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IPPTChap004.pdf
Chapter 4:
Process Selection
Operations Management in the
Supply Chain: Decisions and Cases,
6th edition
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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Chapter 4 Outline
• Product-Flow Characteristics
• Approaches to Order Fulfillment
• Process Selection Decisions
• Product-Process Strategy
• Focused Operations
• Mass Customization
• Environmental Concerns
• Cross-Functional Decision Making
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Product-Flow Characteristics
Types of Product Flow
• Continuous process
• Assembly line
• Batch flow
• Job shop
• Project
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Product-Flow Characteristics
Continuous Process
• Highly standardized and automated
• Flexibility limited
• High volumes of production
• Commodity products
• Low cost is the ‘Order Winner’
• Process industries (sugar, paper, oil, electricity, etc.)
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Product-Flow Characteristics
Assembly Line • Linear sequence of operations (often paced)
• Large capital investment, use of automation
• Very efficient
• High-volume, standardized products
• Inflexibility in product and volume
• Discrete products (autos, appliances, computers, etc.)
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Assembly Line: Metal Bracket (Figure 4.1)
paintdrill bend
Task or work station
Product flow
cut
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Product-Flow Characteristics
Batch Flow • Production of batches or lots
• Batches flow as a unit (set) from one work center to
another
• Process layout of work centers (by tasks)
• Flow is jumbled and intermittent
• Flexible labor and equipment (general purpose)
• Low volume, variety of products
• Many types of products (furniture, dishes, boats)
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Batch Flow: Three Metal Brackets (Figure 4.2)
Cut Paint
Task or work station Product flows
Bend
Drill
Batch A Batch B
Batch C
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Product-Flow Characteristics
Job Shop
• Customized to customer order
• Production of small batches or lots
• Layout/Flow similar to Batch Flow
• Flexible labor and equipment (general purpose)
• Many different types of made-to-order products (plastic
parts, machine components, sheet metal parts, custom
signage, etc.)
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Product-Flow Characteristics
Project • Production of customized single products
• Labor and materials brought to site
• Planning, scheduling challenges
• Little automation, general purpose equipment
• Highly skilled and flexible labor
• Unique, one of a kind products (bridges, building
construction, large aircraft, etc.)
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Throughput Ratio: Process efficiency
TR = Total processing time for the job
Total time in operations X 100%
Typically:
90-100% in Continuous Process and Assembly Line
10-20% in Batch Flow and Job Shop
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Approaches to Order Fulfillment
• Make-to-Stock (MTS)
• Make-to-Order (MTO)
• Assemble-to-Order (ATO)
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Make-to-Stock (MTS) • Produce finished goods
• Customer buys from inventory
• Advantage: faster fulfillment of customer demand, lower
cost, smooth production rate
• Disadvantage: inventory costs
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Make-to-Stock (Figure 4.3)
Customer
Forecast orders
Production
Finished goods
inventory
Product
Customer Order
Product
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MTS Performance Measures
• Service level (orders filled when requested)
• Inventory replenish time
• Inventory turnover (sales/avg. inventory)
• Capacity utilization
• Time to fill back order
• Others, such as shrinkage rate
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Make-to-Order (MTO)
• Start production after customer orders
• No finished goods inventory
• Advantage: higher flexibility to customize order; no
finished goods inventory costs
• Disadvantage: intermittent production (i.e., lumpy
demand pattern)
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Make-to-Order (Figure 4.3)
customer
Production
Product
Customer Order
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MTO Performance Measures
Lead time
Orders completed on time (%)
– Customer request date
– Promise date
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Assemble-to-Order (ATO)
• Produce parts and subassemblies; complete
production when customer places order
• Advantage: less finished goods inventory, faster fulfillment of customer order
• Disadvantage: work-in-process inventory
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Assemble-to-Order (Figure 4.3)
Customer
Forecast orders
Production of
subassemblies
Inventory of
subassemblies
Customer order
Product
Assembly of
the order
Subassembly
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MTS and MTO Comparison
Characteristics Make-to-Stock Make-to-Order
Product Producer-specified
Low variety
Inexpensive
Customer-specified
High variety
Expensive
Objectives Balance inventory,
capacity, and service
Manage delivery lead
times and capacity
Main operations
problems
Forecasting
Planning production
Control of invenntory
Delivery promises
Delivery time
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Order Penetration Point (Figure 4.4)
DistributionAssemblyFabricationSupplier
MTO MTO ATO MTS
∇------------------∇ ∇ ∇
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Process Selection Decisions
• Process characteristics (product when, produce how)
• MTS vs. MTO/ATO
• Continuous/Assembly Line, Batch/Job Shop, Project
• Factors affecting process choice
• Market conditions
• Capital requirements
• Availability and cost of labor
• State of technology
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Process Characteristics Matrix (Table 4.3)
Characteristics Make-to-Stock Make-to-Order
ATO
Continuous and
Assembly
Line Flow
Automobile assembly
Oil refinery
Cannery
Cafeteria
Automobile assembly
Dell computers
Motorola pager
Fast food
Batch and Job Shop
Machine shop
Wine
Glassware factory
Costume jewelry
Machine shop
Restaurant
Hospital
Custom jewelry
Project
Speculation homes
Commercial paintings
Noncommissioned art
Buildings
Movies
Ships
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Product-Process Strategy • Strategy must consider product characteristics process
capabilities.
• Product life cycle:
• Often begins in Job Shop, then Batch Flow, then
Continuous/Assembly Line.
• Example: Bread was first produced in traditional
bakeries, now in modern automated bakeries.
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Product Life Cycle Stages
1. Unique, one of a kind
2. Low volume, low standardization
3. Low-moderate volume, multiple products
4. Higher volume, few major products
5. High volume, high standardization, commodity
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Product-Process Matrix (Figure 4.5) Low volume, low standardization
Printing
Heavy Equipment
Auto assembly
Sugar Refinery
Low volume, Multiple products
Higher volume few major products
High volume, high standardization,
commodity
Job Shop
Batch
Assembly line
Continuous NONE
NONE
Unique, one of a kind product
Project Building
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Focused Operations
• Attempting to accomplish too many goals at one
plant/facility brings lack of focus.
• Example: Product/services proliferation, with various
volumes and levels of standardization.
• Focused facility: Meeting one set of goals.
• Plant-within-a-plant (PWP): Separate products/services
with differing goals by production lines/areas in the same
facility.
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Types of Focus
• Product focus
• Process type
• Technology
• Volume of sales
• Make-to-stock and make-to-order
• New products and mature products
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Mass Customization • Strategy to provide products in lot sizes = 1, in high
volume.
• Made possible by flexible manufacturing.
• Traditional mass production provides economies of scale.
• Mass Customization means high product variety from a single process, to achieve economies of scope.
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Forms of Mass Customization
• Modular production & ATO
• e.g., assembling modules for Dell computers
• Fast changeover
• e.g., zero set-up time at Motorola
• Postponement of options
• e.g. power supply for Hewlett-Packard printers
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Environmental Concerns • Technologies for pollution prevention
• Technologies for pollution control
• Infrastructure Systems for pollution practices
• Other concerns
• Recycling outputs
• Recycled inputs
• Remanufacturing
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Cross-Functional Decision Making: Who has a stake in process choice?
• Marketing wants fast response to customer demand
• Finance provides funds to configure the process
• HR finds/creates the properly skilled workers
• IT serves various data requirements
• Accounting evolves in setting performance measures
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Chapter 4 Summary
• Product-Flow Characteristics
• Approaches to Order Fulfillment
• Process Selection Decisions
• Product-Process Strategy
• Focused Operations
• Mass Customization
• Environmental Concerns
• Cross-Functional Decision Making
