CHAPTER 3 PART II

Process Selection and Capacity Planning

Introduction

 Another major decision for the operation

manager is finding the best way to produce
(Process selection)
 No product can be made and no service provided

without a process, and

 No process can exist without a product or

service.
Process selection Defined …
 The way an organization chooses to produce its
goods or provide its service.
 Involves choice of technology and related issues,

and
 Has major implications for

 capacity planning,
 layout of facilities,
 equipment and design of work systems
A process strategy
 Is an organization’s approach to transform
resources into goods and services.
 Objective - to find a way to produce goods

and services that meet

 customer requirements and
product specifications within cost and other
managerial constraints.
A process strategy …

Process selected will have a

long term effect on
 efficiency and production,
 flexibility,

 cost, and

 quality of goods produced.

Step in process planning to be consider

 Make or Buy Decision

 Process Choice
Make or Buy Decision
 First step in process planning
 Make or buy some or all of a product or
 Subcontract some or all of a service.
 Manufacturer might decide to purchase certain
parts rather than make them;
 sometimes all parts are purchased and
manufacturer simply
performing assembly operations.
Make or Buy Decision …
 Many firms contract out janitorial services,
and
 Some contact for repair services.

 If a decision is made to buy or contract, this

lessens or eliminates the need for process

selection.
Make or Buy Decision …
 Factors to consider make or buy
decisions,
 Available capacity
 Expertise
 Quality considerations
 The nature of demand
 Cost
Process Choice
 One of the first decisions a manager makes in
designing a well functioning process
 A process type that best achieves the relative
importance placed on
 quality,
 time
 flexibility and
 cost.
Process Choice
 The manager has five process types, which
form a continuum, to choose from:
 Job
 Batch
 Continuous
 Line and
 Project
Process choice
 Best choice depends on the volume and
the degree of customization required of
the process
 A process choice might apply to an

entire
process or just one sub process within it.
 Project Process
 Deals with one-of-a kind products
 Product Tailored to the unique requirement of each
customer.
 characterized by a high degree of job customization,
 Based on size it releases substantial resources once a project
is completed
 Eg. building a shopping center,
 planning a major event,

 running a political campaign,

 doing management consulting work, or

 developing a new technology or product.

Projects are set up to handle complex jobs that involve unique sets of activities.
Project Process
 Lies at the high customization low
volume end of the process choice
continuum.
 The sequence of operations and the

process involved in each are unique to

the project, creating one-of a-kind
products or services made specifically to
customer orders.
Job process
 Next in the continuum of process choices
 Appropriate for manufacturers of small batches of
many different products,
 Each of which is custom designed and,
 Each requires its own unique set of processing steps, or
routing, through the production process.
 Examples are providing emergency room care,
 handling special delivery mail or making customized
cabinets.
Job process …
 Customization is relatively high and volume
for any one product or service is low.
 Volumes are not as low as for a project

process, which by definition does not

produce in quantity.
 The work force and equipment are flexible

and handle various tasks

Job process …
 Make products to order and do not produce them
ahead of time.
 Primarily organizes all like resources around itself;
 equipment and workers capable of certain types of work
are located together.
 Customization is high and most jobs have a different
sequence of processing steps,
 This process choice creates jumbled flows through
the operations rather than a line flow.

Jumbled ----Random, mixed up, unordered …

Characteristics of Job process
 Small production runs
 Discontinuous flow of materials
 Disproportionate manufacturing cycle time
 General purpose machines and process layout
 Highly skilled labor
 Highly competent knowledgeable supervision
 Large work-in-progress
 Limited functions of production planning and control
Batch Process
 A step up from job process in terms of product
standardization, but it is not as standardized as line
process.
 Example: scheduling air travel for a group,
 Making components that feed an assembly line,
 Processing mortgage loans, and manufacturing
capital equipment.
 Differs from the job process with respect to
volume, variety and quantity.
Batch Process …. Difference from Job process

1) Volumes are higher as the similar

products/services are provided repeatedly.
2) Narrow range of products and services is
provided.
 Variety is achieved more through an assemble-to-
order strategy than the job process’s make-to-order or
customized services strategy.
 Some of the components going into the final product
or service may be processed in advance.
Batch Process …. Difference from Job process

3) Production lots or customer groups are handled in

larger quantities (or batches) than they are with job
processes.
 A batch of one product or customer grouping is processed,
and then production is switched to the next one.
 Eventually, the first product or service is produced again.
 A batch process has average or moderate volumes, but
variety is still too great to warrant dedicating a separate
process for each product service.
Characteristics of Batch process
 Short runs
 Skilled labor in specific trades
 Supervisor to possess knowledge of a specific
process
 Limited span of control
 General purpose machines and process type of
layout
Characteristics of Batch process
 Manual materials handling
 Manufacturing cycle time affected due to queues
 Large work-in-progress
 Flexibility of production schedules
 Need to have production planning and control
Line Process
 Characterized by a linear sequence of operations used
to make the product or service.
 Products created by a line process include automobiles,
appliances and toys.
 Services based on a line process are fast food restaurants
and cafeterias.
 Lies between the batch and continuous processes on the
continuum,
 volumes are high, and
 products or services are standardized, which allows
resources to be organized around a product or service.
Line Process
 There are line flows, with little inventory held
between operations.
 Each operation performs the same process over and
over, with little variability in the products or
services provided.
 Production orders are not directly linked to
customer orders, as is the case with project and job
process
Characteristics of line process
 Continuous flow of material
 Special purpose machines and product type layout
 Mechanized materials handling
 Low skilled labor
 Short manufacturing cycle time
 Easy supervision
 Limited work-in-progress
 Lesser flexibility in production schedules
Continuous Process
 Also referred to as flow systems because of the rapid rate at
which items move through the system.
 Used when highly standardized products are involved.
 Petroleum refineries, chemical plants, and plants making beer,
steel, and food.
 Firms with such facilities are called the process industry.
 It is the extreme end of high volume, standardized
production with rigid line flows.
 Its name derives from the way materials move through the
process
Characteristics of Continuous Process

 Special purpose machines with built-in controls

 Highly mechanized/automated materials handling
 Virtually zero manufacturing cycle time
 Low skilled labor
 Supervisor to be processes specialist
 Negligible work-in-progress
 Limited production planning and control functions
Capacity Planning
 Size of facility to be considered after process
options
 Determining the size of a facility is critical to a
firm’s success,
 Capacity is the maximum output of a system in a
given period not
a rate (number of tons of steel that can be produced
per week, per month, or per year.)
 It is the maximum number of units that can be
produced in a specific time.
Capacity Planning
 For many companies, measuring capacity can be
straight forward.
 Determining capacity can be more difficult in some
organizations.
 Capacity can be measured in terms of beds (a
hospital) or, active members (a church).
 Other organizations use total work time available
as a measure of overall capacity.
Measures of capacity
1. Design Capacity
2. Effective Capacity
3. Actual output
Measures of Capacity …
 Design Capacity: the maximum output that can possibly
attained under ideal condition.
 Effective capacity: - maximum output rate that can be
sustained under normal conditions.
 Realistic work schedules and breaks,
 Regular staff levels,
 Scheduled machine maintenance, and
 These conditions does not include the temporary measures that
are used to achieve design capacity.
 Note that effective capacity is usually lower than
design capacity.
Measures of Capacity …
 Actual Output: the rate of output actually
achieved.
 Cannot exceed effective capacity and is
 less than effective capacity due to
 breakdowns,
 defective output,
 shortages of materials, and
 Similar factors
Measures of capacity …

 Capacity utilization: How much of our capacity we are

actually using.
 Computed as the ratio of actual output over design capacity:
 Effective capacity is usually less than design capacity owing to
realities of
 changing product mix,
 the need for periodic maintenance of equipment,
 lunch breaks,
 coffee breaks,
 problems in scheduling and balancing operations, and
 similar circumstances.
Capacity utilization …
 Actual output cannot exceed effective
capacity and is often less because of
 Machine breakdowns,
 Absenteeism, and
 Other problems outside the control of the
operations managers.
Measures of system effectiveness
 These measures of capacity are useful in
defining two measures of system
effectiveness: efficiency and utilization.
 Efficiency is the ratio of actual output to
effective capacity.
 Utilization is the ratio of actual output to
design capacity.
Measures of system effectiveness

Measures of system effectiveness
 Managers commonly focus exclusively on
efficiency, but in many instances, this emphasis can
be misleading.
 This happens when effective capacity is low
compared with design capacity.
 In those cases, high efficiency would seem to
indicate effective use of resources when it does not.
Facility Location and Layout