CHAPTER-2

PROCESS ANALYSIS IN INDUSTRY

BY PROF. MEENA MASHRU

 PROCESS ANALYSIS IN INDUSTRY
INTRODUCTION
Processes are used to make tangible goods or deliver services. Manufacturing processes are used to make
everything that we buy ranging from the apartment building in which we live to the ink pens with which we write.
The high-level view of what is required to make something can be divided into three simple steps. (1) Source-2)
Make-3) Deliver)

where manufacturing takes place, and the Deliver step where the product is shipped to the customer.

As a manufacturer of these products, we build them ahead of time in anticipation of demand and ship
them to the retail stores where they are carried in inventory until they are sold. At the other end of the
spectrum are custom products, such as military airplanes, that are ordered with very specific uses in mind and
that need to be designed and then built to the design. In the case of an airplane, the time needed to
respond to a customer order, called the lead time, could easily be years compared to only a few minutes for
the television.
A key concept in manufacturing processes is the customer order decoupling point (arrange some
items in buffer stock or safety stock to have smooth continues function in supply chain mgmt) which
determines where inventory is positioned to allow processes or entities in the supply chain to operate
independently.
MANUFACTURINGPROCESSES
Positioning of the customer order decoupling point is
important to understanding manufacturing environments. Firms
that serve customers from finished goods inventory are known as
make-to-stock firms. (MTS) An example of a make-to-stock business
approach is a large video game company like PlayStation or Xbox
Those that make the customer’s product from raw materials, parts,
and components are make- to-order (MTO) firms. For examples
computer servers, aircraft, automobiles, and bridge construction.
At the same time, Fast-Moving Consumer Goods. Their examples
include toothpaste, ready-to-make food, soap, cookie, notebook,
chocolate, etc.
Those that combine a number of preassembled modules to meet a
customer’s specifications are called assemble-to-order firms (ATO).
For examples Consider a manufacturer of personal computers
An Engineer-to-order firm (ETO) will work with the customer to
design the product, and then make it from purchased materials,
parts, and components. For Other examples of Engineer to Order
products include power plant boilers, electrical switchgear,
commercial HVAC equipment, industrial cranes, and specialty
vehicles like fire trucks
Organization of Manufacturing Processes
Process selection refers to the strategic decision of selecting which kind of production processes to use to produce a product or provide a service.
For example, in the case of Toshiba notebook computers, if the volume is very low, we may just have a worker manually assemble each computer by
hand. In contrast, if the volume is higher, setting up an assembly line is appropriate. The format by which a facility is arranged is defined by the general
pattern of workflow;

There are five basic structures (project, work center, manufacturing cell, assembly line, and continuous process)
1) In a project layout, the product (by virtue of its bulk or weight) remains in a fixed location. Manufacturing equipment is moved to the product
rather than vice versa. Construction sites (houses and bridges) and movie shooting lots are examples of this format. Areas on the site will be
designated for various purposes, such as material staging, subassembly construction, site access for heavy equipment, and a management area.

(Building construction project)

2) A workcenter layout, sometimes referred to as a job shop, is where similar equipment or functions are grouped together, such as all
drilling machines in one area and all stamping machines in another. A part is worked on travels according to the established sequence of
operations, from work center to work center, where the proper machines are located for each operation.

(Workcenter layout)
3) A Manufacturing cell layout is a dedicated area where products that are similar in processing requirements are produced. These cells are
designed to perform a specific set of processes, and the cells are dedicated to a limited range of products.
A firm may have many different cells in a production area, each set up to produce a single product or a similar group of products efficiently, but
typically at lower volume levels. These cells typically are scheduled to produce “as needed” in response to current customer demand.

4) An assembly line is where work processes are arranged according to the progressive steps by which the product is made. These steps are
defined so that a specific production rate can be achieved. The path for each part is, in effect, a straight line. Discrete products are made by
moving from workstation to workstation at a controlled rate, following the sequence needed to build the product. Examples include the
assembly of toys, appliances, and automobiles. These are typically used in high-volume items where the specialized process can be
justified.
 5) A continuous process is similar to an assembly line in that production follows a predetermined sequence of steps, but the flow is
continuous (such as with liquids) rather than discrete. Such structures are usually highly automated and, in effect, constitute one integrated
“machine” that may operate 24 hours a day to avoid expensive shutdowns and startups. Conversion and processing of undifferentiated
materials such as petroleum, chemicals, and drugs are good examples.

product– process matrix

The relationship between layout structures is often depicted on a product– process matrix similar to the one shown in the figure.
Two dimensions are shown. The horizontal dimension relates to the volume of a particular product
Group of standardized products. Standardization is shown on the vertical axis and refers to variations in the product that is produced.
These variations are measured in terms of geometric differences, material differences, and so on. Standardized products are highly similar from a
manufacturing processing point of view, whereas low standardized products require different product–process matrix. For example,
manufacturing cells can be used for a very wide range of applications, and this has become a popular layout structure that often is
employed by manufacturing engineers processes.
 Four Levels of Customization
Manufacturers typically talk about four levels of product customization. From least to greatest customization, these are:

 Make-to-stock (MTS) products

 Assemble-to-order (ATO) or finish-to-order products
 Make-to-order (MTO) products
 Engineer-to-order (ETO) products.
The Customization Point

To manufacturing personnel, the key difference between these four product types is not so much the degree of customization but the point at
which it occurs. That is, when and where do a customer’s specific requirements affect operations and supply chain activities?
Where does customization occur in supply chain?

At Dell Computer, all value chain activities in the manufacturing system except final assembly and shipping, which are downstream activities, take
place before the customer order arrives. Upstream activities include the ordering, manufacturing, shipping, and stocking of standardized
components. The result is two- to three day lead times for the customer.

A second advantage has to do with the law of variability. The greater the random variability either demanded of the process or inherent in the
process itself or in the items processed, the less productive the process is. Completing upstream activities offline helps isolate these activities from
the variability caused by either the timing or the unique requirements of individual customers.
But in ETO, MTO, and ATO environments, some activities must be completed online, once the customer’s needs are known. This tends to
increase lead times to the customer.
SERVICE PROCESSES
Business textbooks have traditionally differentiated between manufacturing and service operations. The reason for this distinction was

Services frequently have to deal directly with customers, who introduce considerable variability into the service process (see the following Supply
Chain Connections feature).
Customer-Introduced Variability in Services

What if manufacturers had to deal with customers on the plant floor, just like service businesses do? For example, manufacturers typically carefully
control the timing, quantity, and quality of raw material coming into their plants. They then schedule and carry out production, almost always out of
the sight of the customer.
But what is done about services? In many cases, the “raw materials”–that is, the customers–arrive at inconvenient times and often with idiosyncratic
needs. Furthermore, service customers often participate directly in the transformation process, creating a host of unique challenges.
 There are five distinct forms of customer-introduced variability:

1. Arrival variability. Customers arrive when they desire service. In some cases, this can be controlled (e.g., a hotel reservation system). In
other cases, it cannot (e.g., emergency medical services).
2. Request variability. Customers demand and expect different services outcomes, even from the same service provider. One
customer might want a restaurant to make a menu substitution, while another might want the restaurant to serve her after closing time.
3. Capability variability. Some customers are capable of performing many service tasks themselves, while others require substantial
hand-holding.

4. Effort variability. Even if they are capable of performing certain tasks, customers can differ from one another with regard to the
amount of effort they are willing to apply to these tasks. For example, some customers at a grocery checkout will bag their own
groceries; others will wait for the cashier or someone else to do it.
5. Subjective preference. Different customers can perceive the same service outcome differently. What one customer might interpret as a
“quick and efficient” answer to a question might strike another customer as a “cold, unsympathetic” response.
Service Packages
A service package includes all the value-added physical and intangible activities that a service organization provides to the customer. For
some service operations, the primary sources of value are physical activities, such as the storage, display, or transportation of goods or people.
Airlines move passengers from one city to another; hotels provide travelers with rooms and meeting facilities; retailers add value by providing
customers with convenient access to a wide range of products at a fair price. Many of the same rules and techniques that are used to manage physical
goods in a manufacturing setting apply equally well to these services, even though airlines, hotels, and retail stores do not actually “make”
products.
Table lists some of the activities in the service packages offered by a university and by a logistics services provider.
Service Customization
Customization has an enormous impact on how services are designed and managed. As the degree of customization decreases, the service package
becomes more standardized. To deliver a standardized service, managers can hire workers with more narrow skills and employ special purpose
technology. Within the same business sector, for instance, one law firm might specialize in divorce or traffic cases, while another might
offer a full range of legal services, depending on the customer’s needs. Law firms that specialize in divorces can use special software
packages designed to help clients reach a quick and equitable settlement.

Consider, for example, a general hospital that offers a full range of health care services, from pediatrics to surgery. On any given day, the mix of
patients and ailments the hospital must treat is only partially predictable. The breadth and depth of skills required to deal with any and every
eventuality are high, and labor costs are, therefore, high as well. Such a hospital also needs to invest in a wide range of technologies, some of
which might be quite expensive.
Service Positioning
Service operations compete and position themselves in the marketplace based on the three dimensions—
• Nature of the service package,
• Degree of customization
• Degree of customer contact

Figure shows a conceptual model of service processes containing these three dimensions. The three dimensions of the cube represent the
nature of the service package, the degree of customization, and the level of contact with the customer.

To illustrate how positioning works, consider the case of public hospitals. Such community-sponsored hospitals are typically chartered to
provide a wide selection of health services to the local population. These hospitals are characterized by:
 LAYOUT DECISION MODELS
An important part of process choice is deciding how the various resources
will be logically grouped and physically arranged. There are four types of
layouts:

• Fixed-position layouts.

• product-based

• functional

• cellular

For a fixed-position layout, there is really little discretion regarding how

the process is laid out because the productive resources have to be moved
to where the product is being made or the service is being provided.

A product-based layout arranges resources sequentially, according to

the steps required to make a product or provide a service. The security
check-in at an airport is an example of a service process that follows a
product-based layout (where the “product” is the passenger). Such an
arrangement makes sense when the sequence of activities does not
change from one period to the next. In contrast, a functional layout
physically groups resources by function.

A functional layout is better suited to environments where the

process steps can change dramatically from one job or customer to
the next. An example of this would be a full-service auto repair
facility, with inspections done in one area, alignments in another, and
major repairs in a third area.
Finally, a cellular layout is similar in many ways to a product-based layout. The primary difference is that the cellular layout is used in a
group technology cell, where the production resources have been dedicated to a subset of products with similar requirements, known as a product
family.