In a manufacturing concern, a substantial part of the financial resources are invested in the plant, machines and equipment.
The return on the investment can be maximized by:
1. Making the optimum investment in the plant and machines , and
2. Making the optimum utilization of the installed production capacity.
The issue of â€œmachine requirementsâ€? deals with above part (1) while the problem of â€œline-balanceâ€? is concerned with part (2). Both these issues are explained in brief in the following paragraphs.
Machine requirements decide the desirable investment in plant and machines. Machine capacity is generally expressed in terms of machine hours. The time (in hours) necessary to complete an operation on the job, multiplied by total number of jobs that are required during a period of time, gives the total capacity required of the type of machine to be used. This is expressed in â€œST X MPâ€? as denoted in the numerator of the following formula. The number of machines for the operation may be determined by dividing this figure by the number of hours that one machine will run during the period as adjusted to the percent capacity utilization. This is expressed in â€œMC X UCâ€? as presented in the denominator of the following formula.
The relationship between these factors can be expressed as under:
N = ST x MP / MC x UC
N = Number of machines required for the particular operation.
ST = Standard time per job for the operation in hours.
MP = Maximum production required during the â€œspecified time.â€?
UC = Utilization of machine capacity in percent.
Illustration: Job A is performed on Machine X.â€™ The relevant details are as under:
1. Standard time per job for the operation is 6 minutes.
2. The maximum requirement of Job A is 70,000 per month.
3. The standard capacity of machine X is 2000hr/month.
4. The average utilization of the machine capacity is 90%.
Ascertain the requirement of Machine X.
Requirement of Machine X:
N= ST x MP / MC x UC
ST = 6 minutes = 6/60 or 1/10
MP= 70,000 jobs
MC = 2,000hr/month
UC = 90%
N = 1/10 x 70,000 / 200 x 90/100 = 7,000 / 1,800 = 3.88
Hence 3.88 units of Machine X will be required. As the machine is the indivisible economic unit, 4 machines will be required.