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S U P P L E M E N T C
O P E RATIONS TECHNOLOGY
Much of the recent growth in productivity has come from the application of operations technology.
In services this comes primarily from soft technology--information processing. In
manufacturing it comes from a combination of soft and hard (machine) technologies. Given
that most readers of this book have covered information technologies in services in MIS
courses, our focus in this supplement is on manufacturing.
T E C H N O L O G I E S I N M A N U F A C T U R I N G
Although technological changes have occurred in almost every industry, many may be
unique to an industry. For instance, a prestressed concrete block is a technological advance
unique to the construction industry. Major developments in the design of automobiles will
result in cars that are made from recyclable parts. (See Exhibit SC.1 for a description of the
materials and process technologies that are being developed.)
Some technological advances in recent decades have had a significant, widespread impact
on manufacturing firms in many industries. These advances, which are the topic of this section,
can be categorized in two ways: hardware systems and software systems.
Hardware technologies have generally resulted in greater automation of processes; they
perform labor-intensive tasks originally performed by humans. Examples of these major
types of hardware technologies are numerically controlled machine tools, machining centers,
industrial robots, automated materials handling systems, and flexible manufacturing
systems. These are all computer-controlled devices that can be used in the manufacturing of
Vol. IV "Quality Product
and Process Design
at Detroit Diesel"
E X H I B I T SC .1
Automobile Recycling
Refrigerant
from air conditioners
is routinely recovered,
cleaned, and reused
in other cars.
Coolant is
purified so that
it can be used
once again.
Oil is replaced
frequently but
typically can be
recycled as fuel oil.
Batteries are
replaced periodically;
the lead plates, acid,
and even plastic cases
are usually recycled.
Bumpers can be disassembled and
recycled into new bumpers.
Catalytic converters
contain valuable amounts
of platinum and thodium,
although extracting these
elements has
proved difficult.
Transmissions and other
mechanical components of
the engine and drivetrain are
often refurbished.
Wheels are commonly
used as replacements
or can be recycled
for scrap steel.
Tires may be used for
scrap rubber,
or can be ground up
and burned as fuel.
Body parts such
as doors are kept as
replacements or recycled
for scrap steel.
Plastic interiors are the
troubling parts to recycle,
but innovative methods
are having success.
Automobile recycling is one of the most successful examples of reuse of manufactured product. About 75 percent of a typical car can
be recycled in the form of refurbished parts, useful fluids and scrap materials. This process can, however, be taken further. New
methods to separate and recycle plastic components, for example, offer the possibility of removing even more material from the waste
stream and returning it to the manufacturing cycle.
FIGURE FROM R. A. FROSCH, "THE INDUSTRIAL ECOLOGY," SCIENTIFIC AMERICAN, SEPTEMBER 1995, P. 18. ILLUSTRATION  1995 BY KARL GUDE. USED WITH PERMISSION.
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products. Software-based technologies aid in the design of manufactured products and in
the analysis and planning of manufacturing activities.These technologies include computeraided
design and automated manufacturing planning and control systems. Each of these technologies
will be described in greater detail in the following sections.
H a r d w a r e S y s t e m s Numerically controlled (NC) machines are comprised of (1) a
typical machine tool used to turn, drill, or grind different types of parts and (2) a computer
that controls the sequence of processes performed by the machine. NC machines were first
adopted by U.S. aerospace firms in the 1960s, and they have since proliferated to many other
industries. In more recent models, feedback control loops determine the position of the machine
tooling during the work, constantly compare the actual location with the programmed
location, and correct as needed. This is often called adaptive control.
Machining centers represent an increased level of automation and complexity relative to
NC machines. Machining centers not only provide automatic control of a machine, they
may also carry many tools that can be automatically changed depending on the tool required
for each operation. In addition, a single machine may be equipped with a shuttle system so
that a finished part can be unloaded and an unfinished part loaded while the machine is
working on a part. To help you visualize a machining center, we have included a diagram in
Exhibit SC.2.
Industrial robots are used as substitutes for workers for many repetitive manual activities
and tasks that are dangerous, dirty, or dull. A robot is a programmable, multifunctional
machine that may be equipped with an end effector. Examples of end effectors include a
gripper to pick things up, or a tool such as a wrench, a welder, or a paint sprayer. Exhibit SC.3
examines the human motions a robot can reproduce. Advanced capabilities have been designed
into robots to allow vision, tactile sensing, and hand-to-hand coordination. In addition,
OPERATIONS TECHNOLOGY supplement C 729
E X H I B I T S SC .2 & 3
Pallet exchanger
Work piece
Controller
Cutting tool
Tool changer
Jointed arm Spherical coordinate Cylindrical coordinate
Wrist axes
1
3
2
2
3
1
1
1
3
2
3
2
SC.2--The CNC Machining Center SC.3--Typical Robot Axes of Motion
SOURCE: J. T. BLACK, THE DESIGN OF THE FACTORY WITH A FUTURE (NEW YORK: MCGRAW-HILL,
1991, P. 39), WITH PERMISSION OF THE MCGRAW-HILL COMPANIES.
SOURCE: L. V. OTTINGER, "ROBOTICS FOR THE IE: TERMINOLOGY, TYPES OF ROBOTS," INDUSTRIAL
ENGINEERING, NOVEMBER 1981, P. 30.
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some models can be "taught" a sequence of motions in a three-dimensional pattern. As a
worker moves the end of the robot arm through the required motions, the robot records this
pattern in its memory and repeats it on command. As shown in the box "Formula for Evaluating
a Robot Investment," robots are often justified based on labor savings.
Automated materials handing (AMH) systems improve efficiency of transportation, storage,
and retrieval of materials. Examples are computerized conveyors and automated storage
and retrieval systems (AS/RS) in which computers direct automatic loaders to pick and place
items.Automated guided vehicle (AGV) systems use embedded floor wires to direct driverless
vehicles to various locations in the plant. Benefits of AMH systems include quicker
material movement, lower inventories and storage space, reduced product damage, and
higher labor productivity.
These individual pieces of automation can be combined to form manufacturing cells or
even complete flexible manufacturing systems (FMS). A manufacturing cell might consist
of a robot and a machining center. The robot could be programmed to automatically insert
and remove parts from the machining center, thus allowing unattended operation. An FMS
is a totally automated manufacturing system that consists of machining centers with automated
loading and unloading of parts, an automated guided vehicle system for moving parts
between machines, and other automated elements to allow unattended production of parts.
In an FMS, a comprehensive computer control system is used to run the entire system.
A good example of an FMS is the Cincinnati Milacron facility in Mt. Orab, Ohio, which
has been in operation for over 20 years. Exhibit SC.4 is a layout of this FMS. In this system,
parts are loaded onto standardized fixtures (these are called "risers"), which are mounted
on pallets that can be moved by the AGVs. Workers load and unload tools and parts onto
the standardized fixtures at the workstations shown on the right side of the diagram. Most
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OPERATIONS TECHNOLOGY supplement C 731
E X H I B I T SC .4
1 Four Milacron T-30 CNC Machining
Centers.
2 Four tool interchange stations, one per
machine, for tool storage chain delivery
via computer-controlled cart.
3 Cart maintenance station. Coolant
monitoring and maintenance area.
4 Parts wash station, automatic handling.
5 Automatic Workchanger (10 pallets) for
online pallet queue.
6 One inspection module--horizontal type
coordinate measuring machine.
7 Three queue stations for tool delivery
chains.
8 Tool delivery chain load/unload stations.
9 Four part load/unload stations.
10 Pallet/fixture build station.
11 Control center, computer room
(elevated).
12 Centralized chip/coolant collection/recovery
system (----flume path).
13 Three computer-controlled carts, with
wire-guided path.
Cart turnaround station
(up to 360° around its own axis)
Key:
Conference
room
3
4
5
6
7
10
11
13
2
1
12
8
9
The Cincinnati Milacron Flexible Manufacturing System
SOURCE: TOUR BROCHURE FROM THE PLANT.
Many companies use the following modification of the basic
payback formula in deciding if a robot should be purchased:
P
where
P = Payback period in years
I = Total capital investment required in robot and
accessories
L = Annual labor costs replaced by the robot (wage and
benefit costs per worker times the number of shifts
per day)
E = Annual maintenance cost for the robot
q = Fractional speedup (or slowdown) factor
Z = Annual depreciation
I
L E q(L Z)
Example:
I = $50,000
L = $60,000 (two workers × $20,000 each working one
of two shifts; overhead is $10,000 each)
E = $9,600 ($2/hour × 4,800 hours/year)
q = 1.5 (robot works 150 percent as fast as a worker)
Z = $10,000
then
P =
= 1/3 year.
$50,000
$60,000 - $9,600 + 1.5($60,000 + $10,000)
FORMULA FOR EVALUATING A ROBOT INVESTMENT
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of this loading and unloading is done during a single shift. The system can operate virtually
unattended for the other two shifts each day.
Within the system there are areas for the storage of tools (Area 7) and for parts (Area 5).
This system is designed to machine large castings used in the production of the machine tools
made by Cincinnati Milacron. The machining is done by the four CNC machining centers
(Area 1). When the machining has been completed on a part, it is sent to the parts washing
station (Area 4), where it is cleaned. The part is then sent to the automated inspection station
(Area 6) for a quality check. The system is capable of producing hundreds of different parts.
S o f t w a r e S y s t e m s Computer-aided design (CAD) is an approach to product and
process design that utilizes the power of the computer. CAD covers several automated technologies,
such as computer graphics to examine the visual characteristics of a product and
computer-aided engineering (CAE) to evaluate its engineering characteristics. Rubbermaid
used CAD to refine dimensions of its ToteWheels to meet airline requirements for checked
baggage. CAD also includes technologies associated with the manufacturing process design,
referred to as computer-aided process planning (CAPP). CAPP is used to design the
computer part programs that serve as instructions to computer-controlled machine tools,
and to design the programs used to sequence parts through the machine centers and other
processes (such as the washing and inspection) needed to complete the part. These programs
are referred to as process plans. Sophisticated CAD systems are also able to do on-screen
tests, replacing the early phases of prototype testing and modification.
CAD has been used to design everything from computer chips to potato chips. Frito-Lay,
for example, used CAD to design its O'Grady's double-density, ruffled potato chip.The problem
in designing such a chip is that if it is cut improperly, it may be burned on the outside
and soggy on the inside, be too brittle (and shatter when placed in the bag), or display other
characteristics that make it unworthy for, say, a guacamole dip. However, through the use
of CAD, the proper angle and number of ruffles were determined mathematically; the
O'Grady's model passed its stress test in the infamous Frito-Lay "crusher" and made it to
your grocer's shelf.
CAD is now being used to custom design swimsuits. Measurements of the wearer are fed
into the CAD program, along with the style of suit desired. Working with the customer, the
designer modifies the suit design as it appears on a human-form drawing on the computer
732 supplement C OPERATIONS TECHNOLOGY
ONE OF THE FOUR LARGE MACHINING CENTERS
(SEE EXHIBIT SC.4) THAT ARE PART OF THE
FLEXIBLE MANUFACTURING SYSTEMS AT
CINCINNATI MILACRON'S MT. ORAB, OHIO,
PLANT.
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screen. Once the design is decided upon, the computer prints out a pattern, and the suit is
cut and sewn on the spot.
Automated manufacturing planning and control systems (MP&CS) are simply computerbased
information systems that help plan, schedule, and monitor a manufacturing operation.
They obtain information from the factory floor continuously about work status, material
arrivals, and so on, and they release production and purchase orders. Sophisticated manufacturing
and planning control systems include order-entry processing, shop-floor control,
purchasing, and cost accounting.
C O M P U T E R - I N T E G R A T E D M A N U F A C T U R I N G ( C I M )
All of these automation technologies are brought together under computer-integrated manufacturing
(CIM). CIM is the automated version of the manufacturing process, where the three
major manufacturing functions--product and process design, planning and control, and the
manufacturing process itself--are replaced by the automated technologies just described. Further,
the traditional integration mechanisms of oral and written communication are replaced
by computer technology. Such highly automated and integrated manufacturing also goes
under other names: total factory automation and the factory of the future.
All of the CIM technologies are tied together using a network and integrated database. For
instance, data integration allows CAD systems to be linked to computer-aided manufacturing
(CAM), which consists of numerical-control parts programs; and the manufacturing planning
and control system can be linked to the automated material handling systems to facilitate
parts pick list generation. Thus, in a fully integrated system, the areas of design, testing, fabrication,
assembly, inspection, and material handling are not only automated but also integrated
with each other and with the manufacturing planning and scheduling function.
E V A L U A T I O N O F T E C H N O L O G Y I N V E S T M E N T S
Modern technologies such as flexible manufacturing systems or computerized order processing
systems represent large capital investments. Hence, a firm has to carefully assess its financial
and strategic benefits from a technology before acquiring it. Evaluating such investments
is especially hard because the purpose of acquiring new technologies is not just to reduce
labor costs but also to increase product quality and variety, to shorten production lead times,
and to increase the flexibility of an operation. Some of these benefits are intangible relative to
labor cost reduction, so justification becomes difficult. Further, rapid technological change
renders new equipment obsolete in just a few years, making the cost­benefit evaluation more
complex.
But never assume that new automation technologies are always cost-effective. Even
when there is no uncertainty about the benefits of automation, it may not be worthwhile to
adopt it. For instance, many analysts predicted that integrated CAD/CAM systems would
be the answer to all manufacturing problems. But a number of companies investing in such
systems lost money in the process. The idea was to take a lot of skilled labor out of the process
of tooling up for new or redesigned products and to speed up the process. However, it
can take less time to mill complex, low-volume parts than to program the milling machine,
and programmer time is more expensive than the milling operator time. Also, it may not
always be easy to transfer all the expert knowledge and experience that a milling operator
has gained over the years into a computer program. Only recently has CAD/CAM integration
software become available that can be cost-effective even in high-variety, low-volume
manufacturing environments.
B E N E F I T S O F T E C H N O L O G Y
I N V E S T M E N T S
The typical benefits from adopting new manufacturing technologies are both tangible and
intangible. The tangible benefits can be used in traditional modes of financial analysis, such
OPERATIONS TECHNOLOGY supplement C 733
Vol. I "Computer Integrated
Manufacturing"
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as discounted cash flow, to make sound investment decisions. Specific benefits can be summarized
as follows:
COST REDUCTION
Labor costs. Replacing people with robots, or enabling fewer workers to run semiautomatic
equipment.
Material costs. Using existing materials more efficiently, or enabling the use of hightolerance
materials.
Inventory costs. Fast changeover equipment allowing for JIT inventory management.
Quality costs. Automated inspection and reduced variation in product output.
Maintenance costs. Self-adjusting equipment.
OTHER BENEFITS
Increased product variety. Scope economies due to flexible manufacturing systems.
Improved product features. Ability to make things that could not be made by hand
(e.g., microprocessors).
Shorter cycle times. Faster setups and change-overs.
Greater product output.
R i s k s i n A d o p t i n g N e w Te c h n o l o g i e s Although there may be many benefits
in acquiring new technologies, several types of risk accompany the acquisition of new
technologies. These risks have to be evaluated and traded off against the benefits before the
technologies are adopted. Some of these risks are described next.
TECHNOLOGICAL RISKS
An early adopter of a new technology has the benefit of being ahead of the competition, but
he or she also runs the risk of acquiring an untested technology whose problems could disrupt
the firm's operations.There is also the risk of obsolescence, especially with electronics-based
technologies where change is rapid and when the fixed cost of acquiring new technologies or
the cost of upgrades is high. Also, alternative technologies may become more cost-effective
in the future, negating the benefits of a technology today.
OPERATIONAL RISKS
There could also be risks in applying a new technology to a firm's operations. Installation
of a new technology generally results in significant disruptions, at least in the short run, in
the form of plantwide reorganization, retraining, and so on. Further risks are due to the delays
and errors introduced in the production process and the uncertain and sudden demands
on various resources.
ORGANIZATIONAL RISKS
Firms may lack the organizational culture and top management commitment required to
absorb the short-term disruptions and uncertainties associated with adopting a new technology.
In such organizations, there is a risk that the firm's employees or managers may
quickly abandon the technology when there are short-term failures or will avoid major
changes by simply automating the firm's old, inefficient process and therefore not obtain
the benefits of the new technology.
ENVIRONMENTAL OR MARKET RISKS
In many cases, a firm may invest in a particular technology only to discover a few years
later that changes in some environmental or market factors make the investment worthless.
For instance, in environmental issues auto firms have been reluctant to invest in technology
for making electric cars because they are uncertain about future emission standards of state
and federal governments, the potential for decreasing emissions from gasoline-based cars,
and the potential for significant improvements in battery technology. Typical examples of
market risks are fluctuations in currency exchange rates and interest rates.
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C O N C L U S I O N
Technology has played the dominant role in the productivity growth of most nations and has
provided the competitive edge to firms that have adopted it early and implemented it successfully.
Although each of the manufacturing and information technologies described here is a
powerful tool by itself and can be adopted separately, their benefits grow exponentially when
they are integrated with each other. This is particularly the case with CIM technologies.
With more modern technologies, the benefits are not entirely tangible and many benefits
may be realized only on a long-term basis. Thus, typical cost accounting methods and standard
financial analysis may not adequately capture all the potential benefits of technologies
such as CIM. Hence, we must take into account the strategic benefits in evaluating such investments.
Further, because capital costs for many modern technologies are substantial, the
various risks associated with such investments have to be carefully assessed.
Implementing flexible manufacturing systems or complex decision support systems
requires a significant commitment for most firms. Such investments may even be beyond the
reach of small to medium-sized firms. However, as technologies continue to improve and are
adopted more widely, their costs may decline and place them within the reach of smaller
firms. Given the complex, integrative nature of these technologies, the total commitment of
top management and all employees is critical for the successful implementation of these
technologies.
R E V I E W A N D D I S C U S S I O N Q U E S T I O N S
1 Do robots have to be trained? Explain.
2 How does the axiom used in industrial selling "You don't sell the product; you sell the company"
pertain to manufacturing technology?
3 List three analytical tools (other than financial analysis) covered elsewhere in the book that can
be used to evaluate technological alternatives.
4 The Belleville, Ontario, Canada, subsidiary of Atlanta-based Interface Inc., one of the worlďs
largest makers of commercial flooring, credits much of its profitability to "green manufacturing"
or "eco-efficiency." What do you believe these terms mean, eh? And how could such practices
lead to cost reduction?
5 Give two examples each of recent process and product technology innovations.
6 What is the difference between an NC machine and a machining center?
7 The major auto companies are planning to invest millions of dollars in developing new product
and process technologies required to make electric cars. Describe briefly why they are investing
in these technologies. Discuss the potential benefits and risks involved in these investments.
OPERATIONS TECHNOLOGY supplement C 735
S E L E C T E D B I B L I O G R A P H Y
Black, J. T. The Design of the Factory with a Future. New York:
McGraw-Hill, 1991.
Chang, T.; R. A. Wysk; and H. Wang. Computer-Aided Manufacturing.
Upper Saddle Creek, NJ: Prentice Hall, 1997.
Cohen, M., and U. Apte. Manufacturing Automation. New York:
Irwin/McGraw-Hill, 1997.
Gaynor, G. H. Achieving the Competitive Edge through Integrated Technology
Management. New York: McGraw-Hill, 1991.
Groover, M. P. Fundamentals of Modern Manufacturing. 2nd ed. New
York: Wiley, 2001.
Hyer, N., and U. Wemmerlöv. Reorganizing the Factory: Competing
through Cellular Manufacturing. Portland: OR; Productivity Press,
2002.
Melnyk, S. A., and R. Narasimhan. Computer Integrated Manufacturing.
Homewood, IL: Irwin Professional Publishing, 1992.
Negroponte, N. Being Digital. New York: Vantage Books, 1995.
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