Process Selection

&
Capacity Planning
..

Chackrit Duangphastra,PhD

Process Selection
Process selection includes:

Technical issuesbasic technology

used to produce a service or good
Volume or scale decisionusing
the proper amount of
mechanization to leverage the
organizations work force
Chackrit Duangp

Product Design, Process Selection, & Capacity Decisions

Chackrit Duangp

Understanding the Scale Factor

Economies of Scale:
Efficiencies of prorating costs over greater
volumes of a single product/service.

Economies of scope:
Efficiencies of prorating processing costs
over a greater number of different
process/services, which are processed
(individually) in smaller item volumes but
(collectively) at greater total volume.

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Outline
Four Process Strategies

Process Focus
Repetitive Focus
Product Focus
Mass Customization Focus
Comparison of Process Choices

Process Analysis and Design

Flow Diagrams
Time-Function Mapping
Process Charts
Work Flow Analysis
Service Blueprinting

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Outline
Service Process Design
Customer Interaction and Process Design
More Opportunities to Improve Service Processes

Process Reengineering
Environmentally Friendly Processes
Selection of Equipment and Technology
Capacity

Defining Capacity
Forecasting Capacity Requirements
Applying Decision Trees to Capacity Decisions
Managing Demand

Chackrit Duangp

Outline
Break-Even Analysis
Single-Product Case
Multiproduct Case

Strategy-Driven Investments
Investment, Variable Cost, and Cash
Flow
Net Present Value
Chackrit Duangp

Learning Objectives
Identify or Define:
Process focus
Repetitive focus
Product focus
Process reengineering
Service process issues
Environmental issues
Process analysis
Lean production
Green manufacturing
The capacity issue
Breakeven analysis
Financial considerations
Strategy-driven investments

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Fit of Process, Volume, and Variety

Repetitive Process
(Modular)

Low-Volume
(Intermittent)

High Variety
One or few units per
run, high variety
(allows customization)

Process focus
projects, job shops,
(machine, print,
carpentry)
Standard Register

Changes in modules
Modest runs, standardized
modules
Changes in attributes
(such as grade,
quality, size,
thickness, etc.)
Long runs only

Poor strategy

Repetitive
(autos, motorcycles)
Harley Davidson

(Variable costs
are high)

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High-Volume
(Continuous)

Mass
Customization
(difficult to
achieve, but huge
rewards)
Dell Computer Co.

Product focus
(commercial baked
goods, steel, glass)
Nucor Steel

Production Process Flow Diagram

Customer
Purchasing
(order inks, paper,
other supplies)
Vendors
Accounting

Receiving
Warehousing
(ink, paper, etc.)

Customer sales
representative
take order
Prepress Department
(Prepare printing plates
and negatives)
Printing Department
Gluing, binding,
stapling, labeling

Collating
Department

Information flow
Material flow

Polywrap
Department
Shipping

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Process Strategies
Involve determining how to produce

a product or provide a service

Objective
Meet or exceed customer requirements
Meet cost & managerial goals

Has long-run effects

Product & volume flexibility
Costs & quality

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Types of Process Strategies

Process strategies that follow a continuum
Within a given facility, several strategies may be

used
These strategies are often classified as:
Process-Focused

Repetitive-Focused

Product-Focused

Continuum

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Process-Focused Strategy
Facilities are organized by process
Similar processes are together
Example: All drill presses are together

Low volume, high variety products

Jumbled flow

Product A

Operation

Other names
Intermittent process
Job shop

11

22

33

Product B

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Figure 7A

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Process Flows Before Applying Group Technology

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Process Flows After Applying Group Technology

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Process-Focused Strategy Examples

Bank
Hospital

1995 Corel Corp.

1995
Corel
Corp.

Machine
Shop
1995 Corel Corp.

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Process Focused Strategy

Advantages
Greater product flexibility
More general purpose equipment
Lower initial capital investment
Disadvantages
More highly trained personnel
More difficult production planning & control
Low equipment utilization (5% to 25%)

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Repetitive Focused Strategy

Facilities often organized by assembly

lines
Characterized by modules

Parts & assemblies made previously

Modules combined for many output

options
Other names

Assembly line
Production line

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Figure 7B

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Repetitive Focused Strategy Considerations

More structured than process-

focused, less structured than

product focused
Enables quasi-customization
Using modules, it enjoys economic
advantage of continuous process,
and custom advantage of lowvolume, high-variety model
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Repetitive-Focused Strategy - Examples

Fast
Food

Clothes
Dryer
McDonalds
McDonalds
over 95 billion served
over 95 billion served

Truck
1995 Corel Corp.

1984-1994 T/Maker Co.

1995 Corel Corp.

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Chackrit Duangp

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Product-Focused Strategy
Facilities are organized by product
High volume, low variety products
Where found
Discrete unit manufacturing
Continuous process manufacturing

Other names
Line flow production
Continuous production

Products A & B
11
22
Operation

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24

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Product-Focused Strategy
Advantages
Lower variable cost per unit
Lower but more specialized labor skills
Easier production planning and control
Higher equipment utilization (70% to 90%)
Disadvantages
Lower product flexibility
More specialized equipment
Usually higher capital investment

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Product-Focused Examples
Soft Drinks
(Continuous,
then Discrete)
Light Bulbs
(Discrete)

Mass
Flu Shots
(Discrete)
Paper (Continuous)

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Chackrit Duangp

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Process Focus Repetitive Focus Product Focus

1. Product: Small
quantity, large
variety
2. Equipment:
General purpose

1. Product: Long runs,

usually standardized
2. Equipment: Special;
assembly line

1. Product: Large
quantities, small
variety
2. Equipment:
Special-purpose

3. Operators broadly
skilled

3. Employees modestly
trained

3. Operators less
broadly skilled

4. Many job
instructions

4. Repetitive operations

4. Few work orders and

job instructions;
standardization

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Process Focus Repetitive Focus

5. Raw material
inventory value high
relative to product
value
6. Work-in-process
inventory high
relative to output
7. Units move slowly
through plant
8. Make to order

Product Focus

5. Just-in-time
procurement

5. Raw material
inventory value low
compared to product
value
6. Just-in-time
6. Work-in-process
inventory
inventory low
compared to output
7. Movement
7. Swift movement
measured in hours and of units through
days
facility
8. Make to forecast
8. Make to forecast;
inventory

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Process Focus Repetitive Focus Product Focus

9. Scheduling
complex; trade-off
between inventory
availability, capacity,
and customer service
10. High fixed costs,
low variable costs
11. Cost, estimated
prior to job;known
only after
completion

9. Scheduling based on 9. Scheduling simple;

models
establishing a rate of
output sufficient to
meet sales forecasts
10. Fixed costs
dependent upon
flexibility of facility
11. Costs usually
known because of
experience

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10. High fixed costs,

low variable costs
11. Costs highly
dependent upon
utilization of capacity

31

Process Continuum
Process Focused
(intermittent process)

Product Focused
(continuous process)

Repetitive
Focus
(assembly line)
Continuum

High variety, low volume

Modular
Low utilization (5% - 25%)
Flexible equipment
General-purpose equipment

Low variety, high volume

High utilization (70% - 90%)
Specialized equipment

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Volume and Variety of Products

Volume and
Variety of
Products
One or very few
units per lot
Very small runs, high
variety
Modest runs, modest
variety
Long runs, modest
variations
Very long runs,
changes in
attributes
Equipment utilization

Low Volume High

Variety Process
(Intermittent)

Repetitive
Process
(Modular)

High Volume
Low Variety
Process
(Continuous)

Poor Strategy
(Fixed costs and
Job Shops
cost changing to
other products are
Disconnected
high).
Repetitive
Connected
Poor Strategy
Repetitive
(High variable
Continuous
costs)
Projects

5%-25%

20%-75%

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70%-80%

33

Mass Customization
Using technology and imagination to

rapidly mass-produce products that

cater to sundry unique customer desires.
Under mass customization the three
process models become so flexible that
distinctions between them blur, making
variety and volume issues less
significant.

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34

Mass Customization - More Choices Than

even
Item

Early
1970s

Vehicle models
Vehicle styles
Bicycle types
Software titles
Web sites
Movie releases
New book titles
Houston TV channels
Breakfast cereals
Items in supermartkets

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140
18
8
0
0
267
40,530
5
160
14,000

Late
1990s

260
1,212
19
380,000
9,865,982
458
77,446
851
340
20,000

35

Repetitive Focus
Assembly line
Modular Design
Flexible equipment
Modular
techniques

Mass Customization
Scheduling
techniques

Process focus
Intermittent process

High variety, low volume

Low utilization (5%-25%)
general purpose equipment

Rapid
throughput

Product focus

Continuous Process
Low variety, high volume
High utilization (70%-90%)
Specialized equipment

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36

Questions for Process Analysis and

Design
Is the process designed to achieve

competitive advantage in terms of

differentiation, response, or low cost?
Does the process eliminate steps that
do not add value?
Does the process maximize customer
value as perceived by the customer?
Will the process win orders?

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Tools for Process Design

Flow Diagrams
Process Charts
Time-Function/Process Mapping
Work Flow Analysis

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Production Process Flow Diagram

Customer
Purchasing
(order inks, paper,
other supplies)
Vendors
Accounting

Receiving
Warehousing
(ink, paper, etc.)

Customer sales
representative
take order
Prepress Department
(Prepare printing plates
and negatives)
Printing Department
Gluing, binding,
stapling, labeling

Collating
Department

Information flow
Material flow

Polywrap
Department
Shipping

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Time Function Map

Warehouse

WIP

Plant B

Wait

Transport

Wait

Wait

Extrude

Product

Print
WIP

Plant A

Product

Wait
Order

Production
control

Product

Process
Order

WIP

Sales

Receive
product

WIP

Order
Product

Order

Customer

Move
12 days

13 days

1 day

4 days

1 day

Move
10 days

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1 day

9 days

1 day

40

Process Chart Example

SUBJECT: Request tool purchase
Dist (ft)

Time (min)

Symbol

Description

D Write order
On desk
75

D To buyer
D Examine
= Operation; = Transport; = Inspect;
D = Delay; = Storage

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Chackrit Duangp

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Work Flow Analysis - Four Phases

Request from a customer or an offer to provide

services by a performer
Negotiation, allowing the customer and the
performer to agree on how the work should be
done and what will constitute customer
satisfaction
Performance of the assignment and
completion
Acceptance, closing the transaction provided
the customer expresses satisfaction and
agrees that the conditions were met.

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43

Process Reengineering
The fundamental rethinking and radical

redesign of business processes to bring

about dramatic improvements in
performance
Relies on reevaluating the purpose of the
process and questioning both the purpose
and the underlying assumptions
Requires reexamination of the basic
process and its objectives
Focuses on activities that cross boundaries

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44

Attaining Lean Production

Focus on inventory reduction

Build systems that help employees
Reduce space requirements
Develop close relationships with suppliers
Educate suppliers
Eliminate all but value-added activities
Develop the workforce
Make jobs more challenging
Set sights on perfection!

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Customer Interaction and Process

Strategy High
Low
Mass Service
Personal
banking

Commercial
Banking

Full-service
stockbroker

General purpose
law firms

Boutiques

Retailing

Service Factory

Law clinics

Fast food
restaurants

Warehouse and
catalog stores

Service Shop
For-profit
hospitals
Fine dining
restaurants

Hospitals

Low

Limited service
stockbroker

No frills
airlines

High

Degree of Labor Intensity

Professional Service

Airlines

Degree of Interaction and Customization

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Techniques for Improving Service Productivity

Strategy

Technique

Separation

Structure service so

Self-service

customers must go where

service is offered
Self-service so customers
examine, compare and
evaluate at their own pace

Postponement

Customizing at delivery

Focus

Restricting the offerings

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Techniques for Improving Service Productivity

Modules
Automation
Scheduling
Training

Modular selection of service.

Modular production
Separating services that lend
themselves to automation
Precise personnel scheduling
Clarifying the service options
Explaining problems

Improving employee flexibility

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More Opportunities to Improve

Service Processes
Layout
Human Resources
Technology

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Showing Sensitivity to the Environment

Make products recyclable
Use recycled materials
Use less harmful ingredients
Use light components
Use less energy
Use less materials
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Factors Affecting Process Alternatives

Production

flexibility
Product volume
Product variety

These
Thesefactors
factors
reduce
reducethe
thenumber
number
of
ofalternatives!
alternatives!

Technology
Cost
Human resources
Quality
1984-1994 T/Maker Co.

Reliability

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Facility Planning
Facility planning answers:
How much long-range capacity is

needed
When more capacity is needed
Where facilities should be located
(location)
How facilities should be arranged
(layout)
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Definition and Measures of Capacity

Capacity:

The maximum output of a system in a

given period

Designed
Capacity:

The maximum capacity that can be

achieved under ideal conditions

Effective capacity:

The percent of design capacity actually

expected

Rated Capacity:

Maximum usable capacity of a

particular facility

RC = (Capacity)(Utilization)(Efficiency)

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Utilization
Measure of planned or actual

capacity usage of a facility, work

center, or machine
Utilization

Expected
capacity
=
Capacity
Planned hours to be used
=
Total hours available
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Efficiency

Measure of how well a facility or

machine is performing when used

Efficiency

Actual
output
=
Effective capacity
Actual
output
in
units
=
Standard output in units
Average actual time
=
Standard time
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Capacity Planning Process

Forecast
Demand

Develop
Alternative
Plans

Quantitative
Factors
(e.g., Cost)

Compute
Rated
Capacity

Evaluate
Capacity
Plans

Qualitative
Factors
(e.g., Skills)

Compute
Needed
Capacity

Select Best
Capacity
Plan

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Implement
Best Plan

56

Managing Existing
Capacity
Capacity Management
Demand Management
Vary prices

Vary staffing

Vary promotion

Change equipment

Change lead times

(e.g., backorders)
Offer complementary
products

& processes
Change methods
Redesign the
product for faster
processing

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Complementary Products
Sales (Units)
5,000
4,000
3,000
2,000
1,000
0

Total
Snowmobiles
Jet Skis

J M M J S N J M M J S N J
Time (Months)
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Approaches to Capacity Expansion

Expected Demand

Expected Demand

New Capacity

Demand

Demand

New Capacity

Time in Years
Capacity leads demand with an incremental expansion

Time in Years
Capacity leads demand with a one-step expansion
Expected Demand
New Capacity

New Capacity
Demand

Demand

Expected Demand

Time in Years
Capacity lags demand with an incremental expansion

Time in Years
Attempts to have an average capacity, with an
incremental expansion

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Approaches to Capacity Expansion

Expected Demand

Demand

New Capacity

Time in Years
Capacity leads demand with an incremental expansion

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Approaches to Capacity Expansion

Expected Demand

Demand

New Capacity

Time in Years
Capacity leads demand with a one-step expansion

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Approaches to Capacity Expansion

Expected Demand

Demand

New Capacity

Time in Years
Capacity lags demand with an incremental expansion

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Approaches to Capacity Expansion

Demand

New Capacity

Expected Demand

Time in Years
Attempts to have an average capacity, with an incremental
expansion

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Breakeven Analysis
Technique for evaluating process &

equipment alternatives
Objective: Find the point ($ or units) at
which total cost equals total revenue
Assumptions
Revenue & costs are related linearly to
volume
All information is known with certainty
No time value of money

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Break-Even Analysis
Fixed costs: costs that continue

even if no units are produced:

depreciation, taxes, debt,
mortgage payments
Variable costs: costs that vary with
the volume of units produced:
labor, materials, portion of utilities
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Cost in Dollars (Thousands)

Breakeven Chart
Total revenue line
Profit

Breakeven point
Total cost = Total revenue

Total cost line

Variable cost

Loss

Fixed cost

Volume (units/period)

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Break-Even Analysis
Total cost = fixed costs + variable costs (quantity):

TC F VC Q

Revenue = selling price (quantity)

R SP Q

Break-even point is where total costs = revenue:

TC R or F VC Q SP Q
or

F
Q
SP VC
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Example
A firm estimates that the fixed cost

of producing a line of footwear is

$52,000 with a $9 variable cost for
each pair produced. They want to
know:
If each pair sells for $25, how many
pairs must they sell to break-even?
If they sell 4000 pairs at $25 each, how
much money will they make?
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Example Solved
Break-even point:

F
$52,000
Q

3,250 pairs
SP VC $25 $9
Profit = total revenue total costs

P SP Q F VC Q
$25 4,000 $52,000 $9 4,000
$12,000
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Crossover Chart
Process A: low volume, high variety
Process B: Repetitive
Process C: High volume, low variety
ts
o
lc
a
t
To

sA
s
e
oc
r
P

ss B
e
c
o
- Pr

c os t
l
a
t
To
ess C
c
o
r
P
ost
Total c

Fixed cost - Process C

Fixed cost - Process B
Fixed cost - Process A

Process A

Process B

Process C

Lowest cost process

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Cost of Wrong Process Found Via Breakeven

Analysis
Variable
cost

Fixed cost
Low volume, high
variety process

Variable
cost

Variable
cost

Fixed cost

Fixed cost

Repetitive process

High volume, low

variety process

Total cost for low

volume high variety

B1
B2

B3
A

Total cost for repetitive process

Total cost for high volume,
low variety process

Volume

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Strategy Driven Investment

Select investments as part of a

coordinated strategic plan

Choose investments yielding competitive
advantage
Consider product life cycles
Include a variety of operating factors in
the financial return analysis
Test investments in light of several
revenue projections

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Limitations of Net Present Value

Investments with the same present value

may have significantly different project

lives and different salvage values
Investments with the same net present
values may have different cash flows
We assume that we know future interest
rates - which we do not
We assume that payments are always
made at the end of the period - which is
not always the case

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Facility Layout
Planning
..

Chackrit Duangphastra,PhD

74

Learning Objectives
Identify or Define:

Fixed-position layout
Process-oriented layout
Work cells
Focused work center
Office layout
Retail layout
Warehouse layout
Product-oriented layout
Assembly-line factory

Describe or explain:
How to achieve a good layout for the process facility
How to balance production flow in a repetitive or
product-oriented facility

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What Is Facility Layout

Planning
Location or arrangement of

everything within & around

buildings
Objectives are to maximize
Customer satisfaction
Utilization of space, equipment, & people
Efficient flow of information, material, &
people
Employee morale & safety

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Strategic Importance of Layout

Proper layout enables:
Higher utilization of space, equipment,and

people
Improved flow of information, materials, or
people
Improved employee morale and safer working
conditions
Improved customer/client interaction
Flexibility

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77

Types of Layout
Fixed-position layout

large bulky projects such as ships and buildings

Process-oriented layout

deals with low-volume, high-variety production (job

shop, intermittent production)

Office layout

positions workers, their equipment, and spaces/offices to

provide for movement of information

Retail/service layout

allocates shelf space and responds to customer behavior

Warehouse layout

addresses trade-offs between space and material

handling

Product-oriented layout

seeks the best personnel and machine use in repetitive

or continuous production

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Layout Example

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Areas of Concern in Layout

Strategy
Communication
Service
Areas

Material
Attributes
Layout
Strategy

Warehousing
Safety

Work
Cell
Material
Flow

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Fixed Position Layout

Design is for stationary project
Workers and equipment come to site
Usually used because product movement is

difficult (ship building) or for convenience

(on-site repair).
This is often managed through Project
Management.
Complicating factors

Limited space at site

Changing material needs in different stages in
construction process

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Process Oriented Layout

Similar processes/functions are grouped

together (job shop)

Department areas having similar
processes located in close proximity
Primary advantages
flexibility, utilization of machinery/equipment.

Disadvantages
greater handling of materials/customers, more
complex scheduling, WIP/waiting lines,
departmental boundaries

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Traditional Process Layout

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Emergency Room Layout (Process Oriented)

Su
rge
ry

E.R.Triage
room

Patient A broken leg

E.R. Admissions
Patient B - erratic
pacemaker

Hallway
Ra
dio
log
y

E.R. beds

Pharmacy

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Billing/exit

84

Process Layouts
General purpose & flexible resources
Lower capital intensity & automation
Higher labor intensity
Resources have greater flexibility
Processing rates are slower
Material handling costs are higher
Scheduling resources & work flow is more
complex
Space requirements are higher

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Designing Process Layouts

Step 1: Gather information:
Space needed, space available, importance of
proximity between various units
Step 2: Develop alternative block plans:
Using trial-and-error or decision support tools
Step 3: Develop a detailed layout
Consider exact sizes and shapes of departments
and work centers including aisles and stairways
Tools like drawings, 3-D models, and CAD
software are available to facilitate this process

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Comparing Alternatives
Load-distance measures
Load: # of trips, weight moved, $-value moved
Distance: rectilinear distance (using north-south
& east-west movements)
REL charts:
Management opinion on strength of relationships
Software tools:
CRAFT: computerized relative allocation of
facilities technique
ALDEP: automated layout design program

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Process Layout Example

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Process Layout Steps

Step 1: Gather information like space needed, from-to

matrix, and REL Chart for Recovery First Sports

Medicine Clinic (total space 3750 sq. ft.)

A
Radiology

B
Laboratory

400 sq. ft.

300 sq. ft.

C
Lobby &
Waiting
300 sq. ft.

D
Examining
Rooms
800 sq. ft.

E
Surgery &
Recovery
900 sq. ft.

F
Physical
Therapy
1050 sq. ft.

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Step 1: Gather Information

(continued)

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Step 2: Develop a Block Layout

Use trial and error with from-to and
REL Charts as a guide
Use computer software like ALDEP or
CRAFT

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Other Example of Process

Oriented Layout

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92

Cost of ProcessOriented Layout

n n

Minimize cost X ijCij

i 1j1

where n total number of work centers or departments

i, j individual departments
X ij number of loads moved from department i to department j
Cij cost to move a load between department i and department j

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Interdepartmental Flow of Parts

1
1
2
3

50

100

20

30

50

10

20

100

50

4
5

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Interdepartmental Flow Graph

Showing Number of Weekly Loads
100
1

50

30
20

50
4

10
50

20

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100

95

Possible Layout 1
Room 1

Room 2

Room 2

Assembly
Department
(1)

Printing
Department
(2)

Machine shop
Department
(3)

Receiving
Department
(4)

Shipping
Department
(5)

Testing
Department
(6)

Room 4

Room 5
60

Room 6

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96

Interdepartmental Flow Graph Showing

Number of Weekly Loads
30
1

50

20

50

100

20

100

10
4

50

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Possible Layout 2
Room 1

Room 2

Room 2

Printing
Department
(1)

Assembly
Department
(2)

Machine shop
Department
(3)

Receiving
Department
(4)

Shipping
Department
(5)

Testing
Department
(6)

Room 4

Room 5
60

Room 6

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98

Office Layout
Design positions people, equipment,

& offices for maximum information

flow
Arranged by process or product
Example: Payroll dept. is by process

Relationship chart used

Examples
Insurance company
Software company

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Office Layout Floor Plan

Finance

Accounting
Fin.

Manager

Acct.

Brand X

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Relationship Chart
1

1 President

O
2 Costing

2
U

A
3 Engineering

I
O

4 Presidents Secretary
I = Important
U = Unimportant

Ordinary
closeness:
President (1) &
Costing (2)

Absolutely necessary:
President (1) &
Secretary (4)

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Retail/Service Layout
Design maximizes product

exposure to customers
Decision variables
Store flow pattern
Allocation of (shelf) space to
products

Types
Grid design
Free-flow design

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o

102

Retail Layouts - Some Rules of Thumb

Locate high-draw items around the periphery of

the store
Use prominent locations such as the first or last
aisle for high-impulse and high margin items
Remove crossover aisles that allow customers the
opportunity to move between aisles
Distribute what are known in the trade as power
items (items that may dominate a shopping trip)
to both sides of an aisle, and disperse them to
increase the viewing of other items
Use end aisle locations because they have a very
high exposure rate

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Retail /Service Layout - Grid Design

Grocery Store
Milk

Meat

Office

Carts

Checkout

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Produce Frozen Foods

Bread

104

Store Layout - with Dairy, Bread, High

Drawer Items in Corners

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Retail/Service Layout - Free-Flow

Design
Apparel Store
Trans.
Counter

Feature

Display
Table
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Retail Store Shelf Space Planogram

SUAVE

SUAVE

5
facings

VO-5

PERT

VO-5

PERT

PERT
VO-5

PERT

VO-5
VO-5

tool for shelfspace

management
Generated from
stores scanner
data on sales
Often supplied by
manufacturer
Example: P&G

PERT

Computerized

2 ft.

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A Good Service Layout

(Servicescape) Considers
Ambient conditions - background

characteristics such as lighting, sound,

smell, and temperature.
Spatial layout and functionality - which
involve customer circulation path planning
Signs, Symbols, and Artifacts characteristics of building design that
carry social significance

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Warehouse Layout
Design balances space (cube)

utilization & handling cost

Similar to process layout
Items moved between dock
& various storage areas
Optimum layout depends on

Variety of items stored

Number of items picked

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Warehouse Layout Floor

Plan
Conveyor
Truck

Zones

Order Picker

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Cross Docking
Transferring goods
from incoming trucks at
receiving docks

Incoming

to outgoing trucks at
shipping docks

Outgoing

Avoids placing goods into

storage

Requires suppliers provide

effective addressing (bar

codes) and packaging
that provides for rapid
transhipment

1984-1994 T/Maker Co.

1995 Corel Corp.

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Random Stocking Systems

Often:
Maintain a list of open locations
Maintain accurate records of existing inventory

and its locations

Sequence items on orders to minimize travel
time required to pick orders
Combine orders to reduce picking time
Assign certain items or classes of items, such as
high usage items, to particular warehouse areas
so that distance traveled is minimized

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Product Layout
Processes/work stations arranged in

sequence of activities required to produce

the product/service (Assembly Line).
Use for high volume, standardized products and
services
WIP and handling of materials/customers is
minimized
Equipment is specialized, capital intensive
Output is dependent on the slowest work
station
The line must be balanced for effectiveness.

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Product Layouts
Specialized equipment
High capital intensity & wide use of

automation
Processing rates are faster
Material handling costs are lower
Less space required for inventories
Less volume or design flexibility
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Product Layout
Product
A

Step 1

Step 2

Step 3

Step 4

Product
B

Step 1

Step 2

Step 3

Step 4

Step 2

Step 3

Product
C

7-14

Step 1

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115

Repetitive Layout
Work

Station

Work Station

Work
Station

5
Belt Conveyor

Office
Note: 5 tasks or operations; 3 work stations

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Assembly Line
Balancing

Analysis of production lines

Nearly equally divides work between

workstations while meeting required output

Objectives
Maximize efficiency
Minimize number of
work stations

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Assembly Line Balancing

1. Precedence diagram: circles=tasks, arrows show

the required sequence.

2. Determine cycle time:
production/time_unit
P
C
D demand(output)/time_unit
3. Determine required workstations (theoretical

T
task_times
minimum Work)
Nt

C
cycle_time
4. Set rules for assigning tasks (number of following
tasks, longest task time)

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Assembly Line Balancing

5. Assign tasks to first workstation, using

rules and staying within cycle time.

Repeat for following workstations until all
tasks are assigned.
6. Evaluate line efficiency:

T
E
; Na actual_wor kstations
NaC

7. Rebalance if efficiency is not satisfactory.

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Designing Product Layouts

Step 1: Identify tasks & immediate predecessors
Step 2: Determine the desired output rate
Step 3: Calculate the cycle time
Step 4: Compute the theoretical minimum

number
of workstations
Step 5: Assign tasks to workstations (balance

the line)
Step 6: Compute efficiency, idle time & balance

delay

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Step 1: Identify Tasks & Immediate Predecessors

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Layout Calculations
Step 2: Determine output rate
Vicki needs to produce 60 pizzas per hour

Step 3: Determine cycle time

The amount of time each workstation is allowed

to complete its tasks
Cycle time (sec./unit)

available time sec./day

60 min/hr x 60 sec/min

60 sec./unit
desired output units/hr
60 units/hr

Limited by the bottleneck task (the longest

task in a process):
Maximum output

available time
3600 sec./hr.

72 units/hr, or pizzas per hour

bottleneck task time 50 sec./unit

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Layout Calculations
(continued)
Step 4: Compute the theoretical minimum
number of stations
TM = number of stations needed to
achieve 100% efficiency (every second is
used)

task times

TM

cycle time

165 seconds
2.75, or 3 stations
60 sec/station

Always round up (no partial workstations)

Serves as a lower bound for our analysis

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Layout Calculations

(continued)

Step 5: Assign tasks to workstations

Start at the first station & choose the longest eligible task
following precedence relationships
Continue adding the longest eligible task that fits without going
over the desired cycle time
When no additional tasks can be added within the desired cycle
time, begin assigning tasks to the next workstation until finished
Workstation
1

Eligible task
A
B
C
D
E, F, G
E, F
F
H
I

Task Selected
A
B
C
D
G
E
F
H
I

Task time
50
5
25
15
15
12
10
18
15

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Idle time
10
5
35
20
5
48
38
20
5

124

Last Layout Calculation

Step 6: Compute efficiency and balance

delay
Efficiency (%) is the ratio of total
productive time divided by total time
Efficiency

(%)

NC

165 sec.
100 91.7%
3 stations x 60 sec.

Balance delay (%) is the amount by which

the line falls short of 100%
Balance delay 100% 91.7% 8.3%

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Comparison of Product vs. Product

Layouts
Layouts

Process Layouts

Product

Products:

large #, different

Resources:

general purpose

specialized

Facilities:

more labor intensive

more capital intensive

Flexibility:
market

greater relative to market

lower relative to

Processing
Rates:

slower

Handling costs: high

small # efficiently

faster
low

Space requirements: higher

lower

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Hybrid Layouts
Combine elements of both product &

process layouts
Maintain some of the efficiencies of
product layouts
Maintain some of the flexibility of
process layouts

Examples:
Group technology & manufacturing cells
Grocery stores

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Hybrid Layouts
Cellular Layout
Cross between product/process layout
group a number of machines into a cell to
produce a family of parts requiring similar
processing (group technology).
Often arranged into U- or C-shaped line flows

Modular Layout
achieves layout flexibility so that layouts can
be changed, expanded, or reduced without
much difficulty.

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Designing Hybrid Layouts

One of the most popular hybrid layouts uses Group

Technology (GT) and a cellular layout

GT has the advantage of bringing the efficiencies of a
product layout to a process layout environment

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Process Flows before the Use of GT

Cells

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Process Flows after the Use of GT

Cells

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Other Product Layout

Considerations
Shape of the line (S, U, O, L):
Share resources, enhance
communication & visibility, impact
location of loading & unloading
Paced versus un-paced lines
Paced lines use an automatically
enforced cycle time
Single or mixed-model lines
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A Bottleneck in the
Product Flow

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Sequential Approach to
Bottleneck Analysis

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Simple Steel Production

Flow

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Steel Production Flow:

A Product Layout

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Determining System
Capacity

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Rounding Out Capacity

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Chemical Corporation:
A Product Layout (Slide 1 of 3)
A

7,000
B

2,000

6,000
1
1

4,000

3
2

8,000

2
1

10,000

3,000

1,800
The numbers listed below the departments represent capacity in gallons
per hour. The number of the arrows represent the number of parts
(ratio) that must be combined to meet the needs of the next department.

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Chemical Corporation:
A Product Layout (Slide 2 of 3)
3,600

3,600

A
7,000

6,000

1,200

2,400

2,000
1,200

4,000

C
1,800

6,000
3
2

F
8,000

9,000
2
1

G
10,000

3,000

H
3,000

The numbers above the departments represent the

production rate required to produce a system capacity
of 9,000 gallons per hour. The bottleneck department
is H.

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Chemical Corporation:
A Product Layout (Slide 3 of 3)
4,000

4,000

7,000

6,000

1,334

2,667

B
2,000

1
1

E
4,000

6,667
3
2

F
8,000

10,000
2
1

G
10,000

3,333

H
?????

1,334

C
1,800

The System capacity can be increased by 1,000 gallons

per hour if the capacity of department H is increased by
333 gallons per hour. If it happens, The bottleneck
becomes department G.

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Summary
Layout planning is deciding on the best

physical arrangement of resources.

There are four basic types of layouts: process,
product, hybrid, and fixed position.
Process layouts provide flexibility to make a
variety of different products. Product layouts
provide greater efficiency for one product.
The steps for designing process layouts are:
gather space and closeness information,
develop a block plan, and develop a detailed
layout.

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Summary
The steps for designing an product layout

are: identify tasks and predecessors,

determine output rate, determine cycle time,
computing the theoretical minimum number
of work stations, assigning tasks to
workstations, and computing efficiency and
balance delay.
Hybrids layouts combine elements from both
types of layouts to increase efficiency.
Hybrid layouts combine GT analysis with
cellular layout concepts .
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