MANUFACTURING AND SERVICE

PROCESSES
1. Understand what a manufacturing process is.
2. Explain how manufacturing processes are organized.
3. Analyze simple manufacturing processes.
4. Understand the characteristics of service processes.
5. Explain how service systems are organized.

Chapter 7and 9 of Chase, Shankar,

Jacobs

McGraw-Hill/Irwin 1
What Are Production Processes?
• Production processes
are used to make any
manufactured item
• High level view can be
divided into three steps
• Step 1 – Source the
parts needed
• Step 2 – Make the
product
• Step 3 – Deliver the
product

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Production Process Terms
Lead time

• The time needed to respond to a customer order

Customer order decoupling point

• Where inventory is positioned to allow entities in the

supply chain to operate independently

Lean manufacturing

• A means of achieving high levels of customer

service with minimal inventory investment
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Types of Firms
Make-to-Stock

• Serve customers from finished goods inventory

Assemble-to-Order

• Combine a number of preassembled modules to meet a

customer’s specifications

Make-to-Order

• Make the customer’s product from raw materials, parts, and

components

Engineer-to-Order

• Work with the customer to design and then make the product
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Make-to-Stock
• Examples of products include the following:
• Televisions
• Clothing
• Packaged food products
• Essential issue in satisfying customers is to balance the
level of inventory against the level of customer service
• Easy with unlimited inventory, but inventory costs money
• Trade-off between the costs of inventory and level of customer
service must be made
• Use lean manufacturing to achieve higher service levels
for a given inventory investment

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Assemble-to-Order
• A primary task is to define a customer’s order in terms of
alternative components because these are carried in
inventory
• An example is the way Dell Computer makes their desktop
computers
• One capability required is a design that enables as much
flexibility as possible in combining components
• There are significant advantages from moving the
customer order decoupling point from finished goods to
components

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Make-to-Order/Engineer-to-Order
• Boeing’s process for making commercial aircraft is an
example
• Customer order decoupling point could be in either raw
materials at the manufacturing site or the supplier
inventory
• Depending on how similar the products are, it might not
even be possible to preorder parts

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How Production Processes Are Organized
Project

• The product remains in a fixed location

• Manufacturing equipment is moved to the product

Workcenter (job shop)

• Similar equipment or functions are grouped together

Manufacturing cell

• A dedicated area where products that are similar in processing requirements are
produced

Assembly line

• Work processes are arranged according to the progressive steps by which the product
is made

Continuous process

• Assembly line only the flow is continuous such as with liquids

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 Product–Process Matrix: Framework Describing Layout
Strategies

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Exhibit 7.2
Production System Design
Project Layout
• The product remains in a fixed location
• A high degree of task ordering is common
• A project layout may be developed by arranging materials
according to their assembly priority

Workcenter
• Most common approach to developing this type of layout is
to arrange workcenters in a way that optimizes the
movement of material
• Optimal placement often means placing workcenters with
large interdepartmental traffic adjacent to each other
• Sometimes is referred to as a department and is focused
on a particular type of operation
•
10
10
Production System Design
Manufacturing Cell

• Formed by allocating dissimilar machines

to cells that are designed to work on
similar products (shape, processing, etc.)

Assembly Line and Continuous

Layout
• Designed for the special purpose of
building a product by going through a
series of progressive steps
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11
Break-Even Analysis
• Defined as standard approach to choosing among
alternative processes or equipment
• Model seeks to determine the point in units produced
where a company will start making profit on the process
• Model seeks to determine the point in units produced
where total revenue and total cost are equal

or

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12
Example 7.1: Break-Even Analysis
• Buy for $200
• Make on lathe for $75
• Make on machining center for $15
• Buy has no fixed costs
• Lathe has $80,000 fixed costs
• Machining center has $200,000 fixed costs

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Example 7.1: Total Cost for Each Option

Purchase

• Cost = $200 x Demand

Produce Using Lathe

• Cost = $80,000 + $75 x Demand

Produce Using Machining Center

• Cost = $200,000 + $15 x Demand

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14
Costs Shown Graphically

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15
Finding Points A and B

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16
Manufacturing Process Flow Design
• Manufacturing process flow design: a method to
evaluate the specific processes that material follow as
they move through the plant
• Common tools are assembly drawings, assembly charts, route
sheets, and flow process charts
• Focus should be on the identification of activities that can
be minimized or eliminated
• Movement and storage
• The fewer the moves, delays, and storage, the better the flow

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The Charts
Assembly drawing

• An exploded view of the product showing its component parts

Assembly chart

• Defines how parts go together, their order of assembly, and overall

flow pattern

Operation and route sheet

• Specifies operations and process routing

Process flowchart

• Denotes what happens to the product as it progresses through the

production facility
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18
 Sample Assembly Drawing

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19
Exhibit 7.4
 Sample Assembly Chart

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20
Exhibit 7.5
 Sample Operation and Route Sheet

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21
Exhibit 7.6
Sample Flowchart

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22
Questions

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Example 7.2: Manufacturing Process Analysis

• 15 workers, eight-hour shift

• Assembly line moves at the rate of 150 components per
hour
• Incentive pay of 30¢ per good part
• Can hire 15 more workers for second shift if needed
• All but molding from outside vender

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Example 7.2: Molding
• 11 Machines
• One usually down
• One operator per machine
• 25 parts per hour
• Paid 20¢ per good part
• Overtime is 30¢ per part
• Employment is flexible
• Currently 6 employees
• 4 more available

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Example 7.2: Remaining Costs
• Raw materials are 10¢ per part
• Electricity is 2¢ per part
• Purchased parts cost 30¢ per component

• Other weekly expenses

• Rent is $100
• Other employees receive $1,000
• Accounting depreciation is $50

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Example 7.2: Questions to Answer
a) Determine the capacity of the process
• Are the capacities balanced?

b) If the molding process were to use 10 machines instead

of 6, what would be the capacity of the entire process?
c) If the company went to a second shift, what would be
the new capacity?
d) Determine the cost per unit output when the capacity is
6,000 per week or 10,000 per week

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Example 7.2: (a) Capacity of Entire Process
• Molding Capacity
• 6 machines x 25 parts per week x 8 hours x 5 days = 6,000

• Assembly Capacity
• 150 components per hour x 8 hours x 5 days = 6,000

• The capacities are balanced

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Example 7.2: (b) Increasing Molding to 10 Machines
• Molding Capacity
• 10 x 25 x 8 x 5 = 10,000

• Assembly capacity has not changed from 6,000

• The capacities are no longer balanced

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Example 7.2: (c) Increasing Assembly Capacity
• Molding Capacity
• 10 x 25 x 8 x 5 = 10,000

• Assembly Capacity
• 150 x 16 x 5 = 12,000

• New capacity is 10,000

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Example 7.2: (d) Cost for 6,000 Parts per Week

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Example 7.2: (d) Cost for 10,000 Parts per Week

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 SERVICE PROCESSES
1: Understand the characteristics of service processes.
2: Explain how service systems are organized.
3: Analyze simple service systems.
4: Contrast different service designs.

McGraw-Hill/Irwin 33
The Nature of Services
• The customer is the focal point of all decisions and
actions
• The organization exists to serve the customer
• Operations is responsible for service systems
• Operations is also responsible for managing the work of
the service workforce

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The Service Triangle

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Service Package
Supporting facility

• The physical resources that must be in place before a service can be offered

Facilitating goods

• The material purchased by the buyer or the items provided to the customer

Information

• Data provided by the customer

Explicit services

• Benefits that are observable by the senses

Implicit services

• Psychological benefits the customer may sense only vaguely

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An Operational Classification of Services
• Customer contact: the physical presence of the
customer in the system
• Extent of contact: the percentage of time the customer must be in
the system relative to service time
• Services with a high degree of customer contact are more difficult
to control
• Creation of the service: the work process involved in
providing the service itself
• The greater the percentage of contact time between the
service system and the customer, the greater the degree
of interaction between the two during the production
process

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Major Differences between High- and Low-Contact
Systems in a Bank

9-38
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Designing Service Organizations
• Cannot inventory services
• Must meet demand as it arises
• Service capacity is a dominant issue
• “What capacity should I aim for?”
• Marketing can adjust demand
• Cannot separate the operations management function
from marketing in services
• Waiting lines can also help with capacity

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How Service Design Is Different from Product
Design?
1. The process and the product must be developed
simultaneously
• The process is the product

2. A service operation lacks the legal protection commonly

available to products
3. The service package constitutes the major output of the
development process
4. Many parts of the service package are defined by the
training individuals receive
5. Many service organizations can change their service
offerings virtually overnight

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Structuring the Service Encounter: Service-System
Design Matrix
• Service encounters can be configured in a number of
different ways
1. Mail contact
2. Internet and on-site technology
3. Phone contact
4. Face-to-face tight specs
5. Face-to-face loose specs
6. Face-to-face total customization
• Production efficiency decreases with more customer
contact
• Low contact allows the system to work more efficiently

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Service-System Design Matrix

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Characteristics Relative to the Degree of
Customer/Service Contact

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Strategic Uses of the Matrix
1. Enabling systematic integration of operations and
marketing strategy
2. Clarifying exactly which combination of service delivery
the firm is providing
3. Permitting comparison of how other firms deliver
specific services
4. Indicating life cycle changes as the firm grows

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Five Types of Variability
Arrival variability

• Customers arriving at times when there are not enough service providers

Request variability

• Travelers requesting a room with a view

Capability variability

• A patient being unable to explain symptoms to doctor

Effort variability

• Shoppers not putting up carts

Subjective preference variability

• Interpreting service action differently

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Applying Behavioral Science to Service Encounters

1. The front-end and back-end of the encounter are not

created equal
2. Segment the pleasure, combine the pain
3. Let the customer control the process
4. Pay attention to norms and rituals
5. People are easier to blame than systems
6. Let the punishment fit the crime in service recovery

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Service Guarantees as Design Drivers
1. Any guarantee is better than no guarantee
2. Involve the customer as well as employees in the
design
3. Avoid complexity or legalistic language
4. Do not quibble or wriggle when a customer invokes a
guarantee
5. Make it clear that you are happy for customers to invoke
the guarantee

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Service Blueprinting and Fail-Safing
• The standard tool for service process design is the
flowchart
• May be called a service blueprint
• A unique feature is the distinction between high customer
contact aspects of the service and those activities the
customer does not see
• Made by a “line of visibility”

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Service Fail-Safing Poka-Yokes (A Proactive
Approach)
• Poka-yokes: procedures that block a mistake from
becoming a service defect
• Common in factories
• Many applications in services
• Warning methods
• Physical or visual contact methods
• Three T’s
1. Task to be done
2. Treatment accorded to the customer
3. Tangible features of the service
• Must often fail-safe actions of the customer as well as the
service workers

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Three Contrasting Service Designs
The production line approach

• McDonald’s
• Service delivery is treated much like manufacturing

The self-service approach

• ATM machines
• Customer takes a greater role in the production of the
service

The personal attention approach

• Ritz-Carlton Hotel Company

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Seven Characteristics of a Well-Designed Service
System
1. Each element of the service system is consistent with
the operating focus of the firm
2. It is user-friendly
3. It is robust
4. It is structured so that consistent performance by its
people and systems is easily maintained
5. It provides effective links between the back office and
the front office
6. It manages evidence of service quality so that
customers see the value of service provided
7. It is cost-effective

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Questions

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Fail-Safing an Automotive Service Operation

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