Slides for Chapter 7

1. Slides for Chapter 7

2. The Relationship Between Process Choice and Layout Investment in Technology Product Technology Process Technology Process Choice Layout

3. The physical layout and the transformation process that an organisation employs are critical factors for strategic operations management: • This is because both the layout and, more specifically, the process transformation process (or process choice as it is sometimes called), provide massive clues about what the organisation can do, as well as what it cannot do. • Having an operations strategy is important because the ability to be agile, lean and flexible does not come about by chance; such states are achieved by enabling the organisation to be poised to achieve such requirements. Operations strategy becomes the means by which capabilities become realised.

4. It is vital to avoid “Technophilia” (Bessant) – the love of technology for its own sake!

5. 2 Traps to Avoid • Technophilia “Throwing Money” at the Problem e.g. GM’s $60-80 Billion ’80s - early 1990s… and beyond – where is GM today?? • Not Investing – A False Accounting Issue

6. Process and Product Technology • Investment decisions are critical and must be made with the aim of equipping the firm or the plant to be more competitive in the market. Furthermore, wrong process choice decisions may severely reduce the company’s capability to satisfy customer demands in particular markets. • Process choice and technology are both vital because key competitive factors for customers including cost, delivery speed and flexibility, can be enhanced by their combination. • If appropriate investment is made in technology and process choice , the resultant capacity and capability should become a central part of the firm’s competitive weaponry.

7. Keller (2001: Collision) Tells How Inappropriate Investment Was Made At General Motors: "While Smith provided the money for automation and supported it completely, he clearly didn't understand it - nor did his engineering staff who encouraged him. With its 260 gleaming new robots for welding, assembling, and painting cars; its fifty automated guided vehicles to deliver parts to the assembly line; and a complement of cameras and computers to monitor, inspect, and control the process, the plant put star's in Smith's eyes. He believed it held the promise of a new era of efficiency and quality and would eventually become a model for all assembly plants. What it became was a nightmare of inefficiency, producing poor-quality vehicles despite the heroic efforts of workers to correct mistakes before they were shipped to dealers" (p169)

8. Before spending a single cent it is vital to understand: The 4 Types of Layout in Manufacturing and Services

9. Fixed Position Layout

10. Process Layout in a Functional Approach: Movement of product (manufacturing) or persons (services) ‘Random' movement takes place as products are moved according to process requirements. There is no ‘flow' as such – each product will have its particular process requirements and will move to each machine group as and when required

11. Product Layout

12. U-Shaped layouts Walk inside Autoliv's 350,000-square-foot facility today, and you feel like you've stepped inside a clock. You can almost hear the ticking. Eighty-eight compact, U-shaped production cells have replaced assembly lines on the main floor. Each consists of a group of workstations staffed by a handful of employees. A screw is tightened, the finished piece scanned and registered in inventory, and then it's handed off to the next associate, who tags it and drops it into a box to be picked up and shipped. There are cells for driver airbags, passenger airbags, and side-curtain airbags, whose sales have grown 50% annually during the past three years. “ Elite Factories” Fortune; 6th September, 2004.

13. Process Layout in a Product Family Cell uuummm mmm xx qqqxxx mm OO qqq q Group 2 Group 3 Group 4 Group 1

14. The 5 Types of Process Choice: Project Job Batch Line Continuous Process

15. The Key Distinction of Volume and Variety Outputs from Process Choice

17. The Changing Task of Manufacturing Management Finished Product Made Period Production Production Task Volume Level Range 1950-1970s (Line processes) Achieve supposed economies of scale by large production runs of limited range Very high Narrow To stock (just in case) Meet specific customer including cost, delivery, range and flexibility As required - volume and variety 1980s on (hybrid systems - FMS) Wide For Customer requirements only (Just in Time)

18. Key Characteristics Of Job Processes 1. Investment in automation is for general purpose process technology rather than product specific investment. 2. Many different products are run throughout the plant and materials handling has to be modified and adjusted to suit many different products and types. 3. Detailed planning will evolve around sequencing requirements for each product, capacities for each work centre and order priorities: because of this scheduling is relatively complicated, in comparison to repetitive 'line' manufacture.

19. Key Characteristics of Batch Processes 1. Automation, especially for lower volumes of batch manufacturing, tends to be general purpose, rather than dedicated to a particular product whose volume does not demand product-specific investment in automation. 2. Scheduling is complicated and has to be completely reviewed on a regular, on-going basis - this applies to new products, 'one-off's that may be required, together with relatively high volume, standard products: all of these types will need to be scheduled. 3. Operators have to be able to perform a number of functions - this is obviously true of 'job' type processes. In batch, though, this flexibility is crucial in that it will allow operators to move to various workstations as required. 4. Where automation is being used, set-up time should be short: the ideal set up times is quick enough to accommodate run lengths of just one unit, switching over to other models and volumes as, and when, required.

20. Key Characteristics of Line Processes 1. Process times should be fast - which is critical in order to satisfy delivery speed requirements 2.There should be simplification in production planning and control and the tasks themselves should also be simplified for each workstation. 3. There should be small amounts of work in process: in fact, work in process (which, in accounting terms, can be viewed as an asset) is a liability to the company which can ruin cash-flow and stifle quick response to market requirements 4. Materials handling between stations should be placed as closely as possible to each other. 5. Materials flow and control are critical: Just-in Time lends itself most noticeably to 'line' or very high volume batch production. Stock-outs have to be avoided although, at the same time, excess stock is a waste and a liability, rather than an asset (materials can be viewed as an asset on the balance sheet which is misleading and alien to world class manufacturing.

21. Key Characteristics Of Continuous Process 1. The volume of a product is very high and the process is dedicated to making, typically, only one product. 2. Huge investment in dedicated plant is often required. 3. Much automation tends to be evident and labour input is one of 'policing' rather than being highly skilled as an integral input to the overall process.

22. The Link Between Process Choice and Layout

23. Process Type Process Characteristics Project Highly flexible – individualised output results in high unit costs; mobile and flexible staff required; quality determined by individual customer requirements. Jobbing Significant flexibility required though the volume is generally higher than when compared to projects. Some repetition in the system and many more common elements to the process than occur with projects. High unit costs relative to higher volume processes, but low set-up costs. Batch Some flexibility to handle differences between batches still required, requiring some investment in set-up for each batch. Higher levels of specialisation required in both people and machines. Line Highly specialised people and machines allow high rates of throughput and low unit costs. Limited flexibility usually associated with this process. Quality levels consistent. Continuous Process Usually non-discrete products produced over a significant period oftime. Very high levels of investment required and limited possibility for flexibility due to highly dedicated processes. Commonly highly automated.

24. Key Headings Linking Process Choice and Layout Process Choice/Type of layout Line/high vol. Batch Product Layout Job/low vol. Batch Process Layout Key Headings Product Design Product Demand Scheduling Maintenance Worker Skill Throughput Time Unit Cost Major Concern ‘Standard’ Relatively Stable Relatively Easy Absolutely Vital Generally Semi-Skilled Short Low Line Balancing Specialized Erratic And Uncertain Difficult Important Generally Highly-Skilled Long High Department Layout

25. Process Choice and Production/Operations Tasks Project Job Batch Line Continuous Process Plant Dominant Utilization Essentially Labour Labour Plant Process Technology General Purpose Universal Dedicated Very Dedicated Process Flexibility High High Low Inflexible

26. The Link Between Process Choice and Marketing Strategy Batch Line Continuous Process Project Job The firm sells a wide variety Of products or designs and there is the perception of customisation for each customer. Order sizes are small or ‘one –off’. New products are required on an on-going basis and the firm ‘sells’ its capability of design and innovation. The firm sells a narrow range of ‘standard’ products but in high volume. New product introductions are difficult because the plant is dedicated around specific products Batch has to be managed by initially mapping products according to ‘job’ or ‘line' characteristics and then focusing the plant to support these cells of manufacture

27. The Importance of Pre-qualifying criteria. ProjectJobBatchLineContinuousProcess Order-winningDeliveryDeliveryÛPricePrice CriteriaQuality Quality Design Designcapability capability QualifyingPricePriceÛDeliveryDelivery CriteriaQualityquality Design designcapability capability Pre-Qualifying Criteria Experience, reputation, and other intangible factors are key here. The importance and strength of the buyer-supplier relationship over time may also be a deciding factor.

28. Craft Job transformation processes link to craft manufacturing – high variety, low volume with general purpose technology The current era of mass customisation and strategic manufacturing demands high volume, high variety and a whole range of simultaneous customer requirements. This requires a combination of technology investment and skills capabilities to deal with greater number and range customer demands. Mass Line transformation processes link to mass production – high volume, low variety with dedicated product technology V AR I E T Y VOLUME • The Manufacturing Eras and Their Impact on Process Choice

29. Pure Standardisation Segmented Standardisation Customized Standardisation Tailored Customisation Pure Customisation Design Design Design Design Design Fabrication Fabrication Fabrication Fabrication Fabrication Assembly Assembly Assembly Assembly Assembly Distribution Distribution Distribution Distribution Distribution From ‘pure standardisation’ to ‘pure customisation’ - adapted from Lampel and Mintzberg, (1996)

30. Customisation and Agility Brown and Bessant (IJOPM 2003, p708) explain: “……there seems to be no firm agreement as to the definitions for, and major differences between, the paradigms of mass customisation and agile manufacturing. For example, Feitzinger and Lee (1997) in their discussion on mass customisation also include“Agile Supply Networks” as a necessary factor. In addition, Da Silveira et al (2001) mention agile manufacturing as a feature within their summary on the literature on mass customisation. We suggest that although it might be important to understand both we add that agile manufacturing and mass customisation are not mutually exclusive paradigms. Instead, we argue that mass customisation is best viewed as a powerful example of a firm’s ability to be agile.”

31. Customisation and Agility Bessant et al (2001) offer an emerging model of agile manufacturing capabilities, consisting of four, key, interlinked parameters: The four major dimensions of the reference model are: “Agile Strategy - involving the processes for understanding the firm’s situation within its sector, committing to agile strategy, aligning it to a fast moving market, and communicating and deploying it effectively. Agile Processes - the provision of the actual facilities and processes to allow agile functioning of the organization Agile Linkages - intensively working with and learning from others outside the company, especially customers and suppliers. Agile People - developing a flexible and multi-skilled workforce, creating a culture that allows initiative, creativity and supportiveness to thrive throughout the organization”.

32. The Change Of Process Choice in a Product Life Cycle

33. Key Points • Process technology is a requirement in order to meet the demands of the needs of markets. In order to meet these needs, technology can be used for rapid changeover and set up times, volume and variety mixes, delivery speed and reliability requirements and for ensuring process quality. However, technology must not be seen as a replacement for human resource capability.

34. Key Points • Vast amounts of investment have been made in some plants with little competitive advantage being gained as a result. However, when appropriate investment is made it should allow the firm to operate at world-class levels, provided that it used to meet the needs of the markets in which the firm is competing.

35. Key Points • A process choice will indicate what a firm can and cannot do. Process choice may significantly influence what the company sells and what it is able to offer.

36. Key Points • The basic types of layout are: • Fixed, • Process, • Hybrid (cell) and • Product

37. Key Points • The five basic types of process choice are: • Project, • Job, • Batch, • Line, and • Continuous Process.

38. Key Points • Layout and Process choice are of major strategic importance to manufacturing and services operations. The options to choose from are also essentially similar - it's not an infinite variety but a small number of options and switching between one to the other is by no means cost free - so there is an important strategic objective to align the transformation process with market requirements and to understand the implications of changing.