Chapter 6

1 1 2002 South-Western/Thomson Learning 2002 South-Western/Thomson Learning TMTM

Slides preparedSlides preparedby John Loucksby John Loucks

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Chapter 6

Operations Technologies

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Overview

Introduction Types of Manufacturing Automation Automated Production Systems Software Systems for Automation Automation in Services Automation Issues Deciding Among Automation Alternatives Wrap-Up: What World-Class Companies Do

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Introduction

In the past, automation meant the replacement of human effort with machine effort, to save labor costs.

Today, automation means integrating a full range of advanced information and engineering discoveries into operations processes for strategic purposes.

Today, automation is applied not only for labor cost savings, but also for:

Improved quality Faster production and delivery of products/services Increased flexibility

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Types of Manufacturing Automation

Machine Attachments Inexpensive add-ons to machines Represent oldest technology in automation Typically perform one or a few simple operations Examples:

Strip feeders Quick centering and grasping devices

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Numerically Controlled (N/C) Machines Have a control system that receives/reads

instructions and translates them into machine operations

N/C machines have evolved: CN/C – computer numerically controlled DN/C – direct numerically controlled (several

machines controlled by a single computer) Examples:

Weaving machines Lathes

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Robots Human-like machines performing production tasks Brain of these machines is a microcomputer Have grippers (vacuum, magnetized, adhesive) Have sensors (tactile, proximity, vision/optical) Can operate in environments hostile to humans

(heat, noise, dust, darkness, skin irritants, …) Perform precisely and repeatedly without fatigue Weld, assemble,paint, inspect, transport, …..

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Automated Quality Control Inspection Take physical dimensions of parts Compare measurements to standards Determine if parts conform to specifications Also check performance (ex. - electronic circuits) Making 100% inspection economically feasible

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Automatic Identification Systems (AIS) Sense and input data into computers Use bar codes, radio frequencies, magnetic stripes,

optical character recognition, machine vision Data read from products, documents, parts, and

containers Used in warehouses, factory floors, retailing,

wholesaling Example – scanner at grocery store checkout

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Automated Process Controls Use sensors to obtain measures of performance Compare measures to standards Might use “expert system” to determine if/what

process adjustment is necessary If necessary, change settings of process Long used in chemical processing, petroleum

refining, paper production

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Automated Production Systems

Automation technology becoming more sophisticated Focus has shifted away from individual machines More common are whole systems of automated

machines linked together for broader purposes

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Automated Flow Lines In-line, automated processing machines linked by

automated material transfer Perform without need for human attendance Used to produce an entire component Also called fixed automation or hard automation Used when product demand is high and stable

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Automated Assembly Systems Automated assembly machines linked by

automated material transfer Operations are component insertion and joining Produce major assemblies or complete products Often use standard (lower cost) robots Product design appropriate for assembly by

humans is not fitting for automated assembly

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Redesigning Products for Automated Assembly

Reduce the amount of assembly required Reduce the number of fasteners required Design components to be automatically delivered and

positioned Design products for layered assembly and vertical

insertion of parts Design parts so that they are self-aligning Design products into major modules for production Increase component quality to avoid machine jams

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Flexible Manufacturing Systems (FMS) Kits of materials/parts for a product are loaded on

the materials-handling system Code is entered into computer identifying product

and its location in the sequence Each production machine (without a worker):

Receives settings/instructions from computer Automatically loads/unloads required tools Carries out its processing instructions

Product automatically transferred to next machine

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Flexible Manufacturing System (FMS)

Machine 1

Tools

X X

Machine 2

Tools

X X

Machine 3

Tools

X X

Computer

Worker

X

X

X

X

X

X

X

UnloadLoad

PalletTransferSystem

Parts

Pallet withworkpieceattached

Workpiecein queue

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Automated Storage & Retrieval Systems (ASRS) Receive orders for materials from anywhere in

operations Collect the materials from locations in warehouse Deliver the materials to workstations in operations Three major elements of ASRS are:

Computers and communication systems Automated materials handling/delivery systems Storage and retrieval systems in warehouse

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Automated Storage & Retrieval Systems (ASRS) Main benefits of ASRS are:

Increased storage capacity Increased system throughput Reduced labor costs Improved product quality

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Software Systems for Automation

Three “complex” computer-based systems Computer-Aided Design and Computer-Aided

Manufacturing (CAD/CAM) Computer-Integrated Manufacturing (CIM) Enterprise Resource Planning (ERP)

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Computer-Aided Design and Computer-Aided Manufacturing (CAD/CAM)

CAD/CAM is a merger of two systems, CAD and CAM (described next)

It is the automation of the transition from product design to manufacturing

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Computer-Aided Design (CAD) Concerned with the automation of certain phases

of product design Use of computer in interactive engineering

drawing and storage of designs CAD systems are installed to:

Increase designers’ productivity Improve the quality of designs Improve product standardization Improve design documentation Create a manufacturing database

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Computer-Aided Manufacturing (CAM) CAM capability progressing slower than CAD Concerned with automating the planning and

control of production: Plan production Prepare product routings Generate N/C programs Fix the settings of machinery Prepare production schedules Control the operation

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Computer-Integrated Manufacturing (CIM) “All of the firm’s operations related to production

are incorporated in an integrated computer system to assist, augment, or automate the operations.”

Covers the chain of events from sales order to product shipment

Output of one activity becomes the input to the next activity

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Computer Integrated Manufacturing (CIM)

Incorporates all manufacturing-related functions

ProcessControls

MRP II

ASRS

CAD/CAM

AutomatedAssembly GT

Systems

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Enterprise Resource Planning (ERP) A complex set of software programs Integrates most of the business functions in an

organization Accounting Human resources Purchasing Production Logistics E-Business … and more

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Enterprise Resource Planning (ERP) Five leading ERP software companies are:

SAP ( their “R/3” software is top seller) Oracle J.D. Edwards PeopleSoft Baan

Can take several years and $millions to implement (Chevron spent $160 million over five years)

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Automation in Services

Example Airlines – air traffic control, passenger reservation Banks – ATMs, computerized bank statements Gas Stations – automated payment (pay-at-the-pump) Health Care – MRI system, AGVS for waste disposal Grocery Store – self-service checkout stations Real Estate – web based house-for-sale tour video

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Automation in Services

Trend developing toward more-standardized services and less customer contact.

Service standardization brings trade-offs: - Service not custom-designed for each customer + Price of service reduced, or at least contained

Banking industry is becoming increasingly automated Service firm can have a manual/automated mix:

Manual - “front room” operations Automated - “back room” operations

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Degree of Customer Contact in Servicesand the Use of Automated EquipmentDegree of Customer Contact

CapitalIntensity

High

High

Low

Low

Manual Operations

Mechanized Operations

AutomatedOperations

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Automation Issues

Not all automation projects are successful. Automation cannot make up for poor management. Economic analysis cannot justify automation of some

operations. Not technically feasible to automate some operations. Automation projects may have to wait in small and

start-up businesses.

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Automation Questions

What level of automation is appropriate? How would automation affect the flexibility of an

operation system? How can automation projects be justified? How should technological change be managed? What are some of the consequences of implementing

an automation project?

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Building Manufacturing Flexibility

Manufacturing flexibility has become the cornerstone of operations strategy in the 2000s.

The ability to improve/maintain market share because Customer orders can be delivered soon after

receipt of the order Production can quickly be shifted from product to

product Production capacity can be increased rapidly New products can be developed and introduced

into production quickly and inexpensively

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Justifying Automation Projects

Payback period, NPV, IRR, and other conventional approaches alone are inadequate tools on which to base product/process design/redesign decisions

Product/process technology must be seen as a long-term strategic choice

Returns on investment include: Improved product/service quality Faster order delivery Increased flexibility Reduced production cost Increased market share

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Managing Technological Change

Have a master plan for automation. Recognize the risks in automating. Establish a new production technology department Allow ample time for completion of automation. Do not try to automate everything at once. People are the key to making automation successful. Don’t move too slowly in adopting new technology.

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Worker Displacement and Training/ Retraining

One result of automation is the elimination of jobs Some say that new jobs are created in engineering,

manufacturing, programming, selling, and servicing the new-technology products

Many firms realize they cannot afford NOT to train and retrain their current workers

Firms are providing more training than ever before Still, US firms spend little on training compared to,

say, German firms (4% of payroll cost on training)

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Deciding Among Automation Alternatives

Economic factors Effect on market share Effect on product/service quality Effect on manufacturing flexibility Effect on labor relations Amount of time required for implementation Effect of implementation on ongoing production Amount of capital required

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Economic Analysis Economic analysis will always be an important, if

not a predominant, factor in deciding among alternatives

Frequently used approaches are: Break-even analysis Financial analysis

By using only economic analysis, other important factors are ignored

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Example: Valley Hospital

Economic AnalysisValley Hospital is planning to install a new

linen retrieval system. Two alternatives being considered are: a continuous vacuum (CV) system and a batch robotic/chute (BR/C) system. The following estimates were prepared:

CV BR/C Annual Fixed Costs ($000) $2,690 $975 Average Variable Cost per Ton $1,660 $2,590

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Economic AnalysisAt a forecast annual operating level of 2,000

tons of linen, which alternative should be chosen based only on total annual cost?

TCCV = 2,690,000 + 1,660(2,000) = $6,010,000 TCBR/C = 975,000 + 2,590(2,000) = $6,155,000

The continuous vacuum (CV) alternative has a lower total annual cost.

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Economic AnalysisThe annual volume of linen has to increase or

decrease to what level in order for the BR/C alternative to be favored?

TCCV = TCBR/C

2,690,000 + 1,660(Q) = 975,000 + 2,590(Q) 830Q = 1,715,000 Q = 1,844.1 tons

Annual volume must decrease to 1,844 tons or less.

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Example: Security Bank

Economic AnalysisSecurity is considering the installation of an

ATM and has estimated the cost of the machine, effects on revenue, savings in taxes from depreciation, and labor savings.

The machine is estimated to have an initial cost of $250,000 and an expected life of five years. The after-tax cash inflows for years 1-5 are estimated to be: $87,500; $79,600; $75,300; $71,600; and $69,400. Compute the after-tax payback period.

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Example: Security Bank

Economic Analysis Cumulative

After-Tax After-Tax Year Cash Inflow Cash Inflow

1 $87,500 $ 87,5002 79,600 167,1003 75,300 242,4004 71,600 314,0005 69,400 383,400

Payback period = 3 + (250,000 – 242,400)/71,600= 3.106 years

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Rating Scale ApproachAutomation alternatives are rated using, say, a 5-point scale on a variety of factors such as:

Economic measures Effect on market share Effect on product quality Effect on manufacturing flexibility Effect on labor relations Amount of time required for implementation Effect on ongoing production

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Relative-Aggregate-Scores ApproachSimilar to Rating Scale Approach, but weights

are formally assigned to each factor which permits the direct calculation of an overall rating for each alternative.

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Example: Brownell Cleaners

Relative-Aggregate-Scores ApproachAn analyst at Brownell Cleaners is considering

two alternatives for a new garment conveyor system, GCS1 and GCS2.

He has interviewed several managers in the firm and conducted extensive analysis of the problem. He has collected the information shown on the next slide.

Which alternative do you recommend, based on the relative-aggregate-scores approach?

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Relative-Aggregate-Scores Approach Factor

Automation Factors Weight GCS1 GCS2Economic factors Annual savings .30 $21,600 $26,700Other factors Score Score

Market share .30 .700 .800Service quality .15 .600 .700Labor relations .15 .500 .800Implementation time .10 .700 .600

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Relative-Aggregate-Scores ApproachGCS1 GCS2

Factor Wgt. Wgt.

Automation Factors Weight Score Score Score ScoreEconomic factors Annual savings .30

1.000 .300 .809 .243Other factors

Market share .30 .700 .210 .800 .240Service quality .15 .600 .090.700 .105Labor relations .15 .500 .075.800 .120Implementation time .10 .700 .070.600 .060

Total Aggregate Score .745 .768

21,600/26,700

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Wrap-Up: World-Class Practice

World-Class companies utilize the latest technologies/practices. For example:

Design products to be automation-friendly Use CAD/CAM for designing products Convert fixed automation to flexible automation Move towards smaller batch sizes Plan for automation Build teams to develop automated systems Justify automation based on multiple factors

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End of Chapter 6

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Chapter 6