UNIT THREE

3.1. Product and Service Design

Product and Service Design is a comprehensive and strategic process that involves the
conception, development, and refinement of offerings aimed at fulfilling customer needs while
achieving organizational goals. This holistic approach merges creativity with analytical thinking
and technical expertise, ultimately striving to deliver high-quality products and services that
resonate with users and stand out in the competitive market.

Product Design

Product design refers to the systematic process of creating tangible goods. It encompasses
several critical dimensions:

 Functionality: A product's primary role is to effectively serve its intended purpose.

Designers must ensure that the product meets specific user requirements and solves
particular problems. For instance, in the automotive sector, the design of a safety feature
like anti-lock brakes must prioritize reliability while enhancing driver control during
emergencies.
 Aesthetics: The visual appeal of a product is crucial in attracting consumers. Designers
consider factors such as color, shape, texture, and materials. Brands like Apple exemplify
this principle, as their products are renowned not only for performance but also for their
elegant, minimalist design that conveys modernity and sophistication.
 Usability: A product should be intuitive and user-friendly, allowing consumers to interact
with it effortlessly. Effective usability design includes ergonomic considerations, easy-to-
understand instructions, and feedback mechanisms. For example, the user interface of
smartphones like the Google Pixel is designed to provide a seamless experience, making
it easy for users to navigate apps and settings.
 Materials: The choice of materials directly influences a product’s durability, cost, and
environmental impact. In the footwear industry, brands like Allbirds focus on sustainable
materials, appealing to eco-conscious consumers while maintaining comfort and style.

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  Manufacturability: Designers must consider how easily a product can be produced
without compromising quality. This includes selecting appropriate materials and
processes that align with production capabilities. For instance, in consumer electronics,
manufacturers often design products that can be efficiently assembled using automated
processes to keep costs low and production times short.

Service Design

Service design focuses on planning and organizing resources to enhance service quality and
customer satisfaction. Key components include:

 Customer Experience: Understanding the customer journey is essential in service

design. Mapping out each interaction point helps organizations identify pain points and
opportunities for improvement. For instance, in a healthcare setting, analyzing the patient
experience from appointment scheduling to post-treatment follow-ups can reveal
inefficiencies that affect overall satisfaction.
 Service Delivery: Designing effective service delivery processes ensures consistency and
efficiency. This can involve optimizing workflows, training employees, and leveraging
technology. Many hotels, for example, use integrated management systems that
streamline booking, check-in, and customer service, enhancing the overall guest
experience.
 Employee Engagement: Engaged employees are essential for providing high-quality
services. Organizations should invest in training and support to empower staff to
effectively meet customer needs. For example, hotels in Ethiopia, such as the Sheraton
Addis, focus on comprehensive training programs that prioritize service excellence,
resulting in outstanding customer experiences.
 Technology Integration: The strategic use of technology can enhance service delivery
and customer interactions. For instance, the rise of chat bots and AI-powered customer
support systems allows businesses to provide immediate assistance, improving
responsiveness and customer satisfaction.

Importance of Product and Service Design

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 1. Diverse Customer Needs: Recognizing that customers have varied preferences is crucial
for product and service design. Organizations must design offerings that satisfy to
different market segments. For example, in the laptop industry, Dell produces a wide
range of products, from high-performance gaming laptops to ultra-portable business
notebooks, to meet diverse consumer preferences. This allows customers to choose
laptops that fit their specific needs, whether they prioritize gaming performance,
portability, or professional use.
2. Processing Requirements: Each product design comes with unique processing needs that
impact manufacturing and service delivery. For instance, the production of complex
electronics requires precise engineering and quality control to ensure functionality and
reliability.
3. Quality, Cost, and Satisfaction: The interplay between design, process selection, and
customer satisfaction is essential. A well-designed product that aligns with efficient
processes tends to meet quality standards and remains cost-effective. For example, the
Lean manufacturing approach adopted by companies like Toyota focuses on eliminating
waste and improving quality, directly enhancing customer satisfaction.
4. Manufacturability: Ensuring that products can be efficiently manufactured is crucial for
profitability. Concepts such as Design for Manufacturability (DFM) help streamline the
production process, reducing costs while maintaining quality. For instance, modular
designs in furniture allow for easy assembly and customization, enhancing both
manufacturability and customer appeal.
5. Customer Satisfaction Strategies: Achieving high levels of customer satisfaction requires
a multifaceted approach, including good design, competitive pricing, and market
relevance. Engaging customers throughout the design process through feedback can lead
to products that genuinely resonate with users.

The Product Design Process

Certain steps are common to the development of most product designs: idea generation, product
screening, preliminary design and testing, and final design.
A. Idea Development

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All product designs begin with an idea. To remain competitive, companies must be innovative
and bring out new products regularly. In some industries, the cycle of new product development
is predictable. We see this in the auto industry, where new car models come out every year, or
the retail industry, where new fashion is designed for every season.

Ideas from Customers, Competitors, and Suppliers. The first source of ideas is customers, the
driving force in the design of goods and services. Marketing is a vital link between customers
and product design. Market researchers collect customer information by studying customer
buying patterns and using tools such as customer surveys and focus groups. Management may
love an idea, but if market analysis shows that customers do not like it, the idea is not viable.
Analyzing customer preferences is an ongoing process; customer preferences next year may be
quite different from what they are today. For this reason, the related process of forecasting future
consumer preferences is important, though difficult.

Competitors are another source of ideas. A company learns by observing its competitors’
products and their success rate.

Benchmarking refers to finding the best-in-class product or process, measuring the

performance of your product or process against it, and making recommendations for
improvement based on the results.
Reverse engineering refers to carefully dismantling and inspecting a competitor’s product to
look for design features that can be incorporated into your own product.
Perceptual maps compare customer perceptions of a company’s products with competitors’
products.

Suppliers are another source of product design ideas. To remain competitive, more companies
are developing partnering relationships with their suppliers to jointly satisfy the end customer.
Suppliers participate in a program called early supplier involvement (ESI), which involves
them in the early stages of product design.

B. Product Screening

Not all new ideas should be developed into new products. New product ideas need to meet at
least three tests: market potential, financial feasibility and operations compatibility.

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After a product idea has been developed, it is evaluated to determine its likelihood of success.
This is called product screening. The company’s product screening team evaluates the product
design idea according to the needs of the major business functions. In their evaluation,
executives from each function area may explore issues such as the following:

Operations

1. Production Needs: Assess the production requirements for the new product, including
materials, technology, and processes. It's important to determine if the company's existing
production resources (machinery, infrastructure, and workforce) can handle the new
demands or if additional capacity is needed.
o Do current facilities and equipment have the capability to produce the new
product efficiently?
2. Facilities and Equipment: Determine whether the new product will require
modifications to current production lines or new machinery and equipment. This can lead
to significant capital investments if new facilities or processes are required.
o Will we need to upgrade, expand, or acquire new equipment or facilities?
3. Labor Skills: Evaluate if the existing workforce has the necessary skills to manufacture
the product. Training or hiring specialized staff might be required if the new product
involves different production techniques.
o Does the workforce have the right skills to produce the new product, or will
additional training and hiring be necessary?
4. Material Availability: Ensure that the materials needed to produce the new product can
be sourced reliably and at a reasonable cost. Material scarcity or high costs could disrupt
production and impact profitability.
o Can the raw materials or components be easily sourced and are they cost-
effective?

Marketing

1. Market Size: Analyze the potential demand for the new product by identifying target
customers and assessing the size and scope of the market. Understanding the potential

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 market size will help forecast sales and revenue.
o What is the estimated size of the market for the new product?
2. Market Development Effort: Gauge the amount of time, resources, and marketing
strategies needed to penetrate the market. A brand-new product may require significant
marketing campaigns to educate customers and build demand.
o How much marketing effort and investment is required to launch and promote the
new product?
3. Long-Term Potential: Consider the longevity of the product in the market. Does it have
the potential for sustained growth, or will demand wane after an initial period?
Understanding the product's lifecycle helps in planning future product iterations or
complementary offerings.
o What is the long-term market potential of the product, and can it be sustained
over time?

Finance

1. Financial Investment: Treat the production of the new product as an investment,

requiring careful consideration of the costs involved and the expected financial return.
This includes analyzing the capital required for development, manufacturing, marketing,
and distribution.
o What are the initial costs to develop and produce the product, including
investments in facilities, equipment, labor, and marketing?
2. Cost and ROI: Determine the overall financial potential of the product by analyzing
costs, sales projections, and potential returns on investment. A thorough financial
analysis will help in understanding how quickly the investment will pay off and what
profit margins can be expected.
o What is the projected cost structure, and what is the expected return on
investment (ROI) for the product?

Incorporating these considerations into product design and development ensures a well-rounded
approach, addressing operational feasibility, market opportunity, and financial viability.

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Unfortunately, there is no magic formula for deciding whether or not to pursue a particular
product idea. Managerial skill and experience, however, are key. Companies generate new
product ideas all the time, whether for a new brand of cereal or a new design for a car door.
Approximately 80 percent of ideas do not make it past the screening stage. Management
analyzes operations, marketing, and financial factors and then makes the final decision.

C. Preliminary Design and Testing

Once a product idea has successfully passed the screening stage, the preliminary design and
testing phase begins. This phase is critical in transforming conceptual ideas into functional
prototypes and ensuring the product meets performance, safety, and usability standards. Here's
an overview of the key steps involved:

Translating Performance Specifications into Technical Specifications

 Performance Specifications: These are general statements about what the product is
expected to do or how it should behave. For example, a smartphone’s performance
specification might include battery life, processing speed, or durability.
 Technical Specifications: Design engineers take these general requirements and translate
them into detailed technical specifications. These include dimensions, materials,
tolerances, production processes, and any technical features required to meet the
performance goals.

Building Prototypes

 Prototyping: Prototypes are early models of the product that are built to test the
feasibility of the design. These are typically working models made using production
methods or sometimes by hand. Prototypes help evaluate various aspects of the product,
such as functionality, aesthetics, and ergonomics.
 Types of Prototypes:
o Concept Prototypes: Early designs that focus on exploring the form, function, and
usability of the product.

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 o Functional Prototypes: More refined versions that simulate the final product, built
using materials and methods that mirror full-scale production.

3. Testing Prototypes

 Testing for Functionality: The prototypes are tested under various conditions to see if
they meet the design criteria. These tests can be related to durability, safety, performance,
and user experience. For example, an automobile prototype might be tested for fuel
efficiency, handling, or crash safety.
 Identifying Weaknesses: The testing phase often reveals design flaws, material
limitations, or performance issues that need to be addressed. This stage helps determine if
the product is capable of meeting both customer expectations and technical requirements.
 Rebuilding the Prototype: Once revisions are made, new prototypes are built that reflect
these changes. The process is typically iterative, meaning that after each round of testing,
further adjustments may be required.
o This cycle of prototype-test-revise continues until the product achieves optimal
performance and meets all specifications.

D. Final Design

In the Final Design stage of product development, the general concept and prototypes have been
refined through testing, and the product is ready for mass production. The primary goal here is to
translate the product's specifications into actionable manufacturing processes, ensuring efficiency
and quality during production. Key aspects include:

1. Selecting Equipment: Identifying and choosing the right machines, tools, and
technology that will be used to produce the product. This may involve automation or
specialized equipment for precision.
2. Outlining Jobs: Defining the roles and tasks required in the production process. This
includes specifying which departments or personnel will handle different stages of
production, ensuring that the workforce has the skills needed to meet production
demands.

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 3. Identifying Materials: Specifying the exact materials required to manufacture the
product. This includes ensuring that raw materials or components meet quality standards
and are suitable for the intended purpose.
4. Choosing Suppliers: Selecting reliable suppliers who can provide the necessary
materials or components at the right time, quality, and cost. This requires assessing
potential suppliers and establishing contracts.
5. Organizing the Process: Developing detailed production plans, including timelines,
workflow sequences, and methods to control quality and optimize efficiency throughout
the production process. This also involves setting up inventory systems, safety protocols,
and quality checks.

The final design phase is critical for ensuring that the transition from design to manufacturing
runs smoothly and that the final product meets both customer expectations and business goals.

Factors Impacting Product Design

Here are some factors that need to be considered during the product design stage.

A. Design for Manufacture (DFM)

When we think of product design, we generally first think of how to please the customer.
However, we also need to consider how easy or difficult it is to manufacture the product.
Otherwise, we might have a great idea that is difficult or too costly to manufacture.

DFM guidelines focus on two issues:

1. Design simplification and Value Analysis /engineering/

Design simplification means reducing the number of parts and features of the product whenever
possible. A simpler product is easier to make, costs less, and gives higher quality.

Value Analysis (also known as value engineering) was developed by General Electric in 1947
to eliminate unnecessary features and functions in product designs. It has reemerged as a

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technique for use by multifunctional design teams. The design team defines the essential
functions of a component, assembly, or product using a verb and a noun. Updated versions of
value analysis also assess the environmental impact of materials, parts, and operations.
2. Design standardization refers to the use of common and interchangeable parts. By using
interchangeable parts, we can make a greater variety of products with less inventory and
significantly lower cost and provide greater flexibility.

B. Product Life Cycle

Another factor in product design is the stage of the life cycle of the product. Most products go
through a series of stages of changing product demand called the product life cycle. There are
typically four stages of the product life cycle: introduction, growth, maturity, and decline.

C. Concurrent Engineering

Concurrent engineering is a collaborative approach to product development that brings together

cross-functional teams early in the design phase. It ensures that all aspects of the product, from
design and manufacturing to procurement and environmental impact, are considered
simultaneously rather than sequentially. This method reduces the time to market, minimizes
design flaws, and increases overall efficiency.
Key considerations in concurrent engineering include:
1. Design for Manufacture (DFM)
 This focuses on how easily and cost-effectively a product can be manufactured. It
involves optimizing the design to simplify production processes, reduce waste, and
minimize complexity. Ensuring manufacturability from the early stages prevents costly
revisions later on.

2. Design for Procurement

 Component Availability: Ensuring that the materials and parts required for the product
can be sourced reliably and cost-effectively is critical. Designers must consider the
availability and lead times of suppliers to prevent bottlenecks in production.
 Supply Chain Compatibility: The design must align with the supply chain's capabilities,
ensuring timely procurement and minimizing the risk of material shortages.
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3. Design for Environment (DfE)
 This addresses the environmental impact throughout the product’s life cycle, from the
extraction of raw materials to disposal. Considerations include:
o Sustainable Material Use: Using recyclable or biodegradable materials.
o Energy Efficiency: Reducing energy consumption during production and product
usage.
o End-of-Life Disposal: Designing products for ease of recycling or safe disposal.
4. Design for Robustness
 Robust design ensures the product can perform consistently under various operating and
environmental conditions. This involves considering factors like temperature, humidity,
vibration, and wear and tear to ensure the product's durability and reliability over time.
5. Design for Assembly (DFA)
 Ease of Assembly: Products should be designed to be easy to assemble, reducing labor
costs and potential errors during production. This includes using standardized parts and
minimizing the number of components.
 Ease of Disassembly: Designing for disassembly also facilitates future repairs,
maintenance, or recycling efforts, ensuring components can be taken apart with minimal
damage

D. Remanufacturing:

Remanufacturing is a concept that has been gaining increasing importance as our society
becomes more environmentally conscious and focuses on recycling and eliminating waste.
Remanufacturing uses components of old products in the production of new ones. In addition to
the environmental benefits, there are significant cost benefits because remanufactured products
can be half the price of their new counterparts. Remanufacturing has been quite popular in the
production of computers, televisions, and automobiles.

E. Quality Function Deployment (QFD):

A critical aspect of building quality into a product is to ensure that the product design meets
customer expectations. This typically is not as easy as it seems. Customers often speak in
everyday language. For example, a product can be described as “attractive,” “strong,” or “safe.”

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However, these terms can have very different meaning to different customers. To produce a
product that customers want, we need to translate customers’ everyday language into specific
technical requirements. However, this can often be difficult. A useful tool for translating the
voice of the customer into specific technical requirements is quality function deployment
(QFD).
QFD is an approach to integrating customer feedback into product design, ensuring that
customer expectations are met while enhancing coordination among different functions like
marketing, engineering, and production.

I. DESIGNING SERVICES

Most of the issues discussed in this chapter are as applicable to service organizations as they are
to manufacturing. However, there are issues unique to services that pose special challenges for
service design.

How Are Services Different from Manufacturing?

In the first chapter we learned about two basic features that make service organizations different
from manufacturing. These are the intangibility of the product produced and the high degree of
customer contact.

a. Intangible Product: Service organizations produce an intangible product, which cannot be

touched or seen. It cannot be stored in inventory for later use or traded in for another model.
The service produced is experienced by the customer. The design of the service needs to
specify exactly what the customer is supposed to experience. For example, it may be
relaxation, comfort, and pampering, such as offered by Canyon Ranch Spa. It may be
efficiency and speed, such as offered by FedEx. Defining the customer experience is part of
the service design. It requires identifying precisely what the customer is going to feel and
think and consequently how he or she is going to behave. This is not always as easy as it
might seem.
b. High Degree of Customer Contact: Service organizations typically have a high degree of
customer contact. The customer is often present while the service is being delivered, such as
at a theater, restaurant, or bank. Also, the contact between the customer and service provider
is often the service itself, such as what you experience at a doctor’s office. For a service to be

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 successful, this contact needs to be a positive experience for the customer, and this depends
greatly on the service provider.

3.2. Process Selection

A process is a set of interrelated tasks or activities that takes specific inputs and transforms them
into outputs, creating value for a customer, organization, or society. Processes are fundamental to
operations management because they define how products are made or services are delivered.
Process design is the planning and structuring of activities, resources, and workflows needed to
produce goods or deliver services effectively. It outlines what tasks need to be done, how they
should be coordinated, and what tools, labor, and technology are required. Process design aims to
create efficient workflows that meet organizational goals, improve productivity, and maximize
value for customers.

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Process strategy is an organization’s comprehensive approach for producing goods and
delivering services to meet its strategic objectives. It shapes how the organization competes in
the market, supports product decisions, and contributes to the achievement of overall corporate
goals.
A firm’s process strategy encompasses:-
1. Vertical Integration: The degree to which the firm controls its supply chain, from
sourcing raw materials to distributing finished goods. This determines whether a
company will handle each production stage internally or rely on external suppliers.
2. Capital Intensity: The balance between capital investments (e.g., machinery,
technology) and human labor within the production process. Higher capital intensity
often leads to greater efficiency but requires significant investment.
3. Process Flexibility: The ability to adapt resources in response to market shifts,
technological advances, or changes in product and service demands. A flexible process
allows for customization and immediate changes in production.
4. Customer Involvement: The level of customer participation in the production or service
delivery process. Involving customers can increase customization and perceived value,
though it may also add complexity to the production.

Process planning determines how a product will be produced or a service provided. It decides
which components will be made in-house and which will be purchased from a supplier, selects
processes, and develops and documents the specifications for manufacture and delivery.

Types of production Processes

Production processes can be classified into projects, Job-Shop production, batch production,
mass production, and continuous production.

A. Project

Projects are used to make one-of-a-kind products exactly to customer specifications. These
processes are used when there is high customization and low product volume, because each
product is different.
Examples can be seen in construction, shipbuilding, medical procedures, and creation of
artwork, custom tailoring, and interior design. With project processes the customer is usually

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involved in deciding on the design of the product. Project take a long time to complete, involve a
large investment of funds and resources, and produce one item at a time to consumer order.
B. Job-Shop Production

Job-shop productions are characterized by manufacturing one or few quantities of products

designed and produced as per the specification of customers within prefixed time and cost. The
distinguishing feature of this is low volume and high variety of products. A job-shop comprises
of general-purpose machines arranged into different departments. Each job demands unique
technological requirements, demands processing on machines in a certain sequence.
Job-shop Production is characterized by

High variety of products and low volume.

Use of general-purpose machines and facilities.
Highly skilled operators who can take up each job as a challenge because of uniqueness.
Large inventory of materials, tools, parts.
Detailed planning is essential for sequencing the requirements of each product, capacities
for each work center and order priorities.

C. Batch Production

Batch productions are used to produce small quantities of products in groups or batches based on
customer orders or product specifications. They are also known as job shops. The volumes of
each product produced are still small, and there can still be a high degree of customization.
Examples can be seen in bakeries, education, and printing shops furniture making. The classes
you are taking at the university use a batch process. Batch production processes many different
jobs through the production system at the same time in groups or batches. Products are typically
made to customer order, volume (in terms of customer order size) is low, and demand fluctuates.
Batch Production is characterized by:

Shorter production runs.

Plant and machinery are flexible.
Plant and machinery set up is used for the production of item in a batch and change of
set up is required for processing the next batch.

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 Manufacturing lead-time and cost are lower as compared to job order production.
D. Mass Production

These are designed to produce a large volume of a standardized product for mass production.
They are also known as flow shops, flow lines, or assembly lines. With line processes the
product that is produced is made in high volume with little or no customization. Think of a
typical assembly line that produces everything from cars, computers, television sets, shoes,
candy bars, even food items. The machines are arranged in a line or product layout. Product and
process standardization exists and all outputs follow the same path. Product demand is stable,
and product volume is high. Goods that are mass produced include automobiles, televisions,
personal computers, fast food, and most consumer goods.
Mass Production is characterized by

Standardization of product and process sequence.

Dedicated special purpose machines having higher production capacities and output
rates.
Large volume of products.
Shorter cycle time of production.
Lower in process inventory.
Flow of materials, components and parts is continuous and without any back tracking.
Production planning and control is easy.
Material handling can be completely automatic.
E. Continuous processes

Continuous production operates continually to produce very high volume of fully standardized
commodity products. The system is highly automated and is typically in operation continuously
24 hours a day. Examples include oil refineries, water treatment plants, and certain paint
facilities. The products produced by continuous processes are usually in continual rather than
discrete units, such as liquid or gas. They usually have a single input and a limited number of
outputs. Also, these facilities are usually highly capital intensive and automated. Continuous
processes are more extreme cases of high volume and product standardization than are line
processes.
Continuous production is characterized by:

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 Dedicated plant and equipment with zero flexibility.
Material handling is fully automated.
Process follows a predetermined sequence of operations.
Component materials cannot be readily identified with final product.
Planning and scheduling is a routine action.

3.3. Strategic Capacity Planning

Capacity can be defined as the maximum output rate that can be achieved by a facility. Or it is
the ability of a process or operation to produce a given volume and is very much determined by
the process choices made at the system design stage. Operations need to be planned and
controlled within capacity constraints. The facility may be an entire organization, a division, or
only one machine. The first level of capacity decisions is strategic and long-term in nature. This
is where a company decides what investments in new facilities and equipment it should make.
Because these decisions are strategic in nature, the company will have to live with them for a
long time. The second level of capacity decisions is more tactical in nature, focusing on short-
term issues that include planning of workforce, inventories, and day-to-day use of machines.
Three strategies in managing capacity.
Lead – adding capacity in advance of demand growth;
Lag – adding capacity after demand growth;
Average – trying to maintain average capacity.

3.4. Facility Location and Layout

3.4.1. Facility Location /Reading Assignment/

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3.4.2. Facility Layout
What is Layout? The ‘layout’ of an operation or process means how its transforming resources
are positioned relative to each other and how its various tasks are allocated to these transforming
resources.
What is Layout Planning?
Facility layout decision entails determining the placement of departments, workstations,
machines and stockholding points within a productive facility. General objective of facility lay
out is to arrange these elements in the way that ensures a smooth workflow (in a factory) or a
particular traffic pattern (in service organization).
Arrangement of areas within a facility is important to:

 Minimize Material Handling Costs: Reduce material movement by arranging machines and
departments logically, cutting transportation costs and delays.
 Utilize Space Efficiently: Maximize floor space use by minimizing wasted space, increasing
productivity, and potentially boosting capacity without extra space.
 Utilize Labor Efficiently: Optimize worker placement to reduce unnecessary movement,
boosting productivity and reducing idle time.
 Eliminate Bottlenecks: Identify and resolve production or service slowdowns, ensuring
smooth workflows and avoiding delays.
 Facilitate Communication and Interaction: Enhance coordination by positioning related
departments and workstations for easier collaboration.
 Reduce Manufacturing Cycle Time: Design layouts that streamline material flow, reducing
production time and increasing competitiveness.
 Reduce Customer Service Time: Improve service efficiency by strategically placing
products or service counters to reduce wait times.
 Eliminate Redundant Movement: Minimize unnecessary movements by workers, materials,
or customers to enhance efficiency.
 Incorporate Safety and Security Measures: Integrate safety protocols and secure sensitive
areas, ensuring worker and customer safety.
 Increase Capacity: Optimize layout to increase output without needing more space,
equipment, or staff.

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Types of Layouts
There are four basic layout types: process, product, hybrid, and fixed position.
A. Process Layouts
Process layouts are layouts that group resources based on similar processes or functions. This
type of layout is seen in companies with intermittent processing systems. You would see a
process layout in environments in which a large variety of items are produced in a low volume.
A hospital is an example of process layout. Departments are grouped based on their function,
such as cardiology, radiology, laboratory, oncology, and pediatrics. The patient, the product in
this case, is moved between departments based on his or her individual needs. A university is
another example. Colleges and departments are grouped based on their function. You, the
student, move between departments based on the unique program you have chosen.
Characteristics of process layout

 Resources used are general purpose. The resources in a process layout need to be capable
of producing many different products.
 Facilities are less capital intensive. Process layouts have less automation, which is
typically devoted to the production of one product.
 Facilities are more labor intensive. Process layouts typically rely on higher-skilled workers
who can perform different functions.
 Resources have greater flexibility. Process layouts need to have the ability to easily add or
delete products from their existing product line, depending on market demands.
 Processing rates are slower. Process layouts produce many different products, and there is
greater movement between workstations.
 Material handling costs are higher. It costs more to move goods from one process to
another.
 Scheduling resources is more challenging. Scheduling equipment and machines is
particularly important in this environment.
 Space requirements are higher. This type of layout needs more space due to higher
inventory storage needs.
B. Product Layouts

Product layouts are layouts that arrange resources in a straight-line fashion to promote efficient
production. They are called product layouts because all resources are arranged to meet the
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production needs of the product. This type of layout is used by companies that have repetitive
processing systems and produce standardized products in large volume.

Examples of product layouts are seen on assembly lines, in cafeterias, or even at a car wash. In
product layouts the material moves continuously and uniformly through a series of workstations
until the product is completed.
Characteristics of product layout

 Resources are specialized. Product layouts use specialized resources designed to produce
large quantities of a product.
 Facilities are capital intensive. Product layouts make heavy use of automation, which is
specifically designed to increase production.
 Processing rates are faster. Processing rates are fast, as all resources are arranged in
sequence for efficient production.
 Material handling costs are lower. Due to the arrangement of work centers in close
proximity to one another, material handling costs are significantly lower.
 Space requirements for inventory storage are lower. Product layouts have much faster
processing rates and less need for inventory storage.
 Flexibility is low relative to the market. Because all facilities and resources are specialized,
product layouts are locked into producing one type of product.
C. Hybrid Layouts

Hybrid layouts: A combination of process and product layouts combines the advantages of both
types of layouts. A combination layout is possible where an item is being made in different types
and sizes. Here machinery is arranged in a process layout but the process grouping is then
arranged in a sequence to manufacture various types and sizes of products. It is to be noted that
the sequence of operations remains same with the variety of products and sizes.
D. Fixed-Position Layouts

A fixed-position layout is used when the product is large and cannot be moved due to its size.
All the resources for producing the product including equipment, labor, tools, and all other
resources have to be brought to the site where the product is located. Examples of fixed-position
layouts include building construction, dam or bridge construction, shipbuilding, or large aircraft
manufacture.

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