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Automation,
Production Systems, and

Automation, Production Systems, and

Computer-Integrated Manufacturing
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Manufacturing
fourth edition

Mikell P. Groover

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 Abbreviations Used in This Book

Abbreviation Unabbreviated Unit(s)

A amps
C Celsius, Centigrade
cm centimeters
F Fahrenheit
hp horsepower
hr hour, hours
Hz hertz (sec)-1
in inch, inches
lbf pounds force
m meters
min minute, minutes
mm millimeters
MPa megapascals (N/mm2)
mV millivolts
N newtons
ops operations
Pa pascals (N/m2)
pc pieces, parts
rad Radians
rev revolutions
sec second, seconds
V volts
W watts
wk week, weeks
yr year, years
m@in microinches
mm microns, micrometers
m@sec microseconds
mV microvolts
Ω ohms

CVR_GROO9612_04_SE_IFC.indd 575 21/04/14 10:54 AM

 Automation,
Production Systems,
and Computer-Integrated
Manufacturing

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A01_GROO6119_04_GE_FM.INDD 2 02/03/15 4:15 PM
 Automation,
Production Systems,
and Computer-Integrated
Manufacturing

Fourth Edition
Global Edition

Mikell P. Groover
Professor Emeritus of Industrial
and Systems Engineering
Lehigh University

Global Edition contributions by

G. Jayaprakash
Professor and Head
Department of Mechanical Engineering
Saranathan College of Engineering, Tiruchirappalli

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Authorized adaptation from the United States edition, entitled Automation, Production Systems, and Computer-
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ISBN 10: 1-292-07611-9

ISBN 13: 978-1-292-07611-9

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 Contents

Preface 11

Chapter 1 Introduction 17
1.1 Production Systems 18
1.2 Automation in Production Systems 22
1.3 Manual Labor in Production Systems 27
1.4 Automation Principles and Strategies 29
1.5 About This Book 34

Part I: Overview of Manufacturing 37

Chapter 2 Manufacturing Operations 37
2.1 Manufacturing Industries and Products 41
2.2 Manufacturing Operations 44
2.3 Production Facilities 48
2.4 Product/Production Relationships 53

Chapter 3 Manufacturing Metrics and Economics 62

3.1 Production Performance Metrics 63
3.2 Manufacturing Costs 75
APPENDIX 3A: Averaging Formulas for Equation (3.20) 89

Part II: Automation and Control Technologies 91

Chapter 4 Introduction to Automation 91
4.1 Basic Elements of an Automated System 94
4.2 Advanced Automation Functions 102
4.3 Levels of Automation 107

Chapter 5 Industrial Control Systems 111

5.1 Process Industries versus Discrete Manufacturing Industries 112
5.2 Continuous versus Discrete Control 114
5.3 Computer Process Control 120

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 6 Contents

Chapter 6 Hardware Components for Automation and Process Control 137

6.1 Sensors 138
6.2 Actuators 142
6.3 Analog–Digital Conversions 154
6.4 Input/Output Devices for Discrete Data 159

Chapter 7 Computer Numerical Control 165

7.1 Fundamentals of NC Technology 168
7.2 Computers and Numerical Control 174
7.3 Applications of NC 179
7.4 Analysis of Positioning Systems 186
7.5 NC Part Programming 194
APPENDIX 7A: Coding for Manual Part Programming 212

Chapter 8 Industrial Robotics 220

8.1 Robot Anatomy and Related Attributes 222
8.2 Robot Control Systems 230
8.3 End Effectors 232
8.4 Applications of Industrial Robots 233
8.5 Robot Programming 242
8.6 Robot Accuracy and Repeatability 250

Chapter 9 Discrete Control and Programmable Logic Controllers 260

9.1 Discrete Process Control 260
9.2 Ladder Logic Diagrams 268
9.3 Programmable Logic Controllers 272
9.4 Personal Computers and Programmable Automation Controllers 279

Part III: Material Handling and Identification 285

Chapter 10 Material Transport Systems 285
10.1 Overview of Material Handling 286
10.2 Material Transport Equipment 291
10.3 Analysis of Material Transport Systems 307

Chapter 11 Storage Systems 325

11.1 Introduction to Storage Systems 326
11.2 Conventional Storage Methods and Equipment 330
11.3 Automated Storage Systems 333
11.4 Analysis of Storage Systems 341

Chapter 12 Automatic Identification and Data Capture 353

12.1 Overview of Automatic Identification Methods 354
12.2 Bar Code Technology 356
12.3 Radio Frequency Identification 363
12.4 Other AIDC Technologies 365

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 Contents 7

Part IV:   Manufacturing Systems 369

Chapter 13 Overview of Manufacturing Systems 369
13.1 Components of a Manufacturing System 370
13.2 Types of Manufacturing Systems 375

Chapter 14 Single-Station Manufacturing Cells 382

14.1 Single-Station Manned Cells 383
14.2 Single-Station Automated Cells 384
14.3 Applications of Single-Station Cells 393
14.4 Analysis of Single-Station Cells 393

Chapter 15 Manual Assembly Lines 406

15.1 Fundamentals of Manual Assembly Lines 408
15.2 Analysis of Single-Model Assembly Lines 414
15.3 Line Balancing Algorithms 421
15.4 Workstation Details 427
15.5 Other Considerations in Assembly Line Design 429
15.6 Alternative Assembly Systems 432
APPENDIX 15A: Batch-Model and Mixed-Model Lines 442

Chapter 16 Automated Production Lines 457

16.1 Fundamentals of Automated Production Lines 458
16.2 Applications of Automated Production Lines 466
16.3 Analysis of Transfer Lines 470
APPENDIX 16A: Transfer Lines with Internal Storage 480

Chapter 17 Automated Assembly Systems 488

17.1 Fundamentals of Automated Assembly Systems 489
17.2 Analysis of Automated Assembly Systems 495

Chapter 18 Group Technology and Cellular Manufacturing 513

18.1 Part Families and Machine Groups 515
18.2 Cellular Manufacturing 522
18.3 Applications of Group Technology 527
18.4 Analysis of Cellular Manufacturing 529
APPENDIX 18A: Opitz Parts Classification and Coding System 544

Chapter 19 Flexible Manufacturing Cells and Systems 547

19.1 What Is a Flexible Manufacturing System? 549
19.2 FMC/FMS Components 554
19.3 FMS Application Considerations 561
19.4 Analysis of Flexible Manufacturing Systems 565
19.5 Alternative Approaches to Flexible Manufacturing 577

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 8 Contents

Part V: Quality Control Systems 591

Chapter 20 Quality Programs for Manufacturing 591
20.1 Quality in Design and Manufacturing 592
20.2 Traditional and Modern Quality Control 593
20.3 Process Variability and Process Capability 596
20.4 Statistical Process Control 599
20.5 Six Sigma 612
20.6 Taguchi Methods in Quality Engineering 616
20.7 ISO 9000 621
APPENDIX 20A: The Six Sigma DMAIC Procedure 628

Chapter 21 Inspection Principles and Practices 634

21.1 Inspection Fundamentals 635
21.2 Sampling versus 100% Inspection 640
21.3 Automated Inspection 644
21.4 When and Where to Inspect 646
21.5 Analysis of Inspection Systems 650

Chapter 22 Inspection Technologies 663

22.1 Inspection Metrology 664
22.2 Conventional Measuring and Gaging Techniques 669
22.3 Coordinate Measuring Machines 669
22.4 Surface Measurement 681
22.5 Machine Vision 683
22.6 Other Optical Inspection Methods 690
22.7 Noncontact Nonoptical Inspection Techniques 693
APPENDIX 22A: Geometric Feature Construction 698

Part VI:   Manufacturing Support Systems 701

Chapter 23 Product Design and CAD/CAM in the Production System 701
23.1 Product Design and CAD 702
23.2 CAM, CAD/CAM, and CIM 709
23.3 Quality Function Deployment 713

Chapter 24 Process Planning and Concurrent Engineering 719

24.1 Process Planning 720
24.2 Computer-Aided Process Planning 725
24.3 Concurrent Engineering and Design for Manufacturing 728
24.4 Advanced Manufacturing Planning 732

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 Contents 9

Chapter 25 Production Planning and Control Systems 737

25.1 Aggregate Production Planning and the Master Production Schedule 739
25.2 Material Requirements Planning 741
25.3 Capacity Planning 747
25.4 Shop Floor Control 749
25.5 Inventory Control 755
25.6 Manufacturing Resource Planning (MRP II) 759
25.7 Enterprise Resource Planning (ERP) 760

Chapter 26 Just-In-Time and Lean Production 766

26.1 Lean Production and Waste in Manufacturing 767
26.2 Just-In-Time Production Systems 771
26.3 Autonomation 778
26.4 Worker Involvement 782

Appendix: Answers to Selected Problems 792

Index798

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A01_GROO6119_04_GE_FM.INDD 10 02/03/15 4:15 PM
 Preface

This book has a history. It was originally published in 1980 as Automation, Production
Systems, and Computer-Aided Manufacturing. Topics included automated flow lines, as-
sembly line balancing, numerical control, CAD/CAM, control theory, process control,
production planning, group technology, and flexible manufacturing systems. A revised
edition was published in 1986 with a change in title to Automation, Production Systems,
and Computer-Integrated Manufacturing. Additional topics included industrial robot-
ics, programmable logic controllers, automated assembly systems, material handling and
storage, automatic identification techniques, shop floor control, and the future automated
factory. The second edition of the new title was released in 2000 with a 2001 copyright.
Many of the topics remained the same as in the 1986 edition, but much of the material on
control theory was eliminated. The book was reorganized substantially, and most of the
chapters were rewritten to bring the technical subject matter up to date. The third edition
was released in 2007 with a 2008 copyright. It contained expanded coverage of new and
emerging technologies (e.g., radio frequency identification, Six Sigma, lean production,
enterprise resource planning).
The basic objective of this new edition remains the same as in the previous edi-
tions: to provide up-to-date coverage of production systems, how they are sometimes
automated and computerized, and how they can be mathematically analyzed to obtain
performance metrics. The textbook is designed primarily for engineering students at
the advanced undergraduate or beginning graduate levels in industrial, mechanical, and
manufacturing engineering. It has all the features of an engineering textbook: equations,
­example problems, diagrams, quantitative end-of-chapter exercises, and technical de-
scriptions that seem designed to baffle college students. The book should also be useful
for practicing engineers and managers who wish to learn about automation and produc-
tion systems technologies in modern manufacturing.

New to This Edition

In this fourth edition of the current title (fifth edition of the original 1980 book), I have
consolidated and reorganized many of the topics and eliminated material that I felt is no
longer relevant. Among the new topics and other changes in the book are those listed
below. Items marked with an asterisk (*) relate to recommendations made by the review-
ers (see Acknowledgments).

• In Chapter 3 (Manufacturing Metrics and Economics), many of the equations have

been revised to make them more robust. A new section on cost of a manufactured
part has been added.

11

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 12 Preface

• In Chapter 6 (Hardware Components for Automation and Process Control), new

content has been added on electric motors, including linear motors and the conver-
sion of rotary motion to linear motion.* Several new figures have been added in
support of the new content.*
• In Chapter 7 (Computer Numerical Control), the appendix on APT has been re-
moved because this method of programming has been largely replaced in industry
by CAD/CAM part programming, coverage of which has been expanded in this
new edition. In addition, the mathematical models of positioning control have been
improved.
• In Chapter 8 (Industrial Robotics), two new robot configurations have been added
and two configurations have been eliminated because they are no longer relevant.
• In Chapter 9 (Discrete Control and Programmable Logic Controllers), corrections
and improvements have been made in the ladder logic examples.* A section on pro-
grammable automation controllers has been added.
• In Chapter 10 (Material Transport Systems), the section on AGVS technologies has
been updated.
• In Chapter 11 (Storage Systems), the section on automated storage/retrieval sys-
tems has been updated and shortened.*
• In Chapter 12 (Automatic Identification and Data Capture), the section on radio
frequency identification (RFID) has been expanded and updated.*
• In Chapter 14 (Single-Station Manufacturing Cells), coverage of CNC machining
centers and related machine tools has been expanded.
• In Chapter 15 (Manual Assembly Lines), coverage of mixed-model assembly lines
has been moved to an appendix, on the assumption that some instructors may not
want to include this topic in their courses. A new section on batch-model assembly
lines has been included in the appendix.
• In Chapter 16 (Automated Production Lines), coverage of transfer lines with in-
ternal parts storage has been moved to an appendix, on the assumption that some
instructors may not want to include this topic in their courses.
• In Chapter 18 (Group Technology and Cellular Manufacturing), the organization
of the text has been substantially revised. A new section on performance metrics in
cell operations has been added. Coverage of parts classification and coding has been
reduced, and the Opitz system has been relocated to an appendix.
• In Chapter 19 (Flexible Manufacturing Cells and Systems), sections on mass cus-
tomization, reconfigurable manufacturing systems, and agile manufacturing have
been added.
• In Chapter 20 (Quality Programs for Manufacturing), the DMAIC procedure in Six
Sigma has been relocated to an appendix, on the assumption that some instructors
may not want to cover the detailed methodology of Six Sigma. If they do, those de-
tails are in the appendix.
• In Chapter 22 (Inspection Technologies), the mathematical details of coordinate
metrology have been relocated to an appendix. The section on machine vision has
been updated to include recent advances in camera technology.

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 Preface 13

• In Chapter 23 (Product Design and CAD/CAM in the Production System), the sec-
tion on CAD has been updated to be consistent with modern industrial practice.*
• In Chapter 25 (Production Planning and Control Systems), the section on work-in-
process inventory costs has been eliminated, and the sections on MRP II and ERP
have been upgraded.
• More than 50% of the end-of-chapter problems are new or revised. The total num-
ber of problems is increased from 393 in the third edition to 416 in this edition.
• An appendix has been added listing answers to selected end-of-chapter problems
(answers to a total of 88 problems, or 21% of the end-of-chapter problems).*
• A total of 36 new or revised figures are included in this new edition, for a total of
278 figures. By comparison, the third edition has 293 figures, so the net change
is a reduction of 15 figures. This is due to the removal of outdated and extrane-
ous figures throughout the book and the elimination of the appendix on APT in
Chapter 7.
• A list of abbreviations used in the book, located in the inside front cover, has been
added for readers’ reference.

Support Materials for Instructors

For instructors who adopt the book for their courses, the following support materials
are available at the Pearson website, www.pearsonglobaleditions.com/Groover. Evidence
that the book has been adopted as the main textbook for the course must be verified.

• A Solutions Manual covering all review questions and problems

• A complete set of PowerPoint slides for all chapters

Acknowledgments

A number of changes in the book were motivated by responses to a survey that was
conducted by the publisher. Some very worthwhile suggestions were offered by the re-
viewers, and I have attempted to incorporate them into the text where appropriate and
feasible. In any case, I appreciate the thoughtful efforts that they contributed to the
project, and I am sure that the book is better as a result of their efforts than it otherwise
would have been. Participants in the survey were T. S. Bukkapatnam, Oklahoma State
University; Joseph Domblesky, Marquette University; Brent Donham, Texas A&M
University; John Jackman, Iowa State University; Matthew Kuttolamadom, Texas
A&M University; Frank Peters, Iowa State University; and Tony Schmitz, University of
North Carolina-Charlotte.
I also acknowledge the following individuals at Pearson Education Inc. for their
support during this project: Holly Stark, Executive Editor; Clare Romeo, Program
Manager; and Sandra Rodriguez, Editorial Assistant. In addition, I am grateful for the
fine job done by George Jacob at Integra Software Services who served as Program
Manager for the project. He and the copy editors working with him were thorough

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 14 Preface

and meticulous in their review of the manuscript (I take back all of the bad things I
have ever said about copy editors throughout the nearly 40 years I have been writing
textbooks).
Also, I am in gratitude to all of the faculty who have adopted the previous edi-
tions of the book for their courses, thus making those projects commercially successful
for Pearson Education Inc., so that I would be allowed to prepare this new edition.
Finally, I wish to thank Marcia Hamm Groover, my wife, my PowerPoint slide ex-
pert, my computer specialist (I write books about computer-related technologies, but she
is the one who fixes my computer when it has problems), and my supporter on this and
other textbook projects.

The publishers would like to thank the following for reviewing the content of the
Global Edition:
G. Paulraj, Professor and Head, Department of Mechanical Engineering, J. J. College
of Engineering and Technology, Tiruchirappalli
Gyan Ranjan Biswal, Assistant Professor, Department of Electrical and
Instrumentation Engineering, Thapar University, Patiala
S. Karthikeyan, Assistant Professor, Department of Mechanical Engineering,
Saranathan College of Engineering, Tiruchirappalli

About the Author

Mikell P. Groover is Professor Emeritus of Industrial and Systems Engineering at Lehigh

University, where he taught and did research for 44 years. He received his B.A. in Arts
and Science (1961), B.S. in Mechanical Engineering (1962), M.S. in Industrial Engineering
(1966), and Ph.D. (1969), all from Lehigh. His industrial experience includes several years
as a manufacturing engineer before embarking on graduate studies at Lehigh.
His teaching and research areas include manufacturing processes, production systems,
automation, material handling, facilities planning, and work systems. He has received a num-
ber of teaching awards at Lehigh University, as well as the Albert G. Holzman Outstanding
Educator Award from the Institute of Industrial Engineers (1995) and the SME Education
Award from the Society of Manufacturing Engineers (2001). His publications include over
75 technical articles and 12 books (listed below). His books are used throughout the world
and have been translated into French, German, Spanish, Portuguese, Russian, Japanese,
Korean, and Chinese. The first edition of Fundamentals of Modern Manufacturing re-
ceived the IIE Joint Publishers Award (1996) and the M. Eugene Merchant Manufacturing
Textbook Award from the Society of Manufacturing Engineers (1996).
Dr. Groover is a member of the Institute of Industrial Engineers (IIE) and the
Society of Manufacturing Engineers (SME). He is a Fellow of IIE and SME.

Previous Books by the Author

Automation, Production Systems, and Computer-Aided Manufacturing, Prentice Hall, 1980.

CAD/CAM: Computer-Aided Design and Manufacturing, Prentice Hall, 1984 (co-authored
with E. W. Zimmers, Jr.).
Industrial Robotics: Technology, Programming, and Applications, McGraw-Hill Book
Company, 1986 (co-authored with M. Weiss, R. Nagel, and N. Odrey).

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 Preface 15

Automation, Production Systems, and Computer-Integrated Manufacturing, Prentice Hall,

1987.
Fundamentals of Modern Manufacturing: Materials, Processes, and Systems, originally pub-
lished by Prentice Hall in 1996, and subsequently published by John Wiley & Sons,
Inc., 1999.
Automation, Production Systems, and Computer-Integrated Manufacturing, Second Edition,
Prentice Hall, 2001.
Fundamentals of Modern Manufacturing: Materials, Processes, and Systems, Second Edition,
John Wiley & Sons, Inc., 2002.
Fundamentals of Modern Manufacturing: Materials, Processes, and Systems, Third Edition,
John Wiley & Sons, Inc., 2007.
Work Systems and the Methods, Measurement, and Management of Work, Pearson Prentice
Hall, 2007.
Fundamentals of Modern Manufacturing: Materials, Processes, and Systems, Fourth ­Edition,
John Wiley & Sons, Inc., 2010.
Introduction to Manufacturing Processes, John Wiley & Sons, Inc., 2012.
Fundamentals of Modern Manufacturing: Materials, Processes, and Systems, Fifth
Edition, John Wiley & Sons, Inc., 2013.

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A01_GROO6119_04_GE_FM.INDD 16 02/03/15 4:15 PM
 Chapter 1

Introduction

Chapter Contents
1.1 Production Systems
1.1.1 Facilities
1.1.2 Manufacturing Support Systems
1.2 Automation in Production Systems
1.2.1 Automated Manufacturing Systems
1.2.2 Computerized Manufacturing Support Systems
1.2.3 Reasons for Automating
1.3 Manual Labor in Production Systems
1.3.1 Manual Labor in Factory Operations
1.3.2 Labor in Manufacturing Support Systems
1.4 Automation Principles and Strategies
1.4.1 The USA Principle
1.4.2 Ten Strategies for Automation and Process Improvement
1.4.3 Automation Migration Strategy
1.5 About This Book

The word manufacturing derives from two Latin words, manus (hand) and factus (make),
so that the combination means made by hand. This was the way manufacturing was accom-
plished when the word first appeared in the English language around 1567. Commercial
goods of those times were made by hand. The methods were handicraft, accomplished in
small shops, and the goods were relatively simple, at least by today’s standards. As many
years passed, factories came into being, with many workers at a single site, and the work
had to be organized using machines rather than handicraft techniques. The products

17

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 18 Chap. 1 / Introduction

became more complex, and so did the processes to make them. Workers had to special-
ize in their tasks. Rather than overseeing the fabrication of the entire product, they were
responsible for only a small part of the total work. More up-front planning was required,
and more coordination of the operations was needed to keep track of the work flow in the
factories. Slowly but surely, the systems of production were being developed.
The systems of production are essential in modern manufacturing. This book is all
about these production systems and how they are sometimes automated and computerized.

1.1 Production Systems

A production system is a collection of people, equipment, and procedures organized to

perform the manufacturing operations of a company. It consists of two major compo-
nents as indicated in Figure 1.1:

1. Facilities. The physical facilities of the production system include the equipment,
the way the equipment is laid out, and the factory in which the equipment is located.
2. Manufacturing support systems. These are the procedures used by the company to
manage production and to solve the technical and logistics problems encountered
in ordering materials, moving the work through the factory, and ensuring that prod-
ucts meet quality standards. Product design and certain business functions are in-
cluded in the manufacturing support systems.

In modern manufacturing operations, portions of the production system are

a­utomated and/or computerized. In addition, production systems include people.
People make these systems work. In general, direct labor people (blue-collar workers)

Manufacturing
systems
Facilities
Factory and
plant layout

Production
system Product design

Manufacturing
planning
Manufacturing
support systems
Manufacturing
control

Business
functions

Figure 1.1 The production system consists of

facilities and manufacturing support systems.

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 Sec. 1.1 / Production Systems 19

are responsible for operating the facilities, and professional staff people (white-collar
­workers) are responsible for the manufacturing support systems.

1.1.1 Facilities

The facilities in the production system consist of the factory, production machines and
tooling, material handling equipment, inspection equipment, and computer systems that
control the manufacturing operations. Facilities also include the plant layout, which is
the way the equipment is physically arranged in the factory. The equipment is usually
organized into manufacturing systems, which are the logical groupings of equipment and
workers that accomplish the processing and assembly operations on parts and products
made by the factory. Manufacturing systems can be individual work cells consisting of a
single production machine and a worker assigned to that machine. More complex manu-
facturing systems consist of collections of machines and workers, for example, a produc-
tion line. The manufacturing systems come in direct physical contact with the parts and/or
assemblies being made. They “touch” the product.
In terms of human participation in the processes performed by the manufacturing
systems, three basic categories can be distinguished, as portrayed in Figure 1.2: (a) man-
ual work systems, (b) worker-machine systems, and (c) automated systems.

Manual Work Systems. A manual work system consists of one or more workers
performing one or more tasks without the aid of powered tools. Manual material handling
tasks are common activities in manual work systems. Production tasks commonly require
the use of hand tools, such as screwdrivers and hammers. When using hand tools, a work-
holder is often employed to grasp the work part and position it securely for processing.
Examples of production-related manual tasks involving the use of hand tools include
• A machinist using a file to round the edges of a rectangular part that has just been
milled
• A quality control inspector using a micrometer to measure the diameter of a shaft
• A material handling worker using a dolly to move cartons in a warehouse
• A team of assembly workers putting together a piece of machinery using hand tools.
Worker-Machine Systems. In a worker-machine system, a human worker oper-
ates powered equipment, such as a machine tool or other production machine. This is
one of the most widely used manufacturing systems. Worker-machine systems include

Periodic worker
Hand tools Machine attention

Worker Worker Automated machine

Process Process Process

(a) (b) (c)

Figure 1.2 Three categories of manufacturing systems: (a) manual work

system, (b) worker-machine system, and (c) fully automated system.

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 20 Chap. 1 / Introduction

combinations of one or more workers and one or more pieces of equipment. The workers
and machines are combined to take advantage of their relative strengths and attributes,
which are listed in Table 1.1. Examples of worker-machine systems include the following:

• A machinist operating an engine lathe to fabricate a part for a product

• A fitter and an industrial robot working together in an arc–welding work cell
• A crew of workers operating a rolling mill that converts hot steel slabs into flat plates
• A production line in which the products are moved by mechanized conveyor and
the workers at some of the stations use power tools to accomplish their processing
or assembly tasks.

Automated Systems. An automated system is one in which a process is per-

formed by a machine without the direct participation of a human worker. Automation
is implemented using a program of instructions combined with a control system that
­executes the instructions. Power is required to drive the process and to operate the pro-
gram and control system (these terms are defined more completely in Chapter 4).
There is not always a clear distinction between worker-machine systems and
­automated systems, because many worker-machine systems operate with some degree
of automation. Two levels of automation can be identified: semiautomated and fully
­automated. A semiautomated machine performs a portion of the work cycle under some
form of program control, and a human worker tends to the machine for the remainder
of the cycle, by loading and unloading it, or by performing some other task each cycle.
A fully automated machine is distinguished from its semiautomated counterpart by its
capacity to operate for an extended period of time with no human attention. Extended
period of time means longer than one work cycle; a worker is not required to be present
during each cycle. Instead, the worker may need to tend the machine every tenth cycle,
or every hundredth cycle. An example of this type of operation is found in many injection
molding plants, where the molding machines run on automatic cycles, but periodically the
molded parts at the machine must be collected by a worker. Figure 1.2(c) depicts a fully
automated system. The semiautomated system is best portrayed by Figure 1.2(b).
In certain fully automated processes, one or more workers are required to be present
to continuously monitor the operation, and make sure that it performs according to the
intended specifications. Examples of these kinds of automated processes include complex

Table 1.1   Relative Strengths and Attributes of Humans and Machines

Humans Machines
Sense unexpected stimuli Perform repetitive tasks consistently
Develop new solutions to problems Store large amounts of data
Cope with abstract problems Retrieve data from memory reliably
Adapt to change Perform multiple tasks
simultaneously
Generalize from observations Apply high forces and power
Learn from experience Perform simple computations
quickly
Make decisions based on Make routine decisions quickly
incomplete data

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 Sec. 1.1 / Production Systems 21

chemical processes, oil refineries, and nuclear power plants. The workers do not actively
participate in the process except to make occasional adjustments in the equipment set-
tings, perform periodic maintenance, and spring into action if something goes wrong.

1.1.2 Manufacturing Support Systems

To operate the production facilities efficiently, a company must organize itself to design
the processes and equipment, plan and control the production orders, and satisfy prod-
uct quality requirements. These functions are accomplished by manufacturing support
­systems—people and procedures by which a company manages its production operations.
Most of these support systems do not directly contact the product, but they plan and
­control its progress through the factory.
Manufacturing support involves a sequence of activities, as depicted in Figure 1.3.
The activities consist of four functions that include much information flow and data
processing: (1) business functions, (2) product design, (3) manufacturing planning, and
(4) manufacturing control.

Business Functions. The business functions are the principal means by which the
company communicates with the customer. They are, therefore, the beginning and the
end of the information-processing sequence. Included in this category are sales and mar-
keting, sales forecasting, order entry, and customer billing.
The order to produce a product typically originates from the customer and proceeds
into the company through the sales department of the firm. The production order will be in
one of the following forms: (1) an order to manufacture an item to the customer’s specifica-
tions, (2) a customer order to buy one or more of the manufacturer’s proprietary products,
or (3) an internal company order based on a forecast of future demand for a proprietary
product.

Product Design. If the product is manufactured to customer design, the design

has been provided by the customer, and the manufacturer’s product design department is
not involved. If the product is to be produced to customer specifications, the manufactur-
er’s product design department may be contracted to do the design work for the product
as well as to manufacture it.
If the product is proprietary, the manufacturing firm is responsible for its develop-
ment and design. The sequence of events that initiates a new product design often origi-
nates in the sales department; the direction of information flow is indicated in Figure 1.3.
The departments of the firm that are organized to accomplish product design might include
research and development, design engineering, and perhaps a prototype shop.

Order to Business Manufacturing Manufacturing

Product design
produce functions planning control

Product to
Starting materials Factory operations
customer

Figure 1.3 Sequence of information-processing activities in a typical

­manufacturing firm.

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 22 Chap. 1 / Introduction

Manufacturing Planning. The information and documentation that constitute the

product design flows into the manufacturing planning function. The information-­processing
activities in manufacturing planning include process planning, master scheduling, material
requirements planning, and capacity planning.
Process planning consists of determining the sequence of individual processing and
assembly operations needed to produce the part. The manufacturing engineering depart-
ment is responsible for planning the processes and related technical details such as tool-
ing. Manufacturing planning includes logistics issues, commonly known as production
planning. The authorization to produce the product must be translated into the master
production schedule, which is a listing of the products to be made, the dates on which
they are to be delivered, and the quantities of each. Based on this master schedule, the
individual components and subassemblies that make up each product must be scheduled.
Raw materials must be purchased or requisitioned from storage, parts must be ordered
from suppliers, and all of these items must be planned so they are available when needed.
The computations for this planning are made by material requirements planning. In
­addition, the master schedule must not list more quantities of products than the factory
is capable of producing each month with its given number of machines and manpower.
Capacity planning is concerned with determining the human and equipment resources
of the firm and checking to make sure that the production plan is feasible.

Manufacturing Control. Manufacturing control is concerned with managing and

controlling the physical operations in the factory to implement the manufacturing plans.
The flow of information is from planning to control as indicated in Figure 1.3. Information
also flows back and forth between manufacturing control and the factory operations.
Included in this function are shop floor control, inventory control, and quality control.
Shop floor control deals with the problem of monitoring the progress of the prod-
uct as it is being processed, assembled, moved, and inspected in the factory. Shop floor
control is concerned with inventory in the sense that the materials being processed in
the factory are work-in-process inventory. Thus, shop floor control and inventory control
overlap to some extent. Inventory control attempts to strike a proper balance between
the risk of too little inventory (with possible stock-outs of materials) and the carrying cost
of too much inventory. It deals with such issues as deciding the right quantities of materi-
als to order and when to reorder a given item when stock is low. The function of quality
control is to ensure that the quality of the product and its components meet the standards
specified by the product designer. To accomplish its mission, quality control depends on
inspection activities performed in the factory at various times during the manufacture of
the product. Also, raw materials and component parts from outside sources are some-
times inspected when they are received, and final inspection and testing of the finished
product is performed to ensure functional quality and appearance. Quality control also
includes data collection and problem-solving approaches to address process problems re-
lated to quality, such as statistical process control (SPC) and Six Sigma.

1.2 Automation in Production Systems

Some components of the firm’s production system are likely to be automated, whereas
others will be operated manually or clerically. The automated elements of the produc-
tion system can be separated into two categories: (1) automation of the manufacturing

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 Sec. 1.2 / Automation in Production Systems 23

Manufacturing
Automation
systems
Facilities
Factory and
plant layout

Production
system Product design

Manufacturing
Computerization
planning
Manufacturing
support systems
Manufacturing
control

Business
functions

Figure 1.4 Opportunities for automation and computerization

in a production system.

systems in the factory, and (2) computerization of the manufacturing support systems.
In modern production systems, the two categories are closely related, because the auto-
mated manufacturing systems on the factory floor are themselves usually implemented
by computer systems that are integrated with the manufacturing support systems and
management information system operating at the plant and enterprise levels. The two
categories of automation are shown in Figure 1.4 as an overlay on Figure 1.1.

1.2.1 Automated Manufacturing Systems

Automated manufacturing systems operate in the factory on the physical product. They
perform operations such as processing, assembly, inspection, and material handling, in
many cases accomplishing more than one of these operations in the same system. They
are called automated because they perform their operations with a reduced level of human
participation compared with the corresponding manual process. In some highly automated
systems, there is virtually no human participation. Examples of automated manufacturing
systems include:

• Automated machine tools that process parts

• Transfer lines that perform a series of machining operations
• Automated assembly systems
• Manufacturing systems that use industrial robots to perform processing or assembly
operations
• Automatic material handling and storage systems to integrate manufacturing
operations
• Automatic inspection systems for quality control.

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 24 Chap. 1 / Introduction

Product variety
Programmable
automation
Flexible
automation

Fixed
automation

1 100 10,000 1,000,000

Production quantity

Figure 1.5 Three types of automation relative

to production quantity and product variety.

Automated manufacturing systems can be classified into three basic types: (1) fixed
automation, (2) programmable automation, and (3) flexible automation. They generally
operate as fully automated systems although semiautomated systems are common in
programmable automation. The relative positions of the three types of automation for
different production volumes and product varieties are depicted in Figure 1.5.

Fixed Automation. Fixed automation is a system in which the sequence of pro-

cessing (or assembly) operations is fixed by the equipment configuration. Each operation
in the sequence is usually simple, involving perhaps a plain linear or rotational motion or
an uncomplicated combination of the two, such as feeding a rotating spindle. It is the inte-
gration and coordination of many such operations in one piece of equipment that makes
the system complex. Typical features of fixed automation are (1) high initial investment
for custom-engineered equipment, (2) high production rates, and (3) inflexibility of the
equipment to accommodate product variety.
The economic justification for fixed automation is found in products that are made
in very large quantities and at high production rates. The high initial cost of the ­equipment
can be spread over a very large number of units, thus minimizing the unit cost relative
to alternative methods of production. Examples of fixed automation include machining
transfer lines and automated assembly machines.

Programmable Automation. In programmable automation, the production

equipment is designed with the capability to change the sequence of operations to ac-
commodate different product configurations. The operation sequence is controlled by a
program, which is a set of instructions coded so that they can be read and interpreted by
the system. New programs can be prepared and entered into the equipment to produce
new products. Some of the features that characterize programmable automation include
(1) high investment in general-purpose equipment, (2) lower production rates than fixed
automation, (3) flexibility to deal with variations and changes in product configuration,
and (4) high suitability for batch production.

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 Sec. 1.2 / Automation in Production Systems 25

Programmable automated systems are used in low- and medium-volume produc-

tion. The parts or products are typically made in batches. To produce each new batch of
a different item, the system must be reprogrammed with the set of machine instructions
that correspond to the new item. The physical setup of the machine must also be changed:
Tools must be loaded, fixtures must be attached to the machine table, and any required
machine settings must be entered. This changeover takes time. Consequently, the typical
cycle for a given batch includes a period during which the setup and reprogramming take
place, followed by a period in which the parts are produced. Examples of programmable
automation include numerically controlled (NC) machine tools, industrial robots, and
programmable logic controllers.

Flexible Automation. Flexible automation is an extension of programmable

automation. A flexible automated system is capable of producing a variety of parts or
products with virtually no time lost for changeovers from one design to the next. There
is no lost production time while reprogramming the system and altering the physical
setup (tooling, fixtures, machine settings). Accordingly, the system can produce vari-
ous mixes and schedules of parts or products instead of requiring that they be made
in batches. What makes flexible automation possible is that the differences between
parts processed by the system are not significant, so the amount of changeover between
designs is minimal. Features of flexible automation include (1) high investment for a
custom-engineered system, (2) continuous production of variable mixtures of parts or
products, (3) medium production rates, and (4) flexibility to deal with product design
variations. Examples of flexible automation are flexible manufacturing systems that
perform machining processes.

1.2.2 Computerized Manufacturing Support Systems

Automation of the manufacturing support systems is aimed at reducing the amount of

manual and clerical effort in product design, manufacturing planning and control, and
the business functions of the firm. Nearly all modern manufacturing support systems are
implemented using computers. Indeed, computer technology is used to implement auto-
mation of the manufacturing systems in the factory as well. Computer-integrated manu-
facturing (CIM) denotes the pervasive use of computer systems to design the products,
plan the production, control the operations, and perform the various information-­
processing functions needed in a manufacturing firm. True CIM involves integrating all
of these functions in one system that operates throughout the enterprise. Other terms
are used to identify specific elements of the CIM system; for example, computer-aided
design (CAD) supports the product design function. Computer-aided manufacturing
(CAM) is used for functions related to manufacturing engineering, such as process plan-
ning and numerical control part programming. Some computer systems perform both
CAD and CAM, and so the term CAD/CAM is used to indicate the integration of the
two into one system.
Computer-integrated manufacturing involves the information-processing activities
that provide the data and knowledge required to successfully produce the product. These
activities are accomplished to implement the four basic manufacturing support functions
identified earlier: (1) business functions, (2) product design, (3) manufacturing planning,
and (4) manufacturing control.

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 26 Chap. 1 / Introduction

1.2.3 Reasons for Automating

Companies undertake projects in automation and computer-integrated manufacturing

for good reasons, some of which are the following:

1. Increase labor productivity. Automating a manufacturing operation invariably in-

creases production rate and labor productivity. This means greater output per hour
of labor input.
2. Reduce labor cost. Increasing labor cost has been, and continues to be, the trend
in the world’s industrialized societies. Consequently, higher investment in au-
tomation has become economically justifiable to replace manual operations.
Machines are increasingly being substituted for human labor to reduce unit
product cost.
3. Mitigate the effects of labor shortages. There is a general shortage of labor in many
advanced nations, and this has stimulated the development of automated opera-
tions as a substitute for labor.
4. Reduce or eliminate routine manual and clerical tasks. An argument can be put forth
that there is social value in automating operations that are routine, boring, fatigu-
ing, and possibly irksome. Automating such tasks improves the general level of
working conditions.
5. Improve worker safety. Automating a given operation and transferring the worker
from active participation in the process to a monitoring role, or removing the
worker from the operation altogether, makes the work safer. The safety and physi-
cal well-being of the worker has become a national objective with the enactment
of the Occupational Safety and Health Act (OSHA) in 1970. This has provided an
impetus for automation.
6. Improve product quality. Automation not only results in higher production rates
than manual operation, it also performs the manufacturing process with greater
consistency and conformity to quality specifications.
7. Reduce manufacturing lead time. Automation helps reduce the elapsed time be-
tween customer order and product delivery, providing a competitive advantage to
the manufacturer for future orders. By reducing manufacturing lead time, the man-
ufacturer also reduces work-in-process inventory.
8. Accomplish processes that cannot be done manually. Certain operations cannot
be accomplished without the aid of a machine. These processes require precision,
miniaturization, or complexity of geometry that cannot be achieved manually.
Examples include certain integrated circuit fabrication operations, rapid prototyp-
ing processes based on computer graphics (CAD) models, and the machining of
complex, mathematically defined surfaces using computer numerical control. These
processes can only be realized by computer-controlled systems.
9. Avoid the high cost of not automating. There is a significant competitive advan-
tage gained in automating a manufacturing plant. The advantage cannot always be
demonstrated on a company’s project authorization form. The benefits of automa-
tion often show up in unexpected and intangible ways, such as in improved quality,
higher sales, better labor relations, and better company image. Companies that do
not automate are likely to find themselves at a competitive disadvantage with their
customers, their employees, and the general public.

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 Sec. 1.3 / Manual Labor in Production Systems 27

1.3 Manual Labor in Production Systems

Is there a place for manual labor in the modern production system? The answer is yes.
Even in a highly automated production system, humans are still a necessary component of
the manufacturing enterprise. For the foreseeable future, people will be required to man-
age and maintain the plant, even in those cases where they do not participate directly in
its manufacturing operations. The discussion of the labor issue is separated into two parts,
corresponding to the previous distinction between facilities and manufacturing support:
(1) manual labor in factory operations and (2) labor in manufacturing support systems.

1.3.1 Manual Labor in Factory Operations

There is no denying that the long-term trend in manufacturing is toward greater use
of automated machines to substitute for manual labor. This has been true throughout
human history, and there is every reason to believe the trend will continue. It has been
made possible by applying advances in technology to factory operations. In parallel and
sometimes in conflict with this technologically driven trend are issues of economics that
continue to find reasons for employing manual labor in manufacturing.
Certainly one of the current economic realities in the world is that there are coun-
tries whose average hourly wage rates are so low that most automation projects are diffi-
cult to justify strictly on the basis of cost reduction. These countries include China, India,
Mexico, and many countries in Eastern Europe, Southeast Asia, and Latin America.
With the passage of the North American Free Trade Agreement (NAFTA), the North
American continent has become one large labor pool. Within this pool, Mexico’s labor
rate is an order of magnitude less than that in the United States. U.S. corporate execu-
tives who make decisions on factory locations and the outsourcing of work must reckon
with this reality.
In addition to the labor cost issue, there are other reasons, ultimately based on eco-
nomics, that make the use of manual labor a feasible alternative to automation. Humans
possess certain attributes that give them an advantage over machines in certain situa-
tions and certain kinds of tasks (Table 1.1). A number of situations can be listed in which
manual labor is preferred over automation:

• Task is technologically too difficult to automate. Certain tasks are very difficult (ei-
ther technologically or economically) to automate. Reasons for the difficulty include
(1) problems with physical access to the work location, (2) adjustments required in
the task, (3) manual dexterity requirements, and (4) demands on hand–eye coordi-
nation. Manual labor is used to perform the tasks in these cases. Examples include
automobile final assembly lines where many final trim operations are accomplished
by human workers, inspection tasks that require judgment to assess quality, and
material handling tasks that involve flexible or fragile materials.
• Short product life cycle. If a product must be designed and introduced in a short
period of time to meet a near-term window of opportunity in the marketplace, or
if the product is anticipated to be on the market for a relatively short period, then
a manufacturing method designed around manual labor allows for a much sooner
product launch than does an automated method. Tooling for manual production
can be fabricated in much less time and at much lower cost than comparable auto-
mation tooling.

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 28 Chap. 1 / Introduction

• Customized product. If the customer requires a one-of-a-kind item with unique

features, manual labor has the advantage as the appropriate production resource
because of its versatility and adaptability. Humans are more flexible than any auto-
mated machine.
• Ups and downs in demand. Changes in demand for a product necessitate changes in
production output levels. Such changes are more easily made when manual labor is
used as the means of production. An automated manufacturing system has a fixed
cost associated with its investment. If output is reduced, that fixed cost must be
spread over fewer units, driving up the unit cost of the product. On the other hand,
an automated system has an ultimate upper limit on its output capacity. It cannot
produce more than its rated capacity. By contrast, manual labor can be added or
reduced as needed to meet demand, and the associated cost of the resource is in di-
rect proportion to its employment. Manual labor can be used to augment the output
of an existing automated system during those periods when demand exceeds the
capacity of the automated system.
• Need to reduce risk of product failure. A company introducing a new product to the
market never knows for sure what the ultimate success of that product will be. Some
products will have long life cycles, while others will be on the market for relatively
short periods. The use of manual labor as the productive resource at the beginning
of the product’s life reduces the company’s risk of losing a significant investment in
automation if the product fails to achieve a long market life. Section 1.4.3 discusses
an automation migration strategy that is suitable for introducing a new product.
• Lack of capital. Companies are sometimes forced to use manual labor in their pro-
duction operations when they lack the capital to invest in automated equipment.

1.3.2 Labor in Manufacturing Support Systems

In manufacturing support functions, many of the routine manual and clerical tasks can
be automated using computer systems. Certain production planning activities are bet-
ter accomplished by computers than by clerks. Material requirements planning (MRP,
Section 25.2) is an example. In material requirements planning, order releases are gener-
ated for component parts and raw materials based on the master production schedule
for final products. This requires a massive amount of data processing that is best suited
to computer automation. Many commercial software packages are available to perform
MRP. With few exceptions, companies that use MRP rely on computers to perform the
computations. Humans are still required to interpret and implement the MRP output and
to manage the production planning function.
In modern production systems, the computer is used as an aid in performing virtually
all manufacturing support activities. Computer-aided design systems are used in product
design. The human designer is still required to do the creative work. The CAD system is a
tool that augments the designer’s creative talents. Computer-aided process planning sys-
tems are used by manufacturing engineers to plan the production methods and routings.
In these examples, humans are integral components in the operation of the manufacturing
support functions, and the computer-aided systems are tools to increase productivity and
improve quality. CAD and CAM systems rarely operate completely in automatic mode.
Humans will continue to be needed in manufacturing support systems, even as the
level of automation in these systems increases. People will be needed to do the deci-
sion making, learning, engineering, evaluating, managing, and other functions for which

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 Sec. 1.4 / Automation Principles and Strategies 29

humans are much better suited than machines, according to Table 1.1. Even if all of the
manufacturing systems in the factory are automated, there is still a need for the following
kinds of work to be performed by humans:

• Equipment maintenance. Skilled technicians are required to maintain and repair the
automated systems in the factory when these systems break down. To improve the reli-
ability of the automated systems, preventive maintenance programs are implemented.
• Programming and computer operation. There will be a continual demand to upgrade
software, install new versions of software packages, and execute the programs. It is an-
ticipated that much of the routine process planning, numerical control part program-
ming, and robot programming may be highly automated using artificial intelligence
(AI) in the future. But the AI programs must be developed and operated by people.
• Engineering project work. The computer-automated and integrated factory is likely
never to be finished. There will be a continual need to upgrade production ­machines,
design tooling, solve technical problems, and undertake continuous improvement
projects. These activities require the skills of engineers working in the factory.
• Plant management. Someone must be responsible for running the factory. There
will be a staff of professional managers and engineers who are responsible for plant
operations. There is likely to be an increased emphasis on managers’ technical skills
compared with traditional factory management positions, where the emphasis is on
personnel skills.

1.4 Automation Principles and Strategies

The preceding section leads one to conclude that automation is not always the right an-
swer for a given production situation. A certain caution and respect must be observed
in applying automation technologies. This section offers three approaches for dealing
with automation projects:1 (1) the USA Principle, (2) Ten Strategies for Automation and
Process Improvement, and (3) an Automation Migration Strategy.

1.4.1 The USA Principle

The USA Principle is a commonsense approach to automation and process improvement

projects. Similar procedures have been suggested in the manufacturing and automa-
tion trade literature, but none has a more captivating title than this one. USA stands for
(1) understand the existing process, (2) simplify the process, and (3) automate the pro-
cess. A statement of the USA Principle appeared in an article published by the American
Production and Inventory Control Society [5]. The article is concerned with implement-
ing enterprise resource planning (ERP, Section 25.7), but the USA approach is so general
that it is applicable to nearly any automation project. Going through each step of the
procedure for an automation project may in fact reveal that simplifying the process is suf-
ficient and automation is not necessary.

1
There are additional approaches not discussed here, but in which the reader may be interested—for
example, the ten steps to integrated manufacturing production systems discussed in J. Black’s book The Design
of the Factory with a Future [1]. Much of Black’s book deals with lean production and the Toyota Production
System, which is covered in Chapter 26 of the present book.

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 30 Chap. 1 / Introduction

Understand the Existing Process. The first step in the USA approach is to com-
prehend the current process in all of its details. What are the inputs? What are the out-
puts? What exactly happens to the work unit2 between input and output? What is the
function of the process? How does it add value to the product? What are the upstream
and downstream operations in the production sequence, and can they be combined with
the process under consideration?
Some of the traditional industrial engineering charting tools used in methods anal-
ysis are useful in this regard, such as the operation chart and the flow process chart [3].
Application of these tools to the existing process provides a model of the process that can be
analyzed and searched for weaknesses (and strengths). The number of steps in the process,
the number and placement of inspections, the number of moves and delays experienced by
the work unit, and the time spent in storage can be ascertained by these charting techniques.
Mathematical models of the process may also be useful to indicate relationships be-
tween input parameters and output variables. What are the important output variables?
How are these output variables affected by inputs to the process, such as raw material
properties, process settings, operating parameters, and environmental conditions? This
information may be valuable in identifying what output variables need to be measured
for feedback purposes and in formulating algorithms for automatic process control.

Simplify the Process. Once the existing process is understood, then the search
begins for ways to simplify. This often involves a checklist of questions about the existing
process. What is the purpose of this step or this transport? Is the step necessary? Can it
be eliminated? Does it use the most appropriate technology? How can it be simplified?
Are there unnecessary steps in the process that might be eliminated without detracting
from function?
Some of the ten strategies for automation and process improvement (Section 1.4.2)
can help simplify the process. Can steps be combined? Can steps be performed simulta-
neously? Can steps be integrated into a manually operated production line?

Automate the Process. Once the process has been reduced to its simplest form,
then automation can be considered. The possible forms of automation include those
listed in the ten strategies discussed in the following section. An automation migration
strategy (such as the one in Section 1.4.3) might be implemented for a new product that
has not yet proven itself.

1.4.2 Ten Strategies for Automation and Process Improvement

Applying the USA Principle is a good approach in any automation project. As suggested
previously, it may turn out that automation of the process is unnecessary or cannot be
cost justified after the process has been simplified.
If automation seems a feasible solution to improving productivity, quality, or other
measure of performance, then the following ten strategies provide a road map to search
for these improvements. These ten strategies were originally published in the author’s
first book.3 They seem as relevant and appropriate today as they did in 1980. They

2
The work unit is the part or product being processed or assembled.
3
M. P. Groover, Automation, Production Systems, and Computer-Aided Manufacturing, Prentice Hall,
Englewood Cliffs, NJ, 1980.

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 Sec. 1.4 / Automation Principles and Strategies 31

are referred to as strategies for automation and process improvement because some
of them are applicable whether the process is a candidate for automation or just for
simplification.

1. Specialization of operations. The first strategy involves the use of special-purpose

equipment designed to perform one operation with the greatest possible efficiency.
This is analogous to the specialization of labor, which is employed to improve labor
productivity.
2. Combined operations. Production occurs as a sequence of operations. Complex
parts may require dozens or even hundreds of processing steps. The strategy
of combined operations involves reducing the number of distinct production
­machines or workstations through which the part must be routed. This is ac-
complished by performing more than one operation at a given machine, thereby
­reducing the number of separate machines needed. Since each machine typically
involves a setup, setup time can usually be saved by this strategy. Material han-
dling effort, nonoperation time, waiting time, and manufacturing lead time are all
reduced.
3. Simultaneous operations. A logical extension of the combined operations strategy is
to simultaneously perform the operations that are combined at one workstation. In
effect, two or more processing (or assembly) operations are being performed simul-
taneously on the same work part, thus reducing total processing time.
4. Integration of operations. This strategy involves linking several workstations to-
gether into a single integrated mechanism, using automated work handling devices
to transfer parts between stations. In effect, this reduces the number of separate
work centers through which the product must be scheduled. With more than one
workstation, several parts can be processed simultaneously, thereby increasing the
overall output of the system.
5. Increased flexibility. This strategy attempts to achieve maximum utilization of equip-
ment for job shop and medium-volume situations by using the same equipment for
a variety of parts or products. It involves the use of programmable or flexible auto-
mation (Section 1.2.1). Prime objectives are to reduce setup time and programming
time for the production machine. This normally translates into lower manufacturing
lead time and less work-in-process.
6. Improved material handling and storage. A great opportunity for reducing non-
productive time exists in the use of automated material handling and storage sys-
tems. Typical benefits include reduced work-in-process, shorter manufacturing lead
times, and lower labor costs.
7. On-line inspection. Inspection for quality of work is traditionally performed after
the process is completed. This means that any poor-quality product has already
been produced by the time it is inspected. Incorporating inspection into the manu-
facturing process permits corrections to the process as the product is being made.
This reduces scrap and brings the overall quality of the product closer to the nomi-
nal specifications intended by the designer.
8. Process control and optimization. This includes a wide range of control schemes
intended to operate the individual processes and associated equipment more ef-
ficiently. By this strategy, the individual process times can be reduced and product
quality can be improved.

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 32 Chap. 1 / Introduction

9. Plant operations control. Whereas the previous strategy is concerned with the con-
trol of individual manufacturing processes, this strategy is concerned with control
at the plant level. It attempts to manage and coordinate the aggregate operations
in the plant more efficiently. Its implementation involves a high level of computer
networking within the factory.
10. Computer-integrated manufacturing (CIM). Taking the previous strategy one level
higher, CIM involves extensive use of computer systems, databases, and networks
throughout the enterprise to integrate the factory operations and business functions.

The ten strategies constitute a checklist of possibilities for improving the production
system through automation or simplification. They should not be considered mutually ex-
clusive. For most situations, multiple strategies can be implemented in one improvement
project. The reader will see these strategies implemented in the many systems discussed
throughout the book.

1.4.3 Automation Migration Strategy

Owing to competitive pressures in the marketplace, a company often needs to introduce a

new product in the shortest possible time. As mentioned previously, the easiest and least
expensive way to accomplish this objective is to design a manual production method,
using a sequence of workstations operating independently. The tooling for a manual
method can be fabricated quickly and at low cost. If more than a single set of worksta-
tions is required to make the product in sufficient quantities, as is often the case, then the
manual cell is replicated as many times as needed to meet demand. If the product turns
out to be successful, and high future demand is anticipated, then it makes sense for the
company to automate production. The improvements are often carried out in phases.
Many companies have an automation migration strategy, that is, a formalized plan for
evolving the manufacturing systems used to produce new products as demand grows. A
typical automation migration strategy is the following:

Phase 1: Manual production using single-station manned cells operating indepen-

dently. This is used for introduction of the new product for reasons al-
ready mentioned: quick and low-cost tooling to get started.
Phase 2: Automated production using single-station automated cells operating
independently. As demand for the product grows, and it becomes clear
that automation can be justified, then the single stations are automated
to reduce labor and increase production rate. Work units are still moved
between workstations manually.
Phase 3: Automated integrated production using a multi-station automated sys-
tem with serial operations and automated transfer of work units between
­stations. When the company is certain that the product will be produced
in mass quantities and for several years, then integration of the single-
station automated cells is warranted to further reduce labor and increase
production rate.

This strategy is illustrated in Figure 1.6. Details of the automation migration strat-
egy vary from company to company, depending on the types of products they make and
the manufacturing processes they perform. But well-managed manufacturing companies

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 Sec. 1.4 / Automation Principles and Strategies 33

Phase 1 Manual workstations Manual handling

Starting Completed
work units work units

Worker
Work-in-process

Phase 2
Manual handling
Automated workstations

Aut Aut Aut

Automated integrated
production
Connected stations
Automated
Product demand

production

One-station Phase 3 Automated transfer

cells of work units

Manual
production Aut Aut Aut

One-
station
cells
Phase 1 Phase 2 Phase 3 Time

Figure 1.6 A typical automation migration strategy. Phase 1: manual

production with single independent workstations. Phase 2: automated
production stations with manual handling between stations. Phase 3:
automated integrated production with automated handling between
stations. Key: Aut = automated workstation.

have policies like the automation migration strategy. There are several advantages of
such a strategy:

• It allows introduction of the new product in the shortest possible time, since
production cells based on manual workstations are the easiest to design and
implement.
• It allows automation to be introduced gradually (in planned phases), as demand
for the product grows, engineering changes in the product are made, and time is
provided to do a thorough design job on the automated manufacturing system.
• It avoids the commitment to a high level of automation from the start, because there
is always a risk that demand for the product will not justify it.

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 34 Chap. 1 / Introduction

1.5 About This Book

The title of this book gives a good indication of its contents, as any textbook title should.
This chapter has provided an overview of production systems, their components, and how
they are sometimes automated and computerized. This overview is summarized in Figure
1.4. An alternative perspective of production systems is presented in Figure 1.7, which
shows six major categories of technical topics related to production systems. The figure
is also a diagram of the book and how it is organized into six parts corresponding to these
categories.
Part I consists of two chapters that survey manufacturing operations and develop
mathematical models to measure performance and costs in manufacturing.
Part II covers automation and control technologies. Whereas this Introduction
­discusses automation in general terms, Part II describes the technologies, which include
industrial control systems, numerical control, industrial robotics, and programmable logic
controllers.
Part III is concerned with material handling and identification used in factories
and warehouses. The technologies involve equipment for transporting materials, storing
them, and automatically identifying them for tracking purposes.
Part IV emphasizes the integration of automation and material handling technolo-
gies into manufacturing systems that operate in the factory. Some of these systems are
highly automated, while others rely largely on manual labor. Chapters include coverage
of single-station work cells, production lines, assembly systems, cellular manufacturing,
and flexible manufacturing systems.
The importance of quality control must not be overlooked in modern production
systems. Part V covers this topic, dealing with statistical process control and inspec-
tion issues. Some of the significant inspection technologies are discussed here, such as
machine vision and coordinate measuring machines. As suggested in Figure 1.7, quality

Manufacturing
support systems
Enterprise level

Quality control
systems

Automation and Material handling

control technologies and identification
Factory level

Manufacturing systems

Manufacturing operations

Figure 1.7 The six major categories of technical

topics related to production systems, corresponding
to the six parts of this book.

M01_GROO6119_04_GE_C01.INDD 34 2/28/15 3:44 PM

 Review Questions 35

control (QC) systems are connected to both facilities and manufacturing support sys-
tems. QC is an enterprise-level function, but it has equipment and procedures that work
in the factory.
Finally, Part VI addresses the remaining manufacturing support functions in the
production system. Included is a chapter on product design and how it is supported
by CAD. Other chapters include process planning and design for manufacturing, pro-
duction planning and control, including topics such as material requirements planning
(MRP, mentioned earlier), manufacturing resource planning (MRP II), and enterprise
resource planning (ERP). The book concludes with a chapter on just-in-time and lean
production—approaches that modern manufacturing companies are using to run their
businesses.

References

[1] Black, J. T., The Design of the Factory with a Future, McGraw-Hill, Inc., New York,
NY, 1991.
[2] Groover, M. P., Fundamentals of Modern Manufacturing: Materials, Processes, and Systems,
5th ed., John Wiley & Sons, Inc., Hoboken, NJ, 2013.
[3] Groover, M. P., Work Systems and the Methods, Measurement, and Management of Work,
Pearson/Prentice Hall, Upper Saddle River, NJ, 2007.
[4] Harrington, J., Computer Integrated Manufacturing, Industrial Press, Inc., New York,
NY, 1973.
[5] Kapp, K. M., “The USA Principle,” APICS—The Performance Advantage, June 1997, pp. 62–66.
[6] Spangler, T., R. Mahajan, S. Puckett, and D. Stakem, “Manual Labor—Advantages, When
and Where?” MSE 427 Term Paper, Lehigh University, 1998.

Review Questions

1.1 What is a production system?

1.2 Production systems consist of two major components. Name and briefly define them.
1.3 What are manufacturing systems, and how are they distinguished from production systems?
1.4 Manufacturing systems are divided into three categories, according to worker participation.
Name them.
1.5 What are the four functions included within the scope of manufacturing support systems?
1.6 Three basic types of automation are defined in the text. What is fixed automation and what
are some of its features?
1.7 Why is programmable automation best suited for batch production?
1.8 What is flexible automation and what are some of its features?
1.9 What are the objectives of computer-integrated manufacturing?
1.10 What are some of the reasons why companies automate their operations?
1.11 Identify three situations in which manual labor is preferred over automation.
1.12 Human workers will be needed in factory operations, even in the most highly automated
systems. The text identifies at least four types of work for which humans will be needed.
Name them.

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 36 Chap. 1 / Introduction

1.13 What is the USA Principle? What does each of the letters stand for?
1.14 The text lists ten strategies for automation and process improvement. Identify five of these
strategies.
1.15 What is an automation migration strategy?
1.16 What are the three phases of a typical automation migration strategy?

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 Part I
Overview of Manufacturing
Chapter 2

1
Manufacturing Operations

Chapter Contents
2.1 Manufacturing Industries and Products
2.2 Manufacturing Operations
2.2.1 Processing and Assembly Operations
2.2.2 Other Factory Operations
2.3 Production Facilities
2.3.1 Low Production
2.3.2 Medium Production
2.3.3 High Production
2.4 Product/Production Relationships
2.4.1 Production Quantity and Product Variety
2.4.2 Product and Part Complexity
2.4.3 Limitations and Capabilities of a Manufacturing Plant

Manufacturing can be defined as the application of physical and/or chemical processes

to alter the geometry, properties, and/or appearance of a given starting material to make
parts or products. Manufacturing also includes the joining of multiple parts to make as-
sembled products. The processes that accomplish manufacturing involve a combination
of machinery, tools, power, and manual labor, as depicted in Figure 2.1(a). Manufacturing
is almost always carried out as a sequence of unit operations.2 Each successive operation
brings the material closer to the desired final state.
1
The chapter introduction and Sections 2.1 and 2.2 are based on [2], Chapter 1.
2
A unit operation is a single step in the sequence of steps used to transform a starting material into a
final part or product.

37

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 38 Chap. 2 / Manufacturing Operations

Machinery
Tools
Power Manufacturing
Labor process
Completed part
Starting or product
material Value added
Manufacturing
process
Scrap
and/or
waste Starting Material Completed
material in processing part or product
(a) (b)

Figure 2.1 Alternative definitions of manufacturing: (a)

as a technological process and (b) as an economic process.

From an economic viewpoint, manufacturing is concerned with the transforma-

tion of materials into items of greater value by means of one or more processing and/or
assembly operations, as depicted in Figure 2.1(b). The key point is that manufacturing
adds value to the material by changing its shape or properties or by combining it with
other materials that also have been altered. When iron ore is converted into steel, value
is added. When sand is transformed into glass, value is added. When petroleum is refined
into plastic, value is added. And when plastic is molded into the complex geometry of a
patio chair, it is made even more valuable.
This chapter provides a survey of manufacturing operations, beginning with the in-
dustries that are engaged in manufacturing and the types of products they produce. Then
the fabrication and assembly processes used in manufacturing are briefly described, as
well as the activities that support these processes, such as material handling and inspec-
tion. Next, several product parameters are introduced, such as production quantity and
product variety, and the influence that these parameters have on production operations
and facilities is examined.
The history of manufacturing includes both the development of manufacturing pro-
cesses, some of which date back thousands of years, and the evolution of the production
systems required to apply these processes (see Historical Note 2.1). The emphasis in this
book is on the systems.

Historical Note 2.1 History of Manufacturing

The history of manufacturing includes two related topics: (1) the discovery and invention of
materials and processes to make things and (2) the development of systems of production.
The materials and processes pre-date the systems by several millennia. Systems of production
refer to the ways of organizing people and equipment so that production can be performed
more efficiently. Some of the basic processes date as far back as the Neolithic period (circa
8000–3000 B.C.), when operations such as the following were developed: woodworking, form-
ing and firing of clay pottery, grinding and polishing of stone, spinning of fiber and weaving
of textiles, and dyeing of cloth. Metallurgy and metalworking also began during the Neolithic,
in Mesopotamia and other areas around the Mediterranean. It either spread to or developed
independently in regions of Europe and Asia. Gold was found by early humans in relatively

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 Chap. 2 / Manufacturing Operations 39

pure form in nature; it could be hammered into shape. Copper was probably the first metal to
be extracted from ores, thus requiring smelting as a processing technique. Copper could not be
readily hammered because it strain-hardened; instead, it was shaped by casting. Other metals
used during this period were silver and tin. It was discovered that copper alloyed with tin pro-
duced a more workable metal than copper alone (casting and hammering could both be used).
This heralded the important period known as the Bronze Age (circa 3500–1500 B.C.).
Iron was also first smelted during the Bronze Age. Meteorites may have been one
source of the metal, but iron ore was also mined. The temperatures required to reduce iron
ore to metal are significantly higher than for copper, which made furnace operations more
difficult. Early blacksmiths learned that when certain irons (those containing small amounts
of carbon) were sufficiently heated and then quenched (thrust into water to cool), they be-
came very hard. This permitted the grinding of very sharp cutting edges on knives and weap-
ons, but it also made the metal brittle. Toughness could be increased by reheating at a lower
temperature, a process known as tempering. What has been described here is, of course, the
heat treatment of steel. The superior properties of steel caused it to succeed bronze in many
applications (weaponry, agriculture, and mechanical devices). The period of its use has sub-
sequently been named the Iron Age (starting around 1000 B.C.). It was not until much later,
well into the nineteenth century, that the demand for steel grew significantly and more mod-
ern steelmaking techniques were developed.
The early fabrication of implements and weapons was accomplished more as crafts
and trades than by manufacturing as it is known today. The ancient Romans had what
might be called factories to produce weapons, scrolls, pottery, glassware, and other prod-
ucts of the time, but the procedures were largely based on handicraft. It was not until the
Industrial Revolution (circa 1760–1830) that major changes began to affect the systems for
making things. This period marked the beginning of the change from an economy based
on agriculture and handicraft to one based on industry and manufacturing. The change
began in England, where a series of important machines was invented, and steam power
began to replace water, wind, and animal power. Initially, these advances gave British indus-
try significant advantages over other nations, but eventually the revolution spread to other
European countries and to the United States. The Industrial Revolution contributed to the
development of manufacturing in the following ways: (1) Watt’s steam engine, a new power-­
generating technology; (2) development of machine tools, starting with John Wilkinson’s
boring machine around 1775, which was used to bore the cylinder on Watt’s steam engine;
(3) invention of the spinning jenny, power loom, and other machinery for the textile industry,
which permitted significant increases in productivity; and (4) the factory system, a new way of
organizing large numbers of production workers based on the division of labor.
Wilkinson’s boring machine is generally recognized as the beginning of machine tool
technology. It was powered by waterwheel. During the period 1775–1850, other machine
tools were developed for most of the conventional machining processes, such as boring, turn-
ing, drilling, milling, shaping, and planing. As steam power became more prevalent, it gradu-
ally became the preferred power source for most of these machine tools. It is of interest
to note that many of the individual processes pre-date the machine tools by centuries; for
example, drilling, sawing, and turning (of wood) date from ancient times.
Assembly methods were used in ancient cultures to make ships, weapons, tools, farm
implements, machinery, chariots and carts, furniture, and garments. The processes included
binding with twine and rope, riveting and nailing, and soldering. By around the time of Christ,
forge welding and adhesive bonding had been developed. Widespread use of screws, bolts,
and nuts—so common in today’s assembly—required the development of machine tools, in
particular, Maudsley’s screw cutting lathe (1800), which could accurately form the helical
threads. It was not until around 1900 that fusion welding processes started to be developed
as assembly techniques.

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 40 Chap. 2 / Manufacturing Operations

While England was leading the Industrial Revolution, an important concept related to
assembly technology was being introduced in the United States: interchangeable parts manu-
facture. Much credit for this concept is given to Eli Whitney (1765–1825), although its impor-
tance had been recognized by others [3]. In 1797, Whitney negotiated a contract to produce
10,000 muskets for the U.S. government. The traditional way of making guns at the time was
to ­custom-fabricate each part for a particular gun and then hand-fit the parts together by filing.
Each musket was therefore unique, and the time to make it was considerable. Whitney believed
that the components could be made accurately enough to permit parts assembly without fit-
ting. After several years of development in his Connecticut factory, he traveled to Washington
in 1801 to demonstrate the principle. Before government officials, including Thomas Jefferson,
he laid out components for 10 muskets and proceeded to select parts randomly to assemble
the guns. No special filing or fitting was required, and all of the guns worked perfectly. The
secret behind his achievement was the collection of special machines, fixtures, and gages that
he had developed in his factory. Interchangeable parts manufacture required many years of de-
velopment and refinement before becoming a practical reality, but it revolutionized methods
of manufacturing. It is a prerequisite for mass production of assembled products. Because its
origins were in the United States, interchangeable parts production came to be known as the
American System of manufacture.
The mid and late 1800s witnessed the expansion of railroads, steam-powered ships, and
other machines that created a growing need for iron and steel. New methods for producing
steel were developed to meet this demand. Also during this period, several consumer products
were developed, including the sewing machine, bicycle, and automobile. To meet the mass de-
mand for these products, more efficient production methods were required. Some historians
identify developments during this period as the Second Industrial Revolution, characterized in
terms of its effects on production systems by the following: (1) mass production, (2) assembly
lines, (3) the scientific management movement, and (4) electrification of factories.
Mass production was primarily an American phenomenon. Its motivation was the mass
market that existed in the United States. Population in the United States in 1900 was 76 million
and growing. By 1920, it exceeded 106 million. Such a large population, larger than any western
European country, created a demand for large numbers of products. Mass production provided
those products. Certainly one of the important technologies of mass production was the assem-
bly line, introduced by Henry Ford (1863–1947) in 1913 at his Highland Park plant (Historical
Note 15.1). The assembly line made mass production of complex consumer products possible.
Use of assembly-line methods permitted Ford to sell a Model T automobile for less than $500
in 1916, thus making ownership of cars feasible for a large segment of the American population.
The scientific management movement started in the late 1800s in the United States
in response to the need to plan and control the activities of growing numbers of produc-
tion workers. The movement was led by Frederick W. Taylor (1856–1915), Frank Gilbreath
(1868–1924) and his wife Lilian (1878–1972), and others. Scientific management included (1)
motion study, aimed at finding the best method to perform a given task; (2) time study, to
establish work standards for a job; (3) extensive use of standards in industry; (4) the piece rate
system and similar labor incentive plans; and (5) use of data collection, record keeping, and
cost accounting in factory operations.
In 1881, electrification began with the first electric power generating station being built in
New York City, and soon electric motors were being used as the power source to operate fac-
tory machinery. This was a far more convenient power delivery system than the steam engine,
which required overhead belts to mechanically distribute power to the machines. By 1920, elec-
tricity had overtaken steam as the principal power source in U.S. factories. Electrification also
motivated many new inventions that have affected manufacturing operations and production
systems. The twentieth century was a time of more technological advances than all previous
centuries combined. Many of these developments have resulted in the automation of manu-
facturing. Historical notes on some of these advances in automation are included in this book.

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 Sec. 2.1 / Manufacturing Industries and Products 41

2.1 Manufacturing Industries and Products

Manufacturing is an important commercial activity, carried out by companies that sell

products to customers. The type of manufacturing performed by a company depends on
the kinds of products it makes.

Manufacturing Industries. Industry consists of enterprises and organizations

that produce and/or supply goods and/or services. Industries can be classified as primary,
secondary, and tertiary. Primary industries are those that cultivate and exploit natural
resources, such as agriculture and mining. Secondary industries convert the outputs of
the primary industries into products. Manufacturing is the principal activity in this cat-
egory, but the secondary industries also include construction and power utilities. Tertiary
­industries constitute the service sector of the economy. A list of specific industries in
these categories is presented in Table 2.1.
This book is concerned with the secondary industries (middle column in Table
2.1), which are composed of the companies engaged in manufacturing. It is useful to

Table 2.1   Specific Industries in the Primary, Secondary, and Tertiary

Categories, Based Roughly on the International Standard Industrial
Classification (ISIC) Used by the United Nations
Primary Secondary Tertiary (Service)
Agriculture Aerospace Banking
Forestry Apparel Communications
Fishing Automotive Education
Livestock Basic metals Entertainment
Quarrying Beverages Financial services
Mining Building materials Government
Petroleum Chemicals Health and medical services
Computers Hotels
Construction Information
Consumer appliances Insurance
Electronics Legal services
Equipment Real estate
Fabricated metals Repair and maintenance
Food processing Restaurants
Glass, ceramics Retail trade
Heavy machinery Tourism
Paper Transportation
Petroleum refining Wholesale trade
Pharmaceuticals
Plastics (shaping)
Power utilities
Publishing
Textiles
Tire and rubber
Wood and furniture

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 42 Chap. 2 / Manufacturing Operations

Table 2.2   International Standard Industrial Classification Codes for Various

Industries in the Manufacturing Sector
Basic Code Products Manufactured
31 Food, beverages (alcoholic and nonalcoholic), tobacco
32 Textiles, clothing, leather goods, fur products
33 Wood and wood products (e.g., furniture), cork products
34 Paper, paper products, printing, publishing, bookbinding
35 Chemicals, coal, petroleum, plastic, rubber, products made
from these materials, pharmaceuticals
36 Ceramics (including glass), nonmetallic mineral products
(e.g., cement)
37 Basic metals (steel, aluminum, etc.)
38 Fabricated metal products, machinery, equipment (e.g., aircraft,
cameras, computers and other office equipment, machinery,
motor vehicles, tools, televisions)
39 Other manufactured goods (e.g., jewelry, musical instruments,
sporting goods, toys)

distinguish the process industries from the industries that make discrete parts and
products. The process industries include chemicals, pharmaceuticals, petroleum, basic
metals, food, beverages, and electric power generation. The discrete product indus-
tries include automobiles, aircraft, appliances, computers, machinery, and the com-
ponent parts from which these products are assembled. The International Standard
Industrial Classification (ISIC) of industries according to types of products manufac-
tured is listed in Table 2.2. In g­ eneral, the process industries are included within ISIC
codes 31–37, and the discrete product manufacturing industries are included in ISIC
codes 38 and 39. However, it must be acknowledged that many of the products made
by the process industries are finally sold to the consumer in discrete units. For ex-
ample, beverages are sold in bottles and cans. Pharmaceuticals are often purchased as
pills and capsules.
Production operations in the process industries and the discrete product industries
can be divided into continuous production and batch production. The differences are
shown in Figure 2.2.
Continuous production occurs when the production equipment is used exclu-
sively for the given product, and the output of the product is uninterrupted. In the
process industries, continuous production means that the process is carried out on a
continuous stream of material, with no interruptions in the output flow, as suggested by
Figure 2.2(a). The material being processed is likely to be in the form of a liquid, gas,
powder, or similar physical state. In the discrete manufacturing industries, continuous
production means 100% dedication of the production equipment to the part or prod-
uct, with no breaks for product changeovers. The individual units of production are
identifiable, as in Figure 2.2(b).
Batch production occurs when the materials are processed in finite amounts or
quantities. The finite amount or quantity of material is called a batch in both the pro-
cess and discrete manufacturing industries. Batch production is discontinuous because
there are interruptions in production between batches. Reasons for using batch produc-
tion ­include (1) differences in work units between batches necessitate changes in meth-
ods, tooling, and equipment to accommodate the part differences; (2) the capacity of the

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 Sec. 2.1 / Manufacturing Industries and Products 43

Proc Proc

... ... ... ...

(a) (b)

Proc Proc

Batch i + 1 Batch i Batch i – 1 Batch i + 1 Batch i Batch i – 1

(c) (d)

Figure 2.2 Continuous and batch production in the process and

discrete manufacturing industries, including (a) continuous pro-
duction in the process industries, (b) continuous production in
the discrete manufacturing industries, (c) batch production in the
process industries, and (d) batch production in the discrete manu-
facturing industries. Key: Proc = process.

equipment limits the amount or quantity of material that can be processed at one time;
and (3) the production rate of the equipment is greater than the demand rate for the parts
or products, and it therefore makes sense to share the equipment among multiple parts or
products. The differences in batch production between the process and discrete manufac-
turing industries are portrayed in Figure 2.2(c) and (d). Batch production in the process
industries generally means that the starting materials are in liquid or bulk form, and they
are processed altogether as a unit. By contrast, in the discrete manufacturing industries, a
batch is a certain quantity of work units, and the work units are usually processed one at
a time rather than all together at once. The number of parts in a batch can range from as
few as one to as many as thousands of units.

Manufactured Products. As indicated in Table 2.2, the secondary industries

include food, beverages, textiles, wood, paper, publishing, chemicals, and basic metals
(ISIC codes 31–37). The scope of this book is primarily directed at the industries that
produce discrete products. Table 2.3 lists the manufacturing industries and corresponding
products for which the production systems in this book are most applicable.
Final products made by the industries listed in Table 2.3 can be divided into two
major classes: consumer goods and capital goods. Consumer goods are products pur-
chased directly by consumers, such as cars, personal computers, TVs, tires, toys, and ten-
nis rackets. Capital goods are products purchased by other companies to produce goods
and supply services. Examples of capital goods include commercial aircraft, process con-
trol computers, machine tools, railroad equipment, and construction machinery.
In addition to final products, which are usually assembled, there are companies in
industry whose business is primarily to produce materials, components, and supplies for the
companies that make the final products. Examples of these items include sheet steel, bar

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 44 Chap. 2 / Manufacturing Operations

Table 2.3   Manufacturing Industries Whose Products Are Likely to Be Produced by

the Production Systems Discussed in This Book
Industry Typical Products
Aerospace Commercial and military aircraft
Automotive Cars, trucks, buses, motorcycles
Computers Mainframe and personal computers
Consumer appliances Large and small household appliances
Electronics TVs, DVD players, audio equipment, video game consoles
Equipment Industrial machinery, railroad equipment
Fabricated metals Machined parts, metal stampings, tools
Glass, ceramics Glass products, ceramic tools, pottery
Heavy machinery Machine tools, construction equipment
Plastics (shaping) Plastic moldings, extrusions
Tire and rubber Tires, shoe soles, tennis balls

stock, metal stampings, machined parts, plastic moldings, cutting tools, dies, molds, and lu-
bricants. Thus, the manufacturing industries consist of a complex infrastructure with various
categories and layers of intermediate suppliers with whom the final consumer never deals.

2.2 Manufacturing Operations

There are certain basic activities that must be carried out in a factory to convert raw
materials into finished products. For a plant engaged in making discrete products, the
factory activities are (1) processing and assembly operations, (2) material handling,
(3) inspection and test, and (4) coordination and control.
The first three activities are the physical activities that “touch” the product as it is
being made. Processing and assembly operations alter the geometry, properties, and/or
appearance of the work unit. They add value to the product. The product must be moved
from one operation to the next in the manufacturing sequence, and it must be inspected
and/or tested to ensure high quality. It is sometimes argued that material handling and
inspection activities do not add value to the product. However, material handling and
inspection may be required to accomplish the necessary processing and assembly opera-
tions, for example, loading parts into a production machine and assuring that a starting
work unit is of acceptable quality before processing begins.

2.2.1 Processing and Assembly Operations

Manufacturing processes can be divided into two basic types: (1) processing operations
and (2) assembly operations. A processing operation transforms a work material from
one state of completion to a more advanced state that is closer to the final desired part or
product. It adds value by changing the geometry, properties, or appearance of the start-
ing material. In general, processing operations are performed on discrete work parts, but
some processing operations are also applicable to assembled items, for example, painting
a welded sheet metal car body. An assembly operation joins two or more components to
create a new entity, which is called an assembly, subassembly, or some other term that

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 Sec. 2.2 / Manufacturing Operations 45

Solidification
processes

Particulate
processing
Shaping
processes Deformation
processes

Material
Processing removal
operations
Property
enhancing Heat treatment

Cleaning and
Surface surface treating
processing
Manufacturing Coating and
processes deposition

Welding

Joining Brazing and

processes soldering

Assembly Adhesive
operations bonding

Threaded
Mechanical fasteners
fastening
Permanent
fastening

Figure 2.3 Classification of manufacturing processes.

refers to the specific joining process. Figure 2.3 shows a classification of manufacturing
processes and how they divide into various categories.

Processing Operations. A processing operation uses energy to alter a work part’s

shape, physical properties, or appearance to add value to the material. The energy is
­applied in a controlled way by means of machinery and tooling. Human energy may also
be required, but human workers are generally employed to control the machines, to over-
see the operations, and to load and unload parts before and after each cycle of operation.
A general model of a processing operation is illustrated in Figure 2.1(a). Material is fed
into the process, energy is applied by the machinery and tooling to transform the material,
and the completed work part exits the process. As shown in the model, most production
operations produce waste or scrap, either as a natural by-product of the process (e.g.,
removing material as in machining) or in the form of occasional defective pieces. A desir-
able objective in manufacturing is to reduce waste in either of these forms.

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 46 Chap. 2 / Manufacturing Operations

More than one processing operation is usually required to transform the starting
material into final form. The operations are performed in the particular sequence to
achieve the geometry and/or condition defined by the design specification.
Three categories of processing operations are distinguished: (1) shaping operations,
(2) property-enhancing operations, and (3) surface processing operations. Part-shaping
operations apply mechanical force and/or heat or other forms and combinations of en-
ergy to change the geometry of the work material. There are various ways to classify
these processes. The classification used here is based on the state of the starting material.
There are four categories:

1. Solidification processes. The important processes in this category are casting (for met-
als) and molding (for plastics and glasses), in which the starting material is a heated
liquid or semifluid, and it can be poured or otherwise forced to flow into a mold cav-
ity where it cools and solidifies, taking a solid shape that is the same as the cavity.
2. Particulate processing. The starting material is a powder. The common technique in-
volves pressing the powders in a die cavity under high pressure to cause the powders
to take the shape of the cavity. However, the compacted work part lacks sufficient
strength for any useful application. To increase strength, the part is then sintered—
heated to a temperature below the melting point, which causes the individual par-
ticles to bond together. Both metals (powder metallurgy) and ceramics (e.g., clay
products) can be formed by particulate processing.
3. Deformation processes. In most cases, the starting material is a ductile metal that
is shaped by applying stresses that exceed the metal’s yield strength. To increase
ductility, the metal is often heated prior to forming. Deformation processes include
forging, extrusion, and rolling. Also included in this category are sheet metal pro-
cesses such as drawing, forming, and bending.
4. Material removal processes. The starting material is solid (commonly a metal, duc-
tile or brittle), from which excess material is removed from the starting workpiece
so that the resulting part has the desired geometry. Most important in this category
are machining operations such as turning, drilling, and milling, accomplished using
sharp cutting tools that are harder and stronger than the work metal. Grinding is an-
other common process in this category, in which an abrasive grinding wheel is used
to remove material. Other material removal processes are known as nontraditional
processes because they do not use traditional cutting and grinding tools. Instead,
they are based on lasers, electron beams, chemical erosion, electric discharge, or
electrochemical energy.

In addition to these four categories based on starting material, there is also a fam-
ily of part fabrication technologies called additive manufacturing. Also known as rapid
prototyping (Section 23.1.2), these technologies operate on a variety of material types by
building the part as a sequence of thin layers each on top of the previous until the entire
solid geometry has been completed.
Property-enhancing operations are designed to improve mechanical or physical
properties of the work material. The most important property-enhancing operations in-
volve heat treatments, which include various temperature-induced strengthening and/or
toughening processes for metals and glasses. Sintering of powdered metals and ceramics,
mentioned previously, is also a heat treatment, which strengthens a pressed powder work
part. Property-enhancing operations do not alter part shape, except unintentionally in

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 Sec. 2.2 / Manufacturing Operations 47

some cases, for example, warping of a metal part during heat treatment or shrinkage of a
ceramic part during sintering.
Surface processing operations include (1) cleaning, (2) surface treatments, and (3)
coating and thin film deposition processes. Cleaning includes both chemical and mechani-
cal processes to remove dirt, oil, and other contaminants from the surface. Surface treat-
ments include mechanical working, such as shot peening and sand blasting, and physical
processes like diffusion and ion implantation. Coating and thin film deposition processes
apply a coating of material to the exterior surface of the work part. Common coating
processes include electroplating, anodizing of aluminum, and organic coating (call it
painting). Thin film deposition processes include physical vapor deposition and chemi-
cal vapor deposition to form extremely thin coatings of various substances. Several sur-
face processing operations have been adapted to fabricate semiconductor materials (most
commonly silicon) into integrated circuits for microelectronics. These processes include
chemical vapor deposition, physical vapor deposition, and oxidation. They are applied to
very localized regions on the surface of a thin wafer of silicon (or other semiconductor
material) to create the microscopic circuit.

Assembly Operations. The second basic type of manufacturing operation is assem-

bly, in which two or more separate parts are joined to form a new entity. Components of
the new entity are connected together either permanently or semipermanently. Permanent
joining processes include welding, brazing, soldering, and adhesive bonding. They combine
parts by forming a joint that cannot be easily disconnected. Mechanical assembly methods
are available to fasten two or more parts together in a joint that can be conveniently disas-
sembled. The use of threaded fasteners (e.g., screws, bolts, nuts) are important traditional
methods in this category. Other mechanical assembly techniques that form a permanent
connection include rivets, press fitting, and expansion fits. Special assembly methods are
used in electronics. Some of the methods are identical to or adaptations of the above tech-
niques. For example, soldering is widely used in electronics assembly. Electronics assembly
is concerned primarily with the assembly of components (e.g., integrated circuit packages) to
printed circuit boards to produce the complex circuits used in so many of today’s products.

2.2.2 Other Factory Operations

Other activities that must be performed in the factory include material handling and stor-
age, inspection and testing, and coordination and control.

Material Handling and Storage. Moving and storing materials between pro-
cessing and/or assembly operations are usually required. In most manufacturing plants,
­materials spend more time being moved and stored than being processed. In some cases,
the majority of the labor cost in the factory is consumed in handling, moving, and storing
materials. It is important that this function be carried out as efficiently as possible. Part
III of this book considers the material handling and storage technologies that are used in
factory operations.
Eugene Merchant, an advocate and spokesman for the machine tool industry for
many years, observed that materials in a typical metal machining batch factory or job
shop spend more time waiting or being moved than being processed [4]. His observation
is illustrated in Figure 2.4. About 95% of a part’s time is spent either moving or waiting
(temporary storage). Only 5% of its time is spent on the machine tool. Of this 5%, less

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 48 Chap. 2 / Manufacturing Operations

Time on
machine Moving and waiting
Time in factory
5% 95%

30% 70%
Time on machine
Cutting Loading,
positioning,
gaging, etc.

Figure 2.4 How time is spent by a typical part in a

batch production machine shop [4].

than 30% of the time on the machine (1.5% of the total time of the part) is time during
which actual cutting is taking place. The remaining 70% (3.5% of the total) is required
for loading and unloading, part handling and positioning, tool positioning, gaging, and
other elements of nonprocessing time. These time proportions indicate the significance of
material handling and storage in a typical factory.

Inspection and Testing. Inspection and testing are quality control activities. The
purpose of inspection is to determine whether the manufactured product meets the estab-
lished design standards and specifications. For example, inspection examines whether the
actual dimensions of a mechanical part are within the tolerances indicated on the engineer-
ing drawing for the part. Testing is generally concerned with the functional specifications
of the final product rather than with the individual parts that go into the product. For
example, final testing of the product ensures that it functions and operates in the manner
specified by the product designer. Part V of the text examines inspection and testing.

Coordination and Control. Coordination and control in manufacturing include

both the regulation of individual processing and assembly operations and the manage-
ment of plant-level activities. Control at the process level involves the achievement of
certain performance objectives by properly manipulating the inputs and other param-
eters of the process. Control at the process level is discussed in Part II of the book.
Control at the plant level includes effective use of labor, maintenance of the equip-
ment, moving materials in the factory, controlling inventory, shipping products of good qual-
ity on schedule, and keeping plant operating costs to a minimum. The manufacturing control
function at the plant level represents the major point of intersection between the physical
operations in the factory and the information-processing activities that occur in production.
Many of these plant- and enterprise-level control functions are discussed in Parts V and VI.

2.3 Production Facilities

A manufacturing company attempts to organize its facilities in the most efficient way to
serve the particular mission of each plant. Over the years, certain types of production
facilities have come to be recognized as the most appropriate way to organize for a given

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 Sec. 2.3 / Production Facilities 49

type of manufacturing. Of course, one of the most important factors that determine the
type of manufacturing is the type of products that are made. As mentioned previously,
this book is concerned primarily with the production of discrete parts and products. The
quantity of parts and/or products made by a factory has a very significant influence on
its facilities and the way manufacturing is organized. Production quantity refers to the
number of units of a given part or product produced annually by the plant. The annual
part or product quantities produced in a given factory can be classified into three ranges:

1. Low production: Quantities in the range of 1 to 100 units

2. Medium production: Quantities in the range of 100 to 10,000 units
3. High production: Production quantities are 10,000 to millions of units.

The boundaries between the three ranges are somewhat arbitrary (author’s judg-
ment). Depending on the types of products, these boundaries may shift by an order of
magnitude or so.
Some plants produce a variety of different product types, each type being made in
low or medium quantities. Other plants specialize in high production of only one product
type. It is instructive to identify product variety as a parameter distinct from production
quantity. Product variety refers to the different product designs or types that are pro-
duced in a plant. Different products have different shapes and sizes and styles, they per-
form different functions, they are sometimes intended for different markets, some have
more components than others, and so forth. The number of different product types made
each year can be counted. When the number of product types made in a factory is high,
this indicates high product variety.
There is an inverse correlation between product variety and production quantity in
terms of factory operations. When product variety is high, production quantity tends to
be low, and vice versa. This relationship is depicted in Figure 2.5. Manufacturing plants
tend to specialize in a combination of production quantity and product variety that lies
somewhere inside the diagonal band in Figure 2.5. In general, a given factory tends to be
limited to the product variety value that is correlated with that production quantity.
Product variety

Low

Medium

High

1 100 10,000 1,000,000

Production quantity

Figure 2.5 Relationship between product variety and

production quantity in discrete product manufacturing.

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 50 Chap. 2 / Manufacturing Operations

Although product variety has been identified as a quantitative parameter (the num-
ber of different product types made by the plant or company), this parameter is much less
exact than production quantity, because details on how much the designs differ are not cap-
tured simply by the number of different designs. The differences between an automobile
and an air conditioner are far greater than between an air conditioner and a heat pump.
Products can be different, but the extent of the differences may be small or great. The auto-
motive industry provides some examples to illustrate this point. Each of the U.S. automo-
tive companies produces cars with two or three different nameplates in the same assembly
plant, ­although the body styles and other design features are nearly the same. In different
plants, the same company builds trucks. Let the terms “hard” and “soft” be used to describe
these differences in product variety. Hard product variety is when the products differ sub-
stantially. In an assembled product, hard variety is characterized by a low proportion of
­common parts among the products; in many cases, there are no common parts. The differ-
ence between a car and a truck is hard. Soft product variety is when there are only small dif-
ferences between products, such as the differences between car models made on the same
production line. There is a high proportion of common parts among assembled products
whose variety is soft. The variety between different product categories tends to be hard; the
variety between different models within the same product category tends to be soft.
The three production quantity ranges can be used to identify three basic categories
of production plants. Although there are variations in the work organization within each
category, usually depending on the amount of product variety, this is nevertheless a rea-
sonable way to classify factories for the purpose of this discussion.

2.3.1 Low Production

The type of production facility usually associated with the quantity range of 1–100 units/
year is the job shop, which makes low quantities of specialized and customized products.
The products are typically complex, such as experimental aircraft and special machinery.
Job shop production can also include fabricating the component parts for the products.
Customer orders for these kinds of items are often special, and repeat orders may never
occur. Equipment in a job shop is general purpose and the labor force is highly skilled.
A job shop must be designed for maximum flexibility to deal with the wide part and
product variations encountered (hard product variety). If the product is large and heavy,
and therefore difficult to move in the factory, it typically remains in a single location, at
least during its final assembly. Workers and processing equipment are brought to the
product, rather than moving the product to the equipment. This type of layout is a fixed-
position layout, shown in Figure 2.6(a), in which the product remains in a single location
during its entire fabrication. Examples of such products include ships, aircraft, railway lo-
comotives, and heavy machinery. In actual practice, these items are usually built in large
modules at single locations, and then the completed modules are brought together for
final assembly using large-capacity cranes.
The individual parts that comprise these large products are often made in factories
that have a process layout, in which the equipment is arranged according to function
or type. The lathes are in one department, the milling machines are in another depart-
ment, and so on, as in Figure 2.6(b). Different parts, each requiring a different opera-
tion ­sequence, are routed through the departments in the particular order needed for
their processing, usually in batches. The process layout is noted for its flexibility; it can
accommodate a great variety of alternative operation sequences for different part con-
figurations. Its disadvantage is that the machinery and methods to produce a part are not

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 Sec. 2.3 / Production Facilities 51

Worker

Mobile
equipment

Product

(a)

Workstations (machines)

Workers

(b)

Work
flow Machines

Worker

(c)

Workers in stations

Work
flow

Work units
(d)

Figure 2.6 Various types of plant layout: (a) fixed-

position layout, (b) process layout, (c) cellular layout,
and (d) product layout.

designed for high efficiency. Much material handling is required to move parts between
departments, so in-process inventory tends to be high.

2.3.2 Medium Production

In the medium quantity range (100–10,000 units annually), two different types of facil-
ity can be distinguished, depending on product variety. When product variety is hard,
the traditional approach is batch production, in which a batch of one product is made,

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 52 Chap. 2 / Manufacturing Operations

after which the facility is changed over to produce a batch of the next product, and so on.
Orders for each product are frequently repeated. The production rate of the equipment
is greater than the demand rate for any single product type, and so the same equipment
can be shared among multiple products. The changeover between production runs takes
time. Called the setup time or changeover time, it is the time to change tooling and to set
up and reprogram the machinery. This is lost production time, which is a disadvantage of
batch manufacturing. Batch production is commonly used in make-to-stock situations, in
which items are manufactured to replenish inventory that has been gradually depleted
by demand. The equipment for batch production is usually arranged in a process layout
Figure 2.6(b).
An alternative approach to medium range production is possible if product variety
is soft. In this case, extensive changeovers between one product style and the next may
not be required. It is often possible to configure the equipment so that groups of similar
parts or products can be made on the same equipment without significant lost time for
changeovers. The processing or assembly of different parts or products is accomplished
in cells consisting of several workstations or machines. The term cellular manufacturing
is often associated with this type of production. Each cell is designed to produce a limited
variety of part configurations; that is, the cell specializes in the production of a given set
of similar parts or products, according to the principles of group technology (Chapter 18).
The layout is called a cellular layout, depicted in Figure 2.6(c).

2.3.3 High Production

The high quantity range (10,000 to millions of units per year) is often referred to as mass
production. The situation is characterized by a high demand rate for the product, and the
production facility is dedicated to the manufacture of that product. Two categories of
mass production can be distinguished: (1) quantity production and (2) flow-line produc-
tion. Quantity production involves the mass production of single parts on single pieces
of equipment. The method of production typically involves standard machines (such as
stamping presses) equipped with special tooling (e.g., dies and material handling devices),
in effect dedicating the equipment to the production of one part type. The typical layout
used in quantity production is the process layout [Figure 2.6(b)].
Flow-line production involves multiple workstations arranged in sequence, and the
parts or assemblies are physically moved through the sequence to complete the product.
The workstations consist of production machines and/or workers equipped with special-
ized tools. The collection of stations is designed specifically for the product to maximize
efficiency. This is a product layout, in which the workstations are arranged into one long
line, as depicted in Figure 2.6(d), or into a series of connected line segments. The work is
usually moved between stations by powered conveyor. At each station, a small amount of
the total work is completed on each unit of product.
The most familiar example of flow-line production is the assembly line, associated
with products such as cars and household appliances. The pure case of flow-line produc-
tion is where there is no variation in the products made on the line. Every product is
­identical, and the line is referred to as a single-model production line. However, to suc-
cessfully market a given product, it is often necessary to introduce model variations so
that individual customers can choose the exact style and options that appeal to them.
From a production viewpoint, the model differences represent a case of soft product vari-
ety. The term mixed-model production line applies to those situations where there is soft

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 Sec. 2.4 / Product/Production Relationships 53

Fixed-position
layout Process
layout
Cellular

Product variety
layout
Job shop Product
Batch layout
production
Cellular
manufacturing
Quantity Flow line

Mass production

1 100 10,000 1,000,000

Production quantity

Figure 2.7 Types of facilities and layouts

used for different levels of production quan-
tity and product variety.

variety in the products made on the line. Modern automobile assembly is an example.
Cars coming off the assembly line have variations in options and trim representing dif-
ferent models (and, in many cases, different nameplates) of the same basic car design.
Other examples include small and major appliances. The Boeing Commercial Airplane
Company uses production line techniques to assemble its 737 model.
Much of the discussion of the types of production facilities is summarized in
Figure 2.7, which adds detail to Figure 2.5 by identifying the types of production facili-
ties and plant layouts used. As Figure 2.7 shows, some overlap exists among the dif-
ferent facility types. Also note the comparison with earlier Figure 1.5, which indicates
the type of automation that would be used in each facility type if the facility were
automated.

2.4 Product/Production Relationships

As noted in the preceding section, companies organize their production facilities and
manufacturing systems in the most efficient manner for the particular products they
make. It is instructive to recognize that there are certain product parameters that are
influential in determining how the products are manufactured. Consider the following
parameters: (1) production quantity, (2) product variety, (3) product complexity (of as-
sembled products), and (4) part complexity.

2.4.1 Production Quantity and Product Variety

Production quantity and product variety were previously discussed in Section 2.3. The
symbols Q and P can be used to represent these important parameters, respectively. Q
refers to the number of units of a given part or product that are produced annually by a
plant, both the quantities of each individual part or product style and the total quantity
of all styles. Let each part or product style be identified using the subscript j, so that

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 54 Chap. 2 / Manufacturing Operations

Qj = annual quantity of style j. Then let Qf = total quantity of all parts or products made
in the factory (the subscript f refers to factory). Qj and Qf are related as

Qf = a Qj
P
(2.1)
j=1

where P = total number of different part or product styles, and j is a subscript to identify
products, j = 1, 2, c, P.
P refers to the different product designs or types that are produced in a plant. It is
a parameter that can be counted, and yet it must be recognized that the difference be-
tween products can be great or small, for example, the difference between hard product
variety and soft product variety discussed in Section 2.3. Hard product variety is when the
products differ substantially. Soft product variety is when there are only small differences
between products. The parameter P can be divided into two levels, as in a tree structure.
Call them P1 and P2 . P1 refers to the number of distinct product lines produced by the fac-
tory, and P2 refers to the number of models in a product line. P1 represents hard product
variety and P2 soft variety. The total number of product models is given by

P = a P2j
P1
(2.2)
j=1

where the subscript j identifies the product line: j = 1, 2, c , P1.

Example 2.1 Product Lines and Product Models

A company specializes in home entertainment products. It produces only TVs
and audio systems. Thus P1 = 2. In its TV line it offers 15 different models, and
in its audio line it offers 5 models. Thus for TVs, P2 = 15, and for audio systems,
P2 = 5. The totality of product models offered is given by Equation (2.2):

P = a P2j = 15 + 5 = 20
2

j=1

2.4.2 Product and Part Complexity

How complex is each product made in the plant? Product complexity is a complicated
issue. It has both qualitative and quantitative aspects. For an assembled product, one
possible quantitative indicator of product complexity is its number of components—the
more parts, the more complex the product is. This is easily demonstrated by comparing
the numbers of components in various assembled products, as in Table 2.4. The list dem-
onstrates that the more components a product has, the more complex it tends to be.
For a manufactured component, a possible measure of part complexity is the num-
ber of processing steps required to produce it. An integrated circuit, which is technically a
monolithic silicon chip with localized alterations in its surface chemistry, requires hundreds
of processing steps in its fabrication. Although it may measure only 12 mm (0.5 in) on a
side and 0.5-mm (0.020 in) thick, its complexity is orders of magnitude greater than a round

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 Sec. 2.4 / Product/Production Relationships 55

Table 2.4   Typical Number of Separate Components in Various

Assembled Products (Compiled from [1], [3], and Other Sources)

Approx. Number
Product (Approx. Date or Circa) of Components
Mechanical pencil (modern) 10
Ball bearing (modern) 20
Rifle (1800) 50
Sewing machine (1875) 150
Bicycle chain 300
Bicycle (modern) 750
Early automobile (1910) 2,000
Automobile (modern) 10,000
Commercial airplane (1930) 100,000
Commercial airplane (modern) 4,000,000

Table 2.5   Typical Number of Processing Operations Required to Fabricate Various Parts
Approx. Number of Typical Processing Operations
Part Processing Operations Used
Plastic molded part 1 Injection molding
Washer (stainless steel) 1 Stamping
Washer (plated steel) 2 Stamping, electroplating
Forged part 3 Heating, forging, trimming
Pump shaft 10 Machining (from bar stock)
Coated carbide cutting 15 Pressing, sintering, coating,
tool grinding
Pump housing, machined 20 Casting, machining
V-6 engine block 50 Casting, machining
Integrated circuit chip Hundreds Photolithography, various ther-
mal and chemical processes

washer of 12-mm (1/2-in) outside diameter, stamped out of 0.8-mm (1/32-in) thick stainless
steel in one step. Table 2.5 is a list of manufactured parts with the typical number of pro-
cessing operations required for each.
So, complexity of an assembled product can be defined as the number of distinct
components; let np = the number of parts per product. And processing complexity of
each part can be defined as the number of operations required to make it; let no = the
number of operations or processing steps to make a part. As defined in Figure 2.8, three
different types of production plant can be identified on the basis of np and no: parts pro-
ducers, pure assembly plants, and vertically integrated plants.
Several relationships can be developed among the parameters P, Q, np, and no that
indicate the level of activity in a manufacturing plant. Ignore the differences between
P1 and P2 here, although Equation (2.2) could be used to convert these parameters into
the corresponding P value. The total number of products made annually in a plant is the
sum of the quantities of the individual product designs, as expressed in Equation (2.1).
Assuming that the products are all assembled and that all component parts used in these

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 56 Chap. 2 / Manufacturing Operations

Number of
operations
Parts producer: This plant makes Vertically integrated plant: This
no > 1 parts, each requiring multiple plant makes parts and assembles
operations. No assembly. them into final products.

Assembly plant: This plant

no = 1 Handicraft shop: Not really a purchases all parts and assembles
production plant. them into the final product, one
operation per part.

np = 1 np > 1
Number of parts

Figure 2.8 Production plants distinguished by number of parts np

(for assembled products) and number of operations no (for manu-
factured parts).

products are made in the plant (no purchased components), the total number of parts
manufactured by the plant per year is given by

npf = a Qjnpj
P
(2.3)
j=1

where npf = total number of parts made in the factory, pc/yr; Qj = annual quantity of
product style j, products/yr; and npj = number of parts in product j, pc/product.
Finally, if all parts are manufactured in the plant, then the total number of process-
ing operations performed by the plant is given by

nof = a Qj a nojk
P npj
(2.4)
j=1 k=1

where nof = total number of operation cycles performed in the factory, ops/yr; and
nojk = number of processing operations for each part k, summed over the number of
parts in product j, npj. Parameter nof provides a numerical value for the total level of part
processing activity in the factory.
Average values of the four parameters P, Q, np, and no might be used to sim-
plify and better conceptualize the factory model represented by Equations (2.1),
(2.3), and (2.4). In this case, the total number of product units produced by the fac-
tory is given by
Qf = PQ (2.5)
where P = total number of product styles, Qf = total quantity of products made in the
factory and the average Q value is given by the following:

a Qj
P

j=1
Q = (2.6)
P
The total number of parts produced by the factory is given by
npf = PQnp (2.7)

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 Sec. 2.4 / Product/Production Relationships 57

where the average np value is given by the following:

a Qj npj
P

j=1
np = (2.8)
PQ
The total number of manufacturing operations performed by the factory is given by
nof = PQnp no (2.9)
where the average no value is given by the following:

a Qj a nojk
P npj

j=1 k=1
no = (2.10)
PQnpf
Using the simplified equations based on average values of the parameters, consider the
following example.

Example 2.2 A Production System Problem

Suppose a company has designed a new product line and is planning to build
a new plant to manufacture this product line. The new line consists of 100 dif-
ferent product types, and for each product type the company wants to produce
10,000 units annually. The products average 1,000 components each, and the
average number of processing steps required for each component is 10. All
parts will be made in the factory. Each processing step takes an average of
1 min. Determine (a) how many products, (b) how many parts, and (c) how
many production operations will be required each year, and (d) how many
workers will be needed in the plant, if each worker works 8 hr per shift for
250 days/yr (2,000 hr/yr)?
Solution: (a) The total number of units to be produced by the factory annually is given by

Q = PQ = 100 * 10,000 = 1,000,000 products

(b) The total number of parts produced annually is

npf = PQnp = 1,000,000 * 1,000 = 1,000,000,000 parts

(c) The number of distinct production operations is

nof = PQnpno = 1,000,000,000 * 10 = 10,000,000,000 operations

(d) First consider the total time TT to perform these operations. If each opera-
tion takes 1 min (1/60 hr),

TT = 10,000,000,000 * 1/60 = 166,666,667 hr

If each worker works 2,000 hr/yr, then the total number of workers required is
166,666,667
w = = 83,333 workers
2000

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 58 Chap. 2 / Manufacturing Operations

The factory in this example is a parts producer. If product assembly were accom-
plished in addition to parts production, then it would be a vertically integrated plant. In
either case, it would be a big factory. The calculated number of workers only includes
direct labor for parts production. Add indirect labor, staff, and management, and the
number increases to well over 100,000 employees. Imagine the parking lot. And inside
the factory, the logistics problems of dealing with all of the products, parts, and opera-
tions would be overwhelming. No organization in its right mind would consider building
or operating such a plant today—not even the federal government.

2.4.3 Limitations and Capabilities of a Manufacturing Plant

Companies do not attempt the kind of factory in Example 2.2. Instead, today’s factories
are designed with much more specific missions. Referred to as focused factories, they are
plants that concentrate “on a limited, concise, manageable set of products, technologies,
volumes, and markets” [5]. It is a recognition that a manufacturing plant cannot do every-
thing. It must limit its mission to a certain scope of products and activities in which it can
best compete. Its size is typically about 500 workers or fewer, although the number may
vary for different types of products and manufacturing operations.
Consider how a plant, or its parent company, limits the scope of its manufactur-
ing operations and production systems. In limiting its scope, the plant in effect makes a
set of deliberate decisions about what it will not try to do. Certainly one way to limit a
plant’s scope is to avoid being a fully integrated factory. Instead, the plant specializes in
being either a parts producer or an assembly plant. Just as it decides what it will not do,
the plant must also decide on the specific technologies, products, and volumes in which it
will specialize. These decisions determine the plant’s intended manufacturing capability,
which refers to the technical and physical limitations of a manufacturing firm and each of
its plants. Several dimensions of this capability can be identified: (1) technological pro-
cessing capability, (2) physical size and weight of product, and (3) production capacity.

Technological Processing Capability. The technological processing capability

of a plant (or company) is its available set of manufacturing processes. Certain plants
perform machining operations, others roll steel billets into sheet stock, and others build
automobiles. A machine shop cannot roll steel, and a rolling mill cannot build cars. The
underlying feature that distinguishes these plants is the set of processes they can perform.
Technological processing capability is closely related to the material being processed.
Certain manufacturing processes are suited to certain materials, while other processes are
suited to other materials. By specializing in a certain process or group of processes, the
plant is simultaneously specializing in a certain material type or range of materials.
Technological processing capability includes not only the physical processes, but also
the expertise possessed by plant personnel in these processing technologies. Companies are
limited by their available processes. They must focus on designing and manufacturing prod-
ucts for which their technological processing capability provides a competitive advantage.

Physical Product Limitations. A second aspect of manufacturing capability is im-

posed by the physical product. Given a plant with a certain set of processes, there are size
and weight limitations on the products that can be accommodated in the plant. Big, heavy
products are difficult to move. To move such products, the plant must be equipped with
cranes of large load capacity. Smaller parts and products made in large quantities can be

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 Review Questions 59

moved by conveyor or fork lift truck. The limitation on product size and weight extends
to the physical capacity of the manufacturing equipment as well. Production machines
come in different sizes. Larger machines can be used to process larger parts. Smaller ma-
chines limit the size of the work that can be processed. The set of production equipment,
material handling, storage capability, and plant size must be planned for products that lie
within a certain size and weight range.

Production Capacity. A third limitation on a plant’s manufacturing capability is

the production quantity that can be produced in a given time period (e.g., month or year).
Production capacity is defined as the maximum rate of production per period that a plant can
achieve under assumed operating conditions. The operating conditions refer to the number
of shifts per week, hours per shift, direct labor manning levels in the plant, and similar con-
ditions under which the plant has been designed to operate. These factors represent inputs
to the manufacturing plant. Given these inputs, how much output can the factory produce?
Plant capacity is often measured in terms of output units, such as annual tons of
steel produced by a steel mill, or number of cars produced by a final assembly plant. In
these cases, the outputs are homogeneous, more or less. In cases where the output units
are not homogeneous, other factors may be more appropriate measures, such as available
labor hours of productive capacity in a machine shop that produces a variety of parts.

References

[1] Black, J. T., The Design of the Factory with a Future, McGraw-Hill, Inc., New York, NY, 1991.
[2] Groover, M. P., Fundamentals of Modern Manufacturing: Materials, Processes, and Systems,
5th ed., John Wiley & Sons, Inc., Hoboken, NJ, 2013.
[3] Hounshell, D. A., From the American System to Mass Production, 1800–1932, The Johns
Hopkins University Press, Baltimore, MD, 1984.
[4] Merchant, M. E., “The Inexorable Push for Automated Production,” Production
Engineering, January 1977, pp. 45–46.
[5] Skinner, W., “The Focused Factory,” Harvard Business Review, May–June 1974, pp. 113–121.

Review Questions

2.1 What is manufacturing?

2.2 What are the three basic industry categories?
2.3 What are the two types of production operations in the process industries and discrete
product industries?
2.4 What are the basic activities carried out in a factory to convert raw materials into finished
products?
2.5 Name the four categories of part-shaping operations, based on the state of the starting
work material.
2.6 Assembly operations can be classified as permanent joining methods and mechanical as-
sembly. What are the four types of permanent joining methods?
2.7 What is the difference between hard product variety and soft product variety?
2.8 What type of production does a job shop perform?

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 60 Chap. 2 / Manufacturing Operations

2.9 Flow-line production is associated with which one of the following layout types: (a) cellular
layout, (b) fixed-position layout, (c) process layout, or (d) product layout?
2.10 What is the difference between a single-model production line and a mixed-model produc-
tion line?
2.11 What is meant by the term technological processing capability?

Problems

Answers to problems labeled (A) are listed in the appendix.

2.1 (A) A manufacturing plant produces four product lines in one of its plants: A, B, C, and D.
Each product line has multiple models: 5 models within product line A, 10 models within
B, 3 models within C, and 6 within D. Average annual production quantities of model A
is 500 units, 1,000 units for model B, 300 units for model C, and 600 units for model D.
Determine the number of (a) different product models and (b) total quantity of products
produced annually in this plant.
2.2 Consider product line B in Problem 2.1. Its ten models have an average of 50 components
each, and the average number of operations needed to produce each component is 6.5. All
components are made in the same plant. Determine the total number of (a) components
produced and (b) operations performed in the plant annually.
2.3 A company produces two products in one of its plants: A and B. Annual production of
Product A is 3,000 units and of Product B is 2,000 units. Product A has 40 components
and Product B has 50 components. For Product A, 45% of the components are made in the
plant, while 55% are purchased parts. For Product B, 35% of the components are made in
the plant, while 65% are purchased. For these two products taken together, what is the total
number of (a) components made in the plant and (b) components purchased?
2.4 (A) A product line has two models: X and Y. Model X consists of 3 components: a, b, and c.
The number of processing operations required to produce these three components are 5, 10,
and 15, respectively. Model Y consists of 3 components: d, e, and f. The number of process-
ing operations required to produce these three components are 2, 4, and 6, respectively. The
­annual quantity of Model X is 2,000 units and of Model Y is 3,000 units. Determine the total
number of (a) components and (b) processing operations associated with these two models.
2.5 The ABC Company is planning a new product line and a new plant to produce the parts
for the line. The product line will include 5 different models. Annual production of each
model is expected to be 400 units. Each product will be assembled of 120 components.
All processing of parts will be accomplished in the new plant. On average, 10 processing
operations are required to produce each component, and each operation takes an average
of 1.5 min (including an allowance for setup time and part handling). All processing opera-
tions are performed at workstations, each of which includes a production machine and a
human worker. The plant operates one shift. Determine the number of (a) components, (b)
processing operations, and (c) workers that will be needed to accomplish the processing
operations if each worker works 2,100 hr/yr.
2.6 The XYZ Company is planning a new product line and a new factory to produce the parts
and assemble the final products. The product line will include 10 different models. Annual
production of each model is expected to be 1,000 units. Each product will be assembled of
300 components, but 65% of these will be purchased parts (not made in the new factory).
There is an average of 8 processing operations required to produce each component, and
each processing step takes 30 sec (including an allowance for setup time and part handling).
Each final unit of product takes 48 min to assemble. All processing operations are per-
formed at work cells that include a production machine and a human worker. Products are

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 Problems 61

assembled at single workstations consisting of one worker each plus assembly fixtures and
tooling. Each work cell and each workstation require 25 m2 of floor space and an additional
allowance of 45% must be added to the total production area for aisles, work-in-process
storage, shipping and receiving, rest rooms, and other utility space. The factory will operate
one shift (the day shift, 2,000 hr/yr). Determine (a) how many processing and assembly
operations, (b) how many workers (direct labor only), and (c) how much total floor space
will be required in the plant.
2.7 Suppose the company in Problem 2.6 were to operate two shifts (a day shift and an evening
shift, a total of 4,000 hr/yr) instead of one shift to accomplish the processing operations.
The assembly of the product would still be accomplished on the day shift. Determine (a)
how many processing and assembly operations, (b) how many workers on each shift (direct
labor only), and (c) how much total floor space will be required in the plant.

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 Chapter 3

Manufacturing Metrics
and Economics

Chapter Contents
3.1 Production Performance Metrics
3.1.1 Cycle Time and Production Rate
3.1.2 Production Capacity and Utilization
3.1.3 Manufacturing Lead Time and Work-in-Process
3.2 Manufacturing Costs
3.2.1 Fixed and Variable Costs
3.2.2 Direct Labor, Material, and Overhead
3.2.3 Cost of Equipment Usage
3.2.4 Cost of a Manufactured Part
Appendix 3A: Averaging Formulas for Equation (3.20)

In the previous chapter, manufacturing was defined as a transformation process that adds
value to a starting material. The current chapter expands on this definition by consider-
ing several metrics. Successful manufacturing companies use metrics to manage their
­operations. Quantitative metrics allow a company to estimate part and product costs, track
performance in successive periods (e.g., months and years), identify problems with per-
formance, and compare alternative methods. Manufacturing metrics can be divided into
two basic categories: (1) production performance measures and (2) manufacturing costs.
Metrics that indicate production performance include production rate, plant capacity,

62

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 Sec. 3.1 / Production Performance Metrics 63

equipment availability (a reliability measure), and manufacturing lead time. Manufacturing

costs that are important to a company include labor and material costs, overhead costs, the
cost of operating a given piece of equipment, and unit part and product costs.

3.1 Production Performance Metrics

In this section, various metrics of production performance are defined. The logical start-
ing point is the cycle time for a unit operation, from which the production rate for the
operation is derived. These unit operation metrics can be used to develop measures of
performance at the factory level: production capacity, utilization, manufacturing lead
time, and work-in-process.

3.1.1 Cycle Time and Production Rate

As described in the introduction to Chapter 2, manufacturing is almost always carried out

as a sequence of unit operations, each of which transforms the part or product closer to its
final form as defined by the engineering specifications. Unit operations are usually per-
formed by production machines that are tended by workers, either full time or periodi-
cally in the case of automated equipment. In flow-line production (e.g., production lines),
unit operations are performed at the workstations that comprise the line.

Cycle Time Analysis. For a unit operation, the cycle time Tc is the time that
one work unit1 spends being processed or assembled. It is the time interval between
when one work unit begins processing (or assembly) and when the next unit begins. Tc is
the time an individual part spends at the machine, but not all of this is processing time.
In a typical processing operation, such as machining, Tc consists of (1) actual processing
time, (2) work part handling time, and (3) tool handling time per workpiece. As an equa-
tion, this can be expressed as:
Tc = To + Th + Tt (3.1)
where Tc = cycle time, min/pc; To = time of the actual processing or assembly operation,
min/pc; Th = handling time, min/pc; and Tt = average tool handling time, min/pc, if such
an activity is applicable. In a machining operation, tool handling time consists of time
spent changing tools when they wear out, time changing from one tool to the next, tool
indexing time for indexable inserts or for tools on a turret lathe or turret drill, tool repo-
sitioning for a next pass, and so on. Some of these tool handling activities do not occur
every cycle; therefore, they must be apportioned over the number of parts between their
occurrences to obtain an average time per workpiece.
Each of the terms, To, Th, and Tt, has its counterpart in other types of discrete-item
production. There is a portion of the cycle when the part is actually being processed
1To 2 ; there is a portion of the cycle when the part is being handled 1Th 2; and there is,
on average, a portion when the tooling is being adjusted or changed 1Tt 2. Accordingly,
Equation (3.1) can be generalized to cover most processing operations in manufacturing.

Production Rate. The production rate for a unit production operation is usually
expressed as an hourly rate, that is, work units completed per hour 1pc/hr2. Consider
1
As defined in Chapter 1, the work unit is the part or product being processed or assembled.

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 64 Chap. 3 / Manufacturing Metrics and Economics

Machine

Proc Proc Proc

One part Batch of parts

Batch of parts

(a) (b) (c)

Machine Workstations

Proc Proc Proc Proc Proc Proc

... ... ... ...

Parts Parts transfer apparatus

(d) (e)

Figure 3.1 Types of production operations: (a) job shop with production quantity Q = 1,
(b) sequential batch production, (c) simultaneous batch production, (d) quantity mass production,
and (e) flow-line mass production. Key: Proc = process.

how the production rate is determined based on the operation cycle time for the three
types of production: job shop production, batch production, and mass production. The
various categories of production operations are depicted in Figure 3.1.
In job shop production, quantities are low (1 … Q … 100). At the extreme low end
of the range, when quantity Q = 1, the production time per work unit is the sum of setup
and cycle times:
Tp = Tsu + Tc (3.2)

where Tp = average production time, min/pc; Tsu = setup time to prepare the ­machine to
produce the part, min/pc; and Tc = cycle time from Equation (3.1). The production rate
for the unit operation is simply the reciprocal of production time, usually expressed as an
hourly rate:
60
Rp = (3.3)
Tp

where Rp = hourly production rate, pc/hr; Tp = production time from Equation (3.2),
and the constant 60 converts minutes to hours. When the production quantity is greater
than one, the analysis is the same as in batch production.
As noted in Section 2.1, batch production usually involves work units that are
­processed one at a time, referred to as sequential batch processing. Examples include
­machining, sheet metal stamping, and plastic injection molding. However, some batch
production involves all work units in the batch being processed together, called simulta-
neous batch processing. Examples include most heat-treating and electroplating opera-
tions, in which all of the parts in the batch are processed at once.

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 Sec. 3.1 / Production Performance Metrics 65

In sequential batch processing, the time to process one batch consisting of Q work
units is the sum of the setup time and processing time, where the processing time is the
batch quantity multiplied by the cycle time; that is,
Tb = Tsu + QTc (3.4a)
where Tb = batch processing time, min/batch; Tsu = setup time to prepare the machine
for the batch, min/batch; Q = batch quantity, pc/batch; and Tc = cycle time per work unit,
min/cycle. If one work unit is completed each cycle, then Tc has units of min/pc. If more
than one part is produced each cycle, then Equation (3.4) must be adjusted accordingly.
An example of this situation is when the mold in a plastic injection molding operation
­contains two cavities, so that two moldings are produced each cycle.
In simultaneous batch processing, the time to process a batch consisting of Q work
units is the sum of the setup time and processing time, where the processing time is the
time to simultaneously process all of the parts in the batch; that is,
Tb = Tsu + Tc (3.4b)
where Tb = batch processing time, min/batch; Tsu = setup time, min/batch; and Tc = cycle
time per batch, min/cycle.
To obtain the average production time per work unit Tp for the unit operation, the
batch time in Equation (3.4a) or (3.4b) is divided by the batch quantity:
Tb
Tp = (3.5)
Q

and production rate is calculated using Equation (3.3).

For quantity-type mass production, the production rate equals the cycle rate of the
machine (reciprocal of operation cycle time) after production is underway and the effects
of setup time become insignificant. That is, as Q becomes very large, 1Tsu >Q2 S 0 and
60
Rp S Rc = (3.6)
Tc

where Rc = operation cycle rate of the machine, pc/hr, and Tc = operation cycle time,
min/pc.
For flow-line mass production, the production rate approximates the cycle rate of
the production line, again neglecting setup time. However, the operation of production
lines is complicated by the interdependence of the workstations on the line. One com-
plication is that it is usually impossible to divide the total work equally among all of the
workstations on the line; therefore, one station ends up with the longest operation time,
and this station sets the pace for the entire line. The term bottleneck station is sometimes
used to refer to this station. Also included in the cycle time is the time to move parts from
one station to the next at the end of each operation. In many production lines, all work
units on the line are moved synchronously, each to its respective next station. Taking
these factors into account, the cycle time of a production line is the longest processing
(or assembly) time plus the time to transfer work units between stations. This can be
expressed as
Tc = Max To + Tr (3.7)
where Tc = cycle time of the production line, min/cycle; Max To = the operation time
at the bottleneck station (the maximum of the operation times for all stations on the

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 66 Chap. 3 / Manufacturing Metrics and Economics

line, min/cycle); and Tr = time to transfer work units between stations each cycle,
min/cycle. Tr is analogous to Th in Equation (3.1). The tool handling time Tt is usually ac-
complished as a maintenance function and is not included in the calculation of cycle time.
Theoretically, the production rate can be determined by taking the reciprocal of Tc as
60
Rc = (3.8)
Tc

where Rc = theoretical or ideal production rate, but call it the cycle rate to be more pre-
cise, cycles/hr, and Tc = cycle time from Equation (3.7).
The preceding equations for cycle time and production rate ignore the issue of de-
fective parts and products made in the operation. Although perfect quality is an ideal
goal in manufacturing, the reality is that some processes produce defects. The issue of
scrap rates and their effects on production quantities and costs in both unit operations
and sequences of unit operations is considered in Chapter 21 on inspection principles and
practices.

Equipment Reliability. Lost production time due to equipment reliability prob-

lems reduces the production rates determined by the previous equations. The most useful
measure of reliability is availability, defined as the uptime proportion of the equipment;
that is, the proportion of time that the equipment is capable of operating (not broken
down) relative to the scheduled hours of production. The measure is especially appropri-
ate for automated production equipment.
Availability can also be defined using two other reliability terms, mean time between
failures (MTBF) and mean time to repair (MTTR). As depicted in Figure 3.2, MTBF is the
average length of time the piece of equipment runs between breakdowns, and MTTR is
the average time required to service the equipment and put it back into operation when a
breakdown occurs. In equation form,
MTBF - MTTR
A = (3.9)
MTBF

where A = availability (proportion); MTBF = mean time between failures, hr; and
MTTR = mean time to repair, hr. The mean time to repair may include waiting time of
the broken-down equipment before repairs begin. Availability is typically expressed as

Breakdown

Repairs completed

Equipment operating

Time
MTTR

MTBF

Figure 3.2 Time scale showing MTBF and MTTR used to define
availability A.

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 Sec. 3.1 / Production Performance Metrics 67

a percentage. When a piece of equipment is brand new (and being debugged), and later
when it begins to age, its availability tends to be lower.
Taking availability into account, the actual average production rate of the equip-
ment is its availability multiplied by Rp from any of the preceding production rate equa-
tions (i.e., average production rate = ARp), based on the assumption that setup time is
also affected by the availability.
Reliability is particularly bothersome in the operation of automated production
lines. This is because of the interdependence of workstations in an automated line, in
which the entire line is forced to stop when one station breaks down. The actual aver-
age production rate Rp is reduced to a value that is often substantially below the ideal Rc
given by Equation (3.8). The effect of reliability on manual and automated production
lines and automated assembly systems is examined in Chapters 15 through 17.

3.1.2 Production Capacity and Utilization

Production capacity was discussed in the context of manufacturing capabilities in

Section 2.4.3. It is defined as the maximum rate of output that a production facility (or
production line, or group of machines) is able to produce under a given set of assumed
operating conditions. The production facility usually refers to a plant or factory, and so
the term plant capacity is often used for this measure. One might say that plant capacity
is to the aggregate plant operation as production rate is to the unit operation. As men-
tioned before, the assumed operating conditions refer to the number of shifts per day
(one, two, or three), number of days in the week that the plant operates, employment
levels, and so forth.
The number of hours of plant operation per week is a critical issue in defining plant
capacity. For continuous chemical production in which the reactions occur at e­ levated
temperatures, the plant is usually operated 24 hours per day, seven days per week
(168 hours per week). On the other hand, many discrete product plants operate one shift
per day, five days per week. For an automobile final assembly plant, capacity is typically
defined as one or two shifts, depending on the demand for the cars made in the plant.
In situations when demand is very high, three production shifts may be used. A trend in
manufacturing is to define plant capacity for the full 7-day week, 24 hours per day. This is
the maximum time available, and if the plant operates fewer hours, then it is operating at
less than its full capacity.

Determining Plant Capacity. Quantitative measures of plant capacity can be de-

veloped based on the production rate models derived earlier. Let PC = the production
capacity of a given facility, where the measure of capacity is the number of units produced
per time period (e.g., week, month, year). The simplest case is where there are n produc-
tion machines in the plant and they all produce the same part or product, which implies
quantity-type mass production. Each machine is capable of producing at the same rate of
Rp units per hour, as defined by Equation (3.6). Each machine operates for the number of
hours in the period. These parameters can be combined to calculate the weekly produc-
tion capacity of the facility,
PC = nHpcRp (3.10)

where PC = production capacity, pc/period; n = number of machines; and Hpc = the

number of hours in the period being used to measure production capacity (or plant capacity).

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 68 Chap. 3 / Manufacturing Metrics and Economics

Table 3.1   Number of Hours of Plant Operation for Various Periods and
Operating Conditions.
Period

Operating Conditions Week Month Year

One 8-hr shift, 5 days/week, 50 weeks/year 40 167 2000
Two 8-hr shifts, 5 days/week, 50 weeks/year 80 333 4000
Three 8-hr shifts, 5 days/week, 50 weeks/year 120 500 6000
One 8-hr shift, 7 days/week, 50 weeks/year 56 233 2800
Two 8-hr shifts, 7 days/week, 50 weeks/year 112 467 5600
Three 8-hr shifts, 7 days/week, 50 weeks/year 168 700 8400
24 hr/day, 7 days/week, 52 weeks/year (24/7) 168 728 8736

Table 3.1 lists the number of hours of plant operation for various periods and operating con-
ditions. Consistent with the definition of production capacity given earlier, Equation (3.10)
assumes that all machines are operating full time during the entire period defined by Hpc.

Example 3.1 Production Capacity

The automatic lathe department has five machines, all devoted to the produc-
tion of the same product. The machines operate two 8-hr shifts, 5 days/week,
50 weeks/year. Production rate of each machine is 15 unit/hr. Determine the
weekly production capacity of the automatic lathe department.
Solution: From Equation (3.10) and Table 3.1,
PC = 518021152 = 6,000 pc , wk

In cases in which different machines produce different parts at different production

rates, the following equation applies for quantity-type mass production:

PC = Hpc a Rpi
n
(3.11)
i=1

where n = number of machines in the plant, and Rpi = hourly production rate of m ­ achine
i, and all machines are operating full time during the entire period defined by Hpc.
In job shop and batch production, each machine may be used to produce more than
one batch, where each batch is made up of a different part style j. Let fij = the fraction of
time during the period that machine i is processing part style j. Under normal operating
conditions, it follows that for each machine i,

0 … a fij … 1 where 0 … fij … 1 for all i (3.12)

j

The lower limit in Equation (3.12) indicates that the machine is idle during the ­entire
week. Values between 0 and 1 mean that the machine experiences idle time during
the week. The upper limit means that the machine is utilized 100% of the time during

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 Sec. 3.1 / Production Performance Metrics 69

the week. If the upper limit is exceeded 1Σfij 7 12, then this can be interpreted as the
machine being used on an overtime basis beyond the number of hours Hpc in the defini-
tion of plant capacity.
The production output of the plant must include the effect of operation sequence for
part or product j. This is accomplished by dividing the production rate for each ­machine
that participates in the production of part j by the number of operations in the operation
sequence for that part, noj. The resulting average hourly production output for the plant
is given by:

Rpph = a a fijRpij>noj
n
(3.13)
i=1 j

where Rpph = average hourly plant production rate, pc/hr; Rpij = production rate of
­machine i when processing part j, pc/hr; noj = the number of operations required to pro-
duce part j, and fij is defined earlier. The individual values of Rpij are determined based on
Equations (3.3) and (3.5), specifically:

60 Tsuij + QjTcij
Rpij = where Tpij =
Tpij Qj

where Tpij = average production time for part j on machine i, min/pc; Tsuij = setup time
for part j on machine i, min/batch; and Qj = batch quantity of part j, pc/batch.
The plant output for a given period of interest (e.g., week, month, year) can be
determined based on the average hourly production rate given by Equation (3.13). For
example, weekly plant output is given by the following:
Rppw = HpwRpph (3.14)
where Rppw = weekly plant production rate for the plant, pc/wk; Rpph = average hourly
production rate for the plant, pc/hr, from Equation (3.13); and Hpw = number of hours in
the week from Table 3.1. If the period of interest is a month, then Rppm = HpmRpph, and if
the period is a year, then Rppy = HpyRpph.
Most manufacturing is accomplished in batches, and most manufactured products
require a sequence of processing steps on multiple machines. Just as there is a bottleneck
station in flow-line production, it is not unusual for certain machines in a given plant
to limit the production output of the plant. They determine the plant capacity. These
machines operate at 100% utilization while other machines in the sequence have lower
utilizations. The net result is that the average equipment utilization in the plant is less
than 100%, but the plant is still operating at its maximum capacity due to the limitations
of these bottleneck operations. If this is the situation, then weekly production capacity is
given by Equation (3.14), that is, PC = Rppw.

Example 3.2 Weekly Production Rate

A small machine shop has two machines and works 40 hr/wk. During a week
of interest, four batches of parts were processed through these machines.
Batch quantities, batch times, and operation sequences for the parts are given
in the table below. Determine (a) weekly production output of the shop and
(b) whether this represents the weekly plant capacity.

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 70 Chap. 3 / Manufacturing Metrics and Economics

Machine 1 Machine 2

Part Rp Duration Rp Duration

A 25 pc/hr 12 hr 30 pc/hr 10 hr
B 10 pc/hr 20 hr
C 7.5 pc/hr 24 hr
D 20 pc/hr 6 hr

Solution: (a) To determine the weekly production output, the fij values are determined
as follows, given 40 hr per week: f1A = 12>40 = 0.30, f1B = 20>40 = 0.50,
f2A = 10>40 = 0.25, f2C = 24>40 = 0.60, and f2D = 6>40 = 0.15. The
fraction of idle time on machine 1 is = 8>40 = 0.20. Noting that part A has
2 operations in its operation sequence and the other parts have 1, the hourly
production rate of parts completed in the plant is given by Equation (3.13):
0.31252 0.251302
Rpph = + 0.51102 + + 0.617.52 + 0.151202 = 20 pc>hr
2 2

Weekly production output Rppw = 40(20) = 800 pc/wk

(b) Machine 2 is operating the full 40 hr/wk. Given the part mix in the problem,
machine 2 is the bottleneck in the plant, and so the 800 pc/wk represents plant
capacity: PCw = 800 pc/wk.

Comment: Machine 1 is only operating 32 hr/wk, so it might be in-

ferred from the situation that the production of part B could be increased by
80 units (8 hr * 10 pc/hr) to achieve a plant capacity of 880 pc/wk. The question
is whether there would be a demand for those 80 additional units of part B.

Utilization. Utilization is the proportion of time that a productive resource (e.g.,

a production machine) is used relative to the time available under the definition of plant
capacity. Expressing this as an equation,

Ui = a fij (3.15)
j

where Ui = utilization of machine i, and fij = the fraction of time during the available
hours that machine i is processing part style j. An overall utilization for the plant is deter-
mined by averaging the Ui values over the number of machines:

a a fij a Ui
n

i=1 j j
U = = (3.16)
n n
The trouble with Equation (3.13) is that weekly production rate is the sum of the
outputs of a mixture of part or product styles. The mixture is likely to change from week
to week, so that parts with different production rates are produced in different weeks.

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 Sec. 3.1 / Production Performance Metrics 71

During one week, output might be higher than average simply because the production
rates of the parts produced that week were high. To deal with this possible inconsistency,
plant capacity is sometimes reported as the workload corresponding to the output pro-
duced during the period. Workload is defined as the total hours required to produce a
given number of units during a given week or other period of interest. That is,

WL = a a QijTpij (3.17)
i j

where WL = workload, hr; Qij = number of work units produced of part style j on ma-
chine i during the period of interest; and Tpij = average production time of part style j
on machine i. In Example 3.2, the workload is the sum of the duration hours listed for
machines 1 and 2, a total of 72 hr. When used as the definition of plant capacity, workload
refers to the maximum number of hours of work that the plant is capable of completing in
the period of interest, which is 80 hr in Example 3.2.

Adjusting Plant Capacity. The preceding equations and examples indicate the
operating parameters that affect plant capacity. Changes that can be made to increase or
decrease plant capacity over the short term are listed below:

• Increase or decrease the number of machines n in the plant. It is easier to remove

machines from operation than to add machines if adding them means purchasing
equipment that may require long lead times to procure. Adding workers in the short
term may be easier than adding equipment.
• Increase or decrease the number of shifts per week. For example, Saturday shifts
might be authorized to temporarily increase capacity, or the plant might operate
two shifts per day instead of one.
• Increase or decrease the number of hours worked per shift. For example, overtime
on each regular shift might be authorized to increase capacity.

Over the intermediate and longer terms, the following changes can be made to
­increase plant capacity:

• Increase the number of machines n in the shop. This might be done by using equip-
ment that was formerly not in use, acquiring new machines, and hiring new workers.
• Increase the production rate Rp by making improvements in methods and/or process-
ing technology.
• Reduce the number of operations no in the operation sequence of parts by using
combined operations, simultaneous operations, and/or integration of operations
(Section 1.4.2, strategies 2, 3, and 4).

Other adjustments that can be considered to affect plant capacity in the short term
or long term include the following:

• Identify the bottleneck operations in the plant and somehow increase the output
rates of these operations, using the USA Principle and other approaches outlined
in Section 1.4. Bottleneck operations in a batch manufacturing plant usually reveal
themselves in one or both of the following ways: (1) These machines are always
busy; they operate at 100% utilization; and (2) they have large queues of work
waiting in front of them.

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 72 Chap. 3 / Manufacturing Metrics and Economics

• Stockpile inventory to maintain level employment during slow periods, trusting

(and betting) that the goods can later be sold when demand increases.
• Backlogging orders, which means delaying deliveries to customers during busy peri-
ods to avoid temporary and potentially costly increases in production capacity.
• Subcontracting work to outside vendors during busy periods or taking in extra work
from other firms during slack periods.

3.1.3 Manufacturing Lead Time and Work-In-Process

In the competitive environment of global commerce, the ability of a manufacturing firm

to deliver a product to the customer in the shortest possible time often wins the order.
This section examines this performance measure, called manufacturing lead time (MLT).
Closely correlated with MLT is the amount of inventory located in the plant as partially
completed product, called work-in-process (WIP). When there is too much work-in-­
process, manufacturing lead time tends to be long.

Manufacturing Lead Time. MLT is defined as the total time required to process
a given part or product through the plant, including any time due to delays, parts being
moved between operations, time spent in queues, and so on. As noted previously, pro-
duction usually consists of a sequence of unit processing operations. Between the unit
operations are these nonproductive elements, which typically consume large blocks of
time (recall the Merchant study, Section 2.2.2). Thus, production activities can be divided
into two categories, unit operations and nonoperation times.
The reader may be wondering: Why do these nonoperation times occur? Why not
just take the parts straightaway from one operation to the next without these delays?
Some of the reasons why nonoperation time occurs between unit operations are the
following: (1) time spent transporting batches of parts between operations, (2) buildup
of queues of parts waiting before each operation, (3) buildup of queues of parts after
each operation waiting to be transported to the next operation, (4) less than optimal
scheduling of batches, (5) part inspections before and/or after unit operations,
(6) equipment breakdowns resulting in lost production time, and (7) workload imbal-
ances among the machines that perform the operations required for a given part or
product style, with some machines being 100% utilized while others spend much of the
time waiting for work.
Let Tc = the operation cycle time at a given machine, and Tno = the nonoperation
time associated with each operation. Further, suppose that the number of separate opera-
tions (machines) through which the work unit must be routed = no. In batch production,
there are Q work units in the batch. A setup is generally required to prepare each machine
for the particular product, which requires a time = Tsu. Given these terms, manufacturing
lead time for a given batch is defined as

MLTj = a 1Tsuij + QjTcij + Tnoij 2

noj
(3.18)
i=1

where MLTj = manufacturing lead time for a batch of part or product j, min; Tsuij = setup
time for operation i on part or product j, min; Qj = quantity of part or product j in the
batch being processed, pc; Tcij = cycle time for operation i on part or product j, min/pc;
Tnoij = nonoperation time associated with operation i, min; and i indicates the operation
sequence in the processing, i = 1, 2, c , noj. The MLT equation does not include the

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 Sec. 3.1 / Production Performance Metrics 73

time the raw work part spends in storage before its turn in the production schedule begins.
Neither does it take into account availability (reliability) of equipment. The effect of equip-
ment availability is assumed to be factored into the nonoperation time between operations.
The average manufacturing lead time over the number of batches to be averaged is
given by the following:

a MLTj
nb

j=1
MLT = (3.19)
nb
where MLT = average manufacturing lead time, min, for the nb batches (parts or prod-
ucts) over which the averaging procedure is carried out, and MLTj = lead time for batch j
from Equation 3.18. In the extreme case in which all of the parts or products are included
in the averaging procedure, nb = P, where P = the number of different part or product
styles made by the factory.
To simplify matters and enhance conceptualization of this aspect of factory opera-
tions, properly weighted average values of batch quantity, number of operations per
batch, setup time, operation cycle time, and nonoperation time can be used for the nb
batches being considered. With these simplifications, Equations (3.18) and (3.19) re-
duce to the following:

MLT = no 1Tsu + QTc + Tno 2 (3.20)

where MLT = average manufacturing lead time for all parts or products in the plant,
min; and the terms Q, no, Tsu, Tc, and Tno are all average values for these parameters.
Formulas to determine these average values are presented in Appendix 3A.

Example 3.3 Manufacturing Lead Time

A certain part is produced in batch sizes of 100 units. The batches must be
routed through five operations to complete the processing of the parts.
Average setup time is 3.0 hr/batch, and average operation time is 6.0 min/pc.
Average nonoperation time is 7.5 hr for each operation. Determine the
manufacturing lead time to complete one batch, assuming the plant runs
8 hr/ day, 5 days/wk.
Solution: Given Tsu = 3.0 hr and Tno = 7.5 hr, the manufacturing lead time for this
batch is computed from Equation (3.20), where the symbol j refers to the fact
that only one part style is being considered.
MLTj = 5 1 3.0 + 100 1 6.0>60 2 + 7.5 2 = 5(20.5) = 102.5 hr
At 8 hr/day, this amounts to 102.5>8 = 12.81 days

Equation (3.20) can be adapted for job shop production and mass production by
making adjustments in the parameter values. For a job shop in which the batch size is one
(Q = 1), Equation (3.20) becomes
MLT = no 1Tsu + Tc + Tno 2 (3.21)

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 74 Chap. 3 / Manufacturing Metrics and Economics

For mass production, the Q term in Equation (3.20) is very large and dominates the
other terms. In the case of quantity-type mass production in which a large number of units
are made on a single machine 1no = 12, MLT is the operation cycle time for the machine
plus the nonoperation time. In this case, Tno consists of the time parts spend in queues
before and after processing. The transportation of parts into and out of the ­machine is
likely to be accomplished in batches. This definition assumes steady-state ­operation after
the setup has been completed and production begins.
For flow-line mass production, the entire production line is set up in advance. If the
workstations are integrated so that all stations are processing their own respective work
units, then the time to accomplish all of the operations is the time it takes each work unit
to progress through all of the stations on the line plus the nonoperation time. Again, Tno
consists of the time parts spend in queues before and after processing on the line. The sta-
tion with the longest operation time sets the pace for all stations:
MLT = no 1Max To + Tr 2 + Tno = noTc + Tno (3.22)
where MLT = time between start and completion of a given work unit on the line, min;
no = number of operations on the line; Tr = transfer time, min; Max To = operation
time at the bottleneck station, min; and Tc = cycle time of the production line, min/pc,
Tc = Max To + Tr from Equation (3.7). Because the number of stations on the line is
equal to the number of operations 1n = no 2, Equation (3.22) can also be stated as
MLT = n1Max To + Tr 2 + Tno = nTc + Tno (3.23)
where the symbols have the same meaning as above, and n (number of workstations) has
been substituted for number of operations no.

Work-in-Process. A plant’s work-in-process (WIP, also known as work-in-

progress) is the quantity of parts or products currently located in the factory that
­either are being processed or are between processing operations. WIP is inventory that
is in the state of being transformed from raw material to finished part or product. An
approximate measure of work-in-process can be obtained from the following formula,
based on Little’s formula,2 using terms previously defined:
WIP = Rpph 1MLT2 (3.24)
where WIP = work@in@process in the plant, pc; Rpph = hourly plant production rate, pc/hr,
from Equation (3.13); and MLT = average manufacturing lead time, hr. Equation (3.24)
states that the level of WIP equals the rate at which parts flow through the factory multi-
plied by the length of time the parts spend in the factory. Effects of part queues, equipment
availability, and other delays are accounted for in the nonoperation time, which is a com-
ponent of MLT.
Work-in-process represents an investment by the firm, but one that cannot be
turned into revenue until all processing has been completed. Many manufacturing com-
panies sustain major costs because work remains in-process in the factory too long.

2
This is an equation in queuing theory developed by John D. C. Little that is usually stated as L = lW,
where L = the expected number of units in the system, l = processing rate of units in the system, and
W = expected time that a unit spends in the system. In Equation (3.24), L becomes WIP, l becomes Rpph,
and W becomes MLT. Little’s formula assumes that the system being modeled is operating under steady-state
conditions.

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 Sec. 3.2 / Manufacturing Costs 75

Example 3.4 Work-In-Process

Assume that the part style in Example 3.3 is representative of other parts
produced in the factory. Average batch quantity = 100 units, average setup
time = 3.0 hr per batch, number of operations per batch = 5, and average
­operation time is 6.0 min per piece for the population of parts made in the
plant. Nonoperation time = 7.5 hr. The plant has 20 production machines that
are 100% utilized (setup and run time), and it operates 40 hr/wk. Determine
(a) weekly plant production rate and (b) work-in-process for the plant.
Solution: (a) Production rate for the average part can be determined from Equations
(3.4) and (3.5):

3.01602 + 10016.02
Tp = = 7.8 min
100

Average hourly production rate Rp = 60>7.8 = 7.69 pc>hr for each machine.
Weekly production rate for the plant can be determined by using this aver-
age value of production rate per machine and adapting Equation (3.13) as
follows:

Rp 7.69
Rpph = n a b = 20a b = 30.77 pc>hr
no 5

Rppw = 40130.772 = 1,231 pc , wk

(b) Given U = 100% = 1.0, WIP = Rpph 1MLT2 = 30.771102.52 = 3,154 pc

Comment: Three observations cry out for attention in this example and
the previous one. (1) In part (a), given that the equipment is 100% utilized,
the calculated weekly production rate of 1,230 pc/wk must be the plant capacity.
Unless the 40 hr of plant operation is increased, the plant cannot produce any
more parts than it is currently producing. (2) In part (b), with 20 machines each
processing one part at a time, it means that 3,154 - 20 = 3,134 parts are in a
nonoperation mode. At any given moment, 3,134 parts in the plant are waiting
or being moved. (3) With five operations required for each part, each opera-
tion taking 6 min, the total operation time for each part is 30 min. From the
previous example, the average total time each part spends in the plant is 102.5
hr or 6,150 min. Thus, each part spends (6,150 - 30)>6,150 = 0.995 or 99.5%
of its time in the plant waiting or being moved.

3.2 Manufacturing Costs

Decisions on automation and production systems are usually based on the relative
costs of alternatives. This section examines how these costs and cost factors are
determined.

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 76 Chap. 3 / Manufacturing Metrics and Economics

3.2.1 Fixed and Variable Costs

Manufacturing costs can be classified into two major categories: (1) fixed costs and
(2) variable costs. A fixed cost is one that remains constant for any level of produc-
tion output. Examples include the cost of the factory building and production equip-
ment, insurance, and property taxes. All of the fixed costs can be expressed as annual
amounts. Expenses such as insurance and property taxes occur naturally as annual
costs. Capital investments such as building and equipment can be converted to their
equivalent uniform annual costs using interest rate factors.
A variable cost is one that varies in proportion to production output. As output in-
creases, variable cost increases. Examples include direct labor, raw materials, and electric
power to operate the production equipment. The ideal concept of variable cost is that it
is directly proportional to output level. Adding fixed and variable costs results in the fol-
lowing total cost equation:
TC = Cf + CvQ (3.25)
where TC = total annual cost, $/yr; Cf = fixed annual cost, $/yr; Cv = variable cost,
$/pc; and Q = annual quantity produced, pc/yr.
When comparing automated and manual production methods, it is typical that the
fixed cost of the automated method is high relative to the manual method, and the vari-
able cost of automation is low relative to the manual method, as pictured in Figure 3.3.
Consequently, the manual method has a cost advantage in the low quantity range, while

Example 3.5 Manual versus Automated Production

Two production methods are being compared, one manual and the other
automated. The manual method produces 10 pc/hr and requires one worker
at $15.00/hr. Fixed cost of the manual method is $5,000/yr. The automated
method produces 25 pc/hr, has a fixed cost of $55,000/yr, and a variable cost of
$4.50/hr. Determine the break-even point for the two methods; that is, deter-
mine the annual production quantity at which the two methods have the same
annual cost. Ignore the costs of materials used in the two methods.
Solution: The variable cost of the manual method is Cv = 1$15.00>hr2 > 110 pc>hr2
= $1.50>pc
Annual cost of the manual method is TCm = 5,000 + 1.50Q
The variable cost of the automated method is Cv = 1$4.50>hr2 > 125 pc>hr2
= $0.18>pc
Annual cost of the automated method is TCa = 55,000 + 0.18Q
At the break-even point TCm = TCa:
5,000 + 1.50Q = 55,000 + 0.18Q
1.50Q - 0.18Q = 1.32Q = 55,000 - 5,000 = 50,000
1.32Q = 50,000Q = 50,000>1.32 = 37,879 pc
Comment: It is of interest to note that the manual method operating
one shift (8 hr), 250 days per year would produce 8(250)(10) = 20,000 pc/yr,
which is less than the break-even quantity of 37,879 pc. On the other hand,
the automated method, operating under the same conditions, would produce
8(250)(25) = 50,000 pc, well above the break-even point.

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 Sec. 3.2 / Manufacturing Costs 77

Costs
Method 1:
manual

Method 2:
TC2 = FC2 + VC2(Q) automated

FC2 VC2 Break-even

point

VC1

TC1 = FC1 + VC1(Q)

FC1

Production quantity, Q

Figure 3.3 Fixed and variable costs as a function of produc-

tion output for manual and ­automated production methods.

automation has an advantage for high quantities. This reinforces the arguments presented
in Section 1.3.1 on the appropriateness of manual labor for certain production situations.

3.2.2 Direct Labor, Material, and Overhead

Fixed versus variable are not the only possible classifications of costs in manufacturing. An
alternative classification separates costs into (1) direct labor, (2) material, and (3) overhead.
This is often a more convenient way to analyze costs in production. Direct labor cost is the
sum of the wages and benefits paid to the workers who operate the production equipment
and perform the processing and assembly tasks. Material cost is the cost of all raw materi-
als used to make the product. In the case of a stamping plant, the raw material consists of
the sheet stock used to make stampings. For the rolling mill that made the sheet stock, the
raw material is the starting slab of metal out of which the sheet is rolled. In the case of an
assembled product, materials are the component parts, some of which are produced by sup-
plier firms. Thus, the definition of “raw material” depends on the company and the type
of production operations in which it is engaged. The final product of one company can be
the raw material for another company. In terms of fixed and variable costs, direct labor and
material must be considered as variable costs.
Overhead costs are all of the other expenses associated with running the manufactur-
ing firm. Overhead divides into two categories: (1) factory overhead and (2) corporate
overhead. Factory overhead consists of the costs of operating the factory other than d ­ irect
labor and materials, such as the factory expenses listed in Table 3.2. Factory over-
head is treated as fixed cost, although some of the items in the list could be correlated

Table 3.2   Typical Factory Overhead Expenses

Plant supervision Applicable taxes Factory depreciation

Line foreman Insurance Equipment depreciation
Maintenance crew Heat and air conditioning Fringe benefits
Custodial services Light Material handling
Security personnel Power for machinery Shipping and receiving
Tool crib attendant Payroll services Clerical support

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 78 Chap. 3 / Manufacturing Metrics and Economics

Table 3.3   Typical Corporate Overhead Expenses

Corporate executives Engineering Applicable taxes

Sales and marketing Research and development Office space
Accounting department Other support personnel Security personnel
Finance department Insurance Heat and air conditioning
Legal counsel Fringe benefits Lighting

with the output level of the plant. Corporate overhead is the cost not related to the com-
pany’s manufacturing activities, such as the corporate expenses in Table 3.3. Many com-
panies operate more than one factory, and this is one of the reasons for ­dividing overhead
into factory and corporate categories. Different factories may have significantly different
factory overhead expenses.
J Black [1] provides some typical percentages for the different types of manufactur-
ing and corporate expenses. These are presented in Figure 3.4. Several observations can
be made about these data. First, total manufacturing cost represents only about 40% of
the product’s selling price. Corporate overhead expenses and total manufacturing cost
are about equal. Second, materials (including purchased parts) make up the largest per-
centage of total manufacturing cost, at around 50%. And third, direct labor is a relatively
small proportion of total manufacturing cost: 12% of manufacturing cost and only about
5% of final selling price.
Overhead costs can be allocated according to a number of different bases, including
direct labor cost, material cost, direct labor hours, and space. Most common in industry
is direct labor cost, which will be used here to illustrate how overheads are allocated and
subsequently used to compute factors such as selling price of the product.
The allocation procedure (simplified) is as follows. For the most recent year
(or several recent years), all costs are compiled and classified into four categories:
(1) direct labor, (2) material, (3) factory overhead, and (4) corporate overhead. The
objective is to determine an overhead rate that can be used in the following year to
allocate overhead costs to a process or product as a function of the direct labor costs
associated with that process or product. Separate overhead rates will be developed
for factory and corporate overheads. The factory overhead rate is calculated as the
g,
ke n,
tin
etc , m atio
me d
nt
lop n
g
rin

ve h a

les str
ar
ee

de arc

sa ni
gin

mi
se

.
Ad
En

Re

Manufacturing cost Profit

Selling price
40% 15% 5% 25% 15%
r
n,

bo
or

er tio
pr ry

t la
lab

en ecia
de hine
ma t an

ec
gy
ct

dir
re

an
c
Di

In
Pl

Parts and materials

Manufacturing cost
12% 26% 12% 50%

Figure 3.4 Breakdown of costs for a manufactured product [1].

M03_GROO6119_04_GE_C03.indd 78 2/28/15 4:03 PM

 Sec. 3.2 / Manufacturing Costs 79

ratio of factory overhead expenses (category 3) to direct labor expenses (category 1);
that is,

FOHC
FOHR = (3.26)
DLC
where FOHR = factory overhead rate, FOHC = annual factory overhead costs, $/yr;
and DLC = annual direct labor costs, $/yr.
The corporate overhead rate is the ratio of corporate overhead expenses (category
4) to direct labor expenses:
COHC
COHR = (3.27)
DLC

where COHR = corporate overhead rate, COHC = annual corporate overhead costs,
$/yr; and DLC = annual direct labor costs, $/yr. Both rates are often expressed as percent-
ages. If material cost were used as the allocation basis, then material cost would be used as
the denominator in both ratios. The following two examples are presented to illustrate (1)
how overhead rates are determined and (2) how they are used to estimate manufacturing
cost and establish selling price.

Example 3.6 Determining Overhead Rates

Suppose that all costs have been compiled for a certain manufacturing firm for
last year. The summary is shown in the table below. The company operates two
different manufacturing plants plus a corporate headquarters. Determine (a)
the factory overhead rate for each plant, and (b) the corporate overhead rate.
These rates will be used by the firm to predict the following year’s expenses.

Expense Category Plant 1 ($) Plant 2 ($) Headquarters ($) Totals ($)
Direct labor   800,000 400,000   1,200,000
Materials 2,500,000 1,500,000   4,000,000
Factory expense 2,000,000 1,100,000   3,100,000
Corporate expense 7,200,000   7,200,000
Totals 5,300,000 3,000,000 7,200,000 15,500,000

Solution: (a) A separate factory overhead rate must be determined for each plant. For
plant 1,
$2,000,000
FOHR1 = = 2.5 = 250%
$800,000

For plant 2,
$1,100,000
FOHR2 = = 2.75 = 275%
$400,000

(b) The corporate overhead rate is based on the total labor cost at both plants.

$7,200,000
COHR = = 6.0 = 600%
$1,200,000

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 80 Chap. 3 / Manufacturing Metrics and Economics

Example 3.7 Estimating Manufacturing Costs and Establishing Selling Price

A customer order of 50 parts is to be processed through plant 1 of the previous
example. Raw materials and tooling are supplied by the customer. The total
time for processing the parts (including setup and other direct labor) is 100 hr.
Direct labor cost is $15.00/hr. The factory overhead rate is 250% and the cor-
porate overhead rate is 600%. (a) Compute the cost of the job. (b) What price
should be quoted to the customer if the company uses a 10% markup?
Solution: (a) The direct labor cost for the job is 1100 hr21$15.00>hr2 = $1,500.
The allocated factory overhead charge, at 250% of direct labor, is
1$1,500212.502 = $3,750. The total factory cost of the job, including allocated
factory overhead = $1,500 + $3,750 = $5,250.
The allocated corporate overhead charge, at 600% of direct labor, is
1$1,500216.002 = $9,000. The total cost of the job including corporate
overhead = $5,250 + $9,000 = $14,250
(b) If the company uses a 10% markup, the price quoted to the customer
would be 11.102 1$14,2502 = $15,675

3.2.3 Cost of Equipment Usage

The trouble with overhead rates as they have been developed here is that they are based
on labor cost alone. A machine operator who runs an old, small engine lathe whose book
value is zero will be costed at the same overhead rate as an operator running a new auto-
mated lathe just purchased for $500,000. Obviously, the time on the machining center is
more productive and should be valued at a higher rate. If differences in rates of different
production machines are not recognized, manufacturing costs will not be accurately mea-
sured by the overhead rate structure.
To deal with this difficulty, it is appropriate to divide the cost of a worker running a
machine into two components: (1) direct labor cost and (2) machine cost. Associated with
each is an applicable overhead rate. These overhead costs apply not to the entire factory
operations, but to individual machines.
The direct labor cost consists of the wages and benefits paid to operate the machine.
Applicable factory overhead expenses allocated to direct labor cost might include taxes
paid by the employer, certain fringe benefits, and line supervision. The machine annual
cost is the initial cost of the machine apportioned over the life of the asset at the appropri-
ate rate of return used by the firm. This is done using the capital recovery factor, as
UAC = IC1A>P, i, N2 (3.28)
where UAC = equivalent uniform annual cost, $/yr; IC = initial cost of the machine,
$; and 1A/P, i, N2 = capital recovery factor that converts initial cost at year 0 into a se-
ries of equivalent uniform annual year-end values, where i = annual interest rate and
N = number of years in the service life of the equipment. For given values of i and N,
(A/P, i, N) can be computed as follows:

i11 + i2 N
1A>P, i, N2 = (3.29)
11 + i2 N - 1
Values of (A/P, i, N) can also be found in interest tables that are widely available.

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