A truly flexible assembly plant could produce cars, aircraft engines, refrigerators, cell phones and bagpipes on the same line. However, that type of scenario probably will never happen, because there are limits to flexibility. In fact, the most flexible type of factory may be a disposable factory.
A truly flexible assembly plant could produce cars, aircraft engines, refrigerators, cell phones and bagpipes on the same line. However, that type of scenario probably will never happen, because there are limits to flexibility.
“Even the most flexible plant can make only a limited range of products,” says Amyn Merchant, senior partner and managing director of the New York office of the Boston Consulting Group Inc. (Boston). He believes that many manufacturers have achieved flexibility through inflexibility.
“In engineering for flexible production, companies have developed inflexible cost structures,” Merchant points out. “Flexible automation buys the option to shift the use of a plant. But, it does so at significant expense.”
Merchant believes the most flexible type of factory is a disposable factory. “Given the rate of technology advancement and new production processes, a traditional 20-to-30-year-old facility is no long prudent for [some types of] manufacturers to consider,” he argues. “Temporary plants [would be ideal] where there is great uncertainty coupled with large volumes of a product that must be manufactured quickly.”
Typically, those types of conditions are more common in the process industries, such as oil and gas, rather than discrete manufacturing. For instance, Merchant says pharmaceutical manufacturers in some developing countries are using the disposable factory concept. “Disposable factories are simpler than factories built for flexibility and have few start-stop irregularities resulting from changeovers,” he explains.
“The cost differences between a disposable factory and one built for flexibility are dramatic,” claims Merchant. “A facility designed along the disposable model can be built for as little as 20 percent to 30 percent of the cost of a U.S. plant designed for flexible automation.
“A traditional factory takes 18 to 36 months to set up,” adds Merchant. “A disposable factory can be set up much quicker. Instead of spending $100 million, you only spend $20 million. [However], quantifying the dollar value of the disposable factory approach requires assessing the option value of the flexibility it provides, given the risks of both near-term demand variability and long-term market viability.”
March 2, 2009