Question: Citing specific examples, critically discuss the relationship between

process design and facility layout.

Introduction

Operations Management is defined as the activity of managing the resources which

produce and deliver products and services (Slack et al., 2013). The process

perspective of operational management takes the view that every component of the

business is a culmination of its processes, which allows for a scientific approach to

better managing a firms resources. All products and services of a firm undergoes a

transformation process whereby inputs are converted into outputs. In this view,

process and layout designs are amongst one of the most important decision a

manager must undertake; a wrong decision causes inefficient operations within the

organization which leads to more severe implications later on.

Product-Process Matrix (PPM)

The PPM provides a simplified model to aid in visualizing the

correlation between product characteristic on the horizontal axis and process design

on the vertical axis. Product characteristic are defined by two main factors, volume

and variety which defers between different types of products and also similar

products within the different stages of its lifecycle. Volume and variety are negatively

correlated to one another as producing in high volume is done with the purpose of

reducing marginal unit cost, unnecessary variety would be counter-productive.

Process design relates to two correlated factors, tasks and flow eg a

diverse/complex task will typically exhibit intermittent workflow.

Process Types

The PPM is an effective model to enable the visualization of the optimum set of

strategic options. The line of natural fit drawn across the upper right and lower left of

the matrix, splitting it into two quadrants. Any selection of processes along this line

are referred to as process types.

It is the interaction between product and process variable which determine product

types (Hayes and Wheelwright, 1979). Process types in the upper-left of the

quadrant, such as project, jobbing and professional services are characteristic by

high variety, low volume with corresponding complex process task and intermittent

process flow. Due to the low volume of production, firms are not able to spread their

fixed costs over a wide enough base, hence such firms typically have high variable

costs instead. To generalize firms in upper-left quadrant are labor-intensive and

emphasis on specialized and flexible products or service over cost efficiency. For

example, architects for service firms and engineers in the oil & gas sector, who have

higher level of work discretion.

Inversely process types in the lower right of the quadrant are characterize by low

variety, high volume with repeated tasks and continuous workflow. Firms who

chooses process types in this quadrant such as mass processes, continuous

process and mass services typically require highly specialized and capital intensive
equipment. This is due to the high volume and low variety characteristics which

incentivize firms to invest in fixed costs so as to increase production and service

efficiency.

Facility Layout

Facility layout concerns with the optimum arrange of physical attributes with known

dimensions in such a way that minimizes material handling and ensure effective

utilization of men, equipment and space (Hossain, Rasel and Talapatra, 2014).

It is highly criteria that a proper facility layout is selected with proper alignment to the

process types, this is to ensure a proper facilitation of the transformational process,

whereby inputs are transformed into outputs. Similarly, to process types the most

important factor in determining facility layout is also the degree of volume and

variety. As an example, we will study the characteristics of a Singapore company and

analyze its choice of facility layout.

Singapore Food Industries (SFI), is a company that operates large scale canteens in

factories. Their business objective is to provide consistent and fast dining experience

with minimal cost. The characteristic of high volume, low variety and continuous

process design, would suggest a place in the lower right of the quadrant, which is

capital intensive. Based on table 4.1 in Slack, the optimal facility layout type would

be product layout. Whereby facilities are arranged via a customers sequence of

needs, starters, main course, dessert and drinks etc. Product layouts advantage of

reducing marginal unit cost and convenient customer movement is able to help SFI

achieve its objective.

Managerial Implications

Due to increasing trends in consumer demands and globalization, the operational

model of a company is greater exposed to invalidity as compared to firms in the

1900s operating in a more static business environment. Hence, changes to the

operational model of a business are expected to be more frequent. It is important to

understand the potential pitfalls associated with repositioning. According, to Meyer,

industries on average tend to position within a bandwidth around the line of fit

(Meyer and Vereecke, 1996). Companies that choose to deviate and operate on the

opposite of the diagonal are subjected to a much higher failure rate.

Companies that operate in the upper right of the quadrant, find themselves

competing in an environment with high volume, low variety with a project process

type which suffers from high variable cost and low production capacity. Inversely,

companies that operate in the lower-left of the quadrant have designed their

production facility to produce in larger than require quantity resulting in wastages.

For example, SFIs management decides to diversify into regular restaurant business

using existing process design. This would signify a reposition from the current lower-

right of the quadrant, horizontally into the lower left quadrant. The new business will

likely fail, as a typical restaurant business requires a more flexible process design

and facility layout to cope with the higher variety of product. In order to survive, the

operational model must be shifted into the upper-left quadrant, once again back to

the line of fit and adopt a production facility layout.

Conclusion

All firms seek to maximize profits, most of the above discussed was centered on the

premise that in order to do so, firms have to position oneself on the diagonal with

proper alignment of process types and facility layout. However, this might not be

entirely true as more recent research, proposes and proof the hypothesis that

modern day firms are able to minimize the trade-off between production volume and

product variety by employing innovative new technologies such as flexible

processing technology, modular design and JIT manufacturing (Ahmed and

Schroeder, 2002). For example, early days car manufacturer traded off variety for

volume in order to keep costs low and adopts a product layout. With JIT

methodology, firms are able to reduce the cost of stocking up spare parts and hence

able to introduce greater variety (Felipe Scavarda et al., 2009). To summarize, other

than volume and variety, a third dimension of operations innovation is also exerting

influence on the relationship between process design and layout.

Word Count: 1097

References

Ahmed, S. and Schroeder, R. (2002). Redefining the product-process matrix.

International Journal of Operations & Production Management, 22(1), p.103.

Felipe Scavarda, L., Schaffer, J., Jos Scavarda, A., da Cunha Reis, A. and

Schleich, H. (2009). Product variety: an auto industry analysis and a benchmarking

study. Benchmarking: An International Journal, 16(3), pp.387-400.

Hayes, R. and Wheelwright, S. (1979). Link Manufacturing Process and Product Life

Cycles. [online] Harvard Business Review. Available at: https://hbr.org/1979/01/link-

manufacturing-process-and-product-life-cycles [Accessed 26 Feb. 2017].

Hossain, R., Rasel, K. and Talapatra, S. (2014). Increasing Productivity through

Facility Layout Improvement using Systematic Layout Planning Pattern Theory.

Global Journal of Researches in Engineering:, 14(7).

Meyer, A. and Vereecke, A. (1996). The Product/Process matrix: An empirical test on

the French industrial manufacturing industries. [online] Available at:

https://flora.insead.edu/fichiersti_wp/inseadwp1996/96-26.pdf [Accessed 24 Feb.

2017].
Nigel Slack, Alistair Bandon-Jones, Robert Johnston, Alan Betts. (2013) Operations

and Process Management Principles and Practice for Strategic Impact. Custom

Edition 2013, Pearson Education Limited.