1. Learning Objectives Distinguish between capacity strategies
Identify and explain economies of scale
Compare and contrast the seven manufacturing process structures
Compare and contrast service process structures
Describe four operations layouts
Use break-even analysis for process selection

2. Class 6: Chapter Five Manufacturing and Service Process Structure
Class Six Plan
Earlier chapter slides on COB faculty homepage
Trimester exam # 1 specs & expectations
News of Note
Anger is not a strategy (Bloomberg)
Lessons of 1984, 1994, and 1996 –Listen t
Some thoughts on 14% poverty rate
Did the rich get richer? How oir will the poor vote?
Stay focus on: jobs, deficits, healthcare and education
Only 4% of college graduates are unemployed
Kentucky tuna anyone
Australian Catholic church bans popular songs from funerals
An Overview of Chapter Five

3. Capacity Planning
Capacity: the amount of output that can be created by, a process, with a given level of resources over a given time period

4. Economies & Diseconomies of scale
Economies of Scale: as volume increases, unit costs decrease to an optimal level
Diseconomies of Scale: unit costs increase as an operation’s size increases
Cost per Unit
Volume (Number of Units)
Diseconomies of Scale
Economies of Scale
Figure 5-1

5. Capacity Planning Decisions
Time Frame (time required for changes)
Limiting Resource
Types of Capacity Change
Examples
Short term (0-6 months)
Low-skilled labor
Over-time, part-time, temporary labor, layoffs
Restaurant wait staff, bank tellers, production line workers
Equipment, space
Rental, leasing
Landscaping equipment, temporary storage
Medium term (6-24 months)
Specialized labor
Hiring, firing, contract labor
Engineers, accountants, machine operators, physicians
Leasing, subcontracting, equipment installation and renovation
Distribution/warehousing, fast-food restaurant rebuild, production line renovation
Long term (2+ years)
Physical plant
New building, outsourcing
Automotive plant open or closure, new office building
Table 5-1

6. Product-Process Matrix
Project
High
Variety
Flexibility
Cost
Low
Mass
Customization
Job Shop
Batch
Repetitive
Process
Cellular
Manufacturing
Continuous
Process
Low Volume High
Figure 5-2
5–6

7. Process Structure and Market Orientation
Engineer to Order (ETO): unique, customized products
Make to Order (MTO): similar design, customized during production
Assemble to Order (ATO): produced from standard components and modules
Make to Stock (MTS): goods made and held in inventory in advance of customer orders

8. Service Process Matrix
Low
High
Service
Factory
Service
Shop
Labor
Customization/Customer Interaction
Low
High
Mass
Service
Professional
Service
Intensity
Figure 5-3
5–8

9. Activity Think of an example of each:
Service Factory
Service Shop
Mass Service
Professional Service
Think of the last service you purchased:
What category was it?
What changes can you suggest to move it to another category?
What could be the advantages of the changes?
5–9

10. Service Blueprinting
Customer actions: all actions done by customers during service delivery
Front office: employee actions in the face-to- face encounter
Back office: behind the scenes activities
Support processes: activities necessary for the service, done by employees without direct customer contact
Physical evidence: tangibles the customers see or collect from the organization
5–10

11. Service Blueprinting
Figure 5-4
5–11

12. Operations Layout
Fixed position: product cannot be moved during production
Process layout: groups together similar resources
Product layout: resources arranged by regularly occurring sequence of activities
5–12

13. Line Balancing in Product Layouts
Used to assign individual tasks to work areas for a desired output rate
Determine precedence relationships
Calculate Takt time
Determine minimum number of work stations = Total of all task times/takt time
Determine efficiency = [sum of all task times/(actual work stations X takt time)] X 100
5–13

14. Line Balancing A B C D E F G Task Predecessors Time (minutes) A
Shape dough
None 2 B
Add pizza sauce 1 C
Add cheese D
Add sausage
0.75 E
Add pepperoni F
Package pizza
D, E
1.5 G
Label package
0.5
Total Time:
8.75 A B C D E F G
5–14

15. Break Even Analysis
Figure 5-4
5–15

16. Manufacturing/Service Process Summary
Strategic capacity decisions include when, where and how much to adjust
Economics/Diseconomies of scale affect costs per unit
Product-process matrix classifies processes based on volume and variety
Service are categorized by customization and labor/capital intensity
Services processes can be front or back office
Layouts should fit with processes used
Process automation affects costs and capabilities
5–16