CHAPTER 7
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Overview
Process Selection
Types of Processes
Process Flow Structures
Product-Process Matrix
Break-Even Analysis
Manufacturing Process Flow Design
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Process and Process Selection
Process: Any set of activities performed by an organization that takes inputs and transforms them into outputs ideally of greater value to the organization than the original inputs.
Process selection refers to the strategic decision of selecting with which kind of production processes to have in the manufacturing plant.
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Process Selection
Three primary questions:
How much variety in products or services will the system need to handle?
What degree of equipment flexibility will be needed?
What is the expected volume of output?
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Types of Processes
Based on what they do
Conversion process
 Iron ore  steel sheets, ingredients of toothpaste  toothpaste
Fabrication process: changing raw materials into some specific form
 Sheet metal  car fender, gold  a crown for a tooth, cloth
 clothes
Assembly process

Assemble parts to components, put toothpaste tubes into a box, fasten a dental crown into someone’s mouth
Testing process
 For quality of products
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Process Types
A process flow structure refers to how a factory organizes material flow using one or more of the process technologies.
Job shop
Batch shop
Assembly Line
Continuous Flow
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Job Shop
Job shop: A process structure suited for low-volume production of a great variety of nonstandard products .
Each job may require a different set or sequence of processing steps
High flexibility of equipment (General-purpose equipment )
Skilled workers
Examples: commercial printing firms, copy center making a single copy of a student term paper, airplane manufacturers, machine tool shops, American Chopper
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Batch Shop
Batch shop: A process structure that produces a moderate variety of standard products at relatively low volumes .
A somewhat standardized job shop
Employed when a business has a relatively stable line of products
The products are produced periodically in batches to reduce the impact of setup time on equipment
The equipment need NOT be as flexible as in a job shop
The skill level of workers need NOT to be as high as in a job shop
Examples:
Bakeries: make bread, cakes, cookies in batches;
Movie theatre: shows movies to groups (batches) of people;
Airlines: carry batches of people from airport to airport;
Other examples: production of beer, book, magazine, etc
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Assembly Line
Assembly line (Repetitive processing):
A process structure designed to make discrete parts moving through a set of specially designed workstations at a controlled rate .
High volume
Standardized products
Slight flexibility of equipment
Skill of workers is usually low
Examples: manual assembly of toys and appliances, automatic assembly of components on a printed circuit board, production line (automobiles, computers, etc.)
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Example: Production Line
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Continuous Flow
Continuous flow: An often automated process structure that converts raw materials into finished product in one continuous process .
Highly standardized products, no variety
Special-purpose equipment (no need for equipment flexibility)
Skill of workers is low
Examples: petroleum, steel, sugar, flour, and salt
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Example: Continuous Flow
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Product-Process Matrix
Choice of process flow structure is based on two main considerations:
Variety—how much the product changes from customer to customer;
Volume of demand.
Product-process matrix: Shows the relationship between process structures and product volume and variety characteristics.
As volume increases and the product line narrows, specialized equipment and standardized material flows become economically feasible. (see next slide)
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Product-Process Matrix
Exhibit 7.1
High
Variety
Low
Low Volume
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High

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Break-Even Analysis
A standard approach to choosing among alternative processes or equipment.
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.
Break-even Point (BEP)
One option case: determine the point in units (produced and sold) at which total cost = total revenue.
Multiple options case: determine the points in units at which one option is indifferent to another.
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Cost-Volume Relationships (Total Cost)
Fixed cost (FC)
0
Q (Quantity in units)
Total cost (TC) = Fixed cost (FC) + Variable cost (VC)
= Fixed cost (FC) + Unit cost (v) X Quantity (Q)
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Revenue-Volume Relationships (Total Revenue)
0
Q (Quantity in units)
Total revenue = Revenue per unit (R)
X
Quantity (Q)
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Cost-Volume Relationships (BEP)
0 BEP Q (volume in units)
Break-even point (BEP): the quantity of output at which total cost and total revenue are equal.
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One-Option Case
Find out the quantity that makes:
Total Revenue (TR) = Total Cost (TC)
Total Revenue = Total Fixed Cost + Total Variable Cost
Unit Revenue* Units = Total Fixed Cost + Unit Cost* Units
R * Q = FC + v * Q
Break Even Quantity: Q
BEP
= FC / (R – v)
Profit (margin) = Total Revenue – Total Cost
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Example -- One-Option Case
Suppose you want to purchase a new computer that will cost $5,000.
It will be used to process written orders from customers who will pay $25 each for the service. The cost of labor, electricity and the form used to place the order is $5 per customer.
How many customers will we need to serve to permit the total revenue to break-even with our costs?
FC = $5,000, R = $25/customer, v = $5/customer
Break-even quantity Q
BEP
:
= FC /(R-v) = 5,000/(25-5)
= 250 customers
How many customers should we serve to make a profit of $1,000?
Profit = Total Revenue – Total Cost
= R * Q – (FC + v * Q) = (R-v) * Q - FC
1,000 = (25-5) * Q – 5,000
Q = 300 customers
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Example -- Multiple-Option Case (page 207)
Suppose a manufacturer has identified the following options for obtaining a machined part:
1. purchase the part
$200/unit, no fixed cost
2. make the part on a semiautomatic lathe
$75/unit, fixed cost = $80,000
3. make the part on a machining center
$15/unit, fixed cost = $200,000
Which option should the manufacturer choose?
TC_buy = 200 * Q
TC_lathe = 80,000 + 75 * Q
TC_machine = 200,000 + 15 * Q
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Example -- Multiple-Option Case (page 207)
500000
400000
TC_Lathe
TC_Machine
300000
200000
TC_Machine
TC_Lathe
B
100000
TC_buy
A
0
0 300 600 900 1200 1500 1800 2100
Demand < B  Buy
B < Demand < A  Semiautomatic Lathe
Demand >A  Machine center
2400
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Example -- Multiple-Option Case (page 207)
Break-even point B:
Total cost of “buy” = Total cost of “Make on lathe”
200 x Demand = 80,000 + 75 x Demand
Demand
B
= 80,000/(200-75) = 640 units
Break-even point A:
Total cost of “Make on lathe” = Total cost of “Make on machine”
80,000 + 75 x Demand = 200,000 + 15 x Demand
Demand
A
= (200,000- 80,000)/(75-15) = 2,000 units
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Manufacturing Process Flow Design
A process flow design can be defined as a mapping of the specific processes that raw materials, parts, and subassemblies follow as they move through a plant.
The most common tools to conduct a process flow design include assembly drawings, assembly charts, operation and
route sheets, and process flowcharts.
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Assembly Drawing
An assembly drawing is simply an exploded view of the product showing its component parts.
Plug assembly drawing
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Assembly Chart
An 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.
Assembly chart for plug assembly
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Operation and Route Sheet
An operation and route sheet 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.
Operation and route sheet for plug assembly
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Process Flowchart
A process flowchart denotes what happens to the product as it processes through the productive facility.
Process flowchart for plug housing
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Recap
Process
Process selection
Types of processes
Process flow structures
Job shop
Batch shop
Assembly line
Continuous flow
Product-process matrix
Break-even point (BEP)
One-option case
Multiple-option case
Manufacturing process flow design
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