to be of greater value.
Assigning a value to work is not a simple task of adding up prices or costs. We must recognize that there will be simplifications in any method used, and that we have to make some adjustments to compensate for them. Efficiency improvements justified on cost savings need careful checking—are the underlying assumptions and simplifications acceptable?
1.3 MANUFACTURING AND SERVICE INDUSTRIES
1.3.1 Conversion processes
We have defined manufacturing as the process of converting raw materials into useful products. Conversion processes can take various forms. For example, an automobile manufacturer uses mainly physical processes, while a pharmaceutical manufacturer primarily uses chemical or biological processes. Power generation companies that use fossil fuel use a chemical process of combustion and a physical process of conversion of mechanical energy into electrical energy. Manufacturers add value, using appropriate conversion processes.
1.3.2 Factors influencing the efficiency of industries
Since the invention of the steam engine, the productivity of human labor has increased steadily. Some of the efficiency gains are due to improvements in the production process itself. Inventions, discoveries, and philosophies have helped the process. For example, modern power generation plants use a combined-cycle process. They use gas turbines to drive alternators. The hot exhaust gases from the gas turbines help raise high-pressure steam that provides energy to steam turbines. These drive other alternators to generate additional electrical power. Thus, we can recover a large part of the waste heat, thereby reducing the consumption of fuel.
A very significant improvement in productivity has occurred in the last quarter of the twentieth century due to the widespread use of computers. With the use of computers, the required information is readily available, thereby improving the quality and timeliness of decisions.
1.3.3 Factors affecting demand
The demand for services has grown rapidly since World War II. Due to the rise in living standards of a growing population, the number of people who can afford services has grown dramatically. As a result of the larger demand and the effects of economies of scale, unit prices have kept falling. These effects, in turn, stimulate demand, accounting for rapid growth of the services sector. In the case of the manufacturing sector, however, better, longer lasting goods have reduced demand somewhat.
Demographic shifts have also taken place, and in many countries there is a large aging population. This has increased the demand for health care, creating a wide range of new service industries. Similarly, concern for the environment has led to the creation and rapid growth of the recycling industry.
Some of the characteristics of the manufacturing and service industries are very similar. This is true whether the process is one of production or distribution. We will consider a few examples to illustrate these similarities.
A machinist producing a part on an automatic lathe has to meet certain quality standards, such as dimensional accuracy and surface finish. During the machining operation, the tool tip will lose its sharpness. The machine itself will wear out slightly, and some of its internal components will go out of alignment. The result will be that each new part is slightly different in dimensions and finish from the previous one. The parts are acceptable as long as the dimensions and finish fall within a tolerance band. However, the part produced will eventually fall outside this band. At this point, the process has gone out of control, so we need corrective action. The machinist will have to replace the tool and reset the machine, to bring the process back in control. This is illustrated in Figure 1.1.
In a chemical process plant, we use control systems to adjust the flow, pressure, temperature, or level of the fluids. Consider a level-controller on a vessel. The level is held constant, within a tolerance band, using this controller. Referring to Figure 1.2, the valve will open more if the level reaches the upper control setting, allowing a larger outward flow. It will close to reduce flow, when the liquid reaches the lower control setting. As in the earlier example, here the level-controller helps keep the process in control by adjusting the valve position.
Consider now a supermarket that has a policy of ensuring that customers do not have to wait for more than 5 minutes to reach the check-out counter. Only a few check-out counters will be open during slack periods. Whenever the queues get too long, the manager will open additional check-out counters. This is similar to the control action in the earlier examples.
Companies use internal audits to check that the staff observes the controls set out in their policies and procedures. Let us say that invoice processing periods are being audited. The auditor will look for deviations from norms set for this purpose. If the majority of the invoices take longer to process than expected, the process is not in control. A root cause analysis of the problem will help identify reasons for the delays.
Figure 1.1 Process control chart.
Though these examples are from different fields of activity, they are similar when seen from the systems point of view. In each of these examples, we can define the work flow by a process, which is subject to drift or deviation. If such a drift takes place, we can see it when the measured value falls outside the tolerance band. The process control mechanism then takes over to correct it. Such a model allows us to draw generalized conclusions that we can apply in a variety of situations.
1.5 IMPACT OF EFFICIENCY ON RESOURCES
1.5.1 Efficiency of utilization
Earlier,we looked at some of the factors influencing the efficiency in the manufacturing phase. For this purpose, we define efficiency as the ratio of the outputs to the inputs. We can also examine the way the consumer uses the item. We define efficiency of utilization as the ratio of the age at which we replace an item to its design life under the prevailing operating conditions.
Figure 1.2 Level controller operation.
First, we examine whether we use the item to the end of its economic life. Second, is it able to reach the end of its economic life? In other words, do we operate and maintain it correctly? If not, this can be due to premature replacement of parts. When we carry out maintenance on a fixed time basis, useful life may be left in some of the parts replaced. Alternatively, we may replace parts prematurely because of poor installation, operation, or maintenance. In this case, the part does not have any useful life left at the time of replacement, but this shortening of its life was avoidable.
Manufacturers are concerned with production efficiency because it affects their income and profitability. From their point of view, if the consumer is inefficient in using the products, this is fine, as it improves the demand rate for their products. Poor operation and maintenance increases the consumers’ costs. If these consumers are themselves manufacturers of other products, high operating costs will make their own products less profitable. This book helps the consumer develop strategies to improve the efficiency
