The Requirements of the Degree of Master of Science in Materials Engineering

As a consequence of increased rates of new product introduction, rapid technology changes and global competition, consumers around the world have a broader product menu from which to choose. To compete effectively, companies must continually work to improve quality, productivity and flexibility. Flexible manufacturing systems, FMS, are often cited as the means to achieve both flexibility and productivity. However, this is not the only route possible. Flexible manufacturing can also be achieved by means of process selection. Choosing an appropriate process can lead to the desired flexibility without the high levels of investment usually needed to implement a FMS. This paper presents the case of the Argentinean engine valve industry, in which companies achieved the needed flexibility through process selection. To demonstrate this, the paper presents a cost based definition of manufacturing flexibility and a methodology for measuring it. While there are many types of flexibility, this paper is strictly concerned with issues related to the variability of demand and its effect on manufacturing cost. Flexibility is defined as the marginal cost of changes in demand variables. Two different demand scenarios are analyzed, one involving changes in the product mix, and another involving changes in overall product demand. The use of a cost based definition of flexibility requires the ability to estimate manufacturing costs as a function of the product demand variables. This is accomplished through the use of technical cost modeling (TCM). TCM breaks down the manufacturing process into its different cost elements and estimates each one separately based on basic engineering and physics principles. Clearly defined economic and accounting principles are applied to arrive at a final cost breakdown for the process. This gives the model the ability to estimate costs for a range of inputs and thus it can be used to analyze the effects of changes in the demand variables. The methodology is demonstrated using the example of engine valves producers in Argentina. The worldwide market for engine valves is dominated by two competitors, which only focus on large production volume parts. Consequently, their production processes are geared towards large lot sizes. By focusing on smaller production volumes and customized parts, two Argentinean companies have filled a void in the market. To accomplish this, these companies had to acquire flexibility, but without large investments, due to a lack of capital. This paper demonstrates that despite their limited capital, the Argentinean valve producers were able to develop a more flexible manufacturing system through the selection of an appropriate technology thereby achieved their strategic goal of capturing a niche market. Thesis Supervisor: Joel P. Clark Title: Professor of Materials Engineering