Download - PROCESS STRATEGY
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OVERVIEWProcess Strategies
Service Process Design
Capacity
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PROCESS STRATEGY
A process strategy is an organization’s approach to transform resources into goods and/or services.
The objective is to find a way to produce goods and/or services that meet customer demands and product specifications within cost and other managerial constraints.
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FOUR PROCESS STRATEGIES
Process Focus: facilitates low-volume, high variety production
Repetitive Focus: uses previously prepared parts or components in a continuous process
Product Focus: facilitates high volume, low variety production
Mass Customization: facilitates production that accommodates high volume products that respond to changing or unique customer demands
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PROCESS DESIGN
Variety
Process Mass
High Focus Customization
Moderate Repetitive
Product Focus
Low
Low Moderate High
Volume
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PROCESS-FOCUSED STRATEGY EXAMPLESMachine shopsPrinting shopsCabinet shopsEmergency roomsFine dining restaurants
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PROCESS-FOCUSED STRATEGYJob ShopFacilities organized by processSimilar processes are togetherLow volume, high variety productsVariable or “jumbled” flow Operation Product A
1 2 3 Product
B
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CHARACTERISTICS OF PROCESS-FOCUSED STRATEGY
Positives - Greater product flexibility - More general purpose equipmentNegatives - More highly trained personnel - More difficult production planning - Low equipment utilization (5-25%)
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REPETITIVE FOCUS STRATEGY EXAMPLESAutomobile manufacturingMotorcycle manufacturingAppliancesFast food restaurants
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CHARACTERISTICS OF REPETITIVE FOCUSED STRATEGYAssembly or production lineuses modules or pre-made componentsComponents combined for different output optionsFacilities often organized by assembly linesMore structured than process but less structured
than product-focused strategyEnables quasi-customizationModules allow economic advantage of continuous
process with some custom advantage of low-volume, high-variety model
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PRODUCT FOCUS STRATEGY EXAMPLESGlass manufacturingSteel manufacturingBeer productionHardware manufacturingLight bulbsPaper productsCommercial bread making
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CHARACTERISTICS OF PRODUCT-FOCUS STRATEGYContinuous productionFacilities organized by productHigh volume, low varietyHigh facility utilizationEasier to set and measure quality standards
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CHARACTERISTICS OF PRODUCT FOCUS STRATEGYLower variable cost per uniteasier production planning and controlHigher equipment utilization (70-90%)Lower but somewhat specialized labor skillsLow product flexibilityHigher capital investmentSpecialized equipment
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MASS CUSTOMIZATIONBrings variety of products typically
provided by low volume manufacturing at the cost of high volume production
Uses technology and imaginationthe other 3 process models blur and
volume/variety issues become insignificantComputerization, flexible factories and
simultaneous engineering are evident
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MASS CUSTOMIZATIONMORE CHOICE THAN EVER
ITEM EARLY 70’S LATE 90’S
Vehicle styles 18 1212
Bicycle types 8 19
Move releases 267 458
Book titles 40,530 77,446
Breakfast cereals 160 340
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SERVICE PROCESS MATRIX
Labor Intensity
Mass Service Professional Service
High Commercial Banking General Law Firm
Service Factory Service Shop
Warehouse Store Fine Dining Restaurant
Low Fast Food Hospital
Low High
Customization
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TECHNIQUES TO IMPROVE SERVICE PRODUCTIVITYSTRATEGY TECHNIQUESeparation Structuring services so
customers go where service is offeredSelf-service Customers examine,
compare and evaluate at their own pacePostponement Customize at deliveryFocus Restricting the offerings
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TECHNIQUES TO IMPROVE SERVICE PRODUCTIVITYSTRATEGY TECHNIQUEModules Modular selection of service/ modular productionAutomation Separating services that may
lend themselves to some type of auto- mationScheduling Precise personnel scheduleTraining Service options/explain problems
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CAPACITYDesign Capacity: Maximum theoretical
output of a system in a given periodEffective Capacity: The capacity a firm
expects to achieve given current operating constraints (% of Design Capacity)
- Product mix - Scheduling - Maintenance - Standards of quality
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UTILIZATION, EFFICIENCY AND ANTICIPATED OUTPUTUtilization = Actual Output/Design CapacityEfficiency = Actual Output/Effective CapacityAnticipated Production = (Design Capacity)
(Effective Capacity)(Efficiency)
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BILL’S GLASS COMPANY
Characteristics- 2 production lines for cutting standard
plate glass- Operates 5 days per week, 8 hours per
day- Each line is designed to produce 20 panes
per hour- Historical efficiency is 80%- Effective capacity is 90%
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BILL’S GLASS COMPANYANTICIPATED PRODUCTIONMaximum Capacity = (2 lines)(5 days) (8
hours)(20 panes) = 1600 panes/week
Anticipated Production = (1600)(.90)(.80) = 1152 panes/week
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MEETING CAPACITY REQUIREMENTS
Demand Expected Demand
New Capacity
1 2 3
Time (Years)
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MEETING CAPACITY REQUIREMENTS
Demand Demand
New Capacity
1 2 3
Time (Years)
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USING DECISION TREES TO MAKE DECISIONS ABOUT CAPACITYStudy pages 254 and 255The method of using a decision tree to make
decisions about capacity is similar to that discussed in Quantitative Module A (Decision Making Tools)
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MANAGING DEMAND
Demand Exceeds Capacity - Raise prices - Schedule long lead times - Discourage marginally profitable businessCapacity Exceeds Demand - Reduce prices - Aggressive marketingSeasonal Demand - Offer complementary products
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TACTICS TO MATCH CAPACITY WITH DEMANDIncrease or decrease staffAdjust equipment and processes (purchase or
sell or lease out equipment)Improve throughputRe-engineer the product to facilitate more
throughput