What is a make-or-buy decision? It is not always necessary for a company to make everything in-house. When starting the production process, one decision that operation managers make is determining whether the company will make the entire product or whether the product will be assembled with some or all outsourced parts. This is commonly called a make-or-buy decision. Often it is less expensive or more efficient to outsource the production of certain parts. But if that is the decision, it is important that the quality of any outsourced parts is monitored and maintained because a poorly manufactured component can quickly ruin a company’s reputation.

Customers perceive a product as a single entity—not as component piece-parts provided by different suppliers. Customers will hold the company responsible even if an individual supplier is to blame for making a faulty part or missing a deadline and causing a delay. For example, Mattel had to recall close to 1 million toys because its supplier in China had coated the toys in paint that contained lead. Mattel was later fined millions by the Consumer Product Safety Commission because, in the end, Mattel was responsible for the quality of the finished product. So, having a good supplier that meets a company’s needs and cares about a company’s customers as if they were its own is invaluable. Understanding these needs before choosing a supplier is important. We will discuss choosing suppliers in more detail later in the chapter.

Of course, a firm’s decision as to whether to make or buy some or all of the products it intends to sell will affect the rest of its operations management process, including its production processes, capacity planning, the size of its facilities, where to locate them, and often the technology used in the facilities.

What production processes are used in business? Henry Ford introduced the concept of the assembly line to meet the increased demand for his automobiles. The assembly line used continuous flow production, a method that produces discrete units of products in large numbers one by one continuously and rapidly. Although it is a cost-effective method, it is does not allow for products to be customized. In fact, one of Ford’s most famous quotes is “Any customer can have a car painted any color that he wants so long as it is black.”

Over time, firms in the United States began to feel the pressures created by foreign competitors producing customized high-quality products and selling them at reasonable prices. To stay competitive, manufacturers in the United States had to implement new production processes that were both flexible and cost effective. With intermittent processes, production runs are shorter, so machinery can be changed to accommodate product changes.

Today, there are several other types of production processes that manufacturers use. The best product process depends on the company and what types of goods or services it produces. Some common production processes and techniques are listed in Figure 11.1.

Figure 11.1

Common Production Processes and Techniques

How are large quantities of goods produced? Producing large quantities of goods at a low cost is referred to as mass production. The assembly line is a mass production process. Mass production relies on machines and automated processes to produce goods that are identical to each other and adhere to certain standards of quality. Mass production can be cost effective because machines do most of the work, and the need for skilled laborers is low. Mass production also allows a large quantity of goods to be produced very quickly. Because machinery is the main component, the risk of human error is virtually eliminated. A major disadvantage, however, is that mass production is inflexible. After a production line is established, it is difficult to change or alter the process if a change is required.

What production process is best when customization is desired? Mass customization is the production of goods or services tailored to meet customers’ individual needs cost effectively. It ranges from bulk customization of industrial supplies, such as valves, switches, and instruments, to individual customization that is most often seen with clothing, shoes, glasses, and bicycles. For example, Cafepress and Zazzle enable users to place their own designs on clothing, books, and other accessories and to buy, share, or sell them in their own online shops. Blank Label allows customers to design their own shirts online for nearly the same price as a store-bought shirt. The benefit of this process is that Blank Label does not need to produce shirts of every size and style, thus incurring additional warehousing and shipping expenses. This is the same model that Dell Computers began in the 1990s. Rather than warehouse potentially unused parts that soon would be obsolete, Dell allowed customers to design their computers to the specifications that best met their needs. Now, most PC manufacturers offer online customization for their products.

How is mass customization achieved? A flexible manufacturing system (FMS) enables manufacturers to produce large quantities of customized products. Victory Motorcycles, a division of the off-road vehicle manufacturer Polaris, uses an FMS to create motorcycles that customers design online to their specific needs and tastes. In an FMS system, several machines are linked together by one central computer. All the machines in the system can process different part types simultaneously. Unlike a mass production system, an FMS can adapt to changes in schedules and product specifications.

Can mass customization be used in service industries? The technologies of mass customization have enabled many service-based organizations to meet the individual needs of their customers. Burger King is famous for its “Have It Your Way” method of production and associated advertising campaign, which, unlike McDonald’s, allowed customers to “tweak” their hamburger toppings to meet their specific tastes.6

Most hotel chains offer a preference of bed size and perhaps room location, but the rest of the stay is pretty standard no matter which city or country you are in. But the Ritz Carlton trains its staff to record the unique habits, preferences, and dislikes of each guest, which they enter into a database used to further customize a guest’s current stay and also make the person’s next stay filled with personal touches. Each guest is greeted by name, and the hotel knows whether the person has a preference for feather or nonallergenic pillows and ensures that the guest’s favorite newspaper is placed at his or her door every morning. The results of this customized program have been a significant increase in guest retention.

What type of production focuses on efficiency? Lean production is a set of principles concerned with reducing waste and improving the flow of processes. Eliminating overproduction, long wait times as products move through production, needless transportation, excess inventory, superfluous motions, and redundant processes are all aspects of lean production. Toyota first began using lean production methods in the 1980s with great success. Although lean production originally was used for manufacturing, it is also used in service industries, such as hospitals and restaurants.

How does the manufacturing industry used social media? Social media connects consumers to manufacturers (B2C), thus enabling consumers to directly influence what companies develop and produce by providing a venue for consumers to give instant feedback on products. However, social media can also connect manufacturers with others in their industry (B2B) and if done well, is extremely useful. Manufacturers have begun to embrace social media platforms such as Twitter and LinkedIn to start industry-related conversations. YouTube is used to show products in action, customer testimonials, and even factory tours.