Penalty of Change can be applied to

Penalty of Change can be applied to the evalation of all three types of manufacturing flexibility: product flexibility, operation flexibility, and capacity fexbility. Consider the evaluation of product fexibility for two mass production manufacturing systems, A and B. Product fexibility relects the ability of the system to make a variety of products with the same equipment. In order to quantify it with an appropriate POC value, the probability and penalty of change must be established. In this case, the relevant change is a potential change in the product to be manufactured.Let us assume that there is a 70% probability that the next product to be manufactured will be product 1, and a 30% probability that it will be product 2. Let us also assume that product 1 is more similar to the currently manufactured product, and therefore can be accommodated on system A with only $20 million in modifications, as opposed to $50 million in modifications for Product 2. System B is a dedicated system which must becompletely replaced (at a cost of $80 million) in order to accommodate any product change. Evaluating flexibility as the product of penalty and probability, we get POCA = $20 million × 70% + $50 million × 30% = $29million for system A, and POCB ＝$80 million x 70% + $80 million x 30%= $80 million for system B. POC is much lower for system A than for sys-tem B, which means that system A has much more product flexibility than system B.The same methodology may be applied to the calculation of other types of flexibility. Operation flexibility reflects the ability of the system to provide alternative routings for parts and thereby they withstand breakdowns.The penalty of change can be expressed as the average decrease in production rate, caused by an operational change. Let us assume that the decreasein production rate is 10 parts/hour for system A, and 20 parts/hour for system B. Without considering the probability for change, one would conclude that system A has more operational flexibility than system B, since the penalty is less for system A than it is for system B. However, considering the probability of change, namely the probability of system failure(20% for system A and 5% for system B), we get POCA ＝ 10 parts/hour ×20% = 2 parts per hour for system A, and POCB - 20 parts/hour×5% ＝1 part per hour for system B. System B therefore, has more operational flexibility than system A.