Process Choice and Layout Decisions in Manufacturing and Services Chapter 3

Manufacturing Process Decisions 3 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.

Selecting a Manufacturing Process 3 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)?

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

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

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

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

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

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

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

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

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.

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.

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

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

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

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

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

The Product-Process Matrix 3 Based on R. Hayes and S. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984) Figure 3.5

Customization in the Supply Chain 3 Figure 3.6

© 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)

Customization in the Supply Chain 3 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.

Customization in the Supply Chain 3 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.

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

How different services are organized and managed 3 The service package The degree of customization The level of customer contact

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.

Service customization 3 Ranges from highly customized to standardized. As the degree of customization increases, the service package becomes less predictable and more variable.

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.

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

Managerial Challenges in Service Environments 3 Table 3.2

3. Define service blueprinting.

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.

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

Service Blueprints

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

Service Blueprinting Template 3 Figure 3.9

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

Design vs. Protective Capacity 3 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.