Design of Production Systems Design of

Production
for Batch Production in Short Systems

Series to Reduce Lead Time

Kurt Rosander 53
Chalmers University of Technology, Göteborg,Sweden

Introduction
It can often be assumed that production in large and medium-sized companies
is on a large scale. However, this is not always the case in Sweden, where it
is often composed of many small production units characterized by:
• small annual volumes;
• many different types of product;
• a number of variants for each type;
• small batches;
• large added values;
• a large amount of machining.
As a result, these companies suffer at times from high levels of work in progress
and also, in certain cases, have problems of profitability. Among the cases studied
the annual volume of each type produced was small and the variants of the
different types show a wide distribution, batch sizes of manufactured components
being small compared to other manufacturing.
Manufacturers of small volumes with many types and variants make it difficult
to eliminate crossing flows by investments and, for this reason, the organization
of workshops is often similar to the functional form of the organization. This
leads to complex materialflowsand associated problems in operational planning,
causing long lead times in the workshop. The level of work in progress in goods
is therefore higher in these companies than in industry generally. As a
consequence, the revenue from capital tied up in buildings, machinery and
materials is relatively limited and, because of the small volumes involved,
experience does not bring cost advantages.

The Frame of Reference — Flexible Production

The frame of reference includes earlier, well-known theories on flexibility,
primarily the works of Lindér[1,2], Burbidge[3] and Gervin[4], who argue the
need for flexibility and suggest ways in which to reach it. When the consequences
of different changes are linked to the production system, these changes fall
into two different categories [1,5]:
• Capacity. Changes in variables will influence the capacity available. International Journal of Operations
Examples of such influencing variables are level of performance, machine & Production Management, Vol. 12
No. 4, 1992, pp. 53-60, © MCB
availability and total level of absence. University Press, 0144-3577
IJOPM • Work in progress. Variations of work in progress are due to changes in,
12,4 for example, order volume, quality outcome and operation time.
My argument is built mainly on Lindér's flexibility model (Figure 1), as it
summarizes the research done in this area.
A requirement for fully utilizing this flexibility is that it is incorporated into
the company strategy[6]. The reason for this is that companies with batch
54 production are diversified; Porter[7] puts forward various arguments in this respect.
As regards the planning system, Rosander[8] claims that parallel systems are
needed for operational planning within a unit, as each unit has different
requirements and possibilities for such planning.

Method and Design of the Study

The research question in this study is: How should production be organized in
companies with batch production in order to achieve shorter lead times without
the costs being too high? Is Kanban control and production-flow grouping really
the key to success?
Three different cases were analysed in the study, comprising manufacturing
of completely different products in different volumes and batch sizes. The
organization of the companies involved is more or less functional. Cases A and
B form one company and the data from these cases are therefore mixed to some
extent. Case C is one company and the data represent only this company, which
is more or less flow oriented. In parallel with this, theories in the area were
studied. The data were collected from the information systems for each case
and validated in unstructured interviews with middle management from different
departments. In order to obtain a picture of each production unit the following
areas were analysed:
• batch sizes;
• cost structure;
• set-up times;
 • delivery frequency; Design of
• profit margins on the product; Production
• manufacturing costs; Systems
• bottlenecks;
• work in process.
As the number of elements studied was large and data have been obtained from 55
all units, an adequate picture of the actual conditions within the units has been
obtained.
Results
The batch sizes used in the production units responsible for metal cutting are
extremely varied. As can be seen in Figures 2, 3 and 4, 78 per cent of all batches
produced at the companies in a given time ranged between 1 and 100 in batch
size. In total, for all cases, 413 batches were analysed.

The profit margins for the types of product manufactured in A and B units follow
the accumulated profitability curve for the production costs. Figure 5 provides
an illustration of these curves relative to each other.
The cost structure mostly show disparities in terms of the share of wages
for workers (blue collar) and collaborate pay. The units with a more-or-less
functional organization have a share of wages of close to 41 per cent, while in
the moreflow-orientedunit (case C) this share is 24 per cent (Figure 6).
It was shown that the manufacturing costs for the companies follow the rule
of 80-20. This means that 80 per cent of the manufacturing costs can be referred
to 20 per cent of the components.
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The set-up share, delivery frequency and bottlenecks were analysed for different
cases over a period of 22 weeks. The results are shown in Table I.

Conclusions
There is one factor which is common to the three cases and which has to be
solved in order to increase efficiency, namely small volumes. One solution which
 Design of
Production
Systems

57

Case A + B Case C

Set-up share 50 components investigated 40 components investigated

Set-up time/
Operational time (mins) 11.7 to 4 8.5 to 0.8
Bottlenecks 16 times queue > 8 days 5 times queue > 7 days
2 times queue > 6 days 4 times queue > 6 days Table I.
4 times queue ≤ 6 days 13 times queue ≤ 6 days Analysis of Delivery
Frequency and
Delivery frequencies 1 to 6 weeks 1 to 4 weeks Bottleneck for
Different Cases

was found to be feasible, and which has been implemented in some cases, is
the division of components into groups in order to gain scale advantages. This
leads to demands for flexibility, which can be met through intrinsically flexible
machinery and through multiskilled operators.
Owing to the great variety of components manufactured, it is essential to
separate those components causing disruption into a special group with complex
material flows and long throughput times. As a consequence, the high-volume
components can be manufactured in groups of flows, which has a beneficial
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58

influence on the operation as a whole, the effect being an improvement in terms

of both work in progress and turnover rate.
Where other possible improvements have already been made, crossing flows
can partly be attributed to the small volumes involved. When the volumes are
very small, it is not possible to eliminate all crossing material flows by making
investments. This is particularly true of those products which utilize capital- Design of
intensive processes, such as hardening. Production
The planning system in a company with batch production is very important Systems
in order to avoid capital being unnecessarily tied up in work in process. Successful
grouping of the material flows of the different departments, in a way which is
economical for the whole, requires different batch-forming methods and planning
systems, as some components are manufactured according to customer
specification, others in functional workshops and still others are flow oriented. 59
It was established that it is an advantage to have several parallel planning
systems for handling operational planning. For the companies investigated, it
was found that the following planning systems are preferable as a result of the
material flow, the necessity to make investments in machines to achieve flow
groups, and the organizational structure:
• the Kanban system;
• a queue-number system with priority numbers.
If the investments necessary to produce flow groups are too large, it is not
economical to make them. A more economical approach is to buy more materials
and allow disrupted flows for the low-volume value parts. Owing to the small
volumes involved, all in-house manufacturing of components has to take place
within the same workshop to keep costs down. Thus, the workshop has to
be divided into different groups on the basis of the requirements placed on
them in terms of lead times and cost-effectiveness.

Summary
Investigation of the different cases demonstrates that it is too expensive to
eliminate all the disruptions occurring in batch production through investments
in machines. It is more profitable to accept the disruptions and tie together
the different parts of the workshops with the planning function.
The production-flow concept was adopted for high-volume parts with a
reduction in lead time for these parts as a result. Decentralized functions entail
a significantly lower degree of administration. Hence, the decisions are taken
at a lower organizational level, which in turn leads to considerably reduced
administrative costs and lead times.
The planning function has been drastically reduced since the production groups
are responsible for the planning of production. Because of the extra capacity
for high-volume parts, batch sizes were all set independently.

Effect Case A Case B Case C

Lead time -10 -50 -40

Planning function (cost reduction) -75 -50 -20
Table II.
Batch size -50 -10 -40 Effects of the Changes
Service level (number of deliveries on time) + 30 + 80 + 75 (All Figures are
Percentages)
IJOPM The service levels did increase, since the production groups now had
12,4 responsibility for the production. Since the number of disruptions decreased
the total lead time also decreased, with a higher service level as a result. The
effects of the changes in the companies investigated are shown in Table II.

References
1. Lindér, J., "Flexible Production Organization", Proceedings of the 4th World Productivity
60 Conference, Oslo, 1984.
2. Lindér, J., Värderingar avflexibelproduktionsorganisation utifrån sociotekniska principer,
Chalmers Tekniska Högskola, Göteborg, 1990.
3. Burbidge, J.L., "New Methods of Organization to Improve Production Efficiency",
Proceedings of 22nd International MTDR Conference, UMIST, Manchester, 1981.
4. Gervin, D., A Framework for Analyzing the Flexibility of Manufacturers Process, School
of Business Administration, University of Wisconsin, Milwaukee, 1983.
5. Chatterjee, S. and Hollier, R.H., "A Comparative Study of Uncertainty in Three Production
Situations", Proceeding of the 4th ICPR, Tokyo, 1977.
6. Lindberg, P., Linder, J.O. and Tunälv, C., "Strategic Decisions in Manufacturing — On
the Choice of Investments in Flexible Production Organizations", International Journal
of Production Research, Vol. 26 No. 10, 1988, pp. 1695-704.
7. Porter, M.E., Competitive Strategy, Techniques for Analysis of Industries and Competitors,
The Free Press, New York, 1980.
8. Rosander, K.H.M., The Need for Parallel Planning Systems for Operational Planning within
Batch Production, Chalmers Tekniska Högskola, Göteborg, 1991.