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Unit 2

Management of Conversion System


Chapter 4: Product and process design

Lesson 10:- Design of services, flexible manufacturing systems

Learning Objectives
After reading this lesson you will be able to understand
Process of service design
Documents for services
Flexible manufacturing systems

As all of us are aware, in the previous class we have discussed the design
and development of manufactured products. The product-development
process discussed there also applies to the design and development of new
services; however, there are several important differences.
In planning manufactured products, a great deal of attention must be paid to
technical specifications such as size, weight, and engineering specifications.
For physical characteristics, standard may be determined and the
conformance to these standards can be monitored for quality assurance. The
quality of services, on the other hand, depends on the skill and training of
personnel who produce the services. It is more difficult to set standards on
performance, and consistent quality is more difficult to ensure.
For example, all meals on an airline may be of the same quality, but service
may vary considerably with different flight crews.
Another important difference between manufactured products and services
is that manufactured products can be stored for future use, whereas services
must be made available to the customer on demand. This difference is
another important consideration for quality assurance. That is, major quality
considerations must be planned and designed into the service just as it
should be with manufactured products; however, finished goods may be
inspected prior to being released from the factory. For services, this cannot
be done.
The general design principles and procedures, such as simplicity, CE, and
prototyping, apply to designing service products as well as goods. However,
there are additional considerations of special importance when designing
service products. These are:
1. To what extent will the customer be involved in the process? For
example, will a retail operation be primarily self-service (Big Bazar)?
Will a financial institution allow customers to execute their own
transactions using automatic teller machines or telephones (Citibank)?
Normally, greater customer involvement is incorporated into the
product either to reduce costs or to provide grater convenience to the
customer by, for instance, eliminating the need to wait for a
salesperson.
2. How quickly will service be provided? Human queueing systems are
an important aspect of product quality for services. The intended
speed of service will affect staffing, job design, scheduling, and
facility layout.
3. How standardized or customized will the service be? For example,
freight rail service is usually highly standardized: trains are scheduled
to run between specific locations, and if customers want to ship or
receive materials, they must be ready at those times.
4. What variety of services will be offered? If a fast-food restaurant
will provide only carry-out service, there is no need for seating space
in the facility or extra service personnel to clean the tables.
5. What geographical area will be served? American Express
Corporation, which sells its products based on quick worldwide
replacement of lost or stolen traveler’s checks and credit cards. This
product characteristic requires a large international network of
American Express offices and agents with a telecommunications
system linking them.

Another issue of great significance is the documents for services.


Let us consider it now.

Documents for services


Because of the high customer interaction for most services, the documents
for moving the product to production are different. The documentation for a
service to be produced will often take the form of the explicit job
instructions that specify what is to happen at the moment-of-truth. The
moment-of-truth is the moment that exemplifies, enhances, or detracts from
the customer’s expectations. That moment may be as simple as a smile or
having the check-out clerk focus on you rather than talking over his shoulder
to the clerk at the next counter.
Regardless of how good the bank’s products may be in terms of checking,
savings, trusts, loans, mortgages, and so forth, if the moment-of-truth is not
done well, the product may be poorly received. Example 4.1 shows the kind
of documentation a bank may use to move a product (drive-up window
banking) to “production”.
In a telemarketing service the product design and its related payment to
production may take the form of telephone script, and a “story board” may
be used for a motion picture.
Let us take an example.

Example 4.13
Customers who use drive-up teller stations rather than walk-in banks may
require different customer relations techniques. The distance and machinery
between you and the customer raises communication barriers.
Communication tips to improve customer relations at a drive –up window
are:
Be especially discrete when talking to the customer through the
microphone
Provide written instructions for customers who must fill out forms you
provide
Mark lines to be completed or attach a note with instructions
Always say “please” and “thank you” when speaking through the
microphone
Establish eye contact with the customer if the distance allows it
If a transaction requires that the customer park the car and come into
the lobby, apologize for the inconvenience
3
Adapted from Principles of Operations Management (B. Render and J.
Heizer) Prentice Hall
Dear students, you now understand the basic difference between product and
service design.

I would now request you all to pay due attention to the concept of Flexible
Manufacturing System (FMS).

Flexible Manufacturing System (FMS)


Let me start by giving you its main outlines:-
1 FMS is a computer-controlled system.
2 It contains several work stations, each geared to different operations.
Work-station machines are automated and programmable.
3 Automated materials-handling equipment move components to the
appropriate work station.
4 From the work stations, it is moved onto the preprogrammed machines that
select, position, and activate the specific tools for each job.
5 Hundreds of tool options are available
1. Once the machine has finished one batch, the computer signals the
next quantity or component, and the machine automatically
transferred to the next workstation in its routing.

The main features of FMS are as follows:-


Characteristics of an FMS
An FMS is a process technology that can produce a moderate variety of
products in modest volumes, and can do so quickly and with high quality.
Operating costs, too, can be reduced with an FMS; lower direct labour costs
lead to lower manufacturing costs. These benefits, however, are not free; an
FMS requires very large capital investments in equipment, planning and
control systems and human resources.
An FMS is generally appropriate when:
All products are variations of a stable basic design
All products utilize the same family of components
The number of components is only moderate (10 to 50)
The volume of each component is moderate (1000 to 30,000 units
annually), but in lot sizes as small as one unit.

An FMS is most often used in manufacturing components that require


several machining operations. A work station consists of a machine or a
robot that performs a particular class of tasks such as drilling holes,
bending metal in various directions, and so on. Specialized tools are
continuously available for one-at-a time use, and changed automatically
by computers according to the unique requirements for each component
as it progress through the system.
The goal of an FMS is :-
to produce a moderate variety of products in moderate, flexible
quantities.
Clearly, an FMS is more flexible than conventional high-volume
production systems. It is less flexible than a job shop that specializes in
one-of-a-kind products. An FMS is a “mid-range” system appropriate for
moderate variety/moderate volume markets.
Can you now tell me some of its main advantages?
Well, here goes-
Main advantages of FMS
These are:-
1. Improved capital utilization
2. Lower direct labour cost
3. Reduced inventory
4. Consistent quality
Dear students, please bear in mind that a FMS also has certain
disadvantages.
Let me discuss these now.

Disadvantages of FMS
These are:-
1. Limited ability to adapt to changes in product
2. Substantial preplanning and capital
3. Tooling and fixture requirements

We will now see how these are practiced.


Let us consider the case of Burger King in POM in practice.

POM in practice –
Simulation in service design for Burger King
Burger King is one of the largest fast-food restaurant chains., having
approximately 3000 restaurants across the United States and in other nations.
At corporate head quarters in Miami, new products, system, and procedures
are developed; however, franchises must be persuaded to adopt them on a
cost/benefit basis.
That is, the Corporation must demonstrate that new products or systems will
provide an adequate return on investment.
Many changes have occurred over the years since Burger King was
founded in 1954, which necessitated new design of their service facilities.
For instance, as the take-out business increased, Burger King was the
first system to introduce the drive-through service lane. The “Have IT You
Way” concept introduced in 1973 required a change in the kitchen
operations from mass production of similar items to food preparation based
upon individual customer specifications.
In addition “specialty sandwiches”, which were introduced in 1978
required new equipment and procedures. As these changes were
implemented, the original kitchen and work designs required redesign in
order to maintain effective levels of customer service.
One example where such a redesign was necessary involved the drive-
through system. Figure 4.3 illustrates the activities performed by customers
and employees in the original drive-through system. Customers enter the
system, wait in line to place an order, order at an outside menu board, wait
in line again, pay for the order at the pick-up window, and finally leave.
One employee was used to take the order, assemble it, bag it, and
collect the money. Burger King had established a standard transaction time
of 30 seconds. However, an analysis of a number of restaurants showed that
times were averaging 45 seconds. During peak periods, cars could not even
join the end of the line and sales were lost. If the transaction time were 45
seconds, then 80 cars per hour could be handled.
With an average check of $2.44 per order, drive-through sales were
limited to a maximum of $195 per hour. If the time could be shortened to 30
seconds, maximum sales could rise to $292 per hour.
This represented an annual increase in sales of more than $35,000 per
restaurant. The operations research group at corporate headquarters worked
with several franchises and devised new work procedures to decrease the
transaction time.
The work procedures in Figure 4.3 were separated into distinct tasks.
In the new system, one employee does nothing but take orders. A runner /
bagger assembles the order, and a third employee acts as a cashier and hands
the order to the customer.
This seemingly minor modification has significantly increased the
productivity and sales in the Burger King chain.
Enter

Wait in line

Drive orders at
Outside menu board Cashier takes order

Assemble order from sandwich


Wait in line and drink stations

Pay for order at Bag order


Pick-up window
Hand order to customer and
Leave collect money
Customer system Service delivery system

Figure 4.3 Burger King drive through system


In view of the number of changes that have taken place and
escalation of costs, Burger king management developed a productivity
improvement program in 1979. One of the outputs of this effort was
the development of a general purpose restaurant simulation model.
The restaurant was viewed as three interrelated subsystems
(Figure 4.4). The simulation model was developed in a modular
fashion in order to be flexible and easily modified. This allows minor
changes to be made in the model that reflect variations in individual
franchise operations or changes in staffing during peak and low
demand periods.
The simulation model has been extensively used in evaluating
proposed design changes, introductions of new products, and design
of new restaurant configurations.
For instance, in many restaurants, the distance between the
order station and pickup window could only accommodate two or
three vehicles. The model was used to determine the best vehicle
capacity, which resulted in a drastic reduction in waiting time and an
annual increase of over $10,000 per restaurant during the lunch hour.
A second application involved the evaluation of a second
drive-through window in series with the first. The model projected a
sales benefit of 15 percent during peak lunch hours.
After installation in several restaurants, actual benefit was
found to be 14 percent, a very close prediction. A third application of
the model was to analyze the effect of introducing small specialty
sandwiches.
The model indicated that the additional preparation time
required would not be cost-effective and would actually result in a
loss in total sales. The model has also been

Receive order
Customer system Transmit to kitchen via CRT

Food Production Drinks


System Sandwich preparation line
Special sandwich-preparation line
Delivery system Assembly order
Make change

Figure 4.4 Modular view of Burger King restaurants


used to evaluate new restaurant designs. This includes establishing the
proper size in a specific location, while emphasizing the human engineering
aspects of work methods in the kitchen.
Burger King is an example of an organization that provides both
manufactured goods (food items) and service as its major products.
Productivity, quality, and cost issues are integrated into the product design
and development process.
Computer simulation has proven to be a useful tool in the strategic
evaluation of new products and facilities for Burger King.

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