Ch. 4 Process Selection

economies of SCOPE

-high variety of products from a single process

make-to- order (MTO)

-higher flexibilty for product customization - Assemble to order is a hybrid of both MTS and MTO -order fulfillment begins with the customer order -measured by lengths of time it takes to design, make and deliver product aka *LEAD TIME* -measured by percentage of orders completed on time

2.) Assembly Lines

-make 1 or a few products -inflexible equip and labor -assembly line flow is a linear sequence -they make discrete products like cars, fridges, computers, printers AKA mass-produced consumer products -very efficient, very inflexible just like continuous process -requires lots of $ and high volume to justify investment --TRs of 90% - 100% means value is actively being added

4.) Job Shop

-make products to customer order by using a process layout - it is a special case of BATCH process -product made in batches (small) but is CUSTOM made to order -jumbled flow -higher costs and lower standardization than batch -TRs of 10% - 20% means most of its time is spent waiting to be processed rather than actually being processed ex: plastic parts, machine components, electronic parts, sheet metal parts

Cross-Functional Decision Making

-marketing; work with ops to ensure that both current and future market demands can be met, stimulate demand -finance: role in process selection b/c of capital required. -HR: role in providing the human capital that is consistent with the process selection choices -Information systems and Accounting: diff processes have diff performance measures and diff data requirements

3.) Batch Flow

-produced in batches or lots -work centers (a group of similar machines) are used to make the product -uses general purpose machines = NOT specialized - can make MANY diff products and has more variety than an assembly line -flow is jumbled and intermittent NOT sequential -labor is more skilled -MORE flexible than assembly lines -they can handle low-volume orders -high inventories are common b/c jobs wait in line to be processed= loss of efficiency -used when: volume is NOT high or there are many diff products -TRs of 10% - 20% means most of its time is spent waiting to be processed rather than actually being processed

Process Selection

-strategic in nature -requires: long term perspective and cross-functional coordination -decisions are capital intensive and not easily changed

5.) Project

-unique/creative products ex: concerts, building construction, aircrafts -product doesnt flow in a project since materials/labor are brought to the project site -difficult planning and scheduling probs -hard to automate -high skilled labor -high cost ex: Boeing

4 factors influence process selection

1.) Market Conditions 2.) $$$ needed 3.) labor 4.) Techno

2 main classifications of Process Selection

1.) classified by the product flow AKA assembly line, batch, job shop 2.) classified by the type of order fulfillment: made-to-order OR made-to-stock

5 types of Product Flow:

1.) continuous process 2.) assembly line 3.) batch 4.) Job shop 5.) project *table on page 67*

3 forms of mass customizations

1.) modular production and ATO 2.) Fast changeover (zero setup time btw orders) 3.) Postponment of options

Environmental concerns

1.) pollution prevention 2.) pollution control 3.) pollution practices

process layout

Batch flow uses *process layout* which is when machines and labor are organized by process types into work centers. ex: high school classroom organzied according to subject

6 types of Focus`

VMNTPP 1.) volume of sales 2.) make to stock and make to order 3.) new products and mature products 4.) Technology 5.) product focus 6.) process type

risk in order from highest to lowest

assembly line, batch, and project

Product- Process Matrix

created by Hayes and Wheelwright -describes the dynamic nature of product and process choices. -horizontal: the product dimension is the life cycle of a typical product ranges from: unique, one of a kind to a high vol and standardized product -evolves from left to right -Vertical: various processes that could be used. *pg. 74* eX: handheld calculators stay in the low volume, high variety, and high priced calculators

Plant within a plant (PWP)

each product has a process for one product or product line separately from other processes within the same facility.

Process Selection Decisions

first- company should consider market conditions second-company should consider capital requirements third- consider the availability and cost of labor finally- consider the state of technology for both process and product

Fast Changeover

form of mass customization. Motorola uses this for its pager. -production is computer controlled and each order is identified by a bar code that specifies customers options

assembly line

high volume products that are standardized ex: cars

Assemble - to - order

hybrid of MTO and MTS. the subassemblies are made to stock but the final assembly is made to order. -ATO builds subassemblies in advance of demand ex: Subway uses ATO

1.) pollution prevention

investments to reduce or eliminate pollutants from the production process. ex: using solar power vs. coal

batch or job process

low volume customized products ex: wine making or tailor shop

economies of scale

mass PRODUCTION is built on econ. of scale. which means a high vol of standardized product with few options. -with MORE production comes the LOWER average unit cost.

throughput ratio (TR)

measures the efficiency of a process TR = total processing time for the job / total time in operations X 100%

1,) Continuous Process

process industries such as sugar, paper, oil and electricity. -continuous output -highly standardized w/ high volumes of production -usually liquids or semisolids -usually makes commodity products -low cost is the winner b/c it is hard to differentiate -minimizes inventory and distrib costs -HARD to change product mix or product type -TRs of 90% - 100% means value is actively being added

Mass customization

provide products in lots sizes of one in high volume - possible b/c of modern tech, robotics, modular design and the internet -built on economies of SCOPE -a common process rather than a common product ex: Motorola pager. mass customized its pagers by making them in lot sizes of one

Modular Production

provides a variety of options by using an assemble-to- order process. ex: Dell receives a computer order then the company assembles modules or components rapidly to meet customers order.

other enviro concerns

recycling outputs, recycled inputs, remanufacturing

Focused Factory

skinner created this -when production processes are separated each process could respond to its particular customer and market requirements -you can lose focus if you try to be "all things to all people" - focuses on a FEW operations objectives and is a process that is "aligned with its market"

2.) pollution control.

structural investments. they differ from pollution prevention technologies in that they are used to treat or dispose of pollutants that are OUTPUTS from the process.

order penetration point

the type of customer order = order penetration point. in the supply chain where the product is linked to a specific customer order. - 4 possibilities for the placement of the order penetration point

3.) Pollution Practices

this affects the way processes are used. this includes retraining workers to use the existing process in a new manner and increasing cross functional coordination ex: Toyota and Ford got the Energy Star award for their sustained progress in reducing energy consumption in their plants.

make-to-stock (MTS)

this process can provide faster service to customers by delivering orders from available stock and at lower costs than a make-to order -has a standard product line specified by the producer, not by the customer -if product is available it is sent to customer if not, a *back order* may be placed -customers cant be identified in MTS but they can in MTO -*objective: meet desired service level at minimum cost

product layout

used by assembly lines. the machines and labor are organized according to the product flow itself.

general purpose equipmetn

used for batch flow ops. the equip is NOT specialized to make one specific product.

service level

used in MTS. also called fill rate is typically targeted in the range 90-99 percent in inventory

jumbled flow

used in batch flow ops. This results in production scheduling and inventory challenges.

Postponement

used to defer a portion of the production until the point of delivery. -customized tshirts - makes it possible to ship standard units anywhere in the world and customize them at last minute -*the idea of delaying customization for a product for as long as possible to minimize complexity and inventory*

Jewelry business

uses all 3 processes. -MTS is used for rings that are carried in finished goods inventory by the jewelry store - ATO is used when the customer selects the stone and then makes a separate seleciton of stock ring setting -MTO happens by jewelers who make custom settings to the customers design