UNIT - II

SEMESTER - II

Designing the Operations : Strategic Level

Capacity
Work Systems

Location

Technology

Product Design

Process Design

Facility Layout

Product Design Strategies

Sell what the
market wants
Design a Product according to the market needs and then, try to adapt the processes

Sell only what

we can make
Design products according to the limits of our processes and then, find a market

Find the right balance : a simultaneous evolution of products and processes, taking into account the needs of the market and distinctive competencies.

A multi - functional approach

Marketing

Human Resources Finance Other Partners OM

Multi-functional Team

Suppliers Customers

Engineering R&D

Factors affects the Products and Processes In Constant Evolution

Design mistakes / Customer complaints Customer needs / Opportunities

Maturity of actual product line Competitive pressures Innovation strategy New technology Too much capacity Social and legal pressures

Product design
Design for manufacturing (DFM) Remanufacturing

Design for assembly (DFA) Design for recycling (DFR)

Design for disassembly (DFD) Robust design

Product Design
Design for manufacturing (DFM) is design based on minimizing the cost of production and/or time to market for a product, while maintaining an appropriate level of quality. The strategy in DFM involves minimizing the number of parts in a product and selecting the appropriate manufacturing process. Design For Assembly (DFA) involves making attachment directions and methods simpler. "Design for recycling is a method that implies the following requirements of a product: easy to dismantle, easy to obtain 'clean' material-fractions, that can be recycled (e.g. iron and copper should be easy to separate), easy to remove parts/components, that must be treated separately, use as few different materials as possible, mark the materials/polymers in order to sort them correct, avoid surface treatment in order to keep the materials 'clean'. Design for disassembly(DFD) involves designing a product to be disassembled for easier maintenance, repair, recovery and reuse of components/materials Remanufacturing is the process of disassembly and recovery at the module level and, eventually, at the component level. It requires the repair or replacement of worn out or obsolete components and modules Robust product design is a concept from the teachings of Dr. Genichi Taguchi, a Japanese quality guru. It is defined as reducing variation in a product without eliminating the causes of the variation. In other words, making the product or process insensitive to variation. This variation (sometimes called noise) can come from a variety of factors and can be classified into three main types: internal variation, external variation, and unit to unit variation. 6

Introduction

Product Life Cycle

research / product development process modification and enhancement supplier development

Growth
Product design begins to stabilize Effective forecasting of capacity becomes necessary Adding or enhancing capacity may be necessary

Maturity
Competitors now established High volume, innovative production may be needed Improved cost control, reduction in options, paring down of product line
Demand

Decline
Unless product makes a special contribution, must plan to terminate offering
Time

Product Life Cycle, Sales, Cost, and Profit

Cost of Development & Manufacture

Sales, Cost & Profit .

Sales Revenue

Profit
Loss
Growth
Cash flow Time

Introduction

Maturity

Decline

Idea Generation Sources

Companys own R&D department Customer complaints or suggestions Marketing research / Perceptual Maps Visual comparison of customer perceptions Suppliers Salespersons in the field Factory workers New technological developments Competitors / Reverse engineering Dismantling competitors product to improve your own product Benchmarking Comparing product/service against best-in-class

Types of products
Standardized product One size fits all Intended to satisfy majority of customers Produced in large quantities Planning is simple Make-to-stock Customized product Unique product for each customer Produced in small quantities Planning is difficult Make-to- Order

Product Design Process

Simplification reducing number of parts, assemblies, or options in a product Standardization

using commonly available and interchangeable parts Modularity

A prototype is an early sample or model built to test a concept or process or to act as a thing to be replicated or learned from.

combining standardized building blocks, or modules, to create unique finished products

Engineering is the discipline, art, skill, profession and technology of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes

Production Design Strategies

1. Simplification Design Reducing number of parts, assemblies, or options in a product

2. Standardization Design using commonly available and interchangeable parts 3. Modularity Design Modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. 4. Robust Design Design that results in products or services that can function over a broad range of conditions 5. Concurrent Engineering Concurrent engineering is bringing together of engineering design and manufacturing personnel early in the design phase
6. Computer-Aided Design Computer-Aided Design (CAD) is product design using computer graphics. increases productivity of designers, 3 to 10 times 7. Product Life Cycles

1. Simplification Design

(a) Original design

(b) Revised design

(c) Final design

Assembly using common fasteners

One-piece base & elimination of fasteners

4 parts 12 seconds to assemble

Design for push-and-snap assembly

2 parts 4 seconds to assemble
12

24 parts 84 seconds to assemble

2. Standardization
Advantages:
Fewer parts to deal with in inventory & manufacturing Reduced training costs and time
More routine purchasing, handling, and inspection procedures

Disadvantages
Difficult to develop a product that must satisfy the need of many different customers. Designs may be frozen with too many imperfections remaining.
High cost of design changes increases resistance to improvements. Decreased variety results in less consumer appeal.

Orders fillable from inventory

Opportunities for long production runs and automation Need for fewer parts justifies increased expenditures on perfecting designs and improving quality control procedures.

3. Modular Design
Modular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. It allows: easier diagnosis and remedy of failures easier repair and replacement simplification of manufacturing and assembly Lower training costs But higher replacement cost (as you have to replace the whole module)

Modular kitchen design accessories

Modular vs. Integral Design

Modular design
One-to-one mapping between functional elements and components Interfaces

Integral design
Complex mapping from functional elements to components

modular

integral

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4. Robust Design
Robust Design: Design that results in products or services that can function over a broad range of conditions

5. Concurrent Engineering : Principles

Design and Operations personnel are reunited, very early in the design phase, to simultaneously design products and processes. We include people from Operations, Purchasing, Marketing. Customers and suppliers are also invited to participate in certain stages of development.

Traditional
Approach

Idea

Design

Manufacturing

Concurrent Engineering

Idea / Design / Manufacturing

5. Concurrent Engineering : Principles

5. Concurrent Engineering : Principles

New Product

Mfg
Over the Wall Approach

Design

5. Concurrent Engineering : Principles

Concurrent Engineering : Objectives
Smoother transition between Engineering and Operations Shorten the new product introduction cycle Obtain a product that reflects the needs of the customers and our processing capabilities

Concurrent Engineering : Advantages

Operations personnel contribute early on to avoid trial and errors and adapt the product to our capabilities. New equipment can be ordered more quickly and reduce the time to market. Approach is based on problem resolution as opposed to conflict resolutions.

6. Process Technologies
Automated Material Handling: Automated guided vehicles (AGV) Automated storage & retrieval systems (AS/RS)
Computer Aided Design(CAD)

Automation

Robotics & NumericallyControlled (NC) equipment

Robotics
Automated material handling

Flexible Manufacturing Systems (FMS)

Computer-Integrated Manufacturing (CIM)

Automation:
Machinery that has sensing and control devices that enables it to operate

Fixed automation: Low production cost and high volume but with minimal variety and high changes cost Assembly line
Programmable automation: Economically producing a wide variety of low volume products in small batches Computer-Aided Design and Manufacturing systems (CAD/CAM) Numerically controlled (NC) machines / CNC Industrial Robots (ARMS)

Flexible automation: Require less changeover time and allow continuous operation of equipment and product variety Manufacturing cell Flexible manufacturing systems: Use of high automation to achieve repetitive process efficiency with job shop process Automated retrieval and storage Automated guided vehicles Computer-integrated manufacturing (CIM)

Flexible Manufacturing System

Group of machines that include supervisory computer control, automatic material handling, robots and other processing equipment Advantage: reduce labor costs and more consistent quality lower capital investment and higher flexibility than hard automation relative quick changeover time Disadvantage used for a family of products and require longer planning and development times

Computer-integrated manufacturing
Use integrating computer system to link a broad range of manufacturing activities, including engineering design, purchasing, order processing and production planning and control Advantage: rapid response to customer order and product change, reduce direct labor cost, high quality

Design for Environment

Design for environment designing a product from material that can be recycled design from recycled material design for ease of repair minimize packaging minimize material and energy used during manufacture, consumption and disposal

Extended producer responsibility holds companies responsible for their product even after its
useful life

Mass Customization
Mass Customisation is the customisation and personalisation of products and services for individual customers at a mass production price A strategy of producing standardized goods or services, but incorporating some degree of customization

Example : Nike ID

Service Design
Services are intangible Service output is variable Services tend to be decentralized and dispersed Services are consumed more often than products

Services have higher customer contact Services are perishable Service inseparable from delivery

Services can be easily emulated

High v. Low Contact Services

Design Decision
Quality Control

High-Contact Service
More variable since customer is involved in process; customer expectations and perceptions of quality may differ; customer present when defects occur
Excess capacity required to handle peaks in demand

Low-Contact Service
Measured against established standards; testing and rework possible to correct defects
Planned for average demand

Capacity

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High v. Low Contact Services (cont.)

Design Decision
Worker skills

High-Contact Service
Must be able to interact well with customers and use judgment in decision making Must accommodate customer schedule

Low-Contact Service
Technical skills

Scheduling

Customer concerned only with completion date

Service process

Mostly front-room activities; service may change during delivery in response to customer Varies with customer; includes environment as well as actual service

Mostly back-room activities; planned and executed with minimal interference Fixed, less extensive

Service package

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Process Design
Process Selection and System Design
Capacity Planning

Forecasting

Facilities and Equipment

Product and Service Design

Layout

Process Selection Technological Change Work Design

External Environment (political,

economical, social, technological and ecological)
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Questions Before Selecting A Process

Variety of products and services How much Flexibility of the process; volume, mix, technology and design What type and degree Volume Expected output

Batch

Job Shop

Continuous

Repetitive

Process Design
Caracteristics of processes

Process Selection: Process Types

1. Projects Non-routine jobs. Ex: Construction of a Building 2. Job Shops Small runs Ex: tool and die shop, 3. Batch production systems process many different jobs through the system in groups or batches Eg: paint production 4. Mass production (repetitive) produces large volumes of a standard product for a mass market Ex: Cars, cafeteria 5. Continuous production used for very-high volume commodity products Ex: steel mill, chemical plants

Small lot sizes Setup time reduction

Manufacturing cells Limited work in process Quality improvement Production flexibility

Little inventory storage Process Selection (From the following criteria)

1. Quantity to be produced (Lot size) 2. Variety of products 3. Desired flexibility

Processes in Services - Examples:

Projects: (Hospital) Batch (Education) Continuous (Cable companies)

Continuum of Process Types

P roject
1. Produced one at a time, from beginning to end. Crafts Construction projects Consultations

Job & B atch P roces s i ng

2. Job Shop : Small Quantity produced highly differentiated products

3. Batch : Moderate Quantity produced of similar goods or services.

Ma ss P roduct ion a nd Cont i nuous P roducti on

4. Mass production : (repetitive, assembly line) Production in large quantities of very similar products

5. Continuous : Non-stop production of a highly standardized product

Product-Process Matrix
Low Volume
High Variety

High Volume
High Cost

Project Job Shop

Batch

Project process

Job process
Batch process Line process

Low Variety

Line Continuous
High Cost

Continuous process

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Types of Processes
PROJECT
Type of product
Unique

Job Shop
Made-to-order
(customized)

BATCH
Made-to-order / or to stock

MASS
Made-to-stock
(standardized)

Continuous

Commodity

Type of customer Product demand Demand volume No. of different products Production system

One-at-a-time

Few individual
customers Fluctuates

Few individual
customers

Mass

Mass
market

market

Infrequent

Fluctuates

Stable

Very stable

Very low

Low

Low to medium

High

Very high

Infinite variety Long-term project

Many, varied

Many, varied Discrete / batches

Few

Very few
Continuous, process industries
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Discrete, job shops

Repetitive, assembly lines

Types of Processes (cont.)

Project Job shop BATCH
Equipment
Generalpurpose Generalpurpose

MASS
Specialpurpose

Continuous

Varied

Highly automated

Primary type of work

Specialized contracts

Fabrication

Fabrication

Assembly

Mixing, treating, refining

Worker skills

Experts, craftspersons

Wide range of skills

Significant range of skills

Limited range of skills

Equipment monitors

36

Types of Processes (cont.)

Project
Advantages
Custom work, latest technology

Job Shop
Flexibility, quality

BATCH
Flexibility, quality

MASS
Efficiency, speed, low cost

Continuous

Highly efficient, large capacity, ease of control Difficult to change, far-reaching errors, limited variety

Disadvantages

Non-repetitive, small customer base, expensive

Costly, slow, difficult to manage

Costly, slow, difficult to manage

Capital investment; lack of responsiveness

Automobiles, televisions, computers, fast food

Examples

Construction, shipbuilding, spacecraft

Machine shops, print shops

Bakeries, education

Paint, chemicals, foodstuffs

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Basic Process Selection

38

(Sample Capacity Planning)

Capacity/Facility Planning
How much and what kind of physical equipment is needed to support production goals? Issues: Basic Capacity Calculations: stand-alone capacities and congestion effects (e.g., blocking) Capacity Strategy: lead or follow demand Make-or-Buy: vendoring, long-term identity Flexibility: with regard to product, volume, mix Speed: scalability, learning curves

Capacity Planning
Capacity is the upper limit or ceiling on the load that an operating unit can handle. Capacity also includes Equipment Space Employee skills The basic questions in capacity handling are: Capacity What kind of capacity is needed? How much is needed? Design capacity When is it needed? maximum output rate or service capacity an operation, process, or facility is designed for Effective capacity Design capacity minus allowances such as personal time, maintenance, and scrap Actual output rate of output actually achieved-cannot exceed effective capacity.

Importance of Capacity Decisions

1. 2. 3. 4. 5. 6. 7. 8. Impacts ability to meet future demands Affects operating costs Major determinant of initial costs Involves long-term commitment Affects competitiveness Affects ease of management Globalization adds complexity Impacts long range planning

Efficiency and Utilization

Actual output Efficiency = Effective capacity

Actual output

Utilization = Design capacity

Both measures expressed as percentages

Efficiency/Utilization Example
Design capacity = 50 trucks/day Effective capacity = 40 trucks/day Actual output = 36 units/day

Actual output

36 units/day
= 90%

Efficiency =

Effective capacity Actual output Design capacity =

40 units/ day 36 units/day 50 units/day

Utilization =

= 72%

Operations Management Planning

MRP (Material Requirement Planning) A computer-based production management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place (for a single firm)
ERP (Enterprise Resource Planning) A computer application that enables multiple divisions or firms to manage all of their operations (finance, requirements planning, human resources and order fulfillment) on the basis of a single, integrated set of corporate data ERP Programs help to bring operations management to the Internet

Determinants of Effective Capacity

Facilities Product and service factors Process factors Human factors Policy factors Operational factors Supply chain factors External factors

Steps for Capacity Planning

Estimate future capacity requirements Evaluate existing capacity Identify alternatives Conduct financial analysis Assess key qualitative issues Select one alternative Implement alternative chosen Monitor results

Forecasting Capacity Requirements

Long-term vs. short-term capacity needs Long-term relates to overall level of capacity such as facility size, trends, and cycles Short-term relates to variations from seasonal, random, and irregular fluctuations in demand

Strategy Formulation
Capacity strategy for long-term demand Demand patterns Growth rate and variability Facilities Cost of building and operating Technological changes Rate and direction of technology changes Behavior of competitors Availability of capital and other inputs Decision Tree

Key Decisions of Capacity Planning

1. Amount of capacity needed * Capacity cushion (100% Utilization) 2. Timing of changes 3. Need to maintain balance 4. Extent of flexibility of facilities Capacity cushion extra demand intended to offset uncertainty

Product Strategies and Process Choice

Process Selection Facility Layout

48

Planning Service Capacity

Need to be near customers Capacity and location are closely tied Inability to store services Capacity must be matched with timing of demand Degree of volatility of demand Peak demand periods

Developing Capacity Alternatives

1. Design flexibility into systems 2. Take stage of life cycle into account 3. Take a big picture approach to capacity changes 4. Prepare to deal with capacity chunks 5. Attempt to smooth out capacity requirements 6. Identify the optimal operating level

In-House or Outsourcing
Outsource: obtain a good or service from an external provider Available capacity Expertise Quality considerations Nature of demand Cost Risk

Bottleneck Operation

Machine #1
Machine #2

10/hr

Bottleneck operation: An operation in a sequence of operations whose capacity is lower than that of the other operations

10/hr

Bottleneck Operation
10/hr

30/hr

Machine #3

Machine #4

10/hr

50

Bottleneck Operation
Bottleneck

Operation 1 20/hr.

Operation 2 10/hr.

Operation 3 15/hr.

10/hr.

Maximum output rate limited by bottleneck

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Economies of Scale
Economies of scale If the output rate is less than the optimal level, increasing output rate results in decreasing average unit costs Diseconomies of scale If the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs

Optimal Rate of Output

Production units have an optimal rate of output for minimal cost.
Average cost per unit

Minimum average cost per unit

Minimum cost

Rate of output
53

Cost-Volume Relationships

Amount ($)

Fixed cost (FC) 0

Q (volume in units)
54

Cost-Volume Relationships

Amount ($) 0

Q (volume in units)
55

Cost-Volume Relationships

Amount ($) 0

BEP units Q (volume in units)

56

Break-Even Analysis

57

Break-Even Problem with Step Fixed Costs

3 machines 2 machines
1 machine Quantity

Step fixed costs and variable costs.

58

Evaluating Alternatives

Cost-volume analysis Break-even point Financial analysis Cash flow Present value Decision theory Waiting-line analysis

Assumptions of Cost-Volume Analysis

1. 2. 3. One product is involved Everything produced can be sold Variable cost per unit is the same regardless of volume Fixed costs do not change with volume Revenue per unit constant with volume Revenue per unit exceeds variable cost per unit

4. 5. 6.

Financial Analysis

Cash Flow - the difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes. Present Value - the sum, in current value, of all future cash flows of an investment proposal.

Evaluating Alternatives
Decision Theory
1. 2. Helpful tool for financial comparison of alternatives under conditions of risk or uncertainty Suited to capacity decisions

Waiting-Line Analysis
Useful for designing or modifying service systems Waiting-lines occur across a wide variety of service systems Waiting-lines are caused by bottlenecks in the process Helps managers plan capacity level that will be cost-effective by balancing the cost of having customers wait in line with the cost of additional capacity

The Location Decision

Making Location Decisions

Analysis should follow 3 step process: Step 1: Identify dominant location factors Step 2: Develop location alternatives Step 3: Evaluate locations alternatives Procedures for evaluation location alternatives include 1. Factor rating method 2. Load-distance model 3. Center of gravity approach 4. Break-even analysis 5. Transportation method

1. Factor Rating Example

2. Load Distance Method

The load-distance method enables a location planner to evaluate two or potential candidates. Choosing the location with best load-distance among these will satisfy the objective of identifying an appropriate location for the proposed facility. Distance is measured using an appropriate location for the proposed facility. Distance is measured using a Cartesian measure. Let us use the following notations for the load-distance method: The number existing demand (or supply ) points in the grip map= n Index used for existing demand ( or supply ) = 1 Coordinates of existing demand ( or supply ) points I in the grid map=( Xj, Yj) The distance measure for the Cartesian coordinates between an existing demand ( or supply) points and a candidate facility (Dij) is given by: Dij = sqrt((xi Xj) 2 + (yi Yj)2)

3. The Center of Gravity Approach

This approach requires that the analyst find the center of gravity of the geographic area being considered
Computing the Center of Gravity for Matrix Manufacturing
Coordinates Load

Location
Cleveland Columbus Cincinnati Dayton Total

(X,Y) (11,22) (10,7) (4,1) (3,6)

(li) 15 10 12 4 41

lixi 165 165 165 165 325

liyi 330 70 12 24 436

Computing the Center of Gravity for Matrix Manufacturing

Is there another possible warehouse location closer to the C.G. that should be considered?? Why?

Xc.g.

l X 325 7.9 ; Y l 41
i i i

c.g.

lY l
i i

436 10.6 41

4. Break-Even Analysis
Break-even analysis computes the amount of goods required to be sold to just cover costs Break-even analysis includes fixed and variable costs

Break-even analysis can be used for location analysis especially when the costs of each location are known Step 1: For each location, determine the fixed and variable costs Step 2: Plot the total costs for each location on one graph Step 3: Identify ranges of output for which each location has the lowest total cost Step 4: Solve algebraically for the break-even point over the identified ranges Remember the break even equations used for calculation total cost of each location and for calculating the breakeven quantity Q.

Total cost = F + cQ
Total revenue = pQ Break-even is where Total Revenue = Total Cost

Q = F/(p-c)
Q = break-even quantity p = price/unit c = variable cost/unit F = fixed cost

5. The Transportation Method

The transportation method of linear programming can be used to solve specific location problems It could be used to evaluate the cost impact of adding potential location sites to the network of existing facilities It could also be used to evaluate adding multiple new sites or completely redesigning the network There is a unit transportation cost of shipping material from every supply point to every demand point, by an optimal choice of supply points, the total cost of transportation is minimized.

6. Qualitative factor analysis method:

If economic criteria are not sufficiently influential to decide the location alternative, a system of weighting the criteria might be useful in making a plant location decision. This approach is referred to as Qualitative Factor Analysis. The steps involved are: Develop a list of relevant factors. Assign a weight to each factor to indicate its relative importance. Score each potential location according to the designated scale and multiply the scores by the weights to arrive at the weighted scores.

How Manufacturers Have Become More Effective

Focus more on customers Maintain close relationships Continuous improvement Focus on quality Save costs through site selection Rely on the Internet to unite partners New production techniques Looking overseas to get new ideas for production and innovation in providing goods and services