Process Choice and Layout Decisions in Manufacturing and Services

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 2 Chapter Objectives Be able to:  Describe the five classic types of manufacturing processes.  Discuss how different manufacturing and service process choices support different market requirements.  Explain how different processes can be linked together via the supply chain.  Describe the critical role of customization in manufacturing, including the degree and point of customization, and upstream versus downstream activities.  Discuss the three dimensions that differentiate services from one another and explain the different managerial challenges driven by these dimensions.  Create and interpret a service blueprint.  Position a service on a conceptual model and explain the underlying managerial challenges.  Develop a product-based layout using line balancing and calculate basic performance measures for the line.  Develop a functional layout based on total distance traveled.

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 3 Manufacturing Processes Engineering and business perspectives Classic manufacturing processes Choosing between classic types The role of customization

Engineering and Business Perspectives

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 5 Solid Wood Seat for a Kitchen Chair: Process A Saddle Machine Shaper Machine Sander A Sander B Inspection Setup Time: 6 hours Time/Seat 1.1 min. Yield Rate: 92% Process B 5-Axis Router ---- Sander A Sander B Inspection Setup Time: 10 min. Time / Seat: 3.5 min. Yield Rate: 99%

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 6 Classic Engineering Viewpoint u Four Transformation Processes Conversion  Fabrication  Assembly Testing “Advances in Engineering increase and improve the alternatives available”

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 7 Example: Making Windows Raw lumber Molten glass Frame wood Window panes Assembled Windows ConversionFabricationAssembly

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 8 Business View What conversion steps must be done? What are the production volumes like? How similar are the various products we make (can we standardize)? If the product is customized, how late in the process does it occur?

Classic Manufacturing Processes

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 10 Process Types (in order of decreasing volume) Continuous Flow Production Line Batch (High Volume) Batch (Low Volume) Job Shop Project

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 11 Continuous Flow Large production volumes High level of automation Basic material passed along, converted as it moves Usually cannot be broken into discrete units Usually very high fixed costs, inflexible Oil refinery, fiber formation, public utilities, automotive manufacturing

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 12 Production Line High-volume production of standard products or “design window” Processes arranged by product flow Often “paced” (‘takt’ time discussed later) Highly efficient, but not too flexible

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 13 Batch I Somewhere in between job shop and line processes Moderate volumes, multiple products Production occurs in “batches” Can manufacturing, carton makers, advertising mailers, etc.

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 14 Batch II Layout is a cross between that found in a line and that found in a job shop: Group Technology

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 15 Some Examples of Batch Manufacturing Numerical control (NC) machines –Automated processing of entire batch –Machining center - multiple NC machines Flexible manufacturing systems (FMS) –Dedicated to families of parts –NC and automated handling Group technology –Similar in concept to FMS, but not as much automation

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 16 Job Shop Low volume, one-of-a-kind products Job shops sell their capability Highly flexible equipment, skilled workers Equipment arranged by function

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 17 Project Used when a product is: –one-of-a-kind –too large to be moved Resources moved to where needed Equipment, people, etc. are highly flexible Finite duration, often with deadline Construction projects, equipment installation

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 18 Mixing Together the Process Types  Hybrid Process Spindles Arms and Legs Seats BATCH for fabricating parts... ASSEMBLY LINE for putting together final product

Choosing Between Classic Types The product-process matrix Product and process life cycles

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 20 Comparing Process Types... Job ShopBatchLine VolumeVery LowHigh VarietyVery HighLow SkillsBroadLimited AdvantageFlexibilityPrice and Delivery

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 21 Product – Process Matrix One of a Kind Low Volume Multiple Products Moderate Volumes Few Major Products High Volume Commodity Products Job Shop Batch Line Very Poor Fit

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 22 Life-Cycle Planning Framework

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 23 Introduction Stage Availability key to market success but: No reliable movement history Unreliable forecasts Small shipments Erratic orders

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 24 Life-Cycle Planning Framework High product availability Flexibility to handle variation

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 25 Growth Stage Sales somewhat more predictable Higher volumes Performance emphasis?...

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 26 Life-Cycle Planning Framework Availability Achieve break- even volumes as soon as possible Less need for flexibility

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 27 Maturity Stage Intense competition around more standardized products Frequent price and service adjustments Implications...

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 28 Life-Cycle Planning Framework More selective, targeted efforts Value-added service

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 29 Decline Stage (Obsolescence) Product close-out or restricted distribution Lowest cost / differentiated performance not as critical anymore Priorities?

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 30 Life-Cycle Planning Framework Centralized inventory Speed

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 31 Implications What happens to process choices as companies follow products through their life cycles? What happens to process choices when companies support products at various stages of the life cycle?

The Role of Customization

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 33 What is “Customization”? An operations-centric view: “Customization occurs when a customer’s unique requirements directly affect the timing and nature of operations and supply chain activities”

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 34 Customization Point Model I Definitions: ETO – engineer to order MTO – make to order ATO – assemble-to-order MTS – make to stock Upstream: before the customization point, “off-line” activities Downstream: after the customization point, “on-line” activities

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 35 Make-to-Order Windows Off-line Activities Design Buy Materials Fabricate parts Assemble Ship windows On-Line Activities Lead times? Customizability? Price? What type of manufacturing? Sell windows

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 36 Customization Point Model II Manufacturing Systems Design UpstreamDownstream Performance objectives Technology Investment Organization structure Job differentiation Integration Discretion Efficiency Productivity, consistency Mechanistic High Formal Low Responsiveness Flexibility Organic Low Informal High

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 37 Difficulty versus Customization

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 38 Customization Job Difficulty Job Routineness Operations and Supply Chain Design An Operations-Centric View Customization becomes relevant to operations and supply chain managers when a customer’s unique requirements directly affect the timing and nature of operations and supply chain activities

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 39 “Mass customization” at Japan’s National Bicycle Co. 2-WEEK LEAD TIME

Law of Variability The earlier customization is introduced in the supply chain, the greater the random variability of the process and the lower its productivity

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 41 Services What makes them distinctive? High-contact versus low-contact Front room versus back room Service Blueprinting

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 42 Services... Process and “product” are inseparable Marketing and sales often tightly integrated Customer often part of the process Performance metrics can be harder to define Nevertheless: –Focus and process choices / trade-offs still apply

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 43 Degree of Customer Contact Low Contact “off-line” Can locate for efficiency Can smooth out the workload Check clearing, mail sorting High Contact “on-line” Can locate for easy access Flexibility to respond to customers Harder to manage Hospitals, food service

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 44 Classifying Services “Front Room” versus “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

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 45 What is it? What is the performance objective? Restaurant kitchen Software help desk Kinko’s copy center Airline reservations Jet maintenance

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 46 Designing Services Selecting a service focus –Like manufacturing processes, different services have strengths and weaknesses Key is to design a service process that meets the needs of targeted customers The “service package”

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 47 Service Blueprinting Processes Customer actions Onstage activities Backstage activities Support Separations Line of interaction Line of visibility Line of internal interaction

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 48 Service Blueprint Template (Note similarity to ‘swim lane’ in Chapter 3?)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 49 A Cubical Model of Services (Three Dimensions) Nature of the Service Package Primarily Physical Activities (Airline, trucking firm) Primarily Intangible Activities (Law firm, software developer) Degree of CustomizationLower Customization (Quick-change oil shop) Higher Customization (Full-service car repair shop) Degree of Customer Contact Lower Contact (Mail sorting) Higher Contact (Physical therapist)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 50 Community Hospital Public Hospital

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 51 Birthing Center Public Hospital

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 52 Layout Decision Models Product-based layout –Usually best for a line operation –Cycle time a primary measure Functional layout –Usually best for a job shop –Distance between steps a measure Cellular layout –Usually best for batch processes

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 53 Product-Based Layout Line Balancing Improve ‘Takt’ time: –Use minimum number of workstations –Reduce idle time –Reduce setup time –Reduce unnecessary movement –Identify ‘bottlenecks’

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 54 Process Layout Steps 1)Identify all steps, their relationships, and times required. 2)Draw a precedence diagram 3)Determine takt time (time available divided by desired output rate) 4)Determine minimum number of workstations required (total process time divided by takt time) 5)Assign tasks to workstations according to precedence and total time for each to not exceed takt time. 6)Evaluate solution for times per workstation, % idle time, and efficiency delay (100% - % idle time)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 55 Precedence Diagram Example (with workstation task assignments)

© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: Chapter 7, Slide 56 Functional Layout Improvement A.Minimize the total distance traveled Determine distances between functional units Determine numbers of interactions between units Multiply distances times respective number of interactions Revise original layout for minimum total distance after first locating functions best for process material flows B.Minimize information flow for decisions C.Use electronic data interchange (EDI) to allow more flexibility for accomplishing A and B

Case Study in Manufacturing and Service Processes Loganville Window Treatments