1. Process Choice and Layout Decisions in Manufacturing and Services
Chapter 3

2. Manufacturing Process Decisions3
Consider the impact of people, facilities and physical layouts, and information systems working together.
Consider the effect of the manufacturing processes on the overall business strategy.
Consider the impact of many different types of manufacturing processes working together.

3. Selecting a Manufacturing Process3
What are the physical requirements of the company’s product?
How similar to one another are the products the company makes?
What are the company’s production volumes?
Where in the value chain does customization take place (if at all)?

4. 1. What are the strategic decision factors for process requirements?3
1. What are the strategic decision factors for process requirements?

5. General Layout Alternatives
Product-oriented layout
Process-oriented layout
Cellular layout

6. General Layout Decisions
The product-oriented layout
Provides resources in a fixed sequence
Matches the sequence of steps required to produce a product or service
Common in high-volume manufacturing

7. Product Oriented Layout
Advantages
Efficient production of standardized goods and services
High processing speed
Low cost per unit
Disadvantages
Lack of flexibility or customization
Employee boredom/ dissatisfaction
Quality problems

8. Process Oriented Layout
Organized by function
Processing steps can be completed in any sequence
Products or customers can take any “route” necessary.

9. Process Oriented Layout
Advantages
Flexibility
and customization
Disadvantages Higher cost per unit Higher skilled, high cost employees Transport/wait time between departments Less consistency

10. Cellular Layouts Cellular layouts
A compromise of product and process layouts
Create “families” of products with similar process requirements
A “cell” contains all resources needed for family

11. Cellular Layouts Advantages
Flexibility greater than a product-oriented layout
Less costly than a process-oriented layout
Less material transport/wait
Fewer changeovers
Disadvantages
Duplication of resources

12. Impact of Volume Requirements
Project – Unique, one-of-a-kind, products or customers. Generally large in size (building a bridge, installing a software system, implementing a major improvement effort)
Job Shop – Predominantly manufacturing, high customization and flexibility, but higher volume than project.
Batch Production – Groups of identical products or customers processed together through one step and then moved together to the next step. More limited product variety, higher production volume.

13. Process Types (continued)
Assembly Line – Narrowly defined processes, made up of equipment with limited flexibility. Much higher volume. Still the possibility of some flexibility.
Continuous Flow (Repetitive)– Equipment and workstations dedicated to a single thing. Very high volume. Very low flexibility. Best chance for automation.

14. Process flow selection and the Product Process Matrix
Tend to be process- oriented
Can be either
Tend to be product- oriented

15. Demand Linkages Manufacturers match output to demand in different ways
Make-to-order (MTO)
Process activated in response to an actual order
May be either standard or custom product
WIP and finished goods inventory kept to a minimum
Tends to have longer response time
Make-to-stock (MTS)
Process activated to meet expected or forecast demand
Customer orders are served from target stocking level
Shorter lead time for stocked items
MUCH longer for out of stock items
Risk of obsolescence, shrink, etc. 4

16. Demand Linkages (Continued)
Assemble-to-order (ATO)
Partially manufactured and held in unfinished state
Customer order dictates final configuration
Quicker response than MTO; More flexible than MTS 4

17. Demand Linkages
Engineer-to-order (ETO) – Products that are designed and produced from the start to meet unusual customer needs or requirements.

18. Choices for Service Providers: The Service System Design Matrix
Customer contact & sales opportunity versus efficiency.
Exhibit 4.7 Service System Design Matrix

19. The Product-Process Matrix3
Based on R. Hayes and S. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984)
Figure 3.5

20. Customization in the Supply Chain3
Figure 3.6

21. © Schmenner and Swink (1998)
Law of Variability 3
The greater the random variability either demanded of the process or inherent in the process itself or in the items processed, the less productive the process is.
© Schmenner and Swink (1998)

22. Customization in the Supply Chain3
When customization occurs early in the supply chain:
Flexibility in response to unique customer needs will be greater.
Lead times to the customer will tend to be longer.
Products will tend to be more costly.

23. Customization in the Supply Chain3
When customization occurs late in the supply chain:
Flexibility in response to unique customer needs will be limited.
Lead times to the customer will tend to be shorter.
Products will tend to be less costly.

24. 2. What are the three dimensions of service manufacturing processes?3
2. What are the three dimensions of service manufacturing processes?

25. How different services are organized and managed3
The service package
The degree of customization
The level of customer contact

26. The service package 3
Includes all value-added physical and intangible activities that a service organization provides to the customer.
The greater the emphasis on physical activities, the more attention will be directed to capital expenditures, material costs, and other tangible assets.
The greater the emphasis on intangible activities, the more critical are the training and retention of skilled employees and the development of the firm’s knowledge assets.

27. Service customization3
Ranges from highly customized to standardized.
As the degree of customization increases, the service package becomes less predictable and more variable.

28. Customer contact 3
Differs from customization – relates to the importance of front-room or back-room operations.
Front Room – The physical or virtual point where the customer interfaces directly with the service organization.
Back Room – The part of a service operation that is completed without direct customer contact.

29. Customer lobbies, bank teller, receptionist
Front Room vs. Back Room 3
Front room – what the customer can see
Managed for flexibility and customer service
Customer lobbies, bank teller, receptionist
Back room – what the customer does not see
Managed for efficiency and
productivity
Package sorting, car repair, blood test analysis, accounting department

30. Managerial Challenges in Service Environments3
Table 3.2

31. 3. Define service blueprinting.

32. Service Blueprinting 3
Service Blueprinting - A specialized form of business process mapping that lays out the service process from the viewpoint of the customer and parses out the organization’s service actions based on:
The extent to which an action involves direct interaction with the customer.
Whether an action takes place as a direct response to a customer’s needs.

33. 3 Service Blueprinting Processes Customer actions Onstage activities
Backstage activities
Support
Separations
Line of interaction
Line of visibility
Line of internal interaction

34. Service Blueprints

35. 4. What are the four layers of service blueprinting?3
4. What are the four layers of service blueprinting?

36. Service Blueprinting Template3
Figure 3.9

37. 5. Define design capacity and protective capacity.3
5. Define design capacity and protective capacity.

38. Design vs. Protective Capacity3
Design Capacity is the capacity a facility is designed to accommodate on an ongoing basis.
Protective Capacity is a layer of capacity above that which is absolutely required to meet known demand.