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Product DesignProduct Design

Product design refers to the entire process of engineering a potential future product or service, including its form, fit, and function. Product design or redesign should be closely tied to an organization’s strategy. It is a major factor in cost, quality, time to market, customer satisfaction and competitive advantage.

Product Design ActivitiesA range of activities fall under the heading of product design. The activities and responsibilities of

product design include the following:1. Translate customer wants and needs into product and service requirements.2. Refine existing products and services3. Develop new products and services4. Formulate quality goals5. Formulate cost targets6. Construct and test prototypes7. Document specificationsProduct design involves of affects nearly every functional area of an organization. However,

marketing and operations have major involvement.

Reason for Product DesignProduct design has typically and strategic implications for the success and prosperity of an

organization. Furthermore, it has an impact on future activities. Consequently, decisions in this area are some of the most fundamental that managers must make.

Organizations become involved in product design for a variety of reasons. The main forces that initiate design are market opportunities and threats. The factors that give rise to market opportunities and threats can be one or more changes.

1. Economic (e.g. low demand, excessive warranty claims)2. Social and demographic (e.g. aging baby boomers, populations shifts)3. Competitive (e.g. new or changed products, new advertising or promotions)4. Political liability or legal (e.g. government changes, safety issues, new regulations)5. Cost or Availability (e.g. of raw materials, components, labor)6. Technological (e.g. of product components, processes)

Objectives of Product DesignThe main focus of product design is customer satisfaction. Hence, it is essential for designers to

understand what the customer wants and design with that in mind. Marketing is the primary source of information.

It is important to note that although profit is generally the overall measure of design effectiveness because the time interval between the design phase and profit realization is often considerable more immediate measures come into play. These typically include development time and cost, the product cost and the resulting product quality. Quality, of course, is typically high on the list of priorities in product design. At one time, having high quality was enough for a product to stand out, now it is the norm and those that fall below this norm are the ones that stand out.

Secondary focuses in product design relate to function, cost and potential profit (in for-profit organizations), quality, appearance, forecasted volume, ease of production, ease of assembly, and ease of maintenance. It is crucial for designers to take into account the operations capabilities. This is sometimes referred to as designing for operations. Failure to take this into consideration can result in reduced productivity, reduced quality and increased costs. For these reasons, it is wise for design to solicit input from operations people throughout the design process to reduce the risk of achieving a design that looks good on paper but does not work in the real world.

In general, design, operations and marketing must work closely together keeping each other informed and taking into account the wants and needs of the customer. In addition, legal, environmental and ethical considerations can influence the design function.

Factors to Consider in Product Design1. Legal, Ethical, and Environmental Issues

Designers must be careful to take into account a wide array and ethical considerations. Moreover, if there is a potential to harm the environment, then those issues also become important. Most organizations have numerous government agencies that regulate them. Among the more familiar federal agencies are the Food Drug Administration, the Occupational Health and Safety Administration, and the Environmental Protection Agency, and various state and local agencies.

Product Liability can be strong incentives for design improvements. Product Liability means that a manufacturer is liable for any injuries or damages caused by a faulty product because of poor workmanship or design.

Thus, it is extremely important to design products that are reasonably free of hazards. When hazards do exist, it is necessary to install safety guards or other devices for reducing accident potential, and to provide adequate warning notices of risks. Consumer groups, business firms, and various government agencies often work together to develop industry wide standards that help avoid some of the hazards.

Ethical issues often arise in the design of the products and services, it is important for managers to be aware of these issues and for designers to adhere to ethical standards.

Organizations generally want designers to adhere to guidelines such as the following. > Produce designs that are consistent with the goals of the organization. > Give customers the value they expect. > Make health and safety a primary concern. > Consider potential to harm the environment.

2. Life Cycles Many products and services go through life cycles in terms of demand. When an item is

produced, it may be treated as a curiosity. Demand is generally low potential buyers are not yet familiar with the item. Many potential buyers recognized that all of the bugs have probably not been worked out and that price may drop after the introductory period.

3. Standardization An important issue that often arises in both product or services design and process design is

the degree of standardization. Standardization refers to the extent to which there is absence of variety in a product, service, or process. Standardized products are made in large quantities of identical items. Standardized service implies that every customer or item processed receives essentially the same service. Standardized processes deliver standardized service or produced standardized goods.

4. Designing for Mass Customization Companies like standardization because it enables them to produce high volumes of relativity

low-cost products, although products with little variety. Customers, on the other hand, typically prefer more variety although they like the low cost. The question for producers is how to resolve these issues without (1) losing the benefits of standardization and (2) incurring a host of problems that are often linked to variety. The answer, at least for some companies is mass customization, a strategy of producing standardized goods or services, but incorporating some degree of customization in the final product or service. One is delayed differentiation and another is modular design.

Delayed Differentiation - is the postponement tactic: the process of producing, but not quiet completing a product or service, postponing completion until customer preferences or specification are known.

Modular Design - is a form of standardization. Modules represent groupings of component parts into subassemblies, usually to the point where the individual parts lose their separate identity. It is a form of standardization in which component parts are grouped into modules that are easily replaced or interchanged.

5. Reliability Reliability is a measure of the ability of a product, a part, a service or an entire system to

perform its intended function under a prescribed set of conditions. The importance is underscored by its use by prospective buyers in comparing alternatives by sellers as one determinant of price. It is also have an impact on repeat sales, reflect on the product's image, and if it is too low, create legal implications.

6. Robust Design Robust Design is a design that results in products or services that can function over a broad

range of conditions. Some products or services will function as designed only within a narrow range of conditions, while others will perform as designed over a much broader range of conditions. The latter have robust design. The more robust a product or service, the less likely it will fail due to a change in the environment in which it is used or in which it is performed. Hence, the more designers can build robustness into a product or service, the better it should hold up resulting in a higher level of customer satisfaction.

7. Cultural Differences Product designers in multinational companies also must take into account any cultural

differences of different countries or regions related to the product.

Phases in Product Design and DevelopmentProduct design and development generally proceeds in a series of phases:1. Idea Generation

Ideas can come from a variety of sources. They can be Supply- chain based, competitor based, and research based.

A supply chain can be rich source of ideas. Customers, suppliers, distributors, employees and maintenance and repair personnel can provide valuable insights. Customer inputs can be obtained from surveys, focus groups, complaints and unsolicited suggestions for improvement. Input from suppliers, distributors, employees and maintenance or repair personnel might come from interviews, direct or indirect suggestions or complaints.

One of the strongest motivators for a new and improved products or services is competitors’ products and services. By studying a competitor's products or services and how the competitor operates (pricing policies, return policies, warranties, location strategies, etc.), an organization can

glean many ideas. Beyond that, some companies purchase competitors’ products and then carefully dismantle and inspect it, searching for ways to improve their own product. This called reverse engineering, dismantling and inspecting a competitor’s product to discover product improvements.

Research is another source of ideas for new or improved products or services. Research and Development refers to organized efforts that are directed toward increasing scientific knowledge and product or process innovation.

2. Feasibility Analysis This entails market analysis (demand), economic analysis (development cost and production

cost, profit potential) and technical analysis (capacity requirements and availability, and the skills needed). Also it is necessary to answer the question: Does it fit with the mission? It requires collaboration among marketing, finance, accounting, engineering and operations.

1. Product Specification This involves detailed description of what is needed to meet (or exceed) customer wants,

and requires collaboration between legal marketing and operations.2. Process Specification

Once product specifications have been set, attention turns to specifications for the process that will be needed to produce the product. Alternatives must be weighed in terms of cost, availability of resources, profit potential, and quality. It involves collaboration between accounting and operations. 3. Prototype Development

With product and processes specifications complete, one (or few) units are made to see if there are any problems with the product or process specifications. 4. Design Review

Make any necessary changes, or abandon. Involves collaboration among marketing, finance, engineering, design and operations.

Design for Manufacturing The following are design techniques that have greater applicability for the design of products than the

design of services: 1. Concurrent Engineering

To achieve a smooth transition from product design to production, and to decrease product development time, many companies are using simultaneous development or concurrent engineering. It means bringing engineering design and manufacturing personnel together early in the design phase to simultaneously develop the product and the process for creating the product.

2. Computer Aided Design (CAD) Computers are increasingly used for product design. CAD uses computer graphics for product

design. A major benefit of this design is the increased productivity of designers.

3. Production Requirements This is based on the production capabilities of the firm. The term design for manufacturing

(DEM) is used to indicate the designing of products that are compatible with the organization's capabilities. A related concept is the design for assembly (DFA) a good design must take into account not only how a product will be fabricated, but also how it will be assembled. Design for assembly focuses on reducing the number of parts in an assembly, as well as in the assembly

methods and sequence that will be employed. Another more general term is manufacturability which refers to the ease of fabrication and/or assembly.

4. Recycling This means recovering materials for future use. This applies not only for manufactured parts

but also for materials used during production, such as lubricant and solvents. Reclaimed metal or plastic parts maybe melted down and used to make different products. Companies recycle for a variety of reasons, cost savings, environment concerns, and environmental regulations.

5. Remanufacturing This is an emerging concept that refers to refurbishing used products by replacing worn out or

defective components, and reselling the products. Designing products so that they can be easily taken apart has given rise to another design consideration, design for disassembly (DFD). This includes using fewer parts and less materials and using snap-fits where possible instead of screws and bolts. This is "Making It (Almost) New Again".

6. Component CommonalityCompanies that have multiple products or services to offer the customers see to it that these

products have high degree of similarity of features and components. A part can be used in many products.

7. Quality Function Deployment (QFD)Obtaining input from customers is essential to assure that they will want that is offered for sale.

Although obtaining input can be informal through discussions with customers, there is a formal way to document customer wants. Quality function deployment is a structured approach for integrating the "voice of a customer” into both the product or service development process. The purpose is to ensure that customer requirements are factored into every aspects of the process.

Economic AnalysisEconomic analysis is an important factor to the management in taking decisions regarding the product

design policy. After getting sufficient information about customer requirement and market potentialities on one hand and a detailed study about the functional, operational and quality aspect of the proposed product on the other, the economic analysis will start.

An economic analysis must be carried out while making a choice of processes. Often the choice involves make-or-buy decisions. Such decisions cannot be solely based on economic factors and costs. We should also consider other factors such as quality requirements, reliability of supplies in terms of volumes and time frame, political expediency, administrative convenience and technical feasibility. If other factors are nearly the same, economic analysis becomes deciding factor. Break-even analysis helps to determine economically viable solutions. The analysis is based on costs, volume and profit. Costs can be divided into fixed costs and variable costs. Fixed costs are independent of the level of production and may include overheads like rent of buildings, rent of machinery and so on. Variable costs are direct costs incurred in producing a unit of the item and include costs of raw materials, costs of direct labor and so on. The revenue earned is the product of the sale price per unit and the number of units produced (assuming that they all will be sold). The break-even point is that level of production where the revenue equals costs.

Example:Suppose a manufacturer has identified the following options for obtaining a machine part: buy the part

at P200 per unit, make it on a lathe at a cost of P75 per unit or make the part on a sophisticated automatic machine at a cost of P15 per unit. The lathe costs P80,000 and the automatic machine costs P200,000. What is the best option for the manufacturer?

Solution: Let x be the number of parts produced or bought.If the part is bought,

Cost = 200*xIf the part is made on the lathe,

Cost = 80,000 + 75xIf the part is made on automatic machine,

Cost = 200,000 +15xIf the part is sold for P300, then

Revenue = 300xLet us find the break-even point when we buy the part or manufacture it on the lathe.

200x = 80,000 +75xx = 640

Let us also find out the break-even point when we make the part on the lathe or make it on the automatic machine.

80,000x + 75x = 200,000 +15xx = 2000

This implies that if the requirement is less than 640, we should buy the part. If it is between 640 and 2000, we should make the part on the lathe. If the requirement is more than 2000, we should make the part on the automatic machine.

Process Selection and AnalysisProcess

Processes are the essence of operations management. They transform inputs into outputs. More than products or technologies, the ability to do things well--processes--constitutes a firm's competitive advantage.

Process strategy is an organization's overall approach for physically producing goods and services. Process decisions should reflect how the firm has chosen to compete in the marketplace, reinforce product decisions, and facilitate the achievement of corporate goals. A firm's process strategy defines its:

Capital intensity: The mix of capital (i.e., equipment, automation) and labor resources used in the productive process,

Process flexibility: The ease with which resources can be adjusted in response to changes in demand, technology, products or services, and resource availability,

Vertical integration: The extent to which the firm will produce the inputs and control the outputs of each stage of the productive process, and

Customer involvement: The role of the customer in the productive process.Types of Processes

1. Job shop or Project Projects represent one-of-a-kind production for an individual customer. They tend to involve large

sums of money and last a considerable length of time. For those reasons, customers are few and customer involvement intense. Customers are heavily involved in the design of the product and may also specify how certain processes are to be carried out. In some cases, the customer will have representatives on site to observe the production process, or send in inspectors to certify quality at critical stages of project development.

Most companies do not have the resources (or time) to complete all the work on a project themselves, so subcontracting is common. The production process, as well as the final product, is basically designed anew for each customer order. Thus, the process is very flexible. And given the lengthy duration of a project, changes in customer preferences, technology, and costs cause frequent

adjustments in product and process design. Managing these engineering change orders (ECO) is a major concern in project management. Another concern is keeping track of all the activities that are taking place and making sure they are completed correctly and on time, so as not to delay other activities.

Cutting-edge technology, project teams, and close customer contact make project work exciting. But projects can also be risky with their large investment in resources, huge swings in resource requirements (as new projects begin and old ones end), limited learning curve, and dependence on a small customer base.

2. Batch Production Making products one-at-a-time and treating their production as a project can be time consuming

and cost-prohibitive. Most products can be made more quickly and more efficiently in volume. A production system that processes items in small groups or batches is called batch production. Batch production is characterized by fluctuating demand, short production runs of a wide variety of products, and small to moderate quantities of any given product made to customer order.

Most of the operations in batch production involve fabrication (e.g., machining) rather than assembly. Jobs are sent through the system based on their processing requirements, so that those jobs requiring lathe work are sent to one location, those requiring painting to another, and so forth. A job may be routed through many different machine centers before it is completed. If you were to track the flow of a particular customer order through the system, you would see a lot of stopping and starting as jobs queue at different machines, waiting to be processed. Work on a particular product is not continuous; it is intermittent.

Batch production systems are also known as job shops. Examples include machine shops, printers, bakeries, education, and furniture making. Advantages of this type of system are its flexibility, the customization of output, and the reputation for quality that customization implies. Disadvantages include high per-unit costs, frequent changes in product mix, complex scheduling problems, variations in capacity requirements, and lengthy job completion times.

3. Mass Production or Assembly Line Mass production is used by producers who need to create more standardized products in larger

quantities than batch production can economically handle. Products are made-to-stock for a mass market, demand is stable, and volume is high. Because of the stability and size of demand, the production system can afford to dedicate equipment to the production of a particular product. Thus, this type of system tends to be capital-intensive and highly repetitive, with specialized equipment and limited labor skills.

Mass production is usually associated with flow lines or assembly lines. Flow describes how a product moves through the system from one workstation to the next in order of the processing requirements for that particular product. (Batch production cannot be set up in this way because the processing requirements are different for each customer order.) Assembly line describes the way mass production is typically arranged--most of the operations are assembly-oriented and are performed in a line. Goods that are mass-produced include automobiles, televisions, personal computers, fast food, and most consumer goods.

Advantages of mass production are its efficiency, low per-unit cost, ease of manufacture and control, and speed. Disadvantages include the high cost of equipment, underutilization of human capabilities, the difficulties of adapting to changes in demand, technology, or product design, and the lack of responsiveness to individual customer requests.

4. Continuous Flow or Production

Continuous processes are used for very high-volume commodity products that are very standardized. The system is highly automated (the worker's role is to monitor the equipment) and is typically in operation continuously twenty-four hours a day. The output is also continuous, not discrete--meaning individual units are measured, rather than counted. Steel, paper, paints, chemicals, and foodstuffs are produced by continuous production. Companies that operate in this fashion are referred to as process industries.

Advantages of this type of system are its efficiency, ease of control, and enormous capacity. Disadvantages include the large investment in plant and equipment, the limited variety of items that can be processed, the inability to adapt to volume changes, the cost of correcting errors in production, and the difficulties of keeping pace with new technology.

As we move from projects to continuous production, demand volume increases; products become more standardized; systems become more capital intensive, more automated, and less flexible; and customers become less involved.

Process choice depends on a firm's strategy, the type of products, type of customers, volume of demand, and organizational capabilities. The degree of automation is one aspect of process choice that can be quantified based on cost factors and demand volume. Break-even analysis, presented in the next section, is a commonly used quantitative technique.

Process AnalysisProcess analysis is the documentation and detailed understanding of how work is performed and how it

can be redesigned.

A Systematic Approach to Process Analysis1. Suggestion system

A voluntary system by which employees submit their ideas on process improvements.2. Design team

A group of knowledgeable, team-oriented individuals, who work at one or more steps in the process, do the process analysis and make the necessary changes.3. Metrics

Performance measures that are established for a process and the steps within it.4. Flowcharts

A diagram that traces the flow of information, customers, equipment, or materials through the various steps of a process.

Service Blueprint A special flowchart of a service process that shows which steps have high customer

contact (line of visibility).

Break-Even AnalysisThere are several quantitative techniques available for selecting a process. One that bases its decision

on the cost trade-offs associated with demand volume is break-even analysis. The components of break-even analysis are volume, cost, revenue, and profit.

Volume is the level of production, usually expressed as the number of units produced and sold. We assume that the number of units produced can be sold.

Cost is divided into two categories, fixed and variable. Fixed costs remain constant regardless of the number of units produced, such as plant and equipment and other elements of overhead. Variable costs

vary with the volume of units produced, such as labor and material. The total cost of a process is the sum of its fixed cost and its total variable cost (defined as volume times per unit variable cost).

Revenue on a per-unit basis is simply the price at which an item is sold. Total revenue is price times volume sold. Profit is the difference between total revenue and total cost. These components can be expressed mathematically as follows:

In selecting a process, it is useful to know at what volume of sales and production we can expect to earn a profit. We want to make sure that the cost of producing a product does not exceed the revenue we will receive from the sale of the product. By equating total revenue with total cost and solving for v, we can find the volume at which profit is zero. This is called the break-even point. At any volume above the break-even point, we will make a profit. A mathematical formula for the break-even point can be determined as follows:

Example:Several graduate students at Whitewater University formed a company called the New River Rafting

Company to produce rubber rafts. The initial investment in plant and equipment is estimated to be $2,000. Labor and material cost is approximately $5 per raft. If the rafts can be sold at a price of $10 each, what volume of demand would be necessary to break even?

SOLUTION:Given the following:

Then the break-even point is

The solution is shown graphically in the following figure. The x-axis represents production or demand volume and the y-axis represents dollars of revenue, cost, or profit. The total revenue line extends from the origin, with a slope equal to the unit price of a raft. The total cost line intersects the y-axis at a level corresponding to the fixed cost of the process and has a slope equal to the per-unit variable cost. The intersection of these two lines is the break-even point. If demand is less than the break-even point, the company will operate at a loss. But if demand exceeds the break-even point, the company will be profitable. The company needs to sell more than 400 rafts to make a profit. Exhibit 6.1 shows the Excel solution for this problem.

Process Flow DesignA 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, and operation and route sheets.

Process FlowchartingIt is the use of a diagram to present the major elements of a process. The basic elements can include

tasks or operations, flows of materials or customers, decision points, and storage areas or queues. It is an ideal methodology by which to begin analyzing a process.

Flow chart symbols

Tasks or operations Examples: Giving an admission ticket to a customer, installing an engine in a car, etc.

Decision Points Examples: How much change should be given to a customer, which wrench should be used, etc.

Example:

Service Process Selection and DesignService Design There are many similarities between product and service design. However, there are some important differences as well, owing to that nature of the service. One major difference is that unlike manufacturing, where production and delivery are usually separated in time, services are usually created and delivered simultaneously. Service refers to an act, to something that is done to or for a customer. It is provided by delivery a service system, which includes the facilities, processes, and skills needed to provide the service. Many services are not pure services, but part of a product bundle- combination of goods and services provided to a customer. System design involves development or refinement of the overall service package.

1. The physical resources needed. 2. The accompanying goods that are purchased or consumed by the customer or provided with the service. 3. Explicit services (the essential/ core features of a service, such as hair styling, lawn mowing)4. Implicit services (ancillary/ extra features, such as friendliness, courtesy)

Phases in the Service Design Process 1. Conceptualize

a. Idea generation b. Assessment of customer wants/ needs (marketing) c. Assessment of demand potential (marketing)

2. Identify service package components needed (operations and marketing)

Storage areas or queues Examples: Sheds, lines of people waiting for a service, etc.

Flows of materials or customers

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Material Received

from Supplier

Y

No, Continue…

Inspect Material for Defects Defects

found?

Return to Supplier for Credit

Yes

3. Determine performance specifications (operations and marketing)4. Translate performance specifications into design specifications5. Translate design specifications into delivery specifications. This is flowcharting the process. 6. Analyze profitability. Determine which factors can influence profitability , both positively and negatively, and determine how sensitive profitability is to these factors. For example, processing mistakes are often a key factor. Concentrate design efforts on key factors. Establish design features that protect against negative impacts and maximize positive impacts.

Service Blueprinting. A useful tool for conceptualizing a service delivery system is the service blueprint which is a method for describing and analyzing a service process. A key aspect of service blueprinting is flowcharting the process.

The major steps in service blueprinting are:a. Establish boundaries for the process and decide on the level of detail that will be needed. b. Identify the steps involved and described them. If this is an existing process, get input from those who do it. c. Prepare flowchart of major process steps. d. Identify potential failure points. e. Establish a time frame for service execution and an estimate of variability in procession time requirements. Time is primary determinant of cost, so establishing a time standard for service is important. Variability can also impact time, so an estimate of that is also important. Customers regard service time as a key concern- the shorter the service time, the better. However, there are exceptions, such as leisurely meal at a fine restaurant and a physician who takes the time to listen to a patient rather than rush to diagnosis or treatment.Characteristics of Well-designed Service System

1. Being consistent with the organization mission. 2. Being user friendly. 3. Being robust if variability is a factor. 4. Being easy to sustain. 5. Being cost effective. 6. Having value that is obvious to customers. 7. Having effective linkages between back of the house operations and front of the house operations. Front operations should focus on customer service, while back operations should focus on speed and efficiency. 8. Having a single, unifying theme, such as convenience or speed.9. Having design features and checks that will ensure service that is reliable and high quality.

Challenges of Service Design 1. There are variable requirements. This creates a need for robust design that will accommodate a range of inputs and perhaps a range of outputs. 2. Services can be difficult to describe. By their very nature, verbal descriptions can be somewhat imprecise. 3. Customer contact is usually much higher in services. 4. Service design must take into account the service- customer encounter. There can be relatively large number of variables to deal with in the service-customer encounter.

Three Contrasting Service Design1. The product-line approach

This approach has been pioneered by McDonald’s where the delivery of fast food is treated as a manufacturing process rather than as a service process. It overcomes some of the inherent drawbacks of services. Service implies subordination of the server to the served. Manufacturing, on the other hand

concentrates on things rather than people. McDonald’s orientation is toward the efficient production of results and not on the attendance on others. It aims at the rapid delivery of a uniform, high quality mix of prepared foods of an environment of obvious cleanliness, order and cheerful courtesy. Everything is built into the system through attention to total design and facilities planning. The attendant has no other choice but to operate it exactly as the designers intended. McDonald’s can be classified as a face-to-face service with tight specification. For instance, a wide-mouthed scoop is used to pick up precise amount of French fries for each order size. The employee never touches the product.

2. The self-service approach

Automatic teller machines, salad bars, buffet counters and so on shift some of the burden of the service to the customer. The customer feels that he is in control, but the customer has to be trained in what to do as he acts as a partial employee of the organization. The customer should also be able to correct himself in case he makes a mistake. ATM gives elaborate instructions to the customer and provide him ample opportunity to correct himself in case he makes an error.

3. The personal attention approach

Hotel services provided to the guests is a typical example of personal attention approach. Good hotels treat the customer as king and look after all his requirements. The Marriot Hotel advertisement slogan sums it up well --- “Our new desk clerk lent his cufflinks to a guest for a crucial meeting. Instantly, we knew we hired the right guy.” Some businesses create personal customers, making note of their birthdays and wedding anniversaries and send cards and flowers to their customers on such occasions. The “feel good” that is created in the customer goes a long way to promoting the business.

A well designed service system is consistent with the operating focus of the organization. It is robust, user-friendly and offers consistent performance.

Facility layoutFacility Layout

Facility Layout can be defined as the process by which the placement of departments, workgroups within departments, workstations, machines, and stock-holding points within a facility determined.

This process requires the following inputs: Specification of objectives of the system in terms of output and flexibility Estimation of product or service demand on the system Processing requirements in terms of number of operations and amount of flow between

departments and work centers Space requirements for the elements in the layout Space availability within the facility itself

Assembly Line BalancingAn assembly line consists of a series of workstations, each with a uniform time interval that is referred

to as a takt time (which is also the time between successive units coming off the end of the line). At each workstation, work is performed on a product by adding parts and/or by completing an assembly operation. The work performed at each station is made up of many tasks (also referred to as elements, or work units). Such tasks are described by motion-time analysis. Generally, they are groupings that cannot be subdivided on the assembly line without paying a high penalty in extra motions.

The total work to be performed at a workstation is equal to the sum of the tasks assigned to that workstation. The assembly line balancing problem is one of assigning all of the tasks required to a series of workstations so that the time required to do the work at each station does not exceed the takt time, and at

the same time, the unassigned (i.e., idle) time across all workstations is minimized. An additional consideration in designing the line is to assign the tasks as equitably as possible to the stations. The problem is further complicated by the relationships among tasks imposed by product design and process technologies. This is called the precedence relationship, which specifies the order in which the tasks must be performed in the assembly process.

Steps in Assembly Line BalancingThe sequence of steps required to balance an assembly line is straightforward:

1. Specify the sequential relationship among tasks using a precedence diagram. The diagram consists of circles and arrows. Circles represent individual tasks; arrows indicate the order of task performance.

2. Determine the required takt time (T), using the following formula:

T= Production time per dayOutput per day (in units)

3. Determine the theoretical minimum number of workstations (Nt) required to satisfy the takt time constraint, using the following formula:

N t=∑ of task×(S)Takt time (T )

4. Select a primary rule by which tasks are to be assigned to workstations, and a secondary rule to break ties.

5. Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to the takt time, or no other tasks are feasible because of time or sequence restrictions. Repeat the process for Workstation 2, Workstation 3, and so on, until all tasks are assigned.

6. Evaluate the efficiency of the resulting assembly line using the following formula:

Efficiency= Sum of task times (S)= Sum of task times (S) Actual number of workstations (Na) × Takt time (T )

7. If efficiency is unsatisfactory, rebalance the line using a different decision rule.

Example: A toy company produces a Model J Wagon that is to be assembled on a conveyor belt. Five hundred wagons are required per day. The company is currently operating on a one-shift, eight-hour-a-day schedule, with one hour off for lunch (i.e., net production time per day is seven hours). The assembly steps and times for the wagon are given below:

Task Performance Time (in seconds)

Description Tasks that Must Precede

A 45 Position rear axle support and hand fasten four screws to nuts

-

B 11 Insert rear axle AC 9 Tighten rear axle support screws to nuts BD 50 Position front axle assembly and hand fasten

with four screws to nuts-

E 15 Tighten front axle assembly screws DF 12 Position rear wheel #1 and fasten hub cap CG 12 Position front wheel #2 and fasten hub cap CH 12 Position front wheel #1 and fasten hub cap EI 12 Position rear wheel #2 and fasten hub cap EJ 8 Position wagon handle shaft on front axle

assembly F, G, H, I and hand fasten bolt and F, G, H, I

nutK 9 Tighten bolt and nut J

Find the balance that minimizes the number of workstations, subject to takt time and precedence constraints.

1. Draw a precedence diagram.

2. Takt time determination.

Here we have to convert to seconds since our task times are in seconds.

T= Production time per dayOutput per day (in units)

=

7hrsday

x 60minhr

x 60 secmin

500wagons

¿ 25200500

=50.4 seconds

3. Theoretical minimum number of workstations required (the actual number may be greater):

N t=∑ of task×(S)Takt time(T )

=195 seconds50.4 seconds

=3.86 stations→4 stations

4. Select assignment rules. Research has shown that some rules are better than others for certain problem structures. In general, the strategy is to use a rule assigning tasks that either have many followers or are of long duration since they effectively limit the balance achievable. In this case, we use as our primary rule

a. Assign tasks in order of the largest number of following tasks. Our secondary rule, to be invoked where ties exist from our primary rule, is

b. Assign tasks in order of longest operating time.

Task Total Number of Following Tasks Following TasksA 6 B, C, F, G, J, K

B or D 5 C, F, G, J, K (for B)C or E 4 H, I, J, K (for E)

F, G, H, or I 2 J, KJ 1 KK 0 -

5. Make task assignments to form Workstation 1, Workstation 2, and so forth, until all tasks are assigned.

Actual Assignment

*

Task Task Time (in seconds)

Remaining Unassigned

Time (in seconds)

Feasible Remaining

Tasks

Task with Most

Followers

Task with Longest

Operation Time

Station 1

A 45 5.4 idle None

Station 2

D 50 0.4 idle None

Station 3

B 11 39.4 C, E C, E EE 15 24.4 C, H, I CC 9 15.4 F, G, H, I F, G, H, I F, G, H, IF * 12 3.4 idle None

Station 4

G 12 38.4 H, I H, I H, IH * 12 26.4 I

I 12 14.4 JJ 8 6.4 idle None

Station 5

K 9 41.4 idle None

Denotes task arbitrarily selected where there is a tie between longest operation times. Graphically,

6. Calculate the efficiency.

Efficiency= SNT

= 195(5 ) (50.4 )

=0.77=77 %

7. Evaluate the solution. An efficiency of 77 percent indicates an imbalance or idle time of 23 percent (1.0 − 0.77) across the entire line. From Exhibit 8.12A we can see that there are 57 total seconds of idle time, and the “choice” job is at Workstation 5.

Capacity Management and Process TechnologyCapacity

Capacity can be defined as the ability to hold, receive, store, or accommodate. In operations management, the capacity of an operation is the maximum level of value-added activity over a period of time that the process can achieve under normal operating conditions.

To illustrate this, consider a car park which can hold a maximum of 500 vehicles at any given time. The actual processing capacity of the car park will vary depending on how it is used. For example, if the car park is opened for eight hours a day and will be occupied only by full time office workers, the processing capacity will be 500 vehicles per day. On the other hand, if the car park is opened to shoppers, each averaging two hours, the processing capacity will be up to 2000 vehicles per day.

In reality, your business, like many others, does not operate at the maximum processing capacity. This can be either because of insufficient demand, or as a strategic policy, so that the operation can quickly respond to new orders.

Usually, you will find that some parts of your operations are operating below capacity while others are at their peak (also referred to as the ‘ceiling'). The parts that are at the ceiling are the areas of concern for your business as they are the capacity constraint for the whole operation and may potentially cause your business to miss valuable opportunities. Hence, it is critical that you ensure that your business at all times, have enough capacity to meet all current and future demands.

Strategic Capacity PlanningStrategic capacity planning is an approach for determining the overall capacity level of capital intensive

resources, including facilities, equipment, and overall labor force size.

Capacity Planning ConceptsA. Best Operating Level

The Best Operating Level is the output that results in the lowest average unit cost. The best operating level for a facility is the percent of capacity utilization that minimizes average unit cost. Rarely is the best operating level at 100 percent of capacity--at higher levels of utilization, productivity slows and things start to go wrong. Average capacity utilization differs by industry. An industry with an 80 percent average utilization would have a 20 percent capacity cushion for unexpected surges in demand or temporary work stoppages. Large capacity cushions are common in industries where demand is highly variable, resource flexibility is low, and customer service is important. Utilities, for example, maintain a 20 percent capacity cushion. Capital-intensive industries with less flexibility and higher costs maintain cushions under 10 percent.

Economies of Scale: - Where the cost per unit of output drops as volume of output increases - Spread the fixed costs of buildings & equipment over multiple units, allow bulk purchasing & handling of material

Diseconomies of Scale: - Where the cost per unit rises as volume increases- Often caused by congestion (overwhelming the process with too much work-in-process) and scheduling complexity

B. Capacity Utilization RateCapacity utilization rate is a metric which is used to compute the rate at which probable output

levels are being met or used. The output is displayed as a percentage and it can give a proper insight into the general negligence that the organization is at a point of time. Capacity utilization rate is also called as operating rate. Capacity utilization rate reveals how close a firm is to its best operating point (i.e. design capacity).

CapacityUtilization Rate= CapacityUsedBestOperating Level

Example: During one week of production, a plant produced 83 units of a product. Its historic highest or best utilization recorded was 120 units per week. What is this plant’s capacity utilization rate?

CapacityUtilization Rate= CapacityUsedBestOperating Level

= 83120

=0.69=69%

Capacity PlanningCapacity planning is the process of determining the production capacity needed by an organization to

meet changing demand for its products. Capacity is the rate of productive capability of a facility. Capacity is usually expressed as volume of output per time period. It is the process of determining the necessary to meet the production objectives. The objectives of capacity planning are:

1. To identify and solve capacity problem in a timely manner to meet consumer needs.2. To maintain a balance between required capacity and available capacity.3. The goal of capacity planning is to minimize this discrepancy.

Capacity planning is the first step when an organization decided to produce more or a new product. Once capacity is evaluated and a need for a new expanded facility is determined, facility location and process technology activities occur. Too much capacity would require exploring ways to reduce capacity, such as temporarily closing, selling, or consolidating facilities. Consolidation might involve relocation, a combining of technologies, or a rearrangement of equipment and processes. Capacity planning is done in order to estimate whether the demand is higher than capacity or lower than capacity. That is compare demand versus capacity.

Importance of Capacity Planning1. Capacity decisions have a real impact on the ability of the organization to meet future demands for

products and services.2. Capacity decisions affect operating costs.3. Capacity is usually a major determinant of initial cost. Typically, the greater the capacity of a

productive unit, the greater its cost.4. Capacity decisions often involve long-term commitment of resources and the fact that, once they

are implemented, those decisions may be difficult or impossible to modify without incurring major costs.

5. Capacity decisions can affect competitiveness.6. Capacity affects the ease of management.7. Globalization has increased the importance and the complexity of capacity decisions.8. Because capacity decisions often involve substantial financial and other resources, it is necessary

to plan for them far in advance.

Steps in the Capacity Planning Process1. Estimate future capacity requirements2. Evaluate existing capacity and facilities and identify gaps3. Identify alternatives for meeting requirements4. Conduct financial analyses of each alternative5. Assess key qualitative issues for each alternative6. Select the alternative to pursue that will be best in the long term7. Implement the selected alternative8. Monitor results

Determinants of Effective Capacity1. Facilities

The design of facilities, including size and provision for expansion, is key. Locational factors, such as transportation costs, distance to market, labor supply, energy

sources and room for expansion are also important. Likewise, layout of the work area and environmental factors also play a significant role.

2. Product and service factors Product and service design can have a tremendous influence on capacity. The more uniform the output, the more opportunities there are for standardization of methods

and materials.3. Process factors

The quantity capability of a process is an obvious determinant of capacity but subtle determinant is the influence of output quality.

Process improvement that increases quality and productivity can result in increased capacity.4. Human factors

The tasks that make up a job, the variety of activities involved, also the training, skill and experience required to perform a job all have an impact on the potential and actual output.

Employee motivation has a very basic relationship to capacity, as do absenteeism.5. Operational factors

Inventory stocking decisions, late deliveries, purchasing requirements, acceptability of purchased materials, quality inspection and control procedures also have an impact on effective capacity.

6. Supply chain factors It must be taken into account in capacity planning if substantial capacity changes are involved.

7. External factors Product standards, especially minimum quality and performance standards can restrict

management’s options for increasing capacity.

Planning Service CapacityPlanning Service Capacity vs. Manufacturing Capacity Time

Goods cannot be stored for later use and capacity must be available to provide a service when it is needed.

Location Service goods must be at the customer demand point and capacity must be located near the

customer. Volatility of Demand

Much greater than in manufacturing.

Facility LocationFacility location is the process of identifying the best geographic location for a service or production

facility.

Factors Affecting Location Decisions1. Proximity to source of supply

Reduce transportation costs of perishable or bulky raw materials2. Proximity to customers:

High population areas, close to JIT partners3. Proximity to labor

Local wage rates, attitude toward unions, availability of special skills (silicon valley)4. Community considerations

Local community’s attitude toward the facility (prisons, utility plants, etc.)5. Site considerations

Local zoning & taxes, access to utilities, etc.6. Quality-of-life issues

Climate, cultural attractions, commuting time, etc.7. Other considerations

Options for future expansion, local competition, etc.

Making Location DecisionsAnalysis should follow 3 step processes:1. Identify dominant location factors2. Develop location alternatives3. Evaluate locations alternatives