What are the major factors affecting process design decisions?

Answer 1

Operations managers have to consider factors like the nature of demand, the degree of vertical integration, flexibility, degree of automation, and quality level and degree of customer contact while making process design decisions.

Nature of Demand: Organizations have to produce products or services based on customer needs and preferences. They have to schedule their production so as to be able to meet the estimated future demand levels. Methods for estimating future demand consider factors like seasonality, growth trends, and other demand patterns that affect future demand levels.

Influence of demand patterns - The demand for a product rises or falls over a period of time and is influenced by factors like seasonal fluctuations that affect the design of the production process of the product. For example, the demand for products like air conditioners, refrigerators, etc. varies from season to season.

Influence of price level - The price-volume or the demand curve influences the process design. As customers are price-sensitive, they have a tendency to buy more of a product at a low price and less at a high price.

Degree of vertical integration: Vertical integration is the extent to which the production and the distribution chain is brought under the ownership of the organization. The degree of vertical integration determines the extent to which a product and its components are produced internally. Vertical integration is of two types: forward and backward. Forward integration is the expansion of ownership of production to the distribution chain, towards the market. And when it is expanded backward or toward the sources of supplies, it is referred to as backward integration. Vertical integration provides flexibility in manufacturing which results in increased profits due to centralized overheads, pooling of R&D and design efforts, and economies of scale. Vertical integration may not, however, always be desirable as the decision to produce the components instead of buying them could leave organizations stuck with outdated technology. Operations managers should evaluate the pros and cons of vertical integration before deciding on its implementation.

Flexibility: A flexible organization is one that responds quickly to the changing customer preferences or market conditions. Organizations have to be flexible in order to increase or maintain their market share. Flexibility can be broadly classified into: Product/service Flexibility - The ability of the production system to shift quickly from producing one product to another is referred to as product/service flexibility. This is necessary for organizations which produce different custom-designed products/services in small lots using general-purpose equipment and multi-skilled employees. Volume Flexibility - The ability to increase or decrease production volumes rapidly in response to external changes is referred to as volume flexibility. This is necessary for organizations that produce products the demand for which fluctuates and for which it is uneconomical to maintain a high level of inventory.

Degree of automation: Operations managers in the past avoided automation due to the high costs involved in automating the processes and the difficulty in integrating them with other production processes. Of late, they have realized that automation can be used as a strategic weapon for competing with others. Though automation is expensive, it can reduce labor and related costs. Operations managers should decide on the degree of automation required for their production processes. Quality level and degree of customer contact: The quality levels of a product or service decide its competitiveness in the market and affect the production process design at all stages of production. The desired level of quality has direct implications for the degree of automation and the extent of customer interaction and contact required for the production process.

Answer 2

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