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							               Chapter 5

Transformation System
               Design




    Chapter 5: Transformation System Design   1
Chapter 5: Transformation
System Design




                            2
Fender’s Custom Shop

 Customers include Eric Clapton, John
  Deacon (Queen), David Gilmour, Yngwie
  Malmsteen and Stevie Ray Vaughn
 Production steps:
       computer controlled routers and lathes
        shape guitar bodies and necks
       also have “neck duplicator”
       necks and bodies hand and machine sanded
                   Chapter 5: Transformation System Design   3
Fender’s Custom Shop cont.

   Production steps (continued):
       detailed inlay work done with Hegner
        precision scroll saw
       paint and finishing operations in special room
        where air is recirculated 10 times/minute
       buffed
       hung up and seasoned for two weeks
       final assembly by actual musicians

                     Chapter 5: Transformation System Design   4
IBM’s Charlotte, NC Plant
 Assembly line produces 27 significantly
  different products
 Products include hand-held bar-code
  scanners, portable medical computers,
  fiber-optic connectors, and satellite
  communications devices
 “Kits” of parts delivered to workers

 Computer screen displays assembly
  instructionsChapter 5: Transformation System Design   5
Rickard Associates

   Produces magazines and marketing
    materials
   Only two of editorial production company’s
    employees work at headquarters in NJ
   Art director works in AZ
   Editors are located in FL, GA, MI, and D.C.
   Freelancers even more scattered
   Internet and AOL used to coordinate work
                  Chapter 5: Transformation System Design   6
Martin Marietta
Aerospace Plant
   Originally set up as job shop with
    numerous functional departments
       high WIP levels
       long lead times
       long travel distances
       departmental barriers inhibited communication
   Plant subsequently arranged into three
    focused factories
                    Chapter 5: Transformation System Design   7
Martin Marietta continued

 Each focused factory completed entire
  electronic assembly for particular
  application
 Each focused factory treated as separate
  business enterprise
 Factory manager assigned to each
  focused factory
 “NFL draft” used to select worker teams
              Chapter 5: Transformation System Design   8
Martin Marietta continued

   Within focused factories part families identified
    based on technology and processes
   Standard routings identified for each part family
   Improvements
     seven months of consecutive production with
      no scrap
     50% reduction in WIP

     21% reduction in lead times

     90% reduction in overtime
                   Chapter 5: Transformation System Design   9
Nynex

   Analyzed company in terms of four core
    processes
       customer operations
       customer support
       customer contact
       customer provisioning



                    Chapter 5: Transformation System Design   10
Nynex continued

 Obtained services of Boston Consulting
  Group
 Visited 152 companies to document
  best practices
 Estimated savings are $1.5 to $1.7
  billion


              Chapter 5: Transformation System Design   11
Variety of Transformation
Systems
 Fender Custom Shop is job shop
 Rickard Associates is job shop and is
  also a virtual organization
 Martin Marietta converted from a job
  shop to focused factories
 IBM uses a flow shop



              Chapter 5: Transformation System Design   12
Transformation System Design
and Layout Analysis
 Transformation system design
  considers alternative transformation
  forms and selects best one given
  characteristics of desired outputs.
 Layout analysis seeks to maximize the
  efficiency or effectiveness of operations.


               Chapter 5: Transformation System Design   13
      Forms of
Transformation
      Systems
 Continuous Process




   Chapter 5: Transformation System Design   14
Continuous Process

 Highly standardized products in large
  volumes
 Often these products have become
  commodities
 Typically these processes operate 24
  hours/day seven days/week
 Objective is to spread fixed cost over as
  large a volume as possible
               Chapter 5: Transformation System Design   15
Continuous Process continued

 Starting and stopping a continuous
  process can be prohibitively expensive
 Highly automated and specialized
  equipment used
 Layout follows the processing stages

 Output rate controlled through
  equipment capacity and flow mixture
  rates
              Chapter 5: Transformation System Design   16
Continuous Process continued

 Low labor
  requirements
 Often one primary
  input
 Initial setup of
  equipment and
  procedures very
  complex
              Chapter 5: Transformation System Design   17
      Forms of
Transformation
      Systems
                           Flow Shop




   Chapter 5: Transformation System Design   18
Flow Shop

 Similar to continuous process except
  discrete product is produced
 Heavily automated special purpose
  equipment
 High volume - low variety

 Both services and products can use
  flow shop form of processing

              Chapter 5: Transformation System Design   19
A Generalized Flow Shop
Operation




           Chapter 5: Transformation System Design   20
Advantages of the Flow Shop

   Low unit cost
       specialized high volume equipment
       bulk purchasing
       lower labor rates
       low in-process inventories
       simplified managerial control



                    Chapter 5: Transformation System Design   21
Disadvantages of Flow Shop

 Variety of output difficult to obtain
 Difficult to change rate of output

 Minor design changes may require
  substantial changes to the equipment
 Worker boredom and absenteeism

 Work not very challenging

 Vulnerable to equipment breakdowns

              Chapter 5: Transformation System Design   22
Disadvantages of Flow Shop
continued

 Line balanced to slowest element
 Large support staff required

 Planning, design, and installation very
  complex task
 Difficult to dispose of or modify special
  purpose equipment


               Chapter 5: Transformation System Design   23
Flow Shop Layout

 Objective is to assign tasks to groups
 The work assigned to each group
  should take about the same amount of
  time to complete
 Final assembly operations with more
  labor input often subdivided easier
 Paced versus unpaced lines


              Chapter 5: Transformation System Design   24
Line Balancing

             available work time
Cycle time 
                   demand
number of theoretical workstations, N T   task times / cycle time

                 output       total task time
    efficiency =        
                 input ( N A stations) cycle time

                        Chapter 5: Transformation System Design       25
Line Balancing Example
     Task Time Required Precedes
              (min)
      A        2.2       B, C, D
      B        3.4          E
      C        1.7          E
      D        4.1          F
      E        2.7          F
      F        3.3          G
      G        2.6          --

             Chapter 5: Transformation System Design   26
Line Balancing continued

 Company operates one shift per day
 Available time per shift is 450 minutes

 Demand is 100 units/day




               Chapter 5: Transformation System Design   27
Precedence Diagram

                      B

                                                    E

   A                  C




                       D                            F   G


          Chapter 5: Transformation System Design           28
Calculations

   cycle time = 450/75 = 6 minutes/part

   NT = 20/6 = 3.33 = 4 stations




              Chapter 5: Transformation System Design   29
Task Assignment

            Time Elig. Will Task       Idle
    Station Avail. Tasks Fit? Assign. Time
       1     6.0     A    A
            3.8        B,C,D B,C                         B
            0.4           C,D                --          --   0.4
      2     6.0           C,D             C,D            D
            1.9              C               C           C
            0.2              E               --          --   0.2

               Chapter 5: Transformation System Design              30
Task Assignment continued

            Time Elig. Will    Task    Idle
    Station Avail. Tasks Fit? Assign. Time
      3     6.0              E               E           E

            3.3              F               F           F   0.0

      4     6.0             G                G           G   3.4



               Chapter 5: Transformation System Design             31
Line Balancing Solution

                                                              Station 3
        Station 1               B

                                                               E

    A                           C

                        Station 2
                                                                          Station 4

                                 D                             F             G


                    Chapter 5: Transformation System Design                           32
Efficiency

     efficiency = 20/(4*6) = 83.3%




             Chapter 5: Transformation System Design   33
Precedence Graph for
Credit Applications




           Chapter 5: Transformation System Design   34
Station Assignments for
Credit Application




           Chapter 5: Transformation System Design   35
      Forms of
Transformation
      Systems
                              Job Shop




   Chapter 5: Transformation System Design   36
Job Shop

 High variety - low volume
 Equipment and staff grouped based on
  function
 Each output processed differently




             Chapter 5: Transformation System Design   37
A Generalized Job Shop
Operation




           Chapter 5: Transformation System Design   38
Advantages of the
Job Shop
 Flexibility to respond to individual
  demands
 Less expensive general purpose
  equipment used
 Maintenance and installation of general
  purpose equipment easier
 General purpose equipment easier to
  modify and therefore less susceptible to
  becoming obsolete
               Chapter 5: Transformation System Design   39
Advantages of the
Job Shop continued
 Dangerous activities can be segregated
  from other operations
 Higher skilled work leading to pride of
  workmanship
 Experience and expertise concentrated

 Pace of work not dictated by moving line

 Less vulnerable to equipment
  breakdowns
               Chapter 5: Transformation System Design   40
Disadvantages of the
Job Shop
 General purpose equipment is slower
 Higher direct labor cost

 High WIP inventories

 High material handling costs

 Management control very difficult




              Chapter 5: Transformation System Design   41
Directly Specified Closeness
Preferences
 A = absolutely necessary
 E = especially important

 I = important

 O = ordinary closeness OK

 U = unimportant

 X = undesirable



             Chapter 5: Transformation System Design   42
Cost-Volume-Distance Model



            N             N
     TC =    C
            i =1        j=1
                                       ij   V Dij
                                             ij




            Chapter 5: Transformation System Design   43
Office Layout




           Chapter 5: Transformation System Design   44
      Forms of
Transformation
      Systems
  Cellular Production




   Chapter 5: Transformation System Design   45
The Cell Form

 Combines flexibility of job shop with low
  costs and short response times of flow
  shop
 Based on group technology

 First identify part families

 Then form machine cells to produce
  part families

               Chapter 5: Transformation System Design   46
Conversion of a Job Shop
Layout to a Cellular Layout




            Chapter 5: Transformation System Design   47
Organization of Miscellaneous
Parts into Families




           Chapter 5: Transformation System Design   48
Advantages of Cellular
Production
   Reduced machine setup times
       increased capacity
       economical to produce in smaller batch sizes
       smaller batch sizes result in less WIP
       less WIP leads to shorter lead times
       shorter lead times increase forecast accuracy
        and provide a competitive advantage
   Parts produced in one cell
                    Chapter 5: Transformation System Design   49
Advantages of Cellular
Production continued
 Capitalize on benefits of using worker
  teams
 Minimal cost to move from job shop to
  cellular production (e.g. EHC)
 Can move from cellular production to
  “mini-plants”


              Chapter 5: Transformation System Design   50
Disadvantages of Cellular
Production
 Volumes too low to justify highly
  efficient high volume equipment
 Vulnerable to equipment breakdowns

 Balancing work across cells

 Does not offer the same high degree of
  customization as the job shop


              Chapter 5: Transformation System Design   51
Cellular Layout

 Teams of workers and equipment to
  produce families of outputs
 Workers cross-trained

 Nominal cells versus physical cells.

 Remainder cell

 Cell formation methods
       production flow analysis

                    Chapter 5: Transformation System Design   52
Original Machine-Component
Matrix
            A B C D E
        1 1                      1                    1
        2              1                   1
        3 1                      1                    1
        4              1                   1
        5 1                                           1

            Chapter 5: Transformation System Design       53
Reordered Machine-Component
Matrix
            A C E B D
        1 1 1 1
        3 1 1 1
        5 1                     1
        2                                 1 1
        4                                 1 1


            Chapter 5: Transformation System Design   54
      Forms of
Transformation
      Systems
  Project Operations




   Chapter 5: Transformation System Design   55
Project Operations

   Large scale
   Finite duration

   Nonrepetitive

   Multiple
    interdependent
    activities
   Offers extremely
    short reaction times
              Chapter 5: Transformation System Design   56
Selection of the
        Process




   Chapter 5: Transformation System Design   57
Volume/Variety
Considerations
 High volume indicate automated mass
  production
 High variety implies use of skilled labor
  and general purpose equipment
 Make-to-stock versus make-to-order




               Chapter 5: Transformation System Design   58
Output Characteristics Effect
on Transformation Systems




            Chapter 5: Transformation System Design   59
Product/Process Life Cycles

 In R&D stage, product made in small
  volumes
 At peak of life cycle, demand may justify
  high volume special purpose equipment
 System should evolve as market evolves

 Whether an organization moves with a
  product through its life cycle depends on
  the organization’s focus
               Chapter 5: Transformation System Design   60
Selection of Transformation
System by Stage of Life Cycle




           Chapter 5: Transformation System Design   61
Service Processes

   Often implemented with little
    development or pretesting
   Need to consider amount of customer
    contact
   Customers may not arrive at smooth
    and even increments
   Including customer in service process
    provides opportunities to improve
    service   Chapter 5: Transformation System Design   62
New Transformational
   Technologies and
      Reengineering




         Chapter 5: Transformation System Design   63
Information Technology

     World Wide Web
         Federal Express
             Web server set up in late 1994
             By 1996 12,000 customers using service
              each day to access package-tracking
              database
             provides higher customer service
             saves FedEx $2 million per year
     Intranets
                     Chapter 5: Transformation System Design   64
Information Technology continued

  Decision support systems
  Artificial intelligence

  Expert systems




              Chapter 5: Transformation System Design   65
The Office of the Future

 Focus of 1980s was on improving
  individual productivity
 Focus 1990s is enhancing way teams
  work together
 Groupware
       communications (e-mail)
       collaboration (access to shared data)
       coordination (jointly accomplishing activities)
                     Chapter 5: Transformation System Design   66
Manufacturing Technologies

   Numerical Control (NC)
       computer numerical control
       direct numerical control
 Robotics
 Flexible Manufacturing Systems (FMS)




                    Chapter 5: Transformation System Design   67
Business Process
          Design
 (Reengineering)




     Chapter 5: Transformation System Design   68
Division of Labor Concept

   Work broken down into its simplest
    most basic tasks
       Performing same task facilitates attaining
        greater skill
       No time lost switching to another task
       Workers well positioned to improve tools
        and techniques


                     Chapter 5: Transformation System Design   69
Division of Labor Concept
continued

 Division of labor concept not challenged
  until recently despite dramatic changes
  in technology
 Quality, innovation, service, and value
  more important than cost, growth, and
  control


              Chapter 5: Transformation System Design   70
Process

 Set of activities that taken together
  produce a result of value to the customer
 Organizing on basis of processes
       Eliminate delays and errors when work is
        handed off
       Capture information once and at source
       When people closest to process perform
        work, there is little need for management
        overhead
                    Chapter 5: Transformation System Design   71
Business Process Design

The fundamental rethinking and radical
 redesign of business processes to
 bring about dramatic improvements in
 performance



Hammer, M. and Stanton, S. The Reengineering Revolution, Harper
  Business, 1995.
                      Chapter 5: Transformation System Design     72
Radical

 Profoundly change the way work
  performed
 Not concerned with making superficial
  changes
 Get to root

 Get rid of old

 Reinventing, not improving

              Chapter 5: Transformation System Design   73
Redesign

 BPD is about designing how work is
  done
 Smart, capable, well trained, highly
  motivated employees mean little if the
  way work is performed is poorly
  designed


               Chapter 5: Transformation System Design   74
Process

 All organizations perform processes
 Customers not interested in individual
  activities but rather overall results
 Few of them are organized on the basis
  of processes
 Thus, processes tend to go unmanaged

 Team approach one way this addressed

              Chapter 5: Transformation System Design   75
Dramatic

 Quantum leaps in performance, not
  marginal or incremental improvements
 Breakthroughs in performance




              Chapter 5: Transformation System Design   76
IBM Credit Example




           Chapter 5: Transformation System Design   77
IBM Credit Example continued

 Order logged by 1 of 14 people in
  conference room
 Carted upstairs to credit department

 Information entered into computer to
  check borrower’s creditworthiness
 Results written on piece of paper



              Chapter 5: Transformation System Design   78
IBM Credit Example continued

 Business practices department modified
  standard loan covenant in response to
  customer requests
 Used its own computer system

 Pricer keyed data into PC to determine
  appropriate interest rate
 Administrator converted to quote letter
  and Fedexed to field sales rep.
              Chapter 5: Transformation System Design   79
IBM Credit Example continued

 Average time to process a request was
  6 days
 Could take as long as 2 weeks

 Actual processing time 90 minutes

 Deal Structurer
       Turnaround time 4 hours
       Number of deals processed increased 100
        times with small reduction in head count
                    Chapter 5: Transformation System Design   80