Download CHAP 14 BASICS

CHAPTER 14
PRODUCTS
AND
PROCESSES
PRODUCTS AND PROCESSES
A product passes through several stages, known as the product life
cycle, beginning with its introduction and ending with its disappearance from
the marketplace.
NEED FOR NEW PRODUCTS
Introduction phase : This phase is most expensive and risky stage. To get
customer acceptance of the product the firm will usually spend heavily on
adversiting and sales promotion.
Growth Phase :In this phase, of a successful product increase at a rapid rate.
Production increases and the unit cost of the product drops.
Maturity Phase : Nearly everyone interested in the product has sampled or
ows the product and sales begin to level off. The market is satured
Decline Phase : Off as customers begin to lose in the product or to buy
improved versions from competitors. As profits decline still further, companies
will look ways to maintain profitability.
Generally, there are three ways in which this can be done :
INTRODUCE NEW PRODUCTS
IMPROVE EXISTING PRODUCTS
IMPROVE THE METHODS OF PRODUCTION
INTRODUCE NEW PRODUCTS
Somehow the needs of sales and the economics of
production must be balanced. Usually this balance
can be obtained with good programs of simplification,
standardization and specialization Product.
Sales Organizations
want to offer product
variety to customers.
Often this means the
organization must offer
a variety of products,
many of which sell in
small volumes.
OPERATIONS would
like to produce as few
products as possible
and make them in longs
runs.
They would fulfill their
mandate to produce at
the lowest cost.
to
1) Simplification
The emphasis is not cutting out products simply to reduce variety, but
remove unnecessary products and variations
2) Standardization
Standardization is the way parts fit together. If the designs of
assemblies
are standardized so various models or products are
assembled in the
same way, the mass production is possible.
3) Specialization
In product specialization, a firm may produce and market only one or
a limited range of similar products. This leads to prcess and labor
specialization, which increases productivity and decreases costs.
a) Product and Market Focus
Can be based on characteristics such as customer grouping (serving
similar customers), Demand characteritics (volume), Degree of
customization
b) Process Focus
Is based on the similarity of process
c) Focused Factory
An area in an existing factory set aside to specialize in a narrow
product mix.Repetition and concentration in one area allows the workforce
and management to gain advantages of specialization.
PRODUCT DESIGN
1) Functional
The product will be designed to perform as specified in the
marketplace
2) Low-cost Processing
The product must be designed so it can be made at least cost.
3) Simultaneous Engineering
To design products for low-cost manufacture require close
coordination between product design and process design, which is called
silmutaneous engineering. If the two groups can work together, they have a
better chance of designing a product that will function well in the marketplace
and can be manufactured at least cost.
Advantages to this appraoch :
- Time to market is reduced. The organization that gets its products to market
before the competition gains a strong competitive advantage.
- Cost is reduced. Involving all stakeholders early in the process means less
need for costly design changes later.
PROCESS DESIGN
Operations management is responsible for producing the products
and services the customer wants, when wanted, with the required quality, at
minimum cost and maximum effectiveness and fprodictivity.
Five basic factors must be considered when designing a process :
- Product design and quality level, the product’s design determines the
basic processes needed to convert the raw materials and components into the
finished product. The process designer must be aware of capabilities of
machines and processes and select those that will meet the quality level at
least cost.
- Demand Patterns and flexibility needed. If there is variation in demand for
a product, the processus must be flexible enough to respond to these changes
quickly. Flexible processes require flexible equipment and personnel capable
of doing a number of different jobs.
- Quantity/capacity considerations. Product design, the quantity to produce
and process design are closely related. Both product and process design
depend on the quantity needed.
PROCESSING EQUIPMENT
General-Purpose machinery can be used for a variety of
operations or can do work on a variety of products within its machine
classification.
Special-Purpose Machinery is designed to perform specific
operations on one work piece or a small number of similar work pieces.
Special-purpose machinery is less flexible but can produce parts
much quicker than general-purpose machinery.
PROCESS SYSTEMS
Flow Processes, Worstations needed to make the product, or family of
similar products, are grouped together in one department, and are laid out in
the sequence needed to make the product. If sufficient demand exists, flow
systems are extremely efficient because :
- Workstations are designed to produce a limited range of similar products, so
machinery and tooling can be specialized.
- Because material flows from one workstation tothe next, there is very little build-up of
work-in-process inventory
- Because of the flow system and the low work-in-process inventory, led times are short
- In most cases, flow systems substitute capital for labor and standardize what labor
there is into routine tasks.
- Because it is so cost-effective, this sytem of processing should be used wherever and
to whatever extent it can be.
Intermittent Processes, In intermittent manufacturing goods are not made
continuously as in flow system but are made at intervals in lots batches,
Workstations must be capable of processing many different parts. Thus it is
necessary to use general-purpose workstations and machinery that can
perform a variety of tasks.
Project Processes, Project manufacturing is mostly used for large complex
projects such as locomotives, ships, or buildings. He has little advantage
except it avoids the very high costs of moving the product from one
workstation to another.
SELECTING THE PROCESS (COSTING PROCESS)
Fixed Costs, Costs that do not vary with the volume being produced.
Purchase costs of machinery and tools and setup costs are considered
fixed cost.
Variable Costs, Costs that vary with the quantity produced. Direct labor
and direct material are the major variable costs.
Example :
Run time for a produce is 12 minutes per unit
The labor cost 15 euros per hour
The material cost 5 euros per unit
Variable cost is ((12*15)/60) + 5 = 8 euros per unit
And Total Cost is :
Fixed Cost + (Variable Cost * number of units produced)
Then
TC = FC + VCx
If Method A
FCa = 2000 euros
VCa = 3 euros per unit
CTa = 2.000+(3x)
Method B
FCb = 20.000 euros
VCb = 1 euro per unit
CTb = 20.000+(1x)
Unit Cost = (2.000+(3x))/x
Ucb = (20.000+(1x))/x
SELECTING THE PROCESS (COSTING PROCESS)
Cost Equalization Point, Knowing the quantity beyond which the cost of
using method B becomes less than for method A enables us to decide easily
which process to use minimize the total cost (and the unit cost)
This quantity is called the Cost Equalization Point and is the volume for
which the total cost of using one method is the same as another.
TCa = TCb
FCa + VCax = FCb + VCbx
2.000 + 3x = 20.000 + 1x
3x – 1x = 20.000 - 2.000
2x = 18.000
x = 9.000 units
The CEP is 9.000 units. At this quantity the total cost of using method A will
be the same as for method B.
If the volume < 9.000 units, method A is the best.
If the volume > 9.000 units, method B is the best.
CONTINUOUS PROCESS IMPROVEMENT
Continuous Process Improvement is a low-cost method of designing
or improving works methods to maximize productivity.
The Six Steps in Continuous Process Improvement :
useful
1 – Select the process to be studied
2 – Record the existing method to collect the necessary data in a
form
3 – Analyze the recorded data to generate alternative improved
methods
4 – Evaluate the alternatives to develop the best method of doing the
work
5 – Install the method as standard practice by training the operator.
6 – Maintain the new method