Slides prepared

by John Loucks

2002 South-Western/Thomson Learning TM

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Chapter 6

Operations Technologies

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

Volume and Variety of Products

Volume and Variety of
Products
One or very few units per
production lot
Very small runs, high
variety

Low Volume & High

Variety Process
(Intermittent)

Project
Job Shop

Medium run size, medium

variety

Poor strategy. Variable

costs are high

Long run size, medium

variety

Poor strategy. Variable

costs are high

Very long runs, changes in

attributes

Poor strategy. Variable

costs are high

Equipment utilization

5-25%

Repetitive Process
(Modular)

High Volume &

Low Variety
Process
(Continuous)

Poor strategy. Fixed costs and

changeover costs are high

Poor strategy. Fixed

costs and changeover
costs are high

Poor strategy. Fixed costs and

changeover costs are high

Poor strategy. Fixed

costs and changeover
costs are high

Disconnected
Repetitive

Poor strategy. Fixed

costs and changeover
costs are high

Connected
Repetitive
Poor strategy. Variable costs
are high

20-75%

Poor strategy. Fixed

costs and changeover
costs are high

Continuous
70-80%

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

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

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, ..

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

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
This is an area of todays
automation programs

Batch Size

Product
Focused,
Dedicated
Systems
Product
Focused,
Batch
System

Cellular
Manufacturing
Process-Focused,
Job Shop

Number of Product Designs

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Flexible Manufacturing System

Products
General
purpose
1000

Work cells

100

CIM

Flexible
Manufacturing
System

Focused
automation

10

Dedicated
automation

1
1

10

100

1000

10000

100000 1000000

Volume

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Flexible Manufacturing System (FMS)

Pallet
Transfer
System
Workpiece
in queue

X
X
X

Parts

Machine 2
Tools

X
X

Machine 1
Tools

X
X

Pallet with
workpiece X
attached

Load

Tools

Computer

Machine 3

Unload

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 firms 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
Automated
Assembly

CAD/CAM

Process
Controls
GT
Systems

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
Manual Operations

High

Mechanized Operations
Automated
Operations
Low
Low

High

Capital
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 longterm 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.
Dont 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
Year
1
2
3
4
5

After-Tax
Cash Inflow
$87,500
79,600
75,300
71,600
69,400

Cumulative
After-Tax
Cash Inflow
$ 87,500
167,100
242,400
314,000
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

Automation Factors
Economic factors
Annual savings
Other factors
Market share
Service quality
Labor relations
Implementation time

Factor
Weight
.30
.30
.15
.15
.10

GCS1

GCS2

$26,700
Score
.700
.600
.500
.700

$21,600
Score
.800
.700
.800
.600

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Example: Brownell Cleaners

Relative-Aggregate-Scores Approach
21,600/26,700

Automation Factors
Economic factors
Annual savings
Other factors
Market share
Service quality
Labor relations
Implementation time
Total Aggregate Score

GCS1
Factor
Wgt.
Weight Score Score
.30
.30
.15
.15
.10

1.000 .300
.700
.600
.500
.700

.210
.090
.075
.070
.745

GCS2
Wgt.
Score Score
.809

.243

.800
.700
.800
.600

.240
.105
.120
.060
.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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