CHAPTER 4
PROCESS SELECTION
Teaching Notes
The purpose of this chapter is to describe the major types of processes available and the factors that should be considered in any process selection decision. Two major dimensions of process classification are considered; flow of the product, and type of customer order. The product-process matrix, formulated by Hayes and Wheelwright, provides a basis for process selection by linking product-process and corporate strategy. The 3rd edition has a new section on Focused Operations, formerly in Chapter 2.
In teaching this chapter, I give examples of different types of processes and their major characteristics. I also emphasize the interaction between product and process through the product-process matrix. Students often have many questions about this matrix and they find the product-process relationships quite interesting. I frequently find one or more students who feel they have gained insight about marketing policy as a result of thinking about process selection decisions. The focused operation section now follows quite easily from the product-process matrix. The Internet exercises are Virtual plant tours that students find very interesting. By using these exercises students can be exposed to real processes in operations.
Answer to Questions
1. a. Doctor's office – batch flow or project. All patients do not require the same procedure.
b. Automatic car wash -- line flow. There is a linear sequence of operations common to all cars.
c. College curriculum -- can be any:
Line flow -- if same curriculum required of all students.
Batch -- if curriculum is tailored to some degree.
Project -- if curriculum is tailored to individual students.
d. Studying for an exam -- project. The studying process is unique to each student for different exams.
e. Registration for classes -- line. All students must complete the same sequence of steps.
f. Electric utility -- line (continuous). Electric utilities use process flow.
2. Reasons for efficiency, but less flexibility of the line:
a. Standardization of tasks
b. Standard products
c. Highly automated
d. Specialized equipment
e. Unskilled or semi-skilled labor
3. Yes, the rate of productivity improvement in the service industries can be partly attributed to process selection decisions. Service industries typically select a batch or project process to provide customized service. This is usually less efficient than the line process approach.
The problems in using more efficient processes in the service industries are:
- Possible customer dissatisfaction with standardized product
- Need for extensive capital investment
- Need for high and stable volume, particularly necessary without
inventory
- Difficult to specify exact process sequence
4. The project process, typically used for skyscraper construction, probably does lead to higher costs because the volume of skyscraper construction is low.
To make a batch process preferred would require construction of some number of identical skyscrapers. This seems both unlikely and aesthetically undesirable. Perhaps, however, sections of skyscrapers could be standardized and produced by batch processes while still maintaining the appearance of unique buildings. This would be a modular approach to the problem, as discussed in Chapter 3.
5. Some companies in these industries have, of course, progressed down the diagonal. On the whole, however, these industries remain in the upper left quadrant.
These industries are selling products that have prestige value as a component of their product bundle. They must, therefore, have distinctive and changing products. This is not a problem, then, because the distinctive competence of these industries requires that they do not become highly standardized.
6.
Fast Food Expensive
Product Cafeteria Restaurant Restaurant
Order type Large Batch Batch Batch or single
portion
Flow Sequenced Jumbled Jumbled
Product variety Medium Low Usually high
Market type Mass Mass Custom
Volume High High Low
Labor
Skills Low Low High
Task type Repetitive Repetitive Less repetitive
Pay Low Low Medium to high
Fast Food Expensive
Cafeteria Restaurant Restaurant
Capital
Investment High Medium Medium
Inventory Low Medium High
Equipment Special purpose Special purpose General purpose
Objectives
Flexibility Low Low High
Cost Low Low High
Quality Consistent Consistent More variable
Delivery Fast Fast Moderate
Control & Planning
Production control Easy Easy Difficult
Quality control Difficult Difficult Difficult
Inventory control Easy Easy Difficult
7. She would have to consider marketing operations, and financial aspects of the problem. The factors to be considered are:
Cafeteria Fast Food Fine Restaurant
Capital Heavy initial Medium initial Lower initial
Requirements investment to set investment, but investment,
up cafeteria line. higher inventory medium
Low inventory. needs. inventory.
Market Need for large Need for large, Need for
Conditions body of steady inexpensive and expensive
customers; mobile market. market. Less
inexpensive Competition danger from
market. fairly intense. competition.
Competition very
intense.
Labor Low skilled Low skilled Highly skilled
labor at labor at low cooks and
low cost. cost. waiters required.
Technology Most risky. Less risky. Little risk.
8. They will, of course, have to develop an inventory. This will require storage and inventory control procedures.
- They will need to develop standard product lines.
- They will need to forecast demand for the product lines.
- They will need to schedule production and develop capacity planning procedures to meet the forecast demand.
Performance measures will change from delivery time to customer service and utilization of assets.
- They will probably move to a more standardized process.
- Marketing orientation will shift to mass market.
9. Unless the product and process happen to be at the same stage of evolution, this will result in moving off the diagonal of the product-process matrix. Unless this happens to be justified by the firm’s business strategy, the firm will lose its competitive ability.
10. Distinctive Competence Product/Process
a. McDonald's Fast, inexpensive, Product
Restaurant quality food, pleasant
atmosphere Process
b. AT&T Telephone Highest volume of calls Process
Company Best technology
c. General Motors Its reputation, number Product
of dealers
Process
d. Harvard Business Case method Process
School
11. Some of the concerns that other functions of the firm might have when it considers moving from a batch process to a line process are:
Marketing - Can the higher volumes of product and more restricted variety be sold?
Finance - How much additional investment is needed?
Human Resources - Will the tasks become too repetitive for the workers, will the pay structure change?
Accounting - What equipment and job costing systems will be used?
Information Systems - To what extent will the scheduling and inventory control information change?
12. a. The business should consider using a batch process that is flexible enough to be modified into a line process when the products become successful and sell in high volume.
b. The business should expect the need to invest more when it eventually uses a line process. It may be necessary to purchase special purpose equipment when the products sell in high volume for a long period of time. Lower skills, lower pay and more repetitive tasks may characterize the future labor force.
13. Answers will vary based on different sources students will use.
Based in Philadelphia, Acumins (www.acumins.com) uses data that customers provide through a questionnaire to develop individual formulas for one-capsule vitamins that meet each customer's nutritional needs and then produces and ships the customized capsules directly to customers. As users' needs change, they can modify their personalized vitamin formula online.
In November 1999, Nike launched NikeID, a website that allows customers to order a growing number of personalized running shoes and cross trainers. Hoping to avoid the manufacturing and distribution pains that have plagued and sometimes defeated many online retailers, Nike has cautiously expanded the number of sole and color combinations NikeID offers as well as the product lines available through the site.
Companies such as British Airways and Ritz-Carlton Hotels use extensive databases and sophisticated information technology tools to track customer preferences, which allows them to tailor services or items for each guest on his or her next visit or flight.
14. There are four forms of mass customization: mass-customized services, modular production and assemble-to-order, fast changeover, and postponement of options. Information technology and computer equipment are essential tools for achieving mass customization in all cases. In the assemble-to-order case, like Dell Computer, orders are received by the Internet and shipped by UPS overnight, so they need to assure flawless integration between order taking (front office operations) and order fulfillment (back-office operations). Setup time reduction is essential for fast changeover. Postponement requires close coordination between order entry and final shipment to insure that all features ordered are provided.
15. Economies of scale is based on producing high volumes of a standardized product. A high degree of fixed automation is often used to achieve economies of scale. On the other hand, economies of scope use principles of flexible manufacturing to produce low volumes of customized products.
16. Classic signs of an unfocused operation:
a. Operations viewed as just a place to produce the company's products.
b. Uncoordinated decisions made according to implicit goals such as minimum cost which leads to actions with conflicting objectives.
c. Decision making which overlooks the tradeoffs inherent in the four objectives of operations.
d. Staff specialists functioning according to personal or professional goals that do not reflect company goals.
e. A variety of products or services produced together, ostensibly for economies of scale, but with resultant complexity offsetting any savings.
f. No specific identification of the distinctive competence of the organization.
g. No explicit review of goals when the focus of the operation changes.
17. Organizing a plant-within-a-plant has several drawbacks. Some economies of scale are forfeited as a result of smaller-scale production, use of special purpose equipment that may be more expensive and existence of some excess capacity. Jobs with more breadth of skills must be compensated and more supervisors must be employed to solve technical problems.
The plant-within-a-plant concept has various merits. Specially skilled managers and workers can be given greater responsibility. Methods, process flows, standards, controls and professionalism are enhanced. Through focus each PWP becomes more oriented toward its mission. The result of a focused operation is a consistent set of cost, delivery, quality and flexibility objectives.
18. An operation does not need to be focused when
a. There is little competition now or in the future due to government regulations or the company has built large barriers to entry.
b. The company is small and cannot afford separate facilities or PWP’s for each product.
c. The company has protected technology through patents or proprietary technology.
In these cases focus will provide little benefit to the company.
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