3,000 units. Sian estimates thai il will cost $15,000 to se t up the process and then $1.82 per unit for labor and ma[erials. a) Draw a graph illustrating [he crossover (or indifference) poin t. b) Detennine the number of units where either choice has Lhe same

cost. P)c

7.10 Ski Boards, Inc .. wanlS to enter the market quickly with a new finish on its ski boards. 1t has three choices: (a) refurbish [he old equipment at a cost of $800, (b) make major modifications at the cost of $},100, or (c) pu rchase new equipment at a net cost of $1,800. If the finn chooses to refurbish the equipment, materials and labor will be $1.10 per board. If it chooses to make moditica­tions, materials and labor will be $0.70 per board. If il buys new equipment. variable costs are estimated [0 be $.40 per board.

a) Graph the three total cost lines on the same chart. b) Which alternative should Ski Boards, Inc. , choose if it (hinks it

ean sell more than 3,000 boards? c) Which alternative should the finn use if it th inks the marker for

boards will be between 1,()(X) and 2.000? FX"

Case Studies

Chapter 7 Process Design 307

7. f f Susan Meyer. owner/ manager o f Meyer's Motor Cou rt in Key West , is considering outsourcing the dail y room cleanup for her motel to Du ffy's Maid Service. Susa n rents an ave rage of 50 rooms for each of 365 nights (365 X 50 equals the tota l rooms rented for the year). Susan's cost (0 clean a room is $12.50. The Duffy's Maid Service quote is $18.50 per room plus a fixed cost of $25 ,000 for sundry items such as uniforms Wi lh the mote l's name. Susan's annual fi xed COst for space, equipment, and supplies is $61,000. Which is the preferred process for Susan, and why? PJc

7.12 Keith Whittingham, as manager of Designs by Whittingham, is upgrading his CAD software. The high-perfor­mance (HP) sofrware rents for $3,000 per month per workstation. The standard-perfonnance (SP) software rents for $2,000 per month per workstation. The producti vity figures thar he has available sug­gest that tJ)e HP software is faster for hi s k.ind of design. Therefore, with the HP software he wi ll need fi ve engineers and with the SP software he will need six. This translates inlo a variable cost of $200 per drawing for the HP system and $240 per drawing for the SP sys­tem. At hi s projected volume of 80 drawings per month , which sys­tem should he rent? F!Jc

7_13 Using Figure 7.6 in the discussion of value-st ream mapping as a starling point. ana lyz.e an opportunity for improve­ment in a process with which you are familiar and develop an improved process.

7.14 Creative Cabinets, Inc .. needs to choose a production method for its new office shelf, the Maxisland. To help accomplish this , the firm has gathered the following production cost data :

Annualized Variable Costs Fixed Cost of (eer unit) ($1

Process Type Plant & Equip. Labor Material Energy

Mass CuslOmization $1.260.000 30 18 12

Intenninent $1,000,000 24 26 20 Repetitive $1',625,000 28 15 12 Continuous $1.960.000 25 15 10

CreaLive Cabinets projects an annual demand of 24,000 units for the Maxistand. The Maxisland will sell for $120 per unit. a) Whieh process type will maximize the annual profit from pro­

ducing the Maxisland? b) What is (he va lue of th.i s annual profit? ""

~ Rochester Manulacturing's Process Decision

Rochester Manufacturing Corporation (R.M:C) is considering mov­ believe thar a $3 million expenditu re on machinery and the transfer ing some of its producfion from traditionaJ numerically controlled machines will handle about 30% of RMC's work. There will. of machines to a flexible manufacturing system (FMS). Its compute r course, be rransition and startup costs in addition to this. numerical control machines have been operating in a high- variety, T he firm has not yet entered a ll its parrs in to a compre­low-volume manner. Machine utili zat ion, as near as it can deter­ hensive group technology system, but believes that (he 30% is a mine, is hovering around 10%. The mach ine tool salespeople and a good estimate of products suitable for the FMS. This 30% should consulting firm want to put the machines together in an FMS. They fit very nice ly inre a "family." A reduct ion, because of higher

Frilo-Lay has also buih over 50 ac res o f so lar concentrato rs behind its Modesto, Californi a, plant to generate solar power. The so lar power is being converted into he<.lt ::lnd used to cook Sun Chips. A biomass boiler, which will burn agricultuml waste, is also planned to prov ide addition;)1 renewable fuel.

Frito-Lay is install ing high- tech fillers that recycle most o f the wate r used to ri nse and wash potatoes. h also recycles com byprod­ucts to make Doritos and olher snacks; starch is reclaimed and sold, primarily as animal feed . and leftover sludge is burned to create methane gas 10 rUn (he plant boile r.

There are benefits besides the potential energy savings. Like many other large corporations, FritcrLay is striving to establish its green cre­dentjals as consumers become more focused on environmental issues. There are marketi ng opportunit ies, roo . The company, for example. advertises that its popular Sun Chips snacks ale made using solar energy.

AI Fri tO-Lay's Florida planl, on ly 3X% of the was(e goes to landfills, but that is slill 1.5 million pounds an nuall y. The goal is zero waste 10 landfi lls. The snack food maker earned its spot in the NatioJlal Environme ntal Pe rfo rmance Track program by maintain­ing a sustained environme ntal compliance record and making new commitments to reduce, reuse, and recycle at this facilit y.

Chapter 7 Process Design 309

Substantial resource reductions have been made in the production process, with an energy reduction of21 % ncross Frito-Lay's 34 U.S. plants. But the continuing battle for resource reduction cOlltinues. The company is also moving toward biodegradable packaging and pursu~ ing initiatives in areas such as office paper, packaging material, sea­soning bags, and cans and bOllles. While these multiyear iniljarives are expensive. Ihey have the backing at the highest levels of Frito-Lay as well as corporate executives at PepsiCo, dle parent company.

Discussion Questions'

1. Using resources. regulation, and repuratio n as a basis, what are the sources of pressure on fiJlllS such as Frito-Lay to reduce their environmental footprint ?

2. Identify the specifie techniques that Frito~Lay is usin g to become a "green mun ufacturer."

3. Seicci another company and compare its gle en policies to those of Frito-Lay.

*You may wish 10 view lhe video rh<it accompanies thi~ case before addressing these questions.

Source: Professors Beverly Amer. Northern Arizona University ; Barry Render, Rollins College; and Jay Hei zer, Texas Lutheran Un iversi ty.

~ Process Analysis at Arnold Palmer Hospital

The Arnold Palmer Hospital (APH) in Orlando, Florida, is one of the busiest and mOSl respected hospita ls fo r {he medical trealmenl of chi ldren and women in the U.S. Since its o pening on golfing legend

Arnold Palmer's birthday September 10, 1989. more than 1.6 mil~ lion children an d WOOlen ha ve passed through its doors. It is the fourth busiest labor and de li very hospital in the U.S. and one of the largest neonatal intensive ca re units in the Southeast. APH ranks in the top 10% of hospitals nationwide in patient satisfaction.

"Par t of the reason fo r APH 's success," says Executive Direclor Kathy Swanson, " is our continuous improvement process. Our goa l is 100% patient sa tisfaction. But getting there means con· stantly examin ing and reexamining everything we do, from patient flow, to cleanliness, to layout space, to a work~frien dl y enviroll­ment, to speed of medica tion deli ve ry fro m the pha rmacy to a patient. Continuous improvement is a huge and never-ending task ."

One or the tools the hospitaJ uses consiste ntly is (he process flow­chart (like those in Figure 7 . 1 to 7.3 in [his chapter and Figure 6 .6e in Chapter 6). Staffer Diane Bowles. who carries the title "clinkal prac­tice improvement consultant." charts scores of processes. Bowles's flowcharts help study ways (0 improve the turnaround of a vacated room (espeeially import.1I1t in a hospital that has pushed capacity for years), speed up the admission process, and deliver warm Oleals warm.

Lately, APH has been examining the flow of maternity patients (and their paperwork) from the momen t [hey enter the hospital until they are di SC harged , hopefull y wi th the ir health y baby D day or two later. The flow of matern ity patients fo llows these steps:

I. Enter APH's Labor & Delivery (L&D) check-in desk entrance. 2. If the baby is born en route or if birth is imminent, the mothe r

and baby are taken directl y to Labor & Delivery on the second floor and registe red and admined di rectly althe bedside. If {here are no complications, the mother and baby go to ste p 6.

3. If the baby is not yet hom, the front desk asks if the mother is pre­registered. (Mosl do pre-register at the 28- to 30-week pregnancy mark). If she is not, she goes to me registration office on the firsl tloor.

4. The pregnant woman is then taken to L&D Triage on the 8th floor for assessme nl. If she is in active labor, she is taken to an

Video Case ~_ L&D room On the 2nd floor llntillhe baby is born. If she r\. 1. is not ready. she goes 10 step 5.

5. Pregnant women no t ready to deliver (i.e., no contrac­tions or faJse alarm) are either sent home to return on a later date and reenter the system at thal time, or jf contractions are not yet close enough, they are sent to walk around the hospital grounds (to encourage progress) and then reru rn to L&D Triage at a pre­scribed time.

6, When the baby is born, jf thele are no complications, after 2 hours the mother and baby are transferred to a "mother-baby care unit" room on floors 3, 4 . or 5 for an average of 40-44 hours.

7. If lhere are complications with the mother, she goes to an operating room and/or intensive care unit. From the re, she goes back to a mOlher-baby care room upon slabi lizalion-or is discharged at another time if not stabili zed. Complications for the baby may result in a Slay in the neon atal intensive care unjt (NICU) before transfer to the baby nursery near the mOlher's room. If the baby is not stable enough for discharge with the modler, the baby is discharged later.

8. Mother and/or baby, when read y, are discha rged and taken by wheelchai r to the discharge exit for pickup to travel home.

Discussion Questions'

1. As Diane's new ass istant , you need to flowchart this process. Explain how the process might be improved once you have com­pleted Ihe chart.

2. If a mother is scheduled for a Caesarean-section birth (i.e. , the baby is removed from {he womb surg icall y) , how would [hi s flowchart change?

3. If all mothers were e lectronically (or manu<.llly) pre-registered, how would the flowchru1 change? Redraw the chart to show your changes.

4. Desc ribe in detail a process that the hospira l could anal yz.e, besides the ones men tioned in thi s case.

"You may wish 10 view Ihe video lhal accompan ies Ihjs case before addressing lhese questions.