Do you think this will pose any problems for managing this assembly line?
The main problem will be one of co-ordination of supply to the assembly line. In so much as the white piano is exactly the same shape as the black ones, and because the function of the product is the same, there is not, in principle, any problem. However, as the white piano arrives at a particular station on the assembly line, that station must have sufficient white parts to assemble the piano. Thus, the arrival of components at each station must match the arrival of the main product at the station. This issue is especially important in motorcar assembly where several types of the same car are put together on a single assembly line. So, for example, as the top of the range car arrives at the station that assembles the seats into the car, the next seats made available to that station must be the special leather seats that go into the top of the range model.
Chocolate and customers flow through Cadbury’s
1. Both customers and chocolate in the Cadbury’s operations do seem to conform to a product-type layout. Does this mean that both operations have the same objectives?
Both chocolate and customers, in their respective operations, flow in a continuous manner around a set series of stages. All the chocolate follows the same path and, in Cadbury World, all the customers take the same sequence of activities. Also, in some ways the objectives are similar. We can strain the flow of chocolate to make sure that quality standards are conformed to and to reduce costs. Similarly, in Cadbury World we route customers through the same sequence of experiences to ensure the quality of the experience. To some extent also we are reducing the cost of processing the customers. Allowing customers to wander freely around the exhibits would limit what we could do at each exhibit. It would also mean putting more effort into guiding customers around the experience. Moving customers around Cadbury World in a standardized way helps us control the process.
C H A P T E R 8
Process technology Teaching guide
Introduction
There are so many different processing technologies used in operations that it is probably not worth trying to cover all types. However, it is important to make it clear to students that the changing capabilities of process technologies can open up new opportunities for operations. We find it useful therefore to concentrate on newer forms of technology and then try and get students to think through the implications of adopting them. In doing this it is useful to try and identify new technologies, which have not yet been fully developed. For example, security systems are starting to use scanners, which take a photograph of a person’s iris to verify their authorization to enter a building or to take money out of a machine and so on. A discussion around the operations implications of such new security technologies can be more interesting and rewarding than one that concentrates on a manufacturing (say) technology with which the students may not be familiar. The other way to approach process technology is to do so through the task of evaluation. Any exercise which involves comparing alternative technologies, can be used not only to think about the process of evaluation but also to discuss some of the underlying characteristics of the technology in question.
Key teaching objectives
• To overcome the reluctance of some students to consider process technology as anything other than ‘what engineers do’.
• To establish the idea that all operations have some type of technology.
• To illustrate various types of material, information and customer processing technology.
• To establish the three generic dimensions of technology,
• automation
• scale (or scalability)
• coupling (or connectivity)
• To establish the main criteria for choosing alternative process technologies.
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Exercises/discussion points
• Exercise – Make a list of different operations (restaurant, cinema, roadside rescue service, bank, etc.) and get the students in groups to answer the following questions.
• What process technologies are used in these operations?
• What advantages does the process technology bring to the operation itself and its customers?
• How might recent changes and innovations in process technology affect the way these operations use their process technology?
• What criteria do you think these operations would use to decide whether to invest in new process technology?
• Teaching tip – Choose an emerging or potential technology and prompt a discussion on its implications for managing operations (for example, what would be the impact on the operations managers in several businesses of the widespread adoption of fuel cells in cars?)
• Teaching tip – Hold a discussion on the impact of MP3 compression on record retailing operations. Discuss whether this is only a threat to record retailers or whether they could harness the technology in some way.
• Teaching tip – We have found the case exercise at the end of this chapter (Rochem Limited) to be useful in discussing the impact of uncertainty in process technology selection.
Case study teaching notes Rochem Ltd
This case examines an equipment purchase decision as faced by a small food-preservatives manufacturing company. The text is a description of a meeting between four managers concerned with the decision and presents their evidence to the management committee together with their personal views as to which of the two alternative machines ought to be bought. No conclusion is reached in the case.
Some notes on the Rochem Ltd case exercise The equipment purchase decision in general
It is unusual for facilities to be chosen on one criterion only. For example, if a piece of equipment is needed immediately and only one model or make is available without considerable delivery delays, then the criterion of availability would predominate. Normally, however, in addition to availability there are two other groups of criteria which are used: technical and financial.
Technical criteria
The most obvious technical criterion is capability that is, can the equipment do the job required of it? Certainly this criterion can be used as an initial screening test to eliminate obviously unsuitable equipment, but often there will be several, which ostensibly meet the criterion. It may be that the capability requirements are difficult to define or predict, or that none of the alternative machines completely fulfils the requirements.
As well as absolute capability, variation in capability can be important, variation both in the sense of reliability and the process variability in performance that the machine displays. The relative reliability of alternative machines is usually difficult to predict in advance of purchase.
However, if manufacturers are prepared to give service guarantees, then this can alleviate some of the cost of repair although not the inconvenience of the facility not being available. Most processes exhibit some variability in performance and a certain level is normally tolerable.
However, if the required capability had tolerances on variation in performance, this must be used as a criterion.
The range of capability could also be an important factor, that is, how adaptable, flexible or general does the machine have to be? This will depend on how accurately we can predict the future use to which the machine will be put.
Financial criteria – costs
Cost is clearly a major financial criterion for choosing between machines. There are, however, two aspects of the cost of any facility: the initial cost and the total life cycle cost. The initial cost is its basic purchase price.
Sometimes limitations on the amount of capital available could eliminate some alternatives which, although they may be good investments, require more initial capital than the company can afford. The total life cycle cost includes the cost associated with acquiring, using, caring, development, design, production, maintenance, replacement and disposal, as well as all the support, training and operating costs generated by the acquisition.
Financial criteria – benefits
The benefits which accrue from investing in machinery cannot always be described accurately in financial terms, but indirectly always reflect in financial performance. Benefits are usually expressed in profit terms or saving terms, whichever is more appropriate to the particular decision. Any sensible measure of benefit can be used provided all alternatives are assessed on the same criteria. The timing of benefits can also be important.
A useful method of comparing costs and revenue for various levels of use of a facility is by using cost–volume–profit graphs.
Risk and uncertainty
Most factors that determine the ultimate pay-off of a facility's acquisition decision, are, at the time of the decision, only an estimate. We may have more confidence in our forecast of some of the factors than in others, but few of them will be known absolutely. It is useful in such a situation to have some idea of the sensitivity of the outcome of a decision to changes in the
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In Rochem's Case Technical factors:
1. The AFU machine gives more capability if needed (140 kg per month, against 105 kg per month).
2. The quality levels that can be achieved on the AFU machine are better, but this is something of a red herring since the case is quite clear in stating that when the Chemling is working properly, it achieves perfectly satisfactory quality levels. This would only be an issue if the marketing plan for the future required higher quality levels.
3. There is limited information about the ease of maintenance of each machine. The likelihood is that the AFU will be better, but the Chemling is adequate, that is, satisfactory.
4. As regards after sales service, again there is little information on the AFU, but the Chemling is likely to be better.
5. It could be seen as if the maintenance and after sales service factors trade-off between the two machines, but the AFU's plus points on maintenance are based on estimates of performance and are therefore less certain.
Financial factors:
1. The capital cost of the AFU is almost 50% more than the Chemling – a considerable cash difference but its capacity is 40% higher.
2. Figure 1 shows the cost–volume–profit curves for the two alternative strategies.
(a) buy another Chemling
(b) buy an AFU (and use it first, bringing in the Chemling when demand exceeds 140 kg per month).
3. From Figure 1:
Up to 100 kg a month, the Chemling option has lower costs.
Figure 1 Cost–volume–profit curves for the two options
Between 100 kg and 140 kg a month the AFU option has lower costs.
Between 140 kg and 200 kg a month the Chemling option has marginally lower costs.
Over 200 kg a month the AFU will generate more profit.
It is evident that the level of payback from the machines very much depends on the view that the company takes over future sales levels. A very pessimistic view (less than 140 kg a month) or a reasonably optimistic view (200–240 kg a month) favours the AFU option. A very little growth view marginally favours the Chemling.
4. If we take an optimistic view based on a doubling of sales due to a successful modification of the product, the decision then involves a third and fourth machine. Several combinations of the two machines then become possible, but it seems likely that the company would stay with the type of machine that it decided to buy at this point in time. If we assume this, then Figure 2 shows the extended cost–volume–profit graph.
5. From Figure 2:
Figure 2 Extended cost–volume–profit curves
There are in fact four options, which would give a capacity of between 350 kg a month and 450 kg a month.
a) 5 Chemling machines b) 4 Chemling machines c) 2 AFU + 1 Chemling d) 3 AFU + 1 Chemling
6. It can be seen that the situation is very complex and depends again on the view the company takes about likely production levels. Below 380 kg a month option (c) has lower costs.
Between 380 kg a month and 400 kg a month options (a) and (d) are more or less the same.
Between 400kg and 420 kg a month option (d) has lower costs, and about 400 kg a month
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this level of production. Its superiority, however, is not so marked as to eliminate the other options.
Other Factors
1. The spares issue is worth mentioning. A mixture of two types of machines doubles the spares that the company would have to carry and also doubles the quantity of maintenance knowledge that the firm would have to carry.
2. The effect of introducing new technology into the production system must be recognized. In this case it would involve some new training to use the AFU, but also in the long run would de-skill the jobs of the people operating them.
3. If demand does indeed grow rapidly with the modification of the product, one must consider the dynamic problem of increasing capacity as demand increases. In other words, there is a capacity-planning problem. The usual capacity planning problems will then be faced, namely the following:
(a) How to match capacity with demand.
(b) Whether to lead or lag demand.
(c) Whether to go for small capacity increments (Chemling machines) because these can be more readily used to tailor capacity to demand.
Model answers to short cases Customers are not always human