Process Design

Various choices that we make with respect to the flow of parts/ components/material in a manufacturing process Project
one-at-a-time production of a product to customer order Job shops, tool rooms, mining, infrastructure cos., IT sector etc.

Batch Production
Mid-volume and mid-variety products or services Systems operate in batches Manufacture of drugs, passenger cars etc.

Mass Production
large volumes of a standard product for a mass market Dedicated production lines Electric bulbs, spark plugs, cycles, mobiles, etc.

Continuous Production
used for very high volume commodity products Cement, petrochemicals, steel, glass, salt etc.

Product-Process Matrix

Continuous
Forecasting Line balancing Maintenance management Process optimization Flowshop scheduling Product layout design

Mass
Forecasting Line balancing Maintenance management Process optimization Flowshop scheduling Product layout design

Batch
Forecasting Capacity planning Optimized sequencing and scheduling Group technology layout design Material management

Project
Project scheduling Capacity planning Functional & fixed position layout Job order costing Work-inprocess management

Service Processes
Professional Service
highly customized and very labor intensive Legal service, medical service, beauty parlors

Service Shop
customized and labor intensive Repair shops, restaurants

Mass Service
less customized and less labor intensive Retails, traditional banking

Service Factory
least customized and least labor intensive Fast food chains, internet banking, electricity, gas connections etc.

Service-Process Matrix

Process and Capacity Analysis

Capital intensity mix of capital (i.e., equipment, automation) and labor resources used in production process Process flexibility ease with which resources can be adjusted in response to changes in demand, technology, products or services, and resource availability Vertical integration extent to which firm will produce inputs and control outputs of each stage of production process Customer involvement role of customer in production process

1. Process Plans
Set of documents that detail manufacturing and service delivery specifications
assembly charts operations sheets quality-control check-sheets

An Operations Sheet for a Plastic Part

Part name Part No. Usage Crevice Tool 52074 Hand-Vac

Assembly No. 520 Oper. No. 10 20 30 40 50 60 Description Pour in plastic bits Insert mold Check settings & start machine Collect parts & lay flat Remove & clean mold Break off rough edges Dept. 041 041 041 051 042 051 Machine/Tools Injection molding #076 113, 67, 650 Plastics finishing Parts washer Plastics finishing Time 2 min 2 min 20 min 10 min 15 min 10 min

2. Process flowcharts
Symbolic representation of processes Incorporate
nonproductive activities (inspection, transportation, delay, storage) productive activities (operations)

Operations Process Flowchart Symbols Inspection

Transportation
Delay Storage

Operation Transport Inspect Delay Storage

Description of process Unload apples from truck Move to inspection station

1 2

20 100 ft 30 50 ft 360 20 ft 15 20 5 20 ft 30 480 190 ft

3
4 5 6 7 8 9 10

Weigh, inspect, sort

Move to storage

Wait until needed

Move to peeler Apples peeled and cored Soak in water until needed Place in conveyor Move to mixing area Weigh, inspect, sort Page 1 0f 3 Total

11

Distance (feet)

Process flowchart of apple processing

Date: 9-30-02 Analyst: TLR

Location: Graves Mountain Process: Apple Sauce

Step

Time (min)

3. Planning premises
Make-to-Stock (MTS)
Schedule production for the purpose of replenishing stock to some predetermined level Demand is met from the stock of finished goods Fewer product variety and high production volume

Make-to-Order (MTO)
Plan and schedule production only against specific orders High product variety in low volumes

Assemble-to-Order (ATO)
Hybrid of MTS and MTO Component and sub-assembly level there is a high degree of commonality MTO is postponed to the point of product differentiation Mid-volume and mid-variety

4. Make or Buy Decisions

Cost Capacity Quality Speed Reliability Expertise

Sourcing Continuum

Vertical Integration (100% ownership)

Joint Venture (equity partner)

Strategic Alliance (long-term supplier contract; collaborative relationship)

Arms-Length Relationship (short-term contract or single purchasing decision)

Source: Adapted from Robert Hayes, Gary Pisano, David Upton, and Steven Wheelwright, Operations Strategy and Technology: Pursuing the Competitive Edge (Hoboken, NJ: 2005), p. 120

5. Process Selection with Break-Even Analysis

Cost
Fixed costs
constant regardless of the number of units produced

Variable costs
vary with the volume of units produced

Revenue
price at which an item is sold

Total revenue
is price multiplied by volume sold

Profit
difference between total revenue and total cost

 Total cost (TC) = fixed cost (cf)+ total variable cost (vcv) Total revenue (TR) = volume (v) x price (p) Profit (z) = total revenue - total cost

TR = TC vp = cf + vcv vp - vcv = cf v(p - cv) = cf v= cf p - cv

Solving for Break-Even Volume

Break-Even Analysis: Example

Fixed cost = cf = $2,000 Variable cost = cv = $5 per raft Price = p = $10 per raft Break-even point is v= cf p - cv = 2000 10 - 5 = 400 rafts

Break-Even Analysis: Graph

$3,000

Total cost line

$2,000

$1,000

Total revenue line

400 Break-even point Units

Process Selection
Process A Process B $2,000 + $5v = $10,000 + $2v $3v = $8,000 v = 2,667 rafts

Below 2,667, choose A Above 2,667, choose B

Process Selection: Graph

$20,000

Total cost of process A Total cost of process B

$15,000

$10,000

$5,000

Choose process A | 1000 | 2000 | 3000

Choose process B | 4000 Units

Point of indifference = 2,667 Units Example 4.2

6. Technology Decisions

Financial justification of technology

Purchase cost Operating Costs Annual Savings Revenue Enhancement Replacement Analysis Risk and Uncertainty Piecemeal Analysis

7. Capacity Decisions
Capacity
maximum capability to produce
rated capacity is theoretical effective capacity includes efficiency and utilization

Capacity utilization
percent of available time spend working

Capacity efficiency
how well a machine or worker performs compared to a standard output level

Capacity load
standard hours of work assigned to a facility

Capacity load percent

ratio of load to capacity

Capacity Expansion Strategies