Economics of Advanced Manufacturing Systems

Economics of Advanced Manufacturing Systems Edited by

Hamid R. Parsaei Center for Computer-Aided Engineering University of Louisville, USA

and

Ani l Mital Ergonomics and Engineering Controls Research Laboratory University of Cincinnati, USA

SPRINGER-SCIENCE+BUSINESS MEDIA, B.V.

First edition 1992

© 1992 Springer Science+Business Media Dordrecht Originally published by Chapman & Hal l i n 1992 Softcover reprint of the hardcover 1st edition 1992

Typeset in 10/12 pt Times by Best-set Typesetter L t d , Hong Kong

Suffolk

I S B N 978-1-4613-6542-6

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the U K Copyright Designs and Patents Act , 1988, this publication may not be reproduced, stored, or transmitted, in any form or by any means, without the prior permission in writing of the publishers, or in the case of reprographic reproduction only in accordance with the terms of the licences issued by the Copyright Licensing Agency in the U K , or in accordance with the terms of licences issued by the appropriate Reproduction Rights Organization outside the U K . Enquiries concerning reproduction outside the terms stated here should be sent to the publishers at the London address printed on this page.

The publisher makes no representation, express or implied, with regard to the accuracy of the information contained in this book and cannot accept any legal responsibility or liability for any errors or omissions that may be made.

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication data Economics of advanced manufacturing systems /

edited by Hamid R . Parsaei and A n i l Mita l . p. cm.

Includes bibliographical references. I S B N 978-1-4613-6542-6 I S B N 978-1-4615-3480-8 (eBook) DOI 10.1007/978-1-4615-3480-8 1. Manufactures—Technological innovations. 2. Manufacturing

processes—Automation—Economic aspects. 3. Production engineering. I. Parsaei, H . R . II. Mi ta l , A n i l . HD9720.5.E27 1992 338'.064—dc20

91-23613 CIP

To our wives, Farah and Chetna, and children, Boback, Shadi, Aashi and Anubhav, who

suffered through our countless hours of neglect and absence during the preparation of this book.

Contents

Contributors xi

Acknowledgements xv

Preface xvii

Part One ECONOMIC JUSTIFICATION METHODS 1

1 Economic and Financial Justification Methods for Advanced Automated Manufacturing: An Overview Ramesh G. Soni, Hamid R. Parsaei and Donald H. Liles 3

2 Expert Systems Applied to the Economic Justification of Advanced Manufacturing Systems William M. Henghold and Steve R. LeClair 21

3 Economics of Advanced Manufacturing Systems During System Design and Development Hector R. Carrasco and Shih-Ming Lee 37

4 Economics of Flexible Assembly Automation: Inftuence of Production and Market Factors Ani! Mital 45

5 Justification of Cellular Manufacturing Systems Ismail N. Zahran, Adel S. Elmaghraby, and Mohamed A. Shalabi 73

6 Application of the Engineering Economic Analysis Process and Life Cycle Concepts to Advanced Production and Manufacturing Systems James A. Bontadelli 91

Part Two MODELS AND TECHNIQUES 111

7 Analytical Techniques for Justification of Manufacturing Systems M. Jeya Chandra and Catherine M. Harmonosky 113

8 Simulation v. Analytical Models for the Economic Evaluation of Flexible Manufacturing Systems: An Option-Based Approach Giovanni Azzone and Umberto Bertele 127

viii Table of contents

9 Multivariate Learning Curve Model for Manufacturing Economic Analysis Adedeji B. Badiru 141

10 The Economics of Variance Reduction in Sequential Manufacturing Robert G. Batson and Jessica O. Matson 163

Part Three COSTING AND INVESTMENT METHODS 177

11 Memo to Global Competitors: It is Time to Replace Cost Accounting with Process-Based Approach H. Thomas Johnson and Richard W. Sapp 179

12 Joint Cost Allocation to Multiple Products: Cost Accounting v. Engineering Techniques Fariborz Tayyari and Hamid R. Parsaei 189

13 A Totally Integrated Manufacturing Cost Estimating System (TIMCES) Julius P. Wong, Ibrahim N. Imam, Ali Khosravi Kamrani, Hamid R. Parsaei, and Fariborz Tayyari 201

14 Risk Evaluation of Investment in Advanced Manufacturing Technology Brian B. Hundy and David J. Hamblin 225

15 Analysis and Evaluation of Flexible Capital Investment Carl-Henrie Nilsson, Hdkan Nordahl, Ingvar Persson 239

Part Four PERIPHERAL ISSUES 255

16 Firm Size and Computer Integrated Enterprise Concept: CIMICIE Related Strategic Issues for Small Businesses Raja K. Iyer and Donald H. Liles 257

17 Application of Robotics and Automation Technologies to Industrialized Housing Manufacture Ahmad K. Elshennawy, William W. Swart, and Subrato Chandra 273

18 Training and Cost Effectiveness in the Development of Training Devices Lucy C. Morse and Brian Goldiez 295

19 On Safety of Workers in FMS Environments Suesbaek Nanthavanij 305

Table of contents IX

Part Five ECONOMIC ANALYSIS AND JUSTIFICATION RESOURCES 319

20 Information Solutions to Advanced Production and Manufacturing Systems (APMS): A Discipline Impact Factor Analysis lanardan Kulkarni, Hamid R. Parsaei, and Fariborz Tayyari 321

Appendix 331

Index 359

Contributors

Giovannie Azzone Dipartmento di Economia E Produzione, Politecnico di Milano, Piazza Leonardo da Vinci 32, Milan, Italy.

Adedeji B. Badiru School of Industrial Engineering, University of Oklahoma, Oklahoma, USA.

Robert G. Batson Department of Industrial Engineering, The University of Alabama, Alabama, USA.

Umberto Bertele' Dipartmento di Economia E Produzione, Politecnico di Milano, Piazza Leonardo da Vinci 32, Milan, Italy.

Dr James A. Bontadelli Department of Industrial Engineering, University of Tennessee­Knoxville, Knoxville, Tennessee, USA.

Hector R. Carrasco Department of Industrial Engineering, Florida International Univer­sity, Florida, USA.

M. Jeya Chandra Department of Industrial Engineering, Pennsylvania State University, University Park, Pennsylvania, USA.

Subrato Chandra Florida Solar Energy Center, University of Central Florida, Cape Canaveral, Florida, USA.

Adel S. Elmaghraby Department of Engineering mathematics and computer science, University of Louisville, Louisville, Kentucky 40292, USA.

Ahmed K. Elshennawy Department of Industrial Engineering, University of Central Florida, Orlando, Florida, USA.

Brian Goldiez Institute for Simulation and Training, University of Central Florida, Orlando, Florida, USA.

XlI Contributors

David J. Hamblin Putteridge Bury Management Centre, Luton, Bedfordshire, UK.

Catherine M. Harmonosky Department of Industrial and Management Systems Engineering, Pennsylvania State University, University Park, Pennsylvania, USA.

William M. Henghold Universal Technology Corporation, Dayton, Ohio, USA.

Brian B. Hundy College of Manufacturing, Cranfield Institute of Technology, Cranfield, Bedford, UK.

Ibrahim N. Imam Department of Engineering Mathematics and Computer Science, University of Louisville, Louisville, Kentucky, USA.

Raja K. Iyer Center for Research for Information Systems, University of Texas at Arlington, Arlington, Texas, USA.

H. Thomas Johnson Retzlaff Professor of Quality Management, School of Business Administration, Portland State University, Portland, USA.

Ali Khosravi-Kamrani Department of Engineering Management, University of Missouri at Rolla, Roila, USA.

J anardan Kulkarni Laura Kersey Library, University of Louisville, Louisville, Kentucky, USA.

Steve R. LeClair Air Force Materials Laboratory, Wright-Patterson Air Force Base, Dayton, Ohio, USA.

Shih-Ming Lee Department of Industrial Engineering, Florida International Univer­sity, Miami, Florida, USA.

Donald H. Liles Automation and Robotics Research Institute, South Fort Worth, Texas, USA.

Jessica O. Matson Department of Industrial Engineering, University of Alabama, Tuscaloosa, Alabama, USA.

Contributors Xlll

Anil Mital Ergonomics and Engineering Controls Research Laboratory, Department of Mechanical and Industrial Engineering, University of Cincinnati, Cincinnati, Ohio, USA.

Lucy C. Morse Department of Industrial Engineering, University of Central Florida, Orlando, Florida, USA.

Suebsak Nanthavanij Department of Mechanical and Industrial Engineering, New Jersey Institute of Technology, Newark, New Jersey, USA.

Carl-Henric Nilsson Industrial Management, Lund Institute of Technology, Lund, Sweden ..

Hakan Nordahl Industrial Management, Lund Institute of Technology, Lund, Sweden.

Hamid R. Parsaei Center for Computer-aided Engineering, Department of Industrial Engineering, University of Louisville, Louisville, Kentucky, USA.

Ingvar Persson Industrial Management, Lund Institute of Technology, Lund, Sweden.

Richard W. Sapp School of Business Administration, Portland State University, Port­land, USA.

Mohamed Adel Shalabi Department of Mechanical Design and Production, University of Cairo, Giza, Egypt.

Ramesh G. Soni Department of Management, Indiana University of Pennsylvania, Indiana, Pennsylvania, USA.

William W. Swart Department of Industrial Engineering, University of Central Florida, Orlando, Florida, USA.

Fariborz Tayyari Department of Industrial Engineering, Bradley University, Peoria, Illinois, USA.

Julius P. Wong Computer-aided Design Laboratory, Department of Mechanical Engineering, University of Louisville, Louisville, Kentucky, USA.

XIV Contributors

Ismail N. Zahran Department of Engineering Mathematics and Computer Science, University of Louisville, Louisville, Kentucky, USA.

Acknowledgements

During the course of preparation of this book, a number of individuals made invaluable contributions. Among them are all the contributors who submitted their manuscripts and complied with the changes reviewers required and did so cheerfully and promptly. Furthermore, we realize that the quality of a book, such as this, is largely the result of professional integrity and dedication to upholding the highest standards of referees who review the contents. We have been fortunate in this regard as we have had the cooperation, encouragement, and support of the following individuals who made significant contributions to this book by either writing a chapter or reviewing submissions or both, and to them we owe a special thanks:

Layek Abdel-Malek, New Jersey Institute of Technology Suraj M. Alexander, University of Louisville Giovanni Azzone, Politecnico di Milano Adedeji B. Badiru, University of Oklahoma Robert G. Batson, University of Alabama Umberto Bertele, Politecnico de Milano William E. Biles, University of Louisville James A. Bontadelli, University of Tennessee-Knoxville Hector R. Carrasco, Florida International University M. Jeya Chandra, Pennsylvania State University Subrato Chandra, Florida Solar Energy Center Adel S. Elmaghraby, University of Louisville Ahmed K. Elshennawy, University of Central Florida Gerald W. Evans, University of Louisville Brian Goldiez, Institute for Simulation and Training David J. Hamblin, Putteridge Bury Management Centre Catherine M. Harmonosky, Pennsylvania State University William M. Henghold, Universal Technology Brian B. Hundy, Cranfield Institute of Technology Ibrahim N. Imam, University of Louisville Raja K. Iyer, University of Texas-Arlington H. Thomas Johnson, Portland State University Ali Khosravi-Kamrani, University of Louisville Janardan Kulkarni; University of Louisville Steve R. LeClair, Wright-Patterson Air Force Base Shih-Ming Lee, Florida International University

XVI Acknowledgements

Herman R. Leep, University of Louisville Donald H. Liles, Automation and Robotics Research Institute Jessica O. Matson, University of Alabama Nancy L. Mills, University of Southern Colorado Raul Miranda, University of Louisville Lucy C. Morse, University of Central Florida Suebsak Nanthavanij, New Jersey Institute of Technology Carl-Henric Nilsson, Lund Institute of Technology Hakan Nordahl, Lund Institute of Technology Ingvar Persson, Lund Institute of Technology Sabah U. Randhawa, Oregon State University James Reeves, University of Tennessee-Knoxville Richard W. Sapp, Portland State University Hamid Seiffoddini, University of Wisconsin-Milwaukee Mohamed A. Shalabi, The American University of Cairo Ramesh G. Soni, Indiana University of Pennsylvania G. T. Stevens, Jf., University of Texas-Arlington William W. Swart, University of Central Florida Fariborz Tayyari, Bradley University Thomas M. West, Oregon State University Bob E. White, Western Michigan University Mickey R. Wilhelm, University of Louisville Julius P. Wong, University of Louisville Robert M. Wygant, Western Michigan University Ismail N. Zahran, Department of Engineering Mathematics and Com­

puter Science

Preface

The 1980s have witnessed a tremendous growth in the field of computer­integrated manufacturing systems. The other major areas of development have been computer-aided design, computer-aided manufacturing, industrial robotics, automated assembly, cellular and modular material handling, computer networking and office automation to name just a few. These new technologies are generally capital intensive and do not conform to traditional cost structures. The net result is a tremendous change in the way costs should be estimated and economic analyses performed. The majority of existing engineering economy texts still profess application of traditional analysis methods. But, as was men­tioned above, it is clear that the basic trend in manufacturing industries is itself changing. So it is quite obvious that the practice of traditional economic analysis methods should change too.

This book is an attempt to address the various issues associated with non-traditional methods for evaluation of advanced computer-integrated technologies.

This volume consists of twenty refereed articles which are grouped into five parts. Part one, Economic Justification Methods, consists of six articles. In the first paper, Soni et at. present a new classification for economic justification methods for advanced automated manufacturing systems. In the second, Henghold and LeClair look at strengths and weaknesses of expert systems in general and more specifically, an ap­plication aimed at investment justification in advanced technology. The third paper, by Carrasco and Lee, proposes an enhanced economic methodology to improve the needs analysis, conceptual design and de­tailed design activities associated with technology modernization. The fourth paper, by Mital, examines and compares manual and flexible automated methods of assembly of several DF A products. The paper also includes the effects of changes in various production and market factors on the choice of assembly methods. In the fifth paper, Zahran et at. use simulation as a tool to evaluate the feasibility and the benefits of cellular manufacturing systems. The last paper in this section, by Bontadelli, focuses on the application of engineering economy, including life cycle concepts to analyze computer-controlled manufacturing systems.

Part 2 focuses on articles on models and techniques for justification of advanced production systems. In the first paper, Chandra and his co­author, Harmonosky, present some analytical techniques which may be used to obtain various types of flexibility measures and material handling

XVlll Preface

costs. The second paper, outlined by Azzone and Bertele, introduces a new approach which uses the option theory and allows some of the problems which may be associated with the use of simulation based models to be overcome. The third paper, by Badiru, presents a frame­work for developing a multivariate learning curve model for manufacturing economic analysis. In the fourth paper, Batson and Matson explore the issue of how best to control and reduce the variance introduced by sequential fabrication steps on an individual part.

Five papers addressing various issues in costing and investment models are grouped in Part 3. Johnson and Sapp, in the first article, focus on the importance of activity-based information in identifying and managing waste in today's manufacturing environment. The second paper, by Tayyari and Parsaei, presents joint costs allocation to multiple products. In the third paper, Wong et al. outline the design for a software-driven totally integrated manufacturing cost estimating system. The aspect of risk evaluation of investment in advanced manufacturing technology is presented by Hundy and Hamblin in the fourth paper. The last paper in Part 3, by Nilsson et at., deals with the capital-back method. This is used as a measurement of flexibility and a tool for management decision making with respect to capital budgeting.

Articles grouped in Part4 concentrate on peripheral issues in advanced production and manufacturing systems including elM related strategic issues for small business, application of automation, cost effectiveness of automated devices, and the safety issues in FMS environment. The first article, by Iyer and Liles, provides a synthesis of the existing computer­integrated manufacturing and computer-integrated enterprise (eIE) framework, and develops an integrating eIE framework to address small business firms' concerns in particular. Application of automated tech­nologies to industrialized housing manufacture is the subject of a com­prehensive discussion in the second paper by Elshennawy et at. Morse and Goldiez examine the problem concerned with the use of economic analysis to measure the effectiveness of manufacturing training devices. The last paper included in this section, by Nanthavanij, emphasizes the significance and necessity of protective devices in providing safe work conditions for workers in the flexible manufacturing environments.

The last part of this volume consists of one article by Kulkarni et al. This article examines the problem involved with the identification of important literature in a specific engineering field viz. advanced pro­duction and manufacturing systems.

We are indebted to the following individuals: Patricia Ostaszewski, A. Soundararajan, Ali Khosravi-Kamrani, and S. Bangalore, for their assistance and support to make this endeavor possible.

Finally, we would like to express our sincere appreciation to our reviewers who took time off from their schedule to assist us in prep-

Preface XlX

aration of this volume. We hope that this fine collection of the refereed articles will be of value to researchers, practitioners and those who constantly pursue ways to improve mankind.

Hamid R. Parsaei Louisville, Kentucky

and Anil Mital

Cincinnati, Ohio USA