Chapter 4

R. Dan Reid
and Nada R. Sanders, P=66

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  Process Selection
 Service Process Design
 Choice of Technology
 Process-Flow Analysis

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 • Process is any part of an organization that
takes input and transform them into output
that, it is hoped, are of greater value to the
organization than the original input.
• Process selection refers to the way an
organization chooses to produce its goods or
provide its services.
• Process selection often requires engineering
expertise. U.S operations managers Vs
Japanese managers.
– Many Japanese managers have engineering
backgrounds

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 • Types of Product Flow
– Continuous process=little or no processing
variety, eg. Sugar, pepsi
– Line Flow/repetitive/ assembly line flow=with
small variety, eg. Automobiles
– Batch Flow/intermittent flow=tend to have high
to moderate processing variety range, eg. Many
food items
– Job shop=small quantities produced and jobs
change job to job.
– Project Flow= to handle non-routine jobs having
complex set of activities.

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 WS 1 WS 2 WS 3

WS Task or work station

Product flow

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 WS 2 WS 4

WS 1 WS 3 WS 5

WS Task or work station

Product flows

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 Task 2 Task 4

Start End

Task 1 Task 3

Task Task or activity

Precedence relationship

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  Make to Stock (MTS)-items that are completed
and placed in stock before the customer’s order
is received.
 Make to Order (MTO)-completes the end item
after receipt of the customer’s order.
 Assembly to order (ATO)-the company
produces standard-design, optional modules
ahead of time and assembles a particular
combination of these modules after the
customer orders it.

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  Produce finished goods; customer buys from
inventory
 Advantages: smooth production
 Disadvantage: inventory, nonflexibility for
customization
 Key performance measures (next slide)
 Information flow (see Figure 4.3&4.4)

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  Service level (% of time orders filled when
requested)
 Inventory turnover (sales/avg.inventory)
 Back order fill rate
 Inventory accuracy
 Time to replenish/refill
 Others, such as shrinkage rate/reduction
rate

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 • Start production when customer orders.
• Advantages: no finished goods inventory,
flexibility for customization
• Disadvantage: intermittent production
• Key performance measures when MTO
approach is used:
– Lead time: the period of time between the initial phase of
a process and the emergence of results, as between the
planning and completed manufacture of a product. Total
time required to manufacture an item.
– Orders completed on time (or late)
– Quality measures
• Information flow (see Figure 4.4)

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  Make parts and subassemblies; finish when
customer places order.
 Advantages: less inventory, faster service
 Disadvantage: some WIP inventory
 Key performance measures
 Speed of services
 Inventory levels
 Quality of product and service

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 Characteristics Make-to-Stock Make-to-Order
Product Producer-specified Customer-specified
Low variety High variety
Inexpensive Expensive

Objectives Balance inventory, Manage delivery lead

capacity, and service times and capacity

Main operations Forecasting Delivery promises

problems Planning production Delivery time
Control of invenntory

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 Information-flow Comparison
Make-to-Stock (Figure 3-4)
Forecasted
Orders

Sales
Master Schedule
(Shipments)

Accounts
Bill of Materials
Receivable

Production
Schedule
General Inventory
Ledger Control

Purchasing

Cost of Accounts
Sales Payable

Labor

Production

MAKE-TO-STOCK
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 Information-flow Comparison
Make-to-Order (Figure 4-4)
Actual
Orders

Sales
Master Schedule
(Shipments)

Bill of Materials

Accounts
Receivable

Production
Schedule

General
Ledger

Purchasing

Cost of Accounts
Sales Payable

Labor

Production

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MAKE-TO-ORDER
  Process characteristics matrix (Table 4.3) =next
slides
 Factors affecting process choice =next slides

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 Make-to-Order
Characteristics Make-to-Stock
Assemble-to-Order
Oil refinery Automobile assembly
Flour milling line
Line Flow Cannery Telephone company
Cafeteria Electric utility
Machine shop Machine shop
Fast food Restaurant
Batch Flow Glassware factory Hospital
Furniture Custom jewelry
Speculation homes Buildings
Commercial painting Movies
Project Ships
Portraits

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  Market conditions and competition
 Capital requirements
 Labor supply and cost
 Management skills
 Materials supply and cost
 State of technology for both process and pdt

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  Strategy must consider not only the product
or service, but also how to produce it.
 As many industries move through their pdt
life cycles, they also move through a process
life cycle. E.g. the traditional bread bakery
Vs the modern automated bakery.

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  Product-Process Matrix (see Figure 4-5)
 Modified Product-Process Matrix (see Figure 4-
6)=last slide
 Product Life Cycle (PLC) stages
 Process Life Cycle stages
 Cross functional decision making and product-
process strategy

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  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 plant within a
plant (PWP).

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  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.

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  Mass-customized services (e.g.Hertz)
 Modular production & ATO (e.g. Dell)
 Fast changeover (e.g. Motorola)
 Postponement (e.g. Hewlett-Packard)

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 Source: Adapted from Robert Hayes and Steven Wheelwright, Restoring the Competitive Edge Competing
through Manufacturing (New York, John Wiley & Sons, 1984), p. 209.
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 The End!

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