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Chapter Four Process Selection

Chapter Four Process Selection. Operations Management Contemporary Concepts and Cases 5/e. Chapter Outline. Product-Flow Characteristics Approaches to Order Fulfillment Product-Process Strategy Focused Operations Mass Customization Environmental Concerns Cross-Functional Decision Making.

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Chapter Four Process Selection

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  1. Chapter Four Process Selection Operations ManagementContemporary Concepts and Cases 5/e

  2. Chapter Outline • Product-Flow Characteristics • Approaches to Order Fulfillment • Product-Process Strategy • Focused Operations • Mass Customization • Environmental Concerns • Cross-Functional Decision Making

  3. Product-Flow Characteristics Types of Product Flow • Continuous process • Assembly line • Batch • Job shop • 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. Assembly Line Flow(metal bracket, see Fig. 4.1) cut drill bend paint Task or work station Product flow

  7. 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

  8. Batch Flow(three metal brackets, see Fig. 4.2) Bend Paint Batch A Cut Batch B Batch C Drill Product flows Task or work station

  9. Product-Flow CharacteristicsJob Shop • Production of small batches or lots • Orders are customized for particular customer orders • Low volume products • Many different types of products • Flow is jumbled and intermittent • Flexible labor and equipment

  10. Product-Flow CharacteristicsProject • Production of customized single products • Labor and materials brought to site • Planning, scheduling challenges • Unique (one of a kind) products • Little automation • Flexible labor and equipment

  11. Approaches to Order Fulfillment • Make-to-Stock (MTS) • Make-to-Order (MTO) • Assemble-to-Order (ATO)

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

  13. MTS Performance Measures • Service level (orders filled when requested) • Inventory turnover (sales/avg. inventory) • Back order fill rate • Inventory accuracy • Time to replenish • Others, such as shrinkage rate

  14. Make-to-Order (MTO) • Start production after customer orders • Advantage: no finished goods inventory • Disadvantage: intermittent production • Key performance measures • Lead time • Orders completed on time (or late) • Quality measures

  15. Assemble-to-Order (ATO) • Produce parts and subassemblies; finish when customer places order • Advantages: less inventory, faster service • Disadvantage: some WIP inventory • Key performance measures • Speed of service • Inventory levels • Quality of product and service

  16. MTS and MTO Comparison

  17. Make-to-Stock (Figure 4.3) Forecast orders customer Production Customer Order Product Product Finished Goods Inventory

  18. Make-to-Order (Figure 4.3) customer Customer Order Product Production

  19. Assemble-to-Order (Figure 4.3) Forecast orders customer Production of Subassemblies Customer order Subassembly Product Inventory of Subassemblies Assembly of the Order

  20. Order Penetration Point(Figure 4.4) MTO MTO ATO MTS ∇------------------∇ ∇∇ Supplier Fabrication Assembly Distribution

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

  22. Process Characteristics Matrix(Table 4.3)

  23. 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.

  24. 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

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

  26. Job Shop Batch Assembly line Continuous PRODUCT-PROCESS MATRIX (Figure 4.5) Unique, one of a kind product Low volume, low standardization Low volume, Multiple products Higher volume few major products High volume, high standardization, commodity Project NONE Building Printing Heavy Equipment Auto assembly NONE Sugar Refinery

  27. 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.

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

  29. 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.

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

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

  32. Cross-Functional Decision Makingor, who has a stake in process choice? • Marketing wants fast response to customer demand • Finance must find the funds to configure the process • HR must provide the properly skilled workers • IT must serve different data requirements • Accounting must be flexible in setting performance measures

  33. Summary • Product-Flow Characteristics • Approaches to Order Fulfillment • Product-Process Strategy • Focused Operations • Mass Customization • Environmental Concerns • Cross-Functional Decision Making

  34. End of Chapter Four

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