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

Describe database administrator for the itunes store, If you were the datab...

If you were the database administrator for the iTunes store, how might you use predictive analysis to determine which artists and movies will sell most next year?

Explain what are the four main reasons for holding inventory, 1. What facto...

1. What factors enter into the choice of a value for the smoothing constant in exponential smoothing? 2. Name at least 3 competitive advantages of concurrent engineering? 3.

Explain how can differences in the cultures of two countries, How can diffe...

How can differences in the cultures of two countries create ethical issues in our business operations? A key to answering this question is to first understand culture, particularly

Explain briefly how a leader can recognize regressive cycle, Describe brief...

Describe briefly how a leader can recognize a regressive cycle and what should the leader's response be?

Find probability that the store is full, A drug store has two windows avail...

A drug store has two windows available for serving customers, who arrive at a Poisson rate of 40/hr. Service time is exponentially distributed with a mean of 2 min. Only one window

Explain detail the five measures that unions, Detail the five measures that...

Detail the five measures that unions have taken in the collective bargaining process to introduce provisions that would protect employees displaced or laid off due to technology ch

Show role as an employee of an organization in the is field, Briefly descri...

Briefly describe your role as an employee of an organization in the IS field. Give examples of what you need to know about information systems and how it can help with your job per

Explain the government affected by the bp oil spill sin usa, How was the go...

How was the government affected by the bp oil spill sin usa

Write Your Message!

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