PROCESS CHOICE & LAYOUT

DECISIONS IN

MANUFACTURING & SERVICES

Dhanis P. Maharani, ST., MSc.

Certified Procurement Professional by CIPS

(The Chartered Institute of Procurement & Supply)

Education

MSc. Operations, Projects & Supply Chain Management of

Manchester Business School, 2014-2015

Electrical Engineering, UGM, 2001-2005

Professional

Indirect Material Operations Manager, Mondelez Indonesia,

2012-2014

Section Head of Component Buyer, Toyota

Motor Manufacturing Indonesia, 2006-2012

Affiliations

PPI UK- Greater Manchester

Mata Garuda – Indonesia Endowment Fund for Education Awardee

Associaton

MBS Alumni Network

Meet Dhanis dhanis.maharani@gmail.com

Learning Outcomes

Type of manufacturing processes and its

characteristics

The link of manufacturing process and market

requirement

The critical role of customization in manufacturing

Three dimensions of service differentiation

Service and its managerial challenges

Process layout development

Manufacturing Processes

• Dictates the resources needed, e.g.: workers, equipment, production area

• Highly related to the business strategy and its impact on productivity

Why so important

?

• People, facilities, physical layout, IS

• Align with the business strategy

• Support multiple sites/organisations’ collaboration

General Principles

• Physical requirement

• Product similarities and customisation

• Production volumes

Selection Criteria

Types of Manufacturing Processes

• Construction site for a large building Project process

• Customised products with low volume, e.g. craft product

Job shops

• Produced in batches Batch

manufacturing

• Position of the product is fixed, e.g. shipbuilding, F1 pitstop

Fixed-position layout

• Low variety with high similarity products, high volume, e.g. packaging

Production lines

• Use a tightly linked & paced sequence of steps, e.g. chemical

Continuous flow

incr

easi

ng v

ari

ety

increa

sing vo

lume

Job shops

• General purpose equipment and broadly skilled personnel

• Functional/process layout

• Requirement can change dramatically

• High flexibility, low efficiency

Characteristics

Batch manufacturing

• Items are moved through different manufacturing steps in groups/batches

• Balanced flexibility & efficiency

Characteristics

Fixed-position

layout

• Position of the product is fixed

• Materials, equipment, workers are moved to & from the product

• Usually bulky products

• E.g. shipbuilding, mainframe computer maintenance

Characteristics

Production lines

• Product-based layout

• Various steps are linked

• Items are moved through the line

• High-degree of equipment and worker specialisation

• Consistent quality & high efficiency

Characteristics

• Require high volume

• Low flexibility to fit design specification/change

Drawbacks

Continuous Flow

• Product cannot be broken into discrete units

• Highly capital intensive

• Inflexible (output level, process/product modification)

• High degree of product standardisation

• Expensive start-ups & shutdowns

• Need specialist to control operations

• Mostly automatic-driven, direct labours normally load/unload materials and monitor process

Characteristics

Hybrid

Manufacturing

Process

Equipment & personnel

are dedicated to a

product family

Cellular layout,

resources are

arranged based on

dominant activities

E.g. aluminium wheel

disc, resin products

Open heart surgery

Fixed-position layout

Padang restaurant

Batch manufacturing

Oil production

Continuous flow

Job shop Production line

Sofa production Machining line

Selecting Manufacturing Processes

The Product-Process Matrix (Source: Hayes and Wheelwright, 1984)

Product Customisation

Make-to-Stock (MTS)

Assemble-to-Order (ATO)

Make-to-Order (MTO)

Engineer-to-Order (ETO)

Follows

individual

customer’s

specification

greater customisation

No customisation, generic products

End process-customisation

Use standard component with customer specific

final configuration

Engineer-to-Order (ETO)

Make-to-Stock (MTS)

Assemble-to-Order (ATO)

Make-to-Order (MTO)

Engineer-to-Order (ETO)

Car production: left/right hand drive

Phone charger

Sofa

Luxurious house

Design Sourcing materials

Fabrication Assembly/finishing

Distribution

The Customisation Point

ETO MTO ATO MTS

Upstream Downstream

Modified by author (Source: Pine, 1993)

Not affected by individual

customer order

Can be completed off-line

Customer

need-driven

Job shop likely

Efficiency &

capacity utilisation-

driven

High-volume/batch

The Customisation Point

Early Late

Customer

need

flexibility

Great Limited

Lead time to

customer Longer Shorter

Product cost Costly Low-cost

ETO MTO ATO MTS

TimberEdge Cabinets: MTO ATO

Better fabrication efficiency

Reduce lead time weeks to days

Half inventory level

Reduce workforce by 25%

Service Processes

• Produce intangible value

• More diverse

• Customer-introduced variability, i.e. arrival, request, capability, effort, subjective-preference (Frei, 1996)

Characteristics

• Service packages

• Service customisation

• Customer contact

Three dimensions of services

Service Packages Type Primarily Delivers

Intangible Activities

Mix of Physical &

Intangible Activities

Example Lawyer, proof reader Hotel, cruise

Intangible Knowledge Relaxing vacation

Physical Legal document, edited

document

Room, meeting facilities,

enjoyable ship

Strategy More focus on employee

retention & skill

development (intellectual

capital expenses) for the

greater emphasis on

intangible activities

More capital

expenditure-oriented for

the greater the emphasis

on physical activities

Service Customisation

Lower Customisation Degree

• More standardised

• Narrow-skilled workers

• Special purpose technology

• More predictable & relatively faster

• Better measurement & process control

• Better focus on cost & productivity

Higher Customisation Degree

• More variability

• Broad-skilled employees

• Wide range of technologies/investments

• Less predictable

• Difficulties in measurement & process control

• Customer may have diverse unique needs

LOW HIGH

Customer Contact

Lower Customer Contact

• More service package provided by the back-operations

• Key considerations: Layout, location, convenience

• Provides high contact services

Higher Customer Contact

• More service package provided by the front-operations

• Key considerations: Operational cost efficiency & productivity

• Relatively easier to manage

LOW HIGH

Determine the importance of front-room &

back-room operations in a service process

Service Positioning

Type Service

Package Customisation

Customer

Contact

Public

hospital

Recruitment

consulting

firm

Package

delivery

Internet

provider

LOW

HIGH

HIGH

LOW

TO

MEDIUM

HIGH

HIGH

MIX

PRIMARILY

INTANGIBLE

MIX

LOW LOW PRIMARILY

INTANGIBLE

Service Blueprinting

Patient consults to

the doctor about his

health problems

Doctor checks

patient’s general

condition, runs some

tests if necessary

Blood test/X-ray

exam in the

laboratory

Procurement of

medical devices

Layout Decision Models

Two approaches used to logically decide the grouping & physical arrangement of the various

resources

Line balancing – a technique used by assigning tasks to a series of linked

workstations.

The goal is to balance the amount of work in each

station & minimise idle time.

Assigning department locations in functional

layouts – locating diverse functions for better synergy, interaction & productivity.

E.g. through measurement of closeness rating, number of inter-functional trips per

time period

6 Stages of Line Balancing

Process Identification

• Including time for each task & total time

Process Flow Diagram

• Used when assigning individual task to workstations

Determine takt time

Calculate min. workstations

Assign task to each station

• Cycle time won’t exceed takt time

• Focus on task where most tasks directly depend on it

Performance evaluation

utquiredOutp

imeAvailableTTakttime

Re

TaktTime

T

W

I

i

i 1

min

Ti = time required for ith task

= total time for all I tasks

I

i

iT1

Better performance has low idle time, high efficiency delay

CTW

TCTW

IdleTimeactual

I

i

iactual

1%100%

IdleTimeDelayEfficiency %%100

Wactual = actual no. of workstations

CT = cycle time = max. amount of time

spent in any one workstation

Assigning department locations in

functional layouts

Identify potential

department locations & distances between various

locations

Identify interdepart-mental trips

for each department

per time period

Location assignment • Assign a particular

key dept. to a certain location, e.g. customer service

• Rank the no. of interdepartmental trips. The higher, the closer.

• Centrally locate dept. with most inter-connection with multiple dept.

• See if any room of improvement by swapping

Summary

Managers must be considerate in selecting the

manufacturing process, the customisation point and

degree that align with company’s business strategy

Services face diverse challenges, depend on its

positioning : package, customisation, customer

contact

Managers can employ two approaches : line

balancing and assigning department locations in

functional layouts