Question 19.3: Multiple Objectives in Manufacturing Often, the justificatio...
Multiple Objectives in Manufacturing
Often, the justification for using robots and computer-aided design, drafting, and manufacturing (CAD/CAM) systems relies on objectives that include those listed in Exhibit 19.2.
What other objectives might be important? Which of the potential payoffs are measured in dollars, tangibles, or intangibles? How are these objectives linked to improved cash flows for the firm?
EXHIBIT 19.2 Potential payoffs from implementing computer-integrated manufacturing
Reductions
| Personnel costs | 5–50% |
| Engineering design costs | 15–30% |
| Work-in-process inventory | 30–60% |
| 95% Transaction volume for control | 75–95% |
| Lead times | 30–95% |
Gains
| Production rate | 40–70% |
| Capital equipment up-time | 200–300% |
| Product quality | 200–300% |
| Engineering productivity | 300–3500% |
Unlisted objectives include using less floor space, improving product or firm reputation, developing knowledge about new technology, raising morale among engineers (for CAD), and increasing flexibility.
Only two categories in Exhibit 19.2, personnel and engineering design costs, are measured in dollars. The other payoffs in Exhibit 19.2 and the unlisted objective of using less floor space are tangibles that can be measured. The objectives of improving product or firm reputation, developing knowledge about new technology, raising morale among engineers, and increasing flexibility are usually treated as intangibles.
These tangible and intangible objectives are linked to the firm’s bottom line, even though they are not measured in dollars. Using less floor space means faster movement of parts and people and better communications. Reducing work-in-process inventory reduces the need for working capital, the amount of space required, the risk of obsolescence, and the amount of rework.
Reducing the transaction volume reduces the time spent on and the number of personnel required for processing paper, computer messages, etc.
Reducing lead times allows faster response and increases delivery-estimate reliability, both of which increase sales. If lead time can be reduced enough, then a make-to-order manufacturing policy, with possible customization for each customer, can replace a policy of make-to-stock and delivery from stock to customer.
Increasing the production rate increases revenues and material costs without increasing labor or capital costs. A 1% production rate increase may increase profits by 5%. Increasing the time that capital equipment is up or available for use increases production and may remove the need for additional machines.
Increasing product quality reduces rework or scrap costs for defective products, improves customer satisfaction, and may be necessary to remain in business. In a CAM system, for example, automated quality inspection may be 97% accurate, whereas human inspection under optimal conditions may be only 78% accurate.
Increasing engineering productivity reduces the number of engineers required and supports the design of better products that can be produced more cost-effectively. Knowledge about new technology can be used to define and evaluate future projects. Higher morale will increase efforts and creativity. An improved product or firm reputation increases sales. Larger profits will result as new manufacturing systems are designed to increase flexibility to achieve economies of scope and to respond to an uncertain future.