This material is prepared as my teaching material for an undergraduate degree in Business Management. The main source is Handfield & Bozarth book, Introduction to Operations and Supply Chain Management. The actual slide features a video of allow wheel production, to visualise a hybrid production which combines continuous flow, production line as well as batch manufacturing. Feel free to give feedback & share

1. PROCESS CHOICE & LAYOUT
DECISIONS IN
MANUFACTURING & SERVICES
Dhanis P. Maharani, ST., MSc.

2. Certified Procurement Professional by CIPS
(The Chartered Institute of Procurement & Supply)
Education
MSc. Operations, Projects
& Supply Chain
Management of
Manchester Business
School, 2014-2015
Electrical Engineering,
UGM, 2001-2005
Professional
Indirect Material
Operations Manager,
Mondelez Indonesia,
2012-2014
Section Head of
Component Buyer, Toyota
Motor Manufacturing
Indonesia, 2006-2012
Affiliations
PPI UK- Greater
Manchester
Mata Garuda – Indonesia
Endowment Fund for
Education Awardee
Associaton
MBS Alumni Network
Meet Dhanis
dhanis.maharani@gmail.com

3. Learning Outcomes
 Type of manufacturing processes and its
characteristics
 The link of manufacturing process and market
requirement
 The critical role of customization in manufacturing
 Three dimensions of service differentiation
 Service and its managerial challenges
 Process layout development

4. Manufacturing Processes
• Dictates the resources needed, e.g.: workers,
equipment, production area
• Highly related to the business strategy and its
impact on productivity
Why so
important
?
• People, facilities, physical layout, IS
• Align with the business strategy
• Support multiple sites/organisations’
collaboration
General
Principles
• Physical requirement
• Product similarities and customisation
• Production volumes
Selection
Criteria

5. Types of Manufacturing Processes
• Construction site for a large buildingProject process
• Customised products with low volume, e.g.
craft productJob shops
• Produced in batches
Batch
manufacturing
• Position of the product is fixed, e.g.
shipbuilding, F1 pitstop
Fixed-position
layout
• Low variety with high similarity products,
high volume, e.g. packagingProduction lines
• Use a tightly linked & paced sequence of
steps, e.g. chemicalContinuous flow
increasingvariety
increasingvolume

6. Job shops
• General purpose equipment and
broadly skilled personnel
• Functional/process layout
• Requirement can change
dramatically
• High flexibility, low efficiency
Characteristics

7. Batch manufacturing
• Items are moved through
different manufacturing steps in
groups/batches
• Balanced flexibility &
efficiency
Characteristics

8. Fixed-position
layout
• Position of the product is fixed
• Materials, equipment, workers are
moved to & from the product
• Usually bulky products
• E.g. shipbuilding, mainframe
computer maintenance
Characteristics

9. Production lines
• Product-based layout
• Various steps are linked
• Items are moved through the line
• High-degree of equipment and worker specialisation
• Consistent quality & high efficiency
Characteristics
• Require high volume
• Low flexibility to fit design specification/change
Drawbacks

10. Continuous Flow
• Product cannot be broken into discrete units
• Highly capital intensive
• Inflexible (output level, process/product
modification)
• High degree of product standardisation
• Expensive start-ups & shutdowns
• Need specialist to control operations
• Mostly automatic-driven, direct labours normally
load/unload materials and monitor process
Characteristics

11. Hybrid
Manufacturing
Process
 Equipment & personnel
are dedicated to a
product family
 Cellular layout,
resources are
arranged based on
dominant activities
 E.g. aluminium wheel
disc, resin products

13. Open heart surgery
Fixed-position layout
Padang restaurant
Batch manufacturing
Oil production
Continuous flow
Job shop Production line
Sofa production Machining line

14. Selecting Manufacturing Processes
The Product-Process Matrix (Source: Hayes and Wheelwright, 1984)

15. Product Customisation
Make-to-
Stock (MTS)
Assemble-to-
Order (ATO)
Make-to-
Order (MTO)
Engineer-to-
Order (ETO)
Follows
individual
customer’s
specification
greater customisation
No customisation,
generic products
End process-
customisation
Use standard component
with customer specific
final configuration
Engineer-to-Order
(ETO)

16. Make-to-
Stock (MTS)
Assemble-to-
Order (ATO)
Make-to-
Order (MTO)
Engineer-to-
Order (ETO)
Car production:
left/right hand drive
Phone charger
Sofa
Luxurious house

17. Design Sourcing
materials
Fabrication
Assembly
/finishing
Distribution
The Customisation Point
ETO MTO ATO MTS
Upstream
Downstream
Modified by author (Source: Pine, 1993)
 Not affected by individual
customer order
 Can be completed off-line
 Customer
need-driven
 Job shop likely
 Efficiency &
capacity utilisation-
driven
 High-volume/batch

18. The Customisation Point
Early Late
Customer
need
flexibility
Great Limited
Lead time to
customer
Longer Shorter
Product cost Costly Low-cost
ETO MTO ATO MTS

19. TimberEdge Cabinets: MTO ATO
 Better
fabrication
efficiency
 Reduce
lead time
weeks to
days
 Half
inventory
level
 Reduce
workforce
by 25%

20. Service Processes
• Produce intangible value
• More diverse
• Customer-introduced variability, i.e. arrival,
request, capability, effort, subjective-preference
(Frei, 1996)
Characteristics
• Service packages
• Service customisation
• Customer contact
Three dimensions of services

21. Service Packages
Type Primarily Delivers
Intangible Activities
Mix of Physical &
Intangible Activities
Example Lawyer, proof reader Hotel, cruise
Intangible Knowledge Relaxing vacation
Physical Legal document, edited
document
Room, meeting facilities,
enjoyable ship
Strategy More focus on employee
retention & skill
development (intellectual
capital expenses) for the
greater emphasis on
intangible activities
More capital
expenditure-oriented for
the greater the emphasis
on physical activities

22. Service Customisation
Lower Customisation
Degree
• More standardised
• Narrow-skilled workers
• Special purpose
technology
• More predictable &
relatively faster
• Better measurement &
process control
• Better focus on cost &
productivity
Higher Customisation
Degree
• More variability
• Broad-skilled employees
• Wide range of
technologies/investments
• Less predictable
• Difficulties in
measurement & process
control
• Customer may have
diverse unique needs
LOW HIGH

23. Customer Contact
Lower Customer Contact
• More service package
provided by the back-
operations
• Key considerations:
Layout, location,
convenience
• Provides high contact
services
Higher Customer Contact
• More service package
provided by the front-
operations
• Key considerations:
Operational cost
efficiency & productivity
• Relatively easier to
manage
LOW HIGH
Determine the importance of front-room &
back-room operations in a service process

25. Service Positioning
Type
Service
Package
Customisation
Customer
Contact
Public
hospital
Recruitment
consulting
firm
Package
delivery
Internet
provider
LOW
HIGH
HIGH
LOW
TO
MEDIUM
HIGH
HIGH
MIX
PRIMARILY
INTANGIBLE
MIX
LOWLOW
PRIMARILY
INTANGIBLE

26. Service Blueprinting
Patient consults to
the doctor about his
health problems
Doctor checks
patient’s general
condition, runs some
tests if necessary
Blood test/X-ray
exam in the
laboratory
Procurement of
medical devices

27. Layout Decision Models
Two approaches used to logically decide the
grouping & physical arrangement of the various
resources
Line balancing – a
technique used by assigning
tasks to a series of linked
workstations.
The goal is to balance the
amount of work in each
station & minimise idle time.
Assigning department
locations in functional
layouts – locating diverse
functions for better synergy,
interaction & productivity.
E.g. through measurement
of closeness rating, number
of inter-functional trips per
time period

28. 6 Stages of Line Balancing
Process
Identification
• Including time for
each task & total
time
Process Flow
Diagram
• Used when
assigning individual
task to workstations
Determine takt
time
Calculate min.
workstations
Assign task to
each station
• Cycle time won’t
exceed takt time
• Focus on task where
most tasks directly
depend on it
Performance
evaluation
utquiredOutp
imeAvailableT
Takttime
Re

TaktTime
T
W
I
i
i
 1
min
Ti = time required for ith task
= total time for all I tasks
I
i
iT
1
Better performance has low idle time, high efficiency delay















CTW
TCTW
IdleTime
actual
I
i
iactual
1
%100%
IdleTimeDelayEfficiency %%100 
Wactual = actual no. of workstations
CT = cycle time = max. amount of time
spent in any one workstation

29. Assigning department locations in
functional layouts
Identify
potential
department
locations &
distances
between
various
locations
Identify
interdepart-
mental trips
for each
department
per time
period
Location
assignment
• Assign a particular
key dept. to a
certain location,
e.g. customer
service
• Rank the no. of
interdepartmental
trips. The higher,
the closer.
• Centrally locate
dept. with most
inter-connection
with multiple dept.
• See if any room of
improvement by
swapping

30. Summary
 Managers must be considerate in selecting the
manufacturing process, the customisation point and
degree that align with company’s business strategy
 Services face diverse challenges, depend on its
positioning : package, customisation, customer
contact
 Managers can employ two approaches : line
balancing and assigning department locations in
functional layouts