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Manufacturingand ServiceProcessStructures
CHAPTER FIVE
Copyright 2011 by the McGraw-Hil l Companies, Inc. A ll rights
reserved.McGraw-Hill/Irwin
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Where We Are Now
Chapter Relationships
Sustainability
Globalization
Organzatona
Culture/Ethics
ange
Management
Measurement
Part1SupplyChain:AperspectiveforOperationsManagement
1.IntroductiontoManagingOperationsAcrosstheSupplyChain X X
X2.OperationsandSupplyChainStrategy X X X X X
XPart2FoundationsofOperationsManagement
3.ManagingProcessesandCapabilities X X4.Product/ProcessInnovation X
X X X5.ManufacturingandServiceProcessStructures X X X
X6.ManagingQuality X X X X X X7.UnderstandingInventoryFundamentals
X X X8LeanSystems X X X X
XPart3IntegratingRelationshipsAcrosstheSupplyChain
9.CustomerManagement X X10.SupplyManagement X X X X
X11.LogisticsManagement X X X
Part4PlanningofintegratedOperationsAcrosstheSupplychain X
12.DemandPlanning:ForecastingandDemandManagement X X
X13.SalesandOperationsPlanning X X
X14.IndependentDemandInventoryPlanning X
X15.MaterialsandResourceRequirementsPlanning X X
XPart5ManagingChangeinSupplyChainOperations16.ProjectManagement X X
X X X X17.EvolvingBusiness ModelsandChangeDriversintheSupplyChain X
X X X X
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1. Distinguish between capacity strategies
2. Identify and explain economies of scale
3. Compare and contrast the seven manufacturingprocess
structures
4. Compare and contrast service process structures
5. Describe four operations layouts
6. Use break-even analysis for process selection
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Learning Objectives
Capacity Planning
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___________: the amount of output that can becreated by, a
process, with a given level of resourcesover a given time
period
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Economies & Diseconomies of scale
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______________________: as volume increases,unit costs decrease
to an optimal level
______________________: unit costs increase asan operations size
increases
Costper Unit
Volume (Number of Units)
Figure 5-1
Reasons for Economies of Scale
1. Allocation of___________
2. ___________ and___________ costs
3. ___________ costs for purchases
4. ______________________
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Capacity Planning Decisions
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Time Frame(time required
for changes)
Limiting
Resource
Types o f Capacity
ChangeExamples
Short term(0-6 months)
Low-skilled labor Over-time, part-time,temporary labor,
layoffs
Restaurant wait staff,bank tellers, productionline workers
Equipment, space Rental, leasing Landscaping equipment,temporary
storage
Medium term(6-24 months)
Specialized labor Hiring, firing, contractlabor
Engineers, accountants,machine operators,physicians
Equipment, space Leasing, subcontracting,equipment
installation
and renovation
Distribution/warehousing,fast-food restaurant
rebuild, production linerenovation
Long term(2+years)
Physical plant New building,outsourcing
Automotive plant open orclosure, new officebuilding
Table 5-1
Product-Process Matrix
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High
Variety
Flexibility
Cost
Low
Low Volume High
Figure 5-2
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Activity
Identify a product and competitive priorities for:
Project
J ob Shop
Batch
Repetitive
Continuous
Mass Customization
Cellular Manufacturing
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Process Structure and Market Orientation
________________________________:unique, customized products
______________________: similardesign, customized during
production
______________________: producedfrom standard components and
modules
______________________: goodsmade and held in inventory in
advance ofcustomer orders
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Service Process Matrix
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Low
High
Labor
Intensity
Customization/Customer InteractionLow High
Figure 5-3
ActivityThink of an example of each:
Service Factory
Service Shop
Mass Service
Professional Service
Think of the last service you purchased:
What category was it?
What changes can you suggest to move it toanother category?
What could be the advantages of the changes?
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Service Blueprinting
______________________: all actions done bycustomers during
service delivery
______________________: employee actionsin the face-to-face
encounter
______________________: behind the scenesactivities
______________________: activities necessaryfor the service,
done by employees withoutdirect customer contact
______________________: tangibles thecustomers see or collect
from the organization 513
Service Blueprinting
514Figure 5-4
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Operations Layout
______________________: product cannot bemoved during
production
______________________: groups togethersimilar resources
______________________: resources arrangedby regularly occurring
sequence of activities
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Line Balancing in Product LayoutsUsed to assign individual tasks
to work areas for adesired output rate
1. Determine precedence relationships
2. Calculate Takt time
3. Determine minimum number of work stations =Total of all task
times/takt time
4.Determine efficiency =[sum of all task times/(actual work
stations X takt time)] X 100
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dayperneededoutput
daypertimeproductionavailable=
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Line Balancing
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A B CD
E
F G
Task Predecessors Time(minutes)
A Shape dough None 2
B Add pizza sauce A 1
C Add cheese B 2
D Add sausage C 0.75
E Add pepperoni C 1
F Package pizza D, E 1.5
G Label package F 0.5
Total Time: 8.75
Break Even Analysis
518Figure 5-4
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Break Even Point
A firm has variable costs of per unit of $3 andannual fixed
costs of $30,000. What is the break-even point if the sales prices
is 48 per unit
Total Revenue = Total Cost
TR = $8 * volume and TC = $30,000 + $3 * volume
$8 * volume = $30,000 + $3 * volume
$5 * volume = $30,000
volume = 6,000 units per year
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Manufacturing/Service Process Summary1. Strategic capacity
decisions include when, where and
how much to adjust
2. Economics/Diseconomies of scale affect costs per unit
3. Product-process matrix classifies processes based onvolume
and variety
4. Service are categorized by customization andlabor/capital
intensity
5. Services processes can be front or back office
6. Layouts should fit with processes used
7. Process automation affects costs and capabilities
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