LECTURE 3

DESIGNING PROCESSES
Process flow analysis: A technique used for evaluating a process in terms of the sequence of
steps from inputs to outputs with the goal of improving its design.
Process flowchart: A chart showing the sequence of steps in producing the product or
service.
DESIGNING PROCESSES
PRODUCT
Make-to-stock strategy: Produces standard products and services for immediate sale or
delivery.
Assemble-to-order strategy: Produces standard components that can be combined to
customer specifications.
Make-to-order strategy: Produces products to customer specifications after an order has
been received.
PRODUCT STRATEGIES

PROCESS PERFORMANCE METRICS

 CLASSIFICATION OF PRODUCTION

LINKING PRODUCT DESIGN AND PROCESS SELECTION

PRODUCT DESIGN
INTERMITTENT OPERATIONS: Early stage of product life-cycle.
REPETITIVE OPERATIONS: Later stage of product life-cycle. Intermittent
and repetitive operations typically focus on producing products in different
stages of the product life cycle.
COMPARATIVE PRIORITIES

INTERMITTENT OPERATIONS: Delivery, flexibility, and quality.

REPETITIVE OPERATIONS: Cost and quality.
The decision of how a company will compete in the marketplace is affected by the type of
operation it has in place.
FACILITY LAYOUT

INTERMITTENT OPERATIONS: Resources grouped by function.

REPETITIVE OPERATIONS: Resources arranged in line.

Facility layout is concerned with the arrangement of resources in a facility to enhance the
production process. If resources are not arranged properly, a company will have inefficiency
and waste.
PRODUCT STRATEGY

INTERMITTENT OPERATIONS: Make-to-order Assemble-to-order.

REPETITIVE OPERATIONS: Make-to-stock.
Strategies differ by the length of their delivery lead time (the amount of time from when the
order is received to when the product is delivered) and by the degree
of product customization.
VERTICAL INTEGRATION
INTERMITTENT OPERATIONS: Low.
REPETITIVE OPERATIONS: High.
The larger the number of processes performed by a company in the chain from raw materials to
product delivery, the higher the vertical integration.
LOCATION DECISIONS
FACILITY LOCATION: Determining the best geographic location for a company’s facility.

LOCATION ANALYSIS
THE IMPORTANCEOF FACILITY LOCATION DECISIONS:
-Long-term commitments in buildings and facilities.
-Sizable financial investment.
 FACTORS AFFECTING LOCATION

PROXIMITY TO SOURCES OF SUPPLY

When transporting the finished product is less costly than transporting the raw materials the firm
should locate closer to the source of supply.
PROXIMITY TO CUSTOMERS
Locating near the market is often critical for service firms, but also for those
manufacturers that produce perishable goods or have high costs of transportation to the
customer site.
PROXIMITY TO SOURCE OF LABOR
Important for labor intensive businesses.
COMMUNITY CONSIDERATIONS
The success of a company at a particular location can be affected by the extent to which it is
accepted by the local community.
SITE CONSIDERATIONS
Utility costs, taxes, zoning restrictions, soil conditions, and even climate.
QUALITY-OF-LIFE ISSUES
Climate, a desirable lifestyle, good schools, and a low crime rate.
OTHER CONSIDERATIONS
Room for customer parking, visibility, customer and transportation access, room for
expansion, construction costs, insurance, local competition, local traffic,
road congestion.
 PROCEDURE FOR MAKING LOCATION
-Step 1: Identify dominant location factors.
-Step 2: Develop location alternatives.
-Step 3: Evaluate location alternatives.
FACILITY LAYOUT
LAYOUT PLANNING: Deciding on the best physical arrangement of all resources that consume
space within a facility.
Decisions about the arrangement of resources in a business are made:
-When a new facility is being designed.
-Any time there is a change in the arrangement of resources.
TYPES OF LAYOUTS
PROCESS:
-Layouts that group resources based on similar processes or functions.
-The challenge is to arrange resources to maximize efficiency and minimize waste of movement.
-Able to produce a large number of different products.
-Resources used are general purpose.
-Facilities are more labor intensive.
-Greater flexibility relative to the market.
-Slower processing rates.
-High material handling costs.
-Higher space requirements.
PRODUCT
-Layouts that arrange resources in a straight-line fashion to promote efficient production.
-The challenge is to arrange workstations in sequence and designate the jobs that will be
performed by each station in order to produce the product in the most efficient way possible.
-Able to produce a small number of product efficiently.
-Resources used are specialized.
-Facilities are more capital intensive.
-Low flexibility relative to the market.
-Processing rates are faster.
-Lower material handling costs.
-Lower space requirements.
HYBRID
Combine aspects of both process and product layouts - part of the operation is performed using an
intermittent processing system and another part is performed using a continuous processing
system.
FIXED POSITION
-Used when the product is large and cannot be moved due to its size – all resources have to be
brought to the site where product is located.
-The challenge is scheduling different work crews and jobs and managing the project.
DESIGNING A JOB
TECHNICAL FEASIBILITY
The degree to which an individual or group of individuals is physically and mentally able to do
the job.
ECONIOMIC FEASIBILITY
The degree to which the value a job adds and the cost of having the job done create profit for
the company.
BEHAVIORAL FEASIBILITY
The degree to which an employee derives intrinsic satisfaction from doing the job.
FORECASTING
Predicting future events:
- Forecasts are rarely perfect.
- Forecasts are more accurate for groups or families of items rather than for individual items.
- Forecasts are more accurate for shorter than longer time horizons.
STEPS IN THE FORECASTING PROCESS
-Decide what to forecast.
-Evaluate and analyze appropriate data.
-Select and test the forecasting model.
-Generate the forecast.
-Monitor forecast accuracy.
TYPES OF FORECASTING

QUALITATIVE METHODS

QUANTITATIVE METHODS
 TYPES OF DATA

FORECASTING ACROSS THE ORGANIZATION

-MARKETING: Demand and future sales.
-FINANCES: Stock prices, financial performance, capital investment needs, investment
portfolio returns.
-INFORMATION SYSTEMS: Sharing forecasts or demand up-to-date information
between business entities.
-HUMAN RESOURCES: Determining future hiring requirements.
AGGREGATE
1.- PIRAMIDE-AGGREGATE PLAN: Includes the budgeted levels of finished
products, inventory, backlogs, workforce size, and aggregate production rate needed
to support the marketing plan.
2.- PIRAMIDE-MARKETING PLAN: Identifies the markets to be served, desired
levels of customer service, product competitive advantage, profit margins, and the market
share needed to achieve the objectives of the strategic business plan. 3.- PIREMIDE-
SALES AND OPERATIONS PLANNING: The process that brings
together all the functional business plans (marketing, operations, engineering, and finance) into
one integrated plan.
4.- PIRAMIDE-STRATEGIC BUSINESS PLAN: A statement of long-range strategy and
revenue, cost, and profit objectives.