296 HANDOUT: CONTINUOUS FLOW (PRODUCT ORIENTED LAYOUT) AND BOTTLENECK ANALYSIS Reference: Operations Management by Mark A.

Vonderembse and Gregory P. White. The Product Layout and System Capacity The capacity of a product-oriented system can be visualized as a series of pipes of varying capacity, with the smallest diameter or capacity holding back the entire system. Exhibit 9.3 illustrates five pipes (departments or machines) with different diameters (capacities). The output from one pipe becomes the input to the next until the finished product exits pipe number five. In Exhibit 9.3, pipe number two cannot handle all the flow that pipe number one can deliver, and therefore it restricts the flow. Because of pipe number twos limited capacity, it restricts the flow from upstream pipes and starves the downstream pipes. Pipes three, four, and five can work on only what pipe two can deliver. This restriction is called a bottleneck, and it determines the systems capacity. Analysis of System Capacity In a product-oriented layout, identifying the bottleneck is critical. The importance of this analysis cannot be overstated because the results are used not only in determining capacity, but also in planning and scheduling production, which will be discussed in Part III on planning and managing operations. The approach to determining the bottleneck is illustrated in Exhibit 9.4. Start at the beginning of the system, and determine the capacity of the first operation or department. This is the system capacity so far. Use this capacity as the input to the next department in the sequence. Can that department take the total input from the previous department and process it completely? If it can, then the system capacity has not changed. If it cannot, then the system capacity is reduced to the capacity of that department. The procedure continues until the end of the process is reached and the system capacity is known. Consider the example shown in Exhibit 9.5. The basic oxygen furnace has a maximum rate of 4,200 tons per day (tpd), while the continuous casters rate is 6,000 tpd. Clearly, the capacity of that part of the system is limited by the 4,200 tpd of the slower operation. Exhibit 9.3. A Bottleneck in the Product Flow

297 Exhibit 9.4. A Sequential Approach to Bottleneck Analysis

Determining the Bottleneck

Now consider the entire system for making steel shown in Exhibit 9.6. The capacities are listed below each department. At two points in the steel-making process, outputs from two departments are inputs to a single department. The ratio of each input is listed on the arrow that illustrates the flow. For example, in the blast furnace, 3 pounds of iron ore are mixed with 1 pound of coke. In these cases, the inputs to a department should be combined in the correct proportion until at least one of the inputs is exhausted. What is the system capacity? Follow along in Exhibit 9.6. Iron ore processing and coke ovens can deliver 3,000 and 1,000 tpd, respectively. (Only 3,000 tons can

Exhibit 9.5. Simple Steel Production Flow

298 Exhibit 9.6. Steel Production Flow: A Product Layout

Exhibit 9.7.Determining System Capacity.

be used from iron ore processing because of the ratio requirements.) The combined 4,000 tpd is more than sufficient for the blast furnace, which requires only 3,000 tpd total. So far, the blast furnace is holding back production. The blast furnace and scrap handling, in turn, supply 3,000 and 1,500 tpd, which is more than adequate for the basic oxygen furnace capacity of 4,200 tpd. Because the basic oxygen furnace cannot process all available inputs, the blast furnace cannot be the bottleneck. The basic oxygen furnace cannot deliver sufficient output to the remaining departments. Therefore, the basic oxygen furnace is the bottleneck for the system, and the capacity of the system is 4,200 tpd.

To calculate the production rates that allow the system to produce 4,200 tpd, begin at the bottleneck department in Exhibit 9.7. Trace the product flow from the bottleneck to the beginning and the end of the process. In order to achieve 4,200 tpd of basic oxygen furnace input, (2/3)(4,200) = 2,800 tpd comes from the blast furnace and (1/3)(4,200) = 1,400 tpd comes from scrap. The requirements are listed above each department. The blast furnace requires (3/4)(2,800) = 2,100 tpd of iron ore and (1/4)(2,800) = 700 tpd of coke. Moving from the basic oxygen furnace to the end of the process is simpler because there are no pairs of departments. The requirement for those departments is 4,200 tpd. In actual production, each operation in this process would suffer yield loss, which we do not describe here in order to simplify discussion.

299 Rounding Out System Capacity It is also important to know which department, machine, or step in the process restricts the systems capacity. An operations manager may be charged with increasing the systems capacity. If he or she tries to do so by increasing blast furnace capacity, there will be no increase in the systems capacity. This organization could spend millions on a new blast furnace and not get one additional ton of steel out of the system because the bottleneck constricts the flow. The system capacity can be increased by applying resources to the bottleneck department. This approach is called rounding out capacity because resources are applied to the bottleneck to bring it into balance with other parts (departments) in the system. capacity has a limit, however. Simply stated, if the operations manager doubles basic oxygen furnace capacity because it is the bottleneck, the systems capacity will not double. There is not enough capacity in other departments to absorb that large an increase. As a result of doubling basic oxygen furnace capacity, the bottleneck simply jumps to another department. Managers should understand this and carefully analyze the effect on the system of any increase in departmental capacity. An important and useful piece of information to determine is how far the systems capacity can be increased before the next bottleneck appears. To answer, examine the requirements listed above each department in Exhibit 9.7. A quick review shows that scrap handling and the blast furnace will be bottlenecks as basic oxygen furnace capacity is increased. With a cushion of 100 tons per day in scrap handling, the capacity of the system could increase by only 300 tpd. (Remember that one part scrap and two parts hot metal from the blast furnace are required.) The scrap handling and blast furnace departments have insufficient capacity to handle an increase of more than 300 tpd in basic oxygen furnace capacity. If this quick analysis is too confusing, simply set the capacity of the present bottleneck to infinity and rework the problem. The results are shown in Exhibit 9.8. The systems capacity is 4,500 tpd, and there are two bottlenecks: blast furnace and scrap handling. Remember, the basic oxygen furnace capacity was set to infinity. In reality, it must be 4,500 tpd or more if the system capacity is 4,500 tpd. Exhibit 9.8. Rounding Out System Capacity

300 The analysis of system capacity and associated bottlenecks is extremely important for determining capacity. Rational decisions about capacity can be made only if these concepts are fully understood.

317 SUMMARY a. Machine and departmental capacities are needed to determine the capacity of a system. A system can go only as fast as its slowest part, which is the bottleneck. b. Increases in system capacity can be achieved by increasing capacity in the bottleneck department. This is called rounding out capacity. SOLVED PROBLEM 1. Wade Chemical Company has a problem with its flow process. Analyze the following diagram and table:

C
Department A B C D Capacity (Gallons Per Hour) 100 70 50 120

The ratio for mixing the outputs from departments B and C is two to one. This means that getting three gallons of input to department D requires mixing two gallons of Bs output and one gallon of Cs output. a. What is the systems capacity, and which department is the bottleneck? SOLUTION Department A can deliver 100 gallons per hour (gph) to department B, which can only use 70 gph, so department A cannot be the bottleneck. Departments B and C combine their inputs to D in a ratio of two to one. If B has only 70 gph to offer, then only 35 gph of C can be used. So far, department B restricts the capacity. To department D will flow 105 gph (70 from B plus 35 from C). Department D has sufficient capacity to process 120 gph. As a result, the system capacity is 105 gph, and department B is the bottleneck. b. How much slack (unused capacity) is available in the other departments? SOLUTION Department A B C D Capacity (GPH) 100 70 50 120 Production Volume To Make 105 GPH 70 70 35 105 Unused Capacity (GPH) 30 0 15 15

318 The production volumes are calculated in part a of this problem. Start at the bottleneck, and work backward to the beginning of the process. How many gph are needed from A to allow B to make 70 gph? Because no other department inputs to B, all 70 gph must come from A. Now work from the bottleneck to the end of the process. Department C must produce 35 gph to get the total gph needed by D. Department D must process 105 gph. c. How much system capacity can be gained by adding capacity to the bottleneck? SOLUTION Allow the capacity of department B to be unlimited, and rework parts a and b of this problem. Now department A can pass on 100 gph. Department B can process all 100 gallons and combine them with Department Cs output of 50 gph to deliver a total of 150 gph to department D. Department D can only process 120 gph, so the system capacity is now 120 gph and D is the bottleneck. Department A B C D Capacity 100 Infinite 50 120 Production Volume To Make 120 GPH 80 80 40 120 Unused Capacity 20 10 0

The capacity of department B had to be increased from 70 to 80 gph to achieve the 15 gph increase in system capacity.

CAPACITY MANAGEMENT
Capacity is the total productive capability of a system during a unit of time. For a manufacturing facility, capacity is simply the maximum output that can be attained with the existing capital equipment during a period of time. Thus, an automobile manufacturer may define its capacity as the number of cars that can be assembled in an hour, day, week, or month. Capacity is critically important for a productive organization because: It provides the output required to meet product demand. It directly impacts the cost and efficiency of productive capability. It is a major organizational investment. What is design capacity? Design capacity is the total achievable capacity under perfect conditions. Normally, perfect conditions are not achievable, and few organizations operate for any period of time at design capacity. Furthermore, operating at designed capacity can cause rapid wear and breakdowns. Operating at design capacity essentially means operating at the organization`s productive limits. What is effective capacity or utilization? Effective capacity or utilization is a ratio between the expected capacity of a firm and its design capacity. It can be computed by the following formula: EFFECTIVE CAPACITY OR UTILIZATION = EXPECTED CAPACITY/DESIGN CAPACITY

Effective capacity is affected by an organization`s product mix, production scheduling, age of equipment, and maintenance standards. EXAMPLE 1.21 A television manufacturing company has a design capacity of 50 televisions per hour, but due to intensive quality control standards, it normally produces only 40 televisions per hour. The effective capacity or utilization of the television manufacturing company is calculated in the following manner: EFFECTIVE CAPACITY OR UTILIZATION = EXPECTED CAPACITY/DESIGN CAPACITY EFFECTIVE CAPACITY OR UTILIZATION = 40/50 = 80% What is capacity efficiency? Capacity efficiency is a ratio of production output to effective capacity. It is a measure of effective management in utilizing effective capacity. It is calculated using the following formula: EFFICIENCY = ACTUAL OUTPUT/EFFECTIVE CAPACITY EXAMPLE 1.22 The effective capacity of a candy manufacturing company is 1,000 units of candy per hour; however, it actually produces only 850 units per hour. The efficiency of the candy manufacturing company can be computed in the following manner: EFFICIENCY = ACTUAL OUTPUT/EFFECTIVE CAPACITY EFFICIENCY = 850/1,500 = 85% What is rated capacity? Rated capacity is a determination of the maximum usable capacity of manufacturing capability. Rated capacity can never exceed design capacity. It is a product of design capacity times effective capacity times efficiency. The formula used to calculate rated capacity is: Rated capacity = Design capacity x Effective capacity x Efficiency EXAMPLE 1.23 A computer printer manufacturer has a manufacturing facility operating at an effective capacity of 80% with 85% efficiency. It has two assembly lines operating five days a week with two shifts a day. Each assembly line has a designed capacity of 40 printers per hour. The rated capacity of the computer printer manufacturer is calculated by multiplying the design capacity times the effective capacity times the efficiency of the plant. To determine the design capacity, the two production lines have to be multiplied by the number of printers times the combined number of hours of production. Design Capacity = 40 printers/hour x 2 assembly lines x 80 hours = 6,400 ` Rated capacity = Design capacity x Effective capacity x Efficiency Rated capacity = 6,400 x 0.8 x 0.85 = 4,352 printers per week What factors affect capacity? Many factors affect an organization`s productive capacity. Some are within management`s control while others are not. Factors within management`s control include the acquisition and supervision of land, physical resources, and the utilization of labor.

Management challenges affecting organizational capacity include personnel issues, technological maximization, and issues that are not directly controllable such as the impact of weather events, political issues, or war.