2. McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved PROCESS SELECTION Chapter 4

3. 4-2 Chapter Outline Product-Flow Characteristics Classification by Type of Customer Order Process Selection Decisions Product-Process Strategy Focused Operations Mass-customization Cross Functional Decision Making

4. 4-3 Product-Flow Characteristics Types of Product Flow –Line Flow –Batch Flow –Project Flow Characteristics of Flows (see Table 4.1)

5. 4-4 Line Flow (metal bracket, see fig. 4.1) paintdrillbend Task or work station Product flow cut

6. 4-5 Batch Flow (three metal brackets, see fig. 4.2) Cut Paint Task or work station Product flows Bend Drill Batch A Batch B Batch C

7. 4-6 Classification by Type of Customer Order Make to Stock (MTS) Make to Order (MTO) Assemble to Order (ATO)

8. 4-7 Make to Stock (MTS) Produce finished goods; customer buys from inventory Advantage: smooth production Disadvantage: inventory Key performance measures (next slide)

9. 4-8 MTS Performance Measures Service level (orders filled when requested) Inventory turnover (sales/avg. inventory) Back order fill rate Inventory accuracy Time to replenish Others, such as shrinkage rate

10. 4-9 Make to Order (MTO) Start production when customer orders. Advantage: no finished goods inventory Disadvantage: intermittent production Key performance measures –Lead time –Orders completed on time (or late) –Quality measures

11. 4-10 Assemble to Order (ATO) Make parts and subassemblies; finish when customer places order. Advantages: less inventory, faster service Disadvantage: some WIP inventory Key performance measures –speed of service –inventory levels –quality of product and service

12. 4-11 MTS and MTO Comparison

13. 4-12 Make-to-Stock (Figure 4-3) customer Forecast orders Production Finished Goods Inventory Product Customer Order Product

14. 4-13 Make-to-Order (Figure 4-3) customer Production Product Customer Order

15. 4-14 Assemble-to-Order (Figure 4-3) customer Forecast orders Production of Subassemblies Inventory of Subassemblies Customer order Product Assembly of the Order Subassembly

16. 4-15 Process Selection Decisions Process characteristics matrix Factors affecting process choice

17. 4-16 Process Characteristics Matrix (Table 4.3)

18. 4-17 Factors Affecting Process Choice Market conditions and competition Capital requirements Labor supply and cost State of technology

19. 4-18 Product-Process Strategy Strategy must consider not only the product or service, but also how to produce it. As many industries move through their product life cycles, they also move through a process life cycle. e.g. the traditional bread bakery vs. the modern automated bakery.

20. 4-19 Product Life Cycle Stages  Low volume-low standardization, one of a kind  Multiple products, low volume  Few major products, higher volume  High volume-high standardization, commodity product

21. 4-20 Process Life Cycle Stages  Jumbled flow (job shop)  Disconnected line flow (batch)  Connected line flow (assembly line)  Continuous flow

22. 4-21 PRODUCT-PROCESS MATRIX (Figure 4.4) I Low volume-low standardization, one of a kind Commercial Printer Heavy Equipment Automobile assembly Sugar Refinery II Multiple products, low volume III Few major products higher volume III High volume-high standardization, commodity products PRODUCT STRUCTURE (Product Life Cycle) PROCESS STRUCTURE (Process Life Cycle) I Jumbled flow (job shop) II Disconnected line flow (batch) III Connected line flow (assembly line) IV Continuous flow NONE

23. 4-22 Focused Operations Company may have products or services with different volumes and levels of standardization. Mixing them in the same operation can cause significant problems. Focus involves separating different products or services in the same facility into PWPs.

24. 4-23 Types of Focus Product focus Process type Technology Volume of sales Make-to-stock and make-to-order New products and mature products

25. 4-24 Mass Customization Possible because of flexible manufacturing Based on economies of scope instead of economies of scale, i.e. a high variety of products from a single process.

26. 4-25 Forms of Mass Customization Mass-customized services (e.g. Hertz) Modular production & ATO (e.g. Dell) Fast changeover (e.g. Motorola) Postponement (e.g. Hewlett-Packard)

27. 4-26 Cross-Functional Decision Making or, who has a stake in process choice? Marketing wants fast response to customer demand Finance must find the funds to configure the process HR must provide the properly skilled workers IT must serve different data requirements Accounting must be flexible in setting performance measures

28. 4-27 Summary Product-Flow Characteristics Classification by Type of Customer Order Process Selection Decisions Product-Process Strategy Focused Operations Mass-customization Cross Functional Decision Making

29. 4-28 End of Chapter Four