Manufacturing Processes

Operations Management Dr. Ron Tibben-Lembke

Break-Even Analysis
Given a fixed cost, how many do we have to make to break even?  A: buy units @ $200  B: Make on lathe: $80,000 + $75 each  C: Machining Center: $200,000 + $15 each Which is the cheapest way?

Break-Even Analysis
 If we only sell 1, which is cheapest?  If we sell a gazillion, which is cheapest?

Break-Even Total Costs Outsource Draw Lowest Fixed Cost Line Volume .

Break-Even Total Costs Outsource Lathe Add Next-Lowest Cost Volume .

Break-Even Total Costs Outsource Lathe Machining Center Volume .

Break-Even Total Costs Outsource Lathe Machining Center Machining Center Volume Outsource Lathe .

000 + 75*x = 200*x 80.000 = 125*x x = 640 .Break-Even Analysis     When does Lathe become cheaper? 80.

Break-Even Analysis Total Costs Outsource Lathe Machining Center Machining Center 640 Volume Outsource Lathe .

000 .000 = 60*x  x = 2.Break-Even Analysis  When does Machining Center become cheaper?  80.000 + 75*x = 200.000 + 15*x  120.

Break-Even Analysis Total Costs Outsource Lathe Machining Center Machining Center 640 2.000 Volume Outsource Lathe .

Break-Even Analysis
 How

much do sales have to grow to make an investment pay off?  Fixed costs = $10,000  Direct labor = $1.50 / unit  Material = $0.75 / unit  Sales price = $4.00  How many units must sell to break even?

Break-Even Analysis
 How

to measure the value of a dollar saved tomorrow?  Can you say “Net Present Value?”

Break-Even Analysis
 How

to measure the value of a dollar saved tomorrow?  Can you say “Net Present Value?” I knew you could.

Stable line of products.low standardization. every order is a different product.Process Flow Structures  Job Shop . etc. new design  Batch Shop . produced in batches  Assembly Line . paper.Undifferentiated flow of product (beer.Discrete parts moving from workstation to workstation  Continuous Flow .) .

Process Strategy Variety High project Workcenter Manufacturing Cell Assembly Line Continuous Process Medium Low Low Medium High Volume .

glass) Low Low Medium High Medium Volume . motorcycles) Product Focus (steel.Process Strategy Variety High Process Focus (job shops) Repetitive (cars.

Kinko’s)  High amount of flexibility  Each job is different  Relatively high cost per unit  Very high flexibility . high variety. “do it all”  “Job shop” environment (e.Process Focus (Job Shop)  Low volume.g.

standardization increase .  Unit costs decrease as standardization increases. and production increases.Process Selection / Evolution  Products tend to move through the four stages over life cycle.  Flexibility decreases as volume.

Design for Manufacturing -Before .

Design for Manufacturing-After .

Designing the System  How do we decide where to put things? .

Layout Types  Project or Fixed-position layout  Process-oriented layout  Product-oriented layout  Office layout  Warehouse layout  Retail/service layout .

Project or Fixed-Position  Design is for stationary project  Workers & equipment come to site  Complicating factors  Limited space at site  Changing material needs  Examples  Ship building  Highway construction .

.Process-Oriented Layout  Design places departments with large flows of material or people together  Dept. areas have similar processes  e.g. All x-ray machines in same area  Used with process-focused processes  Examples  Hospitals  Machine shops .

.Process-Oriented Layout Floor Plan Table Saws © 1995 Corel Corp. Office Drill Presses Tool Room © 1995 Corel Corp.

Process Layout + Allows specialization .worker can watch several machines at once + High level of product flexibility -.focus on one skill + Allows economies of scale .Makes cross-training difficult .Difficult to incorporate into JIT -.Encourages large lot sizes -.

Process-Oriented Layout Steps
 Construct

‘from-to-matrix’  Determine space needs for each dept.  Develop initial schematic diagram
 Determine  By

layout cost, Σ Σ Xij • Cij

trial-and-error, improve initial layout  Prepare detailed plan
 Includes

factors besides cost

Process-Oriented Example
You work in facilities engineering. You want to find the cost of this layout. The cost of moving 1 load between adjacent dept. is $1. The cost between nonadjacent dept. is $2.
Dept. 1 Dept. 4 Dept. 2 Dept. 5 60 ft. Dept. 3 Dept. 6 40 ft.

There are 6! or 720 possibilities! Clearly, we can’t look at them all.

From-to-Matrix
1 1 2 Dept. 3 4 Number of Trips 5 6 2
50

Department 3 4
100 30 0 50 20

5
0 10 0 50

6
20 0 100 0 0

Schematic Diagram & Cost 100 1 Dept. 3 2 6 2 3 5 5 3 6 Cost $ 200 $ 50 $ 40 $ 50 $ 40 $ 50 $ 10 $ 30 $ 100 50 2 30 3 20 50 4 10 20 100 5 6 1 1 1 4 4 4 2 2 3 50 Total Cost $570 . Dept.

Schematic Diagram & Cost Dept. Dept. 2 3 6 2 3 5 5 3 6 Cost $ 50 $ 100 $ 20 $ 50 $ 40 $ 50 $ 10 $ 60 $ 100 30 2 50 10 20 1 100 50 4 20 5 1 1 1 4 4 3 4 2 2 100 3 50 6 Total Cost $480 .

assembly line  Examples  Auto assembly line  Brewery  Paper manufacturing.Product-Oriented Layout  Facility organized around product  Design minimizes line imbalance  Delay between work stations  Types: Fabrication line. .

Cellular Layout (Work Cells)  Special layout  Consists of different machines brought together to make a product  May be temporary or permanent  Example: Assembly line set up to produce 3000 identical parts in a job shop case of process-oriented .

Work Cell Floor Plan Saws Drills Office Tool Room Work Cell .

Work Cell Advantages Increases: Equipment utilization Employee participation Quality Reduces: Inventory Floor space Direct labor costs .

Requires higher volumes to justify -.May require more capital for equipment .Work Cell Layout + Facilitates cross-training + Can easily adjust production volumes + Easy to incorporate into JIT -.

Office Layout Example .

U = Unimportant Ordinary 1 closeness: 2 President (1) 3 & costing (2) O U 4 A I A Absolutely necessary: President (1) & secretary (4) .Relationship Chart 1 President 2 Costing 3 Engineering O 4 President’s Secretary I = Important.

Relationship Chart 1 2 3 4 5 6 7 8 9 10 1 O I U U I E U U E 2 E O U O A U U E A 3 O I U U U I U 4 U I U U U U 5 U I U U A 6 U O U I 7 U I U 8 U I 9 U 10 .

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Assembly-Line Balancing .

Assembly-Line Balancing  Situation: Assembly-line production.  Many tasks must be performed. and the sequence is flexible  Parts at each station same time  Tasks take different amounts of time  How to give everyone enough. but not too much work for the limited time. .

Product-Oriented Layout Operations Belt Conveyor .

Precedence Diagram Draw precedence graph (times in seconds) A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

Cycle Time   The more units you want to produce per hour. the less time a part can spend at each station. Cycle time = time spent at each spot   C= C = 800 min / 32 = 25 min Production Time 800 min = 13:20 in each day Required output per day (in units) .

88 = 4 (must round up) .Number of Workstations  Given required cycle time. find out the theoretical minimum number of stations Nt = Sum of task times (T) Cycle Time (C)  Nt = 97 / 25 = 3.

Assignments Assign tasks by choosing tasks:  with largest number of following tasks  OR by longest time to complete Break ties by using the other rule .

.H 2 I 1 Choose C first. add D to it. if possible. then. if possible.F 3 G.Number of Following Tasks Nodes # after C 6 D 5 A 4 B. then A.E.

Precedence Diagram Draw precedence graph (times in seconds) A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

F 3 G. F all have 3 stations after. E. then F. . then B. so use tiebreaker rule: time. B=5 E=8 F=3 Use E. so a new station must be created with A. B.E.H 2 I 1 A could not be added to first station.Number of Following Tasks Nodes # after A 4 B.

Precedence Diagram E cannot be added to A. but E can be added to C&D. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

B 5 A 20 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .Precedence Diagram Next priority B can be added to A.

Next priority F can’t be added to either. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .Precedence Diagram Next priority B can be added to A.

. H is 12.Number of Following Tasks Nodes # after G. G takes 15. so G goes first.H 2 I 1 G and H tie on number coming after.

H cannot be added.Precedence Diagram G can be added to F. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

and can be added to H. but J cannot be added also.Precedence Diagram I is next. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

. We needed 5.776  We are paying for 125 minutes of work.Calculate Efficiency  We know that at least 4 workstations will be needed. where it only takes 97. Sum of task times (T) Actual # WS * Cycle Time Efficiencyt = = 97 / ( 5 * 25 ) = 0.

which can’t be added to A. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 . then G.Precedence Diagram Try choosing longest activities first. A is first.

Precedence Diagram H and I both take 12. but H has more coming after it. then add I. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

followed by E. but we could have combined E&G.Precedence Diagram D is next. so we combine them. We’ll try that later. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

B 5 A 20 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 . followed by C and B. all alone.Precedence Diagram J is next.

Precedence Diagram F is last. We end up with 6 workstations. B 5 A 20 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .Precedence Diagram Go back and try combining G and E instead of D and E.

and B is added to A. C is added to D. all alone. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .Precedence Diagram J is next.

Can we do better? A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

B 5 A 20 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 . Five WS again.Precedence Diagram F can be added to C&D.

 Goal of 32 units can be produced in 20 * 32 = 640 minutes.Reduced CT  Efficiency better. Much .97. = 97/100 = 0.  If we set CT = 20.  Significant savings over original 800 minutes. we can produce 3 units per hour.

Can we do better? If we have to use 5 stations. we can get a solution with CT = 20. A 20 B 5 G E 15 I 12 J 7 C 5 D 10 8 F 3 H 12 .

Calculate Efficiency  With 5 WS at CT = 20 Sum of task times (T) Actual # WS * Cycle Time Efficiencyt = = 97 / ( 5 * 20 ) = 0.97  We are paying for 100 minutes of work. where it only takes 97. .

500 labor min.  We were trying to achieve   4 stations * 800 min = 3.Output and Labor Costs  With 20 min CT.200 labor min. Significant labor cost savings . and 800 minute workday  Output = 800 min / 20 min/unit = 40  Don’t need to work 800 min  Goal 25 units: 25 * 20 = 500 min/day  5 workers * 500 min = 2.

 Consider splitting tasks.  If not:  Parallel workstations  use skilled (faster) worker to speed up . if physically possible.Handling Long Tasks  Long tasks make it hard to get efficient combinations.

items picked © 1995 Corel Corp.Warehouse Layout  Design balances space (cube) utilization & handling cost  Similar to process layout  Items moved between dock & various storage areas  Optimum layout depends on Variety of items stored No. .

Warehouse Flow Receiving Shipping .

.Warehouse Layout Try to organize storage in such a way that order pickers can move through the product in a logical and timely manner.

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safety stock . Single item picking  Serpentine vs.Warehouse Layout  Fastest near the front  Fastest within easy reach  Bulk storage vs. oval picking order  Restocking: frequency.

© 1995 Corel Corp.Cross-Docking In-coming  Transferring Outgoing goods from incoming trucks at receiving docks to outgoing trucks at shipping docks  Avoids placing goods into storage © 1984-1994 T/Maker Co. .

Retail/Service Layout  Design maximizes product exposure to customers. profitability per square foot  Decision variables  Store flow pattern  Allocation of (shelf) space to products  Types  Grid design  Free-flow design Video .

Retail/Service Layout Grid Design Grocery Store Bread Meat Milk Office Carts Checkout .

Retail/Service Layout Free-Flow Design Apparel Store Feature Trans. Counter Display Table .

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Retail Store Flow Guidelines    “Prisoner” aisles make you enter store in a particular route. and pass by certain displays Often contain less profitable (for the store) brands “Decompression Zone” people walk past first rows of items before settling into shopping mode. .

restaurant spread aromas by entrance to stimulate taste buds  Siren song of the Starbucks (Safeway)  Food samplers throughout store do same .Retail Store Flow Guidelines  Bakery. coffee shop.

 Profitable sections like produce placed where you keep running into them Meat Milk Produce .Retail Store Flow Guidelines  Frequently purchased items at far sides of stores so you have to go through entire store (produce or meat).

peanut butter)  ‘Power items’ on both sides of aisle so you have to look at both sides Peanut Butter Cereal .Retail Store Flow Guidelines  Major items in middle of aisles so you have to walk down into middle of aisle (Cereal.

not read signs Peanut Butter produce . so produce is often prominently displayed upon entrance  People like to see what they’re looking for.Retail Store Flow Guidelines  Quality Cereal of produce section important in customer decisions about which stores to visit.

it must be on sale  Stimulates sales © 1995 Corel Corp. .Retail Store Flow Guidelines  End caps for highvisibility sale items  Large quantities of inventory serve as “psychic stock”  If there is a lot of it.

the more time you spend in the store. you have to look at more items. . the more you will buy.Retail Store Flow Guidelines  Eliminate aisles:    cross-over less wasted floor space.

SUAVE VO-5 VO-5 VO-5 .Shelf Space Planogram  Computerized tool for shelf-space management  Generated from store’s scanner data on sales  Often supplied by manufacturer  Example: P&G 5 facings PERT PERT PERT PERT PERT SUAVE VO-5 VO-5 2 ft.

Shelf Placement  Companies prefer to be at eye-level or at child-reaching level  Close to leading brands or high-draw items: snack foods next to the peanut butter or across from the cereal:  Lots of kids visit the area .

help balance risk of trying unknown product. slotting fees can represent a significant revenue source.Slotting Fees       Manufacturer pays retailer to get a product into a store 35. .000 items Impossible to evaluate all new products to choose the best new ones Slotting fees guarantee grocer profits on a product.000 new grocery products per year Grocery stores often stock 30. Grocery is a narrow margin business.

Slotting Fees  Senate Small Business Committee held hearings on them in 2000.  Industry refused to cooperate with GAO.  Advocates say small companies can “put their money where their mouths are” just like anyone else .  Small businesses claim they can’t afford the big payments big companies can make.  Growers of produce (not just brand names) now getting involved and complaining.

Perimeter Items  People follow perimeter pattern  Sale items on end – everyone sees  Half of a store’s profit comes from items on the perimeter  Breakfast cereal brings in the most dollars per square foot  Manufacturer incentives increase profitability of soft drinks  “Anchors” at ends of a section: milk and butter at opposite ends of dairy case .

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