Chapter Four Process Selection

1. Chapter Four Process Selection

2. Chapter 4 Outline Product-Flow Characteristics Classification by Type of Customer Order Process Selection Decisions Product-Process Strategy Focused Operations Mass-customization Environmental Concerns Cross Functional Decision Making

3. Product-Flow Characteristics Types of Product Flow Continuous process Assembly/job shop Line Batch Project

4. Product-Flow CharacteristicsContinuous Process Process industries (beer, paper, oil, etc.) Highly standardized and automated High volumes of production Commodity products Low cost is the �order winner� Flexibility limited

5. Product-Flow CharacteristicsAssembly Line Flow Linear sequence of operations Discrete products (autos, appliances, etc.) High-volume, standardized products Inflexibility in product and volume Very efficient Large capital investment

6. Product-Flow CharacteristicsBatch Flow Production of batches or lots Batches flow from one work center to another Low volume products Many different types of products Flow is jumbled and intermittent Flexible labor and equipment

7. Classification by Type of Customer Order Make to Stock (MTS) Make to Order (MTO) Assemble to Order (ATO)

8. Make to Stock (MTS) Produce finished goods; customer buys from inventory Advantage: smooth production Disadvantage: inventory Key performance measures (next slide)

9. Make to Order (MTO) Start production when customer orders. Advantage: no finished goods inventory Disadvantage: intermittent production

10. Assemble to Order (ATO) Make parts and subassemblies; finish when customer places order. Advantages: less inventory, faster service Disadvantage: some WIP inventory

11. Process Selection Decisions Process characteristics matrix Make to stock vs. MTO/ATO Continuous/discrete, batch & project Factors affecting process choice Market conditions Capital requirements Availability and cost of labor State of technology

12. Product-Process Strategy Strategy must consider not only the product or service, but also how to produce it. As many industries move through their product life cycles, they also move through a process life cycle. e.g. the traditional bread bakery vs. the modern automated bakery.

13. Product Life Cycle Stages 1. Unique, one of a kind 2. Low volume, low standardization 3. Low volume, multiple products 4. Higher volume, few major products 5. High volume, high standardization, commodity

14. Process Life Cycle Stages 1. Project 2. Job shop 3. Batch 4. Assembly line 5. Continuous

15. Focused Operations Company may have products or services with different volumes and levels of standardization. Mixing them in the same operation can cause significant problems. Focus involves separating different products or services in the same facility into PWPs.

16. Types of Focus Product focus Process type Technology Volume of sales Make-to-stock and make-to-order New products and mature products

17. Mass Customization A strategy to provide products in lot sizes of one in high volume. Possible because of flexible manufacturing. Based on economies of scope instead of economies of scale, i.e. a high variety of products from a single process.

18. Forms of Mass Customization Modular production & ATO (e.g. Dell) Fast changeover (e.g. Motorola) Postponement of options (e.g. Hewlett-Packard)

19. Environmental Concerns Technologies for Pollution Prevention Technologies for Pollution Control Infrastructure Systems and Practices Other concerns Recycling outputs Recycling inputs Remanufacturing

20. Summary Product-Flow Characteristics Classification by Type of Customer Order Process Selection Decisions Product-Process Strategy Focused Operations Mass-customization Environmental Concerns Cross Functional Decision Making