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2. What types of production processes do manufacturers and service firms use?

In production planning, the first decision involves which type of production process—the way a good or service is created—best fits with
company goals and customer demand. An important consideration is the type of good or service being produced, because different goods may require different production processes. In general, there are three types of production: mass production, mass customization, and customization. In addition to production type, operations managers also classify production processes in two ways: (1) how inputs are converted into outputs and (2) the timing of the process.

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    2. What types of production processes do manufacturers and service firms use?One for All: Mass ProductionJust for You: Customizing GoodsConverting Inputs to OutputsProduction TimingCONCEPT CHECKHow are inputs transformed into outputs?What converts inputs to outputs in an open system?What is the input transformation process?

One for All: Mass Production

Mass production, manufacturing many identical goods once, was a product of the Industrial Revolution. Henry Ford’s Model-T automobile is a good example of early mass production. Each car turned out by Ford’s factory was identical, right
down to its color. If you wanted a car in any color except black, you were out of luck. Canned goods, over-the-counter drugs, and household appliances are other examples of goods that are mass-produced. The emphasis in mass production is on keeping manufacturing costs low by producing uniform products using repetitive and standardized processes. As products became more complicated to produce, mass production also became more complex. Automobile manufacturers, for example, must now incorporate
more sophisticated electronics into their car designs. As a result, the number of assembly stations in most automobile manufacturing plants has increased.

Just for You: Customizing Goods

In mass customization, goods are produced
using mass-production techniques, but only up to a point. At that point, the product or service is custom-tailored to the needs or desires of individual customers. For example, American Leather, a Dallas-based furniture manufacturer, uses mass customization to produce couches and chairs to customer specifications within 30 days. The basic frames in the furniture are the same, but automated cutting machinery precuts the color and type of leather ordered by each customer. Using mass-production
techniques, they are then added to each frame.

Customization is the opposite of mass production. In customization, the firm produces goods or services one a time according to the specific needs or wants of individual customers. Unlike mass customization, each product or service produced is unique. For example, a print shop may handle a variety of projects, including newsletters, brochures, stationery, and reports. Each print job varies in quantity, type of printing
process, binding, color of ink, and type of paper. A manufacturing firm that produces goods in response to customer orders is called a job shop.

Exhibit 10.5 Classification of Production Types
(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
Mass ProductionMass CustomizationCustomizationHighly uniform products or services Many products made sequentially
Uniform standardized production to a point, then unique features added to each product
Each product or service produced according to individual customer requirements
Examples: Breakfast cereals, soft drinks, and computer keyboards
Examples: Dell Computers, tract homes, and Taylor Made golf clubs
Examples: Custom homes, legal services, and haircuts

Some types of service businesses also deliver customized services. Doctors, for instance, must consider the illnesses and circumstances of each individual patient before developing a customized treatment plan. Real estate agents may develop a customized service plan for each customer based on the type of house the person is selling or wants to buy. The differences between mass production, mass customization, and customization are summarized in
Exhibit 10.5.

Converting Inputs to Outputs

As previously stated,
production involves converting inputs (natural resources, raw materials, human resources, capital) into outputs(products or services). In a manufacturing company, the inputs, the production process, and the final outputs are usually obvious. Harley-Davidson, for instance, converts steel, rubber, paint, and other inputs into motorcycles. But the production process in a service company involves a less obvious conversion. For example, a
hospital converts the knowledge and skills of its medical personnel, along with equipment and supplies from a variety of sources, into health care services for patients. Table 10.1 provides examples of the inputs and outputs used by various other businesses.

There are two basic processes for converting
inputs into outputs. In process manufacturing, the basic inputs (natural resources, raw materials) are broken down into one or more outputs (products). For instance, bauxite (the input) is processed to extract aluminum (the output). The assembly process is just the opposite. The basic inputs, like natural resources, raw materials, or human resources, are either combined to create the output or
transformed into the output. An airplane, for example, is created by assembling thousands of parts, which are its raw material inputs. Steel manufacturers use heat to transform iron and other materials into steel. In services, customers may play a role in the transformation process. For example, a tax preparation service combines the knowledge of the tax preparer with the client’s information about personal finances in order to complete the tax return.

Production Timing

A second consideration in choosing a production process is timing. A continuous process uses long production runs that may last days, weeks, or months without equipment shutdowns. This is best for high-volume, low-variety products
with standardized parts, such as nails, glass, and paper. Some services also use a continuous process. Your local electric company is an example. Per-unit costs are low, and production is easy to schedule.

Converting Inputs to OutputsType of OrganizationInputOutputAirline
Pilots, flight attendants, reservations system, ticketing agents, customers, airplanes, maintenance crews, ground facilities
Movement of customers and freight
Grocery store
Merchandise, building, clerks, supervisors, store fixtures, shopping carts, customers
Groceries for customers
High school
Faculty, curriculum, buildings, classrooms, library, auditorium, gymnasium, students, staff, supplies
Graduates, public service
Manufacturer
Machinery, raw materials, plant, workers, managers
Finished products for consumers and other firms
Restaurant
Food, cooking equipment, servers, chefs, dishwashers, host, patrons, furniture, fixtures
Meals for patrons

Table10.1

In an intermittent process, short production runs are used to make batches of different products. Machines are shut down to change them to make different products different times. This process is best for low-volume, high-variety products such as those produced by mass customization or customization. Job shops are examples of firms using an intermittent process.

Although some service
companies use continuous processes, most service firms rely on intermittent processes. For instance, a restaurant preparing gourmet meals, a physician performing surgical procedures, and an advertising agency developing ad campaigns for business clients all customize their services to suit each customer. They use the intermittent process. Note that their “production runs” may be very short—one grilled salmon or one physical exam a time.

CONCEPT CHECK

Describe the different types of production processes.How are inputs transformed into outputs in a variety of industries?

How are inputs transformed into outputs?

There are two basic processes for converting inputs into outputs. In process manufacturing, the basic inputs (natural resources, raw materials) are broken down into one or more outputs (products). For instance, bauxite (the input) is processed to extract aluminum (the output). The assembly process is just the opposite.

What converts inputs to outputs in an open system?

Throughput: An open system converts the inputs into some kind of outputs. This process is known as throughput or transformation process.

What is the input transformation process?

The Input-transformation-output process explains how activities, resources, or material comes into a manufacturing process as inputs, how these inputs transform by adding value to them, and how outputs come out of the process as finished products for customers to buy.
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