chapter 07 process_strategy

OPERATION MANAGEMENT

International Executive MBA PGSM

7 – 1

Operations ManagementOperations ManagementChapter 7 –Process Strategy

PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7eOperations Management, 9e

7 – 2

Outline

Global Company Profile: Dell Computer Corp.

Four Process Strategies

Process Focus

Repetitive Focus

Product Focus

Mass Customization Focus

Comparison of Process Choices



7 – 3

Outline – Continued

Process Analysis and Design

Flow Diagrams

Time-Function Mapping

Value-Stream Mapping

Process Charts

Service Blueprinting

7 – 4


Service Process Design

Customer Interaction and Process Design

More Opportunities to Improve Service Processes

Selection of Equipment and Technology



7 – 5


Production Technology

Machine Technology

Automatic Identification Systems (AISs) and RFID

Process Control

Vision Systems

Robots

7 – 6


Production Technology (cont.)

Automated Storage and Retrieval Systems (ASRSs)

Automated Guided Vehicles (AGVs)

Flexible Manufacturing Systems (FMSs)

Computer-Integrated Manufacturing (CIM)



7 – 7


Technology in Services

Process Redesign

Ethics and Environmentally Friendly Processes

7 – 8

Learning Objectives

When you complete this chapter you should be able to:

1. Describe four production processes

2. Compute crossover points for different processes

3. Use the tools of process analysis

4. Describe customer interaction in process design

5. Identify recent advances in production technology



7 – 9

Dell Computer Company

Mass customization provides a competitive advantage

Sell custom-built PCs directly to consumer

Lean production processes and good product design allow responsiveness

Integrate the Web into every aspect of its business

Focus research on software designed to make installation and configuration of its PCs fast and simple

7 – 10

Process, Volume, and Variety

Process Focusprojects, job shops

(machine, print, carpentry)

Standard Register

Repetitive(autos, motorcycles)

Harley-Davidson

Product Focus(commercial baked goods, steel, glass)Nucor Steel

High Varietyone or few units per run, high variety(allows customization)

Changes in Modulesmodest runs, standardized modules

Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only

Mass Customization(difficult to achieve, but huge rewards)

Dell Computer

Poor Strategy (Both fixed and variable costs

are high)

Low Volume

Repetitive Process

High Volume

VolumeFigure 7.1



7 – 11

Process Strategies

How to produce a product or provide a service that

Meets or exceeds customer requirements

Meets cost and managerial goals

Has long term effects on

Efficiency and production flexibility

Costs and quality

7 – 12

Process Strategies

Four basic strategies

Process focus

Repetitive focus

Product focus

Mass customization

Within these basic strategies there are many ways they may be implemented



7 – 13

Process Focus

Facilities are organized around specific activities or processes

General purpose equipment and skilled personnel

High degree of product flexibility

Typically high costs and low equipment utilization

Product flows may vary considerably making planning and scheduling a challenge

7 – 14

Process Focus

Many inputs

Many variety

of outputs

Job Shop

Ma

ny

de

pa

rtm

en

ts a

nd

m

an

y r

ou

tin

gs



7 – 15

Accounting

Process Flow Diagram

Information flowMaterial flow

Figure 7.2

COLLATING DEPT

GLUING, BINDING, STAPLING, LABELING

POLYWRAP DEPT

SHIPPING

Customer

PRINTING DEPT

PREPRESS DEPTVendors

Receiving

Warehouse

Purchasing

Customer

Customer sales representative

7 – 16

Repetitive Focus

Facilities often organized as assembly lines

Characterized by modules with parts and assemblies made previously

Modules may be combined for many output options

Less flexibility than process-focused facilities but more efficient



7 – 17

Repetitive Focus

Raw materials

and module inputs

Modules combined for many output options

Few modules

Automobile Assembly Line

7 – 18

Process Flow Diagram

THE ASSEMBLY LINETESTING28 tests

Oil tank work cell

Shocks and forks

Handlebars

Fender work cell

Air cleaners

Fluids and mufflers

Fuel tank work cell

Wheel work cell

Roller testing

Incoming parts

From Milwaukee on a JIT arrival schedule

Engines and transmissions

Frame tube bending

Frame-building work cells

Frame machining

Hot-paintframe painting

Crating

Figure 7.3



7 – 19

Product Focus

Facilities are organized by product

High volume but low variety of products

Long, continuous production runs enable efficient processes

Typically high fixed cost but low variable cost

Generally less skilled labor

7 – 20

Product Focus

Few inputs

Output variations

in size, shape,

and packaging

Continuous Work Flow



7 – 21

Product FocusNucor Steel Plant

Co

nti

nu

ou

s c

aste

r

Continuous cast steel sheared into 24-ton slabs

Hot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coiling

D

E F

GHI

Scrap steel

Ladle of molten steelElectric furnace

A

BC

7 – 22

Mass Customization

The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires

Combines the flexibility of a process focus with the efficiency of a product focus



7 – 23

Mass Customization

Vehicle models 140 286Vehicle types 18 1,212Bicycle types 8 19Software titles 0 400,000Web sites 0 98,116,993Movie releases 267 458New book titles 40,530 77,446Houston TV channels 5 185Breakfast cereals 160 340Items (SKUs) in 14,000 150,000

supermarketsLCD TVs 0 102

Number of Choices

Item 1970s 21st Century

Table 7.1

7 – 24

Mass Customization

Mass Customization

Effective scheduling techniques

Rapid throughput techniques

Repetitive FocusFlexible peopleand equipment

Process-FocusedHigh variety, low volume

Low utilization (5% to 25%)General-purpose equipment

Product-FocusedLow variety, high volume

High utilization (70% to 90%)Specialized equipment

Figure 7.5

Modular techniquesSupportive

supply chains



7 – 25

Comparison of Processes

Process Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Small quantity, large variety of products

Long runs, standardized product made from modules

Large quantity, small variety of products

Large quantity, large variety of products

General purpose equipment

Special equipment aids in use of assembly line

Special purpose equipment

Rapid changeover on flexible equipment

Table 7.2

7 – 26


Process Focus


Repetitive Focus

(Modular)

Product Focus


Mass Customization


Operators are broadly skilled

Employees are modestly trained

Operators are less broadly skilled

Flexible operators are trained for the necessary customization

Many job instructions as each job changes

Repetition reduces training and changes in job instructions

Few work orders and job instructions because jobs standardized

Custom orders require many job instructions

Table 7.2



7 – 27


Process Focus


Repetitive Focus

(Modular)

Product Focus


Mass Customization


Raw material inventories high

JIT procurement techniques used

Raw material inventories are low

Raw material inventories are low

Work-in-process is high

JIT inventory techniques used

Work-in-process inventory is low

Work-in-process inventory driven down by JIT, lean production

Table 7.2

7 – 28


Process Focus


Repetitive Focus

(Modular)

Product Focus


Mass Customization


Units move slowly through the plant

Movement is measured in hours and days

Swift movement of unit through the facility is typical

Goods move swiftly through the facility

Finished goods made to order

Finished goods made to frequent forecast

Finished goods made to forecast and stored

Finished goods often build-to-order (BTO)

Table 7.2



7 – 29


Process Focus


Repetitive Focus

(Modular)

Product Focus


Mass Customization


Scheduling is complex, trade-offs between inventory, availability, customer service

Scheduling based on building various models from a variety of modules to forecasts

Relatively simple scheduling, establishing output rate to meet forecasts

Sophisticated scheduling required to accommodate custom orders

Table 7.2

7 – 30


Process Focus


Repetitive Focus

(Modular)

Product Focus


Mass Customization


Fixed costs low, variable costs high

Fixed costs dependent on flexibility of the facility

Fixed costs high, variable costs low

Fixed costs high, variable costs must be low

Costing estimated before job, known only after the job

Costs usually known due to extensive experience

High fixed costs mean costs dependent on utilization of capacity

High fixed costs and dynamic variable costs make costing a challenge

Table 7.2



7 – 31

Crossover Charts

Fixed costs

Variable costs

$

High volume, low varietyProcess C

Fixed costs

Variable costs$

RepetitiveProcess B

Fixed costs

Variable costs$

Low volume, high varietyProcess A

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

V1(2,857) V2 (6,666)

400,000

300,000

200,000

Volume

$

Figure 7.6

7 – 32

Focused Processes

Focus brings efficiency

Focus on depth of product line rather than breadth

Focus can be

Customers

Products

Service

Technology



7 – 33

Changing Processes

Difficult and expensive

May mean starting over

Process strategy determines transformation strategy for an extended period

Important to get it right

7 – 34

Process Analysis and Design

Flow Diagrams - Shows the movement of materials

Time-Function Mapping - Shows flows and time frame

Value-Stream Mapping - Shows flows and time and value added beyond the immediate organization

Process Charts - Uses symbols to show key activities

Service Blueprinting - focuses on customer/provider interaction



7 – 35

“Baseline” Time-Function Map

Customer

Sales

Production control

Plant A

Warehouse

Plant B

Transport Move

Receive product

Extrude

Wait

Move

Wait

Print

Wait

Order product

Process order

Wait

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

52 daysFigure 7.7

7 – 36

“Target” Time-Function Map

Customer

Sales

Production control

Plant

Warehouse

Transport Move

Receive product

Extrude

Wait

Print

Order product

Process order

Wait

1 day 2 days 1 day 1 day 1 day

6 days

Figure 7.7



7 – 37

Value-Stream Mapping

Figure 7.8

7 – 38

Process Chart

Figure 7.9



7 – 39

Service Blueprint

Focuses on the customer and provider interaction

Defines three levels of interaction

Each level has different management issues

Identifies potential failure points

7 – 40

Notify customer the car is ready

Customer departs

Customer pays bill

F

F

Service Blueprint

Personal Greeting Service Diagnosis Perform Service Friendly Close

Level#3

Level#1

Level#2

Figure 7.10

No

Notifycustomer

and recommendan alternative

provider

Customer arrives for service

Warm greeting and obtain

service request

F

Direct customer to waiting room

F

Perform required work

Prepare invoice

YesYes

F

F

Standard request

Determine specifics

No

Canservice be

done and does customer approve?

F F



7 – 41

Process Analysis Tools

Flowcharts provide a view of the big picture

Time-function mapping adds rigor and a time element

Value-stream analysis extends to customers and suppliers

Process charts show detail

Service blueprint focuses on customer interaction

7 – 42

Service Factory Service Shop

Degree of Customization

Low High

Deg

ree o

f L

ab

or

Low

High

Mass Service Professional Service

Service Process Matrix

Commercial banking

Private banking

General-purpose law firms

Law clinics

Specialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores

Fast-food restaurants

Fine-dining restaurants

Airlines

No-frills airlinesFigure 7.11



7 – 43

Service Process Matrix

Labor involvement is high

Selection and training highly important

Focus on human resources

Personalized services

Mass Service and Professional Service

Service Factory and Service Shop

Automation of standardized services

Low labor intensity responds well to process technology and scheduling

Tight control required to maintain standards

7 – 44

Improving Service Productivity

Strategy Technique Example

Separation Structure service so customers must go where service is offered

Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits

Self-service Self-service so customers examine, compare, and evaluate at their own pace

Supermarkets and department stores, Internet ordering

Table 7.3



7 – 45


Postponement Customizing at delivery

Customizing vans at delivery rather than at production

Focus Restricting the offerings

Limited-menu restaurant

Modules Modular selection of service, modular production

Investment and insurance selection, prepackaged food modules in restaurants


Table 7.3

7 – 46


Automation Separating services that may lend themselves to automation

Automatic teller machines

Scheduling Precise personnel scheduling

Scheduling ticket counter personnel at 15-minute intervals at airlines

Training Clarifying the service options, explaining how to avoid problems

Investment counselor, funeral directors, after-sale maintenance personnel


Table 7.3



7 – 47

Improving Service Processes

Layout

Product exposure, customer education, product enhancement

Human Resources

Recruiting and training

Impact of flexibility

7 – 48

Equipment and Technology

Often complex decisions

Possible competitive advantage

Flexibility

Stable processes

May allow enlarging the scope of the processes



7 – 49

Production Technology

Machine technology

Automatic identification systems (AISs)

Process control

Vision system

Robot

Automated storage and retrieval systems (ASRSs)

Automated guided vehicles (AGVs)

Flexible manufacturing systems (FMSs)

Computer-integrated manufacturing (CIM)

7 – 50


Service Industry Example

Financial Services

Debit cards, electronic funds transfer, ATMs, Internet stock trading

Education Electronic bulletin boards, on-line journals, WebCT and Blackboard

Utilities and government

Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems

Restaurants and foods

Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs

Communications Electronic publishing, interactive TV

Table 7.4



7 – 51


Service Industry Example

Hotels Electronic check-in/check-out, electronic key/lock system

Wholesale/retail trade

ATM-like kiosks, point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar coded data

Transportation Automatic toll booths, satellite-directed navigation systems

Health care Online patient-monitoring, online medical information systems, robotic surgery

Airlines Ticketless travel, scheduling, Internet purchases

Table 7.4

7 – 52

Process Redesign

The fundamental rethinking of business processes to bring about dramatic improvements in performance

Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions

Requires reexamination of the basic process and its objectives

Focuses on activities that cross functional lines

Any process is a candidate for redesign



7 – 53

Ethics and Environmentally Friendly Processes

Encourage recycling

Efficient use of resources

Reduction of waste by-products

Use less harmful ingredients

Use less energy

Reduce the negative impact on the environment

chapter 07 process_strategy

Leadership & Management

process strategies process

process focus facilities

continued process analysis

product focus facilities

tools of process analysis4

repetitive focus facilities

product high volume

continued technology