chap 004
TRANSCRIPT
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PROCESS SELECTIONPROCESS SELECTION
Chapter 4Chapter 4
INTRODUCTION to Operation Management 4e, Schroeder
Copyright © 2008 by The McGraw-Hill Companies, Inc., All Rights Reserved.
McGraw-Hill/Irwin
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Chapter OutlineChapter Outline
Product-Flow CharacteristicsProduct-Flow Characteristics
Classification by Type of Customer OrderClassification by Type of Customer Order
Process Selection DecisionsProcess Selection Decisions
Product-Process StrategyProduct-Process Strategy
Focused OperationsFocused Operations
Mass-customizationMass-customization
Cross Functional Decision MakingCross Functional Decision Making
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Product-Flow CharacteristicsProduct-Flow Characteristics
Types of Product FlowTypes of Product Flow– Continuous processContinuous process– Assembly/job shopAssembly/job shop– LineLine– BatchBatch– ProjectProject
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Product-Flow CharacteristicsProduct-Flow CharacteristicsContinuous ProcessContinuous Process
Process industries (beer, paper, oil, Process industries (beer, paper, oil, etcetc.).)
Highly standardized and automatedHighly standardized and automated
High volumes of productionHigh volumes of production
Commodity productsCommodity products
Low cost is the ‘order winner’Low cost is the ‘order winner’
Flexibility limitedFlexibility limited
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Product-Flow CharacteristicsProduct-Flow CharacteristicsAssembly Line FlowAssembly Line Flow
Linear sequence of operationsLinear sequence of operations
Discrete products (autos, appliances, Discrete products (autos, appliances, etcetc.).)
High-volume, standardized productsHigh-volume, standardized products
Inflexibility in product and volumeInflexibility in product and volume
Very efficientVery efficient
Large capital investmentLarge capital investment
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Assembly Line FlowAssembly Line Flow(metal bracket, see fig. 4.1)(metal bracket, see fig. 4.1)
paintdrill bend
Task or work station
Product flow
cut
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Product-Flow CharacteristicsProduct-Flow CharacteristicsBatch FlowBatch Flow
Production of batches or lotsProduction of batches or lots
Batches flow from one work center to anotherBatches flow from one work center to another
Low volume productsLow volume products
Many different types of productsMany different types of products
Flow is jumbled and intermittentFlow is jumbled and intermittent
Flexible labor and equipmentFlexible labor and equipment
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Batch FlowBatch Flow (three metal brackets, see fig. 4.2)(three metal brackets, see fig. 4.2)
Cut Paint
Task or work station Product flows
Bend
Drill
Batch ABatch BBatch C
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Classification by Type of Classification by Type of Customer OrderCustomer Order
Make to Stock (MTS)Make to Stock (MTS)
Make to Order (MTO)Make to Order (MTO)
Assemble to Order (ATO)Assemble to Order (ATO)
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Make to Stock (MTS)Make to Stock (MTS)
Produce finished goods; customer buys Produce finished goods; customer buys
from inventoryfrom inventory
Advantage: smooth productionAdvantage: smooth production
Disadvantage: inventoryDisadvantage: inventory
Key performance measures (next slide)Key performance measures (next slide)
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MTS Performance MeasuresMTS Performance Measures
Service level (orders filled when requested)Service level (orders filled when requested)
Inventory turnover (sales/avg. inventory)Inventory turnover (sales/avg. inventory)
Back order fill rateBack order fill rate
Inventory accuracyInventory accuracy
Time to replenishTime to replenish
Others, such as shrinkage rateOthers, such as shrinkage rate
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Make to Order (MTO)Make to Order (MTO)
Start production when customer orders.Start production when customer orders.
Advantage: no finished goods inventoryAdvantage: no finished goods inventory
Disadvantage: intermittent productionDisadvantage: intermittent production
Key performance measuresKey performance measures
– Lead timeLead time
– Orders completed on time (or late)Orders completed on time (or late)
– Quality measuresQuality measures
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Assemble to Order (ATO)Assemble to Order (ATO)Make parts and subassemblies; finish when Make parts and subassemblies; finish when customer places order.customer places order.Advantages: less inventory, faster serviceAdvantages: less inventory, faster serviceDisadvantage: some WIP inventoryDisadvantage: some WIP inventoryKey performance measuresKey performance measures
– speed of servicespeed of service
– inventory levelsinventory levels
– quality of product and servicequality of product and service
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MTS and MTO ComparisonMTS and MTO ComparisonCharacteristics Make-to-Stock Make-to-OrderProduct Producer-specified
Low varietyInexpensive
Customer-specifiedHigh varietyExpensive
Objectives Balance inventory,capacity, and service
Manage delivery leadtimes and capacity
Main operationsproblems
ForecastingPlanning productionControl of invenntory
Delivery promisesDelivery time
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Make-to-Stock (Figure 4-3)
customer
Forecast orders
Production
Finished Goods Inventory
Product
Customer OrderProduct
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Make-to-Order (Figure 4-3)
customer
Production
Product
Customer Order
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Assemble-to-Order (Figure 4-3)
customer
Forecast orders
Production of Subassemblies
Inventory
of Subassemblies
Customer order
ProductAssembly of
the Order
Subassembly
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Customization Point (Figure 4-4)
DistributionAssemblyFabricationSupplier
MTO MTO ATO MTS
∇------------------∇ ∇ ∇
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Process Selection DecisionsProcess Selection Decisions
Process characteristics matrixProcess characteristics matrix
Factors affecting process choiceFactors affecting process choice
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Process Characteristics MatrixProcess Characteristics Matrix (Table 4.3)(Table 4.3)
Characteristics Make-to-Stock Make-to-Order Assemble-to-Order
Continuous and Assembly Line Flow
Auto Assembly Line Oil refinery Cannery Cafeteria
Auto assembly line Dell Computers Motorola Pager
Batch and Job Shop
Machine shop Fast food Glassware factory Costume Jewelry
Machine shop Restaurant Hospital Custom jewelry
Project
Speculation homes Commercial painting
Buildings Movies Ships Portraits
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Factors Affecting Process ChoiceFactors Affecting Process Choice
Market conditions and competitionMarket conditions and competition
Capital requirementsCapital requirements
Labor supply and costLabor supply and cost
State of technologyState of technology
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Product-Process StrategyProduct-Process Strategy
Strategy must consider not only the product or Strategy must consider not only the product or service, but also how to produce it.service, but also how to produce it.
As many industries move through their As many industries move through their product life cycles, they also move through a product life cycles, they also move through a process life cycle. e.g. the traditional bread process life cycle. e.g. the traditional bread bakery vs. the modern automated bakery.bakery vs. the modern automated bakery.
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Product Life Cycle StagesProduct Life Cycle Stages
1. Unique, one of a kind1. Unique, one of a kind
2. Low volume, low standardization2. Low volume, low standardization
3. Low volume, multiple products3. Low volume, multiple products
4. Higher volume, few major products4. Higher volume, few major products
5. High volume, high standardization, 5. High volume, high standardization, commoditycommodity
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Process Life Cycle StagesProcess Life Cycle Stages
1. Project1. Project
2. Job shop2. Job shop
3. Batch3. Batch
4. Assembly line4. Assembly line
5. Continuous5. Continuous
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PRODUCT-PROCESS MATRIX (Figure 4.5)
Low volume, low standardization
Printing
HeavyEquipment
Autoassembly
SugarRefinery
Low volume,Multiple products
Higher volumefew major products
High volume, highstandardization,commodity
Job Shop
Batch
Assemblyline
Continuous NONE
NONE
Unique, one ofa kind product
ProjectBuilding
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Focused OperationsFocused Operations
Company may have products or services with Company may have products or services with different volumes and levels of standardization.different volumes and levels of standardization.
Mixing them in the same operation can cause Mixing them in the same operation can cause significant problems.significant problems.
Focus involves separating different products or Focus involves separating different products or services in the same facility into PWPs.services in the same facility into PWPs.
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Types of FocusTypes of Focus
Product focusProduct focus
Process typeProcess type
TechnologyTechnology
Volume of salesVolume of sales
Make-to-stock and make-to-orderMake-to-stock and make-to-order
New products and mature productsNew products and mature products
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Mass CustomizationMass Customization
A strategy to provide products in lot sizes of A strategy to provide products in lot sizes of one in high volume.one in high volume.
Possible because of flexible manufacturing.Possible because of flexible manufacturing.
Based on economies of scope instead of Based on economies of scope instead of economies of scale, i.e. a high variety of economies of scale, i.e. a high variety of products from a products from a single processsingle process..
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Forms of Mass CustomizationForms of Mass Customization
Modular production & ATO (e.g. Dell)Modular production & ATO (e.g. Dell)
Fast changeover (e.g. Motorola)Fast changeover (e.g. Motorola)
Postponement of options (e.g. Hewlett-Postponement of options (e.g. Hewlett-Packard)Packard)
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Cross-Functional Decision MakingCross-Functional Decision Makingor, who has a stake in process choice?or, who has a stake in process choice?
Marketing wants fast response to customer demandMarketing wants fast response to customer demandFinance must find the funds to configure the Finance must find the funds to configure the processprocessHR must provide the properly skilled workersHR must provide the properly skilled workersIT must serve different data requirementsIT must serve different data requirementsAccounting must be flexible in setting performance Accounting must be flexible in setting performance measuresmeasures
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SummarySummary
Product-Flow CharacteristicsProduct-Flow Characteristics
Classification by Type of Customer OrderClassification by Type of Customer Order
Process Selection DecisionsProcess Selection Decisions
Product-Process StrategyProduct-Process Strategy
Focused OperationsFocused Operations
Mass-customizationMass-customization
Cross Functional Decision MakingCross Functional Decision Making
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End of Chapter Four