Chapter 3Product & Process Design

Part 2: Process Design

Product vs. Process Design

Which comes first: Design of process or Design of product?

The answer is ??

Product Strategy

Once a company decides to produce a given product or offer a particular service, company should decide if product or service is to be Made-to-order Assemble-to-order (or Built-to-

Order) Made-to-stock

Make-to-order Products/services that are made to

customer’s specs but only after an order is received.

Product/service is customized Volume is ?? Inventory level is ?? Delivery time—from time order is

place to time it is received--is generally ??

Make-to-order

Examples Custom built home or office building Tailor made suit Commercial airplane Wedding cake Professional services (law case,

prescriptions, some medical procedures, etc.)

Hair styling

Assemble-to-order (built-to-order)

Standard components are produced in anticipation of demand.

Once an order is received, components can be combined in different ways to accommodate different customer specs.

Some customization May have what type of inventory? Delivery time shorter than make-to-

order.

Assemble-to-order (built-to-order)

Examples Computers (Dell) Standard vacation packages Track homes Cars built to customer’s specs Omelet

Make-to-stock

Products produced for immediate sale or delivery in anticipation of demand.

Product is standardized. Produced in large volumes. May have what type of

inventory? Instant or short delivery time.

Make-to-stock

Each unit is produced or assembled by going through same series of operations in same order.

Make-to-stock

Examples “Off-the-shelf” items Big ones

Cars TV sets

Small ones Toothpaste Candy

Overview of Product Strategy

Bake

Product Strategies

Differ by Degree of customization Type of inventory Delivery time Volume Type of process (later)

Comparison of Product Strategies

Make to Order

Assemble to Order

Make to Stock

Custom-ization

Very high High Low

Type of inventory

None WIP Finished goods

Delivery time

Long Moderate Instant or Very Fast

Volume Low Moderate Very high

Process Project Batch Line or continuou

s

Types of Processes

What type of process is best for each type of product strategy?

Processes can be classified as Project Batch Line Continuous

Project Process (Custom Job Shop)

A process set that makes a one-at-a-time product exactly to customer specifications.

Product has its own unique processing requirements.

Product is routed to different operations (workstations), depending on its own unique needs.

Project Process (Custom Job Shop)

High degree of customization Low volume

Project Process

Construction, some medical procedures, landscaping, custom built home, tailor made suit.

Therefore, use with products that are “make to order.”

Batch Process

Produces small quantities of a product in groups or batches based on customer orders or specs.

Product is often made using standard components, which are combined in different ways, depending on product requirements.

Batch Process

Print shop, computers (Dell), education classes

Works best for products that are assemble-to-order.

Example of Layout of a Project or Batch Process: Hospital

Line process (or assembly line) Produces large quantities of a

standardized product. Assembly line operation designed for

mass production. Each unit is produced or assembled by

going through same series of operations performed in same order.

Cars, off the shelf items. Works best for make-to-stock

products.

Continuous Process Very high volumes of a fully

standardized product Product is continuous – liquid or gas

Oil refinery Water purification plant Liquid chemicals

Capital intensive and automated Use for make-to-stock products

Example of Repetitive Process: Car Wash

DryRinseSoapSpray

Example of Line Process: Hotel Laundry

Classification of Processes

Project Batch Line Continuous

Intermittent Repetitive

Processes Characterized by Relationship Between Standardization and Volume

Decision Intermittent Operation Repetitive Operation

Product variety Great Small

Degree of standardization Low High

Organization of resources Grouped by Function Line flow

Path of products Varied, depends on product Line flow

Factor driving production Customer orders Forecast of demand

Critical resource Labor Capital

Type of equipment General purpose Specialized

Degree of automation Low High

Throughput time Longer Shorter

Work-in-process inventory More Less

Intermittent vs. Repetitive Processes

Types of Processes vs. Product Strategy

Types of Process

Product Strategy

Project Made to order

Batch Assemble to order

LineMake to stock

Continuous

Process Performance Metrics

To determine if a process is functioning properly, we must measure its performance.

To measure performance, process should be in statistical control.

Process Performance Metrics

Process Velocity

timeadded-Value

timeThroughputVelocity Process

Should ratio be big or small? What does a ratio of 1.0 imply? Greater than 1.0?

Utilization

Avaliable is Resource Time

Usedis Resource Timeon UtilizatiResource

Should ratio be big or small? What does a ratio of 1.0 imply? Less than 1.0?

Output Standard

ouptut ActualEfficiency

Efficiency

Should ratio be big or small? What does a ratio of 1.0 imply? Less than 1.0? Greater than 1.0?

Example – Page 72, text

A title company is analyzing its operations in an effort to improve performance.

The following data has been collected:

It takes an average of 4 hrs. to process and close a title.

Value added time is estimated at 30 minutes per title.

Each title officer is on payroll for 8 hrs. per day, but works 6 hrs. per day on average, accounting for lunches and breaks.

Industry standard for labor utilization is 80%.

The company closes 8 titles per day. Industry standard at comparable

companies is 10 titles closed per day. Compute

Process velocity Labor utilization Efficiency

Process Velocity

8

hrs./title 1/2

hrs./title 4

timeadded-Value

timeThroughputVelocity Process

Labor Utilization

(75%) 75.0

hrs./day 8

hrs./day 6

Avaliable isLabor Time

UsedisLabor TimeizationLabor Util

Efficiency

(80%) 80.0

y titles/da10

y titles/da8

Output Standard

ouptut ActualEfficiency