COB 300 Operations Chp 5

Aldo Redondo drives his own car on company business. His employer reimburses him for such travel at the rate of 36 cents per mile. Aldo estimates that his FC per year- such as taxes, insurance, and depreciation, are 2,052. The direct or variable costs, such as gas, oil, and maintenance average about 14.4 cents per mile. How many miles must he drive to breakeven?

.36 cents per mile profit FC= 2,052 14.4 cents per mile vc 36 U -14.4 U - 2,052= 0 95 miles to breakeven

A book publisher has fixed costs of 300,000 and variable costs per book of 8. The book sells for 23 per copy. How many books must be solve to break even? If the fixed costs increased, would the new break-even point be higher or lower? If the variable cost per unit decreased, would the new break-even point be higher or lower?

23U - 8U - 300,000= 0 15U= 300,000 U= 20,000 FC increases, so maybe 400,000 15U = 400,000 U= 26,666 So break-even point is higher. 23U - 7U - 300,000= 0 16U= 300,000 U= 18,750 so break-even point is lower.

the following diagram represents a process where two components are made at stations A1 and A2 (one component is made at A1 and the other at A2). These components are then assembled at station B and moved through the rest of the process, where some additional work is completed at stations C,D, and E. Assume that one and only one person is allowed at each station. Assume that the times given below for each station represent the amount of work that needs to be done at that station by that person, with no processing time variation. Assume that inventory is not allowed to build in the system. What is the average hourly output of the process when it is in normal operation? Need picture on page 169 to answer this question.

60/.75 = 80 units/hour

How does the production volume affect break-even analysis?

A break-even analysis takes into account the production volume and the relevant cost of producing the volume by the available alternative processes. It calculates the relative profit or loss of the alternative processes, thus helping to decide which alternative to choose for a certain volume of production.

Make-To-Stock

A production environment where the customer is served "on demand" from finished goods inventor. Must balance the level of finished inventory against the level of service to the customer. More inventory increases costs, so a trade-off between the costs of the inventory and the level of customer service must be made. This process can be found by making better estimate of customer demand, finding transportation alternatives, speedier production, more flexible manufacturing. Many invest in lean manufacturing.

Project layout/environment

A setup in which the product remains at one location, and equipment is moved to the product. Construction sites is an example. Managed using the project management techniques, developing a project layout involves visualizing the product and it's needs. A high degree of task ordering is common. a project layout may be developed by arranging materials according to their assembly priority. Example: Mall building

Dell Computers' primary consumer business takes orders from customers for specific configurations of desktop and laptop computers. Customers must select from a certain model line of computer, and choose from available parts, but within those constraints may customize the computer as they desire. Once the order is received, Dell assembles the computer as ordered and delivers it to the customer. What type of manufacturing process is described here?

Assemble-to-order

Breakeven analysis example: 3 different processes Process: 1, fixed cost of 18,500 VC 35 Process: 2, fixed cost of 20,000 VC 25 Process: 3, fixed costs 23,000 VC 20 Which production process should we select? Getting breakeven point between 1 & 2? If the demand is above 150, which process should we select? Between process 2 + 3, above 600? Above 300 for 1 & 3?

Breakeven point between process 1 & 2: 18,500 + 35 U = 20,000 + 25 U Where U= 150 (Demand of more then 150) 18,500 + 35 (151) = 20,000 + 25 ( 151) 23785 = 23775 Process 2 better Above 600? Comparing! 20,000 + 25 U= 23,000 + 20 U 20,000 + 25 (601)= 23,000 + 20 (601) 35025= 35020 Process 3 is better Above 300? 18,500 + 35 U = 23,000 + 25 U 18,500 + 35 (301) = 23,000 + 25 (301) 29035 = 30525 Process 1 is better

What is a customer order decoupling point? Why is it important?

Essentially it is where inventory is stored awaiting demand from the customer. It is important because it affects the lead time to fulfill the customer's order and the amount of inventory investment necessary.

What is meant by manufacturing process flow?

In a manufacturing process, material and information must move throughout the facility between manufacturing points and storage locations. The path that both material andinformation take as they move through the facility defines the process flow.

The customer order decoupling point determines the position of what in the supply chain?

Inventory

What term is used to mean manufacturing designed to achieve high customer satisfaction with minimum levels of inventory investment?

Lean manufacturing

break-even analysis

Step 1: Find the demand by comparing two processes. 2500 + 25 U = 2600 + 26 U, solve for U to find demand. Step 2: Find the one with less cost for demand of less then or greater then the demand. The point where we are indifferent between two options. the process of evaluating different production level trade-offs in order to break even. Must consider the cost of the equipment, the setup time, and the time per unit. Choose among alternative processes or equipment. Presents alternative profits and losses due to the number of units produced or sold. Depends on demand, most suited for large initial investments and fixed costs, when variable costs are reasonably proportional to the number of units produced. can approach at cost minimization or profit maximization.

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 comes from two sources. The molding department makes one very critical part, and the rest come from outside suppliers. there are 11 machines capable of molding the one part done in house however one machine is being repaired at any given time. Each machine requires a full-time operator. the machine 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 on six workers are on this job. Four more are available from a labor pool within the company. The raw materials for each part molded costs 10 cents per part, a detailed analysis by he accounting department 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. the 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 following process flow diagram describes the process. The tasks have been shown as rectangles and the storage of goods (inventories) as triangles. a. determine the capacity of the entire process. Are the capacities of all the processes 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 tasks, what would be the capacity of the entire process? c. If our company went to a second shift of eight more hours on the assembly task, what would be the new capacity? d. Determine the cost per unit output when the capacity is (1) 6,000 per week or (2) 10,000 per week.

Summarized info: Momlding: 11 machines, one usually down, one operator per machine 25 parts per hour Paid 20 cents cents per hour Paid 20 Input costs: Raw materials are 10 cents per part Electricity is 2 cents per part Purchased parts cost 30 cents per component Other weekly 5 working days expenses Rent is 100$ *************************** a. determine the capacity of the entire process. Are the capacities of all the processes (both molding and assembly) balanced? capacity of the molding process: only six workers are employed, each working one machine. So only 6 machines can be operated,. Molding capacity: 6 machines * 25 parts per hour per machine * 8 hours a day * 5 days per week= 6,000 parts per week. Capacity of the assembly process: 15 workers * 8 hour shift * 150 components per hour * 5 days per week= 6,000 components per week. Because capacity is the same, they are indeed 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 tasks, what would be the capacity of the entire process? Capacity of the molding process: Six to 10 workers on the machines, 10 machines operated. Molding capacity: 6 machines * 25 parts per hour per machine * 8 hours a day * 5 days per week= 10,000 parts per week. Capacity of the assembly process: 15 workers * 8 hour shift * 150 components per hour * 5 days per week= 6,000 components per week. Molding capacity would be way higher then the assembly process, causing the process to be only 6,000 because it 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? If our company has molding of 10,000 capacity, what does this mean for the new capacity? Capacity of the assembly process: 15 workers * 8 hour shift * 150 components per hour * 5 days per week= 6,000 components per week. * 2= 12,000 components per week. Still can only handle 10,000 per week. d. Determine the cost per unit output when the capacity is (1) 6,000 per week or (2) 10,000 per week. Cost per unit output at 6,000 per week: cost of producing all 6,000 parts per week. 1. Raw material for molding= 10 cents per part * 6000= 600 2. electricity per part molded= 2 cents per part * 6,000= 120 3. components purchase= 30 cents * 6000= 1800 4. six workers molding= 20 cents * 6,000= 1200 5. 15 workers for assembly = 30 cents * 6,000= 1800 6. 100 for rent 7. 1,000 for extra employees 8. 50 for equipment depreciation Equals 6,670 total cost for 6,000 Cost per unit= 6,670/6,000= 1.11 Do the same with 10,000 to find the answer= 10,350 total cost, cost per unit of 1.04. our cost per unit has been reduced by spreading the fixed cost over a greater number of units.

It has been noted that during World War II Germany made a critical mistake by having its formidable Tiger tanks produced by locomotive manufacturers, while American car manufacturers produced the less formidable U.S. Sherman tank. Use the product-process matrix to explain that mistake and its likely result.

The locomotive manufacturers likely used project technology and processes. This is low volume,high cost production. On the other hand, mass-producing automakers had the technology to make high volume at low per unit cost.

Positioning inventory in the supply chain

The shorter the customer lead time, the higher the inventory investment. Shows the process of source to make to deliver and how much time and investment it takes for each type of order. The inverted triangles represent customer order decoupling points. Make-to-stock orders: customer lead time is short, and inventory investment is high. Decoupling point is at the end of the make cycle. Assemble-to-Order: Customer lead time is medium, inventory investment is medium, and the decoupling process happens halfway through the make time. Make-to-Order: Customer lead time is longer, inventory investment is low, and the decoupling process happens before the make cycle. Engineer-to-order: Customer lead time is long, inventory investment is low, and the decoupling point is at it's source. many firms serve a combination of these environments and a few will have all simultaneously. The arrows going in a circle has to do with lead time. The order comes in and then goes back out, with the lead time determining the length of time. Make-to-stock typically has the shortest lead time, and engineer-to-order has the longest lead time.

What's the relationship between the design of a manufacturing process and the firm's strategic competitive dimensions (Chapter 2)?

There is a natural relationship between the location of the customer order decoupling point, the level of customization the manufacturer provides its customers, and delivery speed of theproduct to the customer. At one end of the spectrum we have make-to-stockprocesses whichproduce in anticipation of demand, allowing inventory to be stored close to the customer for often instantaneous delivery. However, there is virtually no customization available in make-to-stock products. On the other end of the spectrum are engineer-to-order processes, where theproduct is designed from the start to exactly satisfy the customer's unique needs. Customization is maximized in an engineered-to-order product, but lead time is quite extensive.

Lean manufacturing

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

Job shop has more flexibility than assembly line. True or false?

True.

The product-process matrix shows that as volume increases specialized equipment becomes cost effective. True or false?

True.

In a cellular layout, higher equipment utilization can be achieved with reduced inventory.

True. Cellular layout has different cells, things go smoother with less inventory.

AudioCables, Inc., is currently manufacTuring an adapter That has a variable cost of .5 per unit and a selling price of 1.00 per unit. Fixed costs are 14,000. Current sales volume is 30,000 units. The firm can substantially improve the product quality by adding a new piece of equipment at an additional fixed cost of 6,000. Variable costs would increase to .60, but sales volumte should jumpe to 50,000 units due to a higher-quality product. Should AudioCables buy the new equipment?

VC .5 per unit 1.0 Profit FC 14,000 Sales= 30,000 units 1.0 (30,000) - .5 (30,000)- 14,000= 1,000 profit New equipment + 6,000 FC + 14,000 VC= .6 Sales volume 50,000 units 1(50,000) - .6(50,000) - 20,000= No profit.

Why is it that reducing moves, delays, and storages in a manufacturing process is a good thing?Can they be completed eliminated?

While unavoidable to some extent, all three of these add time to the process while adding novalue to the product. Reduction of these will reduce the time it takes to manufacture a productand thereby improve the process' flow.

break-even analysis example: Given the following options 1. Buy the part for 200 per unit 2. buy a machine and make the part for 75$ per unit, where the machine costs 80,000 3. buy a machine center and make the part for 15$ per unit, where the center costs 200,000 Given demand of over 2,000 units, what is the best option for lowest cost? Given demand between 640-2,000 units, what is the best option for lowest cost? Given demand under 640 units, what is the best option for lowest cost?

With a demand of over 2,000 units, the costs are as followed: 1. 200 per unit * demand of 2,001= 400,200 2. 75 per unit * demand of 2,001 + 80,000= 230,075 3. 15 per unit * demand of 2,001 + 200,000= 230,015 So buying the machine center is the best option. With a demand between 640-2,000 units, the costs are as followed: 1. 200 per unit * demand of 641= 128,200 2. 75 per unit * demand of 641 + 80,000= 128,075 3. 15 per unit * demand of 641 + 200,000= 209,615 So buying just one machine is the best option. With a demand under 640 units, the costs are as followed: 1. 200 per unit * demand of 639= 127, 800 2. 75 per unit * demand of 639 + 80,000= 127,925 3. 15 per unit * demand of 639 + 200,000= 209,585 So buying the product from someone else is the best option.

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. the horizontal access shows the volume of a particular product. The vertical access shows standardization, variations in the product that is produced. This is measured in terms of differences. Highly Standardized is highly similar. Low standardized are different in their processes of production. it is desirable to design processes along the diagonal. Depending on where your product lands (medium product volume/product standardization would land in the manufacturing cell) determines the environment you should use. Some of the layouts span across large areas of this framework.

Continuous process

a process that converts raw materials into finished product in one continuous process. A continuous or flow process is similar to this except it moves continuously through the process, quite literally. Continuous process is a liquid or chemical that actually flows through the system. Gasoline is an example. predetermined sequence of steps, continuous, highly automated, constitute one integrated machine run 24 hours. Examples: Sugar, chemicals, petroleum.

Assemble-to-order

a production environment where pre-assembled components, sub assemblies, and modules are put together in response to a specific customer order. Primary task is to define a customer's order in terms of alternative components. Success is found when you engineer designs that enable as much flexibility as possible in combining components, options, and modules into finished products. Also applies lean manufacturing principles to decrease the time required to assemble finished goods and delivering customer orers quicker. advantages can be found by moving the decoupling point from finished goods to components. 17 components that can be combined into 384 ways is much easier to forecast then 384 products of finished goods. In other words, if you put the decoupling point at the 'make' stage instead of the finished goods stage then you can market the combinations without making them yet. It would not make sense to make a decoupling point where a bunch of cheeseburgers with extra onions (a finished good) are produced - much harder to sell then cheeseburgers that can have products added to them (ketchup, mustard, lettuce, etc...)

Make-to-order

a production environment where the product is built directly from raw materials and components in response to a specific customer order. Decoupling point could be in either raw materials at manufacturing site or with the suppliers inventory. engineering determines what materials will be required and what steps will be required in manufacturing. Might not be possible to pre-order parts.

Assembly line/ Flow shop

a setup in which an item is produced through a fixed sequence of workstations, designed to achieve a specific production rate. Progressive ste[ps, specific production rate can be achieved, stagith line at a controlled rate. Examples: Toys, appliances, automobiles. High volume items specialized process can be justified. Done in areas referred to as stations, lined by material handling decides. These designs are used so often by manufacturing firms. A continuous or flow process is similar to this except it moves continuously through the process, quite literally. Assembly line flow is discrete, not continuous. Repetitive focus, equipment is located according to the progressive steps required to make the product. Sequential.

general purpose equipment

can be used easily in many different ways, less specialized equipment. Example: hand drill, can be usedfor other things as well.

Forms of transformation systems

continuous, flow shop/assembly line, batch, job shop, project

manufacturing cell/ Batch

dedicated area where group of similar products are produced. Perform a specific set of processes, the cells are dedicated to a limited range of products. typically used at lower volume levels, produce as needed in response to current customer demand. Examples include: Metal fabricating, computer chip manufacture, assembly work Example: Drugs

Product and Process life cycles

each product has a life cycle, Any product or service will eventually not be selling, with newer tech on the market. Demand goes up, then back down. Frequency/Design cycle: at the beginning changes are high and slowly decreases. Frequency of changes in process: Starts low, gets high, then low again.

Manufacturing process flow design

evaluates the specific processes that raw materials, parts and sub assemblies follow as they move through the plant. Design is made up of: assembly drawing, assembly chart, operation and route sheet, and flow process charts. Focus should be on identifying activities that can be minimized or eliminated. Fewer the moves, delays and storage, the better the flow.

assembly drawing

exploding view of the product showing its component parts

Cellular layouts (Hybrid approach)

grouping parts into families that follow a common sequence of steps because of similar design or manufacturing characteristics (Group Tech) Identifying dominant flow patterns of parts families as a basis for location or relocation of processes Physically grouping machines and processes into cells: higher utilization of machines, relatively less inventory. Use of cellular layout: chip manufacturing and metal fabrication. Flexible manufacturing system FMS: Fully automated version of cellular manufacturing.

Engineer-to-order

here the firm works with the customer to design the product, which is then made from purchased material, parts, and components. Decoupling point could be in either raw materials at manufacturing site or with the suppliers inventory. engineering determines what materials will be required and what steps will be required in manufacturing. Might not be possible to pre-order parts.

What does the product-process matrix tell us? How should the kitchen of a Chinese restaurant be structured?

hows level of variety to volume. The Chinese restaurant case might be debatable since it involves both high volume and high variety. Probably a work cell would be best.

Finished goods

includes the cost of the material plus the cost to fabricate the finished items

special-purpose equipment

more specialized, often available as an alternative to a general-purpose machine. Example: special-purpose drill, drill press

workcenter/ job shop

often referred to as a job shop, a process structure suited for low-volume production of a great variety of nonstandard products. Work centers sometimes are referred to as departments and are focused on a particular type of operation. A part being worked on travels through a sequence of operations, from work center to work center where proper machines are located for each operation. Arrange work centers in a way that optimizes the movement of material. Examples: drilling holes, grinding operations, shipping, receiving, stamping, metal forming, sewing. fabricated in one, then assembled in another. Optimal placement often means placing work centers with large amounts of interdepartmental traffic adjacent to each other. Appliance repair Similar operations are performed in a common or functional area, regardless of the product in which the parts are used. Not focused on efficiency.

What are manufacturing processes?

processes used to make tangible goods. What is required to make something can be divided into 3 simple steps: Source, make, and deliver. Depending on the item being produced supply chain can be very long or very short, where parts are sourced and the product is made locally. Source: Parts are procured from suppliers Make: Manufacturing takes place Deliver: Product is shipped to the customers. Activities organized to minimize costs while meeting the competitive priorities necessary to attract customer orders. consists of a set of tasks, flow of material, and storage of material and information, transformation of input to the desired output. flow consiss of material flow and informational. material flows transfer a product from one tasks to the next, flow of information helps to determine how much of the transformation has been done and what remains. when the task is not being performed or transfered must be stored. Goods in storage is called work-in-process inventory.

What is meant by a process? Describe its important features.

processes used to make tangible goods. What is required to make something can be divided into 3 simple steps: Source, make, and deliver. Depending on the item being produced supply chain can be very long or very short, where parts are sourced and the product is made locally. Source: Parts are procured from suppliers Make: Manufacturing takes place Deliver: Product is shipped to the customers. Activities organized to minimize costs while meeting the competitive priorities necessary to attract customer orders. consists of a set of tasks, flow of material, and storage of material and information, transformation of input to the desired output. flow consiss of material flow and informational. material flows transfer a product from one tasks to the next, flow of information helps to determine how much of the transformation has been done and what remains. when the task is not being performed or transfered must be stored. Goods in storage is called work-in-process inventory.

process flowchart

shows what happens to the product as it progresses through the productive facility. The fewer the moves, the better the flow. shows material received from supplier all the way through finished good.

operations and route sheet

specifies operations and process routing for a particular part. Conveys type of equipment, tooling and operations required to complete the part. Specifically for just a part, shows the flow to complete the part, not the whole product.

Process selection

strategic decision selecting production processes to produce a product or provide a service. If volume is low, manually assemble. If high, assembly line,. The format be which a facility is arranged is based on these five basic structures: project, work center, manufacturing cell, assembly line, and continuous process.

Lead time

the time needed to respond to a customer order. For example: the time it takes to make a burger when it is ordered all the way up to the delivery to the customer.

assembly chart

uses the information presented in the assembly drawing and defines how parts go together, their order of assembly, and often the overall material flow pattern. Specifies specific parts and where they come into play in the production process, unlike the process flowchart where it shows the overall product design.

Customer order decoupling point

where inventory is position in the supply chain to allow processes or entities in the supply chain to operate independently. Where inventory is positioned to allow entities in the supply chain to operate independently. Selecting a decoupling point helps determine customer lead time, greatly impacts inventory investment. Quicker responses mean greater inventory investment. Finished goods inventory includes the cost of the materials, plus the cost to fabricate the finished item.