Typical product cost breakdown
Manufacturing Products
Manufacturing Process
A sequence of operations and processes designed to create a specific product or service, the process of turning materials into a product.
Standard, or make-to-stock (MTS), goods and services are made according to a fixed design, then put into inventory (stock). Customers have no or few options from which to choose. • Examples are appliances, shoes, sporting goods,
credit cards, online courses, and scheduled bus services. Customers take whatever is offered from the lineup with little or no customization.
Strategy Decisions – MTS
Custom, or make-to-order (MTO), goods and services are designed to meet specific customers’ specifications then produced and delivered as one-of- a-kind or in small quantities. • Examples: ships, weddings, certain jewelry, estate
plans, buildings, and surgery. Option, or assemble-to-order (ATO), goods and
services are configurations of standard parts, subassemblies, or services that can be selected by customers from a limited set. • Examples: Dell computers, Subway sandwiches,
machine tools, and travel agent services.
Strategy Decisions – MTO and ATO
Configure or Engineer to Order
NASA’s James Webb Space Telescope project, 14 countries involved, 20+ years, and over $10B!
Variety Many Few Volume Small Large Investment Small Large Time frame Short Long Cost per unit High Low Labor % and cost High Low
Manufacturing Process Decisions
Projects or Job Shops
• Projects and job shops are flexible and capable of customizing work for individual customers. They may consist of many smaller tasks and activities that are coordinated and completed to finish on time and within budget. Characteristics: One-of-a-kind, complex and large
scale at times, wide variation in specs and tasks. Examples: legal service, construction, custom
jewelry, consulting, surgery, hair cut, and software development.
Projects or Job Shops
Batch Production
• Batch is a small scale assembly line with a series of activities or steps to produce a little more variety of goods or services. It’s more flexible and more costly than assembly lines. Characteristics: general or specialized equipment
used to producing small quantity of goods or services that have variety, but use similar sequence of process steps.
Examples: bakery switching from loaves of bread to muffins to cup cakes to dinner rolls in small batches.
Batch Production
Assembly Line or Mass Production
• Assembly Lines are organized around a series of activities or steps to produce a limited variety of similar goods or services. Value is added at each step in the assembly line. Characteristics: specialized equipment dedicated
to producing large quantity of goods or services that are similar, using similar sequence of process steps.
Examples: automobiles, appliances, production of insurance policies and checking account statements, and hospital laboratory work.
Assembly Line or Mass Production
Continuous Flow
• A continuous flow process creates highly standardized goods or services, usually around the clock non-stop in very high volumes. Characteristics: Very high volumes in a fixed
processing sequence, high investment in system, 24-hour/7-day continuous operation, automated, dedicated to almost identical goods or services.
Examples: chemical products, gasoline, electricity, municipal water supply, steel factories.
Continuous Flow
• Computer/software based: CAD/CAM, CNC • Material removing: Water jet cutting, laser process,
drilling, milling, turning, grinding, sawing, etc. • Automated Systems: Assembly systems, transfer
machines, and Flexible Manufacturing Systems (FMS) • Additive Processes: 3D printing, laser sintering, and
rapid prototyping • Material handling systems: Conveyors, automated
wire guided vehicles, and robots
• Smart factories: sensor-equipped factories with automated decision making, also farms and fisheries
Manufacturing Technologies
Industry 4.0 Implications
• Smart building management monitors energy usage of machinery, lighting, HVAC, and fire safety systems.
• Predictive (remote) maintenance tracks patterns of failures effectively, no more ‘if it ain’t broke, don’t fix it’ mentality.
• Augmented reality uses computer-aided data, diagrams and drawings to help repairmen in their line-of-sight.
• Real-time routing and supply chain optimization maximizes productivity of people and equipment.
• Rapid experimentation, simulation, and concurrent engineering shortens time to market.
• Customer co-creation innovates and customizes.
New Manufacturing Technologies
• Transportation: scheduled bus service, Dial-A-Ride • Information services: Canvas 24/7 support line • Education: Coursera, Udacity • Banking: Online banking, centralized bank tellers • Healthcare: Predictive maintenance, gene therapy • Restaurants: Sysco central R&D and kitchen, Open
Table automates reservation systems • Real estate: Zillow and Redfin
Applications in Services
Applications in Services
Soccer team car wash
Zillow Traditional RE Agent
Fairway car wash
Vs.
Vs.
What’s the Difference?
Vs.
Sushi chef Rotating sushi restaurant
Different processes can be used to make similar products. What are the implications of different process choices?
Analyze This Steak Dinner!
Discussion Questions Please research the following questions and provide evidence to support your answers. Everyone: Think of one product and one service that you purchase from MTO and then one each from MTS, what are some major differences? Be specific. Everyone: What would be the best process for each of the following and why: mortgage applications, building 6 UCR learning centers in CA, LASIK eye surgery Everyone: Watch the class videos then answer the following: 1. What’s the problem and how can it be improved with I
Love Lucy’s assembly line? 2. How can the Amish barn raising example be improved,
other than using modern power tools?
Group Discussion Be sure your group is ready to lead and/or discuss the following question in class, with research or facts-based evidence. With Industry 4.0 on the rise, and manufactures pondering return to the U.S. options, how would the manufacturing processes evolve/change? Please discuss with lessons learned so far in product/service design, processes, global manufacturing, value, and time-based competition. (Hint: could the same/different products be made differently therefore returning to the U.S. is more or less attractive?)
