5 - Chapter 8 - Proposed Method Implementation

Proposed Method
Implementation
Chapter 8
20 March 2018 Brian N. Craig, PhD, CPE 1

Action Items
 Return exams
 Turn in labs

CH 8 Key Points – Proposed Method
Implementation
 Decide among alternate methods, using value

engineering, cost-benefit analysis, cross-over
charts, and economic analysis
 Sell the new method; people are resistant to
change
 Establish sound base rates using reliable job
evaluation
 Accommodate workers of all abilities

Proposed Method Implementation
 We will look at at a variety of decision making
tools developed to assist the analyst choose
the “best” (appropriate) alternative
 The next step is selling the proposed method
 Most important, since if not sold  not installed
 Can be true for work method changes, new
equipment, job changes, safety, ergonomic, etc.
 Selling can be tough  people are resistant
to change (Ego's), management’s tight purse
strings, etc.
 In selling a proposal (Guidelines)
 FIRST - demonstrate HOW it will POSITIVELY
effect the bottom line
 Start with and focus on IMMEDIATE benefits 
something management can almost taste
 Value capture and savings (increased productivity, lower
cost per unit, labor (indirect and direct), materials
(indirect and direct), maintenance, etc.)
 Talk in management terms  $$$ (ROI, ROC, PP, etc.)

 In selling a proposal (con’t)
 Second – more value capture and savings
 quality, reliability (decreases in
maintenance), decreased downtimes
(increases in operational availability), and
other direct effects on management
objectives
 These are benefits that will be realized
later in the project life cycle

 In selling a proposal (con’t)

 Third – cost avoidance issues  costs of
injury/illness, fines associated with non-
compliance, material re-work, scrap, etc.

 NOTE:
 The book discusses the third most
important part of the presentation is
recovery of capital (or PP). I feel this issue
should be covered in the initial discussion
of the effect to the bottom line
 How will we pay for this?
 Justification  immediate value and saving
benefits, intermediate value and saving
benefits, finally cost avoidance benefits
Decision Making Tools
 Decision Tables
 Value Engineering
 Cost Benefit Analysis
 Supplemental method (simple and to the
point)
 Breakeven Charts
 Multiple Criteria Decision Making
 Economic Decision Tools
 Decision Tables
 Structured approach designed to take out the
subjectivity (could be an issue surrounded by
emotion and ego’s)
 Tables consist of condition-action statements 
similar to if-then statements in computer programs
and flow charts
 Another form of these tables AKA Hazard Action
Tables (probability-severity tables)  used in
safety engineering
Simple Example of Hazard Action Table
Severity
Frequency Negligible Marginal Critical Catastrophic
Extremely remote
Remote
Reasonably probable *
Probable
Actions
Forget it
Long-range study
Correct (1 year)
Correct (90 days)
Correct (30 days)
Shutdown
From: Henrich, et al., 1980

Decision Tables - Example
 A company manufactures simple, small
knife blades inserted into a plastic
handle

 Operation 1 – formation of the knife blade by
cutting the blade from a thin strip of stainless
steel via a foot pedal operated press
 Using tweezers the operator procures a rubber nib
from a parts bin and inserts it over the blade to
protect it
 After press activation, the cut-off blade is placed
on a holder plate for later assembly into the
handle

 Because of the small blade size, a
stereoscope is used to assist in the
operation
 Operators have complained about wrist,
neck, back, and ankle pain

 Possible method changes include:
 Replacement of the mechanical pedal with a foot
operated electric switch (reduction of ankle fatigue)
 Better adjustment of the position of the stereoscope
(reduction of neck fatigue)
 Implementation of a video projection system for
heads-up viewing (reduction of neck fatigue)
 Use of gravity feed bins for the nibs (productivity
increase, reduce extended reaches and back pain)
 Replace the tweezers with a vacuum operated stylus
(improve productivity and eliminate a potential CTD –
pinch grip)
 Assumption: the productivity increases
in the following table are based on
MTM-2 (CH 13) and the injury
reductions are based on the CTD Risk
Index (Figure 5-25)

TABLE 7-2
Expected Changes in Productivity, Injury Risk Potential, and Cost for Various
Method Changes in Cut-Off Operation
Work Design and Methods  Productivity (%)  CTD Risk (%) Cost ($)
Changes
Foot operated electric switch 0 -1* 175
Adjust stereoscope 0 -2 10
Video projection system +1** -2 2,000
Gravity feed bin +7 -10 40
Vacuum stylus +1** -40 200
*The current CTD Risk Factor Index does not address lower extremities. However, there
is reason to believe that the lower force for the electric switch will have some beneficial
effect.
**Can’t be quantified from MTM-2, but some benefit is expected

 Company policy authorizes methods
engineers to proceed, with no further
authorization needed, IF Condition 1
and EITHER Condition 2 OR 3 are met
 Condition 1 – implementation cost < $200
 Condition 2 – productivity increases are >
5%
 Condition 3 – injury risk decrease > 33%

Decision Table - Example
TABLE 7-3
Decision Table for Cut-Off Operation
Methods Changes Conditions Action
#1 #2 #3 Policy
Electric switch -----
Adjust stereoscope -----
Video projection system -----
Gravity feed bin Proceed
Vacuum stylus Proceed
Brian Craig
13 February 2001
Decision Table –
Cut-Off Operation

 Value Engineering
 Simply a payoff matrix using weighted values
 E.g. benefits weighted 0-10
 A value (0-4) is assigned to reflect how well each
solution produces the desired benefit
 The assigned value is multiplied by the appropriate
weight and the products are summed for the final score
 Highest sum = most appropriate solution
 Example coming up

Value Engineering - Example
handle

protect it
handle

operation

pinch grip)
Index (Figure 5-25)

TABLE 7-2
Changes
effect.

 The weights of 6, 4, and 8 are assigned to
the three factors of interest
 Increased productivity (6)
 Decreased injury rates (4)
 Low cost solutions (8)
 Each solution is rated from 0 to 4 for each of
the factors
 Not very quantitative and very subject to bias

TABLE 7-4
Value Engineering Analysis of the Cut-Off Operation
Plant: Dorben Co. A B C D E
Project: Electric Adjust Video Gravity Vacuum
Alternatives
Cut-Off Operation Switch Stereo- Projection Feed stylus
Date: 20 February scope Bin
2001
Analyst: BC
Factor/Consideration Wt Ratings and Weighted Factors Comments

A B C D E
Increase in 6 0 0 0 0 1 6 3 18 1 6
productivity
Decrease in injuries 4 1 4 1 4 1 4 2 8 3 12
Low cost solution 8 3 24 4 32 1 8 4 32 3 24
Totals 28 36 18 58 42
Remarks:
Gravity feed bin is the most justifiable methods change

 Cost-benefit Analysis
 A more quantitative approach to deciding
between different alternatives

Cost-Benefit Analysis
 5 steps of the Cost-benefit Analysis
 Determine what is changed due to better design 
increased productivity, better quality, decreased
injuries, etc.
 Quantify these changes (benefits) into monetary
changes
 Determine the cost required to implement the changes
 Divide the cost of the benefit for each alternative 
creating a ratio
 The smallest ratio determines the desired alternative

Cost-Benefit Analysis
 Step 2 can be very challenging to gather and
quantify
 If not possible to assign $ values (but remember
earlier in the lecture about speaking in terms
management understands), maybe use percent
changes, injury numbers, or other
 My argument would be  if you can get
percent changes, and many other metrics,
then you should be able to assign a monetary
value to that

Cost-Benefit Analysis - Example
handle

protect it
handle

operation

pinch grip)
Index (Figure 5-25)

Cost-Benefit Analysis - Example Brian Craig
13 February 2001
Cost-Benefit
Analysis – Cut-Off
Operation
TABLE 7-2
Changes
effect.
 Additional information for the cost-benefit
analysis
 $645/year for each 1% increase in productivity
 Decreases in workers compensation can be
considered cost avoidance
 The company has averaged one CTD case/5 years
requiring surgery (cost = $30,000)  or $6,000/year
 For each 1% decrease in risk, the company benefits
$60/year
 This data summarized in Table 7-5

TABLE 7-5
Cost-Benefit Analysis for Cut-Off Operation
Benefit ($)
Method Changes Productivity Injury Total ($) Cost ($) Cost-
Risk Benefit
1. Electric Switch 0 60 60 175 2.92
2. Adjust stereoscope 0 120 120 10 0.08
3. Video projection system 645 120 765 2,000 2.61
4. Gravity feed bin 4,515 600 5,115 40 0.01
5. Vacuum stylus 645 2,400 3,045 100 0.03
Methods changes #2, #4, #5 5,160 3,120 8,280 150 0.02

Alternate Method of Cost Justification
 You are a consultant/sales

representative, etc.
 You are trying to convince a potential
client that investing in an ergonomic
chair(s) will be a solid investment

 KEEP IT SIMPLE  your customer must

understand the logic
 Do NOT insult their intelligence
 Do NOT make them feel uncomfortable

 A simple 1 pager
 Step-by-step
 Show investment (cost)
 Show BENEFIT ($) and TIME to attain that benefit
 Have supplemental materials to back up your claims
and fully understand these materials
 Peer reviewed, scientific journals  NOT anecdotal
evidence - FIRST
 THEN backed up by newspaper, magazine, and other
satisfied customers (companies/corporations) and
success stories (to show practicality/functionality of
your solution)
Simplified Example of Cost Justification
Instructions: Please enter figures in the blue spaces
0.04 x $30,000 x 0.8 /12 = $80.00

% Utilization of the
Annual Direct Cost Workplace (how much
Productivity (salary + equipment, time employee spends Monthly Productivity
Increase (entered as space, and other facility in chair; entered as a Opportunity per
a percent 4% = .04) costs) percent - 80% = .80) Employee
$500.00 / $80.00 = 6.25

Monthly Productivity
Opportunity per
Chair Cost Employee Payback Time (months)
84 - 6.25 = 77.75 x $80.00 = $6,220.00

Chair Life in months Monthly Total Productivity
(industry average is Months of "free" life Productivity Opportunity per
7 years = 84 (after the chair has paid Opportunity Employee over the
months) Payback Time (months) for itself) per Employee Life of the Chair

 Breakeven Charts (Crossover Charts)
 Useful in deciding which of two alternative
methods changes to implement
 One methods change may have low capital
cost, but higher set-up cost, while the
alternative may use special equipment at a
higher capital cost, but lower set-up costs

Total Cost
2 better than 1
2 better than Old
1 better than Old
Parts Produced

 Multiple Criteria Decision Making
 Refer to text

 Economic Decision Tools
 The three (4) most frequently used
appraisal techniques for determining
desirability of investing in a proposed
method
 The return on sales method
 The return on investment, or payback method
 The discounted cash flow method

The Return on Sales Method
 Computes the ratio of
 The average yearly profit brought about through
using the method and
 The average yearly sales, or increase in dollar
value added to the product based on the
pessimistic estimate of life of the product
 This ratio provides information on the
effectiveness, it does NOT consider the
original investment required to get started

Return on Investment Method
 Provides a ratio of
 The average yearly profit brought about
through using the method, based on the
pessimistic estimated life of the product
and
 The original investment
 The method of choice would maximize

this ratio (high profit and low
investment)
Payback Method
 The reciprocal of the return on
investment
 Calculates the amount of time that it
would take to realize a full return on the
original investment

Discounted Cash Flow Method
 Computes the ratio of
 The present worth of cash flow, based on a
percentage return and
 The original investment
 Utilizes the time value of money

 $1 today @ 15% compound interest =
$2.011 in five years OR
 Receiving $1 five years from now may be
like having about $0.50 today
Discounted Cash Flow Method
Single Payment
- Compound amount factor (given P, find S) S = P(1 + i)n
- Present worth factor (given S, find P) P = 1/(1 + i)n
Uniform Series
- Sinking fund factor (given S, find R) R = i/(1 + i)n - 1
- Capital recovery (given P, find R) R = i/(1 + i)n/(1 + i)n - 1
- Compound amount factor (given R, find S) S = (1 + i)n – 1/i
- Present worth factor (given R, find P) P = (1 + i)n – 1/i(1 + i)n
Where:
i = Interest rate for a given period
n= Number of interest periods
P = Present sum of money (present worth of principle)
S = A sum of money at the end of n periods from the present date; equivalent to P
with interest i
R = The end of period payment or receipt in a uniform series continuing for the
coming n periods; the entire series equivalent to P at interest i
Example of These Methods
TABLE 7-7
Comparison of Economic Justification Methods
End of Year Increase in sales Cost of production Gross Profit due to
values due to with proposed proposed method
proposed method method
1 $5,000 $2,000 $3,000
2 $6,000 $2,200 $3,800
3 $7,000 $2,400 $4,600
4 $8,000 $2,600 $5,400
5 $7,000 $2,400 $4,600
6 $6,000 $2,200 $3,800
7 $5,000 $2,000 $3,000
8 $4,000 $1,800 $2,200
9 $3,000 $1,600 $1,400
10 $2,000 $1,500 $500
Totals $53,000 $20,700 $32,300
Average $5,300 $2,070 $3,230

 Investment of proposed method =
$10,000
 Desired return on investment = 10%
 Savage value of jigs, fixtures, and tools
= $500
 Estimated life of the product for which
the proposed method will be used = 10
years
TABLE 7-7
Comparison of Economic Justification Methods
End of Year Increase in sales Cost of production Gross Profit due to
values due to with proposed proposed method
proposed method method
1 $5,000 $2,000 $3,000
2 $6,000 $2,200 $3,800
3 $7,000 $2,400 $4,600
4 $8,000 $2,600 $5,400
5 $7,000 $2,400 $4,600
6 $6,000 $2,200 $3,800
7 $5,000 $2,000 $3,000
8 $4,000 $1,800 $2,200
9 $3,000 $1,600 $1,400
10 $2,000 $1,500 $500
Totals $53,000 $20,700 $32,300
Average $5,300 $2,070 $3,230

$3,230
Re turnOnSales   61%
$5,300
$3,230
Re turnOnInvestment   32.3%
$10,000
$10,000
Payback   3.09Years
$3,230
 The Discounted Cash Flow requires a
few more calculations
 General formula for Present Worth of
Cash Flow
 (Gross profit)(Present Worth Factor)

Example – Discounted Cash Flow
(3,000)(0.9091) = $2,730
(3,800)(0.8264) = $3,140
(4,600)(0.7513) = $3,460
(5,400)(0.6830) = $3,690 Present worth
(4,600)(0.6209) = $2,860 of cash flow
(3,800)(0.5645) = $2,140
(3,000)(0.5132) = $1,540
(2,200)(0.4665) = $1,025
(1,400)(0.4241) = $595
(500)(0.3855) = $193
$21,373
Salvage value of tools
(500)(0.3855) = $193

The total present worth of anticipated
gross profit and tool salvage value =
$21,566
The ratio of present worth to original

investment = $21,566
 2.16
$10,000
Conclusion of Example of These
Methods
 The new method satisfactorily passes all three (four)
appraisal methods
 A 61% return on sales
 A 32.3% return on capital investment
 The return on the $10,000 capital investment will take
3.09 years
 The cash flow analysis reveals the original investment will
be recovered in less than 4 years while earning 10%
 During the 10 year anticipated life of the product, $11,566
more than the original investment will be recorded

Action Items

Proposed Method Presentation
 Written and oral presentation
 Summary is the most important part
 Present first thing (“need to know” for executives)
 Contain 3 elements
 Brief explanation the nature of the problem
 Recommendations (proposed method changes) and
Benefits (immediate financial benefits, intermediate
financial benefits, cost avoidance issues)
– a one-pager, if possible, like most of you did in lab

 Body – “nice to know”
 Introduction
 Nature and background, etc.
 Methods
 Charts, calculations, assumptions, drawings, sketches,
drawings, etc.
 Results/recommendations
 Improvements, benefits, etc
 Discussion
 Supporting data
 Conclusions
 Entire report should be clear, concise,
easy to read, easy to follow, complete,
accurate
 The oral presentation should follow the
same general flow as the written (“need
to know”  “nice to know”)
 Be prepared!!!!  supporting data if
needed
Installation
 After approval  install
 Stay with the installation
 After installation
 Ensure all aspects of the change conform to specs
 Choose and train operator
 Evaluate improvements (be cautious of Hawthorne
Effect)
 Continuous improvement

Resistance to Change
 Rule of thumb  stress the positives for
the operator
 “Easier to use”
 May stay away from “increased efficiency”,

etc. even though that is a major motivation
for job change
 Know your audience!

Note
 Page 296-306 will be covered in
other chapters
 Job analysis
 Job evaluation

Americans with Disabilities Act
 Any method changes and during any
job performance evaluation  must
consider the ADA
 Passed in 1990
 “…outlaw discrimination in employment
against a qualified individual with a
disability”
 Any employer of 15 or more employees

 May entail considerable workplace redesign or other
accommodations
 Covers
 Recruitment
 Hiring
 Promotion
 Training
 Pay
 Layoffs
 Firing
 Leave
 Benefits
 Job assignments, etc.
 The ADA protects any individual “with a
physical or mental impairment that
substantially limits a major life activity”
 Substantial implies something more than
minor, while “major life activity” includes
hearing, seeing, speaking, breathing,
walking, manually feeling or manipulating,
learning, or working
 Temporary injuries are not covered
 The individual with the disability must
be qualified to perform the “essential
functions” of the job with or without
“reasonable accommodation”
 Essential functions = basic job duties
that an employee must be able to
perform
 Essential functions from job analysis
 “Reasonable accommodation = any
change or adjustment to a job or work
environment that allows the individual
to perform the essential functions of the
job and enjoy the benefits and
privileges that all employees enjoy

 Reasonable accommodations can
include
 Physical modification of the tools,
equipment, or workstation
 Job restructuring
 Modification of work schedules
 Modification of training materials or policies
 Etc.

 A reasonable accommodation is one
that does not place undue hardship on
the employer
 Not unduly costly, extensive, substantial, or
disruptive
 Does not fundamentally alter the nature or
operation of the business

Assignment

5 - Chapter 8 - Proposed Method Implementation

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

5 - Chapter 8 - Proposed Method Implementation

Uploaded by

Copyright:

Available Formats

Proposed Method

20 March 2018 Brian N. Craig, PhD, CPE 1

20 March 2018 Brian N. Craig, PhD, CPE 2

 Decide among alternate methods, using value

20 March 2018 Brian N. Craig, PhD, CPE 3

20 March 2018 Brian N. Craig, PhD, CPE 5

20 March 2018 Brian N. Craig, PhD, CPE 6

 In selling a proposal (con’t)

20 March 2018 Brian N. Craig, PhD, CPE 7

20 March 2018 Brian N. Craig, PhD, CPE 11

20 March 2018 Brian N. Craig, PhD, CPE 12

20 March 2018 Brian N. Craig, PhD, CPE 13

20 March 2018 Brian N. Craig, PhD, CPE 14

20 March 2018 Brian N. Craig, PhD, CPE 16

20 March 2018 Brian N. Craig, PhD, CPE 17

20 March 2018 Brian N. Craig, PhD, CPE 18

20 March 2018 Brian N. Craig, PhD, CPE 19

20 March 2018 Brian N. Craig, PhD, CPE 20

20 March 2018 Brian N. Craig, PhD, CPE 21

20 March 2018 Brian N. Craig, PhD, CPE 22

20 March 2018 Brian N. Craig, PhD, CPE 23

20 March 2018 Brian N. Craig, PhD, CPE 25

20 March 2018 Brian N. Craig, PhD, CPE 26

20 March 2018 Brian N. Craig, PhD, CPE 27

Factor/Consideration Wt Ratings and Weighted Factors Comments

20 March 2018 Brian N. Craig, PhD, CPE 28

20 March 2018 Brian N. Craig, PhD, CPE 29

20 March 2018 Brian N. Craig, PhD, CPE 30

20 March 2018 Brian N. Craig, PhD, CPE 31

20 March 2018 Brian N. Craig, PhD, CPE 32

20 March 2018 Brian N. Craig, PhD, CPE 33

20 March 2018 Brian N. Craig, PhD, CPE 34

20 March 2018 Brian N. Craig, PhD, CPE 36

20 March 2018 Brian N. Craig, PhD, CPE 38

20 March 2018 Brian N. Craig, PhD, CPE 39

 You are a consultant/sales

20 March 2018 Brian N. Craig, PhD, CPE 40

 KEEP IT SIMPLE  your customer must

20 March 2018 Brian N. Craig, PhD, CPE 41

Instructions: Please enter figures in the blue spaces

0.04 x $30,000 x 0.8 /12 = $80.00

$500.00 / $80.00 = 6.25

84 - 6.25 = 77.75 x $80.00 = $6,220.00

20 March 2018 Brian N. Craig, PhD, CPE 43

20 March 2018 Brian N. Craig, PhD, CPE 44

20 March 2018 Brian N. Craig, PhD, CPE 45

20 March 2018 Brian N. Craig, PhD, CPE 46

 The discounted cash flow method

20 March 2018 Brian N. Craig, PhD, CPE 47

20 March 2018 Brian N. Craig, PhD, CPE 48

 The method of choice would maximize

20 March 2018 Brian N. Craig, PhD, CPE 50

 Utilizes the time value of money

20 March 2018 Brian N. Craig, PhD, CPE 53

20 March 2018 Brian N. Craig, PhD, CPE 55

20 March 2018 Brian N. Craig, PhD, CPE 57

20 March 2018 Brian N. Craig, PhD, CPE 59

The ratio of present worth to original

20 March 2018 Brian N. Craig, PhD, CPE 61

20 March 2018 Brian N. Craig, PhD, CPE 62

20 March 2018 Brian N. Craig, PhD, CPE 63

20 March 2018 Brian N. Craig, PhD, CPE 66

 May stay away from “increased efficiency”,