HS-OWL UniTS Operations management Process design

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Lorena Morton
6 years ago
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1 Process design

2 Introduction Products, services and the processes which produce them all have to be designed. Design is an activity (mainly conceptual) which must produce a solution that will achieve a series of goals. Products and services should be designed in such a way that they can be created effectively. Process design 2

3 Decisions taken during the design of a product or service will have an impact on the decisions taken during the design of the process which produces those products or services and vice versa. Processes should be designed so that their performance is appropriate to produce the expected results. Process design 3

4 In manufacturing operations overlapping the activities of product and process design is beneficial. In most service operations the overlap between service and process design is implicit in the nature of service. In fact, services involve the customer in being part of the transformation process. Process design 4

5 Designing processes There are different process types. Process types are defined by the volume and variety of items they process. Process types go by different names depending on whether they produce products or services. A useful concept is the volume-variety diagram aka product-process matrix after Hayes and Wheelwright. Process design 5

6 Different operations in the same manufacturing facility may adopt different types of processes. For example, in the same plant both standard and special products may be manufactured. The key question is: how much should the process change in order to transform flow units? Process design 6

7 Process tasks Manufacturing process types Process flow Diverse/ complex Intermittent High Project Jobbing Variety Batch Mass Repeated/ divided Continuous Low Low Volume Continuous High Process design 7

8 Project processes One-off, complex, large scale, high work content products Specially made, every one customised Defined start and finish: time, quality and cost objectives Many different skills have to be coordinated Examples: manufacturing plant, ships, building Process design 8

9 Jobbing processes Very small quantities: one-offs, or only a few required Specially made. High variety, low repetition. Strangers every one customised Skill requirements are usually very broad Skilled jobber, or team, complete whole product Examples: one-off furniture, special equipment, specialist machine tool Process design 9

10 Batch processes Higher volumes and lower variety than for jobbing Standard products, repeating demand. But can make specials Specialised, narrower skills Set-ups (changeovers) at each stage of production Examples: gas turbine, machine tool, food service equipment Process design 10

11 Mass (line) processes Higher volumes than batch Standard, repeat products Low and/or narrow skills No set-ups, or almost instantaneous ones Examples: cars, household appliances, furniture items Process design 11

12 Continuous processes Extremely high volumes and low variety: often single product Standard, repeat products Highly capital-intensive and automated Few changeovers required Difficult and expensive to start and stop the process Examples: petrochemical products, steel, medium-density fibreboard Process design 12

13 Summary project jobbing batch mass continuous process dedicated dedicated shared shared shared resources dedicated shared shared shared shared unit managed single single batch batch flow variability high high medium low low Process design 13

14 Process tasks Diverse/ complex Repeated/ divided Process flow Intermittent Continuous Service process types Low Variety High Low Professional service Service shop Volume Mass service High Process design 14

15 Professional service High levels of customer (client) contact Clients spend a considerable time in the service process High levels of customisation with service processes being highly adaptable Contact staff are given high levels of discretion in servicing customers People-based rather than equipment-based Examples: architectural design, financial consultant, specialist doctor Process design 15

16 Service shops Medium levels of volumes of customers Medium, or mixed, levels of customer contact Medium, or mixed, levels of customisation Medium, or mixed, levels of staff discretion Examples: bank, fitness centre, school. Process design 16

17 Mass service High levels of volumes of customers Low to medium levels of customer contact Low, or mixed, levels of customisation Low, or mixed, levels of staff discretion Examples: telecommunication service, airport, supermarket Process design 17

Deviations from the natural line Manufacturing operations process

Jobbing Batch Mass Continuous None Less process flexibility than is

high cost Professional service Service shop Mass service The

18 Deviations from the natural line Manufacturing operations process types Volume Variety Service operations process types Project Jobbing Batch Mass Continuous None Less process flexibility than is needed so high cost None More process flexibility than is needed so high cost Professional service Service shop Mass service The natural line of fit of process to volume/variety characteristics Process design 18

19 Old process Volume Variety Volume increase of most active PS Old process new product None None New process new product The natural line of fit of process to volume/variety characteristics Process design 19

20 The role of order entry It is possible to analyse production processes at a broad level with respect to the point in which a customer s order enters the process. The order should be seen in general terms as the way in which customers express their intent to make the purchase. The intent is directed towards objects which can satisfy customers needs (of the same kind) at different levels. Process design 20

21 Three aspects deserve particular attention: service content (according to SD-logic s meaning) customer s lead time customer s involvement in the following subprocesses: PS design and engineering purchasing of materials, components and services production delivery. At any rate, customisation takes place after order receipt. Process design 21

22 Make-to-stock (MTS) Customer s Lead Time Design Engineering Purchasing Processing Assembly operations End products Shipment & Delivery Order Process design 22

23 In MTS environments, products are created before receipt of a customer order. Customer orders are then filled from existing stock, and then those stocks are replenished through production orders. MTS environments have the advantage of decoupling manufacturing processes from customer orders. This may enable customer orders to be filled immediately from readily available stock. It also allows the manufacturer to organize production in ways that minimise costly changeovers and other disruptions. Process design 23

24 Engineer-to-order (ETO) Customer s Lead Time Design Engineering Purchasing Processing Assembly operations Shipment Order Process design 24

25 In ETO environments, customer specifications require unique engineering design, significant customisation, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material and routings. ETO are usually the slowest to fulfil orders; in fact time is required to build the product and to custom design according to customer s unique requirements. Process design 25

26 Assemble-to-order (ATO) Customer s Lead Time Design Engineering Purchasing Processing Semi-finished products Final assembly or Sub-assemblies operations Shipment & Delivery Order Process design 26

27 In ATO environments, products are assembled from components after the receipt of a customer order. The key components in the assembly or finishing process are planned and stocked in anticipation of a customer order. Receipt of an order initiates the assembly of the customized product. This strategy is useful when a large number of end products based on the selection of options and accessories can be assembled from common components. Process design 27

28 When products are too complex or customer demand is unpredictable, manufacturers may choose to hold subassemblies or products in semi-finished state. The final assembly operation is then held until a firm customer order is received. In ATO, manufacturers typically cannot deliver products to customers as quickly as MTS since some additional time is required to complete the final assembly. Process design 28

29 Make-to-order (MTO) Design Engineering Customer s Lead Time Purchasing Processing Assembly operations Shipment Order Process design 29

30 In MTO environments, products are made entirely after the receipt of a customer order. The final product usually is a combination of standardised and custom items to meet the customer s specific needs. MTO are more effective when customers consider acceptable to wait in order to get a product with unique features (usually customised or highly engineered products). MTO are slower to fulfil demand than MTS or ATO, because time is required to make the products from scratch. But there is less risk involved with building a product when a firm customer order is in hand. Process design 30

31 The point of the process in which the order enters the system is a decoupling point (or buffer barrier) for the whole process. This is particularly clear in MTO and ATO systems: downstream of the order-entry point the activities are carried out to fulfil the specific order upstream of the order-entry point the activities are performed almost independently of the specific contents of an order. Process design 31

32 If we consider a MTO or an ATO environment, we can highlight the following points: by pushing the decoupling point downstream, it is possible to reduce the customer lead time to increase the production steps that are performed on a forecast basis nonetheless there are some drawbacks: the buffer if composed of items which have more value the customisation is limited to the residual production steps. Process design 32

33 In summary, the presence of the decoupling point implies some effects on process management: Upstream Downstream Process goal To supply the buffer To respond to a specific order Performance required Efficiency and Dependability Flexibility and Speed Management focus Buffer Specific order Process design 33

34 Customer s Lead Time Design Engineering Purchasing Processing Semi-finished products Final assembly or Sub-assemblies operations Shipment & Delivery Time performance is independent from the customer Order Time performance is directly perceived by customer Process design 34

35 The push-pull strategy In this strategy, some stages of the supply chain are operated on a forecast basis (push-based) and others on actual orders (pull-based). The interface between the push-based stages and the pull-based stages is defined push-pull boundary. The push segment of the chain must be characterised by low uncertainty so as to be effectively managed. Process design 35

36 To reduce uncertainty, the company can take advantage of risk pooling: aggregate forecasts are always more accurate than individual forecasts. For example, prediction of individual end-items can be difficult, while the forecast of a family of items is simpler (compensation). Similarly, predicting the demand of a component that is used in several products is simpler. Process design 36

37 Another factor to be taken into account is economies of scale. The higher their importance in reducing cost, the greater is the value of aggregating demand. Accordingly, a segment in which the economies of scale are important should be managed on a long-term forecast (push-based). For some products (e.g. groceries) the demand is largely predictable and economies of scale are highly important. Process design 37

38 In summary: a push strategy is used in the segment of a supply chain where long-term forecast are reliable a pull strategy is used in the segment where the management of actual demand is needed. Push Pull Objective minimise cost maximise service level Complexity high low Focus resource allocation responsiveness Lead time long short Processes supply chain planning order fulfilment Process design 38

Operations Management Session 3 Process Strategy and Analysis

Operations Management Session 3 Process Strategy and Analysis 2/9/2018 Opening remarks. One of the fist decisions a manager makes in designing well functioning process is to choose a process type that