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

2. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 2 Manufacturing Process Decisions  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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 3 Selecting a Manufacturing Process  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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 4 1. What are the strategic decision factors for process requirements?

5. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 5 4- 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. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 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

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

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

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12. 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

13. 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

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15. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 15 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.

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17. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 17  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 Types (continued)

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19. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 19 Process flow selection and the Product Process Matrix Tend to be product- oriented Can be either Tend to be process- oriented

20. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 20  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. Demand Linkages

21. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 21 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

22. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 22 Demand Linkages  Engineer-to-order (ETO) – Products that are designed and produced from the start to meet unusual customer needs or requirements.

23. 4- 23 Exhibit 4.7 Service System Design Matrix Choices for Service Providers: The Service System Design Matrix Customer contact & sales opportunity versus efficiency.

24. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 24 The Product-Process Matrix Based on R. Hayes and S. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984) Figure 3.5

25. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 25 Customization in the Supply Chain Figure 3.6

26. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 26 Law of Variability 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)

27. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 27 Customization in the Supply Chain  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.

28. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 28 Customization in the Supply Chain  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.

29. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 29 2. What are the three dimensions of service manufacturing processes?

30. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 30 How different services are organized and managed  The service package  The degree of customization  The level of customer contact

31. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 31 The service package  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.

32. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 32 Service customization  Ranges from highly customized to standardized.  As the degree of customization increases, the service package becomes less predictable and more variable.

33. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 33 Customer contact  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.

34. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 34 Front Room vs. Back Room  Back room – what the customer does not see  Managed for efficiency and productivity Package sorting, car repair, blood test analysis, accounting department  Front room – what the customer can see  Managed for flexibility and customer service Customer lobbies, bank teller, receptionist

35. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 35 Managerial Challenges in Service Environments Table 3.2

36. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 36 3. Define service blueprinting.

37. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 37 Service Blueprinting  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.

38. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 38 Service Blueprinting Processes  Customer actions  Onstage activities  Backstage activities  Support Separations  Line of interaction  Line of visibility  Line of internal interaction

39. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 39 Service Blueprints

40. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 40 4. What are the four layers of service blueprinting?

41. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 41 Service Blueprinting Template Figure 3.9

42. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 42 5. Define design capacity and protective capacity.

43. Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall3 - 43 Design vs. Protective Capacity  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.