Introduction_to_Operations_and_Supply_Chain_ManagementFifth

Introduction to Operations and Supply Chain Management

Fifth Edition

Chapter 3

Process Choice and Layout Decisions in Manufacturing and Services

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Chapter Objectives (1 of 2)

Be able to:

Describe the characteristics of the five classic types of manufacturing processes.

Discuss how different manufacturing process choices support different market requirements.

Explain how different manufacturing processes can be linked together via the supply chain.

Describe the critical role of customization in manufacturing, including the degree and point of customization, as well as upstream versus downstream activities.

Chapter Objectives (2 of 2)

Be able to:

Discuss the three dimensions that differentiate services from one another – the service package, customization, and customer contact – and explain the different managerial challenges driven by these dimensions.

Position a service on a conceptual model an explain the underlying managerial challenges.

Explain how different service processes support different market requirements.

Develop a product-based layout, using line balancing, and calculate basic performance measures for the line.

Develop a functional layout based on total distance traveled.

Introduction

Manufacturing and Service processes are very important to firms because:

They tend to be expensive and far reaching

Process decisions deserve extra attention because different processes have different strengths and weaknesses.

Some processes are particularly good at supporting a wide variety of goods or services, while others are better at providing standardized products or services at the lowest possible cost.

Managers must carefully consider the strengths and weaknesses of different processes and make sure that the process they choose best supports their overall business strategy and the needs of their targeted customers.

Manufacturing Processes (1 of 17)

Selecting an effective manufacturing process means much more than just choosing the right equipment. Manufacturing processes also include people, facilities and physical layouts, and information systems.

Different manufacturing processes have different strengths and weaknesses. Some are best suited to making small numbers of customized products, while others excel at producing large volumes of standard items.

The manufacture of a particular item might require many different types of manufacturing processes, spread over multiple sites and organizations in the supply chain.

Manufacturing Processes (2 of 17)

Questions to ask when selecting a manufacturing process:

What are the physical requirements of the company’s product?

How similar to one another are the products the company makes?

What are the company’s production volumes?

Where in the value chain does customization take place (if at all)?

Manufacturing Processes (3 of 17)

Product-based layout

A type of layout where resources are arranged sequentially, according to the steps required to make a product.

Functional layout

A type of layout where resources are physically grouped by function.

Manufacturing Processes (4 of 17)

Continuous Flow Processes

Production Line

Batch Manufacturing

Job Shop

Fixed Position Layout

Manufacturing Processes (5 of 17)

Production Line – A type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs.

Follows a product-based layout

Steps are usually linked by some system that moves the items from one step to the next.

Items typically move through the production line at a predetermined pace.

Suitable for high-volume production of product(s) characterized by similar design attributes.

Manufacturing Processes (6 of 17)

Need high volumes to justify the required investment in specialized equipment and labor.

Are inflexible with regard to items that do not fit the design characteristics of the production line.

Manufacturing Processes (7 of 17)

Continuous Flow Processes – A type of manufacturing process that produces highly standardized products using a tightly linked, paced sequence of steps.

Closely resembles the production line process

Form of product usually cannot be broken into discrete units.

Examples include yarns and fabric, food products, and chemical products such as oil and gas

Manufacturing Processes (8 of 17)

Figure 3.1 Production Line and Continuous Flow Processes

Manufacturing Processes (9 of 17)

Job Shops – A type of manufacturing process used to make a wide variety of highly customized products in quantities as small as one.

Characterized by general-purpose equipment and broadly skilled workers.

Main emphasis is meeting a customer’s unique requirements.

Product design is not standardized.

Typically follow a functional layout.

Examples include custom furniture, specialized machine tools used by manufacturers, and restoration and refurbishing work.

Manufacturing Processes (10 of 17)

Figure 3.2 Job Shop Processes

Manufacturing Processes (11 of 17)

Batch Manufacturing – A type of manufacturing process where items are moved through the different manufacturing steps in groups or batches.

Fits between job shops and lines in terms of production volumes and flexibility and strikes a balance between the flexibility of a job shop and the efficiency of a line.

Are the most common type of manufacturing process.

The sequence of steps is not as tightly linked as a production line.

Flexible Manufacturing Systems – Highly automated batch processes that can reduce the cost of making groups of similar products.

Manufacturing Processes (12 of 17)

Fixed-Position Layout – A type of manufacturing process in which the position of the product is fixed.

Materials, equipment, and workers are transported to and from the product.

Used in industries where the products are very bulky, massive, or heavy and movement is problematic.

Examples include shipbuilding, construction projects, and traditional home building.

Manufacturing Processes (13 of 17)

Hybrid Manufacturing Process – A term referring to a manufacturing process that seeks to combine the characteristics, and hence advantages, of more than one of the classic processes.

Machining centers

Group technology

Flexible manufacturing systems

Manufacturing Processes (14 of 17)

Figure 3.3 Group Technology Work Cell

Manufacturing Processes (15 of 17)

3D Printing

An additive manufacturing process that creates a physical object from a digital design

A digital model is turned into a solid three-dimensional physical object by adding material layer by layer.

It allows manufacturing to occur when and where the item is needed which can be a real advantage when time is of the essence or when shipping an item from a plant to its final destination is difficult.

Manufacturing Processes (16 of 17)

Figure 3.4 Linking Processes Together to Make a Sweater

Manufacturing Processes (17 of 17)

Figure 3.5 The Product-Process Matrix

Based on R. Hayes and S. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984)

Product Customization within the Supply Chain (1 of 4)

Four Levels of Customization

Make-to-stock (MTS) – Products that require no customization.

Assemble-to-order (ATO) – Products that are customized only at the very end of the manufacturing process.

Make-to-order (MTO) – Products that use standard components but have customer-specific final configuration of those components.

Engineer-to-order (ETO) – Products are designed and produced from the start to meet unusual customer needs or requirements.

Product Customization within the Supply Chain (2 of 4)

Figure 3.6 Where Does Customization Occur in the Supply Chain?

Product Customization within the Supply Chain (3 of 4)

Law of Variability - The greater the random variability either demanded of the process or inherent in the process itself or in the items processed, the less productive the process is.

This law is relevant to customization because completing upstream activities offline helps isolate these activities from the variability caused by either the timing or the unique requirements of individual customers.

Product Customization within the Supply Chain (4 of 4)

When customization occurs early in the supply chain:

Flexibility in response to unique customer needs will be greater.

Lead times to the customer will tend to be longer.

Products will tend to be more costly.

When customization occurs late in the supply chain:

Flexibility in response to unique customer needs will be limited.

Lead times to the customer will tend to be shorter.

Products will tend to be less costly.

Service Processes (1 of 10)

Three dimensions on which services can differ:

The nature of the service package

The degree of customization

The level of customer contact

Service Processes (2 of 10)

Service Package – A package that includes all the value-added physical and intangible activities that a service organization provides to the customer.

The greater the emphasis on physical activities, the more management’s attention will be directed to capital expenditures (buildings, planes, and trucks), material costs, and other tangible assets.

The greater the emphasis on intangible activities, the more critical are the training and retention of skilled employees and the development and maintenance of the firm’s knowledge assets.

Service Processes (3 of 10)

Service Customization – Ranges from highly customized to standardized.

As the degree of customization decreases, the service package becomes more standardized.

As the degree of customization increases, the service package becomes less predictable and more variable.

Service Processes (4 of 10)

Customer Contact – The degree of customer contact determines the relative importance of front room and back room operations in a service process

Front Room – The physical or virtual point where the customer interfaces directly with the service organization.

Examples: Sales floor in a retail store, Help desk for a software provider, Web page for a company.

Back Room – The part of a service operation that is completed without direct customer contact.

Examples: Package sorting at FedEx or UPS, Testing medical samples

Service Processes (5 of 10)

Service Blueprinting – A specialized form of business process mapping that allows the user to better visualize the degree of customer contact.

It lays out the service process from the viewpoint of the customer and parses out the organization’s service actions based on:

The extent to which an action involves direct interaction with the customer.

Whether an action takes place as a direct response to a customer’s needs.

Service Processes (6 of 10)

Table 3.2 Managerial Challenges in Service Environments

Nature of the service Package	Primarily physical activities → greater emphasis on managing physical assets (Airline, trucking firm).	Primarily intangible activities → greater emphasis on managing people and knowledge assets (Law firm, software developer).
Degree of customization	Lower customization → greater emphasis on closely controlling the process and improving productivity (Quick change oil shop).	Higher customization → greater emphasis on being flexible and responsive to customers’ needs (Full service car repair shop).
Degree of customer contact	Lower contact → More of the service package can be performed in the back room. Service layout, location, and hours will be based more on cost and productivity concerns (Mail sorting).	Higher contact → More of the service package must be performed in the front room. Service layout, location, and hours must be designed with customer convenience in mind (Physical therapist).

Service Processes (7 of 10)

Figure 3.9 Service Blueprinting Template

Service Processes (8 of 10)

Service Positioning

Service operations compete and position themselves in the marketplace based on the three dimensions:

Nature of the Service Package

Degree of Customization

Degree of Customer Contact

Figure 3.12 A Conceptual Model of Service Process

Service Processes (9 of 10)

Service Positioning

Figure 3.13 Positioning a Typical Community Hospital

Service Processes (10 of 10)

Service Positioning

Figure 3.14 Positioning a Birthing Center

Layout Decision Models (1 of 4)

Fixed position layout – Productive resources have to be moved to where the product is being made or the service is being provided.

Product-based layout – Arranges resources sequentially, according to the steps required to make a product or provide a service.

Functional layout – Physically groups resources by function.

Cellular layout – Production resources are dedicated to a subset of products with similar requirements, known as a product family.

Layout Decision Models (2 of 4)

Line balancing – A technique used in developing product-based layouts that works by assigning tasks to a series of linked workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level.

Layout Decision Models (3 of 4)

The six basic steps of line balancing:

Identify all the process steps required, their times for each task, the immediate predecessor for each task, and the total time for all tasks.

Draw a precedence diagram.

Determine task time for the line.

Compute the theoretical minimum number of workstations needed

Use a decision rule to assign tasks to the workstations.

Evaluate the performance of the proposed line by calculating some basic performance measures.

Layout Decision Models (4 of 4)

Line Balancing Performance Measures

Example 3.2 – Blackhurst Engineering (1 of 10)

Blackhurst Engineering, a small contract manufacturer, has just signed a contract to assemble, test, and package products for another company.

The contract states that Blackhurst must produce 500 units per 8-hour day.

Example 3.2 – Blackhurst Engineering (2 of 10)

The list of tasks, including time requirements and immediate predecessors is as follows:

Task	Time (in Seconds)	Immediate Predecessor(S)
A	15	None
B	26	A
C	15	A
D	32	B, C
E	25	D
F	15	E
G	18	E
H	10	E
I	22	F, G, H
J	24	I
Total	202	Blank

Example 3.2 – Blackhurst Engineering (3 of 10)

Figure 3.15 Precedence Diagram

Example 3.2 – Blackhurst Engineering (4 of 10)

Calculate task time and theoretical minimum number of workstations

Example 3.2 – Blackhurst Engineering (5 of 10)

Use the following decision rules to assign tasks to workstations:

Assign the largest eligible task that can be added to the workstation without exceeding the task time.

If there is a tie, assign the eligible task with the most tasks directly dependent on it.

If there is still a tie, randomly choose among any of the tasks that meet the above two criteria.

Workstation 1

Task A	15 seconds
Task B	26 seconds
Task C	15 seconds
Total	56 seconds

Example 3.2 – Blackhurst Engineering (6 of 10)

Workstation 1

Task A	15 seconds
Task B	26 seconds
Task C	15 seconds
Total	56 seconds

Workstation 2

Task D	32 seconds
Task E	25 seconds
Total	57 seconds

Example 3.2 – Blackhurst Engineering (7 of 10)

Workstation 3

Task G	18 seconds
Task F	15 seconds
Task H	10 seconds
Total	43 seconds

Workstation 4

Task I	22 seconds
Task J	24 seconds
Total	46 seconds

Example 3.2 – Blackhurst Engineering (8 of 10)

Figure 3.16 Workstation Assignments

Example 3.2 – Blackhurst Engineering (9 of 10)

Calculate idle time, percent idle time, and efficiency delay:

Example 3.2 – Blackhurst Engineering (10 of 10)

The resulting line is not perfectly balanced.

They will probably need to rotate employees across the workstations.

Workstation	Cycle Time − Actual Time = Idle Time
1	57 − 56 = 1 second
2	57 − 57 = 0 seconds
3	57 − 43 = 14 seconds
4	57 − 46 = 11 seconds
Total	26 seconds of idle time

Layout Decision Models

Assigning Department Locations in Functional Layouts

Arrange the different functional areas or departments in such a way that departments that should be close to one another are, while departments that don’t need to be or shouldn’t be near one another aren’t.

Minimize the total distance traveled

Example 3.3 – Blackhurst Engineering (1 of 5)

Blackhurst Engineering is locating to a new facility.

Figure 3.17 Layout of the New Facility

Table 3.3 Distances (in meters) between Areas

Area	A	B	C	D	E
A	—	Blank	Blank	Blank	Blank
B	30	—	Blank	Blank	Blank
C	40	50	—	Blank	Blank
D	50	40	30	—	Blank
E	70	70	35	35	—

Example 3.3 – Blackhurst Engineering (2 of 5)

Table 3.4 Number of Daily Interdepartmental Trips

Department	Accounting	Marketing	Production	Engineering	S&R
Accounting	—	Blank	Blank	Blank	Blank
Marketing	80	—	Blank	Blank	Blank
Production	35	110	—	Blank	Blank
Engineering	60	40	55	—	Blank
S&R	10	25	90	5	—

Example 3.3 – Blackhurst Engineering (3 of 5)

Table 3.5 Ranked Number of Daily Interdepartmental Trips

Departments	Average Trips Per Day
Production ↔ Marketing	110
S&R ↔ Production	90
Marketing ↔ Accounting	80
Engineering ↔ Accounting	60
Engineering ↔ Production	55
Engineering ↔ Marketing	40
Production ↔ Accounting	35
S&R ↔ Marketing	25
S&R ↔ Accounting	10
S&R ↔ Engineering	5

Example 3.3 – Blackhurst Engineering (4 of 5)

Figure 3.18 Initial Layout Assignments and Distance Traveled

Table 3.6 Total Distance Traveled per Day, Initial Solution

Interdepartmental Travel	Distance Traveled Per Day (Meters)
Production ↔ Marketing	110 trips * 30 = 3,300
S&R ↔ Production	90 * 35 = 3,150
Marketing ↔ Accounting	80 * 50 = 4,000
Engineering ↔ Accounting	60 * 30 = 1,800
Engineering ↔ Production	55 * 50 = 2,750
Engineering ↔ Marketing	40 * 40 = 1,600
Production ↔ Accounting	35 * 40 = 1,400
S&R ↔ Marketing	25 * 35 = 875
S&R ↔ Accounting	10 * 70 = 700
S&R ↔ Engineering	5 * 70 = 350
Total distance traveled	19,925 meters

Example 3.3 – Blackhurst Engineering (5 of 5)

Figure 3.19 Revised Layout Assignments and Distance Traveled

Table 3.7 Total Distance Traveled per Day, Revised Solution

Interdepartmental Travel	Distance Traveled Per Day (Meters)
Production ↔ Marketing	110 trips * 30 = 3,300
Production ↔ S&R	90 * 35 = 3,150
Marketing ↔ Accounting	80 * 40 = 3,200
Engineering ↔ Accounting	60 * 30 = 1,800
Engineering ↔ Production	55 * 40 = 2,200
Engineering ↔ Marketing	40 * 50 = 2,000
Production ↔ Accounting	35 * 50 = 1,750
S&R ↔ Marketing	25 * 35 = 875
S&R ↔ Accounting	10 * 70 = 700
S&R ↔ Engineering	5 * 70 = 350
Total distance traveled	19,325 meters

Process Choice and Layout Decisions in Manufacturing and Services Case Study

Manufacturing and Service Processes: Loganville Window Treatments

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