Production Planning - Chapter 1

Production Planning & Control
Chapter 1: Overview of Planning and

Control
HADI MOSADEGH
Chapter Headlines
 Manufacturing versus Service Operations

 Customer Influence in Design
 Process Categories
 Order Winners and Qualifiers
 Business Environment Issues
 Process Analysis and Information Flows
 General Information Flows
Manufacturing vs Service Operations
 Timing. In service organizations there is often little time between the

recognition of demand and the expected delivery of the process output.
 Customer Contact. The customer in a service environment is often much
more involved in the design of the "product" or output of the experience.
Also, the contact point is often the person who will be delivering the
service.
 Quality. In service organizations much of the quality may be intangible,
making it much more difficult to effectively measure.
 Inventory. "Pure" service organizations (those that have virtually no physical
goods involved in their output) often do not have the luxury of inventorying
their output.
Customer Influence in Design of
Production Systems
 Basically, two important factors are derived by customer that affect the
production systems:
 Volume
 Variety
1. Make-to-Stock (MTS)
2. Assemble-to-Order (ATO)
3. Make-to-Order (MTO)
4. Engineer-to Order (ETO)
Make-to-Stock
 Producing products that are completely made into their final form and
stocked as finished goods.
 Examples of these products are very common, as found in virtually all retail
stores such as hardware, clothing, office supplies, and so on
Forecast demand
Sale Customer
Production Shipment Stock
MTS – Push
Assemble-to-Order
 In this case the customer can often select various options from
predesigned subassemblies. The producer will then assemble these options
into the final product for the customer.
 Automobiles and personal computers are good examples of these types
of products.
Final products
Sub-assemblies
Parts/Materials
Variety
Make-to-Order
 This environment allows the customer to specify the exact design of the
final product or service, as long as they use standard raw materials and
components.
 An example might be a specialty furniture maker or a bakery.
Realize demand
Sale Customer
Production Shipment Stock
MTO – Pull
Engineer-to-Order
 In this case the customer has almost complete say in the design of the
product or service. They are often not even limited to the use of standard
components or raw material, but can have the producer deliver
something designed "from scratch."
Design Production Customer

Process Categories
 There are essentially five categories given to describe the process used in
production, although in practice there are several combinations of these
basic types.
1. Project
2. Job Process
3. Batch or Intermittent Processing
4. Repetitive or Flow Processing
5. Continuous
Process Categories: Project
 Typically assumes a one-of-a-kind production output.

 Projects are typically large in scope and will often be managed by teams
of individuals brought together for this one-time activity based on their
particular skills.
 Examples: building a new building or developing a new software
application
Process Categories: Job Process
 Job processes (job shop processes) are typically designed for flexibility.
 The equipment is often general purpose.
 Workers tend to be highly skilled in a job process.
 For a large variety of special production requirements, as may be found in
an ETO or MTO.
 Information linkages tend to be informal and loose.
 An example is a general-purpose machine shop or a specialty bakery or
caterer.
Process Categories:
Batch or Intermittent Processing
 The equipment tends to be more specialized than the equipment in job shops,
but still flexible enough to produce some variety in design
 The workers do not usually need to be quite as skilled as the workers in the job
shops.
 Often these organizations are organized with homogeneous groupings of
worker skills and machines, forcing the work to move from area to area as it is
being processed.
 The category is often called batch since products are often made in discrete
batches.
 Some batch processes can produce MTO and some MTS, but this environment
is usually well suited to the ATO environment.
 Examples include clothing, bicycles, furniture, and so on.
Process Categories:
Repetitive or Flow Processing
 For a very large volume of a very narrow range of designs.

 The equipment tends to be highly specialized and expensive.
 The labor that is used tends to be unskilled.
 Repetitive processing is typically used for make-to-stock (MTS) designs,
 Examples: refrigerators and other appliances.
Process Categories: Continuous
 As with project processing, this type of process is at the far extreme of the
processing types.
 It is focused on highly specialized applications.
 The equipment is very specialized.
 Little labor tends to be needed.
 Examples: high volume chemical processes and petroleum refining.
Processes: Summary
Hayes-Wheelwright Product/Process
Matrix
Criteria of Buying a Product
 Price
 a. Standard price: such as a catalog price
 b. Custom pricing: usually negotiated
 Quality
 a. Tangible quality: aspects with specific measures
 b. Intangible quality: aspects that may prove of value to the customer
 Delivery
 a. Speed
 b. Reliability
 Flexibility
 a. Volume
 b. Variety
Order Qualifiers & Order Winners
 It should be noted that it is virtually impossible for anyone producer to be

the "best" in the market for all those dimensions (criteria) of competition at
the same time.
 As part of the development of the operations strategy of the firm, the
producer must determine which of these dimensions represent order
winners and which are order qualifiers for their market as defined by the
corporate strategy.
Order Qualifiers & Order Winners
 Order qualifiers: order qualifiers represent the dimension by which a

potential customer determines which suppliers of a product or service
meet criteria to be considered for receiving the final order from the
customer
 Order winners: once potential suppliers have been evaluated as to their

order-qualifying criteria, the final successful supplier for the product or
service is selected based on the order-winning criteria in the mind of the
customer.
Business Environment Issues
 Customer learning: customer expectations rise continuously.

 Competitor moves: Some competitor moves may disqualify order winners,
turning them into qualifiers, and thereby establishing new order winners.
 Multiple markets: The effective producer needs to be aware of and
continually monitor all the markets.
 Product design changes: Technology impacts customer expectations.
Process Analysis and Information Flow
 Control and reporting points: These are points in the process where the
activities of production are captured.
 Process analysis and improvement:
 Process mapping
 Process improvement: Kaizen (continuous improvement)
 Process reengineering: radical/basic improvement
 Value stream mapping: lean production
General Flow of Production and
Control

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Production Planning & Control

Chapter 1: Overview of Planning and

 Manufacturing versus Service Operations

 Timing. In service organizations there is often little time between the

Design Production Customer

 Typically assumes a one-of-a-kind production output.

 For a very large volume of a very narrow range of designs.

 It should be noted that it is virtually impossible for anyone producer to be

 Order qualifiers: order qualifiers represent the dimension by which a

 Order winners: once potential suppliers have been evaluated as to their

 Customer learning: customer expectations rise continuously.

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