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Slides prepared

by John Loucks

 2002 South-Western/Thomson Learning TM 1 1


Chapter 6

Operations Technologies

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Overview

● Introduction
● Types of Manufacturing Automation
● Automated Production Systems
● Software Systems for Automation
● Automation in Services
● Automation Issues
● Deciding Among Automation Alternatives
● Wrap-Up: What World-Class Companies Do

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Introduction

● In the past, automation meant the replacement of


human effort with machine effort, to save labor costs.
● Today, automation means integrating a full range of
advanced information and engineering discoveries
into operations processes for strategic purposes.
● Today, automation is applied not only for labor cost
savings, but also for:

Improved quality

Faster production and delivery of products/services

Increased flexibility
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Volume and Variety of Products
High Volume &
Low Volume & High
Volume and Variety of Repetitive Process Low Variety
Variety Process
Products (Modular) Process
(Intermittent)
(Continuous)
Poor strategy. Fixed
One or very few units per Poor strategy. Fixed costs and
production lot Project changeover costs are high
costs and changeover
costs are high
Poor strategy. Fixed
Very small runs, high Poor strategy. Fixed costs and
variety Job Shop changeover costs are high
costs and changeover
costs are high

Medium run size, medium Poor strategy. Variable Disconnected Poor strategy. Fixed
costs and changeover
variety costs are high
Repetitive costs are high

Long run size, medium Poor strategy. Variable Connected Poor strategy. Fixed
costs and changeover
variety costs are high
Repetitive costs are high
Very long runs, changes in Poor strategy. Variable Poor strategy. Variable costs
attributes costs are high are high Continuous
Equipment utilization 5-25% 20-75% 70-80%
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Types of Manufacturing Automation

● Machine Attachments

Inexpensive add-ons to machines

Represent oldest technology in automation

Typically perform one or a few simple operations

Examples:

Strip feeders

Quick centering and grasping devices

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Types of Manufacturing Automation

● Numerically Controlled (N/C) Machines



Have a control system that receives/reads
instructions and translates them into machine
operations

N/C machines have evolved:

CN/C – computer numerically controlled

DN/C – direct numerically controlled (several
machines controlled by a single computer)

Examples:

Weaving machines

Lathes
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Types of Manufacturing Automation

● Robots

Human-like machines performing production tasks

Brain of these machines is a microcomputer

Have grippers (vacuum, magnetized, adhesive)

Have sensors (tactile, proximity, vision/optical)

Can operate in environments hostile to humans
(heat, noise, dust, darkness, skin irritants, …)

Perform precisely and repeatedly without fatigue

Weld, assemble,paint, inspect, transport, …..

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Types of Manufacturing Automation

● Automated Quality Control Inspection



Take physical dimensions of parts

Compare measurements to standards

Determine if parts conform to specifications

Also check performance (ex. - electronic circuits)

Making 100% inspection economically feasible

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Types of Manufacturing Automation

● Automatic Identification Systems (AIS)



Sense and input data into computers

Use bar codes, radio frequencies, magnetic stripes,
optical character recognition, machine vision

Data read from products, documents, parts, and
containers

Used in warehouses, factory floors, retailing,
wholesaling

Example – scanner at grocery store checkout

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Types of Manufacturing Automation

● Automated Process Controls



Use sensors to obtain measures of performance

Compare measures to standards

Might use “expert system” to determine if/what
process adjustment is necessary

If necessary, change settings of process

Long used in chemical processing, petroleum
refining, paper production

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Automated Production Systems

● Automation technology becoming more sophisticated


● Focus has shifted away from individual machines
● More common are whole systems of automated
machines linked together for broader purposes

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Automated Production Systems

● Automated Flow Lines



In-line, automated processing machines linked by
automated material transfer

Perform without need for human attendance

Used to produce an entire component

Also called fixed automation or hard automation

Used when product demand is high and stable

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Automated Production Systems

● Automated Assembly Systems



Automated assembly machines linked by
automated material transfer

Operations are component insertion and joining

Produce major assemblies or complete products

Often use standard (lower cost) robots

Product design appropriate for assembly by
humans is not fitting for automated assembly

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Redesigning Products for Automated Assembly

● Reduce the amount of assembly required


● Reduce the number of fasteners required
● Design components to be automatically delivered and
positioned
● Design products for layered assembly and vertical
insertion of parts
● Design parts so that they are self-aligning
● Design products into major modules for production
● Increase component quality to avoid machine jams

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Automated Production Systems

● Flexible Manufacturing Systems (FMS)



Kits of materials/parts for a product are loaded on
the materials-handling system

Code is entered into computer identifying product
and its location in the sequence

Each production machine (without a worker):

Receives settings/instructions from computer

Automatically loads/unloads required tools

Carries out its processing instructions

Product automatically transferred to next machine

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Process Design Depends on
Product Diversity and Batch Size

Product This is an area of today’s


Focused, automation programs
Dedicated
Systems
Batch Size

Product
Focused,
Batch
System
Cellular
Manufacturing
Process-Focused,
Job Shop

Number of Product Designs 17


Flexible Manufacturing System
Products

General
purpose
1000
Work cells
CIM

100 Flexible
Manufacturing Focused
System automation
10
Dedicated
automation
1
1 10 100 1000 10000 100000 1000000
Volume

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Flexible Manufacturing System (FMS)
X
Pallet
Transfer Tools
X
System
X X Machine 1

Workpiece X
in queue X Tools
X
X Machine 2
Pallet with
X Computer
workpiece X Tools
attached X
X Machine 3
X
Load Unload
Parts Worker
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Automated Production Systems

● Automated Storage & Retrieval Systems (ASRS)



Receive orders for materials from anywhere in
operations

Collect the materials from locations in warehouse

Deliver the materials to workstations in operations

Three major elements of ASRS are:
Computers and communication systems

Automated materials handling/delivery systems


Storage and retrieval systems in warehouse


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Automated Production Systems

● Automated Storage & Retrieval Systems (ASRS)



Main benefits of ASRS are:
Increased storage capacity

Increased system throughput


Reduced labor costs


Improved product quality


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Software Systems for Automation

● Three “complex” computer-based systems



Computer-Aided Design and Computer-Aided
Manufacturing (CAD/CAM)

Computer-Integrated Manufacturing (CIM)

Enterprise Resource Planning (ERP)

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Software Systems for Automation

● Computer-Aided Design and Computer-Aided


Manufacturing (CAD/CAM)

CAD/CAM is a merger of two systems, CAD and
CAM (described next)

It is the automation of the transition from product
design to manufacturing

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Software Systems for Automation

● Computer-Aided Design (CAD)



Concerned with the automation of certain phases
of product design

Use of computer in interactive engineering
drawing and storage of designs

CAD systems are installed to:

Increase designers’ productivity

Improve the quality of designs

Improve product standardization

Improve design documentation

Create a manufacturing database
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Software Systems for Automation

● Computer-Aided Manufacturing (CAM)



CAM capability progressing slower than CAD

Concerned with automating the planning and
control of production:
Plan production

Prepare product routings


Generate N/C programs


Fix the settings of machinery


Prepare production schedules


Control the operation


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Software Systems for Automation

● Computer-Integrated Manufacturing (CIM)



“All of the firm’s operations related to production
are incorporated in an integrated computer system
to assist, augment, or automate the operations.”

Covers the chain of events from sales order to
product shipment

Output of one activity becomes the input to the
next activity

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Computer Integrated Manufacturing (CIM)

● Incorporates all manufacturing-related functions

ASRS Process
Controls

Automated GT
Assembly Systems

CAD/CAM MRP II

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Software Systems for Automation

● Enterprise Resource Planning (ERP)



A complex set of software programs

Integrates most of the business functions in an
organization

Accounting

Human resources

Purchasing

Production

Logistics

E-Business

… and more
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Software Systems for Automation

● Enterprise Resource Planning (ERP)



Five leading ERP software companies are:

SAP ( their “R/3” software is top seller)

Oracle

J.D. Edwards

PeopleSoft

Baan

Can take several years and $millions to implement
(Chevron spent $160 million over five years)

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Automation in Services

Example
● Airlines – air traffic control, passenger reservation

● Banks – ATMs, computerized bank statements

● Gas Stations – automated payment (pay-at-the-pump)

● Health Care – MRI system, AGVS for waste disposal

● Grocery Store – self-service checkout stations

● Real Estate – web based house-for-sale tour video

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Automation in Services

● Trend developing toward more-standardized services


and less customer contact.
● Service standardization brings trade-offs:

- Service not custom-designed for each customer

+ Price of service reduced, or at least contained
● Banking industry is becoming increasingly automated
● Service firm can have a manual/automated mix:

Manual - “front room” operations

Automated - “back room” operations

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Degree of Customer Contact in Services
and the Use of Automated Equipment
Degree of
Customer Contact
High Manual Operations

Mechanized Operations
Automated
Operations
Low
Capital
Low High Intensity
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Automation Issues

● Not all automation projects are successful.


● Automation cannot make up for poor management.
● Economic analysis cannot justify automation of some
operations.
● Not technically feasible to automate some operations.
● Automation projects may have to wait in small and
start-up businesses.

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Automation Questions

● What level of automation is appropriate?


● How would automation affect the flexibility of an
operation system?
● How can automation projects be justified?
● How should technological change be managed?
● What are some of the consequences of implementing
an automation project?

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Building Manufacturing Flexibility

● Manufacturing flexibility has become the cornerstone


of operations strategy in the 2000s.
● The ability to improve/maintain market share because

Customer orders can be delivered soon after
receipt of the order

Production can quickly be shifted from product to
product

Production capacity can be increased rapidly

New products can be developed and introduced
into production quickly and inexpensively

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Justifying Automation Projects

● Payback period, NPV, IRR, and other conventional


approaches alone are inadequate tools on which to
base product/process design/redesign decisions
● Product/process technology must be seen as a long-
term strategic choice
● Returns on investment include:

Improved product/service quality

Faster order delivery

Increased flexibility

Reduced production cost

Increased market share
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Managing Technological Change

● Have a master plan for automation.


● Recognize the risks in automating.
● Establish a new production technology department
● Allow ample time for completion of automation.
● Do not try to automate everything at once.
● People are the key to making automation successful.
● Don’t move too slowly in adopting new technology.

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Worker Displacement and Training/ Retraining

● One result of automation is the elimination of jobs


● Some say that new jobs are created in engineering,
manufacturing, programming, selling, and servicing
the new-technology products
● Many firms realize they cannot afford NOT to train
and retrain their current workers
● Firms are providing more training than ever before
● Still, US firms spend little on training compared to,
say, German firms (4% of payroll cost on training)

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Deciding Among Automation Alternatives

● Economic factors
● Effect on market share
● Effect on product/service quality
● Effect on manufacturing flexibility
● Effect on labor relations
● Amount of time required for implementation
● Effect of implementation on ongoing production
● Amount of capital required

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Deciding Among Automation Alternatives

● Economic Analysis

Economic analysis will always be an important, if
not a predominant, factor in deciding among
alternatives

Frequently used approaches are:

Break-even analysis

Financial analysis

By using only economic analysis, other important
factors are ignored

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Example: Valley Hospital

● Economic Analysis
Valley Hospital is planning to install a new linen
retrieval system. Two alternatives being considered
are: a continuous vacuum (CV) system and a batch
robotic/chute (BR/C) system. The following
estimates were prepared:
CV BR/C
Annual Fixed Costs ($000) $2,690 $975
Average Variable Cost per Ton $1,660 $2,590

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Example: Valley Hospital

● Economic Analysis
At a forecast annual operating level of 2,000 tons
of linen, which alternative should be chosen based
only on total annual cost?
TCCV = 2,690,000 + 1,660(2,000) = $6,010,000
TCBR/C = 975,000 + 2,590(2,000) = $6,155,000

The continuous vacuum (CV) alternative has a lower


total annual cost.

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Example: Valley Hospital

● Economic Analysis
The annual volume of linen has to increase or
decrease to what level in order for the BR/C
alternative to be favored?
TCCV = TCBR/C
2,690,000 + 1,660(Q) = 975,000 + 2,590(Q)
930Q = 1,715,000
Q = 1,844.1 tons
Annual volume must decrease to 1,844 tons or less.
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Example: Security Bank

● Economic Analysis
Security is considering the installation of an
ATM and has estimated the cost of the machine,
effects on revenue, savings in taxes from
depreciation, and labor savings.
The machine is estimated to have an initial cost of
$250,000 and an expected life of five years. The
after-tax cash inflows for years 1-5 are estimated to
be: $87,500; $79,600; $75,300; $71,600; and
$69,400. Compute the after-tax payback period.

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Example: Security Bank

● Economic Analysis
Cumulative
After-Tax After-Tax
Year Cash Inflow Cash Inflow
1 $87,500 $ 87,500
2 79,600 167,100
3 75,300 242,400
4 71,600 314,000
5 69,400 383,400
Payback period = 3 + (250,000 – 242,400)/71,600
= 3.106 years
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Deciding Among Automation Alternatives

● Rating Scale Approach


Automation alternatives are rated using, say, a 5-
point scale on a variety of factors such as:
● Economic measures
● Effect on market share
● Effect on product quality
● Effect on manufacturing flexibility
● Effect on labor relations
● Amount of time required for implementation
● Effect on ongoing production

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Deciding Among Automation Alternatives

● Relative-Aggregate-Scores Approach
Similar to Rating Scale Approach, but weights
are formally assigned to each factor which permits
the direct calculation of an overall rating for each
alternative.

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Example: Brownell Cleaners

● Relative-Aggregate-Scores Approach
An analyst at Brownell Cleaners is considering
two alternatives for a new garment conveyor system,
GCS1 and GCS2.
He has interviewed several managers in the firm
and conducted extensive analysis of the problem. He
has collected the information shown on the next slide.
Which alternative do you recommend, based on
the relative-aggregate-scores approach?

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Example: Brownell Cleaners

● Relative-Aggregate-Scores Approach
Factor
Automation Factors Weight GCS1 GCS2
Economic factors
Annual savings .30 $26,700 $21,600
Other factors Score Score
Market share .30 .700 .800
Service quality .15 .600 .700
Labor relations .15 .500 .800
Implementation time .10 .700 .600

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Example: Brownell Cleaners

● Relative-Aggregate-Scores Approach
21,600/26,700 GCS1 GCS2
Factor Wgt. Wgt.
Automation Factors Weight Score Score Score Score
Economic factors
Annual savings .30 1.000 .300 .809 .243
Other factors
Market share .30 .700 .210 .800 .240
Service quality .15 .600 .090 .700 .105
Labor relations .15 .500 .075 .800 .120
Implementation time .10 .700 .070 .600 .060
Total Aggregate Score .745 .768
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Wrap-Up: World-Class Practice

● World-Class companies utilize the latest


technologies/practices. For example:

Design products to be automation-friendly

Use CAD/CAM for designing products

Convert fixed automation to flexible automation

Move towards smaller batch sizes

Plan for automation

Build teams to develop automated systems

Justify automation based on multiple factors

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End of Chapter 6

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