presentación marta y jorge process strategy

OPERATIONS

MANAGEMENT 1

PROCESS STRATEGY

PROCESS FOCUS

MARTA ALARCÓN TAMAYO JORGE MORENO FUENTES

What is a proccess strategy?

• A process(or transformation) strategy is an organization’s approach to transforming resources into goods and services.

Objective: 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


• In understanding Process strategy there are three principles that are particularlyimportant:

The key to successful process decisions is to make choices that fit the situation.

Individual processes are the building blocks that eventually create the firm's whole supply chain.

Management must pay close attention to all interfaces between processes in the supply chain, whether they are performed internally or externally.

It can be utilized to guide a variety of process decisions, operations strategy, and your business' ability to obtain the resources necessary to support them.


A process involves the use of an organization’s resources to provide something of

value.

• Major process decisions include:

Process Structure

Customer Involvement

Resource flexibility

Capital intensity


Key Role of the Manager: assess whether the advantages

outweigh disadvantages

Negative aspects:

• Can be disruptive thereby making the process less efficient.

• Quality measurement also becomes more difficult

• can also mean greater expenses :employees with greater interpersonal skills and possibly consider revising your facility layout

Positive aspects:

• Some customers seek active participation in and control over the service process, particularly if they will enjoy savings in both price and time

• Can mean better quality, faster delivery, greater flexibility, and even lower cost.


It is particularly important if your business involves a high level of customer contact.

Resource Flexibility

WorkforceEquipment


Capital Intensity

Capital intensity ratio of a company is a measure of the amount of capital needed per dollar of revenue.

A high capital intensity ratio may due to lower utilization of the company's assets or it may be because the company's business is more capital intensive and less labor intensive (for example, because it is automated).

However, for companies in the same industry and following similar business model and production processes, the company with lower capital intensity is better because it generates more revenue using less assets.

Total Assets

Sales incomes generated at a specified period


Example of capital intensity:

• Coca Cola Company (NYSE: KO) earned $46,542 million in financial year 2011-2012. Total assets at the end of the period were $79,974 million. PepsiCo's total asset turnover ratio for equivalent period was 0.94. Compare capital intensity of both the companies and conclude which one is more efficient using this single metric.

• Solution

• Coca Cola Company's capital intensity ratio= Total Assets ÷ Sales= $79,974M ÷ $46,542M= 1.72

• PepsiCo's capital intensity ratio= 1 ÷ Asset Turnover= 1 ÷ 0.94 = 1.06

• PepsiCo seems to be using its assets more efficiently. It used only $1.06 dollars per $1 of revenue. Coca Cola Company on the other hand utilized $1.72 of assets to generate $1 of revenue.



There are four process strategies:

1) Process Focus

2) Repetitive Focus

3) Product Focus

4) Mass Customization

PROCESS STRATEGY OVERVIEW

What is process focus?

• A production facility organized around processes to facilitate low-volumen high-varietyproductions.

• All operations are grouped according to the type of process.

• The system is also called ‘job or intermitent

• It is usually used to produce small quantity of different items on general purpose machines.


What are the main characteristics of the

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


(low volume, high variety, intermittent processes)

Arnold Palmer Hospital

Many departments and many routings

Many different outputs(uniquely treated patients)

WORKCASE: ARNOLD PALMER HOSPITAL

Many inputs

(surgeries, sick patients,

baby deliveries, emergencies)


The Heart Center

•The Heart Center

• Pediatric Hybrid Cardiac Catheterization Lab

• Cardiac Surgery

• Pediatric Cardiac Anesthesia

• Pediatric Cardiovascular Intensive Care Unit

• Pediatric Cardiac Home Monitoring Program

WORKCASE: ARNOLD PALMER HOSPITAL

Cardiology Endocrinology Neurology Orthopaedics

http://orlandohealth.com/arnoldpalmerhospital/OurMedicalSpecialties/TheHeartCenter.aspx?pid=6793




http://orlandohealth.com/arnoldpalmerhospital/catheterization/catheterization.aspx?pid=7026


http://www.orlandohealth.com/arnoldpalmerhospital/OurSurgicalSpecialties/pediatriccardiacsurgery2.aspx?pid=6653

http://orlandohealth.com/arnoldpalmerhospital/OurMedicalSpecialties/pediatriccardiacanesthesia.aspx?pid=7048

http://orlandohealth.com/arnoldpalmerhospital/pediatriccardiovascularintensivecareunit/pediatriccardiovascularintensivecareunit.aspx?pid=7037

http://orlandohealth.com/arnoldpalmerhospital/OurMedicalSpecialties/cardiachomemonitoringprogram.aspx?pid=70987

http://orlandohealth.com/arnoldpalmerhospital/OurMedicalSpecialties/cardiachomemonitoringprogram.aspx?pid=7098

To summarize:

Positive Negative


Greater product flexibility

More general propose equipment

Lower initial capital investment

More highly trained personal

More difficult production planning and control

Low equipment utilization(5%)

Requires more time if the system operates on

one or more processes at a time

High Variable costs

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

Repetitive Focus


Repetitive 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

Product Focus


Product Focus


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

Mass Customization


Mass Customization Focus


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

Modular techniquesSupportive

supply chains

Mass Customization



PROCESS FOCUS

REPETITIVE FOCUS

PRODUCT FOCUS

MASS CUSTOMIZATION


Main differences of the Process Focus

Strategy and other process strategies.

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




Process Focus

(Low volume,

high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-

variety)

Mass Customization

(High-volume, high-

variety)

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




Process Focus

(Low volume,

high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-

variety)

Mass Customization

(High-volume, high-

variety)

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




Process Focus

(Low volume,

high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-

variety)

Mass Customization

(High-volume, high-

variety)

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

made to order


Process Focus

(Low volume, high

variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-

variety)

Mass Customization

(High-volume, high-

variety)

Scheduling is

complex, trade-offs

between inventory,

availability,

customer service

Scheduling based on

building various

models from

modules to forecasts

Relatively simple

scheduling, establishing

output rate to meet

forecasts

Sophisticated

scheduling required to

accommodate custom

orders

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, not

known until after

job is complete

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


Multiple choice activities


1. Which of the following statements regarding Dell Computer

is false?

a. Dell is a practitioner of the mass customization process.

b. Dell builds its computers overseas in order to gain a low-cost

advantage.

c. Dell keeps very little inventory of finished goods.

d. Dell utilizes a global supply chain, but assembles its computers in

the U.S.

e. Dell's research focuses on manufacturing issues, not computer part

design



2. A job shop is an example of a(n)

a. repetitive process

b. continuous process

c. line process

d. process focus

e. specialized process



3. Three types of processes are

a. goods, services, and hybrids

b. manual, automated, and service

c. process focus, repetitive focus, and product focus

d. modular, continuous, and technological

e. input, transformation, and output




4. A process focused strategy is commonly used to produce

a. high-volume, high-variety products

b. low-volume, high-variety products

c. high-volume, low-variety products

d. low-variety products at either high- or low-volume

e. high-volume products of either high- or low-variety


5. Which of the following products is likely to be assembled on a repetitive process

line?

a. automobiles

b. personal computers

c. dishwashers

d. television sets

e. all of the above



6. An assembly line is an example of a

a. product-focused process

b. process-focused process

c. repetitive process

d. line process

e. specialized process



7 Which of the following is false regarding repetitive processes?

a. They use modules.

b. They allow easy switching from one product to the other.

c. They are the classic assembly lines.

d. They have more structure and less flexibility than a job shop

layout.

e. They include the assembly of basically all automobiles.




8. Utilization in process-oriented facilities is frequently low because

a. the postponement strategy for improving service productivity is being used

b. scheduling in process-oriented facilities is not very complex

c. with high fixed costs, utilization is not very important

d. excess capacity for peak demands is desirable

e. low raw material inventories cause machines to be inactive


9. Which of the following characteristics best describes repetitive focus?

a. It uses sophisticated scheduling to accommodate custom orders.

b. Its output is a standardized product produced from modules.

c. It is too expensive when volumes are low or flexibility is required.

d. It is widely used for the manufacture of steel.

e. Its costs are often known only after a job is done.




10. When done correctly, mass customization

a. increases pressure on supply chain performance

b. helps eliminate the guesswork that comes with sales forecasting

c. drives down inventories

d. increases pressure on scheduling

e. all of the above

presentación marta y jorge process strategy

Education

lower capital intensity

high capital intensity

capital intensive

understanding process

process strategies

companys assets

successful process decisions

major process decisions