Lecture 5 - 2024 - Process and Technology Revised

Operations Management
Tenth Edition
Russell & Taylor
Chapter 6
Processes and Technology
Copyright ©2019 John Wiley & Sons, Inc.

Learning Objectives
• Evaluate strategic options in process planning, including whether

or not to outsource
• Differentiate among different types of production processes
• Understand the effect of volume and standardization on process
selection
• Appreciate the difficulties in translating a design to a process
• Use simple flowcharting tools to improve everyday processes
• Investigate the use of technology in manufacturing and service
processes
Copyright ©2019 John Wiley & Sons, Inc. 2

What is process?

Process Planning
“Processes are planned, analyzed and redesigned as

required by changes in strategy and emerging technology”

Process Strategy
• Vertical integration
o extent to which firm will produce inputs and control outputs of each stage
of production process
• Capital intensity
o mix of capital (i.e., equipment, automation) and labor resources used in
production process
• Process flexibility
o ease with which resources can be adjusted in response to changes in
demand, technology, products or services, and resource availability
• Customer involvement
o role of customer in production process

Outsourcing
Cost • Is it cheaper to make or buy the item?
Capacity • Does the company have the capacity?
Quality • Easier to control quality in your own factory
Speed • Shipping time can reduce savings
Reliability • Quality and timing are reliability measures
Expertise • Protect proprietary information

Sourcing Continuum

Process Selection
• Projects
o one-of-a-kind production of a product to customer
order
• Batch production
o process many different jobs at the same time in
groups or batches
• Mass production
o produce large volumes of a standard product for a
mass market
• Continuous production
o used for very-high volume commodity products

Product-Process Matrix

Types of Processes
Project Batch Production Mass Production Continuous Production
Type of product Unique Made-to-order (customized) Made-to-stock Commodity
(standardized)
Type of customer One-at-a-time Few individual customers Mass market Mass market
Product demand Infrequent Fluctuates Stable Very stable
Demand volume Very low Low to medium High Very high
No. of different products Infinite variety Many, varied Few Very few
Production system Long-term project Discrete, job shops Repetitive, assembly lines Continuous, process industries
Equipment Varied General-purpose Special-purpose Highly automated

Primary type of work Specialized contracts Fabrication Assembly Mixing, treating, refining
Worker skills Experts, crafts persons Wide range of skills Limited range of skills Equipment monitors
Advantages Custom work, latest Flexibility, quality Efficiency, speed, low cost Highly efficiency, large capacity,
technology ease of control
Disadvantages Non-repetitive, small Costly, slow, difficult to Capital investment, lack of Difficult to change, far-reaching
customer base, manage responsiveness errors, limited variety
expensive
Examples Construction, Machine shops, print shops, Automobiles, televisions, Paint, chemicals, foodstuffs
shipbuilding, spacecraft bakeries, education computers, fast food

Process Selection With Break-Even Analysis (1 of 2)
• Study cost trade-offs based on • Revenue

demand volume o price at which an item is
• Cost sold
o Fixed costs • Total revenue
constant regardless of the o price times volume sold
number of units produced • Profit
o Variable costs o difference between total
• vary with the volume of units revenue and total cost
produced

Process Selection With Break-Even Analysis (2 of 2)
Total cost = fixed cost + total variable cost TR = TC

TC = cf + vcv
vp = cf + vcv
Total revenue = volume x price
vp − vcv = cf
TR = vp
Profit = total revenue - total cost v(p − cv) = cf
Z = TR – TC = vp - (cf + vcv) cf
v
cf = fixed cost p  cv
V = volume (i.e., number of units produced and sold)
cv = variable cost per unit
p = price per unit
Break-Even Analysis (2 of 2)
Fixed cost = cf = $2,000

Variable cost = cv = $50 per
unit
Price = p = $100 per unit
Break-even point is
cf 2000
v   40units
p  c v 100  50

Process Selection – Multiple Processes
Process A Process B
$2,000 + $50v = $10,000 +
$30v
$20v = $8,000
v = 400 units
Below or equal to 400,
choose A
Above or equal to 400,
choose B

Exercise 1 (group)
Texloy Manufacturing Company must select a process for its new
product, TX2, from among three different alternatives. The
following cost data have been gathered:
For what volume of demand would each process be desirable?

Solution:

Exercise 2 (group)
• Le Bistro, like most other resturants, makes more than one product and
would like to know its breakeven point in dollars. Information for Le Bistro
follows. Fixed costs are $3,000 per month.

Solution exercise 2
How many sandwich per

day should be sold to
get BEP?
How many drinks and

baked potato per day
should be sold to get
BEP?

Process Plans
• Set of documents that detail manufacturing

and service delivery specifications
o assembly charts
o operations sheets
o quality-control check-sheets

Assembly Chart

Operations Sheet for a Plastic Part

Process Analysis
• Systematic study of all aspects of a process

o make it faster
o more efficient
o less costly
o more responsive
• Basic tools
o process flowcharts
o diagrams
o maps

The Process of Building a
Flowchart
1. Determine objectives
2. Define process boundaries
3. Define units of flow
4. Choose type of chart
5. Observe process and collect
data
6. Map out process
7. Validate chart

Process Flowchart
of Apple Processing

Continuous Improvements and Breakthroughs

From Function to Process

Process
Innovation

Principles for Redesigning Processes
Remove waste, simplify, and consolidate similar activities
Link processes to create value
Let the swiftest and most capable enterprise execute the process
Flex process for any time, any place, any way
Capture information digitally at the source and propagate it through process
Provide visibility through fresher and richer information about process status
Fit process with sensors and feedback loops that can prompt action

Techniques for Generating Innovative Ideas
• Vary the entry point to a • Try inverse brainstorming
problem • what would increase cost
• in trying to untangle fishing • what would displease the
lines, it’s best to start from the customer
fish, not the poles • Chain forward as far as possible
• Draw analogies • if I solve this problem, what is
• a previous solution to an old the next problem
problem might work • Use attribute brainstorming
• Change your perspective • how would this process operate
• think like a customer if. . .
• our workers were mobile and
• bring in persons who have no flexible
knowledge of process • there were no monetary
constraints
• we had perfect knowledge

Financial Justification of Technology
Purchase cost Includes add-ons to make technology work
Operating Costs Visualize how the technology will be used
Annual Savings Better quality and efficiency save money
Revenue New technology can enhance revenue

Enhancement
Replacement When to upgrade to new technology depends on competitive environment
Analysis
Risk and Investment in new technology can be risky
Uncertainty
Piecemeal Make sure new and existing technology are compatible
Analysis
Components of a
Digital Transformation

Operations Management
Tenth Edition
Russell & Taylor
Chapter 7
Capacity and Facilities Design
Copyright ©2019 John Wiley & Sons, Inc.

Learning Objectives
• Evaluate different strategies for capacity expansion, and explain

the concepts of economies of scale, best operating level, and
capacity cushion
• Describe the advantages and disadvantages of different types of
layouts in both manufacturing and service settings
• Visualize workflow and utilize algorithmic problem solving to
design product and process layouts
• Create and evaluate hybrid layouts and hybrid solutions to
problems

Capacity Planning
Capacity • maximum capability to produce
Capacity • establishes overall level of productive resources for a

firm
planning
Capacity decisions affect

product lead times, customer • When to increase?
responsiveness, operating costs • How much to increase?
and a firm’s ability to compete.

Capacity Expansion Strategies

Capacity Expansion
• Capacity increase depends on:

o volume and certainty of anticipated demand
o strategic objectives
o costs of expansion and operation
Best operating level Capacity cushion

• % of capacity utilization • % of capacity held in
that minimizes unit reserve for unexpected
costs occurrences

Best Operating Level for a Hotel

Objectives of Facility Layout
 Minimize movement and material-handling costs
 Utilize space and labor efficiently
 Eliminate bottlenecks
 Facilitate communication and interaction
 Reduce manufacturing cycle time and customer service
time
 Facilitate entry, exit, and placement of material, products,
and people
 Incorporate safety and security measures
 Promote product and service quality
 Encourage proper maintenance activities
 Provide a visual control of activities and flexibility to adapt
to changing conditions
 Increase capacity

Case Study: Benihana
Benihana still cookin’: https://www.youtube.com/watch?v=3HT0VwicHV0
 Less skilled labour required

 Fast cycle time
 Eliminate needs for conventional
kitchen
 78% floor space is dining or bar
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 7-40
Basic Layouts
Process layouts
Product layouts
Fixed-position layouts

Process Layout Process layouts in manufacturing firms
require flexible material handling equipment
(such as forklifts) that can follow multiple
In Service paths, move in any direction, and carry
large loads of in-process goods
Women’s Shoes Housewares
lingerie
In Manufacturing
Women’s Cosmetics and Children’s
dresses jewelry department
Women’s Entry and display Men’s

sportswear area department
Process layouts: Group similar

activities together according to the
process or function they perform.

Product Layout Product layouts Arrange activities in
a line according to the sequence of
operations for a particular product or
service.

Comparison of Product and Process Layouts
Product Layout Process Layout
1. Description Sequential arrangement of activities Functional grouping of activities
2. Type of process Continuous, mass production, mainly Intermittent, job shop, batch production,
assembly mainly fabrication
3. Product Standardized, made to stock Varied, made to order
4. Demand Stable Fluctuating
5. Volume High Low
6. Equipment Special purpose General purpose
7. Workers Limited skills Varied skills
8. Inventory Low in-process, high finished goods High in-process, low finished goods
9. Storage space Small Large
10. Material handling Fixed path (conveyor) Variable path (forklift)
11. Aisles Narrow Wide
12. Scheduling Part of balancing Dynamic
13. Layout decision Line balancing Machine location
14. Goal Equalize work at each station Minimize material handling cost
15. Advantage Efficiency Flexibility

Fixed-Position Layouts
• Typical of projects
• Fragile, bulky, heavy items
• Equipment, workers & materials
brought to site
• Low equipment utilization
• Highly skilled labor
• Typically low fixed cost
• Often high variable costs

Designing Process Layouts
• Goal: minimize material handling costs

• Block Diagramming
o minimize nonadjacent loads
o use when quantitative data is available
• Relationship Diagramming
o based on location preference between areas
o use when quantitative data is not available

Block Diagramming
• Unit load
Steps
o quantity in which material
is normally moved • create load summary
• Nonadjacent load chart
o distance farther than the • calculate composite (two
next block way) movements
• develop trial layouts
minimizing number of
nonadjacent loads
Block Diagramming: Example (1 of 2)
Nonadjacent Loads
110 + 40 = 150

Block Diagramming: Example (2 of 2)
Nonadjacent Loads: 0

Relationship Diagramming (1 of 3)
• Schematic diagram that

uses weighted lines to
denote location
preference
• Muther’s grid
o format for displaying
manager preferences for
department locations

Exercise 3

Exercise 4
Aero Maintenance is a small aircraft engine maintenance facility located in Wichita, Kansas. Its new administrator,
Ann Daniel, decides to improve material flow in the facility, using the process layout method she studied at
Wichita State University. The current layout of Aero Maintenance’s eight departments is shown in Figure below .
The only physical restriction perceived by Daniel is the need to keep the entrance in its current location. All other
departments can be moved to a different work area (each 10 feet square) if layout analysis indicates a move would
be beneficial. First, Daniel analyzes records to determine the number of material movements among departments
in an average month. These data are shown in Figure 9.15 . Her objective, Daniel decides, is to lay out the
departments so as to minimize the total movement (distance traveled) of material in the facility.
Daniel assumes that adjacent departments, such as entrance (now in work area A) and receiving (now in work area B), have a
walking distance of 10 feet. Diagonal departments are also considered adjacent and assigned a distance of 10 feet. Nonadjacent
departments, such as the entrance and parts (now in area C) or the entrance and inspection (area G) are 20 feet apart, and
nonadjacent rooms, such as entrance and metallurgy (area D), are 30 feet apart. (Hence, 10 feet is considered 10 units of cost,
20 feet is 20 units of cost, and 30 feet is 30 units of cost). Given the above information, redesign Aero Maintenance’s
layout to improve its material flow efficiency.

Current Material Flow

Redesign Aero Maintenance’s layout to improve its material flow efficiency.

Relationship Diagramming (2 of 3)
Original layout
Revised layout

Designing Service Layouts
Must be both attractive and functional

Designing Product Layouts
• Objective
o Balance the assembly line
• Line balancing
o tries to equalize the amount of work at each workstation
• Precedence requirements
o physical restrictions on the order in which operations are performed
• Cycle time
o maximum amount of time a product is allowed to spend at each
workstation

Cycle Time Example (1 of 2)
Produce 120 units in an 8-hour day
production time available

Cd 
desired units of output
Cd = _____________________________
Cd =

Cycle Time Example (2 of 2)
Produce 120 units in an 8-hour day
production time available

Cd 
desired units of output
Cd 
 8 hours  60 minutes hour 
120units 
480
Cd   4 minutes
120

Flow Time vs Cycle Time
• Cycle time = max time spent at any station

• Flow time = time to complete all stations
Hid
d
Qui en
z #1

Efficiency of Line and Balance Delay
Efficiency Min# of workstations

j j
t i t i
E i 1 N i 1
nC a Cd
where j
ti
i
= completion time for element t
i 1
i
j = number of work elements

n = actual number of
workstations
Ca = actual cycle time
Cd = desired cycle time
Line Balancing Procedure
1. Draw and label a precedence diagram

2. Calculate desired cycle time required for line
3. Calculate theoretical minimum number of workstations
4. Group elements into workstations, recognizing cycle time and
precedence constraints
5. Calculate efficiency of line
6. Determine if theoretical minimum number of workstations or an
acceptable efficiency level has been reached. If not, go back to
step 4.

Line Balancing (1 of 7)
Real Fruit Snack Strips are made from a mixture of dried fruit, food
coloring, preservatives, and glucose. The mixture is pressed out into a
thin sheet, imprinted with various shapes, rolled, and packaged. The
precedence and time requirements for each step in the assembly
process are given below. To meet demand, Real Fruit needs to produce
6000 fruit strips every 40-hour week. Design an assembly line with the
fewest number of workstations that will achieve the production quota
without violating precedence constraints.
Work Element Precedence Time (Min)

A. Press out sheet of fruit – 0.1
B. Cut into strips A 0.2
C. Outline fun shapes A 0.4
D. Roll up and package B, C 0.3


Cd =
N=


40 hours  60 minutes hour 2400

Cd    0.4 minute
6,000 units 6000
0.1  0.2  0.3  0.4 1.0
N   2.5  3 workstations
0.4 0.4

Workstation Elemen Remaining Time Remaining Elements

t
1
2
3

Workstation Elemen Remaining Time Remaining Elements

t
1 A 0.3 B, C
B 0.1 C, D
2 C 0.0 D
3 D 0.1 none
Cd = 0.4
N = 2.5

Cd = 0.4
N = 2.5
E=

Cd = 0.4
N = 2.5
0.1  0.2  0.3  0.4 1.0

E   0.833  83.3%
3  0.4  1.2

Exercise 5

Individual Assignment #5
• Problem 6.1 (Page 249)

• Problem 7.16 (Page 286)

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Operations Management

Processes and Technology

Copyright ©2019 John Wiley & Sons, Inc.

• Evaluate strategic options in process planning, including whether

Copyright ©2019 John Wiley & Sons, Inc. 2

Copyright ©2019 John Wiley & Sons, Inc. 3

“Processes are planned, analyzed and redesigned as

Copyright ©2019 John Wiley & Sons, Inc. 4

Copyright ©2019 John Wiley & Sons, Inc. 5

Capacity • Does the company have the capacity?

Quality • Easier to control quality in your own factory

Speed • Shipping time can reduce savings

Reliability • Quality and timing are reliability measures

Expertise • Protect proprietary information

Copyright ©2019 John Wiley & Sons, Inc. 6

Copyright ©2019 John Wiley & Sons, Inc. 7

Copyright ©2019 John Wiley & Sons, Inc. 8

Copyright ©2019 John Wiley & Sons, Inc. 9

Equipment Varied General-purpose Special-purpose Highly automated

Copyright ©2019 John Wiley & Sons, Inc. 10

• Study cost trade-offs based on • Revenue

Copyright ©2019 John Wiley & Sons, Inc. 11

Total cost = fixed cost + total variable cost TR = TC

Fixed cost = cf = $2,000

Copyright ©2019 John Wiley & Sons, Inc. 13

Copyright ©2019 John Wiley & Sons, Inc. 14

For what volume of demand would each process be desirable?

Copyright ©2019 John Wiley & Sons, Inc. 15

Copyright ©2019 John Wiley & Sons, Inc. 16

Copyright ©2018 John Wiley & Sons, Inc. 18

How many sandwich per

How many drinks and

Copyright ©2018 John Wiley & Sons, Inc. 19

• Set of documents that detail manufacturing

Copyright ©2019 John Wiley & Sons, Inc. 20

Copyright ©2019 John Wiley & Sons, Inc. 21

Copyright ©2019 John Wiley & Sons, Inc. 22

• Systematic study of all aspects of a process

Copyright ©2019 John Wiley & Sons, Inc. 23

Copyright ©2019 John Wiley & Sons, Inc. 24

Copyright ©2019 John Wiley & Sons, Inc. 25

Copyright ©2019 John Wiley & Sons, Inc. 26

Copyright ©2019 John Wiley & Sons, Inc. 27

Copyright ©2019 John Wiley & Sons, Inc. 28

Link processes to create value

Flex process for any time, any place, any way

Capture information digitally at the source and propagate it through process

Copyright ©2019 John Wiley & Sons, Inc. 29

Copyright ©2019 John Wiley & Sons, Inc. 30

Operating Costs Visualize how the technology will be used

Annual Savings Better quality and efficiency save money

Revenue New technology can enhance revenue

Copyright ©2019 John Wiley & Sons, Inc. 32

Capacity and Facilities Design

Copyright ©2019 John Wiley & Sons, Inc.

• Evaluate different strategies for capacity expansion, and explain

Copyright ©2019 John Wiley & Sons, Inc. 34

Capacity • maximum capability to produce

Capacity • establishes overall level of productive resources for a

Capacity decisions affect

Copyright ©2019 John Wiley & Sons, Inc. 35

Copyright ©2019 John Wiley & Sons, Inc. 36

• Capacity increase depends on: