Lean manufacturing

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Group Technology / Cellular Manufacturing Conference

Groningen, The Netherlands, July 3-5, 2006

Cellular manufacturing against relocation: the most efficient way to transform plants
Lluís Cuatrecasas-Arbós*, Jordi Fortuny-Santos, Jordi Olivella Nadal
Business Management Department. Technical University of Catalonia (UPC)1-3, Jordi Girona Street, Barcelona, 08034, Spain * Correspondingauthor: Tel.: +34 934 016 813; Fax: +34 934 015 629; E-mail: lluis.cuatrecasas@upc.edu

ABSTRACT
This paper presents a methodology to help decide whether a process-oriented plant would become more competitive by relocating its facilities in a low-cost country or by transforming it into an efficient plant by means of the implementation of a cellular layout with production driven by demand, managedin accordance with the principles of lean manufacturing. In this paper, our methodology is applied to an existing processoriented production system A set of key magnitudes and cost data attributed to the production plant and the way it is managed are calculated. These key magnitudes, related to production cycles and inventories, are easily calculated by means of an Operation-Time diagram. Fourteentypes of manufacturing and distribution costs are considered including those costs due to the relocation strategy, which are mostly related to logistics. The paper includes the necessary calculations to transform the original plant by implementing three U-shaped flexible cells and to quantify the number of employees that are necessary, taking into account global takt time and cycle time ofindividual processes. Key production magnitudes and production and distribution costs are then calculated for the cellular implementation. Final conclusions show that an efficient implementation of cellular production processes pursuant to the lean management principles (low resource consumption, elimination of activities that do not contribute to value creation, maintenance, on-time deliveries, highquality…) is able to offset, at least in the studied case, the improvement in costs attributed to relocation strategies in process-oriented plants managed in a conventional style.

1 INTRODUCTION
There is a vast literature on the benefits of lean or cellular manufacturing in certain companies but many times we wonder if those improvements are really due to the operation of a new manufacturingstrategy or maybe to the commitment of people because “something is changing in the factory” or even due to external factors like market demand. In this paper, a methodology to change the plant layout is described and its physical effects are monitored in an Operation-Time diagram to ensure that other events do not affect the outcome. Nowadays, to have a method to study costs and competitiveness isvery important. The topic “Global Relocation” has become very usual because companies are moving their production plants from Western European countries to Central and Eastern European countries or from the Unites States to India and Eastern Asia. This relocation strategy seems to be increasingly applied because more and more companies discover that they are not competitive since their productionplants in developed countries involve high costs, and therefore they decide, in search of a higher degree of competitiveness, to move to foreign countries, where costs, and specially labor costs are lower (Eenennaam and

Brouthers, 1996; Tuselmann, 1999; Pennings and Sleuwaegen, 2000; Manzon, 2005). Therefore, the aim of this research must be to determine if relocation is the only way to cutcosts or maybe transforming the traditional process-oriented plant into a cellular plant can be a feasible –and even better option. In our attempt, our methodology to control cycles, inventories and costs involved in each alternative will be necessary. Our preliminary hypothesis contend that a cellular layout, with one piece flow, according to the principles of lean management must be a good choice...
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