Chapter 4
Process Planning and Design
Processes
What is a process?
Suppose Arlington decides to start a public bus
system.
What would be some processes that need to be
designed?
Process flow diagrams – getting gas at a 7-Eleven
How much detail should be shown?
Designing Processes
Designing a process includes:
• selecting type of process
– streamlined, flexible, off-the-shelf, etc.
• outsourcing plans
– how much to make vs. buy
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•
•
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type of technology and degree of automation
facility design and layout
routing of work
equipment, materials, and personnel plans
integrating process design with product design
Concurrent Engineering
(or Simultaneous Engineering)
Design product and processes concurrently
Traditional approach: product idea  marketing
decides on features  design engineers make
technical designs  mfg. engineers design
processes  production dept. tries to make it 
purchasing dept. orders materials
Concurrent Engineering: create a cross-functional,
design-build team that includes people from
marketing, design engr., mfg. engr., production,
and purchasing. This teams makes all planning
and design decisions together.
Business Process Reengineering (BPR)
BPR – a radical change in a business process to achieve
breakthrough improvements
If we were starting from scratch, with a blank sheet of
paper, how would we design the process
Now, how can we change our current process to the new
process
BPR became a hot consulting trend in the early 1990s
BPR was sometimes used as an excuse by top executives
to downsize their workforce
Do you think fewer employees should be needed after a
BPR effort?
Basic Process Design
Product-focused design (e.g., production line)
– equipment is organized for a certain type of
product
– assembly line, production line, continuous
production, line flow production
– lower cost per unit
– little flexibility to change products
– fewer labor skills required – less training
– higher initial investment
– examples: TVs, cars, cafeteria, canned corn,
paper, Papa John’s pizza
Process-focused design (e.g., job shop)
– equipment is organized by type of process
(departments)
– also called intermittent production or job shop
– higher cost per unit
– most flexibility – large variety of product designs
– more labor skill required
– more complex production planning and control
– examples: machine shop, hospital, print shop
Flow of products in production line vs. job shop
Cellular Manufacturing/Group Technology
– a mix of product-focused and process-focused
designs
– product-focused cells within a process-focused
shop
– gain cost efficiencies for high-volume products
within the more flexible job shop
Functional Layout
Debur 1
Debur 2
Drill 1
Debur 3
Grinder 1
Grinder 1
Drill 2
Debur 4
Grinder 1
Saw 1
Grinder 1
Saw 3
Mill 1
Lathe 1
Drill 3
Lathe 2
Saw 2
Saw 4
Mill 2
Lathe 3
Mill 3
Mill 4
GT Cell (Cellular) Layout
Lathe 3
Raw Material
Saw 2
Grinder 3
GT Cell
Drill 1
Debur 3
Finished Product
Mill 1
Compaq Changes to Produce-to-Order
(example of process design change)
Compaq Computer Corporation has scrapped its long assembly lines and
now makes its personal computers with three-person cells that assemble
the computers produce-to-order. In this arrangement, the three-person
team looks at the next customer’s order on a monitor to see the attributes
of the computer to be assembled (accessories, type of drives, etc.) and
assembles the computer specifically for that customer.
In the three-person cells, one person prepares all the subassemblies
that go into a computer. The second person installs these into the
computer’s frame. And the third person performs all the tests to make sure
the circuits are connected properly.
In this method of production, parts and subassemblies are inventoried
before customer orders are received, but finished products are not; final
assembly occurs only after receipt of customer orders. This allows
Compaq to match production to customer orders and reduces the cost of
every step of production—inventory, handling, freight, and unsold goods.
Shifting to a produce-to-order system also decreases Compaq’s
dependence on market forecasts.
Compaq says that the output of each employee in the three-person
cell increased 23 percent and output per square-foot of factory floor space
increased 16 percent compared to produce-to-stock assembly lines.
Breakeven Analysis
Total Cost = annual Fixed Cost + Variable cost per
unit*(annual Quantity)
TC = FC + v(Q)
Total Revenue = selling Price per unit*(annual Quantity)
TR = p(Q)
Profit = Total Revenue – Total Cost
profit = TR – TC = p(Q) – [FC + v(Q)]
Annual Quantity of Indifference: TCA = TCB
Example of Breakeven Analysis
FC
v
$0
$200
Low automation—B
80,000
75
High automation—C
200,000
15
Subcontract—A
selling price p = $300 per unit
1. Compute the breakeven quantity for each alternative.
2. Compute the annual quantity of indifference between each pair of alternatives.
3. For what range of annual quantities would each alternative be preferred?
Breakeven Quantity
Annual quantity at which profit = 0; so, TR = TC
B:
C:
A:
Quantity of Indifference
Annual quantity at which the total costs of two alternatives
are equal.
A vs. B:
B vs. C:
A vs. C:
Annual Total Costs
A
B
C
200,000
80,000
0
0
640
1,081
Annual Quantity
2,000
Table of Total Costs for Each Alternative
Quantity
Total Cost
A
B
C
0
1000
1500
2500
Breakeven Analysis Example: A young entrepreneur would like to buy
a new riding lawn mower. He typically hires a helper, and the
average size lot that is mowed is one acre, for which the customer
pays $50. He is trying to decide between three lawn mowers based
on the annual fixed cost of each mower and the expected operating
cost (including hired labor cost) to mow a one acre lot. A Sears
Craftsman lawn tractor costs $1,000 and the operating cost would
be $30 per lot. A John Deere lawn tractor costs $5,000 with an
operating cost of $20 per lot. A Lawn Boy lawn tractor would cost
$3,500 with an operating cost of $25 per lot.
a). In the first year, how many lots must be mowed before a positive
profit will be earned with the Lawn Boy?
b). For each type of lawn mower, how many lots would need to be
mowed annually for it to be the preferred alternative?