Manufacturing Process

What are the characteristics of a manufacturing process? How are manufacturing processes organized and evaluated? 500word response

Below is the chapter and citation.

Jacobs, F.R. & Chase, R.B. (2014). Operations and supply chain management (14th ed). New York, NY: McGraw-Hill

Understand what a manufacturing process is.

In this chapter we consider processes used to make tangible goods. Manufacturing processes are used to make everything that we buy ranging from the apartment building in which we live to the ink pens with which we write. The high-level view of what is required to make something can be divided into three simple steps. The first step is sourcing the parts we need, followed by actually making the item, and then sending the item to the customer. As discussed in Chapter 1, a supply chain view of this may involve a complex series of players where subcontractors feed suppliers, suppliers feed manufacturing plants, manufacturing plants feed warehouses, and finally warehouses feed retailers. Depending on the item being produced, the supply chain can be very long with subcontractors and manufacturing plants spread out over the globe (such as an automobile or computer manufacturer) or short where parts are sourced and the product is made locally (such as a house builder).

Strategy

Consider Exhibit 7.1, which illustrates the Source step where parts are procured from one or more suppliers, the Make step where manufacturing takes place, and the Deliver step where the product is shipped to the customer. Depending on the strategy of the firm, the capabilities of manufacturing, and the needs of customers, these activities are organized to minimize cost while meeting the competitive priorities necessary to attract customer orders. For example, in the case of consumer products such as televisions or clothes, customers normally want these products “on-demand” for quick delivery from a local department store. As a manufacturer of these products, we build them ahead of time in anticipation of demand and ship them to the retail stores where they are carried in inventory until they are sold. At the other end of the spectrum are custom products, such as military airplanes, that are ordered with very specific uses in mind and that need to be designed and then built to the design. In the case of an airplane, the time needed to respond to a customer order, called the lead time, could easily be years compared to only a few minutes for the television.

Lead time

The time needed to respond to a customer order.

A key concept in manufacturing processes is the customer order decoupling point which determines where inventory is positioned to allow processes or entities in the supply chain to operate independently. For example, if a product is stocked at a retailer, the customer pulls

Customer order decoupling point

Where inventory is positioned in the supply chain.

exhibit 7.1 Positioning Inventory in the Supply Chain

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the item from the shelf and the manufacturer never sees a customer order. Inventory acts as a buffer to separate the customer from the manufacturing process. Selection of decoupling points is a strategic decision that determines customer lead times and can greatly impact inventory investment. The closer this point is to the customer, the quicker the customer can be served. Typically, there is a trade-off where quicker response to customer demand comes at the expense of greater inventory investment because finished goods inventory is more expensive than raw material inventory. An item in finished goods inventory typically contains all the raw materials needed to produce the item. So from a cost view it includes the cost of the material plus the cost to fabricate the finished item.

Make-to-stock Assemble-to-order Make-to-order Engineer-to-order

These terms describe how customers are served by a firm.

Positioning of the customer order decoupling point is important to understanding manufacturing environments. Firms that serve customers from finished goods inventory are known as make-to-stock firms. Those that combine a number of preassembled modules to meet a customer’s specifications are called assemble-to-order firms. Those that make the customer’s product from raw materials, parts, and components are make-to-order firms. An engineer-to-order firm will work with the customer to design the product, and then make it from purchased materials, parts, and components. Of course, many firms serve a combination of these environments and a few will have all simultaneously. Depending on the environment and the location of the customer order decoupling point, one would expect inventory concentrated in finished goods, work-in-process (this is inventory in the manufacturing process), manufacturing raw material, or at the supplier as shown in Exhibit 7.1.

Lean manufacturing

To achieve high customer service with minimum levels of inventory investment.

The essential issue in satisfying customers in the make-to-stock environment is to balance the level of finished inventory against the level of service to the customer. Examples of products produced by these firms include televisions, clothing, and packaged food products. If unlimited inventory were possible and free, the task would be trivial. Unfortunately, that is not the case. Providing more inventory increases costs, so a trade-off between the costs of the inventory and the level of customer service must be made. The trade-off can be improved by better estimates (or knowledge) of customer demand, by more rapid transportation alternatives, by speedier production, and by more flexible manufacturing. Many make-to-stock firms invest in lean manufacturing programs in order to achieve higher service levels for a given inventory investment. Regardless of the trade-offs involved, the focus in the make-to-stock environment is on providing finished goods where and when the customers want them.

In the assemble-to-order environment, a primary task is to define a customer’s order in terms of alternative components and options since it is these components that are carried in inventory. A good example is the way Dell Computer makes desktop computers. The number of combinations that can be made may be nearly infinite (although some might not be feasible). One of the capabilities required for success in the assemble-to-order environment is an engineering design that enables as much flexibility as possible in combining components, options, and modules into finished products. Similar to make-to-stock, many assemble-to-order companies have applied lean manufacturing principles to dramatically decrease the time required to assemble finished goods. By doing so they are delivering customers’ orders so quickly that they appear to be make-to-stock firms from the perspective of the customer.

LATASHA BELL, A DELL INC. EMPLOYEE, ASSEMBLES A DELL OPTIPLEX DESKTOP COMPUTER AT THE COMPANY’S FACILITY IN LEBANON, TENNESSEE, U.S.

When assembling-to-order there are significant advantages from moving the customer order decoupling point from finished goods to components. The number of finished products is usually substantially greater than the number of components that are combined to produce the finished product. Consider, for example, a computer for which there are four processor alternatives, three hard disk drive choices, four DVD alternatives, two speaker systems, and four monitors available. If all combinations of these 17 components are valid, they can be combined into a total of 384 different final configurations. This can be calculated as follows:

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If N_i is the number of alternatives for component i, the total number of combinations of n components (given all are viable) is:

$\begin{array}{c}\begin{array}{c}\text{Total number of combinations}=N_1\times N_2\times \cdots N_n\\ \text{Or 384=4×3×4×2×4 for this example.}\end{array}\left[7.1\right]\end{array}$

It is much easier to manage and forecast the demand for 17 components than for 384 computers.

In the make-to-order and engineer-to-order environments the customer order decoupling point could be in either raw materials at the manufacturing site or possibly even with the supplier inventory. Boeing’s process for making commercial aircraft is an example of make-to-order. The need for engineering resources in the engineer-to-order case is somewhat different than make-to-order since engineering determines what materials will be required and what steps will be required in manufacturing. Depending on how similar the products are it might not even be possible to pre-order parts. Rather than inventory, the emphasis in these environments may be more toward managing capacity of critical resources such as engineering and construction crews. Lockheed Martin’s Satellite division uses an engineer-to-order strategy.

HOW MANUFACTURING PROCESSES ARE ORGANIZED

LO7–2

Explain how manufacturing processes are organized.

Process selection refers to the strategic decision of selecting which kind of production processes to use to produce a product or provide a service. For example, in the case of Toshiba notebook computers, if the volume is very low, we may just have a worker manually assemble each computer by hand. In contrast, if the volume is higher, setting up an assembly line is appropriate.

The formats by which a facility is arranged are defined by the general pattern of work flow; there are five basic structures (project, workcenter, manufacturing cell, assembly line, and continuous process).

Project layout

For large or massive products produced in a specific location, labor, material, and equipment are moved to the product rather than vice versa.

In a project layout, the product (by virtue of its bulk or weight) remains in a fixed location. Manufacturing equipment is moved to the product rather than vice versa. Construction sites (houses and bridges) and movie shooting lots are examples of this format. Items produced with this type of layout are typically managed using the project management techniques described in Chapter 4. Areas on the site will be designated for various purposes, such as material staging, subassembly construction, site access for heavy equipment, and a management area.

In developing a project layout, visualize the product as the hub of a wheel, with materials and equipment arranged concentrically around the production point in the order of use and movement difficulty. Thus, in building commercial aircraft, for example, rivets that are used throughout construction would be placed close to or in the fuselage; heavy engine parts, which must travel to the fuselage only once, would be placed at a more distant location; and cranes would be set up close to the fuselage because of their constant use.

Workcenter

A process with great flexibility to produce a variety of products, typically at lower volume levels.

PROJECT LAYOUT

In a project layout, a high degree of task ordering is common. To the extent that this task ordering, or precedence, determines production stages, a project layout may be developed by arranging materials according to their assembly priority. This procedure would be expected in making a layout for a large machine tool, such as a stamping machine, where manufacturing follows a rigid sequence; assembly is performed from the ground up, with parts being added to the base in almost a building-block fashion.

A workcenter layout, sometimes referred to as a job shop, is where similar equipment or functions

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are grouped together, such as all drilling machines in one area and all stamping machines in another. A part being worked on travels, according to the established sequence of operations, from workcenter to workcenter, where the proper machines are located for each operation.

WORKCENTERS

The most common approach to developing this type of layout is to arrange workcenters in a way that optimizes the movement of material. A workcenter sometimes is referred to as a department and is focused on a particular type of operation. Examples include a workcenter for drilling holes, one for performing grinding operations, and a painting area. The workcenters in a low-volume toy factory might consist of shipping and receiving, plastic molding and stamping, metal forming, sewing, and painting. Parts for the toys are fabricated in these workcenters and then sent to the assembly workcenter, where they are put together. In many installations, optimal placement often means placing workcenters with large amounts of interdepartmental traffic adjacent to each other.

Manufacturing cell

Dedicated area where a group of similar products are produced.

A manufacturing cell layout is a dedicated area where products that are similar in processing requirements are produced. These cells are designed to perform a specific set of processes, and the cells are dedicated to a limited range of products. A firm may have many different cells in a production area, each set up to produce a single product or a similar group of products efficiently, but typically at lower volume levels. These cells typically are scheduled to produce “as needed” in response to current customer demand.

Assembly line

An item is produced through a fixed sequence of workstations, designed to achieve a specific production rate.

Manufacturing cells are formed by allocating dissimilar machines to cells that are designed to work on products that have similar shapes and processing requirements. Manufacturing cells are widely used in metal fabricating, computer chip manufacture, and assembly work.

MANUFACTURING CELL

An assembly line is where work processes are arranged according to the progressive steps by which the product is made. These steps are defined so that a specific production rate can be achieved. The path for each part is, in effect, a straight line. Discrete products are made by moving from workstation to workstation at a controlled rate, following the sequence needed to build the product. Examples include the assembly of toys, appliances, and automobiles. These are typically used in high-volume items where the specialized process can be justified.

ASSEMBLY LINE

The assembly line steps are done in areas referred to as “stations,” and typically the stations are linked by some form of material handling device. In addition, usually there is some form of pacing by which the amount of time allowed at each station is managed. Rather than develop the process for designing assembly at this time, we will devote the entire next section of this chapter to the topic of assembly line design since these designs are used so often by manufacturing firms around the world. A continuous or flow process is similar to an assembly line except that the product continuously moves through the process. Often the item being produced by the continuous process is a liquid or chemical that actually “flows” through the system; this is the origin of the term. A gasoline refinery is a good example of a flow process.

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exhibit 7.2 Product–Process Matrix: Framework Describing Layout Strategies

A continuous process is similar to an assembly line in that production follows a predetermined sequence of steps, but the flow is continuous such as with liquids, rather than discrete. Such structures are usually highly automated and, in effect, constitute one integrated “machine” that may operate 24 hours a day to avoid expensive shutdowns and start-ups. Conversion and processing of undifferentiated materials such as petroleum, chemicals, and drugs are good examples.

Continuous process

A process that converts raw materials into finished product in one contiguous process.

The relationship between layout structures is often depicted on a product–process matrix similar to the one shown in Exhibit 7.2. Two dimensions are shown. The first dimension relates to the volume of a particular product or group of standardized products. Standardization is shown on the vertical axis and refers to variations in the product that is produced. These variations are measured in terms of geometric differences, material differences, and so on. Standardized products are highly similar from a manufacturing processing point of view, whereas low standardized products require different processes.

Product–process matrix

A framework depicting when the different production process types are typically used depending on product volume and how standardized the product is.

Exhibit 7.2 shows the processes approximately on a diagonal. In general, it can be argued that it is desirable to design processes along the diagonal. For example, if we produce nonstandard products at relatively low volumes, workcenters should be used. A highly standardized product (commodity) produced at high volumes should be produced using an assembly line or a continuous process, if possible. As a result of the advanced manufacturing technology available today, we see that some of the layout structures span relatively large areas of the product–process matrix. For example, manufacturing cells can be used for a very wide range of applications, and this has become a popular layout structure that often is employed by manufacturing engineers.

Analytics

Break-Even Analysis

The choice of which specific equipment to use in a process often can be based on an analysis of cost trade-offs. There is often a trade-off between more and less specialized equipment. Less specialized equipment is referred to as “general-purpose,” meaning that it can be used easily in many different ways if it is set up in the proper way. More specialized equipment, referred to as “special-purpose,” is often available as an alternative to a general-purpose machine. For example, if we need to drill holes in a piece of metal, the general-purpose option may be to use a simple hand drill. An alternative special-purpose drill is a drill press. Given the proper setup, the drill press can drill holes much quicker than the hand drill can. The trade-offs involve the cost of the equipment (the manual drill is inexpensive, and the drill press expensive), the setup time (the manual drill is quick, while the drill press takes some time), and the time per unit (the manual drill is slow, and the drill press quick).

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A standard approach to choosing among alternative processes or equipment is break-even analysis. A break-even chart visually presents alternative profits and losses due to the number of units produced or sold. The choice obviously depends on anticipated demand. The method is most suitable when processes and equipment entail a large initial investment and fixed cost, and when variable costs are reasonably proportional to the number of units produced.

EXAMPLE 7.1: Break-Even Analysis

Suppose a manufacturer has identified the following options for obtaining a machined part: It can buy the part at $200 per unit (including materials); it can make the part on a numerically controlled semiautomatic lathe at $75 per unit (including materials); or it can make the part on a machining center at $15 per unit (including materials). There is negligible fixed cost if the item is purchased; a semiautomatic lathe costs $80,000; and a machining center costs $200,000.

To view a tutorial on break-even analysis, visit www.mhhe.com/jacobs14e_tutorial_ch07.

The total cost for each option is

$\begin{array}{ccc}\text{Purchase cost}& =& \$200\times \text{Demand}\\ \text{Produce}-\text{using}-\text{lathe cost}& =& \$80,000+\$75\times \text{Demand}\\ \text{Produce}-\text{using}-\text{machining}-\text{center cost}& =& \$200,000+\$15\times \text{Demand}\end{array}$

For a step-by-step walkthrough of this example, visit www.mhhe.com/jacobs14e_sbs_ch07.

SOLUTION

Whether we approach the solution to this problem as cost minimization or profit maximization really makes no difference as long as the revenue function is the same for all alternatives. Exhibit 7.3 shows the break-even point for each process. If demand is expected to be more than 2,000 units (point A), the machine center is the best choice because this would result in the lowest total cost. If demand is between 640 (point B) and 2,000 units, the semiautomatic lathe is the cheapest. If demand is less than 640 (between 0 and point B), the most economical course is to buy the product.

exhibit 7.3 Break-Even Chart of Alternative Processes

For the Excel template, visit www.mhhe.com/jacobs14e.

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The break-even point A calculation is

$\begin{array}{c}\$80,000+\$75\times \text{Demand}=\$200,000+\$15\times \text{Demand}\\ \text{Demand (point A)}=120,000/60=2,000\text{units}\end{array}$

The break-even point B calculation is

$\begin{array}{c}\$200\times \text{Demand}=\$80,000+\$75\times \text{Demand}\\ \text{Demand (point B)}=80,000/125=640\text{units}\end{array}$

Consider the effect of revenue, assuming the part sells for $300 each. As Exhibit 7.3 shows, profit (or loss) is the vertical distance between the revenue line and the alternative process cost at a given number of units. At 1,000 units, for example, maximum profit is the difference between the $300,000 revenue (point C) and the semiautomatic lathe cost of $155,000 (point D). For this quantity the semiautomatic lathe is the cheapest alternative available. The optimal choices for both minimizing cost and maximizing profit are the lowest segments of the lines: origin to B, to A, and to the right side of Exhibit 7.3 as shown in green.

MANUFACTURING PROCESS FLOW DESIGN

LO7–3

Analyze simple manufacturing processes.

Manufacturing process flow design is a method to evaluate the specific processes that raw materials, parts, and subassemblies follow as they move through the plant. The most common production management tools used in planning and designing the process flow are assembly drawings, assembly charts, route sheets, and flow process charts. Each of these charts is a useful diagnostic tool and can be used to improve operations during the steady state of the production system. Indeed, the standard first step in analyzing any production system is to map the flows and operations using one or more of these techniques. These are the “organization charts” of the manufacturing system.

Process

An assembly drawing (Exhibit 7.4) is simply an exploded view of the product showing its component parts. An assembly chart (Exhibit 7.5) uses the information presented in the assembly drawing and defines (among other things) how parts go together, their order of assembly, and often the overall material flow pattern.¹ An operation and route sheet (Exhibit 7.6), as its name implies, specifies operations and process routing for a particular part. It conveys such information as the type of equipment, tooling, and operations required to complete the part.

exhibit 7.4 Plug Assembly Drawing

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exhibit 7.5 Assembly (or Gozinto) Chart for Plug Assembly

exhibit 7.6 Operation and Route Sheet for Plug Assembly

A process flowchart such as Exhibit 7.7 denotes what happens to the product as it progresses through the productive facility. Process flowcharting is covered in Chapter 11. The focus in analyzing a manufacturing operation should be the identification of activities that can be minimized or eliminated, such as movement and storage within the process. As a rule, the fewer the moves, delays, and storages in the process, the better the flow.

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exhibit 7.7 Process Flowchart for the Plug Housing (partial)

EXAMPLE 7.2: Manufacturing Process Analysis

A process usually consists of (1) a set of tasks, (2) a flow of material and information that connects the set of tasks, and (3) storage of material and information.

For a step-by-step walkthrough of this example, visit www.mhhe.com/jacobs14e_sbs_ch07.

1. Each task in a process accomplishes, to a certain degree, the transformation of input into the desired output.

2. The flow in a process consists of material flow as well as flow of information. The flow of material transfers a product from one task to the next task. The flow of information helps in determining how much of the transformation has been done in the previous task and what exactly remains to be completed in the present task.

3. When neither a task is being performed nor a part is being transferred, the part has to be stored. Goods in storage, waiting to be processed by the next task, are often called work-in-process inventory.

Process analysis involves adjusting the capacities and balance among different parts of the process to maximize output or minimize the costs with available resources. Our company supplies a component from our emerging plant to several large auto manufacturers. This component is assembled in a shop by 15 workers working an eight-hour shift on an assembly line that moves at the rate of 150 components per hour. The workers receive their pay in the form of a group incentive amounting to 30 cents per completed good part. This wage is distributed equally among the workers. Management believes that it can hire 15 more workers for a second shift if necessary.

Parts for the final assembly come from two sources. The molding department makes one very critical part, and the rest come from outside suppliers. There are 11 machines capable

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of molding the one part done in-house; but historically, one machine is being overhauled or repaired at any given time. Each machine requires a full-time operator. The machines could each produce 25 parts per hour, and the workers are paid on an individual piece rate of 20 cents per good part. The workers will work overtime at a 50 percent increase in rate, or for 30 cents per good part. The workforce for molding is flexible; currently, only six workers are on this job. Four more are available from a labor pool within the company. The raw materials for each part molded cost 10 cents per part; a detailed analysis by the accounting department has concluded that 2 cents of electricity is used in making each part. The parts purchased from the outside cost 30 cents for each final component produced.

This entire operation is located in a rented building costing $100 per week. Supervision, maintenance, and clerical employees receive $1,000 per week. The accounting department charges depreciation for equipment against this operation at $50 per week.

The process flow diagram just below describes the process. The tasks have been shown as rectangles and the storage of goods (inventories) as triangles.

SOLUTION

a. Determine the capacity (number of components produced per week) of the entire process. Are the capacities of all the processes balanced?

Capacity of the molding process:

Only six workers are employed for the molding process, each working as a full-time operator for one machine. Thus, only 6 of the 11 machines are operational at present.

$\begin{array}{ccc}\text{Molding capacity}& =& 6\text{machines}\times 25\text{parts per hour per machine × 8 hours per day ×}& & \text{5 days per week}\\ & =& 6,000\text{parts per week}\end{array}$

Capacity of the assembly process:

$\begin{array}{ccc}\text{Assembly capacity}& =& 15\text{0 components per hour}\times \text{8 hours per day}\times \text{5 days per week}\\ & =& 6,000\text{components per week}\end{array}$

Because capacity of both the tasks is 6,000 units per week, they are balanced.

b. If the molding process were to use 10 machines instead of 6, and no changes were to be made in the final assembly task, what would be the capacity of the entire process?

Molding capacity with 10 machines:

$\begin{array}{ccc}\text{Molding capacity}& =& 10\text{machines}\times 25\text{parts per hour per machine × 8 hours per day ×}& & \text{5 days per week}\\ & =& 10,000\text{parts per week}\end{array}$

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Because no change has been made in the final assembly task, the capacity of the assembly process remains 6,000 components per week. Thus, even though the molding capacity is 10,000 per week, the capacity of the entire process is only 6,000 per week because in the long run the overall capacity cannot exceed the slowest task.

c. If our company went to a second shift of eight more hours on the assembly task, what would be the new capacity?

A second shift on the assembly task:

As calculated in the previous section, the molding capacity is 10,000.

$\begin{array}{ccc}\text{Assembly capacity}& =& \text{150 components per hour × 16 hours per day × 5 days per week}& =& \text{12},\text{000 components per week}\end{array}$

Here, even though the assembly capacity is 12,000 per week, the capacity of the entire process remains at 10,000 per week because now the slowest task is the molding process, which has a capacity of 10,000 per week. Thus, we can note here that capacity of a process is not a constant factor; it depends on the availability of inputs and the sequence of tasks. In fact, it depends on several other factors not covered here.

d. Determine the cost per unit output when the capacity is (1) 6,000 per week or (2) 10,000 per week.

(1) Cost per unit when output per week = 6,000

First, we calculate the cost of producing all the 6,000 parts per week:

ITEM	CALCULATION	COST
Raw material for molding	$0.10 per part × 6,000 =	$ 600
Parts purchased from outside	$0.30 per component × 6,000 =	1,800
Electricity	$0.02 per part × 6,000 =	120
Molding labor	$0.20 per part × 6,000 =	1,200
Assembly labor	$0.30 per part × 6,000 =	1,800
Rent	$100 per week	100
Supervision	$1,000 per week	1,000
Depreciation	$50 per week	50
Total cost		$6,670

$\text{Cost per unit}=\frac{\text{Total cost per week}}{\text{Number of units produced per week}}=\frac{\$6,670}{6,000}=\$1.11$

(2) Cost per unit when output per week = 10,000

Next, we calculate the cost of producing all the 10,000 parts per week:

ITEM	CALCULATION	COST
Raw material for molding	$0.10 per part × 10,000 =	$ 1,000
Parts purchased from outside	$0.30 per component × 10,000 =	3,000
Electricity	$0.02 per part × 10,000 =	200
Molding labor	$0.20 per part × 10,000 =	2,000
Assembly labor	$0.30 per part × 10,000 =	3,000
Rent	$100 per week	100
Supervision	$1,000 per week	1,000
Depreciation	$50 per week	50
Total cost		$10,350

$\text{Cost per unit}=\frac{\text{Total cost per week}}{\text{Number of units produced per week}}$