UNIT 4: PROCESS PLANNING AND PROCESS DESIGN

Process planning and design is the complete delineation and description of the specific steps in
production. The design and redesign of products and the design or redesign of processes are
interrelated. Process planning and selection also involves choice of technology and related issues
and it has major implications for capacity planning, layout of facilities, equipment, and design of
work systems. This relationship can be best understood by having a look at on the following
figure.

Demand of the Capacity

product planning

Product/service Facilities and

Process Design
Design and Selection equipment

Technology Layout of
advancement facilities

Process selection occurs as a matter of course when new products or services are being planned.
However, it also occurs periodically due to technological changes in equipment as well as
changes in existing product or services.

4. 2.1Types of Processes
At the basic level, the types of process can be categorized into three main categories:

1. Conversion Processes
Under this process the reaction under specific controlled conditions yields products that may
hardly resemble their parents. For example, changing iron ore into steel sheets or making all the
ingredients listed on the box of toothpaste into tooth paste are conversion processes.
2. Fabricating Processes
This process involves changing raw materials into some specific form. For example making
sheet metal into car fender and making chair out of wood are fabricating processes.

3. Assembly processes
Assembly processes brings together necessary raw materials or components that makeup a
product. For examples, assembly automobiles, building construction, house appliances etc.

4.2.2 Factors affecting choice of process design

Major factors affecting choice of process designs decisions include:
1. Nature of product demand pattern of demand and price-volume relationship. Production
processes must have adequate capacity to produce the volume of the product that
consumers want. Seasonality, growth trends, and other patterns of demand affect the
amount of production capacity needed. /to meet quantities during peak demand seasons/.

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 Therefore, provisions must be made for expanding or contracting capacity to keep pace
with the growth trends of sales.

Different types of production processes provide a different mix of competitive advantage

therefore the choice of price and the choice of the design of production processes must be
synchronized.

2. Degree of Vertical Integration. Vertical integration is the amount of the production and
distribution chain, from suppliers of components to the delivery of products to customers, that is
brought under the ownership of accompany. There two types of vertical integration, that is
forward and backward integration. Forward integration is expanding ownership of the
production and distribution chain toward the market whereas, backward integration means
expanding ownership of the production and distribution chain backward towards the source of
supply. The degree to which a company decides to be vertically integrated determines now many
production processes need to be planned and designed.

3. Production flexibility. It refers to the ability to respond fast to customer's needs. Flexibility is
of two types. The first is Product flexibility, which refers to the ability of the production system
to quickly change from producing one product to producing another. For such cases, production
process must be designed to include general-purpose equipment and cross-trained employees.
The second type of flexibility is volume flexibility. It is the ability to quickly increase or reduce
the volume of products produced. Volume flexibility is needed when demand is subject to peaks
and valleys and when it is impractical to inventory products in anticipation of customer demands.
In this case production process must be designed with production capacities that can be quickly
and inexpensively expanded and contracted. The fundamental nature of service creates the need
for flexibility.

4. Degree of Automation. Automation is the substitution of machinery for human labor. The
machinery includes sensing, the control devices that enable it to operate automatically. A key
question in process planning is whether to automate or not; and how much to automate, (fully or
partially).

Advantages of Automation
Automation offers a number of advantages over human labor. Some of these are:
1. It has low variability; it is difficult for a human to perform as fast in exactly the same way,
and in the same amount of time on a repetitive basis.
2. Machines do not get bored or distracted nor do they go out on strike, ask for higher wages, or
file labor grievances.
3. It is taken as a necessary strategy for competitiveness.

Disadvantages/limitations
1. Automation can be costly because the acquisition of new technology can be expensive
2. Usually, it requires high volumes of output to offset high costs of initial investment.
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 3. Automation is much less flexible than human beings are.
4. Once process has been automated, there is substantial reason for not changing it
5. It often becomes an emotional issue with workers because of the fear of job loss.

Therefore, the degree of automation must be carefully examined so that its limitation can be
minimized and its benefits can be exploited.

5. Level of Product quality

The choice of design of production processes is certainly affected by the desired level of product
quality.

6. Degree of customer contact

For most services and for some manufacturers, customers are an active part of the process of
producing and delivering products. The extent to which customers become involved in the
production systems has important implications for the design of production processes. In this
case every element of the equipment, employee training, and building must be designed with the
customer in mind. Also courteous attention, comfortable surrounding must be provided to
receive, hold process and release customers.
At the other extreme of customer involvement, the design is little affected by interaction with
customers.

3.2.3 Types of Process Flow Structure

Production system exists to produce product/ services of a kind that customers want and like a
process flow structure refers to how a factory organizes material flow using one or more of the
process technologies.
There are basically, four (4) types of processing systems: continuous, assembly line, intermittent
and project processing. These major operation processes are described briefly as follows:

1. Continues process (product-focused)

A form of production processing organization in which production departments are organized
according to the type of product being produced. All of the production operation required to
produce a product are ordinarily grouped in to one production department. It is also called line
flow production or continuous production because; the product follows a pre-determined
sequence of steps. In line flow production, products tend to follow along direct linear paths
without backtracking or side tracking.
Continuous processing systems produce high volume of standardized output. The ultimate
continues processing systems produce a single product such as flour, sugar, chemicals, liquid,
powder, detergents, gasoline, oil, and the like. Generally, these products are measured on
continues basis rather than counted as discrete units.
Characteristics of continues or product-focused process
 The system produce highly uniform or standardized output
 uses highly standardized machine/equipment and methods, and operated for 24 hours
to avoid expensive shutdowns and startups.
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  the skills requirements of workers are usually fairly low because of division of labor
 equipment tends to be highly specialized which tends to make it expensive relative to
more general purpose equipment, but the high volume of output result in a low
cost per unit
 product of such process are generally made for stock/inventory rather than customer
order
 the process is inflexible, it handles only one product
 Product focused systems usually require high initial investment because it uses
expensive, fixed-position material -handling equipment e.g. Overhead conveyors.
In continuous production products tend to proceed through production without stopping.
This figure shows the flow of raw material from one end of production process to the other end
following a straight line.

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3

2 4

2. Assembly line process (Repetitive process)

Assembly line process refers to production of discrete parts moving from workstation to
workstation at a controlled rate, following the sequence steps needed to build the product. This
part of continuous process produces output that allows for some variety; products are highly
similar but not identical. Examples include assembly of automobiles, televisions, computers
calculators, cameras, appliances etc. Typically, these products are produced in discrete units.
This form of processing is often referred to as repetitive manufacturing.
The application of this process in service area is less common because services tend to be more
customized on a per-unit basis. But still it can be applied in car washes, mechanical caressers,
mail service, fast-food operations etc.

3. Intermittent Processing (Process-focused)

Intermittent processing is used when systems handle a variety of processing requirements on a
start-and stop basis. This system is characterized by:
 A low volume of output than continuous process

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  Use general-purpose equipment that can satisfy a variety of processing
requirements.
 Require semiskilled or skilled workers who operate the general equipment
 The system is relatively flexible.
 Span of supervision is narrow than the low in the case of continuous process
system.
Intermittent Processing takes two forms:
1. Batch Processing- Produces the same item again and again, usually in a specified lot
sizes. Such system is generally employed when a business has a relatively stable line of
products, each of which is produced in periodic batches, either to customers order or for
inventory.
2. Job shop process- Used to handle/produce small batches/lots of a large number of
different products most of which require a different set or sequence of processing steps.
Examples
 Commercial printing firms, publication
 airplane manufacturers
 Machine tool shops, Educational system
In job shops products do not follow continuous routes through production. On the contrary, the
system is:
1. highly irregular stop and go
2. zigzag type routs with side tracking and backtracking
3. Jobs spend the majority of this time waiting to be processed in production departments.
Process focused production systems include hospitals, automobile repair shop machine
shop and manufacturing plants.

The advantages of job shop

1. Product flexibility /able to produce small batches of a wide variety of products
2. Less initial investment/they use general purpose equipment.
Problems
1. greater employee skill
2. more employee training
3. more supervision
The following flow structure illustrates the process-focused production system.
Founding Rough Fabricating Painting Packaging
Job X
9 1
1 4

3
Job Y 2 5 7
9

What makes this system different from batch process is that the job requirements often vary
considerably from job to job, so that the sequence of processing steps and the job content of the
steps, vary considerably, for example, Auto repair shops.

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 4. Projects
Projects are set up to handle complex jobs consisting of unique sets of activities that must be
completed in a limited time span. Examples of application include large or unusual construction
projects, new product development or promotion and so on. This process in characterized by:
i. high variable cost
ii. fixed costs are negligible or non-existent
iii. High skilled manpower-the process requires manpower who can work independently
without much supervision and guidance.
iv. Involves the manufacture of a single, one-of-a kind product.
Processing Alternative decision
In deciding on a particular type of production processing organizations, several factors must be
considered. Some these factors are:
1. Batch size and product variety. This factor includes the amount of product variety and the
volume to be demanded of each product model
If the demand for a single product is high, product -focused is appropriate because cost/unit is
very low but not flexible. Whereas, if products are many and one-of -kind job shop/ process
focused is appropriate. Because this process flows structure allows companies to take the
advantage of product flexibility.

2. Capital requirements for process Designs

The second factor that affects the choice of production process is capital requirements for the
process design. The amount of capital required for the production system tends to differ for each
type of production processing organization. If a firm has only a little capital available for a
particular product, process focused may be the only type of process design that can be planned.

3. Economic analysis
Commonly used to compare alternative processing plans for the production of products, four (4)
important considerations include:
a. Cost function of processing alternatives. Each type of process design tends to require a
different amount of capital. The greater that initial cost of equipment, buildings, and other
fixed assets, the greater one the fixed costs. The cost function of a job shop usually
exhibits very low fixed cost and very high variable costs.

If capital availability is not a factor and annual production costs are the predominate
consideration, the process design that is preferred depends on the production volume of
the product.

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Annual Cost Job shop
of Production Cellular hybrid

Automated
assembly

2,250,000

1,110,000

500,000
Number of units
100,000 250,000 produced per year

b. Concept of operating leverage. Operating leverage is a measure of the

relationship between a firm's annual cost and its annual sales. If a high percentage
of a firms total costs are fixed then the firm is said to have a high degree of
operating leverage.
Other things being equal /held constant/, a high degree of operating leverage implies that a
relatively small percentage change in sales will result in a large percentage change in operating
income (the difference between annual sales and annual production costs).
The concept of operating leverage has the following important implications for the choice of
process design.
1. Greater long rage profits can be realized from production processes with greater
operating leverage once the production volume reaches a certain level.
2. Greater long-range losses can result from operation processes with greater operating
leverage if the production volume is less than the break even point.
3. The high the operating leverage of a production process, the greater is uncertainty of
future volume.
4. The great the uncertainty of sales forecasts, the great is the risk of losses using
production processes with high operating leverage.
If there is a substantial amount of uncertainty concerning the forecast of number of
products to be produced, process design with lower levels of operating leverage tend to
be performed.

Sales
(revenue)
Annual
income
(cost)

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 Number of units
BE1 BE2 BEP
produced /Yr

C. Break even Analysis (BEA)

Break Even Analysis (BEA) is commonly used to choose between processing alternatives. It
does have some weaknesses, however, when compared to other methods:
1. A primary weakness is the techniques inability to deal in a direct way with uncertainty.
All of the costs, volumes and other information used in the technique must be assumed to
be known with certainty.
2. The costs are assumed to hold over the entire range of possible volumes.
3. It does not take into account the time value of money.

Example: Three production processes, automated (A), Cellular(C) and job shop (J) have the
following cost structure.

Process Fixed cost per year Variable cost per unit

A 110,000 2
C 80,000 4
T 75,000 5

i. What is the most economical process for a volume of 10,000 units per year?
ii. At what volume would each of processes be preferred?

Solution
P = Price/unit Q = quantity produced and sold/period
V = Variable cost/unit P = Profit/period
Fc = Fixed cost/period TR = total revenue/period
TVC = Total Variable cost/period TC = Total cost/period
C = Contribution /period C = Contribution/unit
At BEP, profit is equal to zero (0)
TR = PQ FC = P.Q – V.Q = Q(P.V)
FC
C = Pu – Vu Q= ( P−V )
C = Q(Po – V) = TR – VQ = Fc + Pp TVC = TR – FC = PQ - FC
TC = FC + TVC
TVC = VQ
P = TR – TC = PQ – (FC + VQ)
( P+Fc ) TR−TC PuQ−FC FC
= =P−
Q = Pu-Vu V= Q Q Q
TR = FC + TVC = FC + VQ
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 ( FC+ VQ) FC
P= = +Vv
Q Q
a) TC = FC + V(Q)
TCA = FCA + VA(10,000)
= 110,000 + 2(10,000) = 130,000
TCc = FCc + Vc(10,000)
= 80,000 + 4(10,000) = 120,000
TCT = FCT + VT (10,000)
= 75,000 + 5(10,000) = 125,000
The cellular manufacturing production process has the lowest cost when Q = 10,000
b) TCJ = TCc
FCJ + VJ(Q) = FCc + Vc(Q)
75,000 + 5(Q) = 80,000 + 4(Q)
Q = 5,000 units
TCc = TCA
FCc + Vc(Q) = FCA + VA(Q)
80000 + 4(Q) = 110000 + 2(Q)
Q = 15000 units

J
Annual C
cost A

1100

8000
7500

0
50,000 10,000 15,000
The job shop process would be preferred in the annual volume rate of 0 – 5000 units, cellular
manufacturing in the 5000 – 15000 range and automated at 15000 or above

D Financial Analysis
The great amount of money to be invested in production processing alternative and the length of
time these assets are expected to last make the time value of money an important concept. The
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payback period, RPu, IRT and profitability under are aced to analyze POM problems involving
long periods of time.
SERVICE DESIGN

Because of the difference between services and products, the design of services must take in to
account different elements than the design of products. Consider these differences:

1. Products are generally tangible; service is generally intangible. Consequently service

design often focuses more on intangible factors such as peace of mind, ambiance than
does product design.
2. Series are often produced and received at the same time. (e.g. Haircut, a car wash, repair
etc), Because of this there is less latitude in finding and correcting errors before the
customer has a chance to discover them. Consequently, training, process design; the
customer relations are particularly important.
3. Service cannot be inventoried. This posse restriction on flexibility, and makes capacity
design very important.
4. Services are highly visible to customers, and must be designed with that in mind; this
adds an extra dimension to process design usually not present in product design
5. Some services have low barriers to entry and exit. This posse another burden on service
design to continually be aware of what competitors are offering.
6. Location is often important in service design with convenience as a major factor. Hence,
design of services and choice of location are often closely linked.
Table 2.1. Summarizes the difference and similarities of the basic processes.
Types of Product Product Automation Frequency Labor Unit
Production Volume Variety & of Skill Cost
Processes Specialized machine
Equipment set
up &
changes
1. High Low High Low low low
Continuous
2. Assembly Medium Medium High Low low low
3. Batch Medium Medium Medium Medium medium medium
4. Job Shop Low High High High high high
5. Project Low Low Low Low high high

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