Slides for Chapter 7. Investment in Technology Process Technology Product Technology Process Choice Layout The Relationship Between Process Choice and.

Slides for Chapter 7

Investment in Technology

Process Technology

Product Technology

Process Choice

Layout

The Relationship Between Process Choice and Layout

The physical layout and the transformation process that an organisation employs are critical factors for strategic operations management:

This is because both the layout and, more specifically, the process transformation process (or process choice as it is sometimes called), provide massive clues about what the organisation can do, as well as what it cannot do. Having an operations strategy is important because the ability to be agile, lean and flexible does not come about by chance; such states are achieved by enabling the organisation to be poised to achieve such requirements. Operations strategy becomes the means by which capabilities become realised.

It is vital to avoid “Technophilia” (Bessant) –

the love of technology for its own sake!

2 Traps to Avoid

• Technophilia “Throwing Money” at the Problem e.g. GM’s $60-80 Billion ’80s - early 1990s… and beyond – where is GM today??

• Not Investing – A False Accounting Issue

Investment decisions are critical and must be made with the aim of equipping the firm or the plant to be more competitive in the market. Furthermore, wrong process choice decisions may severely reduce the company’s capability to satisfy customer demands in particular markets.

Process choice and technology are both vital because key competitive factors for customers including cost, delivery speed and flexibility, can be enhanced by their combination.

If appropriate investment is made in technology and process choice , the resultant capacity and capability should become a central part of the firm’s competitive weaponry.

Process and Product Technology

Keller (2001: Collision) Tells How Inappropriate Investment Was Made At General Motors:

"While Smith provided the money for automation and supported it completely, he clearly didn't understand it - nor did his engineering staff who encouraged him. With its 260 gleaming new robots for welding, assembling, and painting cars; its fifty automated guided vehicles to deliver parts to the assembly line; and a complement of cameras and computers to monitor, inspect, and control the process, the plant put star's in Smith's eyes. He believed it held the promise of a new era of efficiency and quality and would eventually become a model for all assembly plants. What it became was a nightmare of inefficiency, producing poor-quality vehicles despite the heroic efforts of workers to correct mistakes before they were shipped to dealers" (p169)

Before spending a single cent it is vital to understand:

The 4 Types of Layout in Manufacturing and Services

Fixed Position Layout

Product

Operators perform processes on the 'fixed' product. There may be more than one operation performed on the product at the same time. Each operation adds to the product until it is completed.

Process Layout in a Functional Approach:

‘Random' movement takes place as products are moved according to process requirements. There is no ‘flow' as such – each product will have its particular process requirements and will move to each machine group as and when required

Movement of product (manufacturing) or persons (services)

Product Layout

Walk inside Autoliv's 350,000-square-foot facility today, and you feel like you've stepped inside a clock. You can almost hear the ticking. Eighty-eight compact, U-shaped production cells have replaced assembly lines on the main floor. Each consists of a group of workstations staffed by a handful of employees. A screw is tightened, the finished piece scanned and registered in inventory, and then it's handed off to the next associate, who tags it and drops it into a box to be picked up and shipped. There are cells for driver airbags, passenger airbags, and side-curtain airbags, whose sales have grown 50% annually during the past three years.

U-Shaped layouts

“ Elite Factories” Fortune; 6th September, 2004.

Process Layout in a Product Family Cell

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m m m xx qqq xxx

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Group 1 Group 2 Group 3 Group 4

Project

Job

Batch

Line

Continuous Process

The 5 Types of Process Choice:

Project Job Batch Line Continuous Process

Increase in Volume – typically competing on cost viascale economies

Increase in Variety – typically competing on capabilities of scope

The Key Distinction of Volume and Variety Outputs from Process Choice

Increase in variety of product range

Increase in volume of each product

Project

Job

Batch

Continuous Process

Line

Process Choice

The initial choice - a continuum of Volume or Variety

Adapted from Hill (1993) and Hayes and Wheelwright (1979)

PeriodProduction

ProductionTask Volume

Level

Finished Product

MadeRange

1950-1970s(Line processes)

1980s on(hybrid systems - FMS)

Narrow

Wide

Achieve supposedeconomies of scaleby large productionruns of limited range

Meet specific customerincluding cost, delivery, range and flexibility

Very high

As required- volumeand variety

To stock(just in case)

For Customerrequirements only(Just in Time)

The Changing Task of Manufacturing Management

1. Investment in automation is for general purpose process technology rather than product specific investment. 2. Many different products are run throughout the plant and materials handling has to be modified and adjusted to suit many different products and types. 3. Detailed planning will evolve around sequencing requirements for each product, capacities for each work centre and order priorities: because of this scheduling is relatively complicated, in comparison to repetitive 'line' manufacture.

Key Characteristics Of Job Processes

Key Characteristics of Batch Processes

1. Automation, especially for lower volumes of batch manufacturing, tends to be general purpose, rather than dedicated to a particular product whose volume does not demand product-specific investment in automation. 2. Scheduling is complicated and has to be completely reviewed on a regular, on-going basis - this applies to new products, 'one-off's that may be required, together with relatively high volume, standard products: all of these types will need to be scheduled. 3. Operators have to be able to perform a number of functions - this is obviously true of 'job' type processes. In batch, though, this flexibility is crucial in that it will allow operators to move to various workstations as required. 4. Where automation is being used, set-up time should be short: the ideal set up times is quick enough to accommodate run lengths of just one unit, switching over to other models and volumes as, and when, required.

Key Characteristics of Line Processes

1. Process times should be fast - which is critical in order to satisfy delivery speed requirements 2.There should be simplification in production planning and control and the tasks themselves should also be simplified for each workstation. 3. There should be small amounts of work in process: in fact, work in process (which, in accounting terms, can be viewed as an asset) is a liability to the company which can ruin cash-flow and stifle quick response to market requirements  4. Materials handling between stations should be placed as closely as possible to each other. 5. Materials flow and control are critical: Just-in Time lends itself most noticeably to 'line' or very high volume batch production. Stock-outs have to be avoided although, at the same time, excess stock is a waste and a liability, rather than an asset (materials can be viewed as an asset on the balance sheet which is misleading and alien to world class manufacturing.

Key Characteristics Of Continuous Process

1. The volume of a product is very high and the process is dedicated to making, typically, only one product.  2. Huge investment in dedicated plant is often required.  3. Much automation tends to be evident and labour input is one of 'policing' rather than being highly skilled as an integral input to the overall process.

Process Choice Type of Layout Project Fixed Job Process Batch Process/Product (see note 1below) Line Product Continuous Product (see note 2 below) Process Notes: 1. The link between Batch and the type of layout would depend upon volume and variety - in low volume/high variety Batch, Process layouts would be used; in high volume/low variety Batch, Product layouts would be appropriate 2. Continuous process differs from line due to the fact that a line process can be stopped at a particular stage and the product will be at that stage of production; in Continuous process, stopping the process is an exception and is very costly (e.g. shutting down a blast furnace).

The Link Between Process Choice and Layout

Process Type

Process CharacteristicsProject Highly flexible – individualised output results in high unit costs; mobile and

flexible staff required; quality determined by individual customer requirements.

Jobbing Significant flexibility required though the volume is generally higher than when compared to projects. Some repetition in the system and many more common elements to the process than occur with projects. High unit costs relative to higher volume processes, but low set-up costs.

Batch Some flexibility to handle differences between batches still required, requiring some investment in set-up for each batch. Higher levels of specialisation required in both people and machines.

Line Highly specialised people and machines allow high rates of throughput and low unit costs. Limited flexibility usually associated with this process. Quality levels consistent.

ContinuousProcess

Usually non-discrete products produced over a significant period of time. Very high levels of investment required and limited possibility for flexibility due to highly dedicated processes. Commonly highly automated.

Key Headings Linking Process Choice and Layout

Process Choice/Type of layout

Line/high vol. BatchProduct Layout

Job/low vol. BatchProcess Layout

Key HeadingsProduct DesignProduct DemandSchedulingMaintenanceWorker SkillThroughput TimeUnit CostMajor Concern

‘Standard’Relatively StableRelatively EasyAbsolutely VitalGenerally Semi-SkilledShortLowLine Balancing

SpecializedErratic And UncertainDifficultImportantGenerally Highly-SkilledLongHighDepartment Layout

Process Choice and Production/Operations Tasks

DominantUtilization

ProcessTechnology

ProcessFlexibility

Project Job Batch Line ContinuousProcessPlantEssentially

LabourLabour Plant

General Purpose

Universal Dedicated VeryDedicated

High High Low Inflexible

The Link Between Process Choice and Marketing Strategy

Project Job Batch Line Continuous Process

The firm sells a wide varietyOf products or designs and there is the perception of customisation for each customer. Order sizes are small or ‘one –off’. New products are required on an on-going basis and the firm ‘sells’ its capability of design and innovation.

The firm sells a narrow range of ‘standard’ products but in high volume. New product introductions are difficult because the plant is dedicated around specific products

Batch has to be managed by initially mapping products according to ‘job’ or ‘line' characteristics and then focusing the plant to support these cells of manufacture

The Importance of Pre-qualifying criteria.

Project Job Batch Line Continuous Process

Order-winning Delivery Delivery Û Price PriceCriteria Quality Quality

Design Design

capabilitycapability

Qualifying Price Price Û Delivery DeliveryCriteria Quality quality

Design designcapability capability

Pre-Qualifying

Criteria   

Experience, reputation, and other intangible factors are key here. The importance and strength of the buyer-supplier relationship over time may also be a deciding factor.

CraftJob transformation processes link to craft manufacturing – high variety, low volume with general purpose technology

MassLine transformation processes link to mass production – high volume, low variety with dedicated product technology

The current era of mass customisation and strategic manufacturing demands high volume, high variety and a

whole range of simultaneous customer requirements. This requires a combination of technology investment and skills capabilities to deal with greater number and

range customer demands.

VARIETY

VOLUME

The Manufacturing Eras and Their Impact on Process Choice

Fabrication

Design

Fabrication

Assembly

Design

Fabrication

Design

Distribution

Assembly

Distribution

Fabrication

Assembly

Distribution

Design

Fabrication

Assembly

Distribution

Design

Assembly

Distribution

Pure Standardisation

Segmented Standardisation

Customized Standardisation

Tailored Customisation

Pure Customisation

From ‘pure standardisation’ to ‘pure customisation’ - adapted from Lampel and Mintzberg, (1996)

Brown and Bessant (IJOPM 2003, p708) explain:

“……there seems to be no firm agreement as to the definitions for, and major differences between, the paradigms of mass customisation and agile manufacturing. For example, Feitzinger and Lee (1997) in their

discussion on mass customisation also include “Agile Supply Networks” as a necessary factor. In addition, Da Silveira et al (2001) mention agile

manufacturing as a feature within their summary on the literature on mass customisation. We suggest that although it might be important to

understand both we add that agile manufacturing and mass customisation are not mutually exclusive paradigms. Instead, we argue that mass

customisation is best viewed as a powerful example of a firm’s ability to be agile.”

Customisation and Agility

Bessant et al (2001) offer an emerging model of agile manufacturing capabilities, consisting of four, key, interlinked parameters: The four

major dimensions of the reference model are:

“Agile Strategy - involving the processes for understanding the firm’s situation within its sector, committing to agile strategy, aligning it to a fast

moving market, and communicating and deploying it effectively.Agile Processes - the provision of the actual facilities and processes to

allow agile functioning of the organizationAgile Linkages - intensively working with and learning from others outside

the company, especially customers and suppliers.Agile People - developing a flexible and multi-skilled workforce, creating

a culture that allows initiative, creativity and supportiveness to thrive throughout the organization”.

Customisation and Agility

Volume

Time

Intro Growth Maturity Saturation Decline

LowVolumeBatch

HighVolumeBatch

HighVolumeBatch orLine

HighVolumeBatch orLine

LowVolumeBatch

The Change Of Process Choice in a Product Life Cycle

Key Points

Process technology is a requirement in order to meet the demands of the needs of markets. In order to meet these needs, technology can be used for rapid changeover and set up times, volume and variety mixes, delivery speed and reliability requirements and for ensuring process quality. However, technology must not be seen as a replacement for human resource capability.

Key Points

Vast amounts of investment have been made in some plants with little competitive advantage being gained as a result. However, when appropriate investment is made it should allow the firm to operate at world-class levels, provided that it used to meet the needs of the markets in which the firm is competing.

Key Points

A process choice will indicate what a firm can and cannot do. Process choice may significantly influence what the company sells and what it is able to offer.

Key Points

The basic types of layout are:

Fixed, Process, Hybrid (cell) and Product

Key Points

The five basic types of process choice are:

Project, Job, Batch, Line, and Continuous Process.

Key Points

Layout and Process choice are of major strategic importance to manufacturing and services

operations. The options to choose from are also essentially similar - it's not an infinite variety but a small number of options and switching between

one to the other is by no means cost free - so there is an important strategic objective to align

the transformation process with market requirements and to understand the implications

of changing.