Operations Management Chapter 2

4 production and inventory strategies for manufacturing

Design to order strategy make to order strategy assemble to order strategy make to stock strategy

Batch Process

a process that differs from the job process with respect to volume, variety, and quantity o The primary difference is that volumes are higher because the same or similar products or parts going into them are produced repeatedly. o Some of the components going into the final product may be processed in advance o Production lots are handled in larger quantities (or batches) than they are with job processes o A batch of one product (or component part going into it or perhaps other products) is processed, and then production is switched to the next one. Eventually, the first product is produced again. A batch process has average or moderate volumes, but process divergence is still too great to warrant dedicating a separate process for each product. The process flow is flexible, but more dominant paths emerge than at a job process, and some segments of the process have a line flow. Examples of a batch process are making standard components that feed an assembly line or some processes that manufacture capital equipment.

3 parts of the process strategy decision

customer involvement resource flexibility capital intensity

Resource Flexibility

ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions

Process Structure

groups jobs and activities that are part of the same processes

5 positions on product process matrix

job process batch process line process continuous flow process

Capital Intensity

mix of equipment and human skills in a process. Greater the cost of equipment relative to the cost of labor, greater the capital intensity

Stages of Six Sigma Model (DMAIC)

o Define o Measure o Analyze o Improve o Control

Make to order strategy

o Manufacturers that make products to customer specifications in low volumes tend to use this o Even though the product is based on a standard design, it is a more complex process than assembling a final product from standard components. o This strategy provides a high degree of customization and typically uses job or small batch processes. o The processes have high divergence. Specialized medical equipment, castings, and expensive homes are suited to the make-to-order strategy.

Make to stock strategy

o Manufacturing firms that hold items in stock for immediate delivery, thereby minimizing customer delivery times use this o This strategy is feasible for standardized products with high volumes and reasonably accurate forecasts. o It is the inventory strategy of choice for line or continuous-flow processes. o Examples of products produced with a make-to-stock strategy include garden tools, electronic components, soft drinks, and chemicals. o Combining a line process with the make to stock strategy is sometimes called mass production o Stable and predictable o Workers repeating narrowly defined tasks with low divergence

Assemble to order strategy

o an approach to producing a wide variety of products from relatively few subassemblies and components after the customer orders are received. o Typical competitive priorities are variety and fast delivery times. o The assemble-to-order strategy often involves a line process for assembly and a batch process for fabrication o the fabrication processes focus on creating appropriate amounts of component inventories for the assembly processes o Stocking finished products would be economically prohibitive because the numerous possible options make forecasting relatively inaccurate. o Principle of Postponement is applied: o whereby the final activities in the provision of a product are delayed until the orders are received o Also linked to mass customization o highly divergent processes generate a wide variety of customized products at reasonably low costs

Job Process

o creates the flexibility needed to produce a wide variety of products in significant quantities, with considerable divergence in the steps performed o Customization is high and volume for any one product is low o Companies choosing job processes often bid for work. o Typically, they make products to order and do not produce them ahead of time. o Each new order is handled as a single unit—that is, as a job. o Examples are machining a metal casting for a customized order or producing customized cabinets.

Line Process

o lies between the batch and continuous processes on the continuum; volumes are high and products are standardized, which allows resources to be organized around particular products o Divergence is minimal in the process or line flows, and little inventory is held between the processing steps. o Each step performs the same process over and over, with little variability in the products manufactured. o Production and material handling equipment is specialized. o line process include the assembly of computers, automobiles, appliances, and toys. o Standard products produce in advance of need and stored in inventory

Front Office

o process has high customer contact where the service provider interacts directly with the internal or external customer. o Because of the customization of the service and variety of service options, many of the steps in it have considerable divergence. o Work flows are flexible, and they vary from one customer to the next. o The high-contact service process tends to be adapted or tailored to each customer.

Back Office

o process has low customer contact and little service customization. o The work is standardized and routine, with line flows from one service provider to the next until the service is completed. o Preparing the monthly client fund balance reports in the financial services industry is a good example. It has low customer contact, low divergence, and a line flow.

Hybrid Office

o process has moderate levels of customer contact and standard services, with some options available from which the customer chooses. o The work flow progresses from one workstation to the next, with some dominant paths apparent

Continuous Flow Process

o the extreme end of high-volume standardized production, with rigid line flows. o Process divergence is negligible. o Its name derives from the way materials move through the process. o Usually, one primary material (such as a liquid, a gas, or a powder) moves without stopping through the process o A continuous-flow process differs from a line process in one important respect: Materials (be they undifferentiated or discrete) flow through the process without stopping until the whole batch is finished. The time span can be several shifts or even several months. Examples of a continuous-flow process are petroleum refining; chemical processes; paper manufacturing; and processes making steel, soft drinks, and food.

Design to order strategy

o when it can design new products that do not currently exist, and then manufacture them to meet unique customer specifications. o Typically a job process is employed to create a highly customized product, such as a designer pair of shoes for a particular client.

Customer Involvement

reflects the ways in which customers become part of the process and the extent of their participation

Process Analysis

the documentation and detailed understanding of how work is performed and how it can be redesigned