The success of an operation is greatly influenced by several key design factors such as, but not limited to, the design of the goods or services, quality systems, and process strategy. To remain competitive in a marketplace a company must first ensure their product or service is designed under an excellent product strategy or it can be devastating to a firm (pg 156 a. lib.).
After a product or service is defined and selected, a firm can then determine the process strategies that will be utilized to produce the goods or services for consumption.
In our case study Rochester Manufacturing Corporation (RMC) is considering changing their operation from traditional numerically controlled machines to a flexible manufacturing system (FMS). The numerically controlled machines are operating at 10% utilization producing high-variety, low-volume products. The low machine utilization has caused the machine tool salespeople and a consulting firm to suggest the implementation of a flexible manufacturing system to increase utilization and lower production costs. RMC’s process decision will be analyzed by Group Four by examining the strengths and weaknesses of the scenario and RMC’s process design considerations. Additionally, the flexible manufacturing system and a proposed alternate process design will be evaluated. Finally, Group Four’s optimum process strategy for Rochester Manufacturing Corporation will be proposed for implementation.
PROCESS STRATEGY EVALUATION
The efficient production of goods relies heavily on the manner in which the production process is designed. In the case of Rochester Manufacturing Corporation’s low machine utilization several tools and strategies can be utilized to ensure an optimum solution is selected to increase utilization and lower production costs.
First,
Rochester Manufacturing Corporation (RMC) is a traditional manufacturing company that has recently begun investigating options to improve its manufacturing processes, improve machine utilization rates, and lower labor costs. RMC has enlisted the counsel of a consulting firm along with a machine tool vendor to perform an analysis of the current state of operations.
The consulting firm has targeted a group of RMC’s product offerings which make up approximately 30% of the company’s total product output. Current machine utilization is around 10%; transitioning this group of products from the current manufacturing process to a flexible manufacturing system is expected to lower the number of machines needed from 15 to about 4.
Likewise, personnel needed are forecasted to drop as well, from 15 employees to as low as 3 employees that will be involved in this group of products. Along with machine and personnel reductions floor space usage is forecasted to decrease from 20,000 square feet to about 6,000 square feet.
These reductions should yield a one-time inventory savings of $750,000 and annual labor savings of about $300,000. In addition to the labor and material savings the incorporation of an FMS in place of the traditional numerically controlled systems should lower processing time from 7-10 days currently to just 1-2 days.
The initial projections all looks promising, however an analysis of the project’s return on investment (ROI) show it to be in the 10%-15% range per year. Past improvement projects at RMC have typically yielded an ROI of above 15% with a payback period well under 5 years.
In our discussion of RMC, we will examine the current state of operation processes. We will also look at the proposed implementation of an FMS and detail positives and negatives associated with both options. A third, hybrid solution will also be proffered which seeks to find a middle ground solution to the challenges facing RMC.
FLEXIBLE MANUFACTURING SYSTEM
A Flexible Manufacturing System is a machine that can be changed or adapted rapidly to manufacture different products or components at different volumes of production (Ryan, 2007). The component design may change very quickly but as long as the mould is updated the machine can still operate. Computers monitor the supply of materials, the operation itself and quality control. An FMS is ideal for process focused strategies which deal with a low volume and high variety of products such as RMC which manufactures different medical device and hydraulic components.
One of the biggest benefits of an FMS is the speed in which components and the different product moulds can be easily changed to produce different products. It’s estimated that an implementation of an FMS at RMC would increase machine utilization from l0% to 30% and decrease the throughput time from an average of about 8.5 days to 1.5 days. This increase in speed will provide many advantages to RMC. One of which is an ability to provide a customized product to a customer in a much shorter time period that its competitors. RMC can market this competitive advantage. Another benefit of the decrease in throughput is that RMC will be able to increase their production volume if needed, because they can now create products in a shorter amount of time. If their number of product orders grow they will be able to handle the extra capacity. Another benefit of a decrease in throughput time is the savings of fixed costs. RMC will be able to reduce their number of operators from 15 to 3 people which would be an annual savings of $300,000.
Another benefit of an FMS is its computer programmed quality control features. An FMS can sense defects in products and also assist in troubleshooting where problems may occur in the system. This programmed quality control system allows RMC to reduce their operator workforce and have more reliable quality control procedures than quality being controlled manually be employees.
The implementation of an FMS will allow RMC to reduce their number of machines from 15 to four, which is a one time inventory reduction of $750,000. Floor space would also be reduced from 20,000 to 6,000 square feet. The reduction in floor space would provide RMC an opportunity to purchase other machines, if needed to grow their business.
Although there are a lot of great benefits to an FMS there are some drawbacks. The biggest drawback may be the initial investment cost. The FMS which RMC is thinking about purchasing is $3M. There would also be a lot of start up costs that would go along with this implementation such as the training of employees, unemployment benefits to employees laid off, a possible decrease in the volume of products produced while transitioning systems. Because the machine is so expensive, RMC is estimating that it may take more than five years to see a return on investment.
The other negative of an FMS is that you are highly reliant on one system. If the system breaks down, you run the risk of a severe decrease in production. Also, because these systems are complicated, it may not be very simple to fix.
ALTERNATE HYBRID PROCESS
Another alternative in response to RMC’s challenge to improve its manufacturing processes between its current state and the option of a new flexible manufacturing system is to implement a hybrid approach between the two scenarios.
Under the hybrid approach, RMC would focus on a process improvement, thereby reducing the amount of labor and machines needed to handle current manufacturing output. In an effort to identify areas of the process in the most need of alteration, a process chart tool might be helpful. Process charts “use symbols, time, and distance to provide an objective and structured way to analyze and record the activities that make up” the existing process (p.281). By utilizing this tool, Rochester Manufacturing will be able to pinpoint weak links in the process and also, match up similar products in order most efficiently group families for the potential few new implemented machines of the FMS.
As an alternative to standard manufacturing and assembly processes, suggestions for optimization would include the transition to organizing production by work cells or a focused work center for families of similar products that have a large or stable demand at RMC.
There are several advantages in using work cells for production. Communication is improved as workers are grouped together and closer to the overall production of the product(s) of the work cell. Other functions associated with production such as inspection of finished goods may be able to be performed as a part of the work cell function; this reduces the needs of additional labor later in the manufacturing process and can eliminate redundancies. (p.407)
A new job design that focuses on skill variety through job rotation will be helpful as the company moves to a system requiring fewer employees. With goodwill and employer relations in mind, a drastic reduction in labor might leave a bad taste in the mouths of investors, customers, and former and current employees. Under the hybrid approach, a more conservative and less dramatic labor cut from 15 to approximately 9 employees might lend itself to preserving the reputation of Rochester Manufacturing. Furthermore, job rotation and cross training will be helpful to avoid the risk of employee illness or absence, and all employees will have the knowledge to continue the manufacturing process of all products. Employees will be specialized in several areas, and therefore, reducing the risk for production slow-down or stoppage in the event of employee absence.
For the group of products that RMC is currently looking at organizing into a family for production under a flexible manufacturing system, the same may be done as focused work center within the existing production facility at RMC. The work center is in effect a dedicated work cell that remains a part of the present facility. (p.409). To put it another way, the work center functions as a factory within a factory.
The use of work cells and centers may also benefit by examination of the labor used in production processes currently in place, to see if efficiencies and reductions in human capital may be gained. Investigation of labor standards by using methods such as historical experience, time studies, predetermined time standards and work sampling may reveal additional productivity gains throughout the production process. (p.445)
Using this hybrid approach to reorganize RMC’s production process and efficiently allocate labor and material assets, it is estimated that RMC can reduce the number of machines currently in use from 15 units to 9 units. By reducing the number of machines and reorganization the production into work cells, required floor space is expected to drop from 20,000 ft2 to 12,000 ft2.
In relation to employee requirements reorganization and investigation of current work standards should yield a reduction of 6 employees needed for production. This takes the total number needed from 15 down to 9, for a projected annual labor savings of $150,000.
CONCLUSION
Moreover, the amount that FMS would save supersedes those of the other suggestions. Reducing the workforce from fifteen to three leading to annual savings of $300,000 makes the FMS significantly advantageous. The hybrid system reduces labor cost by only $150,000. The system would also save an inventory of about $750,000 by reducing the machines from fifteen to four. On top of that, it would reduce floor space from twenty thousand square feet to only six thousand. Besides, the FMS allows for computerized quality control that would reduce defects, and consequently increase profits.
The drawbacks associated with the FMS are solvable with little effort. First, the startup cost is quite high, but the total savings are significant enough to encourage the use of the FMS. RMC can invest on full-time technicians to repair the systems on a regular basis to avoid any prolonged failure. As long the company follows the terms of service in laying off the employees, there would be no damage because most investors, customers, and employees appreciate the use of technology in manufacturing. Relying on humans in production is counterproductive because the absence of one or two affects the production rate and efficiency significantly. The use of machines ensures production goes on with minimal reliance on humans, such as the case of the FMS.
The hybrid would save little space, labor cost, and would also have to deal with a larger labor force that comes with higher managerial expenses. The combined system may lead to new challenges associated with human-machine interaction that may cause unnecessary losses. The rate of production, customization, saving on labor and space, and reduction of errors makes the FMS preferable to the hybrid system or doing nothing.
Reference
Ryan, V. (2007). FLEXIBLE MANUFACTURING SYSTEMS - FMS – 1. Retrieved on March 6, 2016 from http://www.technologystudent.com/prddes1/flexbl1.html
