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Process Strategy

PowerPoint presentation to accompany

Heizer and Render

Operations Management, Eleventh Edition

Principles of Operations Management, Ninth Edition

PowerPoint slides by Jeff Heyl

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Outline

Global Company Profile:
Harley-Davidson

Four Process Strategies
Selection of Equipment
Process Analysis and Design
Special Consideration for Service Process Design

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Outline - Continued

Production Technology

Technology in Services

Process Redesign

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Learning Objectives

When you complete this chapter you should be able to:

Describe four process strategies
Compute crossover points for different processes
Use the tools of process analysis
Describe customer interaction in service processes
Identify recent advances in production technology

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Harley-Davidson

Repetitive manufacturing works

The only major U.S. motorcycle company
Emphasizes quality and lean manufacturing
Materials as Needed system
Many variations possible
Tightly scheduled repetitive production line

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Process Flow Diagram

Oil tank work cell

Shocks and forks

Handlebars

Fender work cell

Air cleaners

Fluids and mufflers

Fuel tank work cell

Wheel work cell

TESTING

28 tests

Roller testing

THE ASSEMBLY LINE

Engines and transmissions

Incoming parts

Arrive on a JIT schedule from a 10-station work cell in Milwaukee

Frame tube bending

Frame-building work cells

Frame machining

Hot-paint

frame painting

Crating

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Process Strategy

The objective is to create a process to produce products that meets customer requirements within cost and other managerial constraints

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Process Strategies

How to produce a product or provide a service that
Meets or exceeds customer requirements
Meets cost and managerial goals
Has long term effects on
Efficiency and production flexibility
Costs and quality

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Process, Volume, and Variety

Process Focus

projects, job shops (machine, print, hospitals, restaurants)

Arnold Palmer Hospital

Repetitive

(autos, motorcycles, home appliances)

Harley-Davidson

Product Focus

(commercial baked goods, steel, glass, beer)

Frito-Lay

High Variety

one or few units per run,

(allows customization)

Changes in Modules

modest runs, standardized modules

Changes in Attributes (such as grade, quality, size, thickness, etc.)

long runs only

Mass Customization

(difficult to achieve, but huge rewards)

Dell Computer

Poor Strategy (Both fixed and variable costs are high)

Figure 7.1

Volume

Low Volume

Repetitive Process

High Volume

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Process Strategies

Four basic strategies

Process focus
Repetitive focus
Product focus
Mass customization

Within these basic strategies there are many ways they may be implemented

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Process Focus

Facilities are organized around specific activities or processes
General purpose equipment and skilled personnel
High degree of product flexibility
Typically high costs and low equipment utilization
Product flows may vary considerably making planning and scheduling a challenge

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Process Focus

Figure 7.2(a)

Many departments and many routings

Many inputs

(surgeries, sick patients,
baby deliveries, emergencies)

Many different outputs
(uniquely treated patients)

(low-volume, high-variety, intermittent processes)

Arnold Palmer Hospital

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Repetitive Focus

Facilities often organized as assembly lines
Characterized by modules with parts and assemblies made previously
Modules may be combined for many output options
Less flexibility than process-focused facilities but more efficient

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Repetitive Focus

Figure 7.2(b)

Raw materials and module inputs

Modules combined for many

Output options

(many combinations of motorcycles)

Few modules

(multiple engine models, wheel modules)

(modular)

Harley Davidson

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Product Focus

Facilities are organized by product
High volume but low variety of products
Long, continuous production runs enable efficient processes
Typically high fixed cost but low variable cost
Generally less skilled labor

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Product Focus

Figure 7.2(c)

Few Inputs

(corn, potatoes, water, seasoning)

Output variations in size, shape, and packaging

(3-oz, 5-oz, 24-oz package labeled for each material)

(high-volume, low-variety, continuous process)

Frito-Lay

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Mass Customization

The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires
Combines the
flexibility of a
process focus
with the efficiency
of a product focus

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Mass Customization

TABLE 7.1	Mass Customization Provides More Choices Than Ever
NUMBER OF CHOICES
ITEM	1970s	21ST CENTURY
Vehicle styles	18	1,212
Bicycle types	8	211,000
Software titles	0	400,000
Web sites	0	255,000,000
Movie releases per year	267	744
New book titles	40,530	300,000
Houston TV channels	5	185
Breakfast cereals	160	340
Items (SKUs) in supermarkets	14,000	150,000
LCD TVs	0	102

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Mass Customization

Figure 7.2(d)

Many parts and component inputs

Many output versions

(custom PCs and notebooks)

Many modules

(chips, hard drives, software, cases)

(high-volume, high-variety)

Dell Computer

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Mass Customization

Imaginative product design
Flexible process design
Tightly controlled inventory management
Tight schedules
Responsive supply-chain partners

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Comparison of Processes

TABLE 7.2	Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY)	REPETITIVE FOCUS (MODULAR)	PRODUCT FOCUS (HIGH-VOLUME, LOW-VARIETY)	MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY)
Small quantity and large variety of products	Long runs, usually a standardized product from modules	Large quantity and small variety of products	Large quantity and large variety of products
Broadly skilled operators	Moderately trained employees	Less broadly skilled operators	Flexible operators

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Comparison of Processes

TABLE 7.2	Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY)	REPETITIVE FOCUS (MODULAR)	PRODUCT FOCUS (HIGH-VOLUME, LOW-VARIETY)	MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY)
Instructions for each job	Few changes in the instructions	Standardized job instructions	Custom orders requiring many job instructions
High inventory	Low inventory	Low inventory	Low inventory relative to the value of the product

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Comparison of Processes

TABLE 7.2	Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY)	REPETITIVE FOCUS (MODULAR)	PRODUCT FOCUS (HIGH-VOLUME, LOW-VARIETY)	MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY)
Finished goods are made to order and not stored	Finished goods are made to frequent forecasts	Finished goods are made to a forecast and stored	Finished goods are build-to-order (BTO)
Scheduling is complex	Scheduling is routine	Scheduling is routine	Sophisticated scheduling accommodates custom orders

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Comparison of Processes

TABLE 7.2	Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY)	REPETITIVE FOCUS (MODULAR)	PRODUCT FOCUS (HIGH-VOLUME, LOW-VARIETY)	MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY)
Fixed costs are low and variable costs high	Fixed costs are dependent on flexibility of the facility	Fixed costs are high and variable costs low	Fixed costs tend to be high and variable costs low

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Crossover Chart Example

Evaluate three different accounting software products
Calculate crossover points between software A and B and between software B and C

TOTAL FIXED COST	DOLLARS REQUIRED PER ACCOUNTING REPORT
Software A	$200,000	$60
Software B	$300,000	$25
Software C	$400,000	$10

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Crossover Chart Example

Software A is most economical from 0 to 2,857 reports

Software B is most economical from 2,857 to 6,666 reports

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Crossover Charts

Figure 7.3

Fixed costs

Variable costs

High volume, low variety

Process C

Fixed costs

Variable costs

Repetitive

Process B

Fixed costs

Variable costs

Low volume, high variety

Process A

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

Total process A costs

Total process B costs

Total process C costs

(2,857)

(6,666)

400,000

300,000

200,000

Volume

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Focused Processes

Focus brings efficiency

Focus on depth of product line rather than breadth

Focus can be

Customers

Products

Service

Technology

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Selection of Equipment

Decisions can be complex as alternate methods may be available
Important factors may be

Cost
Cash flow
Market stability

Quality
Capacity
Flexibility

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Equipment and Technology

Possible competitive advantage
Flexibility may be a competitive advantage
May be difficult and expensive and may require starting over
Important to get it right

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Process Analysis and Design

Is the process designed to achieve a competitive advantage?
Does the process eliminate steps that do not add value?
Does the process maximize customer value?
Will the process win orders?

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Process Analysis and Design

Flowcharts
Shows the movement of materials
Harley-Davidson flowchart
Time-Function Mapping
Shows flows and time frame

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“Baseline” Time-Function Map

Figure 7.4(a)

Customer

Sales

Production control

Plant A

Warehouse

Plant B

Transport

12 days

13 days

1 day

4 days

1 day

10 days

1 day

0 day

1 day

52 days

Move

Receive product

Product

Extrude

Wait

WIP

Product

Move

Wait

WIP

Wait

Order

WIP

Order product

Process order

Wait

Order

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“Target” Time-Function Map

Figure 7.4(b)

Customer

Sales

Production control

Plant

Warehouse

Transport

1 day

2 days

1 day

6 days

Move

Receive product

Product

Extrude

Wait

Order

WIP

Product

Order product

Process order

Wait

Order

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Process Analysis and Design

Value-Stream Mapping
Where value is added in the entire production process, including the supply chain
Extends from the customer back to the suppliers

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Value-Stream Mapping

Begin with symbols for customer, supplier, and production to ensure the big picture

Enter customer order requirements

Calculate the daily production requirements

Enter the outbound shipping requirements and delivery frequency

Determine inbound shipping method and delivery frequency

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Value-Stream Mapping

Add the process steps (i.e., machine, assemble) in sequence, left to right
Add communication methods, add their frequency, and show the direction with arrows
Add inventory quantities (shown with ) between every step of the entire flow
Determine total working time (value-added time) and delay (non-value-added time)

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Value-Stream Mapping

Figure 7.5

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Process Chart

Figure 7.6

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Service Blueprinting

Focuses on the customer and provider interaction
Defines three levels of interaction
Each level has different management issues
Identifies potential failure points

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Service Blueprint

Level

Figure 7.7

Personal Greeting

Service Diagnosis

Perform Service

Friendly Close

Level

Notify
customer
and recommend
an alternative
provider.

(7 min)

Customer arrives for service.

(3 min)

Warm greeting and obtain service request.

(10 sec)

Direct customer to waiting room.

Notify customer the car is ready.

(3 min)

Customer departs

Customer pays bill.

(4 min)

Perform required work.

(varies)

Prepare invoice.

(3 min)

Yes

Standard request.

(3 min)

Determine specifics.

(5 min)

Can
service be
done and does customer approve?

(5 min)

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Special Considerations for Service Process Design

Some interaction with customer is necessary, but this often affects performance adversely

The better these interactions are accommodated in the process design, the more efficient and effective the process

Find the right combination of cost and customer interaction

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Service Process Matrix

Figure 7.8

Degree of Customization

Low

High

Degree of Labor

Low

High

Mass Service

Professional Service

Service Factory

Service Shop

Private banking

Commercial banking

Law clinics

General-

purpose law firms

Specialized hospitals

Hospitals

Limited-service stockbroker

Full-service stockbroker

Boutiques

Warehouse and catalog stores

Retailing

Fast-food restaurants

Fine-dining restaurants

No-frills airlines

Airlines

Digital orthodontics

Traditional orthodontics

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Service Process Matrix

Labor involvement is high
Focus on human resources
Selection and training highly important
Personalized services

Mass Service and Professional Service

Service Factory

Service Shop

Degree of Customization

Low

High

Degree of Labor

Low

High

Mass Service

Professional Service

Commercial banking

Private banking

General-

purpose law firms

Law clinics

Specialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores

Fast-food restaurants

Fine-dining restaurants

Airlines

No-frills airlines

Digital orthodontics

Traditional orthodontics

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Service Process Matrix

Service Factory and Service Shop

Automation of standardized services
Restricted offerings
Low labor intensity responds well to process technology and
scheduling
Tight control required to
maintain standards

Service Factory

Service Shop

Degree of Customization

Low

High

Degree of Labor

Low

High

Mass Service

Professional Service

Commercial banking

Private banking

General-

purpose law firms

Law clinics

Specialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores

Fast-food restaurants

Fine-dining restaurants

Airlines

No-frills airlines

Digital orthodontics

Traditional orthodontics

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Improving Service Productivity

TABLE 7.3	Techniques for Improving Service Productivity
STRATEGY	TECHNIQUE	EXAMPLE
Separation	Structuring service so customers must go where the service is offered	Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits
Self-service	Self-service so customers examine, compare, and evaluate at their own pace	Supermarkets and department stores
Postponement	Customizing at delivery	Customizing vans at delivery rather than at production
Focus	Restricting the offerings	Limited-menu restaurant

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Improving Service Productivity

TABLE 7.3	Techniques for Improving Service Productivity
STRATEGY	TECHNIQUE	EXAMPLE
Modules	Modular selection of service Modular production	Investment and insurance selection Prepackaged food modules in restaurants
Automation	Separating services that may lend themselves to some type of automation	Automatic teller machines
Scheduling	Precise personnel scheduling	Scheduling ticket counter personnel at 15-minute intervals at airlines
Training	Clarifying the service options Explaining how to avoid problems	Investment counselor, funeral directors After-sale maintenance personnel

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Production Technology

Machine technology
Automatic identification systems (AISs) and RFID
Process control
Vision systems
Robots
Automated storage and retrieval systems (ASRSs)
Automated guided vehicles (AGVs)
Flexible manufacturing systems (FMSs)
Computer-integrated manufacturing (CIM)

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Machine Technology

Increased precision
Increased productivity
Increased flexibility
Improved environmental impact
Reduced changeover time
Decreased size
Reduced power requirements

Computer numerical

control (CNC)

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Automatic Identification Systems (AISs)

Improved data acquisition
Reduced data entry errors
Increased speed
Increased scope
of process
automation

Bar codes and RFID

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Process Control

Real-time monitoring and control of processes
Sensors collect data
Devices read data
on periodic basis
Measurements translated into digital signals then sent to a computer
Computer programs analyze the data
Resulting output may take numerous forms

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Vision Systems

Particular aid to inspection
Consistently
accurate
Never bored
Modest cost
Superior to
individuals performing the same tasks

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Robots

Perform monotonous or dangerous tasks
Perform tasks
requiring significant
strength or
endurance
Generally enhanced
consistency and
accuracy

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Automated Storage and Retrieval Systems (ASRSs)

Automated placement and withdrawal of parts and products
Reduced errors and labor
Particularly useful in inventory and test areas of manufacturing firms

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Automated Guided Vehicle (AGVs)

Electronically guided and controlled carts
Used for movement of products and/or individuals

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Flexible Manufacturing Systems (FMSs)

Computer controls both the workstation and the material handling equipment
Enhance flexibility and reduced waste
Can economically produce low volume at high quality
Reduced changeover time and increased utilization
Stringent communication requirement between components

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Computer-Integrated Manufacturing (CIM)

Extend flexible manufacturing
Backwards to engineering and inventory control
Forward into warehousing and shipping
Can also include financial and customer service areas
Reducing the distinction between low-volume/high-variety, and high-volume/low-variety production

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Computer-Integrated Manufacturing (CIM)

Figure 7.9

ASRS and AGVs

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Technology in Services

TABLE 7.4	Examples of Technology’s Impact on Services
SERVICE INDUSTRY	EXAMPLE
Financial Services	Debit cards, electronic funds transfer, ATMs, Internet stock trading, on-line banking via cell phone
Education	Electronic bulletin boards, on-line journals, WebCT, Blackboard, and smart phones
Utilities and government	Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems, meters allowing homeowners to control energy usage and costs
Restaurants and foods	Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs
Communications	Interactive TV, e-books via Kindle

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Technology in Services

TABLE 7.4	Examples of Technology’s Impact on Services
SERVICE INDUSTRY	EXAMPLE
Hotels	Electronic check-in/check-out, electronic key/lock systems, mobile Web bookings
Wholesale/retail trade	Point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar-coded data, RFID
Transportation	Automatic toll booths, satellite-directed navigation systems, Wi-Fi in automobiles
Health care	Online patient-monitoring systems, online medical information systems, robotic surgery
Airlines	Ticketless travel, scheduling, Internet purchases, boarding passes downloaded as two-dimensional bar codes on smart phones

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Process Redesign

The fundamental rethinking of business processes to bring about dramatic improvements in performance
Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions
Requires reexamination of the basic process and its objectives
Focuses on activities that cross functional lines
Any process is a candidate for redesign

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Printed in the United States of America.

200,000+ 60( )V1 =300,000+ 25( )V1 35V1 =100,000 V1 =2,857

200,000+60

()

=300,000+25

()

35V

=100,000

=2,857

300,000+ 25( )V2 = 400,000+ 10( )V2 15V2 =100,000 V2 =6,666

300,000+25

()

=400,000+10

()

15V

=100,000

=6,666

288 P A R T 2 | D E S I G N I N G O P E R AT I O N S

Technology in Services Just as we have seen rapid advances in technology in the manufacturing sector, so we also find dramatic changes in the service sector. These range from electronic diagnostic equipment at auto repair shops, to blood- and urine-testing equipment in hospitals, to retinal security scan- ners at airports. The hospitality industry provides other examples, as discussed in the OM in Action box “Technology Changes the Hotel Industry.” The McDonald’s approach is to use self-serve kiosks. The labor savings when ordering and speedier checkout service provide valu- able productivity increases for both the restaurant and the customer.

In retail stores, POS terminals download prices quickly to re!ect changing costs or market conditions, and sales are tracked in 15-minute segments to aid scheduling. Drug companies, such

Management decides to make a product

OM runs production process, purchasing components, coordinating suppliers, planning and scheduling operations, overseeing quality and the workforce, and shipping to customers.

Computer-aided manufacturing (CAM) converts raw materials into components or products

Robots and specialized equipment weld, insert, and assemble components.

Robots test it and box the finished product.

Information flows

Material flows

ASRS (above) and AGVs move incoming materials and parts, work-in-process, and complete product.

Computer-aided design (CAD) designs the product and programs the automated production equipment.

C o

m p

u te

r in

te g

ra te

d m

an u

fa ct

u ri

n g

( C

IM )

F le

xi b

le m

an u

fa ct

u ri

n g

s ys

te m

( F

M S

)

Figure 7.9 Computer-Integrated Manufacturing (CIM) CIM includes computer-aided design (CAD), computer-aided manufacturing (CAM), flexible manufacturing systems (FMSs), automated storage and retrieval systems (ASRSs), automated guided vehicles (AGVs), and robots to provide an integrated and flexible manufacturing process.

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