McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 1 Process Choices

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 2 Module Objectives Understand the fundamental process choices made by both manufacturing and service organizations Describe the product-process matrix for manufacturing organizations and the service-system design matrix for service organizations Understand the relationships between unit cost, process flexibility, capital investment, worker skill, and technology choice that characterize different aggregate process choices Match strategic goals with appropriate process choices Comprehend the effects of computerized technologies, including the Internet, on traditional product-process relationships

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 3 Elements of Process Choice Process layout Equipment Staffing and training Scheduling and organization of work Information systems Product design

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 4 Process Choices - Example

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 5 Product-Process Matrix LowHighVolume Capital Investment Flexibility Unit Cost Customer Involvement High Project (Software Installation ) Job Shop (Commercial Printer) Batch (Neighborhood Bakery) Line Flow (Bicycle Assembly) Continuous Flow (Brewery) Low

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 6 Projects A project is a unique set of activities. A high degree of customization, a wide scope of activities, a high degree of customer involvement, and the use of primarily generalized tools and equipment characterize projects.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 7 Job Shop Process A job shop process structure provides high flexibility to produce a variety of products in limited volumes. Customization tends to be high, although not as high as for projects, while volume per product is fairly low.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 8 Batch Process A batch process structure is essentially a higher volume job shop, in which the same or similar products are produced repetitively. The variety of products in a batch process is significantly lower than in a job shop process.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 9 Line Flow Process Line flow processes use dedicated resources to produce high volumes of standardized products. The flow of products is organized around a single (or few) product(s).

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 10 Continuous Flow Process Continuous flow processes produce high volumes with low flexibility. They work with nondiscrete items that are not divided into their final packages until the very end of production.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 11 Job shop Batch Assembly line Continuous flow Process Flow Structures

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 12 Manufacturing Process Characteristics

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 13 Service Process Matrix Service Factory Movie Theaters Airlines Hotels Fast Food (Taco Bell) Service Shop Hospitals Auto Repair Gourmet Restaurants Mass Service Retail Stores (Wal-Mart) Wholesalers Schools Professional Service Physicians Lawyers Accountants LowHighCustomer Involvement Low High Labor Intensity

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 14 Service Process Matrix The service process matrix can be classified along the dimensions of customer involvement and labor intensity. Services allow greater customization and customer involvement for the customer.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 15 Layout Types Process layout Product layout Fixed-position layout Hybrid layout

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 16 Layout Types Mixing Rolling Baking Cutting Cleaning Decorating Counter Cookies Bread Cakes Mix Roll/Cut Outer Cookie Bake Apply Filling & Join two outer cookies Package (a) Process Layout - Neighborhood Bakery(b) Product Layout - Oreo Cookie Production Line

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 17 Comparison of Layout Types

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 18 Break-Even Analysis Break-even analysis is a basic mathematical technique that allows a comparison of total costs for different processes. This technique takes the fixed costs and variable costs and finds the break-even point for which the cost of two or more processes are equal in cost.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 19 Break-Even Analysis $0.00 $2, $4, $6, $8, $10, $12, $14, $16, Number of Transactions Total Cost ($) General Software Specialized Software Break-even Quantity Fixed cost = $5,000 Fixed cost = $10,000

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 20 Process Analysis Techniques Flowcharting Simulation From-to charts

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 21 From-to Charts

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 22 Alternative Layouts for Southeastern Hospital

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 23 From-to Chart for Southeastern Hospital Distance Chart

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved. 24 LD (layout 1) = 0*(1) + 20*(2) + 10*(1) + 40*(2) + 50*(3) + 20*(1) + 10*(2) + 25*(1) + 5*(2) + 0*(3) + 15*(2) + 20*(1) + 45*(1) + 5*(2) + 30*(1)= 510 LD (Layout 2)=0*(1) + 20*(2) + 10*(2) + 40*(1) + 50*(1) + 20*(3) + 10*(1) + 25*(2) + 5*(2) + 0*(2) + 15*(1) + 20*(1) + 45*(1) + 5*(3) + 30*(2)= 435 Solution for Southeastern Hospital