Page 217 - DMGT501_OPERATIONS_MANAGEMENT

Unit 7: Process Control Charts

Generally, capital-intensive operations must have high utilization to be justifiable. Also, Notes

automation does not always align with a company’s competitive priorities. If a firm offers a
unique product or high-quality service, competitive priorities may indicate the need for skilled
servers, hand labor, and individual attention rather than new technology. Thus, the automation
decision requires careful examination.
One big disadvantage of capital intensity can be the prohibitive investment cost for low-volume
operations. Processes that use general-purpose equipment that are not capital-intensive have

small fixed costs, although the variable cost per unit produced is high. Only high volumes can
justify continuous processes at producing the product with variable costs so low that the price of
the product turns out to be low enough so that consumers can afford to buy it.

The top of the pyramid in mechanization is automation. Automation is a system, process, or
price of equipment that is self-acting and self-regulating. Although automation is often thought
to be necessary to gain competitive advantage, it has both advantages and disadvantages.
Manufacturers use two types of automation systems:
1. Fixed, and
2. Flexible.

1. Fixed Automation: Fixed automation is particularly appropriate for line and continuous
process choices. It produces one type of a part or product in a fixed sequence of simple

operations. Until the mid-1980s, most US automobile plants were dominated by fixed

automation. Chemical processing plants and oil refineries also utilize this type of
automation.
Operations managers favor fixed automation when demand volumes are high, product

designs are stable, and product lifecycles are long. These conditions compensate for the
process’s two primary drawbacks: large initial investment cost and relative inflexibility.

The investment cost is particularly high when a single, complex machine (called a transfer
machine) is capable of handling many operations. Since fixed automation is designed

around a particular product, changing equipment to accommodate new products is difficult

and costly. However, fixed automation maximizes efficiency and yields the lowest variable

cost per unit if volumes are high.
2. Flexible Automation: Flexible automation is production equipment that can be changed
easily to handle various processes. These equipments are programmable. This characteristic
is useful for both low-customization and high-customization processes. Manufacturers
of FMCG products use high volume production lines, with low customization but high
variety. In the case of high customization, the equipment makes a variety of products in
small batches that can be programmed to alternate between products.

These equipment types have the ability to accept reprogramming. When the equipment that has
been dedicated to a particular product is at the end of its lifecycle, the machine can simply be
reprogrammed with a new sequence of operations for a new product.
7.3.3 Process Choice

The relationship between production system and product characteristics is depicted on a
product-process matrix and forms the basis for selection of the production process. In this matrix,
product characteristics are defined on three dimensions, the volume, unit cost and the nature of

the product. Processes are defined on the basis of the production system. As the volume increases

and the product narrows, specialized equipment and standardized material flows become
economically feasible.

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