Page 593 - Introduction to Business

CHAPTER 16 Managing Business Operations 567

production volume because of the narrower range of products that are offered. That
is, the number of units being produced in a batch is markedly larger than the num-
ber of units being produced in a job. In a batch process, product variety is achieved
by an assemble-to-order strategy instead of the make-to-order strategy utilized in
project and job processes. Another important difference between job and batch
processes is that frequently there could be several jobs concurrently being pro-
duced in a job process, while batches are produced one at a time. Although batches,
like jobs, flow from one production resource to another, in batch processes, unlike
in job processes, dominant flow paths emerge. For example, in a furniture company
that manufactures chairs, tables, and desks, all batches of, say, chairs will tend to
follow the same flow path.
A line process involves a relatively high production volume and a relatively low line process A process where the
product customization. Examples of line flow are a cafeteria, a car oil-change shop, product is produced at a relatively high
volume with relatively low product
an automobile manufacturer, and a car wash facility. In a line process, production
customization
orders are not necessarily directly linked to customers orders, as in the case of proj-
ect, job, and batch processes. Production is done under a make-to-stock strategy,
and hence customer orders are filled using an inventory of finished goods. Because
the products in a line process are highly standardized, production resources are
organized around each product, and products flow linearly from one production
resource to another. The assembly line used by Henry Ford to produce his Model T
automobiles represents a pioneering application of the line process notion.
A continuous process produces products in very large volumes but with very continuous process A process where
little customization. Examples of organizations using continuous processes are oil the product is produced in very large
volumes but with very little
refineries, chemical plants, electricity producers, and paper companies. It has been
customization
argued that emergency services organizations such as ambulance companies,
police departments, and fire stations are also examples of service systems using
continuous processes. The process is called continuous because the goods or serv-
ices flow continuously. Hence, while the products produced in the project, job,
batch, and line processes can be measured in discrete units such as buildings,
repaired cars, manufactured desks, and assembled computers, the products pro-
duced in continuous processes have to be measured in continuous units such as
gallons, pounds, and time. The major advantage of continuous processes is the
economies of scale that can be achieved by the very large production volumes. The
major disadvantage is that they are very inflexible. Once the process has been
designed and set to produce a particular product, say, gasoline, it is virtually impos-
sible to change the process to produce a different product, say, steel. The process
may be able to produce a different grade of gasoline, but the product will still have
to be gasoline. Compare this to a company that uses a job process to produce wind-
mills, elevators, and overhead cranes, which obviously are very different products.

Capacity
Designing the production system to have the right capacity is extremely important
for two reasons. First, if a company has too much capacity, this may lead to an
excessive level of finished goods inventory, which is very risky and costly, or it may
lead to unacceptable levels of idleness in the production system, which is also very
costly. Imagine staffing an emergency room with five physicians when two are ade-
quate. On the other hand, if a company has not enough capacity, then it will be los-
ing customers to the competition or will have to permanently subcontract the
needed capacity with potentially serious financial and quality consequences. The
second reason for the importance of capacity is that adding or reducing capacity
implies major capital expenditures.

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