Typical product cost
breakdown

Manufacturing Products

Manufacturing Process

A sequence of operations and processes designed to
create a specific product or service, the process of
turning materials into a product.

Standard, or make-to-stock (MTS), goods and
services are made according to a fixed design, then
put into inventory (stock). Customers have no or few
options from which to choose.
• Examples are appliances, shoes, sporting goods,

credit cards, online courses, and scheduled bus
services. Customers take whatever is offered from
the lineup with little or no customization.

Strategy Decisions – MTS

Custom, or make-to-order (MTO), goods and
services are designed to meet specific customers’
specifications then produced and delivered as one-of-
a-kind or in small quantities.
• Examples: ships, weddings, certain jewelry, estate

plans, buildings, and surgery.
Option, or assemble-to-order (ATO), goods and

services are configurations of standard parts,
subassemblies, or services that can be selected by
customers from a limited set.
• Examples: Dell computers, Subway sandwiches,

machine tools, and travel agent services.

Strategy Decisions – MTO and ATO

Configure or
Engineer to Order

NASA’s James
Webb Space
Telescope
project, 14
countries
involved, 20+
years, and over
$10B!

Variety Many Few
Volume Small Large
Investment Small Large
Time frame Short Long
Cost per unit High Low
Labor % and cost High Low

Manufacturing Process Decisions

Projects or
Job Shops

• Projects and job shops are flexible and capable of
customizing work for individual customers. They may
consist of many smaller tasks and activities that are
coordinated and completed to finish on time and
within budget.
– Characteristics: One-of-a-kind, complex and large

scale at times, wide variation in specs and tasks.
– Examples: legal service, construction, custom

jewelry, consulting, surgery, hair cut, and
software development.

Projects or Job Shops

Batch
Production

• Batch is a small scale assembly line with a series of
activities or steps to produce a little more variety of
goods or services. It’s more flexible and more costly
than assembly lines.
– Characteristics: general or specialized equipment

used to producing small quantity of goods or
services that have variety, but use similar
sequence of process steps.

– Examples: bakery switching from loaves of bread
to muffins to cup cakes to dinner rolls in small
batches.

Batch Production

Assembly
Line or
Mass
Production

• Assembly Lines are organized around a series of
activities or steps to produce a limited variety of
similar goods or services. Value is added at each
step in the assembly line.
– Characteristics: specialized equipment dedicated

to producing large quantity of goods or services
that are similar, using similar sequence of
process steps.

– Examples: automobiles, appliances, production
of insurance policies and checking account
statements, and hospital laboratory work.

Assembly Line or Mass Production

Continuous
Flow

• A continuous flow process creates highly
standardized goods or services, usually around the
clock non-stop in very high volumes.
– Characteristics: Very high volumes in a fixed

processing sequence, high investment in system,
24-hour/7-day continuous operation, automated,
dedicated to almost identical goods or services.

– Examples: chemical products, gasoline, electricity,
municipal water supply, steel factories.

Continuous Flow

• Computer/software based: CAD/CAM, CNC
• Material removing: Water jet cutting, laser process,

drilling, milling, turning, grinding, sawing, etc.
• Automated Systems: Assembly systems, transfer

machines, and Flexible Manufacturing Systems (FMS)
• Additive Processes: 3D printing, laser sintering, and

rapid prototyping
• Material handling systems: Conveyors, automated

wire guided vehicles, and robots

• Smart factories: sensor-equipped factories with
automated decision making, also farms and fisheries

Manufacturing Technologies

Industry 4.0 Implications

• Smart building management monitors energy usage of
machinery, lighting, HVAC, and fire safety systems.

• Predictive (remote) maintenance tracks patterns of
failures effectively, no more ‘if it ain’t broke, don’t fix it’
mentality.

• Augmented reality uses computer-aided data, diagrams
and drawings to help repairment in their line-of-sight.

• Real-time routing and supply chain optimization
maximizes productivity of people and equipment.

• Rapid experimentation, simulation, and concurrent
engineering shortens time to market.

• Customer co-creation innovates and customizes.

New Manufacturing Technologies

• Transportation: scheduled bus service, Dial-A-Ride
• Information services: Canvas 24/7 support line
• Education: Coursera, Udacity
• Banking: Online banking, centralized bank tellers
• Healthcare: Predictive maintenance, gene therapy
• Restaurants: Sysco central R&D and kitchen, Open

Table automates reservation systems
• Real estate: Zillow and Redfin

Applications in Services

Applications in Services

Soccer team car wash

ZillowTraditional RE Agent

Fairway car wash

Vs.

Vs.

What’s the Difference?

Vs.

Sushi chef Rotating sushi restaurant

Different processes can be used to make similar products.
What are the implications of different process choices?

Analyze This Steak Dinner!

Discussion Questions
Please research the following questions and
provide evidence to support your answers.
Everyone: Think of one product and one service that you
purchase from MTO and then one each from MTS, what are
some major differences? Be specific.
Everyone: What would be the best process for each of the
following and why: mortgage applications, building 6 UCR
learning centers in CA, LASIK eye surgery
Everyone: Watch the class videos then answer the following:
1. What’s the problem and how can it be improved with I

Love Lucy’s assembly line?
2. How can the Amish barn raising example be improved,

other than using modern power tools?

Group Discussion
Be sure your group is ready to lead and/or
discuss the following question in class, with
research or facts-based evidence.
With Industry 4.0 on the rise, and manufactuers
pondering return to the U.S. options, how would
the manufacturing processes evolve/change?
Please discuss with lessons learned so far in
product/service design, processes, global
manufacturing, value, and time-based
competition. (Hint: could the same/different
products be made differently therefore returning
to the U.S. is more or less attractive?)