1

Chapter Two
Design of the Operations/production Systems
2.1. Product-Service Design and Development
Design is the process of structuring of component parts/activities of a product so that as a unit it
can provide specified value for the one who purchase it. The product will be designed in terms of
size, color, and other related dimensions.
Thus, product-service design plays a strategic role in the degree to which an organization is able
to achieve its goals. It is a major factor in customer satisfaction, product-service quality, and
production costs. The customer connection is obvious i.e., the product or service is the main
concern of the customer, and becomes the ultimate basis for judging the organization. The
quality connection is twofold. Quality is obviously affected by design, but also, during
production, by the degree to which production conforms to the intent of design. A key factor is
the manufacturability, which refers to the ease with which design features can be achieved by
production. Similarly, design affects cost, both the cost of materials specified by design and the
cost required to achieve the intent of design (e.g., labor and equipment costs).
Objectives of Product-Service Design
The objectives of product-service design may vary somewhat from situation to situation.
Generally, however, the objectives are:
- To bring new or revised products or services to the market as quickly as possible.
- To design products and/or services that have customer appeal
- To increase the level of customer satisfaction
- To increase quality
- To reduce costs
In a competitive environment, getting new or improved products or services to the market ahead
of competitors gives an organization a competitive advantage that can lead to increased profits as
well as increased market share, and can create an image of the organization as a leader. In the
not-for-profit sector, getting new or improved products or services to the market as quickly as
possible enables organizations to increase their level of customer service.

Compiled by :Biruk G
2

Successful product design must reflect a creative and intimate knowledge of the market
environment. And the processes used to produce or deliver them must make effective use of the
firm’s resources and available levels of technology.

Notice here that, Production/operations is not the sole responsibility of Operation Department or
Division what to produce is rather an interactive decision of Marketing, Finance, Engineering,
Purchasing/procurement and further involves Customers, Suppliers, Creditors, and other related
parties.

The Design Process

The design process begins with the motivation for design. For a new business or new product,
the motivation may be obvious: to achieve the goals of the organization. For an existing
business, in addition to that general motivation, there are more specific factors to consider, such
as government regulations, the appearance of new technologies that have product or process
applications, competitive pressures, and customer needs.

Ultimately, the customer is the driving force for product-service design. Failure to satisfy
customers can result in customer complaints, returns, warranty claims, and so on. Loss of market
share becomes a potential problem if customer satisfaction is not achieved.
In order for the design process to occur, there must be ideas for new or improved designs. These
can come from a variety of sources. The most obvious source is the customer. Marketing can tap
this source of ideas in a number of ways, such as the use of focus groups, surveys, and the
analysis of buying patterns. Some organizations have Research and Development (R&D)
departments that also generate ideas for new or improved products and services.
Competitors are another important source of ideas. By studying a competitor’s products or
services, and how it operates (e.g., pricing policies, return warranties, and so on), an organization
can learn a great deal that can help to achieve design improvements. Beyond that, some
companies buy a competitor’s newly designed product the moment it appears on the market.
Using a procedure called Reverse Engineering; they carefully dismantle and inspect the product.
This may uncover product improvement that can be incorporated in their own product.

Compiled by :Biruk G
3

Forecasts of future demand can be very useful, supplying information on the timing and volume
of demand as well as information on demands for new products and services.

The design of a product or service must take into account is cost, its target market, and its
function. Manufacturability is a key concern for manufactured goods: ease of fabrication and/or
assembly is important for cost, productivity, and quality. Similarly, with services, ease of
providing the service, cost, productivity, and quality and great concern.

In general, design, production, and marketing must work closely together, keeping each other
informed and taking into account the wants and needs of the customer. In addition, there can be
legal or regulatory considerations as well as life cycle factors that influence the design function.
Philosophies towards Product Design and Development
There are three philosophies/strategies for product design and development: Market-putt
approach, Technology-push approach, and Inter-functional approach
1. Market-Pull Philosophy
The market-pull logo is: “One should make what can be sold”. It implies that one should produce
the market requirement or customer demand irrespective of internal technology or processes. So
it is required to undertake customers’ survey and market research. Where customer survey
implies the marketing efforts once the product has produced and tries to determine whether the
targeted customers are satisfied or else develops purchasing dissonance with the product. Market
research, on the other hand, is much broader in scope and deals with the formulation of a firm’s
marketing strategies with regard to the four P’s (Product, Price, Promotion, and Place) i.e.,
designing the marketing mix strategy of the firm.
In market pull strategy, new products are determined by the market with little regard given to
existing technology and operations processes. Instead the customers’ needs and wants play the
primarily role for new product design and development.

2. Technology-Push Philosophy
The technology-push strategy logo is “one should sell what can be made”. It implies the existing
technology and/or process determines what kind of a product to be produced. So that customer

Compiled by :Biruk G
4

needs is become a secondary issue. It can be said it is a period of marketing myopia or marketing
shortsightedness.
Under this approach new product will be derived from production technology with little regard
for the market. Marketing is responsible to create a market and sell the products that are already
produced. The view is dominated by vigorous use of technology and simplicity of operations and
the assumption is through aggressive Research and Development and producing superior
products which have an advantage in the market. Therefore, the main issue is undertaking
Research and Development and the implementation of operations efficiency and effectiveness.
3. Inter-functional Philosophy
The inter-functional approach logo is: “Product design and development is neither market-pull
nor technology-push. Rather it is inter-functional and interactive processes of customers,
marketing, finance, personnel, engineering, procurement, suppliers and other related functional
areas”.
Under this approach a new product has to be developed which considers the existing technology,
needs and wants of the customers, inputs, and enable to use the best marketing efforts of the
company. However, there is a big problem in applying this strategy. It is because there is an
inter-functional conflict among different functional areas and parties as a result difference in
their respective outlook. The best solution to overcome such a problem is to form a committee or
taskforce whose members are drawn from various departments of the company.
Approaches to Product Design and Development
In addition to those philosophies for product design and development discussed in the previous
section, there are specific product design techniques to speed up the design process and create
product-service bundles (i.e., new product development).
a. Concurrent engineering
Concurrent engineering is an approach to product-service design in which the concerns of more
than one function are considered simultaneously such as design for manufacturability; design
procurement; design for environment; and design for disassembly
i. Design for Manufacturability (DFM) is a product development approach that explicitly
considers the effectiveness with which a product can be made during the initial
development of the product-service design. This approach is based on the belief that the
cost of developing and running the value-adding system is as important as the functionality
Compiled by :Biruk G
5

and aesthetics of the product-service bundle. Three concepts are closely related to
designing for ease of production: specifications, standardization, and simplification.
 Specification: is a detailed description of material, part, or product including physical
dimensions. These specifications profiled production Departments with precise
information about the characteristics of the product to be produced. Eli Whitney’s
system of interchangeable parts required each part of a rifle to be manufactured to
specific tolerances. Tolerances are stated as a minimum and maximum for each
dimension of a product. For example, a minimum of 3.999 inches and a maximum of
4.0001 inches could be specified as 4.000+- 011 inch. Specifications, including
tolerances, are needed to allow both ease of assembly and effective functioning of the
finished products.
 Standardization: refers to the design activity that reduces variety amount of a group
of products or parts. For example, if a product group having 20 models were
redesigned to have only 10 models, we would refer to the new group as more
standardized. Standardization of groups of products or parts usually results in higher
volume for each product or part model, which can lead to lower production costs,
higher product quality, greater ease of automation and lower inventory investment.
 Simplification of product design is the elimination of the complex features so that the
intended function is performed but with reduced costs, higher quality, or more
customer satisfaction. Customer satisfaction may be increased by making a product
easier to recognize, buy, install, maintain, or use. Costs can be reduced through easier
assembly, eliminated operations, less expensive substitute materials, and when less
material is wasted as scrap.
Note: the concepts of specifications, tolerances, standardization, and simplification are all
important in designing products for ease of production. Of particular importance is that
products must be designed to accommodate automated machinery.
ii. Design for procurement: places explicit consideration of component parts supply during
the initial development of a product-service design. What is the supply base for the
required component parts? What is the capacity of that supply base? At what cost can
parts be made and at what levels of conformance quality? Design for procurement

Compiled by :Biruk G
6

extends the DFM concept to the early stages in the creation of value, before in-house
production begins.
iii. Design for environment: is a product development approach that broadens the concept
of design from the extraction of raw materials to their disposal. This strategy is based on
the concept of sustainable development which encourages companies to meet the needs
of today’s consumer without compromising the ability of future generations to meet their
needs.
iv. Design for disassembly: has become increasingly important in the context of the
extensive environmental regulations with which businesses must now comply. More and
more, manufacturers are beginning to understand and accept the fact that they are
responsible for the items they make, from start to finish. Using a design-for-disassembly
philosophy today can help to prevent such environmental liabilities in the future.

b. Robust Design
Some products will perform as designed only within a narrow range of conditions, while other
products will perform as designed over a much broader range of conditions. The latter case
describes a product that has robust design. Consider a pair pf fine leather boots-obviously not
made for walking mud or snow. Now consider a pair of heavy rubber boots-just the thing for
mud or snow. The rubber boots have a design that is more robust than the fine leather boots.

The more robust a product (or service) is, the less likely that it will fail due to a change in the
environment in which it is used or in which it performed (in the case of a service). Hence, the
extent to which designers can build robustness into the product or service, the better it should
hold up, and the higher the level of customer satisfaction.
d. Modular Design
Modular design is another form of standardization. Modules represent groupings of component
parts into subassemblies, usually to the point where the individual parts lose their separate
identity. One familiar example of modular design is a television set with easily removed control
panels. Computers, too, have modular parts that can be replaced if they become defective. By
arranging modules in different configurations, different computer capabilities can be obtained.

Compiled by :Biruk G
7

Generally, it is an approach that allows designers to consider an item’s components or

subsystems independently. Because these independent modules can be installed and replaced
individually, the concept is beneficial when requirements vary from one customer to the next and
when customer needs may change over time.

One advantage of modular design of equipment is that failures are often easier to diagnose and
remedy because there are fewer pieces to investigate compared with a no modular design.
Similar advantages are found in ease repair and replacement; the faulty module is conveniently
removed and replace with a good one. The manufacture and assembly of modules involves
simplifications: fewer parts are involved, so purchasing and inventory control become more
routine, fabrication and assembly operations become more standardized, and training costs often
are less.
The main disadvantages of modular design stem from the decrease in variety: the number of
possible configurations of modules is much less than the number of possible configurations
based on individual components. Another disadvantages that is sometimes encountered is the
inability to disassemble a module in order to replace a faulty part; the entire module must be
scrapped-usually a more costly procedure.
e. Computer-Aided Design (CAD)
Computer-Aided Design (CAD) is an approach that uses computer software and hardware
applications to generate digitized models representing a product’s structural characteristics and
physical dimensions. The models can then be analyzed using special software, represented and
examined from a wide variety of perspectives on a computer screen, and printed out on a
blueprint plotter or some other output device.

When CAD is used, a design engineer starts by developing a rough sketch or, conceivably, just
in idea. The designer then uses a graphic display as a drafting board to construct the geometry of
a design. As a geometric definition is completed, a sophisticated CAD system allows the
designer to determine various kinds of engineering data, such as strength or heat transfer. CAD
also allows the designer to ensure that parts fit together so there will be no interferences when
parts are subsequently assembled.

Compiled by :Biruk G
8

f. Value Analysis (VA)

Although Value Engineering (VE) focuses on pre-production design improvement; Value
Analysis (VA), a related technique, takes place during the production process, when it is clear
that a new product is a success. VA seeks improvements that led to either a better product or a
product made more economically. The techniques and advantages for VA are the same as for
Vale Engineering, although minor changes in implementation may be necessary because Value
Analysis (VA) is taking place while the product is being produced.

As families of parts are identified, activities and machines can be grouped to minimize setups,
routings and material handling. GT provides a systematic way to review a family of components
to see if an existing component might suffice on a new project. Using existing or standard
components eliminates all the costs connected with the design and development of the new part,
which is a major cost reduction. For these reasons, successful implementation of GT leads to the
following advantages:
- Improved design (because more design time can be devoted to fewer components) i.e., a
design team can enhance the manufacturability of a design and speed up the design cycle,
- Reduced raw materials and purchases
- Simplified production planning and control
- Improved layout, routing, and machine loading
- Reduced tooling setup time, and work-in-process and production time.
2.2. Process Design and Selection
2.2.1. Process Design
Process design decisions are another strategic concern area of Operations Managers. The term
process refers to the facilities, skills, and knowledge used to produce firm’s products. Based on
this definition, one can infer that where product design dictate “what to produce” where as
process design imply “hot to produce”.

Process flow design, on the other hand, focuses on the specific processes that raw materials,
parts, subassemblies, or people flow as they move through the plant. The most common
Production and Operations Management tools used in planning process design are:

Compiled by :Biruk G
9

1. Assembly drawing: simply shows an exploded view of the product. An assembly

drawing is usually a three-dimensional drawing, known as an isometric drawing;
the relative locations of components are drawn in relation to each other to show
how to assemble the unit/product.
2. Assembly charts: is a schematic form that show how a product is assembled i.e., a
graphic means of identifying how components flow into subassemblies and
ultimately into a final product. These charts list all major materials, components
(which could be manufactured components, purchased components, or a
combination of both), subassembly operations, inspections, and assembly
operations. Assembly charts, sometimes called gozinto charts (from the words
goes into), are ideal for getting a bird’s eye view of the process for producing
most assembled products. They are also useful for planning production systems
for services when those services involve processing tangible goods, as in fast-food
restaurants, dry-cleaning shops, and quick tune-up shops for automobiles.
3. Process charts: provides more detail for process planners than do assembly charts.
This chart is a detailed analysis of only one of the operations required to produce
a specific product. This planning tool breakdown the operation into various
elemental steps and segregates them into 5 classes: Operations – Transport,
inspection, delay and storage. The frequency of occurrence of each class, distance
traveled, and description and time for each step are recorded. When the heading
of the chart is completed, the method of performing certain assembly operation is
thoroughly documented.

Process charts can be used to compare alternative methods of performing individual operations
or groups of operations. Distance traveled and time to produce products/services can thus be
reduced by examining alternative process charts for different production methods. This process-
planning tool can be used for products/services that are produced in either continuous or
intermittent production systems. Additionally, it is equally valuable for process planning when
new products/services are being planned or when existing operations are being analyzed for
improvement as in the case of Business Process Reengineering (BPR).
Notions for the Process Chart:
Compiled by :Biruk G
10

Operation: something is actually being done. This may be work on a product, some support
activity, or anything that is directly productive in nature.
Transportation: the subject of the study (product, service, or person) moves from one location
to another.
Inspection: the subject is observed for quality and corrections.
Delay: the subject of the study must wait before starting the next step in the process.
Storage: the subject is stored, such as finished products in inventory or completed papers in a
file. Frequently, a distinction is made between temporary storage and permanent storage by
inserting a T or P in the triangle.

Note: Process design is primarily useful to facilitate analysis is asking why each activity is done and whether it can
be improved by eliminating a task, combining tasks, changing the sequence of tasks, or simplifying tasks.
These aids make flow process charts very useful for the analysis of process efficiency.

2.2.2. Process Selection Decisions

Process selection decisions determine the type of productive process to be used and the
appropriate span of the process. For example the Operations Manages of fast-food restaurant
may decide whether to produce food strictly to customer-order (make-to-order) or inventory
(make-to-stock). The managers must also decide whether to organize the process flow as a high-
volume line flow or a low-volume batch-production process. Furthermore, they must decide
whether to integrate forward toward the market and/or backward toward their suppliers. All these
decisions help define the type of process which will be used to make product.

Process selection is sometimes viewed as layout problem or as a series of relatively low-level

decisions, but this is mistake, since process selection is, on the contrary, strategic in nature and of
the greatest importance. Process decisions affect the costs, quality, delivery, flexibility of
operations. As one scholar pointed out, process selection decisions tend to bind the firm with
equipment, facilities, and a particular type of labor force. This, in turn, tends to limit strategic
options.
So, in this subsection we will focus on the two main types of process classifications. First, a
process is classified by type of product flow: line/continuous, intermittent/job shop, or project.

Compiled by :Biruk G
11

Second, a process classified by type of customer order: make-to-stock or make-to-order. These

dimensions of classifications greatly affect costs, volumes, flexibility, and virtually all aspects
operations.
A. Process Classification based on the type of Product Flow
There are three types of flows: line/continuous, intermittent/job-shop, and project. In
manufacturing, product flow is the same as material flow, since materials are being converted
into a product. In pure service industries, there is no physical product flow, but thee is,
nevertheless, a sequence of operations performed in delivering the service. This sequence of
service operations is considered as the “product flow” for service industries.

i. Continuous Production Process/Line flow

- Continuous production process is characterized by a linear sequence of operations used to
make the product or service.
- The product is well standardized and must flow from one operation or workstation to the
next in a prescribed sequence.
- The individual work tasks are closely coupled and should be balanced so that one task
should not delay the next.
- There may be side-flow which impinges on this line, but they are integrated to achieve a
smooth flow.
- It usually yields a lower unit cost for the product or service being produced due to
economies of scale.
- Storage costs per unit are usually lower, as the raw materials are stored only briefly and
work-in-progress inventories move through the plant very rapidly
- The time required for production is very shorter
- Fixed-path materials handling equipments like conveys, chutes and rails are mostly used
- It requires large investment, because it uses special purpose machines etc.
- The marketing effort focuses on developing distribution channels for the large volume of
output and persuading customers to accept standardized products.
- Example: refineries, paper plants, chemical plants, automobile industries, flour milling,
electric utility etc

Compiled by :Biruk G
12

ii. Intermittent Production Process/Job Shop system

- It is characterized by production in batches at intermittent intervals
- Equipment and labor are organized into work centers by similar types of skills and/or
knowledge or equipment. A product or job will then flow only to those work centers that
are required and will skip the rest. This results in a jumbled flow pattern.
- The storage costs per unit are higher in intermittent production systems due to jumbled
flow pattern and product variety involving serious problems in controlling inventories
and schedules.
- The time required for production is usually longer since products in systems are usually in a
state of partial completion for several days or several works.
- Variable path materials handling equipments like carts, lift trucks, and cranes are usually
used.
- It requires lower investment as it uses general purpose equipment like grinders, drills,
shapers etc. which may involve lower costs.
- In this production process, there is much more flexibility as compared to the continuous
production process.
- The marketing effort is directed toward getting and filling individual customers for varied
products
- Products are not standardized
- Intermittent production process is common in the early stages of the product life cycle.
Example: custom cabinet shops, machine shops, furniture, custom jewelers etc.

iii. Project Production process

- It is used to produce a unique product such as a work of art, a concert, a building or a motion
picture
- Each unit of these products is produced as a single item.
- Strictly speaking, there is no product flow for a project; but, there is still a sequence of
product operations. In this case, all individual operations or tasks should be sequenced to
contribute to the final project objective.

Compiled by :Biruk G
13

- A significant problem in project management is the planning, sequencing, and controlling of

the individual tasks leading to completion of the entire project.
The project form of operation is used when there is a greater need for
creativity and uniqueness
- Automation is difficult in the case of projects as they are done only once
- Projects involve high cost and difficulty in managerial planning and control as it is hard
to define initially with a great probability of changes in the meantime. Examples include
construction buildings, movies, ships, commercial paintings etc.

B. Process Classification based on the type of Customer Order

Another critical dimension affecting process choice is whether the product is made to stock or
made to order. Each of these processes has its own advantages and disadvantages. While a make-
to-stock process will provide fast service at low cost, it offers less flexibility in product choice
than a make-to-order process.
i. Make-to-order
- It essentially responds to the customer’s request for a product.
- The order cycle does not begin (i.e. nothing is done) until the order is received, and the
product is then designed and produced entirely to customer specifications. In other cases,
components are built up in advance, and the product is merely assembled at the last
minute to meet the customer’s choices. In this case, the finished product is standardized
but not carried in stock.
- On the basis of the customer’s request, the producer will quote a price and delivery time.
If the customer accepts the quotation, the product will be either assembled from
components or designed and built completely to customer specifications.
- The key operations performance measure for make-to-order process is the delivery and
control of the order flow (i.e., the length of delivery time and percentage of orders
delivered on time). Before placing the order, the customer will want to know how long it
will take for delivery. Therefore the process must be flexible to meet customer orders.
ii. Make-to-Stock

Compiled by :Biruk G
14

- It must have a standardized product line. The product availability objective then is to
provide the customer with these standard products from inventory at some satisfactory
level.
- The firm will build-up inventory in advance of demand. Therefore, forecasting, inventory
management, and capacity planning become essential operation.
- In this process flow, very little in operations is keyed to actual customer orders; rather,
the focus is on replenishment of inventory.
- The cycle begins with the producer, rather than the customer, specifying the product. The
customer takes the product from stock if the price is acceptable and the product is on
hand.
- The production system is building stock levels for future demand, not current ones.
- The key performance measures are utilization of production assets (inventory and
capacity) and customer service. These measures might include: inventory turnover,
capacity utilization, use of overtime, and percentage of orders filled from stock.
- The objective of the operation is to meet the desired level of customer service at
minimum cost.
2.3. Capacity Planning
Why a company Needs Capacity Planning
The capacity of the production system defines the firm’s competitive boundaries. Specifically, it
gets the firm’s response rate to the market, its cost structure, its work-force composition, its level
of technology, its management and staff supports requirements, and its general inventory
strategy. If capacity is inadequate, a company may lose customers through slow service or by
allowing competitors to enter the market. If capacity is excessive, a company may have to reduce
its prices to stimulate demand, underutilize its work force, carry excess inventory, or seek
additional, less profitable products to stay in business.
What is Capacity?
Important terminologies:
- Capacity is the rate of output that can be achieved from a process. This characteristic is
measured in units of output per unit of time.

Compiled by :Biruk G
 15

- Design capacity it the rate at which a firm would like to produce under normal
circumstances and for which the system was designed.
- Maximum capacity is used to describe the maximum output rate that could be achieved
when productive resources are used to their maximum. However, at this maximum level,
utilization of resources may be inefficient (for example, increasing energy costs, the need
for overtime, higher maintenance costs, etc).
Factors Affecting Capacity
Capacity is affected by both external and internal factors. The external factors include
government regulations (working hours, safety, pollution), union agreements, and suppliers
capabilities. The internal factors include product-service design, personnel and jobs (worker
training, motivation, learning, job content, and methods), plant layout and process flow,
equipment capabilities and maintenance, materials management, quality control system, and
management capabilities.
Important Capacity Concepts
1. Best operating level: the best operating level of capacity for which the average unit cost
is at a minimum. As we can see from the following figure, as we move down the curve,
we achieved economies of scale until we reach the best operating level, and we encounter
diseconomies of scale as we exceed this point.

500 units plant

Average 700 units plant

unit cost 1300 units plant
900 units plant
1100 units plant

Best operating level

Volume
Figure 2.5. Best Operating Level
2. Economies of Scale: the basic notion is well known: as a plant gets larger and volume
increases, the average cost per unit of output drops because each succeeding unit absorbs
part of the fixed costs. This reduction in average unit cost continues until the plant gets so
Compiled by :Biruk G
16

big that coordination of material flows and staffing becomes so expensive that new
sources of capacity must be found. This concept can be related to best operating levels by
comparing the average unit cost of different size plants.
Economics (as well as diseconomies) of scale are found not just between cost curves, but
also within each one. As the output approaches a facility’s best operating level,
economies of scale are realized. Beyond the level, diseconomies set in. although finding
the best size and operating level is illusive, managers often set policies regarding the
maximum-size for anyone facility.
3. Capacity utilization rate: the extent to which a firm uses its capacity is defined by its
capacity utilization rate, which is calculated by dividing capacity used (actual output)
with design capacity. The capacity utilization rate is expressed as a percentage and
requires that both the numerator and the denominator be measured in similar units and
time periods (machine hours/day, Barrels of oil/day, patients/day, Amount of
output/month, etc.
4. Capacity cushions: it is an amount of capacity in excess of expected demand. For
example, if the expected monthly demand on a facility is Birr 1 million worth of products
per month and the design capacity is 1.2 million per month, it has 20 percent capacity
cushion. A 20 percent capacity cushion equates to an 83 percent Capacity utilization rate
(100%/120%).
When a firm’s design capacity is less than the capacity required to meet its demand, it is said
to have a negative capacity cushion. If, for example, a firm has demand for Birr 1.2 million
products per month but can produce only Birr 1 million per month, it has a negative capacity
cushion of 20 percent.
5. Capacity flexibility: essentially means having the capability to deliver what the customer
wants within a Lead Time (LT) shorter than competitors. Such flexibility is achieved
through:
i. Flexible plants: perhaps the ultimate in plant flexibility is zero-changeover-time plant.
Using movable equipment, knockdown walls, easily accessible and re-routable
utilities, such a plant can adapt to change in real time- a plant with equipment that is
easy to install and easy to tear-down and move. Typical example is circus in the old
tent-circus days.
Compiled by :Biruk G
17

ii. Flexible processes: are characterized by flexible manufacturing systems on the one
hand, and simple, easily set-up equipment on the other, enabling what is sometimes
referred to as economies of scope (by definition, economies of scope exist when
multiple products can be produced at a lower cost in combination than they can
separately.
iii. Flexible workers: have multiple skills and the ability to switch easily from one kind
of task to another. They require broader training that specialized workers and need
managers and staff support to facilitate quick changes in their work assignments.
iv. Using external capacity: two common strategies for creating flexibility by using the
capacity of other organizations are subcontracting and sharing capacity. Exchanging
aircraft (suitably repainted) when one’s routes are heavily used and the other’s are
not.
Measures of Capacity
- Design capacity: is the maximum rate of output achieved under ideal condition. In other
words, it is a planned (engineered) rate of output of goods or services under normal or
full-scale operating conditions.
- Effective capacity: is the maximum possible given a product mix, problems in scheduling
and balancing operations, machine maintenance, quality factor, and so on. It also includes
lunch breaks and coffee breaks. It is typically les than or equal to the design capacity.
- Output capacity: the actual output of a system at a given point in time. It is even less than
effective capacity, for it is affected by short-range factors such as actual demand,
equipment breakdowns, absenteeism, shortage of raw materials, productivity, and other
factors that are outside the control of the Operations Manager.
Derived Measures of Capacity Include:
a. Utilization rate: is simply the percent of actual output to design capacity. It can be
computed from the following formula:
Utilization = Actualoutput
DesignCapacity
b. Efficiency: is a measure of actual output over effective capacity.
Efficiency= ActualOutput
EffectiveCapacity
Compiled by :Biruk G
18

Depending on how facilities are used and managed, it may be difficult or impossible to reach
100% efficiency.
c. Rated Capacity: is a measure of the maximum usable capacity of a particular facility. The
equation used to compute rated capacity is:
Rated Capacity= (Design Capacity) (Effective Capacity) (Efficiency)
Rated Capacity will always be less than or equal to effective capacity
Illustration:
The Sara James Bakery has a plant for processing breakfast rolls. The facility has an efficiency
of 90%, and the effective capacity is 80%. Three process lines are used to produce the rolls. The
lines operate 7 days a week and three 8-hours shifts per day. Each line was designed to process
120 standard rolls per hour. What is the rate capacity?
Given
No of lines =3, No. of hours = 168, No of rolls/hr= 120
Therefore, Design capacity = No of lines x No of hours x No of rolls/hr
= 3x168x120 = 60,480 rolls per week
Effective capacity =80%
Efficiency = 90%
Each facility is used 7 days a week, 3 shifts a day = 7x3x8=168
Rated capacity= (capacity) (Effective Capacity) (Efficiency)
= (3x168x120) (.8) (.9) = 43,546 rolls per week
Variables that Affect Capacity
Some factors affecting capacity are more controllable than others
1. Controllable factors: include the amount of labor, facility, machines, tooling, shifts
worker per day, days worker per week, overtime, subcontracting, preventing maintenance
and number of setups.
2. Less controllable factors: include absenteeism, labor performance, machine breakdown
material shortages, scrap and rework and unexpected problems.
Indicators problems may be evidenced in the long Lead Time (LT) for many goods and in the
queues at service facilities such as hospitals, banks and some retail stores. Underutilized facilities
are also part of the capacity problem.
2.4. Facility/Plant Location and Layout Operations Decisions
Compiled by :Biruk G
19

2.4.1. facility/plant location decisions

2.4.1.1. The Need for Facility/Plant Location Operations Decision
Facility/plant location decisions are among the strategic operations decisions areas. It is the
process of determining a geographical site for a company’s operations. Location problem is very
important decision for two basic reasons:
1. Location decision is somewhat irreversible due to its expensiveness or impossibility.
Once a plant location is chose, a company usually remains in that location for many
years. Thus, errors in plant location often lead to long-problems which are very difficult
to overcome.
2. It affects the cost of production (such as cost of resources i.e., direct material, labor,
overhead, energy etc) and on the effectiveness of marketing. If expansion is impossible,
the potential for satisfying the market from this location cannot be fulfilled.
Thus, the plant-location decision is of vital importance in production-system design. It is
because:
a. It affects the costs of shipping raw materials and finished production.
b. It affects the costs of operations, including labor, raw materials, taxes, construction, land,
utilities, power, and many other factors.
c. It affects expansion potential in the future.
d. It affects the marketing effectiveness of the firm.

These effects, in some situations, can spell out the difference between the company's success and
failures in the long-run. Thus, plant location decisions must involve long-range forecasting and
an analysis of the current relationships of the factors involved in the decisions.

The operation Managers of a business firm, when confronted with problems leading to a decision
on plant location, have several alternatives:
i. Continuing operating on the present location and subcontract for the additional demand. It
applies mostly on hotel, warehouse and transportation. It is because the demand is not stable.
ii. Expand the present plant on the present site provided that there is available site.
iii. Keeping the present plant and at the same time build new plant/plants elsewhere.
iv. Sell the present plant and relocate the entire operation.

Compiled by :Biruk G
20

If the decision is to build new plants elsewhere, then a complex analysis is necessary. Such
analysis should start with the gathering of data concerning the location requirements of the firm.
It includes:
Which market will be served by the firm?
Where are the sources of raw materials used by the firm?
What type labor supply is necessary? Skilled, unskilled, semiskilled
What methods of transportation are necessary? Land, sea, air, etc.
How much land will be needed for the plant and for future expansion?
What types of power will be needed/ required in the production process? Hydro, nuclear,
geothermal gasoline, wind, etc
What particular type of climatic conditions required? Dry, temperate, damp, ……
climates

2.4.1.2 Steps in Making Location Decisions

The way an organization approaches location decisions often depends on its size and the nature
or scope of its operations. New firms typically locate in a certain area simply because that is
where the owner lives. Similarly,

Managers of small firms often want to keep operations in their own backyard, so they tend to
focus almost exclusively on location alternatives. Large established companies, particularly ones
that already operate in more than one location, then to take a more formal approach. Moreover,
they generally consider a wider range of geographic locations.

The general procedure for making location decisions usually consists of the following steps:
i. Decide on the criteria than will be used to evaluate location alternatives, such as increased
revenues or community services.
ii. Identify the factors than are important, such as lovation of markets or raw materials.
iii. Develop location alternatives:
 Identify the general region for a location
 Identify a small number of community alternatives
 Identify a particular site alternatives
iv. Evaluate the alternatives and make a seletion.
Compiled by :Biruk G
21

2.4.1.3 Considerations in Facility/plant Location Decisions

The problem of plant/facility location is common to new and existing businesses. This planning
is critical to company's eventual success. There are certain stages to be followed for the initial
phase of the plant-location decision, during which management is involved in selecting the
region or general area, then the community within the region, and finally, the particular site at
which the plant should be located.

A. Regional Considerations/Factors

The following important regional factors must be taken in to account when the operations
Manager would like to make decisions concerning the region where locate a plant.
1. Proximity to markets: possible reasons to locate plants their market can be:
a. When the products to be produced is perishable
b. Fragility of products (risk of long shipment
c. The fact that the product's volume, bulk, fragility, and perish ability increase when it is
processed further. Example, soft drinks
d. The fact that the nature of the product needs large transportation space. Example, barrels,
boxes
e. When the product is a service. Example, restaurants, gasoline stations
f. When the company deals with custom-made products
g. When the product is inexpensive but involves high transportation cost i.e, large percentage of
transportation cost form the total cost Example, bricks, cement etc.
2. Proximity to materials: relates to the location of raw materials, supplies, semi-finished
goods, parts, equipment tools etc. Possible reasons to locate near source of raw materials can
be:
a. When the Wight or bulk of the product largely decreases by further processing. Example,
sugarcane is the raw material but when production process completed, we find crystallized
sugar.
b. When the perish-ability of products decrease by further processing. Example, freezing,
canning, pasteurizing …..

Compiled by :Biruk G
22

c. If the product needs a number of raw materials, the location decision regarding materials is
made at a place that reduces the cost transporting these materials
3. Adequate transportation facilities: transportation facilities are essential for the economical
operations of production systems. Operation Managers must study the characteristics of the
raw materials and finished products in regard to their transportation need and search for the
location that provides facilities of transportation with a reasonable cost. There are different
types of transportation facilities: water, railroad, road, pipelines, and airlines transports.
4. Labor supply: one of the important inputs in production system is labor. When a firm
considers a new location, several labor-related questions require answers:
a. The availability of potential employees
b. The level of skill and education of potential employees
c. Productivity of potential employees
d. Their unionization
e. Costs of labor (including fringe benefits)
f. Costs of living as related to labor cost
5. Climate: favorable climate is important in order to acquire and maintain productive work
force. Certain industries like agricultural business require specific climatic conditions.

B. Community Considerations/Factors
Choice of community includes the following considerations:
1. Managerial preference: relates to the personal preference of owners and managers.
2. Community facilities: is concerned with the availability of schools, churches, medical
facilities, residential housing, recreational opportunities, police and fire protection, highways,
etc.
3. Community attitudes: in order to assume the long-term existence in that community, it is
mandatory to win the interest, enthusiasm, and cooperation of the society. Otherwise, poor
relations with local government, labor, customers etc. Will result in putting the survival of
the organization under question mark.
4. Community government and taxation: it is important to assess the current situation and
attempt to predict the future situation in regard to the policies of the government. In general,

Compiled by :Biruk G
23

stable, competent, honest and cooperative government officials are great assets to a newly
located company.
5. Availability and cost of sites: relates to the consideration of the availability of sites and
building. Selecting communities without assessing the availability and costs of sites often
leads to a mistake.

C. Site Considerations/Factors

After identifying the community in the already chosen region, our final step is to screen out the
best site out of the possible ones. The following are some of the considerations:
1. Size of the site: the size of the site must be large enough to satisfy some requirements such as
employee parking requirement, future expansion plan, etc.
2. Drainage and soil condition: poor drainage leads to accumulation of water around the plant
which may be harmful for some organizations. Similarly, if the load bearing capacity of the
soil is low, it will be difficult to establish sound building foundations.
3. Water supply: even though the amount may differ for different organizations, all enterprises
require getting access to safe and pure water. Some organizations like breweries need water
even with some extraordinary quality.
4. Utilities: Costs of acquiring and using utilities like electricity, natural gas, water, etc. must be
analyzed
5. Transportation facilities: relates to getting access to highways, railroads, pipelines, water, and
air transport as the case may be.
6. Land and development costs: costs related to excavation, grading, filling, construction of
roads, siding etc. must also be taken in to consideration.
7. Waste disposal and environmental considerations: as part of discharging some societal
responsibilities a business may shoulder, it has to play its part by preventing and reducing
pollution and environmental degradations and deteriorations. Accordingly it has to take care
while disposing its wastes by going for sites that qualify for "economical" disposal facility.

2.4.1.4 Where do we get such information for plant Location Analysis?

The following institutions can be considered as possible sources of information:

Compiled by :Biruk G
24

Investment office (both federal and regional), Municipalities, Government sponsored

organizations, Sub cities, Addis Ababa chamber of Commerce (AACC), Ethiopia Chamber of
Commerce (ECC), Commercial banks both governmental and private). Industrial development
corporations, Ethiopian Road authority or Addis Ababa Road Authority Administration,
Ethiopian Electric Power Corporation, Ethiopian water and Sewerages Authority, Ethiopia
Telecommunication Corporation (ETC), etc

2.4.1.5 Approaches to Locational Decision Making

This section contains descriptions of major quantitative and qualitative techniques that are used
to help operations Managers in evaluating location alternatives: Locational break-even analysis,
Factor rating, center of gravity and Transportation method of linear programming.

a. Locational Break-even Analysis

Locational break-even analysis is the use of cost volume analysis to make an economic
comparison of location alternatives. By identifying fixed and variable costs and graphing them
for each location, we can determine which one provides the lowest cost. Locational break-even
analysis can be done mathematically or graphically. The graphic approach has the advantage of
providing the range of volume over which each location is preferable.
The three steps to locational break-even analysis are:
i. Determine the fixed and variable cost for each location.
ii. Plot the costs for each location with costs on the vertical axis of the graph and annual volume
on the horizontal axis.
iii. Select the location that has the total cost for the expected production volume this method
assumes the following:
 Fixed costs are constant for the range of probable output.
 Variable costs are linear for the range of probable output.
 The required level of output can be closely estimated.
 Only one product is involved
Illustration 1
An operations Manager has narrowed the search for new facility location to three different
communities. The annual fixed costs (land, property tax, insurance, equipment and buildings)

Compiled by :Biruk G
 25

and the variable costs (labor, materials, transportation, and variable overheads) are given in the
following table for each community respectively:

Community FC/Yr (in Birr) Unit VC/yr (in Birr)

A 10,000 60
B 30,000 40
C 90,000 20

Required:
i. plot the cost curves for all the communities on a single graph. Identify on the graph the
approximate range over which each community provides the lowest cost.
ii. Using break-even analysis, calculate the break-even quantities over the relevant ranges.
iii. If the expected demand is 2,000 unit per year, which community will be the best location?
Solution:
i. To plot a community's total cost line, let's compute the total cost for two output levels: when
Q=o and Q=5000 units per year. For Q=o level, the total cost is simply the fixed cost of each
respective community. However, for Q=5,000, the total cost will be the sum of both fixed
costs and variable costs. Thus:

Community Fixed Costs(in Birr) Total Variable costs (in Birr) Total costs (in Birr)
A 10,000 60x5000=300000 310,000
B 30,000 40x5000=200000 230,000
C 90,000 20x5000=100000 190,000

Compiled by :Biruk G
 26

Com. “A”

Com. “B”
400
Com. “C”
BEP. “B&C”
Annual costs (‘000 of Birr)

300

200 BEP. “(A&B)”

100

Com. “A” Com. “B” Com. “C”

0 1 2 3 4 5
Qauntity (in ‘000 of units)

ii. The break-even quantity between com. "A" and Com "B" lies at the end of the first range,
where com. ''A" is best, and the beginning of the second range, where com. "B" is best. We
find it by setting their total cost equations equal to each other solving as indicated below:
10000+60(Q)=30000+40(Q)
60(Q)-40(Q)=30000-10000
20(Q)=20000
Q= 1000 Units
The break-even quantity between Com. "B" and Com. "C" lies at the end of the range over which
Com. "B" is best and the beginning of the final range where com. "C" is best. Thus:
30000_40 (Q) =90000+20(Q)
40 (Q)-20(Q) = 90000-30000
20 (Q) = 60000
Q= 3000 units
iii No other break-even quantities are needed. The break-even point between com. "A" and Com
"C" lies above the shaded area, which does not mark either the start or one of the three relevant
ranges. Thus, the graph shows that 2000 units' lies in the medium of volume range, so
community "B" is the best choice.

Compiled by :Biruk G
27

Illustration 2
Given the above information in illustration 1, which community is the best for the expected
demand of 2000 units if the selling price per unit is Birr 75, Birr 68, and Birr 80 per unit for
community A, B and C respectively?
Solution:
Community "A"
Profit= TR-TC
= 75 (2000)-[10000+60(2000)]
= 150000-130000
= 20000 Birr
Community "B"
Profit= TR-TC
= 68 (2000)-[30000+40(2000)]
= 136000-110000
= 26000 Birr
Community "C"
Profit = TR-TC
= 80 (2000)-[90000+20(2000)]
= 160000-130000
= 30000 Birr
Community "C" is best one where the profit is higher than community "A" and community "B".

b. Factor-rating Method
There are many factors, both qualitative and quantitative to consider in choosing a location.
Some of these factors are more important than others, so operations managers can use weightings
to make the decision processes more objective. The factor-rating method is popular because a
wide variety of factors from education to recreation to labor skills can be objectively included.
The factor rating method has six steps:
i. Develop a list of relevant factors which could be labor costs, labor availability, proximity to
raw materials and suppliers, proximity to markets, state and local government fiscal polices
(including incentives, taxes, unemployment compensation), environmental regulations,
Compiled by :Biruk G
 28

utilities, site costs, transportation availability, quality-of-life issues in the community, quality
of government etc.
ii Assign a weight to each factor to reflect its relative importance in the company's objectives
iii. Develop a scale for each factor (1-10 or 1-100 points)
iv. Have management score each location for each factor, using the scale in step 3.
v. Multiply the score by the weights for each factor and total score for each location.
vi Make a recommendation based on the maximum point score, considering the results of
quantitative approaches as well.

Illustration:
Etfruit management has decided to expand overseas by opening its first branch in Eastern Africa.
The ratings sheet in the following provides a list of qualitative factors that management has
decided are important; their weightings and their ratings for three possible sites: Nairobi, Kenya,
Khartoum, Sudan and Dareselam, Tanzania.

Scores (out of 100) Weighted Score

Factors Wt Nairobi Khartoum Dareselam Nairobi Khartoum Dareselam
Proximity to supplier .20 80 70 50 .2x80=16 .2x70=14 .2x50=10
state &local government
fiscal policy (tax structure) .30 65 55 70 .3x65=20* .3x55=17* .3x70=21
Labor availability & .18 80 70 85 .18x70=13* .18x70=13* .18x85=15*
altitude
Site costs .10 70 65 70 .1x65=7* .1x65=7* .10x70=7
Educational and Health
.14 80 80 80 .14x80=11* .14x80=11* .14x80=11*
Per capital income .08 60 70 50 .08x70=6* .08x70=6* .08x50=4
Totals 1.00 68.0 68.0 68.0

* rounded to the next decimal place

Give the option of 100 points assigned to each factor, the Nairobi, Kenya location is preferable.
By changing the points or weights slightly for those factors about which there is some doubt, we
can analyze the sensitivity of the decision.

C. Center of gravity Method

The center of gravity method is a technique for locating single facilities that considers the
existing facilities, the distance between them, and the volumes of goods to be shipped. The
Compiled by :Biruk G
29

technique is often used to locate intermediate or distribution warehouses. in its simplest form,
this method assume that inbound and outbound transportation cost are equal, and it does not
include special shipping costs for less-than-full-loads.
The center of gravity method begins by placing the existing locations on a coordinate grid
system. The choice of coordinate system is entirely arbitrary. The purpose is to establish relative
distance between locations using longitude and latitude coordinates might be helpful in
international decisions.

The center of gravity is found by calculating the X and y coordinates that result in the minimal
transportation cost. We use the following formulas.

Cx = ∑ dixVi Cx is x coordinate of the center of gravity

∑ Vi Cy is y coordinate of the center of gravity
dix is x coordinate of the ith location
Cy = ∑ diyVi diy is y coordinate of the ith location
∑Vi vi is volume of goods moved to or from the ith location

Illustration:
Consider the case of MOHA soft Drinks Factory, which is engaged in producing and distributing
its pepsi products through out Ethiopia. The factory's store locations are in Gonder, Addis
Ababa, Kombolcha, and Awassa as shown in the following coordinates:

Store location dix diy

Gonder 30 120
Addis Ababa 90 110
Kombolcha 130 130
Awassa 60 40

They are currently being supplied out of an old and inadequate warehouse in Addis Ababa, the
site of the factory's first store. Data on demand for each store are shown as follows:

Store location No. of boxes shipped per week

Gonder 2000
Addis Ababa 1000
Kombolcha 1000
Awassa 2000

Compiled by :Biruk G
30

The factory has desired to find some "central location" in which to build a new warehouse using
* Kombolcha (130, 130)
the center of gravity method.
* Gonder (30, 120)
120
* Addis Ababa (90, 110)
90  Center of Gravity (66.7, 93.3)

60

30 * Awassa (60, 40)

30 60 90 120 150

Using the data given in the above tables and figure above for each of the location of the stores,
we can compute the x and y coordinates of the new "central warehouse"

Cx = (30)(2000)+(90) (1000)+(130 (1000) + (60)(2000) = 400000= 66.67

2000+1000+1000+2000 6000
Cy= (120)(2000)+(110)(1000)+(130)(1000)+(40)(2000) = 560000 =93.3
2000+1000+1000+2000 6000

By overlaying the Ethiopian Map grid map, we find this location in near Nazareth. The firm may
well wish to consider nearby towns such as Modjo, Meki, and Debreziet as an appropriate
location.
2.4.2 Facilities Layout Decisions

One of the most important aspects of production system design is the layout of facilities. It
involves the determination of the arrangement of machines, personnel, materials and to
supply services in order to maximize the value that is intended to be created.

Reasons for Facilities Layout and Re-layout Analysis

The need for analysis of the layout and re-layout of facilities may arise from:
 New plant location
 Changes in the level of demand
Compiled by :Biruk G
31

 The introduction of new products and changes in the design of existing products
 Obsolescence of processes or machines
 Personnel problems and industrial accident hazards
 The need for cost reductions

Objectives of Facilities Layout

The primary objective of facilities layout is to optimize the arrangements of machines, personnel,
materials and supporting services to maximize the value created. In addition, the layout should
satisfy the needs of all personnel associated with the production system.

Beyond these general objectives, several specific objectives are strived for in the development of
good layouts:

1. Minimize materials handling cost: with the intention to minimize both the financial costs and
time required to move materials through the production process. Example, dairy industries
2. Reduce hazards to employees: to protect the health and safety of employees. Example, exhaust
ducts to remove dusts, paint spray or other particles from the air etc.
3. Balance the production process: this is to avoid bottlenecks by arranging machines and
equipments in their proper position. By doing so, we avoid excessive inventories, operate
smoothly, and avoid misplacement of resources.
4. Minimize interferences from machines: interferences may be in the form of excessive noise,
dust, vibration, fumes and heat that can be emitted from machines. Our layout must be
arranged on the way these interference can at least be minimized as they may adversely
affect employees' productivity.
5. Increase employee morale: the layout should create a favorable environment for workers.
6. Utilize available space: in order to maximize the Return on Investment (ROI), the space
available in a plant must be efficiently utilized. Here you remember that space, in most cases,
is a fixed cost.
7. Utilize labor effectively: a good layout should provide for the effective utilization of labor.
Workers should not walk a long distance for tools, equipments and supplies. Supervisors
should be located where they can keep in contact with production operations.

Compiled by :Biruk G
32

8. Provide flexibility: revision of layout is virtually inevitable in the long run. Thu, the costs of
re-layout can be minimized if the original layout is designed with flexibility in mind.

Types of Facility Layouts

There are several types of layouts that may be used in facilitating the operations activities in an
effort to produce a firm's goods and/or services. The following section commonly applied types
of layout.

a. Process/Job-shop/ Functional Layouts

It is a format in which similar equipment or functions are grouped together, such as all lathes in
one area and all stamping machines in another. A part being worked on then travels, according
established sequence of operations, from one workstation to workstation, where the proper
machines are located for each operation. This type of layout is typical in hospitals, for example,
where areas are dedicated to particular medical care, such as maternity words and intensive care
units. Metal and wood workshops are also good examples of such type of layout. In such cases,
particular products cannot be mentioned because such shops can produce a great variety of
products according to customers' specifications.
 It is used for low volume, high variety production
 Resources are general purpose and less capital intensive
 More flexible and less vulnerable to change
 Equipment utilization is higher when volumes are low as resources can be dedicated to
other product lines
 Process layouts are less vulnerable to breakdowns. If one machine breaks down, the
other can continue processing
 It is possible to isolate machines that create interference (noise, vibration, heat,…) since
machines can be located separately
 Individual-based incentive pay systems can be used, since work is usually paced by the
employees rather than by the machine.

The disadvantages, on the other hand, are:

 Processing rates tend to be slower

Compiled by :Biruk G
33

 Productive time is lost changing from one product to another

 More space and capital are tied up in inventory
 The time lags between job starts and end points are larger i.e. longer production Lead
Time (LT)
 Materials handling is costly

 Variable-path devices (Which are more costly) are used

 Production planning and control is more difficult

b. Product /Production Line/Assembly Line/Flow-shop Layouts

It is the one in which machines, employees and materials are arranged according to the
progressive steps (Operations) by which the product is made. That is, resources are arranged
around the product route, rather than shared across many products. The path for each part is, in
effect, a Straight line or U-Shape. It is typically used for continuous process (mass production).
The advantages include:
 Fast processing rate due to mechanized fixed-path materials handling equipment and the
machine pacing of the production rate
 Routing and scheduling of production are much simpler
 Low fixed-cost-per-unit due to standardized high volume products reduced work-in-
process inventory
 Easier training and supervision
 Less unproductive time due to change in processes and materials

The disadvantages, on the other hand, are:

 Machine breakdowns and absenteeism may cause shutdown of the entire plant
 Less flexible necessitating standardized products
 It demands high-volume to justify the Return of the heavy Investments (ROI) in special
purpose machines
 Difficult to avoid machine interference like excessive noise, vibration, fumes, dusts, hest,
etc.
 Difficulty of applying individual-based incentive plans since the work is machine paced.
Note:

Compiled by :Biruk G
34

Although a straight line may have intuitive appeal, a U-Shaped line has a number of advantages
that make worthy of consideration. One disadvantage of a long, straight line is that it interferes
with cross travel of workers and vehicles. A U-shaped line is more compact; it often requires a
little more than half the length of a straight production line. In addition, a U-shaped line permits
increased communication among workers on the line because workers are clustered, and it also
facilitates teamwork. And flexibility in work assignments is increased because workers can
handle not only adjacent stations, but also stations on opposite sides of the line. Moreover, if
materials enter the plant at the same point that finished products leave it, a U-shaped line will
minimize material handling.

Of course, not all situations lend themselves to U-shaped layouts: highly automated lines reduce
the teamwork and communication benefits. And entry and exit points may be on opposite sides
of a building. Also, operations may need to be separated due to noise or contamination factor.

C. Fixed-position Layouts

The product (by virtue of its bulk or weight) remains at one location. Manufacturing equipment,
workers along with their tools and supporting services are moved to the product rather than vice
versa. This type of layout makes sense when the product is particularly massive or difficult to
move like a ship, a highway, a bridge, a house, dam, etc. The advantages include:
 Provides pride for workers as they can apply their high level skill to complete the job
 Highly flexible
 Easy to alter the sequences of operations when tools, materials, or supplies do not arrive
on time
It is, however, is not without disadvantages. Just to mention major limitations: Lack of
efficiency, difficulty in scheduling and communicating with widely dispersed resources, and a
potential for significant cost overruns and quality problem.

Problem Associated with product Layout: Assembly-Line Balancing

Assembly lines are a special in case of product layout. According to Joseph G.Monks who is a
professor of operation Management defines line balancing as follows:

Compiled by :Biruk G
35

Line balancing is the apportionment of sequential work activities in to workstations in order to gain a high
utilization of labor and equipment and therefore minimize idle time.

From the definition what we can understand, line balancing refers to compatible work activities
that are combined in to approximately equal time groupings. These in turn should not violate the
order (or precedence) in which they must be done.

In 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 from all workstations. Within this broad definition, there are
important differences among line types. A few of these are material handling devices (belt or
roller conveyer, 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 line includes toys, appliances, autos,
planes, guns, garden equipment, clothing, and a wide variety of electronic components. In fact, it
is probably easy to say that virtually any product that has multiple parts and is produced in large
volume uses assembly lines to some degree. Cleary, lines are an important technology; to really
understand their managerial requirements, we should have some familiarity with how a line is
balanced.

Application of Heuristics in Assembly-Line Balancing

Authorities in the field of Management Science/Operations Research defined the term heuristic
and discussed in detail how the model is applied in real managerial problems. They have similar
ideas up on its application of different managerial decisions. Some of the definitions are listed
below

The world "heuristic" is derived from the Greek, meaning "to discover." Heuristics are decision rules,
which are discovered, usually by trial and error, to solve problems sometimes these rules come very close

Compiled by :Biruk G
36

to providing an optimal solution to Mathematical problems, and sometimes the rules are not so good.
(Schroeder 1993)

Heuristics are sometimes described as "rules of thumb which work" An example of a commonly used
heuristics is "stand in the shortest line" Although using this rule may not work if everyone in the shortest
line requires extra time, in general it is not a bad rule to follow. Many heuristics are very complex, and
their formulation involves a great deal of analysis. Heuristics tend to be effective in solutions in which
some of the more formal, mathematical Management Science or Operation Research (OR) techniques
may not be applied successfully. (Levin, et al 1992)

Heuristic methods involve sets of rules that, though perhaps not optimal, do facilitate solutions of
scheduling. Layout and distribution problems when applied in a consistent manner.
(Monks, 1987)

From the above given definitions, we infer that heuristic is nothing more than a decision rule
based up on either one's intuition or some empirical evidence which leads to believe that some
particular decision generally is a good one to follow. In contrast to an algorithm such as the
simplex method, which produces an optimal or exact solution, heuristic programming cannot
guarantee optimality. Good heuristics often do yield optimal solutions, but in some cases the
best one can hope for is a solution that is just close to being optimal. Consequently, heuristic
solutions are called approximate or near optimal.

Problem Associated with Balancing an Assembly-Line

In attaining a perfectly balance line the major problem is the ability to obtain task bundles and/or
groupings having the same duration. This could be due to: impossibility of combining certain
activities because of difference in equipment or because the activities are not compatible;
grouping tasks may not always the difference among elemental/ individual task length, and
required technical sequence may prohibit task combination.

Terminologies and Major Heuristic Rules

1. Tasks: elements of work such as grasp pencil, position pencil on paper to write, and write
something on the paper…
2. Cycle Time: is the amount of time each workstation has to complete its set of tasks before the
product moves to the next station.

Compiled by :Biruk G
37

3. Task Length: is the amount of time required to complete a single task.

4. Precedence Relationship: specifies the orders in which the tasks must be performed in the
process. Precedence for each task is known from a listing of the tasks that must immediately
precede it.
5. Operating Time: total available time during specific period that used for operational purpose.
It could be a day but it is required to determine number of hours/minutes/seconds available
per day.
6. Desired Output: the rate of output that is expected to be attained during the period or
Operating Time.
7. Assignment Rule: the rule by which individual tasks are going to be assigned to the
workstations. It is, of course, based on heuristic approach.
8. Workstation: a physical location where a particular set of tasks is performed. Work stations
are usually two types a manned workstation containing one worker who operates machines
and/or tools, and an unmanned workstation containing unattended machines like robots.
9. Work center: a physical location where two or more identical workstations are located. If more
than one work station is required enough production capacity, they are combined to form a
work center.
10. Productive time per hour: the number of minutes in each hour that a work station is working
on the average. A workstation may hot be working because of such things as lunch, personal
time, breakdowns, start-ups, and shutdowns.

There are five major heuristic rules. These are:

1. Longest task First (Operations time) Heuristic: from the available tasks, assign the task
with the largest (longest) time.
2. Most Number of following Heuristic: from available tasks the task with the largest number
of following tasks.
3. Ranked Positional Weight Heuristic: from the available tasks, assign the task whose the sum
of the task time of each following task is longest.
4. Shortest Task First (Operations time) Heuristic: from the available tasks, assign the task
with the shortest time.

Compiled by :Biruk G
38

5. Least Number of following tasks Heuristics: from the available tasks, assign the task with
the least number of subsequent tasks.

Steps in Balancing an Assembly Line

After defining the heuristic rules through which individual's tasks to be assigned to the
workstations, then our remaining operation will become line balancing. There are seven major
steps to be followed in assembly-line balancing. The steps are:
i. Specify the sequential relationships among tasks using a precedence diagram. The diagram
consists of circles and arrows. Circles represent individual tasks where as arrows indicate the
order to task to be performed.
ii Determine the required workstation Cycle Time (CT), using the following formula.
CT=OT Where:
D CT stands for Cycle Time
OT stands for Operating Time (production time available per day)
D stands for Desired Level (Demand) of Operation (required output
per day) length.
iii. Determine the theoretical
number of workstations (Nt) required to satisfy the workstation Cycle time constraint using
the minimum formula (note that this must be rounded up to the next highest integer).
Nt=sum of Task Times where ∑t is the sum of the actual
Cycle Time worker time required to complete
one unit. Or it is equivalent to task
Nt= ∑t length.
CT
iv. Selected a primary rule by which tasks are to be assigned to work stations and a secondary
rule to break ties. The primary and secondary rules are to be selected from any of the given
five heuristic stated earlier in Five Major Heuristic Rules.
v. Assign tasks one at a time to the first workstation until the sum of the times is equal to the
Cycle Time or no other tasks are feasible of time or sequence restrictions. And repeat the
process for the following workstations until all tasks are assigned. The grouping of tasks is
done heuristically with the aid of a precedence diagram. Designate work stations on the
precedence diagram and more appropriate activities in to preceding Zones that is to the left
until the time is fully used as possible.
vi. Evaluate the efficiency of the balanced line. An efficient will minimize the amount of Idle
Time (IT). The balance efficiency (EffB) can be computed in either of two ways:
Compiled by :Biruk G
39

EffB= sum of task Times (∑t)

Actual in.o.of workstations (Na) X Cycle Time (CT)

EffB = ∑t Where:
Na. CT CT is the cycle time
Na is Actual number of work stations
= 1- (% of Idle Time)

vii. if efficiency is unsatisfactory, rebalance using a different decision rule.

Illustration:

Yong, a large toy manufacturer, assembles Model TT 404 kids' doll at its Guangzhou province
plant. The assembly tasks that must be performed on each toy are shown below. The parts used
in this assembly line are supplied by materials-handling personnel to parts bins used each task.
The assemblies are moved along by belt conveyers between work stations. If 144 toys must be
produced by this assembly line per hour: find the assembly-line balance that minimizes the
number of workstations, subjects to cycle time and precedence constrains and evaluate the line
by using the largest positional weight and break ties with most number of following heuristics.

Table 2.4.2.1 Assembly steps and times for model Tt404 kid's Doll

Task Task time (in Immediate

seconds Predecessor
A 12 -
B 17 A
C 8 B
D 11 -
E 8 D
F 12 E
G 5 C
H 10 C
I 12 F,G,H
J 8 I
Total 93 Second

Solution

Compiled by :Biruk G
40

step-1 Develop Precedence relationship

5
12 7 8 5 G

A B C 10
H

11 8 12
D E F12 12 8J
I

Step-2 Determine cycle time: since the task time is stated in seconds, we first compute available
production time in terms of seconds i.e., 60x60=3600 second

CT=OT = 60x60 = 3600 = 25 Seconds

D 144 144

Step -3 compute the theoretical minimum number of workstations

Nt=∑t = Nt = 93 = 3.72 = 4 workstations
CT 25

Step -4 Primary rule - Largest positional weight heuristic

Secondary rule- The most number of following heuristic

Task Largest positional Most number

Weight Following
A 62 6
B 50 5
C 43 4
D 51 4
E 40 3
F 32 2
G 25 2
H 30 2
I 20 1
J 8 -

Compiled by :Biruk G
41

Step - 5 Workstation assignments

Work Available Eligible (Feas.) Assigne Idle

station time task d time
1 25 A,D A
13 B,D D
2 B,E - 2
2 25 B,C B
18 C,E C
10 E,F,H, E
2 F,G,H - 2
3 25 F,G,H F
13 G,H H
3 G - 3
4 25 G G
20 I I
8 J J -

Step - 6 Measurement of efficiency

EffB = ∑t = 93 = 93 = 93%
Na.CT 4x25 100

EffB = 1-[% of Idle Time]

= 1- ∑ IT = 1- 7 = 0.93 = 93%
Na.CT 100

Step -7 If we are not satisfied with the efficiency, then we can opt for rebalance using a different
heuristic decision rules.

Compiled by :Biruk G
42

Compiled by :Biruk G