Process selection and process design, Operation Management

Assignment Help:

Process Selection and Process Design

Having identified alternative process sequences and process span choices, the question then to be answered is which of the configurations should be selected for implementation. The answer to this question may not be straightforward. The simplest case would be where, for all of the process sequences being considered, the various processes entailed are already owned by the company, and there is enough free capacity to meet the forecast demand.

1290_Process Selection and Process Design.png

In this case a simple break-even analysis may help in making the choice. For each of the process sequences to be compared, the fixed and variable costs are determined: the fixed costs are those, such as special tooling costs, which are required to set up the processes and are independent of the volume of output; variable costs are those, such as direct labour and material costs, which vary in direct proportion to the output volume. This figure shows, graphically, how the total costs of three process sequences (A, B and C) change with volume of output, alongside the associated revenue. This shows that, for quantities below V1, none of the process sequences recover their costs; for quantities between V1 and V2, process sequence A is the most economical; for quantities greater than V2, process B becomes the least costly. Notice that, in this illustrative example, process sequence C is uncompetitive at all levels of output.

The question may be more difficult to answer if one or more of the competing process sequences require significant capital expenditure. In this case, in addition to break-even analysis, investment appraisal tests may be applied. For example, a process sequence which is attractive according to break-even analysis may be rejected on the basis that its payback period renders the necessary investment too risky. Further consideration of break-even analysis and investment appraisal techniques are beyond the scope of this unit, but are covered at length in Finance and Financial Management.

 


Related Discussions:- Process selection and process design

Explain the consumers have a high debt-to-income ratio, In the U.S., consum...

In the U.S., consumer expenditures on homes and other large purchases tend to slow down during a recession because a. of steady supply of loanable funds in the economy dur

Competitive advantage of t and d for organizations, Go online and research ...

Go online and research the future trends relative to the field of T & D. Consider researching professional organizations such as SHRM or ASTD. What predictions do you find? Where d

Defend your choice and discuss the strategy, Pick a product that you believ...

Pick a product that you believe would be beneficial for line extension. Justify your choice and discuss the strategy you would adopt for the new product

Define what makes fddi more fault tolerant than a typical, What makes FDDI ...

What makes FDDI more fault tolerant than a typical Ethernet or Token Ring network?

Describe how does national culture affect strategy, How does national cultu...

How does national culture affect strategy? To what extent do different approaches to strategy, different ways of thinking about strategy, reflect different underlying cultural assu

Methods used in manufacturing - operation strategy, Methods Used in Manufac...

Methods Used in Manufacturing - Operation Strategy Many of the methods used in manufacturing are just as applicable; however a greater degree of customisation will be required

#operational performance, what are the 5 operational performance objectives...

what are the 5 operational performance objectives may influence decision making associated to process design and layouts

What are the advantages of a permanent arbitrator, What are the differences...

What are the differences between the FMCS and the AAA in their methods of selection of arbitrators? What are the advantages of why some employers and unions contract the use of a p

Flexible work schedules in their organizations describe, What can HR manage...

What can HR managers do to help facilitate flexible work schedules in their organizations?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd