6.

Welcome to Lesson 6:

Process, Location & Layout Strategies; and PLANNING.

6.1

Process Strategy; Location Strategy; Layout Strategy.

What is Process Strategy?

q

6.2

Process Strategy is the approach that an organisation takes to transform its resources into goods and services.
Its importance occurs when there is a new product, or when there is a technological change, or there is a competitive pressure.

4 Types of Process Strategy

6.3

Process Focus processes of low volume, high variety of products. E.g. A bakery shop produces all types of breads & cakes, cookies & buns but in small quantities. E.g. Banking, spa & restaurant services also adopt process focus deliver to customer orders.

4 Types of Process Strategy

6.4

Product Focus this is a mass assembly line with high volume, low variety products. Facilities are organized around product (families). They require high investment, with specialized equipment high fixed costs, but low variable costs. E.g. Car and TV assembly lines.

4 Types of Process Strategy

6.5

Repetitive Process Focus falls in between product & process focuses. This uses the modular approach. Modules are components that are pre-prepared in assembly lines. E.g. In a factory, there are various types of sub-assembly lines all these will feed into the final assembly line.

4 Types of Process Strategy

6.6

Mass Customisation Focus this produces various types of products economically, and in quantities the customers want in a very short time. It is a combination of product, process and repetitive strategy good for make-to-order forecasts. E.g. Toyota car production.

Process Flow Diagram

CUSTOMER: Order product
STORE CLERK: Key in item, Take item from rack. CUSTOMER: Pay cash, Receive item.

6.7

SALESPERSON: Process order, Print order, Go to store.

SALESPERSON: Pack item

Why Location Strategy?

q

6.8

Once a new product/service design has been determined, a company has to select a location for its business or its outlet.
Just observe the locations of KFC, McDonald, commercial banks, food restaurants, etc. Locations affect business performances and sales.

Objectives of Location Strategy

q q

6.9

To maximise the benefits of being near (accessible) to customers. To minimise the operational costs: Cost of land, rental, living, etc; Distribution costs; Raw material costs; Labour costs.

3 Factors Influencing Location Strategy

Tangible Factors:
q q q q q q

6.10

Land cost & size; Raw material cost & availability; Labor costs & availability; Distribution costs; Utilities & services costs; Foreign Exchange & Tax rates.

3 Factors Influencing Location Strategy

Intangible Factors:
q q q q q q Geographical site; Climatic factors; Political stability; High purchasing power; Safety & security; Cultural factors.

6.11

3 Factors Influencing Location Strategy

Market Factors:
q q q

6.12

Proximity to customers; Proximity to suppliers; Competition businesses have tendencies to cluster, i.e. to locate near to each other, even competitors, to create a critical mass.

A Location Study
q

6.13

How to carry out a location study? First, form a team of at least 3 members. The team needs to do a site survey and collect data. Quantitative Data: population, age, gender, youths, family size, income, size of location, no.of shops, schools, bus terminals, hospitals; and others through interviews as well.

A Location Study

6.14

Qualitative Data: climate, security,

environment, local government regulations, local communities, culture, market, competitions (through observations), networking, chats & mingling with locals, etc. From these groundworks, the team is able to determine the tangibles, the intangibles, & market factors.

Importance of Layout Strategy

q
q q q q q

6.15

To achieve high utilisation of space, equipment & people; To improve flow of people, material and people; To increase employee morale; To create a safer work condition; To improve customer interactions; To cater for flexibility (future).

Types of Layout Strategies

q q q q q q

6.16

Fixed position layout for handling projects, like road construction; Process layout low volume high variety; for product differentiation strategy; Product layout high volume low variety; Group cell layout for modular design; Retail layout to show out products; Office layout good for service-based, not for product-based organisations.

6.17

Types of Planning; MRP; MRP 2; and ERP.

AGGREGATE PLANNING

6.18

Aggregate Planning is part of a larger planning system. It requires a good understanding of forecasting demand in the market, and capacity planning in the organisation. Aggregate planning is done for the overall products and the overall capacity.

Aggregate Planning (objective & goal)

6.19

The objective of A/P is to meet forecast demand in the market and to minimise operational cost over the planning period through various strategies such as: Adjusting production rates; Managing the inventory levels; Working hours; etc

Aggregate Planning (objective & goal)

6.20

The goal of A/P is to produce a production plan Master Production Schedule (MPS) that will effectively utilise the organisations resources to match expected forecast demand.

The Planning Process

6.21

Long Range Planning, or strategic planning is the responsibility of the Top Management e.g. President, CEO, Board of Directors, etc. Medium Range Planning, or tactical planning will start after completion of the strategic plan. This is where Aggregate Planning is done. Short Range Planning, or operational planning follows next.

Aggregate Planning (strategies)

6.22

A/P strategies involve manipulation of inventory, production rates, labour levels, capacity and other controllable variables. Given forecast demand, facility capacity, the workforce size, and all the above information, the planner has to determine the rate of production output for the organisation or a facility over 6-12 months.

Aggregate Planning
Market Demand Process Plan. Capacity Dec. Machine Capacity

6.23

Product Dev. Decisions Forecast Demand Aggregate Planning Master Prod. Schedule

Research, Design & Technology Manpower Planning SubContracting Operational Costs

Raw Mater. Planning Cap.

Vendor, Supp. Capacity

Aggregate Planning
(continue)
Aggregate Planning Master Prod. Schedule

6.24

Engineer.

Product.

Finance

Market.

Procure.

Material Requirement Planning (MRP)

MRP is a production planning and inventory control system used to manage manufacturing processes.

6.25

While it is possible to conduct MRP by hand, today, most MRP systems are software-based.

Material Requirement Planning (MRP)

6.26

MRP is a computerised information system that incorporates a pool of huge database on all requirements needed to plan, forecast, schedule, order, track and monitor the movements of items, components and inventories for all production stages. It also includes the inventory stock levels, and others, to help in planning and making operational decisions.

Material Requirement Planning (MRP)

MRP has 3 simultaneous objectives:

6.27

To ensure raw materials are available for production, and products are available for delivery to customers; To maintain the lowest possible raw material and product levels in store; To plan manufacturing activities, delivery schedules, and purchasing activities.

Material Requirement Planning (MRP)

6.28

MRP begins with the Master Production Schedule (MPS) for finished goods to be produced. MRP system requires 4 main requirements (inputs) as listed below: Master Production Schedule (MPS); Bill of Materials; Inventory Stock Level; Purchase Order Outstanding

Manufacturing Resource Planning (MRP-2)

6.29

Too frequent changes in sales forecasts, entailing continual adjustments in production, as well as the unsuitability of the parameters fixed by the system, led Material Requirement Planning (MRP) to evolve into a new concept: Manufacturing Resource Planning (MRP 2).

Manufacturing Resource Planning

6.30

MRP-2 is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.

Manufacturing Resource Planning

6.31

MRP-2 is not exclusively a software function, but a marriage of people skills, dedication to database accuracy, and computer resources.

It is a total company management concept for using human resources more productively.

Enterprise Resource Planning (ERP)

6.32

MRP and MRP-2 are predecessors of Enterprise Resource Planning (ERP), a business information integration system. The development of these manufacturing coordination and integration methods and tools made todays ERP systems possible.

Enterprise Resource Planning

6.33

Both MRP and MRP-2 are still widely used, independently and as modules of more comprehensive ERP systems. But the original vision of integrated information systems as we know them today began with the development of MRP and MRP-2 in manufacturing.

Enterprise Res. Planning

6.34

ERP systems integrate internal and external management of information across an entire organization embracing finance & accounting, manufacturing, sales & services, CRM, etc. ERP facilitates information flow between all business functions inside the organization, and manages connections to outside stakeholders. ERP software is a multi-billion dollar industry.

Last

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