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1. What is happening in manufacturing? Initial activity

Watch this TED video about production by Olivier Scalabre: The next manufacturing revolution is here.

Before watching the video:

1. What do you know about TED?
2. How do you think the manufacturing process has changed in the last century? Do you know who Henry Ford is?
3. What changes in the manufacturing process do you think will happen in the next years?

Some vocabulary that could be challenging: Relocating a company offshore, Stockpiling a product, Supply chain, Replenishing the stocks, Lead time, Make-to-order production, Mass production, Customization.

After watching the video answer the following questions.
The transcript of the video will be provided to the students

1. Olivier said that our economy growth is stopping and it is not the first time this happens. He talked about “manufacturing revolutions” as the solution. How many “manufacturing revolutions” have already happened? Describe each of these revolutions.
2. Olivier talked about attempts to improve our manufacturing system. What improvement attempts have been carried out in order to improve our current manufacturing system? Have they been successful? What do you think of these attempts?
3. According to Olivier Scalabre, what is the next manufacturing revolution? What changes will allow this revolution?
4. At 3min 40s the video shows examples of elements that are at play in this new revolution. Describe the elements that Olivier does not explain in the video and list some uses or advantages they can have to improve the manufacturing model.

3. Types of Production Systems

Production systems are broadly classified into three categories:

1. Job shop production
2. Batch production
3. Mass production

1. Job shop production

In this system products are made to satisfy a specific order. However, that order may be produced only once or at irregular time intervals. Small batches of a variety of custom products are made in this type of system. These businesses deal in customization and relatively small production runs, not volume and standardization. A commercial printing shop is an example of job shop.

The following are the important characteristics of job shop type production system:

• Machines and methods employed should be general purpose as product changes are quite frequent. Machines are grouped on functional basis.
• Operators should be skilled enough to deal with changing work conditions.
• Product cost is normally high because of high material and labour costs.

This system needs to be very flexible because of the high variety of products that will be manufactured. Production planning can result more difficult due to the frequent changes in product requirements.

2. Batch production

Batch production is the manufacture of a number of identical articles. In this approach, instead of manufacturing items individually or continuously, manufacturing moves in groups or batches. Each of the steps in the production process is applied at the same time to an entire batch of items, and that batch does not move onto the next stage of the production process until the whole batch is done. An example of batch production is the way cookies are elaborated in a local bakery.

Batch can be manufactured either only once or repeatedly at irregular time intervals as and when demand arises or repeatedly at regular time intervals to satisfy a continuous demand.

The following are the important characteristics of batch production:

• As the final product is somewhat standard and manufactured in batches, costs are lower than in a job shop production. Inventory management is also simpler.
• Machines are grouped on functional basis similar to the job shop manufacturing.
• Semi automatic, special purpose automatic machines are generally used to take advantage of the similarity among the products.
• In order to produce a variety of different product variations labour should be skilled enough.

Normally production planning and control is difficult due to the odd size and non-repetitive nature of order.

3. Mass production

In mass production, the same type of product is manufactured to meet the continuous demand of the product. Usually demand of the product is very high and market is going to sustain same demand for sufficiently long time.

The following are the important characteristics of mass production:

• Cost of production is low due to the high rate of production. Production scheduling facilitates inventory.
• As the same product is manufactured for sufficiently long time, machines can be laid down in order of processing sequence.
• Most of the equipment is semi automatic or automatic in nature. Material handling is also automatic (such as conveyors).
• Semi skilled workers are normally employed, as most of the facilities are automatic.

As the product flows along a pre-defined line, planning and control of the system is much easier.

5. How much to produce?

All businesses, regardless of size or complexity, try to earn a profit. In the Production Plan we need to take into account the number of units of our product that we need to manufacture to start making a profit.
The operations to obtain this amount are made in the financial plan.

Profit = Total revenue − Total cost

Total revenue is the income brought into a firm from selling its products. It is calculated by multiplying the price of the product times the quantity of output sold.

The calculation for the total cost is not so simple.

We can distinguish between two types of cost: explicit and implicit. Explicit costs are out-of-pocket costs—payments that are actually made. Wages that a firm pays its employees or rent that a firm pays for its office are explicit costs.

Implicit costs are more subtle but just as important. They represent the opportunity cost of using resources already owned by the firm. Often for small businesses, they are resources contributed by the owners—for example, working in the business while not getting a formal salary or using the ground floor of a home as a retail store. Implicit costs also allow for depreciation of goods, materials, and equipment that are necessary for a company to operate.

These two definitions of cost are important for distinguishing between two conceptions of profit—accounting profit and economic profit. Accounting profit is a cash concept. It means total revenue minus explicit costs—the difference between dollars brought in and dollars paid out. Economic profit is total revenue minus total cost, which includes both explicit and implicit costs.

The difference is important. Even though a business pays income taxes based on its accounting profit, whether or not it is economically successful depends on its economic profit.

When calculating the explicit costs we need to distinguish between:

• Fixed cost, like the rent of a space, a cost that will not change when the number of units produced increases.
• Variable costs that will be given by the amount of units produced. For example, when running a restaurant the food is a variable cost.

The increasing in the variable costs doesn´t need to be proportional to the increasing in units produced. Maybe when buying a large amount from a supplier I can get a better price.

You can watch a video with a worked example using the following link: Marginal cost and average total cost.

7. The future of our production system

In the next article you will read about five different aspects that will play an important role in the next manufacturing revolution.

Five Trends For The Future Of Manufacturing

Author: François Barbier is President of Global Operations and Components at Flex.

1. Augmented Reality. Seeing Around Corners – In 360°

New tools are allowing companies to create and test situations in the virtual world, to simulate the design process and the assembly line before an actual product is created. Simulating the product-creation phase helps cut down on manufacturing time and ensure the manufacturing process delivers what companies intended to create. At Flex, we are also using augmented reality solutions for remote assistance, allowing people in different locations around the world to connect in a live view and trouble-shoot together. This allows an engineer in China to consult with an engineer in the U.S. on a technical issue and receive feedback in real time through wearable Augmented Reality (AR) glasses, expediting problem solving and significantly reducing travel costs.

2. Viewing The Fourth Wave – In 3D

Also making a mark in the manufacturing world is 3-D printing, which allows for the seamless creation of tangible products using a single machine. This is a fundamental change, because it gives you a lot more possibilities for how you design a part. For a certain category of product where you would normally need six pieces, 3-D printing can achieve the same thing in one piece without additional processes like welding or screwing.

Three-dimensional printing reduces waste by recycling plastic and cuts down on the wait time for replacement parts and transportation. Its implications for mass production are various, making advancements possible in products ranging from toys to medical devices.

3. Automation: Advanced Manufacturing – On Autopilot

Automation is another vital aspect of the industry’s future. Approximately 50% of Flex’s manufacturing processes are already fully automated. Automation enables a level of accuracy and productivity beyond human ability—even in environments that would be considered unsafe for humans. The new generation of robotics is not only much easier to program, but easier to use, with capabilities like voice and image recognition to re-create complex human tasks. Another advantage of robots is that they do precisely what you ask them to do – nothing more, nothing less. And while automation eliminates some of the most tedious manufacturing jobs, it is also creating new jobs for a re-trained workforce, discussed below.

4. Building Intelligent Factories – In The Cloud

In addition to robotics and virtual reality, factories environments are also driving advancements in cloud computing and smart sensors. Smart sensors can perform tasks such as converting data into different units of measurement, communicating with other machines, recording statistics and feedback and shutting off devices if a safety or performance issue arises. IoT functionality can track and analyze production quotas, consolidate control rooms and create models of predictive maintenance.

IoT allows us to get the right information at the right time to make the right decisions, like a speedometer that shows how fast you’re driving in the moment versus your speed from yesterday. Cloud computing enables companies to extract and analyze information that affects the production line. Data from augmented and virtual reality, as well as increased customer feedback, will have a significant impact on research and development, giving consumers more of what they want, getting it to them faster and cutting down on costs—a system that ultimately will drive innovation.

5. Robots On The Rise – Managed By Humans

Building a better manufacturing sector with augmented and virtual reality, robotics and data analysis using smart equipment naturally raises an important question: What will the Industry 4.0 workforce look like? While there are still some significant challenges ahead, the outlook is strong despite the obvious concern of robots displacing jobs. The bulk of automation is used for work that would be considered unsafe or impossible for humans. This makes robots a complement to, not a replacement for, human workers. Because of robots, we’ll be able to increase our output.

We will still need people who can manage new operations, manage the robotics, program them and maintain them. Just as there was a shift from farm work to factory work in the early 20th century, almost every sector will need new kinds of workers: those who can build hardware, software and firmware; those who can design automation and robotics; and those who can adapt and maintain new equipment. Close to 15 million new jobs will be created in the U.S. over the next decade as a direct result of automation and artificial intelligence, equivalent to 10% of the workforce, according to estimates from Forrester Research – although technology will cause job losses too.

Increased efficiency could spell a bright future for American manufacturing. A shift to smart manufacturing will save our corporations money and translate into greater profits, more jobs and healthier economies. As our machines move into a more complex age, so do our workers and products, symbiotically ushering in a new era of production.

9. Information sources for this paper

Mighty Mechanical
Management Study Guide
Money Matters
Entrepreneur
Career Trend
Investopedia
Khan Academy
TED