Manufacturing Processes

Consider this you walk into an Apple store and see the shelf stocked with products from the iPhone
you might buy for personal use to the MacBook you might use for work. Everything is manufactured
using cutting edge processes and technology. You may not realize it at the moment, but the five
states stages of acquire, convert, deliver, support and commit in the production and manufacturing
process have played a significant role in ensuring you experience the innovation and seamless design
that is synonymous with the Apple brand. However, it is important to note that these five stages can
be easily reorganized depending on a firm's strategy and manufacturing capabilities and customers
demands. For instance, products like clothes, food items or television sets are on demand products
and are typically ready for rapid delivery from a nearby departmental store or through an
ecommerce service. However, products such as airplanes are first ordered and then built to specific
designs. In these examples, the time needed to build an airplane or fulfill a customer's demand, as
known as lead time. This could take years as compared to fulfilling the demand for a television set.
Another crucial aspect of the manufacturing process is the customer order decoupling point, which
identifies the location of inventory to enable the independent functioning of various supply chain
processes. An example of this is a retail store where products are stored on the shelves and
customers directly pick them up without the manufacturer receiving a customer order. The closer
the CODP is to the customer, the faster the customer can receive a product. A company selects its
decoupling points strategically. These points greatly impact a company's investment in its inventory.
For instance, a product that a customer assesses easily through a decoupling point is a part of the
company's finished goods inventory. It is twice as expensive for a company to maintain an inventory
of finished goods than raw materials. This is because it finished goods inventory item comprises all
the raw materials that have been used to prepare the product.

So, from a cost point of view, the finished product goods inventory includes both the cost of the raw
materials and the cost of creating the finished item.

Now that you understand what lead time and customer order decoupling point mean, we will
discuss the four types of manufacturing processes based on it. Different types of firms have different
types of manufacturing processes, and these processes have a significant impact on investment in
the inventory of a particular product. For instance, Make to Stock Firms these firms produce goods in
advance of receiving a customer order with the expectation of selling the goods from ready
inventory. This approach is typically used by multiple national retail corporations such as Walmart.
These manufacture products with a highly stable and predictable demand, like electronics and daily
consumer goods such as toothpaste. Here's how Walmart's make the stock model works. Demand
Forecasting walmart's team of analysts uses data such as past sales, customer demographics and
market trends to protect the demand for certain products in their stores. Ordering from Suppliers
based on the demand forecast, Walmart orders these products from suppliers in bulk to reduce the
cost per unit. This allows the company to offer customers these products at low prices. Stocking the
Products upon receiving the products from suppliers, Walmart stores stock the items on their
shelves for customers to purchase. The company's distribution network ensures that the products
are available in stores when customers need them. Sales when customers come to the store and
purchase the product, the inventory levels are reduced and the demand forecast are updated
accordingly. This MTS model allows Walmart to efficiently manage its inventory and offer a wide
range of products at low prices. On the other hand, some firms maintain a stock of component parts
and assemble the final product only when an order is received. These are called assemble to order
firms. These firms produce a product only after receiving an order from a customer. The product is
assembled from components kept in inventory rather than being manufactured from scratch. The
world's leading supplier of personal computers and laptops, Dell is well known example of a
company that uses the ATO business model. Here's how the ATO model works customer
Configuration dell allows customers to customize their computer systems online, choosing from a
range of components such as processors, memory, storage and graphics cards. Order Placement
once the customer has configured their system according to their own specifications and customized
it, they placed an order with Dell assembly. Dell then assembles the components of the customer
system to create the customized computer delivery. The assembled computer is then shipped
directly to the customer. By using the ATO model, Dell is able to offer customers a high degree of
customization while also reducing manufacturing lead, times and costs. The company also benefits
from improved inventory management as it only assembles the components it needs to fulfill
customer orders. Then there are make to order firms which produce products only after receiving an
order from a customer. This model is used when customers require highly customized products or
when there is a long lead time for manufacturing a product from scratch. For example, travel agents
use the MTO model by creating customized travel packages for their clients. Here's how it works.
Customer Request A customer contacts a travel agent and expresses their desired travel itinerary,
including destination dates and specific requirements such as budget, activities and accommodation.
Order Creation the travel agent then creates a customized travel package based on the customer's
request, taking into consideration factors such as flight schedules, hotel availability and budget
constraints, confirmation and Payment the travel agent presents the customized travel package to
the customer. The customer approves it and then makes the payment, booking and delivery. The
travel agent then books the components of the travel package, such as flights, hotels and activities,
and delivers the final itinerary to the customer. By using the Mto model, agents are able to offer
their clients a high degree of customization and flexibility. They are also MTO to respond quickly to
changes in customer demand, making it possible to adjust travel packages as needed. Finally, they
are engineered to order ETO Firms these firms create unique, one of a kind products or systems to
meet the specific needs of individual customers. The products are designed and engineered after a
customer places an order. A well known company that employs the engineer to order model is
General Electric. GE is an American multinational conglomerate best known for its work in the
power, renewable energy, aviation and healthcare industries. It designs and engineers complex
systems and equipment to meet its customers specific requirements. Here is a step by step
breakdown of how it works. A customer contacts GE and expresses their need for custom
engineered system or equipment. This could include specific design requirements, performance
specifications and budget constraints. GE accepts the order and begins the design and engineering
process. GE's engineers and designers work to create a custom solution that meets the customer's
requirements, taking into consideration factors such as production capabilities, materials and budget
constraints. Once the design is complete and approved by the customer, GE begins the
manufacturing process. The final product is then delivered to the customer. By employing the ETO
model, GE is able to offer highly customized my solutions to its customers and provide a competitive
advantage by offering tailored solutions that meet the unique needs of each customer.

This allows GE to better manage its resources, reduce the risk of overstocking, and increase its
margins by charging a premium for the unique and specialized products it produces.

Lean Manufacturing
The manufacturing process is highly dependent upon strategy. With a growing competition in the
market, companies now aim to improve the efficiency of their manufacturing strategies. The
traditional methods of production have evolved and still continue to improve. Organizations today
strive to eliminate or minimize waste in terms of manpower, inventory and so on. Waste in this
context refers to unproductive resources like excess goods or excess human resources. If five people
can do a particular job, employing eight people is a wasteful expenditure. This ideology has led to
the adoption of a new and novel concept of manufacturing called lean manufacturing. Lean
manufacturing refers to a flexible system of operations that uses considerably fewer resources than
a traditional manufacturing system. The primary objective of lean manufacturing is to eliminate
uncertainty in the manufacturing process due to factors such as equipment breakdown, changes in
demand, and so on. Let's put the concept of lean manufacturing into perspective. One relevant
example in the Indian context is that of Tata Nano, a compact city car manufactured by Indian
automaker Tata Motors. Apart from using the original equipment created in house, the car was
made in close and direct collaboration with suppliers and vendors, but with reference to the Tata
Nano. Tata practices lean manufacturing in certain ways. Tata Nano employs just in time production,
which minimizes inventory and reduces waste by producing components and assembling vehicles
only as they are required. And when a client places an order, no production or manufacturing starts
before an order is received. Tata Nano encourages its employees to identify and eliminate waste in
their work processes. This helps the company continuously improve its processes and reduce cost.
Tata Nano has established standard operating procedures for each task in its production processes.
This helps reduce variability and improve efficiency. Tata Nano continuously trains its workers to
perform multiple tasks, allowing the company to respond better to changes in demand and minimize
the need for specialized workers. Tata NATO uses visual management techniques such as visual
controls and color coding to make work processes easier to understand and improve efficiency. By
implementing lean manufacturing principles, Tata Nano has been able to increase efficiency, reduce
waste, and provide value to its customers by producing high quality vehicles at a lower cost. Another
great example of a company practicing lean manufacturing in its product development technique is
Intel, a technology manufacturer best known for developing the microprocessors found in most of
the world's personnel computers. Intel uses the five S methodology to improve its work
environment and product development processes, including sorting, simplifying, sweeping,
standardizing and sustaining improvements. It also employs value stream mapping, or VsM, to
visualize its production processes and identify areas for improvement. VsM is a visual tool used to
understand and analyze the flow of materials and information in a production process from the raw
materials to the finished product.

It is used to identify and eliminate waste and streamline the flow of materials and information.

So how can a business or an organization implement lean manufacturing? Firstly, it can do so

through its product design. For a business engaged in manufacturing, the number of parts required
to develop products increase every day. Using standard parts or modular designs limits the variation.
It also aids the business in training and developing the workforce efficiently to get the job done using
one single process to establish uniformity and product development. The second way in which a
company can implement lean manufacturing is through the adoption of Just in Time Manufacturing.
This requires strategic coordination between suppliers and manufacturers. Just in Time
manufacturing works by eliminating inventory costs because manufacturers receive materials and
parts as needed for production and do not have to pay storage costs. Additionally, manufacturers
are not left with unwanted inventory if an order is canceled or not fulfilled. For example, in a Just in
Time manufacturing strategy, a car manufacturer will deliberately operate with low inventory and
rely on the suppliers to deliver the parts it requires to build cars on an as needed basis. The parts are
required to assemble the vehicles only after an order is received and not before. Lean manufacturing
also forms an integral part of Agile manufacturing practices. Agile Manufacturing includes a set of
practices that emphasizes flexibility, speed and adaptability in the manufacturing process. It is
designed to respond quickly to changes in customer demand, market conditions and technology. For
instance, global smartphone giant Apple uses an Agile approach to design, develop and
manufacturers products. The company continuously gathers customer feedback and studies market
trends to design and launch new models in short cycles rather than waiting years to release new
products. On the other hand, in contract manufacturing, a company outsources the production of
one or more of its products to an external manufacturer known as a contract manufacturer. The
company that outsources the production, known as the original equipment manufacturer, focuses
on its core competencies, such as marketing and the distribution of the product. For instance,
Microsoft's Xbox game machine is made by a company called Flextronics Corporation. Flexronics
Corp. Is one of the largest global electronics manufacturers in the world.

It assists Microsoft's team in the process of designing the Xbox.

Facility Layout
To understand facility layout and its importance in supply chain management, let's look at the
example of the pod, or point of delivery concept, used by grocery warehouses of the American retail
giant Walmart. This concept involves organizing the warehouse into different pods or points of
deliveries or zones, each with a specific function such as receiving, storing or picking. Each pod is
designed to optimize the flow of goods and materials and to minimize the distance that products
need to travel. For example, the receiving pod is located near the loading docks to facilitate the
efficient unloading of goods. The storage pod is designed to maximize the use of space and to allow
easy access to the products. The picking pod is located near the shipping area to minimize the
distance the products need to travel before they are shipped out. By using the pod concept in its
warehouses, Walmart claims to have seen benefits such as reduced labor cost, improve inventory
accuracy, and increased productivity. The pod concept is a good example of how facility layout can
be used to optimize the flow of goods and materials and improve the overall performance of a
warehouse. There are four common facility layouts. Let's look at them one by one. The first is the
work center layout or a job shop. Consider the example of a manufacturing facility that produces
customized electronic devices such as smartphones and laptops. In this facility, different stages in
the assembly process are grouped together in specific areas or work centers. One work center is
dedicated to assembling circuit boards, another is dedicated to assembling the devices casing, and
another is dedicated to installing and testing software. Each work center is designed to optimize the
specific tasks being performed. All work centers combined together handle a wide variety of tasks. It
also allows for the easier maintenance and faster repair of defunct equipment, as all the work
centers are located in close proximity to one another. However, this kind of layout involves complex
planning and scheduling. The second layout is the batch layout. This is where products are produced
in small, discrete groups or batches. Each batch of products is manufactured, processed and
completed before the next batch begins. The batch production layout is flexible and it could be
adapted to a wide range of products, making it a popular choice for companies that manufacture a
wide range of products. It is also a suitable choice for companies that have a low volume of
production runs and produce multiple units of products in two to three production cycles. This also
makes the batch layout cost effective. Some examples of this are bakeries which make bread, cakes
or cookies in batches. It can take a call to change the batch size or quality of products at any time.
Movie theaters will show movies to batches of people and airlines which carry batches of people
from one airport to another. The third layout is an assembly line, also called a flow shop layout. It is
a type of production system in which a product moves through a series of stations, each performing
a specific task. This type of layout is commonly used in manufacturing industries such as the
automotive and electronic industries, where the production processes and products are highly
standardized. Since the products are standardized, the products are produced efficiently and in high
volume, which reduces their total unit cost. There's also very little flexibility when it comes to
changes of processes and equipment. Here, for example, in an assembly line for smartphones, the
production process starts with the assembly of a phone's motherboard. The motherboard then
moves down the assembly line to the next station, where the CPU and Ram are installed. After that,
the phone moves to the next station where the screen and touchscreen are assembled. The process
continues as the phone moves down the assembly line, with each station adding new components or
performing a specific task, such as assembling the camera or installing the battery. By the end of the
assembly line, the phone is fully assembled and ready for packaging. The continuous movement of
the product along the line also helps in reducing idle time at each station. The fourth is a continuous
type of layout. Here the production process flows continuously and in a smooth manner without
interruptions or stops from one workstation to the next. It is often used in manufacturing and
assembly operations, where raw materials are transformed into products through a series of
sequential processes. The goods produced here are highly standardized with almost no variety, and
are produced in higher volumes. Workers skills needed are generally low, since the machinery and
equipment used in this type of layout are highly specialized. An example of this is a car semi line in a
factory, raw materials such as metal sheets and parts are delivered to the beginning of the assembly
line. The materials then move along the line as they are assembled into car parts such as doors,
hoods and fenders by workers and machines at various stations. The partially assembled parts are
then welded and painted before being assembled into complete cars.

Additionally, the flow of materials and products is easily monitored, enabling the quick identification
and correction of any problems that may arise.