Manufacturing Environments

Today, since I have been dragged into the world of manufacturing, we will try to shed some light into the most common manufacturing systems, but prior to that, a fairly extensive definition of “manufacture” is needed to understand the several manufacturing processes that a company could choose amidst.

Manufacture can be defined as the process of raw material into a finished product, especially by means of a large-scale industrial operation.

 There are five basic manufacturing or production environments

 

- Build to Stock or Make to Stock, often abbreviated as BTS or MTS, is a build-ahead production system in which production plans are based on sales forecasts or historical demand and goods are produced in advanced and stored in warehouses before they are sold hence, the supply is available before receipt of a customer order.

Build to Stock or Make to Stock are appropriate solutions for low configured products assembled massively.

Hammers, for example, are products that call for a Make to Stock manufacturing system.

- Build to Order or Make to Order, abbreviated as BTO or MTO is an order fulfillment strategy characterized for the end product not being built until a confirmed order is received. This method calls for much customized products where particular conditions need to be addressed to fulfill customer’s indications. However the level of sophistication is high, it does not require as much design lead time as in ETO.

This system is considered optimum for highly configured products like computers, bicycles or automobiles where holding inventories can prove to be very expensive.

Large utility transformers will be produced following the Make to Order approach.

- Assemble to Order also known as ATO is a hybrid manufacture strategy where parts and subassemblies are produced massively as in the Build to Stock strategy, but the assembly of the final product is delayed until an order in received.

 Personal computers are the most common example to illustrate the Assemble to Order manufacturing system.

- Engineer to Order (ETO) is a manufacturing process defined by the total customization of the product according to the final customer requirements. Obviously, as in MTO, in the ETO system, the product is not built until an order is received. This approach is only suitable for specific and very rare items and can be seen as the most extreme evolution of the MTO system.

 Energy plants that need very specific design requirements is an example of an Engineer to Order manufacturing system.

- Mass Customization The product is made in many different configurations mainly from stock components, but is quickly assembled in high volume.

 Finally bicycles are produced nowadays massively but with a certain level of customization.

 The choice of the most suitable manufacture system will be influenced by the following:

- Lead time expectations: Customers will have certain expectations with respect to delivery time; therefore the manufacture process should accommodate the customer delivery time frame.

- Product volume and variety: Primarily volume but also variety will play a significant role in the choice of the manufacturing environment.

- Product life cycle: Depending on the type of product and its life cycle different manufacturing approaches should be considered, and the system chosen might chance as the product evolves through its life cycle.

- The degree of customization: The degree of product design required will have an effect on the lead time and eventually on the manufacture system 

Robot Arms.....the future, now

Since I have been extremely busy over the past few weeks, I didn´t have nether the time nor the peace to find an interesting topic to write about and draw up the next post, for that I apologize and even though I can promise I will be updating this blog more often, I can assure you I will try hard not to let it sink into my many duties.

Going into the matter, today´s post will show you how robot arms are made, but also how they are used in everyday life, using a supply chain based example, the BMW assemble line.

Robot´s precision can´t be compared to human´s and since its introduction in factories, productivity has soar at the same rate cost production has plummet making them essential in any modern factory nowadays.

Without more introductions, enjoy these two videos!

 

The first one shows how robot arms are made, and in the second one, we will get to see an example of how they work at the BMW assemble line. 

As a bonus, watch out the next video, another astonishing example on how robot arms are today what we thought we would see in the future.

Incoterms

Today I will introduce a series of terms published by the International Chamber of Commerce called the Incoterms (International Commercial Terms) widely used in international transactions.

The incoterms are a series of three-letter trade terms related to common sales practices, they were created to avoid the gap between different members of the industry by acting as a uniform language they can use. The Incoterms are intended to communicate the costs and risks associated with the transaction of goods.

The Incoterms where first published in 1936 due to the necessity to address a recurrent problem; the differences existing between industries, countries etc, and the resulting misunderstanding when it came to delivering the goods.

Since its creation, the Incoterms rules have been periodically updated, with the eighth version (Incoterms 2010) having been published on January 2011.

There are 11 different term, 7 of them are defined for any modes of transportation and the other 4 are specific to sea transportation.

EXW (Ex-works)

This term places the maximum obligation on the buyer and minimum on the seller. The only obligation for the seller is making the good available at its premises on the date agreed. In the other hand, the buyer is the one who has to upload the goods and take care of the expenses plus has to bear the risks associated to the movement of the merchandise.

FCA (Free Carrier)

The seller is responsible for delivering the goods to an specific point designed by the buyer, the seller has also the obligation of loading the goods into the buyer´s carrier.

CPT (Carriage Paid To)

The seller pays for carriage. Responsibility for the goods transfers to the buyer when the seller passes them to the first carrier.

CIP (Carriage and Insurance Paid)

This term is very similar to CPT, the seller pays for carriage plus the insurance, but risks passes to the buyer when the goods are handed to the buyers hauler.

DAT (Delivered at Terminal)

In this case, the seller pays for carriage to the terminal and assumes all risks up to the point that the goods are loaded at the terminal; the buyer however is responsible for the costs related to importing the goods.

DAP (Delivered at Place)

The seller covers the cost for carriage to the named place and assumes all risks up to the point that the merchandise is ready to be unloaded by the buyer. Nonetheless, the seller hasn´t have to cover the cost related to import clearance.

DDP (Delivered Duty Paid)

This term, as opposed to EXW, DDP places the maximum obligations on the seller and little to no obligations on the buyer. The seller is responsible for dealing with all the tasks involved in moving the goods from the manufacturing plant to the buyer´s door. This include uploading the merchandise, covering all the transportation costs to the named place including the import clearance costs and taxes and also assuming all the risks. The buyer is only responsible for unloading the goods.

The following Incoterms only applies to sea and inland waterway transportation.

FAS (Free Alongside Ship)

The seller has the obligation to place the goods at the named port. The seller must get the goods ready for export, but the buyer is responsible for the cost and risk involved in loading them.

FOB (Free on Board)

The seller´s obligation includes loading the goods on board the buyer´s vessel. The buyer and seller share the costs and risks when the goods are on board.

CFR (Cost and freight)

The seller must bring the goods to the port of destination; however the buyer will have to deal with the risks once the goods are loaded on board of the vessel.

CIF (Cost, Insurance and Freight)

This term is exactly the same as the CFR except that the seller will also be responsible for paying for the insurance.

Summarizing; terms beginning with F refer to shipments where the primary cost of shipping is not paid by the seller. Terms beginning with C deal with shipments where the seller pays for shipping. E terms occur when seller's responsibilities are fulfilled when goods are ready to depart from their facilities. D terms cover shipments where the shipper's responsibility ends when the goods arrive at some specific point.

The Incoterms also deal with the documentation required for global trade specifying which part is responsible for which documents. It is essential for shippers to know the exact status of their shipments in terms of ownership and responsibility.