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USMA DSE EM420: Processes and Technology

Ch 6: Intro to Op and SCM by Russell and Taylor

Libby Schott

on 1 April 2015

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Transcript of USMA DSE EM420: Processes and Technology

Ch 6: Processes and Technology
The Process
Process Selection - Breakeven Analysis
Study cost trade-offs based on demand volume
Processes and Technology
Process Innovation
Redesigning Processes
Process Analysis
Systematic study of all aspects of a process
Assembly Chart

Information Technology
Manufacturing Technology
Product Technology
Standard for exchange of product model data (STEP)
Set standards for communication among different CAD vendors; translates CAD data into requirements for automated inspection and manufacture
Computer-aided design and manufacture (CAD/CAM)
Electronic link between automated design (CAD) and automated manufacture (CAM)
Computer aided process (CAPP)
Generates process plans based on database of similar requirements
Electronic purchasing of items from e-marketplaces, auctions, or company websites
Process Technology
Computer-aided design (CAD)
Creates and communicates designs electronically
Group technology (GT)
Classifies designs into families for easy retrieval and modification
Computer-aided engineering (CAE)
Tests functionality of CAD designs electronically
Collaborative product commerce (CPC)
Facilitates electronic communication and exchange of information among designers and suppliers
Product data management (PDM)
Keeps track of design specs and revisions for the life of the product
Product life cycle management (PLM)
Integrates decisions of those involved in product development, manufacturing, sales, customer service, recycling, and disposal
Product configuration
Defines products “configured” by customers who have selected among various options, usually from a Web site
Business – to –Business (B2B)
E-transactions between businesses usually via the Internet
Business – to –Consumer (B2C)
E-transactions between businesses and their customers usually via the Internet
Bar Codes
Series of vertical lines printed on packages that identify item and other information
Radio Frequency Identification tags (RFID)
Integrated circuit embedded in a tag; can send and receive information; a “twenty-first century bar code” with read/write capabilities
Electronic data interchange (EDI)
Computer-to-computer exchange of business documents over a proprietary network; very expensive and inflexible
Extensible markup language (XML)
A markup language that facilitates computer–to–computer communication over the Internet by tagging data before its is sent
Enterprise resource planning (ERP)
Software for managing key functions of an enterprise, including sales, marketing, finance, accounting, production, materials management & human resources
Supply chain management (SCM)
Software to manage flow of goods and information among a network of suppliers, manufacturers and distributors
Customer relationship management (CRM)
Software to manage interactions with customers; compiling and analyzing customer data
Decision support systems (DSS)
Information system to help managers make decisions; includes quantitative modeling components and interactive components for what-if analysis
Expert systems (ES)
A computer system that uses the knowledge of experts to diagnose or solve a problem
Artificial intelligence (AI)
Field of study replicating elements of human thought and natural processes in software; includes expert systems, genetic algorithms, neural networks, and fuzzy logic
A global information system of computer networks that facilitates communication and data transfer
Communication networks internal to an organization; can also be password (i.e., firewall) protected sites on the Internet
Intranets connected to the Internet for shared access with select suppliers, customers, and trading partners
Advanced Components of Manufacturing
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 Enhancement
New technology can enhance revenue
Replacement Analysis
When to upgrade to new technology depends on competitive environment
Risk and Uncertainty
It is risky to invest and risky to not
Piecemeal Analysis
Make sure new and existing technology are compatible
Financial Justification of Technology
Vary the entry point to a problem
in trying to untangle fishing lines, it’s best to start from the fish, not the poles
Draw analogies
a previous solution to an old problem might work
Change your perspective
think like a customer
bring in persons who have no knowledge of process
Try inverse brainstorming
what would increase cost
what would displease the customer
Chain forward as far as possible
if I solve this problem, what is the next problem
Use attribute brainstorming
how would this process operate if. . .
our workers were mobile and flexible
there were no monetary constraints
we had perfect knowledge
Techniques for Generating
Innovative Ideas
Provide visibility through fresher and richer information about process status
Fit process with sensors and feedback loops that can prompt action
Add analytic capabilities to the process
Connect, collect, and create knowledge around process through all who touch it
Personalize process with preferences and habits of participants
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
Principles for Redesigning Processes

Simple Value Chain Flowchart

Process Map or Swimlane Chart of Restaurant Service

Process Flowchart of Apple Processing

Look at manufacture of product or delivery of service from broad perspective
nonproductive activities (inspection, transportation, delay, storage)
productive activities (operations)
Flow Charts in Microsoft Visio

Determine objectives
Define process boundaries
Define units of flow
Choose type of chart
Observe process and collect data
Map out process
Validate chart

Building a Flowchart
Basic tools
process flowcharts
Set of documents that detail manufacturing and service delivery specifications
assembly charts
operations sheets
quality-control check-sheets
Process Plans

Process Selection in Excel

Multiple Processes – Indifference Point
Total revenue: price times volume sold
Profit: difference between total revenue and total cost

Fixed costs
constant regardless of the number of units produced
Variable costs
vary with the volume of units produced

Sourcing Continuum
Is it cheaper to make or buy the item
Does the company have the capacity
Easier to control quality in your own factory
Shipping time can reduce savings
Quality and timing are reliability measures
Protect proprietary information

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

Process Strategy
Group of related tasks with specific inputs & outputs
Process design
tasks to be done & how they are coordinated among functions, people, & organizations
Process strategy
an organization’s overall approach for physically producing goods and services
Process planning
converts designs into workable instructions for manufacture or delivery
Process Planning
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

Learning Objectives

Computer numerically control (CNC)
Machines controlled by software to perform a range of operations with the help of automated tool changers; collects processing information and quality data
Fixed-path material handling; move items along a belt or chain; “reads” package labels and diverts them to correct destination
Automatic guided vehicle (AGV)
Driverless trucks that move material along a specified path; directed by wire or tape embedded in floor or by radio frequencies
Automated storage and retrieval system (ASRS)
An automated warehouse; items placed in a storage system and retrieved by fast-moving stacker cranes; controlled by computer
Flexible manufacturing system (FMS)
A collection of CNC machines connected by an automated material handling system to produce a wide variety of parts
Programmable manipulators that can perform repetitive tasks; more consistent than workers but less flexible
Process Control
Continuous monitoring of automated equipment; makes real-time decisions on ongoing operation, maintenance, and quality
Computer-integrated manufacturing (CIM)
Automated manufacturing systems integrated through computer technology; also called e-manufacturing
Additive Manufacturing
Building up a product layer-by-layer from digital instructions, 3-D printing

Flowcharts in Excel
Visio Flowcharts

Total cost = fixed cost + total variable cost
TC = cf + V*cv
Total revenue = volume x price
TR = V*p
Profit = total revenue - total cost
Z = TR – TC = V*p - (cf + V*cv)

cf = fixed cost
V = volume (i.e., number of units produced and sold)
cv = variable cost per unit
p = price per unit

Oper. No. Description Dept. Machine/Tools Time
10 Pour in plastic bits 041 Injection molding 2 min
20 Insert mold 041 #076 2 min
30 Check settings 041 113, 67, 650 20 min
& start machine
40 Collect parts & lay flat 051 Plastics finishing 10 min
50 Remove & clean mold 042 Parts washer 15 min
60 Break off rough edges 051 Plastics finishing 10 min

Operations Sheet for Plastic Part
Total redesign of a process for breakthrough improvements
one-of-a-kind production of a product to customer order
used for very-high volume commodity products
produce large volumes of a standard product for a mass market
process many different jobs at the same time in groups or batches
Product-Process Matrix
Process Selection
Check Sheets
price at which an item is sold
Solving for Breakeven Point
Total cost = Total revenue
cf + V*cv = V*p

Solving for V:
V = cf / (p - cv)
An Example
Travis and Jeff own Up Right Paddlers, a new startup company with the goal of designing, making, and marketing stand-up paddle boards for streams and rivers. A new fitness craze, stand-up paddle boards are similar to surfboards in appearance, but are used by individuals to navigate down rivers in an upright position with a single long pole (or paddle), instead of sitting in tubes or rafts and floating down. The boards are constructed from heavy-duty raft material that is inflatable, rather than the fiberglass material used in surfboards. Unlike surfboards that market for $500 to $1000 each, paddle boards are typically sold for between $100 and $400. Since Travis and Jeff are just starting out and the demand for paddle boards on the East Coast has not been firmly established, they anticipate selling their product for $100 each. Travis estimates the fixed cost for equipment and space will be $20,000, and the material and labor costs will run $50 per unit. What volume of demand will be necessary for Travis and Jeff to break even on their new venture?
The solution is shown graphically in the figure. The x-axis represents production or demand volume, and the y-axis represents dollars of revenue, cost, or profit. The total revenue line extends from the origin, with a slope equal to the unit price of a board. The total cost line intersects the y-axis at a level corresponding to the fixed cost of the process and has a slope equal to the per-unit variable cost. The intersection of these two lines is the breakeven point. If demand is less than the breakeven point, the company will operate at a loss. But if demand exceeds the breakeven point, the company will be profitable. The company needs to sell more than 40 paddle boards to make a profit.
Jeff, the more optimistic of the two owners of UpRight Paddlers, believes that demand for paddle boards will exceed the breakeven point of 40 units calculated in Example 6.1. He proposes spending $10,000 in fixed costs to buy more automated equipment that would reduce the materials and labor cost to $30 per board. The boards would sell for $100, regardless of which manufacturing process is chosen. Compare the two processes and determine for what level of demand each process would be preferred. Label Travis's proposal as Process A and Jeff's proposal as Process B.
1. Formulate a total cost equation for each process considered.
2. Calculate the
point of indifference
between two alternative processes (i.e., the volume at which the total cost of manufacturing is the same for the two processes) by setting their total cost equations equal to each other and solving for demand volume.
3. Above the point of indifference, choose the alternative with the lowest variable cost.
4. Below the point of indifference, choose the alternative with the lowest fixed cost.
Can apply Breakeven Analysis
to compare Processes
If demand is less than or equal to 400 boards, the alternative with the lowest fixed cost, process A, should be chosen. If demand is greater than or equal to 400 boards, the alternative with the lowest variable cost, process B, is preferred. (Because the boards will be sold for $100 apiece regardless of which process is used to manufacture them, no revenue line is needed.)
make it faster
more efficient
less costly
more responsive
Flowchart Symbols
Generating Innovative Ideas
High Level Process Map
© 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e
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