Process Selection Chapter 3, Part 2

Intermittent Operations Intermittent operations: processes used to produce a variety of products with different processing requirements at lower volumes Project processes: used to make one-of-a-kind items to customer specifications Batch processes: used to make small quantities of products in batches based on customer orders or specifications Also called job shops

Repetitive Operations Repetitive operations: Processes used to make one product or a few standardized products in high volume Line process – also called an assembly line or flow shop May have assemble-to-order options Continuous process: operates continuously, produces a high volume of a fully standardized product Some firms use more than one type of process

Underlying Process Relationship Between Volume and Standardization

Process Choice and Layout Intermittent operations usually use a process (department) layout: workers & equipment are grouped by function Different products may take different paths through the production process Repetitive operations use a product layout: workers & equipment are grouped in the order in which they will be needed

Process Choice and Inventory Policy

Process Design Tools Process flow analysis is a tool used to analyze and document the sequence of steps within a total process. Usually first step in process reengineering. Process reengineering is the fundamental rethinking and radical redesign of a process to bring about dramatic improvements in performance Cost Quality Time Flexibility Both operations processes and business processes can be re- engineered. Re-engineer a process before you automate it or computerize it.

Process Flow in a Pizza Restaurant

Vertical Integration Vertical integration is the degree to which a firm chooses to perform a variety of operations in the supply chain Backward integration means moving closer to primary raw materials (natural resources) Forward integration means moving closer to customers

Making Low-Volume Products Project or batch process More product variety – may be customized products Production based on customer orders General purpose equipment Higher skilled labor Higher work in process inventory Lower capital costs Higher variable costs Make-to-order or assemble to order inventory policy Low vertical integration Making High-Volume Products Line or continuous process Limited product variety Production based on a sales forecast Special purpose equipment Labor is usually less skilled Lower work in process inventory Higher capital costs Lower variable costs Assemble-to-order or make-to- stock inventory policy High vertical integration

Outsourcing Outsourcing means purchasing goods or services, rather than making them Offshore outsourcing means purchasing goods or services outside the country where they will be sold or used to produce a good or service Decisions about whether to produce or outsource are called make-or-buy decisions

Considerations in Make-or-Buy Decisions Strategic impact Will outsourcing help or hurt the firm's ability to achieve its strategic goals? Outsourcing non-core activities allows the firm to concentrate on its core competency It is usually not wise to outsource a core competency Your capabilities vs. supplier capabilities Available capacity Expertise to produce the good or service Quality Timely production or delivery (speed) Cost

Pure Services vs. Quasi-Manufacturing Services Pure Services High customer contact Customer is involved in the process Often customized Usually labor intensive Facility and business hours must be convenient for customer Facility affects customer perceptions of quality Service design must balance cost & customer service Quasi-Manufacturing Services No direct customer contact Customer is not involved in the process Usually not customized Usually capital intensive Facility location & layout are designed for efficiency. Service can be designed for efficiency but quality must be maintained. Automation is OK if it does not reduce quality.

Mixed Services Front Office High customer contact Workers need "people skills" and job skills Customer is involved in the process Quality and service design issues are similar to those for pure services There must be good communication between the "front office" and the "back office" Back Office No customer contact Workers need job skills Customer is not involved in the process Quality and timeliness are important. Process can be managed for efficiency Customer does not enter "back office"

Service Package The benefits that are purchased as part of the service Physical items Sensual benefits Psychological benefits Sensual and psychological benefits are often order winners The service package must be tailored to the target market.

A Well-Designed Service System is Consistent with the firm’s strategic focus User friendly Robust: quality can be maintained as demand and conditions vary Easy to sustain: workers should not constantly have to overcome obstacles Cost effective Benefits of the service are visible to customers