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PRODUCTION TECHNOLOGYBuilding Manufacturing Flexibility Manufacturing flexibility refers to all types of equipment and production systems that provide the ability to respond to changing market needs. Manufacturing flexibility is advantageous as it enables quick execution of customer orders; production capacity can be developed and introduced into production quickly and inexpensively in response to shifting market needs. The following machines of production systems make the manufacturing system flexible: 1.NC machines 2.Programmable and reprogrammable robots 3.Automatic quality control inspection 4.Automatic identification system (AIS) 5.Automated process controls 6.Automatic assembly systems 7.Flexible manufacturing systems (FMS) 8.Automatic storage and retrieval systems (ASRS) 9.Computer integrated manufacturing (CIM) These machines and production systems represent the core of manufacturing flexibility. They involve huge investment. Such huge investment is worth because the machines and systems help achieve low unit cost and high profitability. Justifying Automation Projects Till now, traditional capital budgeting techniques such as payback period, net present value, internal rate of return and the like have been used to evaluate and decide upon investment in new capital projects. These techniques have tended to lead managers to expand present facilities with existing technology, rather than build new facilities with new production technology. Carrying this approach to its extreme, companies end up with huge unwieldy, highly centralized production facilities based on outdated production technology. From now onwards, decisions on new projects should not be based on conventional appraisal techniques. Rather, investing in new technology must be seen as a long-term strategic choice for the company. These 246
PRODUCTION TECHNOLOGYchoices like other major strategic business decisions, cannot be based solely on a simple payback formula. Although returns on investment will continue to be an important criterion for new investment decisions, the term return should take extended meaning. Improved product quality, faster delivery of customer orders, increased manufacturing flexibility, reduced production costs, increased market share, and other advantages will have to be factored into the future capital budgeting decisions. Investment in new technology must be seen as a way of changing the factory into a competitive weapon that assists the corporation in achieving its strategic objectives. Deciding among Automation Alternatives Three approaches that are commonly used in industry today are economic analysis, rating scale approach and relative aggregate scores approach. (i) Economic analysis involves cost comparisons of processing alternatives, the concept of operating leverage, break-even analysis and financial analysis.