Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

4.4.3 Five Features in Reference to Logistics and Production Resources

Intended learning outcomes: Present important features and their possible values in reference to logistics and production resources. Differentiate between flexible capability of capacity and quantitatively flexible capacity. Explain the production environment: make-to-stock, assemble-to-order, make-to-order, and engineer-to-order. Describe site production, job shop production, as well as single-item-oriented, high-volume and continuous line production.



Figure 4.4.3.1 shows the second group of features.

Fig. 4.4.3.1        Important features and their possible values in reference to logistics and production resources. 

Production environment or manufacturing environment refers to whether a company, plant, product, or service is organized to fulfill orders downstream from a specific (customer) order penetration point (OPP). The organization involves methods and techniques of planning & control of development, procurement, production, and delivery.

This feature is naturally closely connected with the (customer) order penetration point (OPP) and the stocking level (see Fig. 1.3.3.1):

  • Make-to-stock is a store at the level of the end product. Delivery takes place from the end products store according to customer order.An order picking store or a commission stock are special cases in the logistics flow that represent a status between actual stocking and use. Here all items or products are brought together that will be used for a certain production or sales order. They are stocked until final use in production or in the form of delivery to the customer. See Section 15.4.1.
  • Assemble-to-order, or finish-to-order, is stocking at the level of assemblies or single parts. Upon receipt of a customer’s order, a customized product is assembled using key components from the assemblies store or from the single parts store (that is, from the in-house parts store or purchased parts store).Package-to-order is a production environment in which a good can be packaged during the customer tolerance time. The item itself is the same for all customers. However, (only) packaging determines the end product.
  • Make-to-order involves stocking at the level of raw materials or direct purchasing of material from suppliers after receipt of a customer’s order. The final product is produced to meet the special needs of the customer using materials from the raw materials store or acquired through customer procurement orders. In both cases, the starting point is completed design and manufacturing process design. Thus, we can speak of stocking at the level of product and process design.Consigned stocks, or consignment inventory, or vendor-owned inventory (VOI) are inventories that legally still belong to the sup­plier, but have already been physically moved to the company.[note 401]
  • Engineer-to-order involves no stocking at all, at least for parts of a customer order. These must be developed or engineered prior to procurement and production.
The depth of product structure in the company is defined as the number of structure levels within the company.

This feature describes the degree to which the company’s logistics resources must work toward the inside and toward the outside of the company. In regard to the supply chain within a company, the following is possible:

  • In a pure trading company the number of structure levels, and thus the depth of product structure, is zero. Note: A company is still a trading company if it administrates a supply chain but contracts the production processes to third parties. Actually, though, the under­lying basis is a one-level process plan with all external operations.
  • Pure assembling companies or producers of single parts generally have at least one-level production, with mainly outside suppliers.
  • A supplier may produce preassemblies or single parts or perform individual operations (such as surface treatments). Here, again, one-level production is the general rule. Suppliers are forced, however, to depend on producers further along the supply chain. Sometimes they function as system suppliers.
  • The greater the number of structure levels the company itself “ma­kes,” the fewer components it will purchase from outside sup­p­li­ers, and the greater the depth of product structure in the company.

This feature goes hand in hand with the feature depth of product structure within the total supply chain (Section 4.4.2). The less depth of product structure in a company as compared to that in the entire supply chain, the more strongly the company is bound to the transcorporate supply chain. In other words, with less depth of product structure, the greater the necessity for transcorporate cooperation. Experience has shown that deep product structure of the entire supply chain is also “wide,” in the sense that many components enter into each structure level. This extends the range of procurement tasks.

With great depth of production structure, a company may attempt to reduce the complexity of the network by turning over structure levels to third parties (buy decision). This reduces complexity within the company it­self, but complexity is not reduced within the total supply chain. Each com­pany should contribute toward mastering the total complexity. Out­sourcing must result in lower trans­action costs (see also Section 2.1.1). The general rule is that outsourcing replaces long push logistics with pull lo­gistics, through augmenting the number of independent partners and thus the number of process levels in the process model. In consequence, more per­sons become involved in planning & control. As they stand closer to their part of the entire process, the quality of planning & control can increase.

The facility layout describes the physical organization of the production infrastructure (the spatial arrangement and grouping of production equipment in work centers), the degree of the division of labor among workers, and the course that orders take through the work centers.

The following values of this feature are generally distinguished as:

  • Fixed-position layout for site production, project productionproject manufacturing, or island production: Here one work center carries out all operations to produce a product. All persons involved work here. All the production equipment is found at this work center or supplied to it. From the outside, the sum of all operations has the appearance of one gross operation. Workers exercise ex­ten­sive autonomous control at the construction site. Typical exam­p­les include plant and facility construction, shipbuilding, large aircraft, very specific car production, automobile repair ser­vice, service at tables in a restaurant, and operations in a hospital. Examples for island production include the pilot tests[note 402] and specific product families, in particular with group technology.[note 403]
  • Process layout, also called job shop layout or functional layout, for job shop production, or simply job shop: Similar production equipment is grouped together spatially at one work center. Only one operation is carried out at the work center, usually by one person (division of labor). The product moves from shop to shop in a variable, undirected sequence; that is, according to the particu­lar process plan. The process plan lists all individual operations to be carried out. Certain persons are responsible for control. Typical examples include the production of appliances, electrical devices and electronics, furniture, pharmaceuticals, radiology and specific analysis in a hospital, and traditional forms of education.[note 404]
  • Product layout for single-item-oriented line production: Here, the product moves through all work centers, which are ordered along the process, meaning the sequence of operations to produce the product. Depending on the product, individual work centers or operations may be omitted. Generally, the line processes several variants of a product family in rather small batches, or a large variety of variants in single items (lot size of 1), often with high value-added for each unit. The quantity produced by the line is determined by the actual demand. The fewer the number of variants produced, the more that production scheduling and control can be based on production rates.[note 405] Setup times between batches, if required, are very short. All the required production equipment is found along the line. Ideally, workers are capable of executing neighboring operations in the process, whereby they move along the line.[note 406] To the outside, the sum of all these operations looks like one rough-cut operation. If workers are organized in group production, the group itself exercises control to a large degree within the group. Sometimes, the offices for planning & control as well as those for product and process design can be found close to the line, too. Typical examples include the assembly of automobiles, catamarans, motors and axles, machines, personal computers, and — most recently — aircraft (the Boeing 717-200, for example). Other examples are a modern cafeteria line or office administration.[note 407]
  • Product layout for single-item-oriented line production: Here, the product moves through all work centers, which are ordered along the process, meaning the sequence of operations to produce the product. Depending on the product, individual work centers or operations may be omitted. Generally, the line processes several variants of a product family in rather small batches, or a large variety of variants in single items (lot size of 1), often with high value-added for each unit. The quantity produced by the line is determined by the actual demand. The fewer the number of variants produced, the more that production scheduling and control can be based on production rates.[note 405] Setup times between batches, if required, are very short. All the required production equipment is found along the line. Ideally, workers are capable of executing neighboring operations in the process, whereby they move along the line.[note 406] To the outside, the sum of all these operations looks like one rough-cut operation. If workers are organized in group production, the group itself exercises control to a large degree within the group. Sometimes, the offices for planning & control as well as those for product and process design can be found close to the line, too. Typical examples include the assembly of automobiles, catamarans, motors and axles, machines, personal computers, and — most recently — aircraft (the Boeing 717-200, for example). Other examples are a modern cafeteria line or office administration.[note 407]
  • Product layout for high-volume line production: Here we find the same arrangement as in single-item-oriented line production. However, the opera­tions are generally more detailed. Whole sequences of operations are carried out in direct succession. At times, the course of the process is rhythmic, meaning that the course follows a strict time schedule. The work centers form a chain or a network with fixed, specifically designed facilities, sometimes linked by conveyors or pipes. Generally, the production line produces only a few different products, whenever possible in large batches of discrete units or nondiscrete items (for example, liquids). That is, the line produces with long runs, but the material flow is discontinuous. Setup times between batches are typically very high, because of cleaning or major adjustments of the production equipment, for example. The facility is built in order to obtain very low unit costs. Typical examples include the production of food, general chemicals, and transportation.
  • Product layout for continuous production or continuous flow production is an extreme form of line production, namely, a lotless production system where material flow is continuous during the production process (cf. [APIC16]). The process is halted only if required by the transportation infrastructure or if resources are un­avai­lable. The production line generally processes a commodity such as sugar, petroleum, and other fluids, powders, and basic materials.

The latter three kinds of facility layout have a common spatial arrangement:

A line is a specific physical space for the manufacture of a product that in a flow shop layout is represented by a straight line. In actuality, this may be a series of pieces of equipment connected by piping or conveyor systems ([APIC16]).

The work centers are arranged along the process, that is, according to the sequence of operations required to produce a product or a product family. A line in the manufacturing environment is often called assembly line (particularly in the case of single-item-oriented line production) or production line (particularly in the case of high-volume line production).[note 408] In practice, a line can take any form or configuration, such as straight, U-shaped, or L-shaped (see Section 6.2.2). From the term line, used to describe this particular spatial arrangement, stems the term line production. For high-volume line production or continuous production, the terms flow shop or flow manufacturing are sometimes used synonymously. The facility layout can be dependent on the structure level. For example, facility layout may differ for assembling and parts production. In addition, a subcategory here is the degree of structuring of the process plan. This degree of structuring tells us the number of operations divided up in the process plan for one structure level. Site production and single-item-oriented line production generally have a low degree of structuring, as the operations defined are considerably less detailed.

The flexible capability of capacity determines whether capacity can be implemented for various or for particular processes only.

A producer’s flexible capability of capacity is made up of the flexible capability of its employees and of its production infrastructure. This is the feature that sets a company’s possible range with regard to the target area of flexibility. If employees have broad qualifications and the production infrastructure can be widely implemented, there will be great flexibility in the use of resources. This is also the necessary prerequisite for a wide product range and thus for flexibility in achieving customer benefit. In practical application, this feature can be broken down further into sub-categories, if the different types of capacity show differences in flexible capability. The main differentiation is between the flexible (capability of the) workforce and the flexible capability of the production infrastructure. The flexible workforce deserves special attention (job enlarge­ment is also often used). First of all, it can normally be achieved to a far greater degree than flexible capability of the production infrastructure. Second, in contrast to the production infrastructure, employees do not simply represent a production factor, for they are them­selves stakeholders.

The feature (Quantitatively) flexible capacity describes its temporal flexibility.

Temporal flexibility of capacity along the time axis is a significant factor in the target areas of delivery and cost. As follows, it even becomes a crucial feature when choosing planning & control methods, particularly in capacity. If different types of capacity show varying quantitative flexibility, it will be necessary to differentiate subcategories. The main differentiation is between the Quantitatively flexible workforce and the (Quantitatively) flexible production infrastructure. People have far greater possibilities to achieve quantitative flexibility than machines. (Quan­titatively) flexible machines can only be reached by means of maintaining over­capacity. People, however, are to a certain degree able to adapt their efforts to the current load. Moreover, if capacity has a flexible capability that transcends the “home” work center (that is, employees can be deployed for processes outside the “home” work center), flexibility along the time axis is increased. For example, if workers can be moved from one work center to another, this is the same as flexibility in deployment of the employees at both work centers. Depending on load in the areas, the employees can be deployed flexibly.


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Course section 4.4: Subsections and their intended learning outcomes

  • 4.4 Characteristic Features Relevant to Planning & Control in Supply Chains

    Intended learning outcomes: Produce an overview on principle and validity of characteristics in planning & control. Explain six features in reference to customer, and item or product or product family, five features in reference to logistics and production resources, as well as seven features in reference to the production or procurement order. Describe important relationships between characteristic features and features of transcorporate logistics in supply chains.

  • 4.4.1 Principle and Validity of Characteristics in Planning & Control

    Intended learning outcomes: Describe the characteristic in planning & control in a supply chain. Explain the use of the results of the analysis.

  • 4.4.2 Six Features in Reference to Customer, and Item or Product or Product Family

    Intended learning outcomes: Present important features and possible values referring to the user and the product or product family. Differentiate between a convergent product structure and a divergent product structure, between continuous demand and discontinuous demand. Explain the product variety concept. Describe unit cost and transportability of an item. Disclose the T analysis within the VAT analysis and its relation to the product variety concept.

  • 4.4.3 Five Features in Reference to Logistics and Production Resources

    Intended learning outcomes: Present important features and their possible values in reference to logistics and production resources. Differentiate between flexible capability of capacity and quantitatively flexible capacity. Explain the production environment: make-to-stock, assemble-to-order, make-to-order, and engineer-to-order. Describe site production, job shop production, as well as single-item-oriented, high-volume and continuous line production.

  • 4.4.4 Seven Features in Reference to the Production or Procurement Order

    Intended learning outcomes: Present important features and possible values in reference to production or procurement order. Differentiate between order release according to demand, prediction, and consumption. Differentiate between production (or procurement) without, with infrequent, and with frequent order repetition. Identify the features flexibility of the order due date and type of long-term order. Explain the concepts of lot size, lot traceability, and loops in the order structure.

  • 4.4.5 Important Relationships between Characteristic Features

    Intended learning outcomes: Identify links among facility layout, orientation of product structure, and (order) batch size. Disclose Links among the features product variety concept, production environment, and frequency of order repetition. Explain why the features frequency of customer demand and frequency of order repetition do not necessarily need to correspond.

  • 4.4.6 Features of Transcorporate Logistics in Supply Chains

    Intended learning outcomes: Present important features, possible values, and increasing complexity of supply chain collaboration, of supply chain coordination, and of the configuration of the supply chain.