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CHAPTER 7: MANUFACTURING
PROCESSES
LO7–1: Understand what a manufacturing process is.
LO7–2: Explain how manufacturing processes are organized.
LO7–3: Analyze simple manufacturing processes.
McGraw-Hill/Irwin Copyright ©2017 McGraw-Hill Education. All rights reserved.
What Are Production Processes?
• Production processes
are used to make any
manufactured item
• High level view can be
divided into three steps
• Step 1 – Source the
parts needed
• Step 2 – Make the
product
• Step 3 – Deliver the
product
Exhibit 7.1 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-2
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Production Process Terms
Lead time
• The time needed to respond to a customer order
Customer order decoupling point
• Where inventory is positioned to allow entities in the
supply chain to operate independently
Lean manufacturing
• A means of achieving high levels of customer
service with minimal inventory investment
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Types of Firms
Make-to-Stock
• Serve customers from finished goods inventory
Assemble-to-Order
• Combine a number of preassembled modules to meet a
customer’s specifications
Make-to-Order
• Make the customer’s product from raw materials, parts, and
components
Engineer-to-Order
• Work with the customer to design and then make the product
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Make-to-Stock
• Examples of products include the following:
• Televisions
• Clothing
• Packaged food products
• Essential issue in satisfying customers is to balance the
level of inventory against the level of customer service
• Easy with unlimited inventory, but inventory costs money
• Trade-off between the costs of inventory and level of customer
service must be made
• Use lean manufacturing to achieve higher service levels
for a given inventory investment
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Assemble-to-Order
• A primary task is to define a customer’s order in terms of
alternative components because these are carried in
inventory
• An example is the way Dell Computer makes their desktop
computers
• One capability required is a design that enables as much
flexibility as possible in combining components
• There are significant advantages from moving the
customer order decoupling point from finished goods to
components
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Make-to-Order/Engineer-to-Order
• Boeing’s process for making commercial aircraft is an
example
• Customer order decoupling point could be in either raw
materials at the manufacturing site or the supplier
inventory
• Depending on how similar the products are, it might not
even be possible to preorder parts
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How Production Processes Are
Organized
Project
• The product remains in a fixed location
• Manufacturing equipment is moved to the product
Workcenter (job shop)
• Similar equipment or functions are grouped together
Manufacturing cell
• A dedicated area where products that are similar in processing requirements are
produced
Assembly line
• Work processes are arranged according to the progressive steps by which the product
is made
Continuous process
• Assembly line only the flow is continuous such as with liquids
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Product–Process Matrix: Framework Describing Layout
Strategies
Exhibit 7.2 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-9
Production System Design
Project Layout
• The product remains in a fixed location
• A high degree of task ordering is common
• A project layout may be developed by arranging materials
according to their assembly priority
Workcenter
• Most common approach to developing this type of layout is
to arrange workcenters in a way that optimizes the
movement of material
• Optimal placement often means placing workcenters with
large interdepartmental traffic adjacent to each other
• Sometimes is referred to as a department and is focused
on a particular type of operation
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Production System Design
Manufacturing Cell
• Formed by allocating dissimilar machines
to cells that are designed to work on
similar products (shape, processing, etc.)
Assembly Line and Continuous
Layout
• Designed for the special purpose of
building a product by going through a
series of progressive steps
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Break-Even Analysis
• Defined as standard approach to choosing among
alternative processes or equipment
• Model seeks to determine the point in units produced
where a company will start making profit on the process
• Model seeks to determine the point in units produced
where total revenue and total cost are equal
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑐𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑐𝑒𝑠𝑠 𝑜𝑟 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡
• 𝐵𝑟𝑒𝑎𝑘𝑒𝑣𝑒𝑛 𝑑𝑒𝑚𝑎𝑛𝑑 =
𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 − 𝐶𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
or
• 𝐵𝑟𝑒𝑎𝑘𝑒𝑣𝑒𝑛 𝑑𝑒𝑚𝑎𝑛𝑑 =
𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠 𝑜𝑓 𝑝𝑟𝑜𝑐𝑒𝑠𝑠 𝑜𝑟 𝑒𝑞𝑢𝑖𝑝𝑚𝑒𝑛𝑡
𝑈𝑛𝑖𝑡 𝑝𝑟𝑖𝑐𝑒 𝑡𝑜 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟 −𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
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Example 7.1: Break-Even Analysis
• Buy for $200
• Make on lathe for $75
• Make on machining center for $15
• Buy has no fixed costs
• Lathe has $80,000 fixed costs
• Machining center has $200,000 fixed costs
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Example 7.1: Total Cost for Each Option
Purchase
• Cost = $200 x Demand
Produce Using Lathe
• Cost = $80,000 + $75 x Demand
Produce Using Machining Center
• Cost = $200,000 + $15 x Demand
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Example 7.1: Costs Shown Graphically
Exhibit 7.3 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-15
Example 7.1:Finding Points A and B
Point A
$80,000 $75 Demand $200,000 $15 Demand
$80,000 $60 Demand $200,000
$60 Demand $120,000
Demand $120,000 2,000
$60
Point B
$200 Demand $80,000 $75 Demand
$125 Demand $80,000
Demand $80,000 640
$125
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Manufacturing Process Flow Design
• Manufacturing process flow design: a method to
evaluate the specific processes that material follow as
they move through the plant
• Common tools are assembly drawings, assembly charts, route
sheets, and flow process charts
• Focus should be on the identification of activities that can
be minimized or eliminated
• Movement and storage
• The fewer the moves, delays, and storage, the better the flow
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The Charts
Assembly drawing
• An exploded view of the product showing its component parts
Assembly chart
• Defines how parts go together, their order of assembly, and overall
flow pattern
Operation and route sheet
• Specifies operations and process routing
Process flowchart
• Denotes what happens to the product as it progresses through the
production facility
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Sample Assembly Drawing
Exhibit 7.4 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-19
Sample Assembly Chart
Exhibit 7.5 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-20
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Sample Operation and Route Sheet
Exhibit 7.6 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-21
Sample Flowchart
Exhibit 7.7 Copyright ©2017 McGraw-Hill Education. All rights reserved. 7-22
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Example 7.2: Manufacturing Process
Analysis
• 15 workers, eight-hour shift
• Assembly line moves at the rate of 150 components per
hour
• Incentive pay of 30¢ per good part
• Can hire 15 more workers for second shift if needed
• All but molding from outside vender
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Example 7.2: Molding
• 11 Machines
• One usually down
• One operator per machine
• 25 parts per hour
• Paid 20¢ per good part
• Overtime is 30¢ per part
• Employment is flexible
• Currently 6 employees
• 4 more available
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Example 7.2: Remaining Costs
• Raw materials are 10¢ per part
• Electricity is 2¢ per part
• Purchased parts cost 30¢ per component
• Other weekly expenses
• Rent is $100
• Other employees receive $1,000
• Accounting depreciation is $50
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Example 7.2: Questions to Answer
a) Determine the capacity of the process
• Are the capacities balanced?
b) If the molding process were to use 10 machines instead
of 6, what would be the capacity of the entire process?
c) If the company went to a second shift, what would be
the new capacity?
d) Determine the cost per unit output when the capacity is
6,000 per week or 10,000 per week
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Example 7.2: (a) Capacity of Entire
Process
• Molding Capacity
• 6 machines x 25 parts per week x 8 hours x 5 days = 6,000
• Assembly Capacity
• 150 components per hour x 8 hours x 5 days = 6,000
• The capacities are balanced
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Example 7.2: (b) Increasing Molding to 10
Machines
• Molding Capacity
• 10 x 25 x 8 x 5 = 10,000
• Assembly capacity has not changed from 6,000
• The capacities are no longer balanced
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Example 7.2: (c) Increasing Assembly
Capacity
• Molding Capacity
• 10 x 25 x 8 x 5 = 10,000
• Assembly Capacity
• 150 x 16 x 5 = 12,000
• New capacity is 10,000
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Example 7.2: (d) Cost for 6,000 Parts per
Week
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Example 7.2: (d) Cost for 10,000 Parts
per Week
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Summary
• Manufacturing processes are used to make tangible items
• Sourcing parts, making the item, sending it to the customer
• To allow parts of the process to operate independently,
inventory is strategically positioned in the process
• Positioning the decoupling points has an impact on speed,
flexibility, and many other trade-offs
• Manufacturing layouts are designed based on the nature of the
product, the volume needed to meet demand, and the cost of
equipment
• Break-even analysis is useful for understanding the cost trade-
offs between alternative equipment choices
• Visual charts can be used to document manufacturing process
flows
• Flowcharts provide a simple but insightful analysis of capacity
and variable cost
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Practice Exam
1. A firm that makes predesigned products directly to fill customer
orders has this type of production environment
2. A point where inventory is positioned to allow the production
process to operate independently of the customer order delivery
process
3. A firm that designs and builds products from scratch according to
customer specifications would have this type of production
environment
4. If a production process makes a unit every two hours and it takes
42 hours for the unit to go through the entire process, what is the
expected work-in-process equal to
5. This is a production layout where similar products are made.
Typically, it is scheduled on an as-needed basis in response to
current customer demand
6. The relationship between how different layout structures are best
suited depending on volume and product variety characteristics is
depicted on this type of graph
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