between the collection site and the staging area. Thus the objective is to minimize the sum of distances from collection sites weighted by the number of trips made to the collection sites. A computer program was written to solve this problem and permit rapid comparison of potential sites. The analysis revealed an improved location in one region studied and also helped to determine how many collection units should be used. It was noted that the method used to assist in the location of bloodmobile staging areas provides useful insight into blood collection patterns and sheds light on a problem that has traditionally been performed by a seat-of-the pants approach. Locating a facility within a network of facilities When a firm with a network of existing facilities plans a new facility, one of two conditions exists- either the facilities operate independently (e.g., a chain of restaurants, health clinics, banks, or retail establishments) or the facilities interact (e.g., component manufacturing plants, assembly plants, and warehouses). Independently operating units can be located by treating each as a separate single facility, as described. Locating interacting facilities introduces new issues, such as how to allocate work between the facilities and how to determine the best capacity for each. In many cases a workable solution can be identified merely by looking for patterns in the cost, demand, and capacity data. In other cases, more formal approaches are needed. To answer the questions like, what is the best way to partition work among various facilities- transportation method, linear programming can be used. Locating retail, public service, and emergency facilities There are some significant differences between manufacturing locations and those involving retail, public service, and emergency facilities. For a manufacturer, location
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decisions involve analysis of the costs of distribution and service delivery times. Service facilities, on the other hand, are the terminal points in the system at which demand takes place. Goods are not moved to and from the service location; customers are. Thus the location of facilities such as fast food franchises, gasoline stations, and banks depend on the concentration of demand and the location of competition. Retail facility location. The major criterion used in locating a retail facility is the volume of demand. For a grocery store or restaurant, this might be measured by rupees sales revenue, whereas for an amusement park, this might be the number of visitors each year. In any case, estimates of demand must be obtained for potential locations. Public service facility location. Public service facilities include post offices, schools, highways, parks, and so on. One of the major problems in locating such facilities is the lack of easily quantifiable data. How does one define social cost or social benefit? Some of the typical criteria used in public service location problems include the average distance or time traveled by the users of the facilities and the maximum distance or travel time between the facility and its intended population. Another factor not present in individual location problems is that public facilities create demand; one would like to locate facilities to serve the largest segment of the population. In this sense, the problem is similar to locating a bank or grocery store, except that profit is not a motivating factor. Cost-benefit analysis is often used to determine public facility location. Emergency facility location. The problem of locating emergency facilities such as fire stations, ambulance stations, and police substations has the objective of minimizing response time from the notification of an emergency to the delivery of service. Usually, the goal is to locate the facility so that the maximum response time to any point of demand is minimized. The center of gravity method can often be used to locate service facilities. Retail outlets, power-generating stations, sewage-treatment plants, and waste-disposal facilities are some examples. Summary Before finalizing the exact location, lot more introspection is required from the decision makers side. Location strategy and its importance has to be felt at the initial stage itself; if not will have a long term effect on the organization. Globalisation dictates the location decision in certain in a deep routed way. The organizations need to balance their strengths and weaknesses so that at the end they become successful. Due to globalization the factors influencing the decision do vary widely and has an impact on cost both positively and negatively. Balancing act from the side of the managers lays the foundation for success. To gear them up lot more analytical tools are provided.
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REVIEW QUESTIONS 1. Discuss the advantages of the insulated economy on location decision process? 2. Enumerate the merits and demerits of the Globalisation on Indian manufacturing sector? 3. Deciding on Global Locations need different managerial personality Comment. 4. Discuss, using examples, the changing pattern of Economies of Scale in Indian Context? 5. Illustrate the Load-Distance Method, by using your own data?
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PROCESS MANAGEMENT AND STRATEGY

Learning Objectives: By learning this unit, the learner will be able to:

Have the holistic view of the process Appreciate the performance metrics Strategic and Operational view process management Carry out the product and process trade off
4.1 THE PROCESS VIEW OF ORGANIZATION The product-development process discussed elsewhere also applies to the design and development of new services; however, there are several important differences. In planning manufactured products, a great deal of attention must be paid to technical specifications such as size, weight, and engineering specifications. For physical characteristics, standard may be determined and the conformance to these standards can be monitored for quality assurance. The quality of services, on the other hand, depends on the skill and training of personnel who produce the services. It is more difficult to set standards on performance, and consistent quality is more difficult to ensure. For example, all meals on an airline may be of the same quality, but service may vary considerably with different flight crews. Another important difference between manufactured products and services is that manufactured products can be stored for future use, whereas services must be made available to the customer on demand. This difference is another important consideration for quality assurance. That is, major quality considerations must be planned and designed into the service just as it should be with manufactured products; however, finished goods may be inspected prior to being released from the factory. For services, this cannot be done.
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4.2 GENERAL DESIGN PRINCIPLES The general design principles and procedures, such as simplicity, CE, and prototyping, apply to designing service products as well as goods. However, there are additional considerations of special importance when designing service products. These are: 1. To what extent will the customer be involved in the process? For example, will a retail operation be primarily self-service (Big Bazar)? Will a financial institution allow customers to execute their own transactions using automatic teller machines or telephones (Citibank)? Normally, greater customer involvement is incorporated into the product either to reduce costs or to provide grater convenience to the customer by, for instance, eliminating the need to wait for a salesperson. 2. How quickly will service be provided? Human queuing systems are an important aspect of product quality for services. The intended speed of service will affect staffing, job design, scheduling, and facility layout. 3. How standardized or customized will the service be? For example, freight rail service is usually highly standardized: trains are scheduled to run between specific locations, and if customers want to ship or receive materials, they must be ready at those times. 4. What variety of services will be offered? If a fast-food restaurant will provide only carry-out service, there is no need for seating space in the facility or extra service personnel to clean the tables. 5. What geographical area will be served? American Express Corporation, which sells its products based on quick worldwide replacement of lost or stolen travelers checks and credit cards. This product characteristic requires a large international network of American Express offices and agents with a telecommunications system linking them. 4.3 DOCUMENTS FOR SERVICES Because of the high customer interaction for most services, the documents for moving the product to production are different. The documentation for a service to be produced will often take the form of the explicit job instructions that specify what is to happen at the moment-of-truth. The moment-of-truth is the moment that exemplifies, enhances, or detracts from the customers expectations. That moment may be as simple as a smile or having the check-out clerk focus on you rather than talking over his shoulder to the clerk at the next counter. Regardless of how good the banks products may be in terms of checking, savings, trusts, loans, mortgages, and so forth, if the moment-of-truth is not done well, the product may be poorly received. Example 4.1 shows the kind of documentation a bank may use to move a product (drive-up window banking) to production.
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In a telemarketing service the product design and its related payment to production may take the form of telephone script, and a story board may be used for a motion picture. Let us take an example. Example Customers who use drive-up teller stations rather than walk-in banks may require different customer relations techniques. The distance and machinery between you and the customer raises communication barriers. Communication tips to improve customer relations at a drive up window are: Be especially discrete when talking to the customer through the microphone Provide written instructions for customers who must fill out forms you provide Mark lines to be completed or attach a note with instructions Always say please and thank you when speaking through the microphone Establish eye contact with the customer if the distance allows it If a transaction requires that the customer park the car and come into the lobby, apologize for the inconvenience
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By now you would have understood the basic difference between product and service design. I would now request you all to pay due attention to the concept of Flexible Manufacturing System (FMS). 4.4 FLEXIBLE MANUFACTURING SYSTEM (FMS) Let me start by giving you its main outlines:1. FMS is a computer-controlled system. 2. It contains several work stations, each geared to different operations. Work-station machines are automated and programmable. 3. Automated materials-handling equipment move components to the appropriate work station. 4. From the work stations, it is moved onto the preprogrammed machines that select, position, and activate the specific tools for each job. 5. Hundreds of tool options are available. Once the machine has finished one batch, the computer signals the next quantity or component, and the machine automatically transferred to the next workstation in its routing.
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Features of FMS An FMS is a process technology that can produce a moderate variety of products in modest volumes, and can do so quickly and with high quality. Operating costs, too, can be reduced with an FMS; lower direct labour costs lead to lower manufacturing costs. These benefits, however, are not free; an FMS requires very large capital investments in equipment, planning and control systems and human resources. An FMS is generally appropriate when: All products are variations of a stable basic design All products utilize the same family of components The number of components is only moderate (10 to 50) The volume of each component is moderate (1000 to 30,000 units annually), but in lot sizes as small as one unit.
An FMS is most often used in manufacturing components that require several machining operations. A work station consists of a machine or a robot that performs a particular class of tasks such as drilling holes, bending metal in various directions, and so on. Specialized tools are continuously available for one-at-a time use, and changed automatically by computers according to the unique requirements for each component as it progress through the system. The goal of an FMS is to produce a moderate variety of products in moderate, flexible quantities. Clearly, an FMS is more flexible than conventional high-volume production systems. It is less flexible than a job shop that specializes in one-of-a-kind products. An FMS is a mid-range system appropriate for moderate variety/moderate volume markets. Main advantages of FMS These are:1. Improved capital utilization 2. Lower direct labour cost 3. Reduced inventory 4. Consistent quality
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Disadvantages of FMS These are:1. Limited ability to adapt to changes in product 2. Substantial preplanning and capital 3. Tooling and fixture requirements We will now see how these are practiced. 4.5 PRODUCT ATTRIBUTE AND PROCESS COMPETENCIES EXAMPLE OF BURGER KING Simulation in service design for Burger King Burger King is one of the largest fast-food restaurant chains., having approximately 3000 restaurants across the United States and in other nations. At corporate head quarters in Miami, new products, system, and procedures are developed; however, franchises must be persuaded to adopt them on a cost/benefit basis. That is, the Corporation must demonstrate that new products or systems will provide an adequate return on investment. Many changes have occurred over the years since Burger King was founded in 1954, which necessitated new design of their service facilities. For instance, as the take-out business increased, Burger King was the first system to introduce the drive-through service lane. The Have IT You Way concept introduced in 1973 required a change in the kitchen operations from mass production of similar items to food preparation based upon individual customer specifications. In addition specialty sandwiches, which were introduced in 1978 required new equipment and procedures. As these changes were implemented, the original kitchen and work designs required redesign in order to maintain effective levels of customer service. One example where such a redesign was necessary involved the drive-through system. The activities performed by customers and employees in the original drive-through system. Customers enter the system, wait in line to place an order, order at an outside menu board, wait in line again, pay for the order at the pick-up window, and finally leave. One employee was used to take the order, assemble it, bag it, and collect the money. Burger King had established a standard transaction time of 30 seconds. However, an analysis of a number of restaurants showed that times were averaging 45 seconds. During peak periods, cars could not even join the end of the line and sales were lost. If the transaction time were 45 seconds, then 80 cars per hour could be handled.
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With an average check of $2.44 per order, drive-through sales were limited to a maximum of $195 per hour. If the time could be shortened to 30 seconds, maximum sales could rise to $292 per hour. This represented an annual increase in sales of more than $35,000 per restaurant. The operations research group at corporate headquarters worked with several franchises and devised new work procedures to decrease the transaction time. The work procedures were separated into distinct tasks. In the new system, one employee does nothing but take orders. A runner / bagger assembles the order, and a third employee acts as a cashier and hands the order to the customer. This seemingly minor modification has significantly increased the productivity and sales in the Burger King chain. In view of the number of changes that have taken place and escalation of costs, Burger king management developed a productivity improvement program in 1979. One of the outputs of this effort was the development of a general purpose restaurant simulation model. The restaurant was viewed as three interrelated subsystems. The simulation model was developed in a modular fashion in order to be flexible and easily modified. This allows minor changes to be made in the model that reflect variations in individual franchise operations or changes in staffing during peak and low demand periods. The stages are:

Enter Wait in line Drive orders at Outside menu board Cashier takes order Assemble order from sandwich Wait in line and drink stations Pay for order at Bag order Pick-up window Hand order to customer and Leave collect money
Customer system Service delivery system The simulation model has been extensively used in evaluating proposed design changes, introductions of new products, and design of new restaurant configurations.
For instance, in many restaurants, the distance between the order station and pickup window could only accommodate two or three vehicles. The model was used to determine the best vehicle capacity, which resulted in a drastic reduction in waiting time and an annual increase of over $10,000 per restaurant during the lunch hour. A second application involved the evaluation of a second drive-through window in series with the first. The model projected a sales benefit of 15 percent during peak lunch hours. After installation in several restaurants, actual benefit was found to be 14 percent, a very close prediction. A third application of the model was to analyze the effect of introducing small specialty sandwiches. The model indicated that the additional preparation time required would not be costeffective and would actually result in a loss in total sales. The model has also been Modular view of Burger King restaurants

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Receive order Customer system Transmit to kitchen via CRT Food Production Drinks System Sandwich preparation line Special sandwich-preparation line Delivery system Assembly order
Make change used to evaluate new restaurant designs. This includes establishing the proper size in a specific location, while emphasizing the human engineering aspects of work methods in the kitchen. Burger King is an example of an organization that provides both manufactured goods (food items) and service as its major products. Productivity, quality, and cost issues are integrated into the product design and development process. Computer simulation has proven to be a useful tool in the strategic evaluation of new products and facilities for Burger King. 4.6 PROCESS DESIGN After products and services design now we concentrate on process design. To make products or provide services, a process is a prerequisite.
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PROCESS DECISIONS Process decisions must be made when: A new or substantially modified product or service is being offered Quality must be improved Competitive priorities have changed Demand for a product or service is changing Current performance is inadequate The cost or availability of inputs has changed Competitors are gaining by using a new process; or New technologies are available Process decisions directly affect the process itself, and indirectly the products and services that it provides. Lets focus on the relevant common process decisions. In general, Operations managers must consider five common process decisions. These are: 1. 2. 3. 4. 5. Process choice - whether resources are organized around products or processes. It depends on volume and degree of customization to be provided Vertical integration backward integration, and forward integration Resource flexibility ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions Customer involvement Capital intensity mix of equipment and human skills in a process
4.7 CLASSIFICATION OF PRODUCTION PROCESS STRUCTURES We often classify processes based on their physical configuration, material and product flow, flexibility, and volume expectation. There are five different process types, which a manager can choose, keeping in mind the relative importance of the following attributes:Quality, Time, Flexibility, and Cost. These are: 1. Project process 2. Job process 3. Batch process 4. Line process, and 5. Continuous process
Project process: Selecting location for new plant Job process : Machining precision metal tubes Batch process : Producing a batch of textbooks Line process : Auto assembly Continuous process : Oil-refining process organizations alike. In fact, some manufacturers processes provide a service and do not involve manufacturing, as demonstrated with project process examples. A high degree of job customization, the large scope of each project, and the release of substantial resources characterize a project process. Lets now focus on the various constituents. Job process A job process creates the flexibility needed to produce a variety of products or services in significant quantities. Customization is relatively high and volume for any one product or service is low. A job process primarily organizes all like resources around itself; equipment and workers capable of certain types of work are located together. These resources process all jobs requiring that type of work. This process choice creates jumbled flows through the operations as customization is high and most jobs have a different sequence of processing steps. After job process, lets analyze: Batch process A batch process (disconnected flow processes) differs from the job process with respect to volume, variety, and quantity. The primary difference is that volumes are higher because the same or similar products or services are provided repeatedly. Another difference is that a narrower range of products and services is provided. Then moving over to the: Line process A line process (repetitive or discrete flow process) lies between the batch and continuous processes on the continuum; volumes are high, and products or services are standardized, which allows resources to be organized around a product or service. There are line flows, with little inventory held between operations. Each operation performs the same process over and over, with little variability in the products or services provided.
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We would focus now on: Continuous process A continuous process is the extreme end of high-volume, standardized production with rigid line flows. Its name derives from the way materials move through the process. Usually, the primary material, such as liquid, gas, or powder, moves without stopping through the facility. The processes seem more like separate entities than a series of connected operations. The process is often capital-intensive and operated round the clock to maximize utilization and to avoid expensive shutdowns and start-ups. Advantages and disadvantages of flow processes The tightly connected configuration, continuous or repetitive transfer of product, narrow product line, and often automated nature of continuous and repetitive flow processes have several advantages over other production structures. The following are the primary advantages and disadvantages of continuous and repetitive flow processes. Advantages: 1. Equipment can be specified to perform a narrow range of functions very efficiently 2. Jobs can be specialized, so workers can benefit from repetition of a narrow range of tasks performed at any given work station. 3. Material handling can be simplified using efficient but inflexible, fixed location material handling methods, such as conveyers, pipes, and gravity slides 4. Work-in-process (WIP) inventories are small because products move between work stations with little or no waiting and storage time in between 5. Space utilization is efficient because there is no need to store in-process inventories, and material handling is performed using conveyors, pipes, or slides, so the wide aisles required by fork lifts and other mobile machines can be reduced or eliminated. 6. Quality conformance is easier to achieve because with the narrow range of products workers know the quality requirements and how to achieve them, product changeovers and equipment setups, which are major causes of quality problems, are infrequent, and repetition improves worker skill, so there is less likelihood of errors. 7. Production scheduling and coordination are relatively easy because there are few separate work orders and only work at the first wok station has to be scheduled; work at the other work stations automatically follows in the same sequence. 8. Costs are easy to monitor because all products undergo the same processing and use the same resources in consistent amounts.
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Disadvantages 1. The primary disadvantage is that continuous and repetitive flow processes are inflexible. The process can make only products that require the same processing in the same sequence. In addition, once the process has been established, it is expensive to modify its physical configuration to accommodate new products that require different types of processing or a different sequencing of processing stages. Flow processes are also relatively inflexible in terms of volume changes. 2. Initial costs are high because of the specialized equipment used and the substantial work required to design, set up, and balance the workload at each workstation. 3. Work can become tedious and boring for workers unless jobs are well designed and workers are allowed some flexibility through job rotation and cross-training. 4. The production system is extremely vulnerable to unplanned work stoppages due to machine breakdowns, defective components, or worker errors. Batch flow processes exhibit many of the same advantages, except that equipment and jobs cannot be as specialized, material flow must be more flexible, inter stage inventories are necessary, and greater storage and transport space is needed than for continuous and repetitive processes. However, the disadvantages are less severe because batch processes are more flexible in both product variety and production volumes, work tends to be less tedious, and the system is less vulnerable to shutdowns because some work stations can operate while others are stopped if there are inter stage inventories. (Advantages and disadvantages of Job process ) Advantages The advantages and disadvantages of job-shop processes are the opposite of those for continuous and repetitive flow processes. The primary advantage of a job shop is its production flexibility. Any product requiring the types of processing that are available in the work centers can be produced. The ability to accommodate different processing times and lot sizes is an especially crucial aspect of flexibility. The other major advantages of job shops are low initial costs for general-purpose equipment and greater worker satisfaction because of the variety of work performed. Disadvantages: The flexibility and lower capital costs for job-shop processes are not free; the following are some corresponding disadvantages. 1. General-purpose equipment is usually less efficient at processing materials. 2. More skilled, higher-paid employees are needed to set up and operate general purpose equipment and to modify work methods to make a variety of products.
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3. Less efficient but more flexible material-handling methods, such as fork lifts and hand trucks, are required. 4. Work-in-process inventories are needed to keep the work centers operating during equipment setups, as well as to provide the scheduling flexibility needed to coordinate the variety of products and job processing times. 5. The large in-process inventories and flexible material-handling systems require more space than do flow processes. 6. Quality conformance is difficult because workers must be familiar with a wider range of quality requirements, they perform more product changeovers, and they cannot spend as much time refining their wok methods for any one product. 7. The variability in process sequencing, lot sizes, and processing times, as well as possible uncertainty about order receipts and due dates, make scheduling and coordinating jobs and equipment very complex. These factors, along with the large in-process inventories, result in long throughput times. 8. The variety of products and their processing requirements make it difficult to assign costs to each product, so it is more difficult to determine the profitability of individual products. Cellular processes Organizations often capture some of the efficiencies of flow processes and the flexibility of job-shop processes by creating hybrids of the two, called cellular processes. A cellular process can be thought of as a mixture of mini flow processes, called work cells (or cells), and a job-shop operation. The work cells may perform only two or three activities in a spatially connected flow process, or they may perform several activities connected in sequence. Cellular processes are most commonly used as substitutes for job-shop processes that need increased productivity. Increasingly, however, they are being used in place of flow processes to obtain greater flexibility. They are also becoming a popular way to organize service operations. To create a cellular process, an organization divides its products into families or group of products that require similar processing steps in the same sequence. A work call is then created to perform these steps in the designated sequence for all the products in the family. The output of the cell may be a finished product or a semi finished product that must be sent elsewhere for further processing. Some products will not be appropriate for any cell, and many products cannot be made entirely at a single cell, so there will normally be a jobshop subsystem (cell) that can do all the processing steps in any sequence.
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Advantages and disadvantages of cellular processes Advantages: 1. Material handling and transport are reduced because the work stations (machines) are spatially close and often are operated as repetitive flow processes. 2. Setup times are reduced because jobs processed at the same cell often have similar characteristics that require less changeover from job to job. 3. Throughput time is reduced because the wait between production stages, the wait for transport, and the transport time are reduced. 4. In-process inventories are smaller because of more efficient scheduling and reduced setup time disruptions. Also, the shorter throughput times reduce the amount of safety stock needed. 5. Less space is needed because the machines in cells are located close together and less in-process inventory must be stored. 6. Although some investment in equipment is often required, total equipment costs often decrease because the increase in efficiency and machine utilization means that less total equipment is needed to produce the same amount of output. 7. Workers enjoy more satisfaction because they have greater job variety than workers in either flow processes or job shops, since their work often involves several machines and tasks. 8. Quality improves because of greater job satisfaction, simpler machine setups, and similarity of products within cells, which produce fewer mistakes. Disadvantages: Successful implementations of a cellular production system requires a considerable amount of work and expertise to characterize and classify products and then design the appropriate work cells and remaining job-shop process. All of us should appreciate that no organization in this world is self sufficient to run the business independently. It has to depend on others for: Either raw materials or For delivering the product.
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It is hence time now to introduce the concept of vertical integration. 4.8 PLANNING, AND CONTROL: VERTICAL INTEGRATION All business buy at least some inputs to their processes, such as professional services, raw materials, or manufactured parts, from other producers. An organization which performs
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more processes in the supply chain by itself, the more vertically integrated it is. If it doesnt perform some processes itself, it must rely on outsourcing. When managers opt for more vertical integration, there is by definition less outsourcing. These decisions are sometimes called make-or-buy decisions, with a make decision meaning more integration and a buy decision meaning more outsourcing. Lets brush up our knowledge of two other integration processes, i.e. Backward integration Forward integration
Vertical integration can be in two directions. Backward integration represents movement upstream toward the sources of raw materials and parts, such as a major grocery chain having its own plants to produce house brands of ice cream, frozen pizza dough, and peanut butter. Forward integration means that the firm acquires more channels of distribution, such as its own distribution centers (warehouses) and retail stores. It can also mean that the firm goes even further by acquiring its business customers. The advantages of vertical integration are the disadvantages of more outsourcing. Similarly, the advantages of more outsourcing are disadvantages of more vertical integration. More vertical integration can sometimes improve market share and allow a firm to enter foreign markets more easily than it could otherwise. Extensive vertical integration is generally attractive when input volumes are high because high volumes allow task specialization and greater efficiency. For performing operations you need equipments as resources. In this regard question arise is the equipment needed are general purpose or special-purpose? Should the workforce flexible enough? To answer these we need to understand resource flexibility. 4.9 RESOURCE FLEXIBILITY Flexible workforce operations manager must decide whether to have flexible workforce. A flexible workforce means workforce whose members are capable of doing many tasks, either at their own workstations or as they move from one workstation to another. Equipment- When products or services have a short life cycle and a high degree of customization, low volumes mean that process managers should select flexible, generalpurpose equipment Another vital question regarding process design is: how much customer involvement will be allowed in the process?
The amount of customer involvement may range from self-service to customization of product to decide the time and place of the service to be provided. Customer involvement can be categorized as Self service self-service is the process decisions of many retailers, particularly when price is a competitive priority. Product selection a business that competes on customization frequently allows customers to come up with their own product specifications or even become involved in designing the product Time and location when services cannot be provided in the customers absence, customers may determine the time and location that the service is to be provided. If the service is delivered to the customer, client, or patient by appointment, decisions involving
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Another question regarding process design is how much should a firm depend on machinery and automated processes? The operation manager must determine the amount of capital intensity required. 4.10 CAPITAL INTENSITY For either the design of a new process or the redesign of an existing one, an operations manager must determine the amount of capital intensity required. Capital intensity is the mix of equipment and human skills in the process; the greater is the relative cost of equipment, the greater is the capital intensity. Let us understand now the concept of fixed automation. FIXED AUTOMATION Fixed automation is a manufacturing process that produces one type of part or product in a fixed sequence of simple operations. Operations managers favour fixed automation when demand volumes are high, product designs are stable, and product life cycles are long. These conditions compensate for the processs two primary drawbacks; large initial investment cost and relative inflexibility. The investment cost is particularly high when a single, complex machine must be capable of handling many operations. However, fixed automation maximizes efficiency and yields the lowest variable cost per unit volumes are high. Let us ponder over the issue of Flexible automation now.
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FLEXIBLE AUTOMATION It is a manufacturing process that can be changed easily to handle various products. The ability to reprogram machines is useful for both low customization and high customization processes. In the case of high customization, a machine that makes a variety of products in small batches can be programmed to alternate between products. When a machine has been dedicated to a particular product or family of products, as in the case of low customization and a line flow, and the product is at the end of its life cycle, the machine can simply be reprogrammed with a new sequence of operations for a new product. Before 1970, many firms were willing to endure the additional complexities that came with size. New products or services were added to a facility as a better utilization of fixed costs and keeping everything under one roof. The result was a jumble of competitive priorities, process choices, and technologies. In the effort to do everything, nothing was done well. Hewlett-Packard, Richo and Mitsubishi are some of the firms that have created focused factories splitting large plants that produced all the companys products into several specialized smaller plants. The theory is that narrowing the range of demands on a facility will lead a workforce toward a single goal. The five main process decisions discussed represent broad strategic issues. The next issue in process management is determining exactly how each process will be performed. Three techniques flow diagrams, process charts, and simulation are widely used to study current process and proposed changes. We now focus on these three concepts. 4.11 FLOW DIAGRAM A flow diagram traces the flow of information, customers, employees, equipment, or materials through a process. There is no precise format, and the diagram can be drawn simply with boxes, lines, and arrows. 4.12 PROCESS CHART What is a process chart? A process chart is an organized way of recording all the activities performed by a person, by a machine, at a workstation, with a customer, or on materials. These activities can be grouped to five categories. Operation: Changes, creates, or adds something. Transportation: Moves the studys subject from one place to another. The subject can be a person, a material, a tool, or a piece of equipment. Inspection: Checks or verifies something but does not change it.
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Delay: Occurs when the subject is held up awaiting further action. Time spent waiting for materials or equipment, cleanup time, and time that workers, machines, or workstations are idle because there is nothing for them to do are examples of delays. Storage: Occurs when something is put away until a later time. Supplies unloaded and placed in a storeroom as inventory, equipment put away after use, and papers put in a file cabinet are examples of storage. The third one is simulation model. 4.13 SIMULATION MODEL Simulation is an act of reproducing the behaviour of a process using a model that describes each step of the process. Once the current process is modeled, the analyst can make changes in the process to measure the impact on certain performance measures, such as response time, waiting lines, resource utilization, etc. Flow diagrams, process charts, and simulation models are means to an end continually improving the process. After a chart has been prepared for either a new or existing process, brainstorming is needed for improvement ideas. To make a process more efficient, the analyst should question each delay and then analyze the operation, transportation, inspection, and storage activities to determine whether they can be combined, rearranged, or eliminated. There is always a scope of doing things in better way. Improvements in productivity, quality, time, and flexibility can be significant. Once the process is designed next comes to evaluate the process and see is there any scope for improvement or is there any need to change the process? Process reengineering addresses these questions. What is process reengineering? 4.14 PROCESS REENGINEERING Process reengineering is the fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance. Reengineering asks questions as: Is the process designed to create customer value? Do we achieve competitive advantage in terms of quality, product, speed of delivery, or price? Does the process help us to win orders? Does the process maximize the customers perception of value?
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Process reengineering means revaluating the purpose of the process and questioning those purposes and assumptions. Process reengineering only works if the basic process and objectives are reexamined. Often a firm finds that the initial assumptions of its process are no longer valid. Reengineering focuses on dynamic improvements in cost, time, or customer service irrespective of how the process is currently being done. Any process can be considered for radical redesign. It could be a factory layout, a purchasing procedure or a new way of processing credit applications as described in the POM in practice below. EXAMPLE: IBM credit application Choosing a service process strategy Five processes choice considered are applicable to service as well as manufacturing. In process-focused facilities (project and job process) equipment utilization is low perhaps as low as 5%. This is true not only for manufacturing but also for services. An x-ray machine in a dentists office and much of the equipment in a fine dining restaurant have low utilization. Hospitals can also be expected to be in that range, which would suggest why their costs are considered high. Why such low utilization? In part because excess capacity for peak loads is desirable. Hospital administrators, as well as managers of other service facilities and their patients and customers, expect equipment to be available as needed. Another reason of low utilization is poor scheduling. The service industry moves to apply continuous process by establishing fast-food restaurants, auto lubrication shops, and so on. As the variety of services is reduced, per unit cost is also expected to drop. The following figure provides more insight into service processes.
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We have learnt what products or services are to be offered and how they should be made. For making these products or for providing such services, men and machines would be required to be properly coordinated. . Hence management must plan the capacity of its processes. 4.15 STRATEGIC POSITIONING AND OPERATIONAL EFFECTIVENESS What is Capacity? Capacity is the maximum rate of output for a process. The operations manager must provide the capacity to meet current and future demand; otherwise, the organization will miss opportunities for growth and profits. Capacity plans are made at two distinct levels: Long term capacity plan ( it covers at least two years in future) (e.g. investment in new facilities and equipments) Short term capacity (it covers week-to-week operation) (e.g. it focuses on workforce size, overtime budgets, inventories, etc) Please bear in mind that too much capacity can be as agonizing as too little. Searching for the optimal balance can often be quite an elusive affair and is one of the strategic decisions that the management must tackle successfully. What are the questions that assume significance in this regard? Well, Questions to be considered The relevant questions in this regard are: How much of cushion is needed to handle variable, uncertain demand? Should we expand capacity before the demand is there or wait until demand is more certain? Measures of capacity There are two main methods of measuring capacity. These are expressed as: Output measures (choice for high volume process) Input measures (choice for low volume flexible processes)
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Output measures Output measures are best utilized when the firm provides a relatively small number of standardized products and services, or when applied to individual process within the overall firm. Nissan Motor Company states capacity at its Tennessee plant as 4,50,000 vehicles per year. That plant produces only one type of vehicle, making capacity easy to measure. However, many organizations produce more than one product or service. For example, a restaurant may be able to handle 50 sit-down or 100 take-out customers per hour. It might also handle 25 sit-down and 50 take-out customers or many other combinations of the two types of customers. As the amount of customization and variety in the product mix becomes excessive, output-based capacity measures become less useful. Input measures Input measures are useful for low-volume, flexible processes. For example in a photocopy shop, capacity can be measured in machine hours or number of machines. Just as product mix can complicate output capacity measures, so as demand can complicate input measures. Demand, which is expressed as an output rate, must be converted to an input measure. Only after making the conversion can a manager compare demand requirements and capacity on an equivalent basis. For example, the manager of a copy center must convert its annual demand for copies from different clients to the number of machines required. When we talk about capacity planning it requires knowledge of the current capacity of a process and its utilization. Next question would be:What is capacity utilization? Capacity utilization is the degree to which equipment, space, or labour is currently being used. It is expressed as a percent. Mathematically, it can be expressed as under: Utilization = %100capacity Maximum rate output Average The unit of measurement for both Numerator and Denominator should be same. Utilization indicates the need for adding extra capacity or eliminating unneeded capacity. Two definitions of maximum capacity, i.e.: Peak capacity and Effective capacity are quite useful. Let us focus on these aspects.
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Peak capacity The maximum output that a process or facility can achieve under ideal conditions is called peak capacity. It can be sustained only for a short time, few hours a day or few days in a month. A process reaches it by using marginal methods of production, such as excessive overtime, extra shifts, temporarily reduced maintenance activities, overshifts, and subcontracting. Effective capacity The maximum output that a process or firm can economically sustain under normal conditions is its effective capacity. In some organizations, effective capacity implies a oneshift operation; in others, it implies a three-shift operation. For this reason, Census Bureau surveys define capacity as the greatest level of output the firm can reasonably sustain by using realistic employee work schedules and the equipment currently in place. When operating close to peak capacity, a firm can make minimal profits or even lose money despite high sales levels. Let us now see how to calculate these measures of utilization through an example. Example If operated around the clock under ideal conditions, the fabrication department of an engine manufacturer can make 100 engines per day. Management believes that a maximum output rate of only 45 engines per day can be sustained economical over a long period of time. Currently, the department is producing an average of 50 engines per day. What is the utilization of the department relative to peak capacity? Effective capacity? Solution. The two utilization measures are Utilization= peak capacity x Peak rate output Average = 10050100% = 50% Effective Utilization = capacity x Effective rate output Average = 4550100% = 111% To increase the maximum capacity the process need to be focused more. Most processes involve multiple operations, and often their effective capacities are not identical. A bottleneck is an operation that has the lowest effective capacity of any operation in the process and thus limits the systems output. A project or job process does not enjoy the simple line flows. Its operations may process many different items, and the demand on any one operation could vary considerably from one day to the next. Bottlenecks can still be identified by computing the average utilization
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of each operation. In this situation, management prefers lower utilization rate, which allow greater slack to absorb unexpected rise in demand. The long-term capacity of bottleneck operation can be expanded in various ways. Investments can be made in new equipments, The bottlenecks capacity also can be expanded by operating it more hour per week, such as going from a one-shift operation to multiple shifts, or going from five workdays week to six or seven workdays per week. Managers also might relieve the bottleneck by redesigning the process, either through process reengineering or process improvement. At this point, consider an important fact regarding the Theory of constraints. (TOC) 4.16 STRATEGIC FIT: THEORY OF CONSTRAINTS TOC refers to an approach that focuses on bottlenecks of a firms financial performance. Long-term capacity expansions are not the only way to ease bottlenecks. Overtime, temporary or part-time employees, or temporarily outsourcing during peak periods are short term options. Managers should also explore ways to increase the effective capacity utilization at bottlenecks, without experiencing the higher costs and poor customer service usually associated with maintaining output rates at peak capacity. The key is to carefully monitor short-term schedules, keeping bottleneck resources as busy as practical. They should also minimize the time spent unproductively for setups. When a changeover is made at a bottleneck operation, the number of units or customers processed before the next changeover should be large, compared to the number processed at less critical operations. Maximum the number processed per setup means that there will be fewer setups per year and thus less total time lost to set ups. The TOC is an approach to management that focuses on whatever hinders progress toward the goal of maximizing the flow of total value added funds or sales less sales discounts and variable costs. The impediments or bottlenecks might be overloaded processes such as order entry, new product development, or a manufacturing operation. The fundamental idea is to focus on the bottlenecks to increase their throughput, thereby increasing the flow of total value added funds. Let us now learn to apply this concept using sequential steps. Application of TOC involves the following steps Its basically a five step process. 1. Identify the system bottleneck 2. Exploit the bottleneck
3. Subordinate all other decision to step 2 4. Elevate the bottleneck 5. Do not let inertia set in FACTORS THAT DETERMINE CAPACITY Ultimately, the output from a production facility or system is not determined simply by the physical size of the facility, the sizes or types of machines, or the number of employees working. Production capacity, especially effective capacity, is affected by the design of the products and processes, the training of employees, the management of quality, and many other factors. The most important factors affecting production capacity are: 1. Process design. In multistage production processes the maximum rate of output that can be achieved is governed by the slowest) lowest capacity stage. 2. Product design. With exactly the same personnel and equipment, the capacity for making a product that is well designed for production will be greater than for a poorly designed one. 3. Product variety. The fewer types of products made by a production unit and the more similar they are, the more specialized equipment and jobs can be, and the less time lost on product changeovers and machine set-ups. 4. Product quality. The way products are made, tested, and inspected will affect the rate at which products of acceptable quality can be produced. 5. Production scheduling. Scheduling that keeps product flows well balanced and synchronized and unproductive time minimized will utilize machines and personnel better and result in greater effective capacity. 6. Materials management. Shortages of materials can cause work stoppages, while excess inventories can cause congestion and wasted time searching for materials. 7. Maintenance. Equipment breakdowns and defects due to machine wear are two majors sources of lost production. 8. Job design and personnel management. The amount of output a production system actually produces is greatly determined by the personnel operating the system. Inadequate training, poor job design, overwork, and absenteeism all lead to lost production. We will now look at practical examples of these in the following two POM in practice. EXAMPLE: The agony of too much and too little capacity Carnival Cruise Line has a fleet of cruise ships that ply the waters off Florida. The capacity of these ships is huge. The Destiny is its largest, which displaces 1,00,000 tons
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and can carry over 3,100 passengers. But Carnival has been sailing in choppy seas during the last year, plagued by three onboard fires and technical problems. The most pressing problem, however, is the glut of new ships being added throughout the industry. Carnival alone is bringing in a cadre of 15 new amenity-filled ships, boosting its fleet to 61. With other cruise lines also adding to their fleets, the number of available beds jumped by 12 percent in 2000. But historically, passenger volume has grown at only about 8 percent annually. Carnival argues that with the baby boomers now approaching their peak cruisevacation years, the industry has lots of room to grow beyond the 6.5 million people who will book a cruise this year. What is important to us is that we are building over the next five years $6.5 billion worth of new ships, says COO Frank. We are going to continue to grow our business, and we are going to grow it profitably. Not everyone is convinced. Some experts worry about the overcapacity issue and Carnivals decreasing return on investment. During 2000, the companys share prices plunged by more than 50 percent. For now, Carnival is filling its berths by slashing prices. After years of rising prices in this industry, the capacity glut is causing the steep discounts. For a seven-day cruise, the cheapest fare has dropped from $599 to $549, and discounted tickets have gone as low as $359. Carnival is also adding a variety of shorter and cheaper voyages as a way to expand the market, because high utilization is a key to success when its resources are so capitalintensive. The aircraft industry experienced the opposite problem in the late 1980s not enough capacity. The worlds airlines reequipped their fleets to carry more passengers on existing planes and vie to buy a record number of new commercial passenger jets. Orders received by Boeing, Airbus, and McDonnell Douglas surged to more than 2,600 planes. McDonnell Douglas alone had a backlog of some $18 billion in firm orders for its MD-80 and new MD-11 wide body enough to keep its plant fully utilized for more than three years. Despite the number of orders, Douglass commercial aircraft division announced a startling loss; Airbus struggled to make money, and even mighty Boeing fought to improve sub par margins. Capacity shortage caused many problems for McDonnell Douglas: Its suppliers were unable to keep pace, its doubled workforce was inexperienced and less productive, and considerable work had to be subcontracted to other plants. The result was that costs skyrocketed and profits plummeted. In 1997, Boeing acquired McDonnell Douglas. 4.17 MATCHING PRODUCTS AND PROCESSES: ECONOMIES OF SCALE The concept that increasing its output rate can reduce the average unit cost of a good or service is called economies of scale. There are four principal reasons to go for economies of scale
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Fixed costs are spread over more units In the short term, certain costs do not vary with changes in the output rate. When the output rate and, therefore, the facilitys utilization rate- increases, the average unit cost drops because fixed costs are spread over more units. As increments of capacity often are rather large, a firm initially might have to buy more capacity than it needs. However, demand increases in subsequent years can then be absorbed without additional fixed costs. Construction costs are reduced Certain activities and expenses remain same in building small and large facilities alike. Doubling the size of the facility usually does not double construction costs. Industries such as breweries and oil refineries benefit from strong economies of scale because of this phenomenon. Costs of purchased material are cut Higher volumes can reduce the costs of purchased materials and services. It gives the purchaser a better bargaining position and the opportunity to take advantage of quantity discounts. Process advantages are found High volume production provides many opportunities for cost reduction. At a higher output rate, the process shifts toward a line process, with resources dedicated to individual products. Firms may be in a position to justify the dedicating resources to individual products. For example, higher volume allow a paper manufacturer to achieve greater efficiency than manufacturers producing a wide variety of products in small volumes, because the mill can set up its machines for one long run of a certain grade of paper and not have to make as many adjustments for different grades. Let us now focus our attention on the other issue i.e. the diseconomies of scale. Diseconomies of scale The average cost per unit increases as the facilitys size increases. The reason is that excessive size can bring complexity, loss of focus, and inefficiencies that raise the average unit cost of a product or service. There may be too many layers of employees and bureaucracy, and management loses touch with employees and customers. The organization is less agile and losses the flexibility needed to respond to changing demand. Many large companies become so involved in analysis and planning that they innovate less and avoid risks. The result is that small companies outperform corporate giants in numerous industries. Figure 5.3 illustrates the transition from economies of scale to diseconomies of scale. The 500-bed hospital shows economies of scale because the average unit cost at its best operating level is less than that of the 250-bed hospital. However, further expansion to a
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750-bed hospital leads to higher average unit costs and diseconomies of scale. One reason the 500-bed hospital enjoys greater economies of scale than the 250 bed hospital is that the cost of building and equipping it is less than twice the cost for the smaller hospital. The 750-bed facility would enjoy similar savings. Its higher average unit costs can b explained only by diseconomies of scale, which outweigh the savings realized in construction costs. Let us now take an example of estimating requirements Example A copy center in an office building prepares bound reports for two clients. The center makes multiple copies (the lot size) of each report. The processing time to run, collate, and bind each copy depends on, among other factors, the number of pages. The center operates 250 days per year, with an eight hours shift. Management believes that a capacity cushion of 15% is best. It currently has 3 copy machines. Based on the following table of information, determine how many machines are needed at the copy center. Item Client X Client Y Annual demand forecast (copies) 2000 6000 Standard processing time (hour/copy) 0.5 0.7 Average lot size (copies per report) 20 30 Standard setup time (hours) 0.25 0.40 Solution. M = C/100]-N[1 ... duct2(D/Q)s]Pro [Dp duct1(D/Q)s]Pro [Dp++++ = 100/151)(/8)(/1)(/250(]40.0*)30/6000(7.0*6000[]25.0*)20/ 2000(5.0*2000[+++shifthoursdayshiftyeardaysclientYclientX = 17005305 = 3.12 Note - If demand continues at the current level or grows, it may be worthwhile to consider the proposal to acquire a fourth machine EXAMPLE: ( Production capacity analysis at Champion international ) Champion International Corporation is one of the largest forest products companies in the world, employing over 41,000 people in the United States, Canada, and Brazil. Champion manages over 3 million acres of timberlands in the United States. Its objective is to maximize
the return of the timber base by converting trees into three basic product groups: (1) building materials, such as lumber and plywood; (2) white paper products, including printing and writing grades of white paper; (3) brown paper products, such as linerboard and corrugated containers. Given the highly competitive markets within the forest products industry, survival dictates that Champion must maintain its position as a low-cost producer of quality products. This requires an ambitious capital program to improve the timber base and to build additional modern, cost-effective timber conversion facilities. An integral pulp and paper mill is a facility in which wood chips and chemicals are processed in order to produce paper products o dried pulp. To begin with, wood chips are cooked and bleached in the pulp mill; the resulting pulp is piped directly into storage tanks as shown in Figure 5.5. From the storage tanks the pulp is sent to either the paper mill or a dryer. In the paper mill, the pulp is routed to one or more paper machines which produce the finished paper products. Alternatively, the pulp is sent to a dryer, and the dried pulp is then sold to other paper mills, which do not have the capability of producing their own pulp. The total system, referred to as an integrated pulp and paper mill, is a large facility costing several hundred million dollars. One of Champions major pulp and paper facilities is presently comprised of a pulp mill, three paper machines, and a dryer. As the facility developed, it was found that the pulp mill could produce more pulp than the combination of paper machines and the dryer could use. A study was undertaken to determine whether it would be worthwhile to invest in improvements to increase the capacity of the dryer. One of the first questions to be answered in the study was how much additional pulp could be produced and dried, given each possible capacity increase on the dryer. A simple approach to this question is to look at average flows. For example, the pulp mill has a capacity of 940 tons per day (TPD), the three paper machines together average 650 TPD of pulp use, and the dryer can handle 200 TPD. Based on average flows for each ton of increased dryer capacity, we can produce one more ton of pulp in the pulp mill. Note, however, that this is true only until the capacity of the dryer reaches 290 TPD, after which further improvements to the dryer will have no benefit. The above analysis is inadequate because it ignores the day-to-day deviations from the average. That is, all of the equipment in the mill is subject to downtime and to variations in efficiency. For example, suppose that on one day, the pulp mill is inoperable for more than the average length of time; on the same day, the paper machines are experiencing less than the usual downtime. In this case there will be very little pulp available for the dryer, regardless of its capacity. This lack of pulp will not average out on days when the opposite conditions occur, since there will be far more pulp available than the pulp dryer can handle. Consequently, the pulp storage tanks will become full, and the pulp mill will have to shut down.
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Based upon the above analysis, we can conclude that in order not too reduce the production on the paper machines; the ratio of additional pulp production to the increase in dryer capacity will be less than 1. Since the benefits of any investment in the dryer are directly proportional to this ratio, a simulation was undertaken in order to estimate this ratio as precisely as possible. The simulation model that was developed had the following components: Pulp Mill The pulp mill was assumed to have an average production rate of 1044TPD when it is operating, with an average of 10 percent downtime. The actual downtime used in the model in each time period simulated was drawn randomly from a sample of actual downtimes experienced by the pulp mill over several months. Thus one day the pulp mill might be down 2 percent of the time, the next day 20 percent and so on. Paper Machine The rate of pulp flow to the paper machines in a time period is a function of the particular type of paper being mad and the amount of downtime on the paper machines. In the simulation, the rate of pulp flow was input to the model based on a typical schedule of types of paper to be made. The downtime for each machine was drawn from a sample of actual downtimes. Pulp Dryer In each run of the model, downtime on the dryer was drawn from a sample of actual downtimes. The capacity of the dryer was set at different levels in different runs. Storage Tanks The connecting link between the pulp mill, the paper machines, and the dryer is the pulp storage tanks. In the model all pulp produced by the pulp mill is added to the inventory in these tanks. All pulp drawn by the dryer and paper machines is subtracted from this inventory. If the storage tanks are empty, the model must shutdown the paper machines. If the tanks are full, the pulp mill must be shut down. The actual rate at which the dryer is operated at any moment must be set by the model (as it is in the reality) to try to keep the storage tanks from becoming too empty or too full. A computer program was developed to simulate the above process. The simulation program was run at various levels of dryer capacity. The simulation results showed that for every TPD of additional pulp capacity, approximately 0.8 TPD of additional pulp could actually be dried without reducing the production on the paper machines. This number was then used by management in comparing the costs and benefits of the capital investment
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necessary to increase the pulp dryer capacity. Note that if the average basis analysis had been used, the benefits of the project would have been overstated by 25 percent. Labour planning is another area of great significance. Lets see how. Labour planning Suppose that a company is interested in determining the number of quality control inspectors to have for a final inspection of a product. If each inspector can work at a rate of p minutes per unit at an efficiency e (taking into account fatigue, personal time, and so forth), let us see the number of inspectors required in order to meet a required output rate R. In service organizations, labour planning represents one of the most important aspects of capacity planning. Examples include nurse staffing in hospitals, operator staffing at a telephone switchboard, and the number of grocery clerks at check-out counters. To illustrate this approach in service organizations, suppose that a social worker performs two major activities. Activity 1 requires 4 hours, while activity 2 requires 1.5 hours. Each person is available 40 hours per week and an allowance for personal time and non-routine activities is 20 percent. Thus the efficiency factor will be 1 - .20 = .80. The estimated workload is 40 cases per week of type 1 and 60 cases per week of type 2. We let p1 = time for activity 1 = 4 hours p2 = time for activity 2 = 1.5 hours R1 = 40 cases per week of type 1 R2 = 60 cases per week of type 2 T = 40 hours per week Then the minimum staff required for this agency is calculated as N = TeRpRp2211+ = )8(.40)60(5.1)40(4+ = 7.8125 Thus eight workers will be needed to meet the forecasted demand. In general, N=TepiRiki=1,wherekisthenumberofdifferentactivitiesperformed.
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4.18 OPERATIONAL FRONTIER AND TRADE-OFFS: LEARNING CURVE All of us have a fair idea of what The Learning curve is all about. As you do often (more), you tend to get better at it. Now, Stop that wide grin. Just dont get any funny ideas. If you have ever learned to type or play a musical instrument, you know that the longer and more often you work at it, the better you become. The same is true in production and assembly operations. Improvement in productivity and quality of work as a job is repeated is called the learning effect. This was recognized in the 1920s at Wright-Patterson Air Force Base in the assembly of aircraft. Studies have shown that the number of labourhours required to produce the fourth plane was about 80 percent of the amount of time spent on the second; the eighth plane took only 80 percent as much as the fourth; the sixteenth plane 80 percent of the time of the eighth, and so on. In other words, as production doubles from N units to 2N units, the time per unit of the 2Nth unit is 80 percent of the time of the Nth unit. This is called an 80 percent learning curve. Such a curve exhibits a steep initial decline and the levels off as workers become more proficient in their tasks. The labour content (in person-hours per unit) required to make a product, expressed as a function of the cumulative number of units made, is called a learning curve. Defense industries such as aircraft and electronics which introduce many new and complex products, use learning curves to assist managers in estimating labour requirements and capacity, in determining costs and budget requirements, and in planning and scheduling production. Eighty percent curves are generally accepted as a standard, although the ratio of machine work to manual assembly affects the percentage to use. Obviously, no learning takes place if all assembly is done by machine. As a rule of thumb, if the ratio of manual to machine work is 3 to 1, then 80 percent is a good value; if the ratio is 1 to 3, then 90 percent is often used. An even split of manual and machine work gives an 85 percent curve. More generally, the amount of time required to make the Nth unit of the product will be
a
T =T .N
N 1
Where T = time to make the Nth unit (in person-hours)

N
T = time to make the first unit

1
a = (ln x)/(ln 2) x = learning rate (expressed as a decimal) This calls for a practical example.
The following example illustrates the use of a learning curve in determining labour requirements. Sherly Joseph produces handmade Christmas ornaments. She usually hires several students part-time in order to meet her production requirements. Sherly sells primarily to local department stores who need her merchandise by December 1. Their orders are not placed until September, so Sherly has essentially 8 weeks to make all the items. Since all manual labour is used, Sherly estimates that a 75 percent learning curve can be used as her part-time employees are trained. She has observed in the past that it takes an average of about 60 minutes for a student to make the first ornament. Each student works 10 hours per week. Sherly would like to know how many students will be required to meet any level of forecasted demand. A 75 percent learning curve has the following characteristics: Unit Time Required 1 60 2 45 (60 x .75) 4 33.75 (45 x .75) 8 25.31 (33.75 x .75) 16 18.98 (25.31 x .75) 32 14.23 (18.98 x .75) 64 10.68 (14.23 x .75) The following Table lists the approximately cumulative minutes required to produce a given number of units at a 75 percent rate of learning. Table Cumulative Time for 75 percent learning curve
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Design of product and process layouts This lesson introduces you to the concept of design of product as well as process layout. You learn to appreciate the meaning and significance of line balancing, cycle time and the allied concepts. The behavioral dimension is also stressed upon. By now all of us are familiar with the process of layout planning, which we discussed in the previous lesson. Design of product as well as process layout is an intricate as well as fascinating process, as you shall soon realize. Lets start now. Design of product layouts In product layout, equipment or departments are dedicated to a particular product line, duplicate equipment is employed to avoid backtracking, and a straight-line flow of material movement is achievable. Adopting a product layout makes sense when the batch size of a given product or part is large relative to the number of different products or parts produced Assembly lines are a special case of product layout. In a general sense, the term assembly line refers to progressive assembly linked by some material handling device. The usual assumption is that some form of pacing is present and the allowable processing time is equivalent for all workstations. Within this broad definition, there are important differences among line types. A few of these are material handling devices (belt or roller conveyor, overhead crane); line configuration (U-shape, straight, branching); pacing (mechanical, human); product mix (one product or multiple products); workstation characteristics (workers may sit, stand, walk with the line, or ride the line); and length of the line (few or many workers). The range of products partially or completely assembled on lines includes toys, appliances, autos, clothing and a wide variety of electronic components. In fact, virtually any product that has multiple parts and is produced in large volume uses assembly lines to some degree. A more-challenging problem is the determination of the optimum configuration of operators and buffers in a production flow process. A major design consideration in production lines is the assignment of operation so that all stages are more or less equally loaded. Consider the case of traditional assembly lines illustrated . In this example, parts move along a conveyor at a rate of one part per minute to three groups of workstations. The first operation requires 3 minutes per unit; the second operation requires 1 minute per unit; and the third requires 2 minutes per unit. The first workstation consists of three operators; the second, one operator; and the third, two operators. An operator removes a part from the conveyor and performs some assembly task at his or her workstation. The completed part is returned to the conveyor and transported to the next operation. The number of operators at each workstation was chosen so that the line is balanced. Since three operators work simultaneously at the first workstation, on the average one part will be completed
each minute. This is also true for other two stations. Since the parts arrive at a rate of one pr minute, parts are also completed at this rate. Assembly-line systems work well when there is a low variance in the times required to perform the individual subassemblies. If the tasks are somewhat complex, thus resulting in a higher assembly-time variance, operators down the line may not be able to keep up with the flow of parts from the preceding work station or may experience excessive idle time. An alternative to a conveyor-paced assembly line is a sequence of workstations linked by gravity conveyors, which act as buffers between successive operations. Flow-blocking delay and lack-of-work delay. Flow-blocking delay occurs when a production stage completes a unit but cannot release it because the in-process storage at the next stag is full. This operator must remain idle until storage space becomes available. Lack-of-work delay occurs whenever one stage completes work and no units are awaiting processing from the previous stage. Well, I guess that was quite a eye-opener. But thats not the end of it. Let us quickly move over to the concept of line balancing. Line balancing Assembly-line balancing often has implications for layout. This would occur when, for balance purposes, workstation size or the number used would have to be physically modified. The most common assembly line is a moving conveyor that passes a series of workstations in a uniform time interval called the workstation cycle time (which is also the time between successive units coming off the end of the line). At each workstation, work is performed on a product either by adding parts or by completing assembly operations. The work performed at each station is made up of many bits of work, termed tasks, elements, and work units. Such tasks are described by motion-time analysis. Generally, they are grouping that cannot be subdivided on the assembly line without paying a penalty in extra motions. The total work to be performed at a workstation is equal to the sum of the tasks assigned to that workstation. The line balancing problem is one of assigning all tasks to a series of workstations so that each workstation has no more than can be done in the workstation cycle time, and so that the unassigned (idle) time across all workstations is minimized. The problem is complicated by the relationships among tasks imposed by product design and process technologies. This is called the precedence relationship, which specifies the order in which tasks must be performed in the assembly process.
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The steps in balancing an assembly line are: 1. Specify the sequential relationships among tasks using a precedence diagram. 2. Determine the required workstation cycle time , using the formula 3. C = ) (RePrinunitsutperdayquiredoutpmeperdayoductionti 4. Determine the theoretical minimum number of workstations (N ) required to satisfy t the workstation cycle time constraint using the formula 5. N = ) () (CCycletimeTimesSumoftaskt
t
6. Select a primary rule by which tasks are to be assigned to workstations, and a secondary rule to break ties. 7. Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to the workstation cycle time, or no other tasks are feasible because of time or sequence restrictions. Repeat the process for Workstation 2, Workstation 3, and so on until all tasks are assigned. 8. Evaluate the efficiency of the balance derived using the formula 9. Efficiency=) () (ln) (Ceoncycletimx Workstati Nakstationsum berofwor ActuaTimes Sumoftaskt 10. If efficiency is unsatisfactory, rebalance using a different decision rule. It will be clearer if we take an example now. Example The MS 800 car is to be assembled on a conveyor belt. Five hundred cars are required per day. Production time per day is 420 minutes, and the assembly steps and times for the wagon are given below. Find the balance that minimizes the number of workstations, subject to cycle time and precedence constraints.
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2. Determine workstation cycle time. Here we have to convert production time to seconds because our task times are in seconds C = )(RePrinunitsutperdayquiredoutpmeperdayoductionti = carsx500sec60min420 = 50025200 = 50.4
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3. Determine the theoretical minimum number of workstations required (the actual number may be greater) Nt = CT = ondsondssec4.50sec195 = 3.87 = 4 (rounded up) 4. Select assignment rules. a. Prioritize tasks in order of the largest number of following tasks
Our secondary rule, to be invoked where ties exist from our primary rule, is b. Prioritize tasks in order of longest task time. Note that D should be assigned before B, and E assigned before C due to this tiebreaking rule. 5. Make task assignments to form Workstation 1, Workstation 2, and so forth until all tasks are assigned. It is important to meet precedence and cycle time requirements as the assignments are made. 6. Calculate the efficiency. Efficiency = NaCT = 4.505195x = .77 or 77% 7. Evaluate the solution. An efficiency of 77 percent indicates an imbalance or idle time of 23 percent (1.0 - .77) across the entire line. Is a better balance possible? Try balancing the line with rule b and breaking ties with rule a. In addition to balancing a line for a given cycle time, managers must also consider four other options: pacing, behavioural factors, number of models produced, and cycle times. Pacing is the movement of product from one station to the next after the cycle time has elapsed. Paced lines have no buffer inventory. Unpaced lines require inventory storage areas to be placed between stations. Let us now focus on the relevant Behavioral aspects.
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Behavioral factors. The most controversial aspect of product layout is behavioural response. Studies have shown that paced production and high specialization lower job satisfaction. One study has shown that productivity increased on unpaced lines. Many companies are exploring job enlargement and rotation to increase job variety and reduce excessive specialization. For example, New York Life has redesigned the jobs of workers who process and evaluate claims applications. Instead of using a production line approach with several workers doing specialized tasks, New York Life has made each worker solely responsible for an entire application. This approach increased worker responsibility and raised morale.. In manufacturing, at its plant in Kohda, Japan, Sony Corporation dismantled the conveyor belts on which as many as 50 people assembled camcorders. It set up tables for workers to assemble an entire camera themselves, doing everything from soldering to testing. Output per worker is up 10 percent, because the approach frees efficient assemblers to make more products instead of limiting them to conveyor belts speed. And if something goes wrong, only a small section of the plant is affected. This approach also allows the line to match actual demand better and avoid frequent shutdown because of inventory buildups. Number of models produced. A mixed-model line produces several items belonging to the same family. A singlemodel line produces one model with no variations. Mixed-model production enables a plant to achieve both high-volume production and product variety. However, it complicates scheduling and increases the need for good communication about the specific parts to be produced at each station. Cycle Times. A lines cycle time depends on the desired output rate (or sometimes on the maximum number of workstations allowed). In turn, the maximum line efficiency varies considerably with the cycle time selected. Thus, exploring a range of cycle times makes sense. A manager might go with a particularly efficient solution even if it does not match the output rate. The manager can compensate for the mismatch by varying the number of hours the line operates through overtime, extending shifts, or adding shifts. Multiple lines might even be the answer. Dear students, after we have been able to understand and appreciate the product layout design and the related concepts, now are the time to focus on process lay out design.
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Process layout design The analysis involved in the design of production lines and assembly lines relates primarily to timing, coordination, and balance among individual stages in the process. For process layouts, the relative arrangement of departments and machines is the critical factor because of the large amount of transportation and handling involved. Procedure for designing process layouts Process layout design determines the best relative locations of functional work centers. Work centers that interact frequently, with movement of material or people, should be located close together, whereas those that have little interaction can be spatially separated. One approach of designing an efficient functional layout is described below. 1. List and describe each functional work center 2. Obtain a drawing and description of the facility being designed 3. Identify and estimate the amount of material and personnel flow among work centers 4. Use structured analytical methods to obtain a good general layout 5. Evaluate and modify the layout, incorporating details such as machine orientation, storage area location, and equipment access. The first step in the layout process is to identify and describe each work center. The description should include the primary function of the work center )drilling, new accounts, or cashier_; its major components, including equipment and number of personnel; and the space required. The description should also include any special access needs (such as access to running water or an elevator) or restrictions (it must be in a clean area or away from heat). For a new facility, the spatial configuration of the work centers and the size and shape of the facility are determined simultaneously. Determining the locations of special structures and fixtures such as elevators, loading docks, and bathrooms becomes part of the layout process. However, in many cases the facility and its characteristics are a given. In these situations, it is necessary to obtain a drawing of the facility being designed, including shape and dimensions, locations of fixed structures, and restrictions on activities, such as weight limits on certain parts of a floor or foundation. To minimize transport times and material-handling costs, we would like to place close together those work centers that have the greatest flow of materials and people between them. To estimate the flows between work centers, it is helpful to begin by drawing relationship diagram as shown in the figure below.
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For manufacturing systems, material flows and transporting costs can be estimated reasonably well using historical routings for products or through work sampling techniques applied to workers or jobs. The flow of people, especially in a service system such as a business office or a university administration building, may be difficult to estimate precisely, although work sampling can be used to obtain rough estimates. The amounts and/or costs of flows among work centers are usually presented using a flow matrix, a flow-cost matrix, or a proximity chart. 1. Flow Matrix A flow matrix is a matrix of the estimated amounts of flow between each pair of work centers. The flow may be materials (expressed as the number of loads transported) or people who move between centers. Each work center corresponds to one row and one column, and the element fij designates the amount of flow from work center (row) I to work center (column) j. Normally, the direction of flow between work centers is not important, only the total amount, so fij and fji can be combined and the flows represented using only the upper righ half of a matrix. Table Flow Matrix
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A basic assumption of facility layout is that the cost of moving materials or people between work centers is a function of distance traveled. Although more complicated cost functions can be accommodated, often we assume that the per unit cost of material and personnel flows between work centers is proportional to the distance between the centers. So for each type of flow between each pair of departments, I and j, we estimate the cost per unit per unit distance, cij.
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3. Proximity Chart Proximity charts (relationship charts) are distinguished from flow and flow-cost matrices by the fact that they describe qualitatively the desirability or need for work centers to be close together, rather than providing quantitative measures of flow and cost. These charts are used when it is difficult to measure or estimate precise amounts or costs of flow among work centers. This is common when the primary flows involve people and do not have a direct cost but rather an indirect cost, such as when employees in a corporate headquarters move among departments (payroll, printing, information systems) to carry out their work. EXAMPLE Well, now is the time to look back and systematically analyze what we have gathered from the foregoing discussions and there is no better way to do it than with the help of a practical case study. The following case exposes you to the issues involved in process design and helps you translate the textbook concept into practical reality. Design of a University Library Workroom The workroom in the Southern Technical Institute Library processed about 8000 new books each year. All library books must pass through the workroom in order to be prepared for shelving in the librarys stacks. When the library was built, only about 3000 books were processed each year. Since no major additions or remodeling changes were possible, this increase necessitated an evaluation of the existing layout. As you can see from the flow diagram, there is unnecessary movement back and forth across the workroom. In addition, the main storage shelves constitute a major barrier to the effective low of materials. From these observations, a new layout was propose, which results in a much more orderly flow, shorter distance traveled, and more book storage space. By moving the major storage shelves out of the center of the room and off to one side, but the density of books in a rack can be increased by decreasing the shelf height from 24 to 12 inches. This corresponds to a 367 percent increase in available shelf space. Well, now is the time to look back and systematically analyze what we have gathered from the foregoing discussions and there is no better way to do it than with the help of a practical case study. The following case exposes you to the issues involved in process design and helps you translate the textbook concept into practical reality. Design of a University Library Workroom The workroom in the Southern Technical Institute Library processed about 8000 new books each year. All library books must pass through the workroom in order to be prepared for shelving in the librarys stacks. When the library was built, only about 3000
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books were processed each year. Since no major additions or remodeling changes were possible, this increase necessitated an evaluation of the existing layout. there is unnecessary movement back and forth across the workroom. In addition, the main storage shelves constitute a major barrier to the effective low of materials. From these observations, a new layout was propose, which results in a much more orderly flow, shorter distance traveled, and more book storage space. By moving the major storage shelves out of the center of the room and off to one side, but the density of books in a rack can be increased by decreasing the shelf height from 24 to 12 inches. This corresponds to a 367 percent increase in available shelf space. SUMMARY The process management involves very many steps and have to be orchestrated for achieving expected results. The organization has to be viewed from process angle to achieve the target. Development of performance metrics ensures the success of the process of process management. Every process has its own performance competencies and have to be matched with the process attributes. The strategic orientation will help in bringing in a trade off between the product and product characteristics. REVIEW QUESTIONS 1. Illustrate how the process view of organization is different from that of product view? 2. Explain, using examples, how the errors in performance measuring tools will deter the scope of performance measurement? 3. Highlight the tools and techniques used in Process planning and control process? 4. Enumerate the strategic and operational issues in ensuring the effectiveness of the process? Give examples.
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UNIT V
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PROCESS FLOW
Learning Objectives By perusing this unit, the reader, Be able to appreciate the importance and complexity of the Process Will be able to understand the methods of measurement and the process of it Balance the Capacity and Process flow Integrating the organization through Lean Philosophy.
5.1 PROCESS ANALYSIS An operation is composed of processes designed to add value by transforming inputs into useful outputs. Inputs may be materials, labor, energy, and capital equipment. Outputs may be a physical product (possibly used as an input to another process) or a service. Processes can have a significant impact on the performance of a business, and process improvement can improve a firms competitiveness. The first step to improving a process is to analyze it in order to understand the activities, their relationships, and the values of relevant metrics. Process analysis generally involves the following tasks: Define the process boundaries that mark the entry points of the process inputs and the exit points of the process outputs. Construct a process flow diagram that illustrates the various process activities and their interrelationships. Determine the capacity of each step in the process. Calculate other measures of interest. Identify the bottleneck, that is, the step having the lowest capacity. Evaluate further limitations in order to quantify the impact of the bottleneck. Use the analysis to make operating decisions and to improve the process.
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5.2 PROCESS FLOW DIAGRAM The process boundaries are defined by the entry and exit points of inputs and outputs of the process. Once the boundaries are defined, the process flow diagram (or process flowchart) is a valuable tool for understanding the process using graphic elements to represent tasks, flows, and storage. The following is a flow diagram for a simple process having three sequential activities: Process Flow Diagram
The symbols in a process flow diagram are defined as follows: Rectangles: represent tasks Arrows: represent flows. Flows include the flow of material and the flow of information. The flow of information may include production orders and instructions. The information flow may take the form of a slip of paper that follows the material, or it may be routed separately, possibly ahead of the material in order to ready the equipment. Material flow usually is represented by a solid line and information flow by a dashed line. Inverted triangles: represent storage (inventory). Storage bins commonly are used to represent raw material inventory, work in process inventory, and finished goods inventory. Circles: represent storage of information (not shown in the above diagram). In a process flow diagram, tasks drawn one after the other in series are performed sequentially. Tasks drawn in parallel are performed simultaneously. In the above diagram, raw material is held in a storage bin at the beginning of the process. After the last task, the output also is stored in a storage bin. When constructing a flow diagram, care should be taken to avoid pitfalls that might cause the flow diagram not to represent reality. For example, if the diagram is constructed using information obtained from employees, the employees may be reluctant to disclose rework loops and other potentially embarrassing aspects of the process. Similarly, if there are illogical aspects of the process flow, employees may tend to portray it as it should be and not as it is. Even if they portray the process as they perceive it, their perception may
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differ from the actual process. For example, they may leave out important activities that they deem to be insignificant. 5.3 PROCESS PERFORMANCE MEASURES Operations managers are interested in process aspects such as cost, quality, flexibility, and speed. Some of the process performance measures that communicate these aspects include: Capacity utilization - the percentage of the process capacity that actually is being used.
Process capacity - The capacity of the process is its maximum output rate, measured
NOTES
in units produced per unit of time. The capacity of a series of tasks is determined by the lowest capacity task in the string. The capacity of parallel strings of tasks is the sum of the capacities of the two strings, except for cases in which the two strings have different outputs that are combined. In such cases, the capacity of the two parallel strings of tasks is that of the lowest capacity parallel string.
Capacity utilization - the percentage of the process capacity that actually is being
used.
Throughput rate (also known as flow rate ) - the average rate at which units flow
past a specific point in the process. The maximum throughput rate is the process capacity.
Flow time (also known as throughput time or lead time) - the average time that a
unit requires to flow through the process from the entry point to the exit point. The flow time is the length of the longest path through the process. Flow time includes both processing time and any time the unit spends between steps.
Cycle time - the time between successive units as they are output from the process.
Cycle time for the process is equal to the inverse of the throughput rate. Cycle time can be thought of as the time required for a task to repeat itself. Each series task in a process must have a cycle time less than or equal to the cycle time for the process. Put another way, the cycle time of the process is equal to the longest task cycle time. The process is said to be in balance if the cycle times are equal for each activity in the process. Such balance rarely is achieved.
Process time - the average time that a unit is worked on. Process time is flow time
less idle time.
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Idle time - time when no activity is being performed, for example, when an activity
is waiting for work to arrive from the previous activity. The term can be used to describe both machine idle time and worker idle time.
Work In process - the amount of inventory in the process. Set-up time - the time required to prepare the equipment to perform an activity on
a batch of units. Set-up time usually does not depend strongly on the batch size and therefore can be reduced on a per unit basis by increasing the batch size.
Direct labor content - the amount of labor (in units of time) actually contained in the
product. Excludes idle time when workers are not working directly on the product. Also excludes time spent maintaining machines, transporting materials, etc.
Direct labor utilization - the fraction of labor capacity that actually is utilized as
direct labor. Littles Law The inventory in the process is related to the throughput rate and throughput time by the following equation: W.I.P. Inventory = Throughput Rate x Flow Time This relation is known as Littles Law, named after John D.C. Little who proved it mathematically in 1961. Since the throughput rate is equal to 1 / cycle time, Littles Law can be written as: Flow Time = W.I.P. Inventory x Cycle Time 5.4 THE PROCESS BOTTLENECK The process capacity is determined by the slowest series task in the process; that is, having the slowest throughput rate or longest cycle time. This slowest task is known as the bottleneck. Identification of the bottleneck is a critical aspect of process analysis since it not only determines the process capacity, but also provides the opportunity to increase that capacity. Saving time in the bottleneck activity saves time for the entire process. Saving time in a non-bottleneck activity does not help the process since the throughput rate is limited by the bottleneck. It is only when the bottleneck is eliminated that another activity will become the new bottleneck and present a new opportunity to improve the process. If the next slowest task is much faster than the bottleneck, then the bottleneck is having a major impact on the process capacity. If the next slowest task is only slightly
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faster than the bottleneck, then increasing the throughput of the bottleneck will have a limited impact on the process capacity. 5.5 STARVATION AND BLOCKING Starvation occurs when a downstream activity is idle with no inputs to process because of upstream delays. Blocking occurs when an activity becomes idle because the next downstream activity is not ready to take it. Both starvation and blocking can be reduced by adding buffers that hold inventory between activities. 5.6 PROCESS IMPROVEMENT Improvements in cost, quality, flexibility, and speed are commonly sought. The following lists some of the ways that processes can be improved. Reduce work-in-process inventory - reduces lead time. Add additional resources to increase capacity of the bottleneck. For example, an additional machine can be added in parallel to increase the capacity. Improve the efficiency of the bottleneck activity - increases process capacity. Move work away from bottleneck resources where possible - increases process capacity. Increase availability of bottleneck resources, for example, by adding an additional shift - increases process capacity. Minimize non-value adding activities - decreases cost, reduces lead time. Nonvalue adding activities include transport, rework, waiting, testing and inspecting, and support activities. Redesign the product for better manufacturability - can improve several or all process performance measures. Flexibility can be improved by outsourcing certain activities. Flexibility also can be enhanced by postponement, which shifts customizing activities to the end of the process.
NOTES
In some cases, dramatic improvements can be made at minimal cost when the bottleneck activity is severely limiting the process capacity. On the other hand, in welloptimized processes, significant investment may be required to achieve a marginal operational improvement. Because of the large investment, the operational gain may not generate a sufficient rate of return. A cost-benefit analysis should be performed to determine
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if a process change is worth the investment. Ultimately, net present value will determine whether a process improvement really is an improvement. 5.7 PROCESS FLOW STRUCTURES The flow structure of the process used to make or deliver a product or service impacts facility layout, resources, technology decisions, and work methods. The process architecture may be an important component in the firms strategy for building a competitive advantage. When characterized by its flow structure, a process broadly can be classified either as a job shop or a flow shop. A job shop process uses general purpose resources and is highly flexible. A flow shop process uses specialized resources and the work follows a fixed path. Consequently, a flow shop is less flexible than a job shop. Finer distinctions can be made in the process structure as follows: Project - Example: building construction Job shop - Example: print shop Batch process - Example: bakery Assembly line - Example: automobile production line Continuous flow - Example: oil refinery These process structures differ in several respects such as: Flow - ranging from a large number of possible sequences of activities to only one possible sequence. Flexibility - A process is flexible to the extent that the process performance and cost is independent of changes in the output. Changes may be changes in production volume or changes in the product mix. Number of products - ranging from the capability of producing a multitude of different products to producing only one specific product. Capital investment - ranging from using lower cost general purpose equipment to expensive specialized equipment. Variable cost - ranging from a high unit cost to a low unit cost. Labor content and skill - ranging from high labor content with high skill to low content and low skill. Volume - ranging from a quantity of one to large scale mass production. It is interesting to note that these aspects generally increase or decrease monotonically as one moves between the extremes of process structures. The following chart illustrates how the process characteristics vary with structure.
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5.8 COMPARISON OF PROCESS STRUCTURES AND CHARACTERISTICS
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The following sections describe each of the architectures, highlighting their differentiating characteristics. 5.9 PROJECT

Flow - no flow Flexibility - very high Products - unique Capital investment - very low Variable cost - very high Labor content and skill - very high Volume - one
In a project, the inputs are brought to the project location as they are needed; there is no flow in the process. Technically, a project is not a process flow structure since there is no flow of product - the quantity produced usually is equal to one. It is worthwhile, however, to treat it as a process structure here since it represents one extreme of the spectrum.
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Projects are suitable for unique products that are different each time they are produced. The firm brings together the resources as needed, coordinating them using project management techniques. Job Shop

Flow - jumbled flow Flexibility - high Products - many Capital investment - low Variable cost - high Labor content and skill - high Volume - low
A job shop is a flexible operation that has several activities through which work can pass. In a job shop, it is not necessary for all activities to be performed on all products, and their sequence may be different for different products. To illustrate the concept of a job shop, consider the case of a machine shop. In a machine shop, a variety of equipment such as drill presses, lathes, and milling machines is arranged in stations. Work is passed only to those machines required by it, and in the sequence required by it. This is a very flexible arrangement that can be used for wide variety of products. A job shop uses general purpose equipment and relies on the knowledge of workers to produce a wide variety of products. Volume is adjusted by adding or removing labor as needed. Job shops are low in efficiency but high in flexibility. Rather than selling specific products, a job shop often sells its capabilities. Batch Process

Flow - disconnected, with some dominant flows Flexibility - moderate Products - several Capital investment - moderate Variable cost - moderate Labor content and skill - moderate Volume - moderate
A batch process is similar to a job shop, except that the sequence of activities tends to be in a line and is less flexible. In a batch process, dominant flows can be identified. The activities, while in-line, are disconnected from one another. Products are produced in batches, for example, to fill specific customer orders. A batch process executes different production runs for different products. The disadvantage is the setup time required to change from one product to the other, but the advantage is that some flexibility in product mix can be achieved. Assembly Line Process

NOTES
Flow - connected line Flexibility - low Products - a few Capital investment - high Variable cost - low Labor content and skill - low Volume - high
Like a batch process, an assembly line processes work in fixed sequence. However, he assembly line connects the activities and paces them, for example, with a conveyor belt. A good example of an assembly line is an automobile plant. Continuous Flow Process

Flow - continuous Flexibility - very low Products - one Capital investment - very high Variable cost - very low Labor content and skill - very low, but with skilled overseers Volume - very high
Like the assembly line, a continuous flow process has a fixed pace and fixed sequence of activities. Rather than being processed in discrete steps, the product is processed in a continuous flow; its quantity tends to be measured in weight or volume. The direct labor content and associated skill is low, but the skill level required to oversee the sophisticated equipment in the process may be high. Petroleum refineries and sugar processing facilities use a continuous flow process.
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5.10 PROCESS SELECTION The primary determinants of the optimal process are the product variety and volume. The amount of capital that the firm is willing or able to invest also may be an important determinant, and there often is a trade-off between fixed and variable cost. The choice of process may depend on the firms marketing plans and business strategy for developing a competitive advantage. From a marketing standpoint, a job shop allows the firm to sell its capabilities, whereas flow-shop production emphasizes the product itself. From a competitive advantage perspective, a job shop helps a firm to follow a differentiation strategy, whereas a flow shop is suited for a low cost strategy. The process choice may depend on the stage of the product life cycle. In 1979 Robert H. Hayes and Steven C. Wheelwright put forth a product-process matrix relating process selection to the product life cycle stage. For example, early in a products life cycle, a job shop may be most appropriate structure to rapidly fill the early demand and adjust to changes in the design. When the product reaches maturity, the high volumes may justify an assembly line, and in the declining phase a batch process may be more appropriate as product volumes fall and a variety of spare parts is required. The optimal process also depends on the local economics. The cost of labor, energy, equipment, and transportation all can impact the process selection. A break-even analysis may be performed to assist in process selection. A break-even chart relates cost to levels of demand in various processes and the selection is made based on anticipated demand. 5.11 FLOW CHARTS
Flow chart is defined as a pictorial representation describing a process being studied or even used to plan stages of a project. Flow charts tend to provide people with a common language or reference point when dealing with a project or process. Four particular types of flow charts have proven useful when dealing with a process analysis: top-down flow chart, detailed flow chart, work flow diagrams, and a deployment chart. Each of the different types of flow charts tend to provide a different aspect to a process or a task. Flow charts provide an excellent form of documentation for a process, and quite often are useful when examining how various steps in a process work together. When dealing with a process flow chart, two separate stages of the process should be considered: the finished product and the making of the product. In order to analyze the finished product or how to operate the process, flow charts tend to use simple and easily recognizable symbols. The basic flow chart symbols below are used when analyzing how to operate a process.
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In order to analyze the second condition for a flow process chart, one should use the ANSI standard symbols. The ANSI standard symbols used most often include the following:
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HISTORY AND BACKGROUND As a whole, flow charting has been around for a very long time. In fact, flow charts have been used for so long that no one individual is specified as the father of the flow chart. The reason for this is obvious. A flow chart can be customized to fit any need or purpose. For this reason, flow charts can be recognized as a very unique quality improvement method. 5.12 INSTRUCTIONS Step-by-Step process of how to develop a flow chart. Gather information of how the process flows: use a)conservation, b)experience, or c)product development codes. Trial process flow. Allow other more familiar personnel to check for accuracy. Make changes if necessary. Compare final actual flow with best possible flow.
Note: Process should follow the flow of Step1, Step 2, ... , Step N. Step N= End of Process 5.13 CONSTRUCTION/INTERPRETATION TIP FOR A FLOW CHART. Define the boundaries of the process clearly. Use the simplest symbols possible. Make sure every feedback loop has an escape. There is usually only one output arrow out of a process box. Otherwise, it may require a decision diamond.
INTERPRETATION Analyze flow chart of actual process. Analyze flow chart of best process. Compare both charts, looking for areas where they are different. Most of the time, the stages where differences occur is considered to be the problem area or process. Take appropriate in-house steps to correct the differences between the two seperate flows.
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5.14 PROCESS FLOW CHART- FINDING THE BEST WAY HOME This is a simple case of processes and decisions in finding the best route home at the end of the working day. The Best Way Home
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5.15 PROCESS FLOW CHART- HOW A PROCESS WORKS (Assembling a ballpoint pen)
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5.16 FLOW TIME MEASUREMENT Direct measurement of flow time: 1. Observe the process over a specified, extended period of time. 2. Take a random sample of flow units over the specified period. 3. For each flow unit in the sample, measure its flow time from entry to exit. 4. Compute the average of flow times measured. Indirect measurement of flow time: Littles Law: T = I / R T (average flow time) = I (average inventory) / R (average throughput or flow rate) Example (customer flow): A restaurant processes, on average, 1500 customers per 15-hour work day. At any point in time, there are, on average, 75 customers in the restaurant. Given: Throughput rate = R = 1500/day or 100 customers / hour Average inventory = I = 75 customers Derived: Time = I/R = 75/100 or average customer spends hour in the restaurant. Average flow time: we can combine the process flow chart with information about waiting in its various buffers to study flow time using this procedure: 1. Treat waiting in each buffer as an additional (passive) activity with activity time equal to the amount of time spend in that buffer, 2. Add waiting times in buffers to the theoretical flow time of the appropriate path, and 3. Obtain the average flow time of the process by finding the path whose 4. overall length (activity plus waiting) is maximal. Theoretical flow time = minimal amount of time required for processing a typical flow unit without any waiting.
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Flow time = value adding flow time + non value adding flow time Flow time efficiency = theoretical flow time / average flow time 5.17 FLOW RATE The average flow rate (throughput) of a stable process can be determined by the following four-step process: 1. Identify a particular entry and exit point in the process. 2. Observe the process over a given, extended period of time. 3. Measure the number of flow units that pass through the selected point 4. over the selected period of time. 5. Compute the average number of flow units per unit of time.
The theoretical capacity of a resource unit is its maximum sustainable flow rate if it were fully utilized during its scheduled availability. The theoretical capacity of a resource pool is the sum of the theoretical capacities of all the resources units in that pool. The theoretical capacity of a process is the theoretical capacity of its slowest resource pool. Resource pools with minimum theoretical capacity are called theoretical bottlenecks. Theoretical capacity of a resource unit: (1/unit load) x load batch x scheduled availability 5.18 KEY MANAGERIAL LEVERS FOR MANAGING FLOW RATE: 1. Manage supply and demand to increase the throughput. a. Have reliable suppliers; produce better forecasts of demand. 2. Decrease resource idleness to increase process capacity. a. Synchronize flows within the process to reduce starvation. b. Set appropriate size buffers to reduce blockage. 3. Increase the net availability of resources to increase process capacity. a. Improve maintenance policies, perform preventative maintenance outside periods of scheduled availability, institute effective problem solving measures that reduce frequency and duration of breakdowns.
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b. Institute motivational programs and incentives to reduce c. absenteeism, increase employee morale. d. Reduce the frequency of or time required for setups or changeovers e. for a given product mix or change the product mix. 4. Increase the theoretical capacity. a. Decrease unit load on the bottleneck resource pool. i. Work faster, work smarter, do it right the first time, change product mix. ii. Subcontract or outsource. iii. Invest in flexible resources. b Increase the load batch of resources in the bottleneck resource pool (increase scale of resource). c Increase the number of units in the bottleneck resource pool (increase scale of process). d Increase scheduled availability of the bottleneck resource pool (work longer). 5.19 MANAGING FLOW VARIABILITY Example: Henry Fords Assembly Line for the Model T 25 A B C Output
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ADVANTAGES4.1
Facilitates synchronous flow of information and materials between processing stations Physical proximity of cells reduce transportation of low units Moves small batches of flow units quickly Encourages teamwork & cross functional skill development Improved communication between stations Improves synchronization where each station produces parts only if the next station needs them Easier to recognize and report problems Quicker ability to correct defects
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DISADVANTAGES

Resources are dedicated to specific cells Resources cannot be used by other cells Lose advantage of resource pooling Worker incentives must be team oriented, not individual performance based
REMEDIES

Use flexible resources that are cross functional Peer pressure to control productivity of team members
5.20 TWO APPROACHES
PUSH: Input availability triggers production where emphasis is on keeping busy and maximize resource utilization (as long as there is work)
Planning Tool: MRP (Material Requirements Planning) MRP: End-Product demand forecasts are exploded backwards to determine parts requirements at each station
PUSH works well under these conditions if: All information is accurate Forecasts of finished goods are correct There is no variability in processing times If one of these conditions at any stages is not met will
DISTURB PLANNED FLOW AND DESTROY SYNCHRONIZATION THROUGHOUT THE PROCESS!0.4.2ImprovingInformation&MaterialFld

Demand-Pull: Where demand from a customer station triggers production. Consequences of Demand-Pull Each station produces only on demand from its customer station The demand is actually downstream Two requirements to make a pull system work:
Must have a well-defined customer with a well-defined supplier
process.
Must produce the quantity needed only when signaled to do so by its customer
Demand Pull SUPPLY PUSH:Inputavailabilitytriggersproduction DEMAND PULL:Outputneedtriggersproduction Operations:DemandPull Demand Signaling: Customer needs a way to signal (inform) the supplier of its need.

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Customers demand starts a chain reaction For withdrawals and replenishments of intermediate parts EOQ-ROP system is a Pull system where ROP triggers production at the supplier and EOQ determines the quantity produced aterial Flow: Demand Pull
Synchronized Pull: When the delivery of parts are in sequence [Suppliers must have greater ability and capability to achieve a synchronized pull effectively]33 10.4.3ImprovingProcessFlexibility:Batch-SizeReduction Each station must know HOW MUCH TO PRODUCE AT A TIME
Level Production: where small quantities are produced frequently to mach customer demand [i.e., if demand is 10000 sedans and 5000 SUVs, the production would call for producing 2 sedans and then 1 SUV, and then repeat the sequence]
Changeover Costs and Batch Reduction: Goal of level production is reduction of changeover costs (fixed setup or transportation costs of each batch) I.E. In auto production expensive parts like seats are produced in batches of one, wipers in larger batches Study the Changeover process to: use special tools to speed it up, customize some machines, keep some machines already set up. Consider small-batch production Defective flow units increase average flow time and cost!!!
WHY?

It necessitates inspection and rework!!! Anticipate and then Compensate for the problem:
Hold extra safety inventory in the buffer This increases avg. flow time and cost
Plan and control Quality:

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Prevent defects for occurring in the first place Detect and correct them as soon as they appear
Defect Prevention

Careful design of both product and process Simplification & standardization Mistake-proofing (poka yoke) Parts are designed to halt automatically when defective units are fed into them (parts are designed to minimize chances of incorrect assembly)
Defect Visibility

Early detection/corrections more effective & economical Defect visibility (contd) Early detection helps tracing to the source Contribution to better synchronization and lower costs Early detection requires constant vigilance and monitoring!!
Decentralized Control
Employees must be empowered with authority and the means to identify & correct problems at the local level Decentralized Control (contd) In typical plants, line workers dont feel the responsibility, motivation or security to point out problems.
BEST STRATEGIES OF LEAN OPERATIONS ARE:

Preventing problems through better planning Highlighting problems as soon as they occur Delegating problem solving to the local level
Reduce Variability:
Standardize work at each stage and specify it clearly
Advantages to Standardization:

Reduces variability from changing personnel Reduces variability from one production cycle to the next Makes it easier to identify sources of waste that can be eliminated
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5.21 PROCESS INTEGRATION IS A TERM IN CHEMICAL ENGINEERING WHICH HAS TWO POSSIBLE MEANINGS. 1. A holistic approach to process design which considers the interactions between different unit operations from the outset, rather than optimising them separately. This can also be called integrated process design or process synthesis. An important first step is often product design which develops the specification for the product to fulfil its required purpose. 2. Pinch analysis, a technique for designing a process to minimise energy consumption and maximise heat recovery, also known as heat integration, energy integration or pinch technology. The technique calculates thermodynamically attainable energy targets for a given process and identifies how to achieve them. A key insight is the pinch temperature, which is the most constrained point in the process. 5.22 LEAN MEANS MANUFACTURING WITHOUT WASTE. Waste (muda in Japanese) has many forms. Material, time, idle equipment, and inventory are examples. Most companies waste 70%-90% of their available resources. Even the best Lean Manufacturers probably waste 30%. Lean Manufacturing and Cellular Manufacturing improve material handling, inventory, quality, scheduling, personnel and customer satisfaction. For examples and hard numbers on these improvements see Benefits. The payoff to shareholders is significant and documented. A history of these developments is at A Brief History of (Just In) Time. Lean manufacturing or lean production, which is often known simply as Lean, is the optimal way of producing goods through the removal of waste and implementing flow, as oppose to batch and queue. Lean manufacturing is a generic process management philosophy derived mostly from the Toyota Production System (TPS). It is renowned for its focus on reduction of the original Toyota seven wastes in order to improve overall customer value, but there are varying perspectives on how this is best achieved. The steady growth of Toyota, from a small company to the worlds largest automaker, has focused attention upon how it has achieved this. For many, Lean is the set of tools that assist in the identification and steady elimination of waste (muda). As waste is eliminated quality improves while production time and cost is reduced. The tools consist of value stream mapping, 5-S, Kan-ban (pull systems), and poka-yoke (error-proofing). There is a second approach to Lean Manufacturing, which is promoted by Toyota, in which the focus is upon improving the flow or smoothness of work (thereby steadily eliminating mura; unevenness) through the system and not upon waste reduction per se. Techniques to improve flow include production levelling, pull production (by means of
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kanban) and the Heijunka box. This is a fundamentally different approach to most improvement methodologies which may partially account for its lack of popularity. The difference between these two approaches is not the goal but the prime approach to achieving it. The implementation of smooth flow exposes quality problems which already existed and thus waste reduction naturally happens as a consequence. The advantage claimed for this approach is that it naturally takes a system-wide perspective whereas a waste focus has this perspective, sometimes wrongly, assumed. Some Toyota staff have expressed some surprise at the tool-based approach as they see the tools as work-arounds made necessary where flow could not be fully implemented and not as aims in themselves. Both Lean and TPS can be seen as a loosely connected set of potentially competing principles whose goal is cost reduction by the elimination of waste. These principles include: Pull processing, Perfect first-time quality, Waste minimization, Continuous improvement, Flexibility, Building and maintaining a long term relationship with suppliers, Automation, Load leveling and Production flow and Visual control. The disconnected nature of some of these principles perhaps springs from the fact that the TPS has grown pragmatically since 1948 as it responded to the problems it saw within its own production facilities. Thus what one sees today is the result of a need driven learning to improve where each step has built on previous ideas and not something based upon a theoretical framework. Toyotas view is that the main method of Lean is not the tools, but the reduction of three types of waste: muda non-value-adding work, muri overburden, and mura unevenness, to expose problems systematically and to use the tools where the ideal cannot be achieved. Thus the tools are, in their view, workarounds adapted to different situations, which explains any apparent incoherence of the principles above. The TPS has two pillar concepts: Just-in-Time (JIT) or flow, and autonomation (smart automation). Adherents of the Toyota approach would say that the smooth flowing delivery of value achieves all these improvements as a side-effect. If production flows perfectly then there is no inventory, if customer valued features are the only ones produced then product design is simplified and effort is only expended on features the customer values. The other of the two TPS pillars is the very human aspect of autonomation, whereby automation is achieved with a human touch. This aims to give the machines enough intelligence to recognise when they are working abnormally and flag this for human attention. Thus humans do not have to monitor normal production and only have to focus on abnormal, or fault, conditions. A reduction in human workload that is probably much desired by all involved since it removes much routine and repetitive activity that humans often do not enjoy and where they are therefore not at their most effective. Lean implementation is therefore focused on getting the right things, to the right place, at the right time, in the right quantity to achieve perfect work flow while minimizing waste and being flexible and able to change. These concepts of flexibility and change are principally
required to allow production levelling, using tools like SMED, but have their analogues in other processes such as research and development (R&D). The flexibility and ability to change are not open-ended, and therefore often not expensive capability requirements. More importantly, all of these concepts have to be understood, appreciated, and embraced by the actual employees who build the products and therefore own the processes that deliver the value. The cultural and managerial aspects of Lean are just as important as, and possibly more important than, the actual tools or methodologies of production itself. There are many examples of Lean tool implementation without sustained benefit and these are often blamed on weak understanding of Lean in the organization. Lean aims to make the work simple enough to understand, to do and to manage. To achieve these three at once there is a belief held by some that Toyotas mentoring process (loosely called Senpai and Kohai), is one of the best ways to foster Lean Thinking up and down the organizational structure. This is the process undertaken by Toyota as it helps its suppliers to improve their own production. The closest equivalent to Toyotas mentoring process is the concept of Lean Sensei, which encourages companies, organizations, and teams to seek out outside, third-party experts, who can provide unbiased advice and coaching, History of waste reduction thinking Pre-20th Century Most of the basic goals of lean manufacturing are common sense and documented examples can be seen back to at least Benjamin Franklin. Poor Richards Almanack says of wasted time, He that idly loses 5s. [[[shilling]]s] worth of time, loses 5s., and might as prudently throw 5s. into the river. He added that avoiding unnecessary costs could be more profitable than increasing sales: A penny saved is two pence clear. A pin a-day is a groat a-year. Save and have. Again Franklins The Way to Wealth says the following about carrying unnecessary inventory. You call them goods; but, if you do not take care, they will prove evils to some of you. You expect they will be sold cheap, and, perhaps, they may [be bought] for less than they cost; but, if you have no occasion for them, they must be dear to you. Remember what Poor Richard says, Buy what thou hast no need of, and ere long thou shalt sell thy necessaries. In another place he says, Many have been ruined by buying good penny worths. Henry Ford cited Franklin as a major influence on his own business practices, which included Just-in-time manufacturing. The concept of waste being built into jobs and then taken for granted was noticed by motion efficiency expert Frank Gilbreth, who saw that masons bent over to pick up bricks from the ground. The bricklayer was therefore lowering and raising his entire upper body to get a 5 pound (2.3 kg) brick but this inefficiency had been built into the job through long
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practice. Introduction of a non-stooping scaffold, which delivered the bricks at waist level, allowed masons to work about three times as quickly, and with less effort. 20th Century Frederick Winslow Taylor, the father of scientific management, introduced what are now called standardization and best practice deployment. In his Principles of Scientific Management, (1911), Taylor said: And whenever a workman proposes an improvement, it should be the policy of the management to make a careful analysis of the new method, and if necessary conduct a series of experiments to determine accurately the relative merit of the new suggestion and of the old standard. And whenever the new method is found to be markedly superior to the old, it should be adopted as the standard for the whole establishment. Taylor also warned explicitly against cutting piece rates (or, by implication, cutting wages or discharging workers) when efficiency improvements reduce the need for raw labor: after a workman has had the price per piece of the work he is doing lowered two or three times as a result of his having worked harder and increased his output, he is likely entirely to lose sight of his employers side of the case and become imbued with a grim determination to have no more cuts if soldiering [marking time, just doing what he is told] can prevent it. Shigeo Shingo, the best-known exponent of single minute exchange of die (SMED) and error-proofing or poka-yoke, cites Principles of Scientific Management as his inspiration. American industrialists recognized the threat of cheap offshore labor to American workers during the 1910s, and explicitly stated the goal of what is now called lean manufacturing as a countermeasure. Henry Towne, past President of the American Society of Mechanical Engineers, wrote in the Foreword to Frederick Winslow Taylors Shop Management (1911), We are justly proud of the high wage rates which prevail throughout our country, and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets, and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes. Ford starts the ball rolling Henry Ford continued this focus on waste while developing his mass assembly manufacturing system. Charles Buxton Going wrote in 1915: Fords success has startled the country, almost the world, financially, industrially, mechanically. It exhibits in higher degree than most persons would have thought possible the seemingly contradictory requirements of true efficiency, which are: constant increase of
quality, great increase of pay to the workers, repeated reduction in cost to the consumer. And with these appears, as at once cause and effect, an absolutely incredible enlargement of output reaching something like one hundredfold in less than ten years, and an enormous profit to the manufacturer. Ford, in My Life and Work (1922), provided a single-paragraph description that encompasses the entire concept of waste: I believe that the average farmer puts to a really useful purpose only about 5%. of the energy he expends.... Not only is everything done by hand, but seldom is a thought given to a logical arrangement. A farmer doing his chores will walk up and down a rickety ladder a dozen times. He will carry water for years instead of putting in a few lengths of pipe. His whole idea, when there is extra work to do, is to hire extra men. He thinks of putting money into improvements as an expense.... It is waste motion waste effort that makes farm prices high and profits low. Poor arrangement of the workplacea major focus of the modern kaizenand doing a job inefficiently out of habitare major forms of waste even in modern workplaces. Ford also pointed out how easy it was to overlook material waste. A former employee, Harry Bennett, wrote: One day when Mr. Ford and I were together he spotted some rust in the slag that ballasted the right of way of the D. T. & I [railroad]. This slag had been dumped there from our own furnaces. You know, Mr. Ford said to me, theres iron in that slag. You make the crane crews who put it out there sort it over, and take it back to the plant. In other words, Ford saw the rust and realized that the steel plant was not recovering all of the iron. Design for Manufacture (DFM) also is a Ford concept. Ford said (in My Life and Work)... entirely useless parts [may be]a shoe, a dress, a house, a piece of machinery, a railroad, a steamship, an airplane. As we cut out useless parts and simplify necessary ones, we also cut down the cost of making. ... But also it is to be remembered that all the parts are designed so that they can be most easily made. The same reference describes just in time manufacturing very explicitly. While Ford is renowned for his production line it is often not recognized how much effort he put into removing the fitters work in order to make the production line possible. Until Ford, a cars components always had to be fitted or reshaped by a skilled engineer at the point of use, so that they would connect properly. By enforcing very strict specification and quality criteria on component manufacture, he eliminated this work almost entirely, reducing manufacturing effort by between 60-90%.[9] However, Fords mass production
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system failed to incorporate the notion of pull production and thus often suffered from over-production. 5.23 PROCESS SYNCHRONIZATION AT TOYOTA DEVELOPS LEAN THINKING Toyotas development of ideas that later became Lean may have started at the turn of the 20th century with Sakichi Toyoda, in a textile factory with looms that stopped themselves when a thread broke, this became the seed of autonomation and Jidoka. Toyotas journey with JIT may have started back in 1934 when it moved from textiles to produce its first car. Kiichiro Toyoda, founder of Toyota, directed the engine casting work and discovered many problems in their manufacture. He decided he must stop the repairing of poor quality by intense study of each stage of the process. In 1936, when Toyota won its first truck contract with the Japanese government, his processes hit new problems and he developed the Kaizen improvement teams. Levels of demand in the Post War economy of Japan were low and the focus of mass production on lowest cost per item via economies of scale therefore had little application. Having visited and seen supermarkets in the USA, Taiichi Ohno recognised the scheduling of work should not be driven by sales or production targets but by actual sales. Given the financial situation during this period over-production had to be avoided and thus the notion of Pull (build to order rather than target driven Push) came to underpin production scheduling. It was with Taiichi Ohno at Toyota that these themes came together. He built on the already existing internal schools of thought and spread their breadth and use into what has now become the Toyota Production System (TPS). It is principally from the TPS, but now including many other sources, that Lean production is developing. Norman Bodek wrote the following in his foreword to a reprint of Fords Today and Tomorrow: I was first introduced to the concepts of just-in-time (JIT) and the Toyota production system in 1980. Subsequently I had the opportunity to witness its actual application at Toyota on one of our numerous Japanese study missions. There I met Mr. Taiichi Ohno, the systems creator. When bombarded with questions from our group on what inspired his thinking, he just laughed and said he learned it all from Henry Fords book. It is the scale, rigour and continuous learning aspects of the TPS which have made it a core of Lean. Types of wastes While the elimination of waste seem like a simple and clear subject it is noticeable that waste is often very conservatively identified. This then hugely reduces the potential of such an aim. The elimination of waste is the goal of Lean, and Toyota defined three types of waste: muda, muri and mura.
To illustrate the state of this thinking Shigeo Shingo observed that only the last turn of a bolt that tightens itthe rest is just movement. This ever finer clarification of waste is key to establishing distinctions between value-adding activity, waste and non-value-adding work. Non-value adding work is waste that must be done under the present work conditions. One key is to measure, or estimate, the size of these wastes, in order to demonstrate the effect of the changes achieved and therefore the movement towards the goal. The flow (or smoothness) based approach aims to achieve JIT, by removing the variation caused by work scheduling and thereby provide a driver, rationale or target and priorities for implementation, using a variety of techniques. The effort to achieve JIT exposes many quality problems that are hidden by buffer stocks; by forcing smooth flow of only value-adding steps, these problems become visible and must be dealt with explicitly. Muri is all the unreasonable work that management imposes on workers and machines because of poor organization, such as carrying heavy weights, moving things around, dangerous tasks, even working significantly faster than usual. It is pushing a person or a machine beyond its natural limits. This may simply be asking a greater level of performance from a process than it can handle without taking shortcuts and informally modifying decision criteria. Unreasonable work is almost always a cause of multiple variations. To link these three concepts is straightforward. Firstly, muri focuses on the preparation and planning of the process, or what work can be avoided proactively by design. Next, mura then focuses on implementation and the elimination of fluctuation at the scheduling or operations level, such as quality and volume. Muda is discovered after the process is in place and is dealt with reactively. It is seen through variation in output. It is the role of management to examine the muda, in the processes and eliminate the deeper causes by considering the connections to the muri and mura of the system. The muda and mura inconsistencies must be fed back to the muri, or planning, stage for the next project. A typical example of the interplay of these wastes is the corporate behaviour of making the numbers as the end of a reporting period approaches. Demand is raised, increasing (mura), when the numbers are low which causes production to try to squeeze extra capacity from the process which causes routines and standards to be modified or stretched. This stretch and improvisation leads to muri-style waste which leads to downtime, mistakes and backflows and waiting, thus the muda of waiting, correction and movement. The original seven muda are:

NOTES
Overproduction (production ahead of demand) Transportation (moving products that is not actually required to perform the processing) Waiting (waiting for the next production step)
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Inventory (all components, work-in-progress and finished product not being processed) Motion (people or equipment moving or walking more than is required to perform the processing) Over Processing (due to poor tool or product design creating activity) Defects (the effort involved in inspecting for and fixing defects)
Some of these definitions may seem rather idealistic, but this tough definition is seen as important. The clear identification of non-value-adding work, as distinct from wasted work, is critical to identifying the assumptions behind the current work process and to challenging them in due course.[12] Breakthroughs in SMED and other process changing techniques rely upon clear identification of where untapped opportunities may lie if the processing assumptions are challenged. 5.24 PROCESS IMPROVEMENT AND LEAN IMPLEMENTATION System engineering Lean is about more than just cutting costs in the factory. One crucial insight is that most costs are assigned when a product is designed, Often an engineer will specify familiar, safe materials and processes rather than inexpensive, efficient ones. This reduces project risk, that is, the cost to the engineer, while increasing financial risks, and decreasing profits. Good organizations develop and review checklists to review product designs. Companies must often look beyond the shop-floor to find opportunities for improving overall company cost and performance. At the system engineering level, requirements are reviewed with marketing and customer representatives to eliminate those requirements which are costly. Shared modules may be developed, such as multipurpose power supplies or shared mechanical components or fasteners. Requirements are assigned to the cheapest discipline. For example, adjustments may be moved into software, and measurements away from a mechanical solution to an electronic solution. Another approach is to choose connection or power-transport methods that are cheap or that used standardized components that become available in a competitive market.
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An example program In summary, an example of a lean implementation program could be:-
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Lean Leadership The role of the leaders within the organization is the fundamental element of sustaining the progress of lean thinking. Experienced kaizen members at Toyota, for example, often bring up the concepts of Senpai, Kohai, and Sensei, because they strongly feel that transferring of Toyota culture down and across the Toyota can only happen when more experienced Toyota Sensei continuously coach and guide the less experienced lean champions. Unfortunately, most lean practitioners in North America focus on the tools and
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methodologies of lean, versus the philosophy and culture of lean. Some exceptions include Shingijitsu Consulting out of Japan, which is made up of ex-Toyota managers, and Lean Sensei International based in North America, which coaches lean through Toyota-style cultural experience. One of the dislocative effects of Lean is in the area of key performance indicators (KPI). The KPIs by which a plant/facility are judged will often be driving behaviour, because the KPIs themselves assume a particular approach to the work being done. This can be an issue where, for example a truly Lean, Fixed Repeating Schedule (FRS) and JIT approach is adopted, because these KPIs will no longer reflect performance, as the assumptions on which they are based become invalid. It is a key leadership challenge to manage the impact of this KPI chaos within the organization. A set of performance metrics which is considered to fit well in a Lean environment is Overall Equipment Effectiveness, or OEE. Similarly, commonly-used accounting systems developed to support mass production are no longer appropriate for companies pursuing Lean. Lean Accounting provides truly Lean approaches to business management and financial reporting. Key focus areas for leaders are

PDCA thinking Genchi Genbutsu go and see philosophy Process confirmation
5.25 DIFFERENCES FROM TPS Whilst Lean is seen by many as a generalization of the Toyota Production System into other industries and contexts there are some acknowledged differences that seem to have developed in implementation. 1. Seeking profit is a relentless focus for Toyota exemplified by the profit maximization principle (Price Cost = Profit) and the need, therefore, to practice systematic cost reduction (through TPS or otherwise) in order to realize benefit. Lean implementations can tend to de-emphasise this key measure and thus become fixated with the implementation of improvement concepts of flow or pull. 2. Tool orientation is a tendency in many programs to elevate mere tools (standardized work, value stream mapping, visual control, etc.) to an unhealthy status beyond their pragmatic intent. The tools are just different ways to workaround certain types of problems but they dont solve them for you or always highlight the underlying cause of many types of problems. The tools employed at Toyota are often used to expose particular problems that are then dealt with, as each tools limitations or blindspots are perhaps better understood. So, for example, Value Stream Mapping focuses upon material and information flow problems (a title
built into the Toyota title for this activity) but is not strong on Metrics, Man or Method. Internally they well know the limits of the tool and understood that it was never intended as the best way to see and analyze every waste or every problem related to quality, downtime, personnel development, cross training related issues, capacity bottlenecks, or anything to do with profits, safety, metrics or morale, etc. No one tool can do all of that. For surfacing these issues other tools are much more widely and effectively used. 3. Management technique rather than Change agents has been a principle in Toyota from the early 1950s when they started emphasizing the development of the production managers and supervisors skills set in guiding natural work teams and did not rely upon staff level change agents to drive improvements. This can manifest itself as a Push implementation of Lean rather than Pull by the team itself. This area of skills development is not that of the change agent specialist, but that of the natural operations work team leader. Although less prestigious than the TPS specialists, development of work team supervisors in Toyota is considered an equally, if not more important, topic merely because there are tens of thousands of these individuals. Specifically, it is these manufacturing leaders that are the main focus of training efforts in Toyota since they lead the daily work areas, and they directly and dramatically affect quality, cost, productivity, safety, and morale of the team environment. In many companies implementing Lean the reverse set of priorities is true. Emphasis is put on developing the specialist, while the supervisor skill level is expected to somehow develop over time on its own. 5.26 LEAN SERVICES Lean, as a concept or brand, has captured the imagination of many in different spheres of activity. Examples of these from many sectors are listed below. Lean principles have been successfully applied to call center services to improve live agent call handling. By combining Agent-assisted Voice Solutions and Leans waste reduction practices, a company reduced handle time, reduced between agent variablity, reduced accent bariers, and attained near perfect process adherence. A study conducted on behalf of the Scottish Executive, by Warwick University, in 2005/06 found that Lean methods were applicable to the public sector, but that most results had been achieved using a much more restricted range of techniques than Lean provides. The challenge in moving Lean to services is the lack of widely available reference implementations to allow people to see how it can work and the impact it does have. This makes it more difficult to build the level of belief seen as necessary for strong implementation. It is also the case that the manufacturing examples of techniques or tools need to be translated into a service context which has not yet received the level of work or publicity that would give starting points for implementors. The upshot of this is that each implementation
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often feels its way along as must the early industrial engineers of Toyota. This places huge importance upon sponsorship to encourage and protect these experimental developments. Just-in-Time JIT is the most used and recognized lean manufacturing technique. For many years just-in-time has been misused or misunderstood for many American manufacturing companies. According to the book, Running Todays Factory, some people think that JIT means Just Implement Techniques, in other words, use best practices. The correct definition of just-in-time is having the right part at the right place in the right amount at the right time. This technique shortens cycle times, decreases the amount of inventory that a company carries, leads to low work-in-process (WIP), and creates a flexible atmosphere for the type or amount of product that a company would like to run and most of all streamlines work flow through a manufacturing facility. Problems A lean process requires reduced variability and uncertainty in the supply chain to reduce needs for raw materials and finished goods inventories. In order to reduce lot sizes and achieve reduced work in process inventory in an economical fashion, fixed costs of batching and ordering would have to be reduced first. Finally, seasonal effects might give incentive to buffer the production process against known shifts in demand in order to avoid costly shifts in production levels. Without a reduction in fixed costs or uncertainty, Lean supply chains are subject to longer flow times and reduced throughput, and potentially reduced economic performance. SUMMARY The importance of process and its flow within the organisation plays a key role in determining the success of the firm. Ill conceived and poorly designed processes can make the bottom line the a focused area of course in the negative sense. The metrics used to measure the flow and its effect will have a say on the long term health of the organisation. REVIEW QUESTIONS 1. Using an example, discuss the importance of the process in an organisation? 2. Service process is more important than the process used in manufacturing Comment and Examine. 3. Enumerate the metrics used in the flow time measurement? Highlight one of its application? 4. Lean means shedding extra fat and nothing else Discuss.

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FACILITIES LOCATION AND PROCESS DESIGN

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ANNA UNIVERSITY CHENNAI