1. Supply Chain Management Principles
LB 5: Manufacturing and Service Operations Overview

2. LB Objectives
Understand the significance of Manufacturing & Sales Operations (M&SO) in the supply chain process
Explain the difference between manufacturing and sales service operations
Discuss product life cycles
Identify three different types of operational decisions
Recognize the role of quality
LO1

3. Manufacturing & Sales Operations (M&SO)
The supply chain element of manufacturing and service operations is accountable for management, resources, and processes that provide saleable products and services
Manufacturing operations apply labor, materials, and equipment to produce tangible items
Service Operations apply labor, tools and equipment, including spare parts to provide a service that is not tangible and cannot be placed in inventory
M&SO is a critical link in the supply chain and is dependent on demand planning, procurement, inventory management, and warehouse operations
LO2

4. What is a process?
A process is a set of individual activities that are combined to produce products and services
Manufacturing routing – The overall process plan to make an item based on several individual processes
Manufacturing routing consists of:
Inputs; Outputs; Controls; Resources
Example: Routing for baking cookies:
Inputs = Ingredients; Outputs = Cookies
Controls = Recipe; Resources = Oven & labor
LO1

5. Process Structures
Product-process matrix – Has five process structures used to plan product outputs
Project Process – High variety and low volume with few products made e.g. custom homes
Job Shop Process – Medium-to-low-volume and medium-to-high variety such as auto repair shops
Batch Process – Medium volume and medium variety, such as bakeries
Repetitive Process – High-volume and medium-to-low variety, such as automotive assembly
Continuous Process – High volume and low variety, such as bottling factories
LO1

6. Product Life Cycles
Product life cycle - Progression of manufactured goods
Businesses change and adapt their operational capabilities based on the 4 segments or phases of the product life cycle:
Introduction – Involves months and years of market evaluation, product designs, testing, packaging & SCM
Growth – Product sales expand. Changes to design, manufacturing processes & quality evolve to maximize revenue stream. Supply chain & manufacturing is monitored
Maturity – Product demand is stable. Focus on cost reduction, efficiency & competition
Decline – Attempt to keep customers interested
LO2

7. Product Life Cycle The time for each phase can vary dramatically
Smartphones move from introduction to decline in months
Cereals – demand stabilizes when the product matures
Operations managers use product life cycle information to plan and adapt supply chain processes
LO2

8. Manufacturing & Service Operations (M&SO)
M&SO manages the process by which inputs are converted to provide a product or service
In the U.S., more people work for service-providing companies than for manufacturing companies
Output of manufacturing operations is tangible and can be placed in inventory
Output of service operations is not tangible and cannot be placed in inventory
Service operations include automotive technicians and repair personnel
Manufacturing and service operations are not always separate. They can be used together to provide products and services to end users
LO3

9. Independent and Dependent Demand
Finished goods that are sold are known as independent demand. The demand is created outside the company
Independent demand creates demand for additional finished goods to be manufactured which creates dependent demand for raw materials
Bill of Materials (BOM) – lists the dependent demand parts and components required to assemble the final product
The BOM is often used by repair technicians in the service industry to troubleshoot defective parts
LO1

10. Defining How Products Are Sold
Production approaches are used to align production with customer expectations
Engineer-to-order (ETO): Long lead times, high customization and expensive. Orders are placed in advance (Project or shop). Design begins after order is placed
Make-to-order (MTO): Larger class of customers with customization. Pre-ordered products. Most design is complete with parts in inventory
LO5

11. Defining How Products Are Sold
Assemble-to-order (ATO): Assembled from standardized parts. Options for buyers to customize the products. Repetitive process structure
Make-to-stock (MTS): Goods are mass produced to be kept in inventory. Demand forecast is used to estimate production requirements e.g. products in the mature stage. Repetitive and continuous process is used e.g. books, patio furniture, & clothing
LO5

12. Defining How Services Are Offered
Service operations (car wash, repair shop) require interaction with the customer. Service types:
Service Factory: Low labor costs, low customization, low customer interaction e.g. hotels, trucking companies, & airlines.
Customer Traits: Price-shopping
Service Shop: Low labor costs, high customization and high customer interaction e.g. auto repair shops
Issues for operations managers: Staying current with technology and scheduling
LO5

13. Defining How Products Are Sold
Mass Service: High labor costs, lower customization and lower customer interaction e.g. retail banks. Operations managers focus on improving service times and automation
Professional Service: High labor costs. High customization and high customer interaction. E.g. accountants, consultants, doctors and lawyers. These service providers are highly educated and provide services that are time consuming.
LO5

14. Manufacturing and Service Quality
Organizations invest tremendous resources on product quality
The Malcolm Baldrige Quality Award is a national award that recognizes superior quality and performance excellence. It is presented by the National Institute for Standards and Technology
Total Quality Management (TQM) refers to designing processes that produce consistent quality
Six Sigma enhances process output quality by identifying reasons for poor product output
LO5