Chapter 4:
Process Selection
4-1
Product-Flow Characteristics
Types of Product Flow
• Continuous process
• Assembly line
• Batch flow
• Job shop
• Project
4-2
Product-Flow Characteristics:
Continuous Process
• Highly standardized and automated
• Flexibility limited
• High volumes of production
• Commodity products
• Low cost is the ‘Order Winner’
• Process industries (sugar, paper, oil, electricity, etc.)
4-3
Product-Flow Characteristics:
Assembly Line
• Linear sequence of operations (often paced)
• Large capital investment, use of automation
• Very efficient
• High-volume, standardized products
• Low flexibility to product and volume changes
• Discrete products (autos, appliances, computers, etc.)
4-4
Assembly Line: Metal Bracket (Figure 4.1)
cut drill bend paint
Task or work station
Product flow
4-5
Product-Flow Characteristics:
Batch Flow
• Production of batches or lots
• Batches flow as a unit (set) from one work center to
another
• Process layout of work centers (by tasks)
• Flow is jumbled and intermittent
• Flexible labor and equipment (general purpose)
• Low to high volume, variety of products
• Many types of products (furniture, dishes, boats)
4-6
Batch Flow: Three Metal Brackets (Figure 4.2)
Bend
Batch A
Cut Paint Batch B
Batch C
Drill
Task or work station Product flows
4-7
Product-Flow Characteristics:
Job Shop
• Customized to customer order
• Production of small batches or lots
• Layout/flow similar to Batch Flow
• Flexible labor and equipment (general purpose)
• Many types of made-to-order products (plastic parts,
machine components, sheet metal parts, custom signs,
artificial limbs, etc.)
4-8
Product-Flow Characteristics:
Project
• Production of customized single products
• Labor and materials brought to site
• Planning, scheduling challenges
• Little automation, general purpose equipment
• Highly skilled and flexible labor
• Unique, one of a kind products (bridges, building
construction, large aircraft, etc.)
4-9
Throughput Ratio: Process efficiency
Total processing time for the job
TR = X 100%
Total time in operations
Typically:
90-100% in Continuous Process and Assembly Line
10-20% in Batch Flow and Job Shop
4-10
Order Fulfillment
• Make-to-Stock (MTS)
• Make-to-Order (MTO)
• Assemble-to-Order (ATO)
4-11
Make-to-Stock (MTS)
• Produce finished goods according to production schedule
• Customer buys from inventory
• Advantage: faster fulfillment of customer demand, lower
cost, smooth production rate
• Disadvantage: inventory holding costs, slower to respond
to changes in customer preferences
4-12
Make-to-Stock
Forecast orders
Customer Production
Customer order
Product
Product
Finished goods
inventory
4-13
MTS Performance Measures
• Service level (orders filled when requested)
• Inventory replenishment time
• Inventory turnover (sales/avg. inventory)
• Capacity utilization
• Time to fill back order
• Others, such as shrinkage rate
4-14
Make-to-Order (MTO)
• Start production after customer orders
• No finished goods inventory
• Advantage: higher flexibility to customize order; no
finished goods inventory costs
• Disadvantage: intermittent production (i.e., lumpy
demand pattern), slower response to customer demand
4-15
Make-to-Order (Figure 4.3)
Customer
Customer order
Product
Production
4-16
MTO Performance Measures
Lead time
Orders completed on time (%)
– Customer request date
– Promise date
4-17
Assemble-to-Order (ATO)
• Produce parts and subassemblies (modules); complete production
when customer places order
• Advantage: less finished goods inventory, faster fulfillment of
customer order
• Disadvantage: work-in-process inventory
4-18
Assemble-to-Order
Forecast orders
Customer Production of
subassemblies
Customer order
Product Subassembly
Assembly of Inventory of
the order subassemblies
4-19
MTS and MTO Comparison
Characteristics Make-to-Stock Make-to-Order
Product Producer-specified Customer-specified
Low variety High variety
Inexpensive Expensive
Objectives Balance inventory, Manage delivery lead
capacity, and service times and capacity
Main operations Forecasting Delivery promises
challenges Planning production Delivery time
Control of invenntory
4-20
Order Penetration Point
MTO MTO ATO MTS
∇------------------∇ ∇ ∇
Supplier Fabrication Assembly Distribution
4-21
Process Selection Decisions
• Process characteristics (produce when? produce how?)
• When: MTS, MTO, ATO
• How: Continuous process, Assembly line, Batch flow,
Job shop, Project
• Factors affecting process choice
• Market conditions
• Capital requirements
• Availability and cost of labor
• Technology options
4-22
Process Characteristics Matrix
Make-to-Order
Characteristics Make-to-Stock
or ATO
Automobile assembly Automobile assembly
Continuous and Oil refinery Dell computers
Assembly Cannery Electronic components
Line Flow Cafeteria Fast food
Machine shop Machine shop
Wine Restaurant
Batch and Job Shop Glassware factory Hospital
Costume jewelry Custom jewelry
Speculation homes Buildings
Commercial paintings Movies
Project Noncommissioned art Ships
4-23
Product-Process Strategy
• Strategy must consider product characteristics and
process capabilities.
• Product life cycle:
• Often begins in Job Shop, then Batch Flow, then
Continuous/Assembly Line.
• Example: Bread was first produced by hand in individual
units in traditional bakeries, and is now produced in very
large batches in modern automated bakeries.
4-24
Product-Process Matrix
Low volume,
Unique, one of Low volume, Higher volume High volume, high
multiple
a kind low few major standardization,
products
product standardization products commodity
Project
Building NONE
Job Shop
Printing
Batch Heavy
Equipment
Auto
Assembly assembly
Line
Sugar
Refinery
Continuous NONE
4-25
Focused Operations
• Lack of focus means attempting to accomplish too many
goals at one plant or one facility.
• Examples of declining focus: Product/service proliferation,
requiring different volumes and different levels of
standardization.
• Focused facility: Meeting one set of goals.
• Plant-within-a-plant (PWP): Separate products/services
with differing goals by production lines/areas within the
same facility.
4-26
Mass Customization
• Strategy to produce products in lot sizes = 1, in high
volume.
• Made possible by flexible manufacturing.
• Traditional mass production provides economies of scale.
• Mass Customization means using a high volume process
(economies of scale = low unit cost) to produce relatively
custom products (economies of scope = high variety).
4-27
Forms of Mass Customization
• Modular production & assemble-to-order (ATO)
• e.g., assembling modules for Dell computers
• Fast changeover
• e.g., zero set-up time at Motorola
• Postponement of options
• e.g. power supply for Hewlett-Packard printers
4-28
3D Printing & Additive Manufacturing
• Based on digital design model (stored in cloud, not
warehouse!)
• Layer plastic, metal, ceramic to build object
• Normal (real) size
• Complex shapes and spaces
• Uses: medical implants, aerospace, spare parts, etc.
• Complements manufacturing for special needs, rather than
replacing production facilities
• Can shorten global supply chain; reduce inventory
4-29
Environmental Concerns
• Technologies for pollution prevention.
• Technologies for pollution control.
• Infrastructure Systems for pollution practices.
• Other concerns
• Recycling outputs
• Recycled inputs
• Remanufacturing
4-30
Cross-Functional Decision Making:
Who has a stake in process choice?
• Marketing wants fast response to customer demand
• Finance provides funds to configure the process
• HR finds/creates the properly skilled workers
• IT serves various data requirements
• Accounting evolves in setting performance measures
4-31