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Flexible manufacturing systems: issues and implementation.

Flexible Manufacturing Systems: Issues and Implementation

Within the last two decades the conventional factory has been thrust into a role to which it is unaccustomed. Faced with shrinking markets and fierce competition from overseas, American manufacturers can no longer consider their factories as merely the creators of cost and the absorbers of capital. Manufacturing is now seen as a critical strategic resource and the focus of management's interest. Ferdows and Skinner identify three key areas of concern within this new role established for manufacturing management: inventory production planning and scheduling, quality, and automation and process technology. It is the latter area--automation and process technology--and related issue that we address here.

Simultaneously seen by many as the salvation and the ruination of the U.S.'s current economic woes, automation at least offers promise for a brighter tomorrow. There are three primary methods of manufacture in use today: flow production of liquids and gases, mass production of discrete parts, and batch production of discrete parts. Overseas manufacturers with low labor costs will have a long-term manufacturing cost advantage in the mass production of discrete, standardized parts. Therefore, surviving U.S. manufacturers must either have a strong advantage in the area of transportation cost or they must be producing goods that are not standard. The prospect of automation, particularly the flexible manufacturing system (FMS), presents the possibility of making the ability to produce non-standard parts our competitive advantage over foreign competition.

The flexible manufacturing system (FMS) is currently in use not only within this country, but others as well. Darrow surveyed Eastern Europe, Western Europe, Japan, and the U.S. and found that with the exception of Eastern Europe, all exhibited a rapid exponential growth rate for FMS technology. In 1985, there were approximately 50 fully computerized FMS installations in the U.S. By 1990, it is estimated that close to 300 complete FMS installations will be operational here. Apparently, the dedicated machine of the past is rapidly becoming an anachronism with hard automation becoming increasingly more flexible.

We propose to examine the issues involved in flexible manufacturing and, in particular, defines what it is, who can utilize it, what benefits result and finally propose an implementation plan to facilitate the installation of a flexible manufacturing system.

What is an FMS?

An FMS has been described as an automated job shop and as a miniature automated factory. Actually, an FMS is an automated production system that produces one or more families of parts in a flexible manner. Miltenburg and Krinsky state that this flexibility has three components:

1. The flexibility to produce a variety of products using the same machines and to produce the same products on different machines.

2. The flexibility to produce new products on existing machines.

3. The flexibility of the machines to accommodate changes in the design of products.

Two kinds of manufacturing systems are included within the FMS spectrum. These are assembly systems which assemble components into final products and forming systems which actually form components or final products.

The key elements of the FMS are machine tools that are serviced by an automated materials handling system, such as an automatic guided vehicle (AGV) and are controlled by a computer. Buzacott and Yao define the generic FMS as consisting of the following components:

* A set of work stations containing machine tools which do not require significant set-up time or change-over time between successive jobs. Each machine tool is a numerically controlled (NC) machine that has its own individual computer and is linked to the FMS system computer. Typical operations these machine tools perform include milling, boring, drilling, tapping, reaming, turning and grooving. The equipment controllers perform two major functions [1] they translate work station commands into a sequence of simple tasks that can be understood by the vendor-supplied controller, and [2] they monitor the execution of these tasks via the sensors attached to the hardware.

* A material handling system (MHS) that is automated and flexible in that it permits jobs to move between any pair of machines so that any job routing can be followed. A more sophisticated FMS might include an automated storage and retrieval system for fixtures, tool pallets, raw materials, and piece parts as well as automated washing, assembly, and inspection stations.

* A network of supervisory computers and microprocessors, which performs some or all of the following tasks [1] directs the routing of jobs through the system, [2] tracks the status of all jobs in progress so it is known where each job is to go next, [3] passes the instructions for the processing of each operation to each station and ensures that the right tools are available for the job, [4] provides essential monitoring of the correct performance of operations and signals problems requiring attention. The computer may diagnose work stoppages or other problems and suggest corrective action. It also may generate reports about system utilization, individual machine tool utilization, material handling system utilization, cutting tools replaced, and machine time per part or lot.

* Storage, locally at the work stations, and/or centrally at the system level.

* The jobs to be processed by the system. In most machining systems, jobs are mounted on pallets or fixtures and the number of these is limited. In operating an FMS, the worker enters the job to be run at the supervisory computer which then downloads the part programs to the cell control or NC controller. The material handling system is also presented with similar information. The supervisory computer then performs a traffic control function as previously discussed.

The concept of flexible manufacturing systems evolved during the 1960s when robots, programmable controllers (PLCs) and computerized numerical controls (CNC) brought a controlled environment to the factory floor in the form of numerically controlled (NC) and direct numerically controlled (DNC) machines. The main emphasis was to integrate machine tools, material handling, and computer control systems to convert the job shop flow into a process flow. The first FMS systems on the market had dual computer controls; DNC for the cell and a separate computer to monitor the traffic and the management information system. Since the 1970s, there has been an explosion in system controls. The programmable controller appeared in the late 1970s followed by numerical control and up to the present where we now have a single computer using distributed logic control with many levels of intelligent decision-making capabilities.

Until recently, productivity objectives were achieved at the expense of flexibility for volume, changes in production, and customer specials (this is the way the U.S. auto industry became the prisoner of its own capital-intensive assembly process technology). Stated formally the general objectives of an FMS are to:

* Approach the efficiencies and economies of scale normally associated with mass production.

* Maintain the flexibility required for small and medium lot size production of a variety of parts.

Who Can Use an FMS?

FMS can be used by anyone whose corporate objectives include competing on the basis of flexibility. For example, one firm viewed FMS as essential for its strategic corporate objective of increasing turnover by 300 percent by the late 1980s and speeding up response to the market without increasing the size of the factory or taking on new labor. But for the most part, FMS is limited to firms involved in batch production or job shop environments. This area of batch manufacturing is no small and insignificant representation of our economy. Batch manufacturing represents more than 35 percent of the U.S. manufacturing base and constitutes 36 percent of manufacturing's share of the Gross National Product. In addition, roughly 75 percent of all metal-working components made in the industrialized world are produced in small batches of less than 50 and batch manufacturing accounts for a large portion of the industrialized world's production. This batch manufacturing sector includes all aerospace production, equipment production and much of the automotive industry's production. Kearney & Treker (manufacturer of FMS equipment) represents its products as being designed to efficiently produce parts in the mid-volume, mid-variety range with appropriate applications in assembly operations, electronic components, printing, garment-making, various metalworking processes as well as others.

In 1984, 56 percent of all FMSs were used for manufacturing machinery with 41 percent utilized for manufacturing components for the transportation industry. Nineteen eighty-nine's $1.5 billion market will be apportioned thusly:
 Electrical Equipment 29.8%
 Transportation Industry 29.9%
 Metal Fabrication 10.6%
 Instruments 5.8%
 Other 1.6%

Normally, batch producers have two kinds of equipment to choose from: dedicated machinery or unautomated general purpose tools. Dedicated machinery results in cost savings but lacks flexibility. General purpose machines such as lathes, milling machines or drill presses are all costly and may not realize their full capacity. Flexible manufacturing systems provide the batch manufacturer with a third choice, one which can make batch manufacturing just as efficient and productive as mass production.

Benefits of FMS

One firm stated that its biggest benefit from FMS was its action as a catalyst for change. The FMS became, in essence, a "club" which could be used to achieve the discipline they needed but could not have justified to upper management.

The Allen-Bradley Company utilizes a 50 machine FMS which can turn out a wide variety of starters for electrical motors. A total of 143 variations can be assembled on two sizes of bases. Allen-Bradley's management expects to leverage their $15 million investment in FMS into a 30 percent share of the worldwide market becoming the world's low cost producer for this product.

Hughes Aircraft's FMS in El Segundo, California, uses nine machining centers plus a coordinate measuring machine, a tow-line conveyor system, and supervisory computer control to do the work of 25 stand-alone machining centers. The FMS was built for 75 percent of the investment cost, operates at 13 percent of the labor cost, and will generate the required production at 10 percent of the machining time cost.

Vought Corporation's $10 million flexible manufacturing system expected to save $25 million in machining costs by performing in 70,000 hours work that would take 200,000 by conventional methods. General Electric modernized its locomotive plant in Erie, Pennsylvania, by installing an FMS. Machining time for multi-ton engine frame parts was reduced from 16 days to 16 hours with increased design flexibility added. Ingersoll Milling Machine Company of Rockford, Illinois can machine 25,000 different prismatic parts on its FMS. Seventy percent of these will be in lot sizes of one while half will never be made again. The Mazak factory in Florence, Kentucky uses an FMS to produce 180 different parts ranging in weight from a few pounds to three tons with only two operators. They hope to offer 30-day delivery on machine tools normally requiring six or more months lead time.

Remington, Parker Hannifin Corporation, Chrysler Corporation, and GMR Robotics Corporation report such gains as:

* Work-in-process reduced from 40 percent to 80 percent

* Scrap reduced by 5 percent up to 73 percent

* Lead time reduced from 10 weeks to one week

* Floor space requirement reduced by 75 percent

Despite these glowing reports of FMS successes, it must be noted that not all FMS installations are considered complete successes. Even many of those considered successful are not realizing the full benefits that are within their potential grasp. Dilworth and McAlister surveyed 20 users of FMSs and found that for the most part, they did not realize the benefits claimed for FMS. To many, the money invested was far in excess of the benefits.

Jaikumar reports that, with few exceptions, the FMSs installed in the U.S. show an astonishing lack of flexibility. In many reported cases, the FMS performs worse than the conventional machinery it replaced.

Compared to the Japanese FMS users, American manufacturers are not realizing the benefits that are obtainable. In 1984, the average number of parts made by an FMS in the U.S. was 10 compared to the Japanese average of 93. For every part introduced into a U.S. FMS system, 22 parts were introduced in Japan. Equipment utilization for FMSs in the U.S. averages 52 percent compared to 84 percent for the Japanese while the average American machines average production of 10 types of parts pales to the Japanese average of 93 types of parts per machine. This statistic gives some clue to the difference in benefits. Apparently, U.S. users are attempting to utilize FMSs for high-volume production of a few parts rather than for high-variety production of many parts at a low cost per unit. The remaining difference is likely accounted for by the work force's technical literacy, and management competence.


The importance of the truly crucial aspect of implementation cannot be overstated. No doubt, many of the failures of FMSs in the U.S. can be attributed to a superficial or inadequate implementation process. The following section is dedicated to examining each step in a recommended implementation strategy. The steps in this strategy are listed below:

1. Define the firm's manufacturing


2. Define the environment

3. Insure management commitment

4. Technical evaluation

5. Economic evaluation

6. People involvement

7. Installation

Define Manufacturing Strategy

This is probably the most critical step in the implementation process. If the firm misidentifies its objectives and its manufacturing mission and does not maintain a manufacturing strategy that is consistent with the firm's overall strategy, problems would seem inevitable (remember, Skinner recommends that you keep the strategy "focused" rather than broad). Likewise, it is crucial that a firm's technology acquisition decisions be consistent with its manufacturing strategy.

A company that chooses to implement an FMS for the wrong reasons or who does not fully understand its application is setting itself up for a major disappointment.

Define the Environment

A substitution of capital for labor is ideal for environments where flexibility can be economically traded off for efficiency. In other words, if the firm chooses to compete on the basis of flexibility rather than cost then it may be a candidate for flexible manufacturing. As was discussed, many firms make the mistake of attempting to apply flexible manufacturing to high-volume mass production when in fact it is suited for low to mid-volume production. Also, in industries where products change rapidly, the ability to introduce new products may be more important than minimizing cost.

In making flexibility and responsiveness the mission of manufacturing, scale no longer becomes the central concern. Size is no longer a barrier to entry. Jaikumar submits that the minimum efficient scale for FMS operations is a cell of roughly six machines and fewer than six people. Other issues to be considered at the start are the frequency of part design changes and the stability of market demand.

Management Commitment

Since new technology is costly and requires several years to install and become productive, it requires a supportive infrastructure and the allocation of scarce resources for implementation preparation and for the installation of the equipment. This necessitates that top management be committed to the project. Willis and Sullivan recognize the need for the commitment of management and report that in order to assure success, management must be able to:

* Commit to the new strategy and the

new technology

* Allocate adequate financial support

* Authorize and recognize a pilot project

* Devote key management and staff to

the project

* Risk short-term operational results for

the sake of longer term improvements

Technology Evaluation

The firm should decide on the family of parts to be run on the FMS, what machining operations are to be done, and the number of batch sizes required. The FMS workload and elements, as identified in this stage, can now be validated through extensive modelling, simulation and analysis activities undertaken by systems engineers. If all this is technically feasible, the FMS may be compared to other alternatives which are also feasible. JIT practices or "design for manufacturability" practices may achieve the same benefits at a fraction of the capital cost. For example, IBM found that a redesigned printer was simple enough for high quality manual assembly and the manual assembly could be achieved at a lower cost than automated assembly.

Also, during this evaluation process, the sources of risk and uncertainty related to the FMS should be identified. The stochastic variability related to market demand, component supply and competitive interaction will all affect the contribution of the FMS to the firm.

Economic Justification

The justification for the installation of an FMS on economic grounds is probably the most difficult step in the implementation process. Current methods of justification include payback period, return on investment, net present value, and internal rate of return. Unfortunately, current cost accounting is designed for mass production of a mature product with known characteristics and a stable technology. Therefore, managers who retain older, mostly depreciated assets report much higher ROIs than managers who invest in new assets. While this is acceptable in appropriate circumstances, it is not seen as giving an accurate indication of the justifiability of flexible manufacturing.

Either not enough information is available to support the estimate of future net returns or, more likely, a problem exists dealing with how to quantify the benefits of flexibility. For example, customers of innovative companies purchase the products because of the value of their unique characteristics, not because the products are cheaper than those of competitors. Cost accounting systems, however, rarely distinguish between products that compete on cost and those that compete on the basis of unique characteristics valued by customers. Historically, the formal justification of new equipment has been conducted as if the costs and benefits were deterministic, in time as well as amount.

A company's economic value is not merely the sum of the values of its tangible assets, whether measured at historical cost, replacement cost or current market prices. It also includes the value of intangible assets: its stock of products and processes, employee talent and morale, customer loyalty, reliable suppliers, and efficient distribution network. The aforementioned justification methods do not account for the value of shortened response time and the ability to provide changes in product design or the potential resultant increase in market share. Neither does it consider improvements in quality, set-up, labor costs, safety, downtime, inventory, or efficiency.

Adler sees the reasons for the slow diffusion of new measures for justification as being that they are:

* Too sophisticated and therefore vulnerable to subversion by threatened managers.

* Too simple and therefore unreliable in the presence of such common but analytically complex phenomena as product mix changes.

* Too difficult to implement for lack of available data.

Whatever the reason, cost accounting must be encouraged to adopt conventions that better express the new manufacturing mission and the new conditions of automation. Although a majority of manufacturing firms report that they intend to integrate automation into their firm within the next five years, few are actually adopting new policies and accounting practices to bring this about.

The author recommends that traditional justification methods be utilized as a start. Jaikumar studied 22 systems in Japan and found that all met their companies ROI criterion of a three year payback. So it is possible that the FMS can be justified on a conventional basis. It may be advisable to develop a portfolio of projects whose net returns is calculated at three to five year intervals. Then the set of projects can be justified as a whole, rather than trying to justify each project by itself. Net present value or internal rate of return is recommended because each of these discounted cash flow techniques considers all estimated future cash flows associated with projected time value of money. Payback does not consider this so it is useful only as a secondary technique. If the calculated value is negative, the firm should then apply managerial judgment to decide whether the short-fall is worth the intangible benefits. System-wide effects must be considered and not local effects only. Since there is little data for calculating these intangible benefits, their value will have to be set largely by intuitive estimates.

Potential FMS users should also consider that some of the costs traditionally incurred in manufacturing may actually be higher in a flexible automated system than in conventional manufacturing. Although the system is continually monitoring itself, maintenance costs can be expected to be higher. Energy costs are likely to be higher despite more efficient use of energy (however, energy costs usually amount to less than 10 percent of total costs). Increased machine utilization can result in faster deterioration of equipment providing a shorter than normal economic life. Finally, personnel training costs may prove to be relatively high.

In addition, potential FMS users must realize that other costs are involved than just the initial piece of machinery. Frequently, the fixtures cost as much as the FMS itself. Software development can be expected to be anywhere from 12 to 20 percent of the total cost involved. Support devices such as material handling equipment, automated storage and retrieval systems and tool-handling equipment can add another 30 percent to the hardware costs. Finally, obsolescence can be a key factor. Rapidly changing technology and shortened product life cycles can cause capital equipment to become obsolete quite quickly. One firm reported that every CNC they integrated into their FMS changed, on average, every two years. Spare parts, logistics, and software then became a fairly constant problem.

People Involvement

Many managers do not understand the philosophy behind the FMS and undermine its effectiveness by pulling maintenance workers off the system to handle "hot" jobs elsewhere, by letting untrained operators supervise the machine, or by letting untrained foremen have supervisory responsibility for the FMS. It is important that each individual be informed about aspects of the new system. Helander suggests that:

* Information must be comprehensive and factual

* Misconceptions must be recognized and corrected

* Problems associated with similar systems must be addressed

* Design inputs from users must be considered

Resistance to the new automation is also possible and likely. Many workers justifiably perceive automation as an effort to replace them with a tireless piece of metal that doesn't eat, take breaks, or go to the bathroom. Many FMS firms stress that workers are upgraded as a result of FMS installation and that no loss of job ensues. However, some firms report that former workers on conventional machinery are upgraded to positions amounting to very little. The fear is that all-around machinists in batch settings will change from skilled craftworkers to operators with occasional responsibility for editing programs written off the shop floor and in turn only monitor a process for which they have no planning responsibility. One firm reported that in the first 33 months of operation, employee turnover rate on their FMS was 150 percent.

A good implementation plan should try to identify where possible opposition may occur. Then management can anticipate and possibly avert any problems that may occur. Remember that a potential user's initial attitude depends on the perceived features of the innovation; prior experiences with similar developments; estimates of relative advantage; compatibility and complexity; and perceived personal risk. With these issues in mind, proper communication flow via workshops and training sessions can do much to allay the fears of the FMS workers.


It is standard advice to enter high-tech manufacturing one small step at a time, learning from each subsystem as you go and preparing for the next one. In this way, expertise is built up without incurring substantial, and expensive risk of failure. Since FMS usually requires several years to install, time-phased projects should make up the installation process. In addition, Salomon and Biegel report that a firm can save approximately 12 percent in capital recovery costs if an FMS is implemented on an incremental basis as compared to total implementation.

Competitive Advantage

While technology alone is not the answer, FMS may become the only alternative for remaining competitive in certain markets. An implementation plan has been presented to facilitate the successful installation of a flexible manufacturing system. The implementation of automated manufacturing systems with flexibility as the key factor holds implications for global competition in general and manufacturing in particular.

Groover sees the following as results of this trend in flexible manufacturing:

* Greater use of the computer for process control

* Greater use of management information systems and communications systems in manufacturing

* Development of computer-automated programming routines for production equipment

* Improved data input techniques and human-machine interfaces

* Improved machine breakdown analysis and diagnostic systems

* Greater use of vision systems and other noncontrol inspection techniques

* More use of 100 percent inspection

* Greater use of robots as components

Flexible manufacturing has shown many advantages in low to mid-volume, high-mix production applications. Future systems will probably see lower and lower quantities per batch. FMS will shift the emphasis in the U.S. from large-scale repetitive manufacturing of standard products to a highly automated job shops featuring the manufacture of items in small batches for specific customers. Uniqueness at the last minute will become a catch phrase for many manufacturers.
COPYRIGHT 1991 Institute of Industrial Engineers, Inc. (IIE)
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Title Annotation:includes related article
Author:Inman, R. Anthony
Publication:Industrial Management
Date:Jul 1, 1991
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