Operations Management

Chapter 7 Process Strategy

PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e
2006 Prentice 2006 Prentice Hall, Inc. Hall, Inc. 71

Outline
Global Company Profile: Dell Computer Co.

Four Process Strategies

Process Focus Repetitive Focus Product Focus Mass Customization Focus Comparison of Process Choices
2006 Prentice Hall, Inc. 72

Outline Continued
Process Analysis And Design
Flow Diagrams Time-Function Mapping Value Stream Mapping Process Charts Service Blueprinting

2006 Prentice Hall, Inc.

73

Outline Continued
Service Process Design
Customer Interaction and Process Design More Opportunities to Improve Service Processes

Selection Of Equipment And Technology

2006 Prentice Hall, Inc.

74

Outline Continued
Production Technology
Machine Technology Process Control Vision Systems

Automated Storage and Retrieval System

Automated Guided Vehicle (AGV) Flexible Manufacturing System (FMS) Computer-Integrated Manufacturing (CIM)
2006 Prentice Hall, Inc. 75

Outline Continued
Technology In Services

Process Redesign
Ethics And Environmentally Friendly Processes

2006 Prentice Hall, Inc.

76

Learning Objectives
When you complete this chapter, you should be able to: Identify or Define:
Process focus Repetitive focus Product focus Process reengineering Service process issues Environmental issues
2006 Prentice Hall, Inc. 77

Learning Objectives
When you complete this chapter, you should be able to: Describe or Explain:
Process Analysis Service Design Production Technology Process Redesign Ethics and Environmentally Friendly Processes
2006 Prentice Hall, Inc. 78

Dell Computer Company

How can we make the process of buying a computer better?
Sell custom-built PCs directly to consumer

Build computers rapidly, at low cost, and only when ordered

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
2006 Prentice Hall, Inc. 79

Process, Volume, and Variety

Figure 7.1

Volume Low Volume Repetitive Process High Volume Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co.

High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only
2006 Prentice Hall, Inc.

Process Focus projects, job shops (machine, print, carpentry) Standard Register

Repetitive (autos, motorcycles) Harley Davidson Product Focus (commercial baked goods, steel, glass) Nucor Steel
7 10

Poor Strategy (Both fixed and variable costs are high)

Process Flow Diagram

Customer Purchasing Customer sales representative

Vendors
PREPRESS DEPT

Accounting

Receiving
PRINTING DEPT

Warehouse
COLLATING DEPT GLUING, BINDING, STAPLING, LABELING

Information flow Material flow

POLYWRAP DEPT

SHIPPING
2006 Prentice Hall, Inc.

Figure 7.2
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
2006 Prentice Hall, Inc. 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
2006 Prentice Hall, Inc. 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
2006 Prentice Hall, Inc. 7 14

Process Focus
Print Shop

Many inputs

High variety of outputs

2006 Prentice Hall, Inc.

7 15

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

2006 Prentice Hall, Inc. 7 16

Repetitive Focus
Automobile Assembly Line

Raw materials and module inputs

Modules combined for many output options

Few modules
2006 Prentice Hall, Inc. 7 17

Process Flow Diagram

Frame tube bending
TESTING 28 tests

Frame-building work cells

Frame machining THE ASSEMBLY LINE

Incoming parts

Hot-paint frame painting Engines and transmissions

From Milwaukee on a JIT arrival schedule

Air cleaners Fluids and mufflers

Oil tank work cell Shocks and forks

Fuel tank work cell

Wheel work cell Roller testing

Handlebars
Fender work cell Crating

Figure 7.3
2006 Prentice Hall, Inc. 7 18

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

2006 Prentice Hall, Inc. 7 19

Product Focus
Bottling Plant

Many inputs

Output variation in size, shape, and packaging

2006 Prentice Hall, Inc.

7 20

Product Focus
D

Nucor Steel Plant

Scrap steel

Continuous caster

B
Ladle of molten steel

Electric furnace

Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coiling

H I

2006 Prentice Hall, Inc.

7 21

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

General purpose equipment

Long runs, standardized product made from modules

Special equipment aids in use of assembly line

Large quantity, small variety of products

Special purpose equipment

Large quantity, large variety of products

Rapid changeover on flexible equipment

Table 7.2
2006 Prentice Hall, Inc. 7 22

Comparison of Processes
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

Custom orders require many job instructions

Many job instructions as each job changes

Repetition reduces training and changes in job instructions

Few work orders and job instructions because jobs standardized

Table 7.2
2006 Prentice Hall, Inc. 7 23

Comparison of Processes
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

Work-inprocess is high

JIT procurement techniques used

JIT inventory techniques used

Raw material inventories are low

Work-inprocess inventory is low

Raw material inventories are low

Work-inprocess inventory driven down by JIT, lean production
Table 7.2

2006 Prentice Hall, Inc.

7 24

Comparison of Processes
Process Focus (Low volume, high variety) Units move slowly through the plant Finished goods made to order Repetitive Focus (Modular) Movement is measured in hours and days Finished goods made to frequent forecast Product Focus

(High-volume, low-variety)
Swift movement of unit through the facility is typical Finished goods made to forecast and stored

Mass Customization (High-volume, high-variety) Goods move swiftly through the facility Finished goods often made to order

Table 7.2
2006 Prentice Hall, Inc. 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)

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

Table 7.2
2006 Prentice Hall, Inc. 7 26

Comparison of Processes
Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety)

Fixed costs low, variable costs high

Costing estimated before job, not known until after job is complete

Fixed costs dependent on flexibility of the facility

Costs usually known due to extensive experience

Fixed costs high, variable costs low

High fixed costs mean costs dependent on utilization of capacity

Fixed costs high, variable costs must be low

High fixed costs and dynamic variable costs make costing a challenge
Table 7.2

2006 Prentice Hall, Inc.

7 27

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

2006 Prentice Hall, Inc.

7 28

Mass Customization
Table 7.1

Item Vehicle models Vehicle types Bicycle types Software titles Web sites Movie releases New book titles Houston TV channels Breakfast cereals Items (SKUs) in supermarkets
2006 Prentice Hall, Inc.

Number of Choices Early 21st Early 1970s Century 140 260 18 1,212 8 19 0 300,000 0 46,412,165 267 458 40,530 77,446 5 185 160 340 14,000 150,000
7 29

Mass Customization
Figure 7.5

Repetitive Focus
Modular design Flexible equipment

Modular techniques

Mass Customization
Effective scheduling techniques Rapid throughput techniques

Process-Focused
High variety, low volume Low utilization (5% to 25%) General-purpose equipment
2006 Prentice Hall, Inc.

Product-Focused
Low variety, high volume High utilization (70% to 90%) Specialized equipment
7 30

Crossover Charts
Variable costs

Variable costs

Variable costs Fixed costs

Repetitive Process B

$
Fixed costs
High volume, low variety Process C

Fixed costs
Low volume, high variety Process A

$
400,000 300,000 200,000
Fixed cost Process A Fixed cost Process B Fixed cost Process C

Figure 7.6
2006 Prentice Hall, Inc.

(2,857)

V1

V2 (6,666)

Volume
7 31

Changing Processes
Difficult and expensive May mean starting over

Process strategy determines transformation strategy for an extended period Important to get it right

2006 Prentice Hall, Inc.

7 32

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
2006 Prentice Hall, Inc. 7 33

Time-Function Mapping
Customer Order product Process order Receive product Sales Production control Plant A

Wait

Print

Warehouse

Wait

Wait

Wait

Plant B

Extrude

Transport 12 days 13 days 1 day

Move 4 days 1 day 10 days 52 days 1 day 0 day

Move 1 day
7 34

Figure 7.7
2006 Prentice Hall, Inc.

Time-Function Mapping
Customer Order product Process order

Receive product

Sales

Production control

Wait

Plant

Print

Extrude

Warehouse

Wait

Transport 1 day Figure 7.7

2006 Prentice Hall, Inc.

Move 2 days 1 day 6 days 1 day 1 day

7 35

Process Chart

Figure 7.8
2006 Prentice Hall, Inc. 7 36

Service Blueprint
Focuses on the customer and provider interaction

Defines three levels of interaction

Each level has different management issues Identifies potential failure points

2006 Prentice Hall, Inc.

7 37

Service Blueprint
Personal Greeting Level #1
Customer arrives for service

Service Diagnosis

Perform Service

Friendly Close
Customer departs

Warm greeting and obtain service request

Determine specifics No Standard request Can service be done and does customer approve?

Notify customer and recommend an alternative provider No

Customer pays bill

Level #2
Direct customer to waiting room

Notify customer the car is ready

Yes

Yes

Level #3 Potential failure point

Perform required work

Prepare invoice

Figure 7.9
2006 Prentice Hall, Inc. 7 38

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
2006 Prentice Hall, Inc. 7 39

Service Process Matrix

Degree of Customization Low High Professional Service
Private banking Commercial banking

Mass Service

High
Degree of Labor

Full-service stockbroker Boutiques Retailing

Generalpurpose law firms

Service Factory
Warehouse and catalog stores

Law clinics Service Specialized Limited-service hospitals stockbroker

Fast food restaurants Fine-dining restaurants

Shop

Low

Hospitals

Airlines

Figure 7.10
2006 Prentice Hall, Inc.

No frills airlines
7 40

Service Process Matrix

Mass Service and Professional Service Labor involvement is high Selection and training highly important Focus on human resources Personalized services 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
2006 Prentice Hall, Inc. 7 41

Improving Service Productivity

Strategy
Separation

Technique
Structure service so customers must go where service is offered Self-service so customers examine, compare, and evaluate at their own pace

Example
Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits Supermarkets and department stores, internet ordering

Self-service

Table 7.3
2006 Prentice Hall, Inc. 7 42

Improving Service Productivity

Strategy Postponement Technique Customizing at delivery Restricting the offerings Modular selection of service, modular production Example Customizing vans at delivery rather than at production Limited-menu restaurant Investment and insurance selection, prepackaged food modules in restaurants
Table 7.3
2006 Prentice Hall, Inc. 7 43

Focus Modules

Improving Service Productivity

Strategy Automation Scheduling Technique Precise personnel scheduling Precise personnel scheduling Example Automatic teller machines 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 44

2006 Prentice Hall, Inc.

Equipment and Technology

Often complex decisions
Possible competitive advantage
Flexibility Stable processes

May allow enlarging the scope of the processes

2006 Prentice Hall, Inc.

7 45

Improving Service Processes

Layout
Product exposure, customer education, product enhancement

Human Resources
Recruiting and training Impact of flexibility

2006 Prentice Hall, Inc.

7 46

Production Technology
Machine technology Automatic identification systems (AIS) Process control Vision system Robot Automated storage and retrieval systems (ASRS) Flexible manufacturing systems (FMS) Computer-integrated manufacturing (CIM)
2006 Prentice Hall, Inc. 7 47

Machine Technology
Increased precision

Increased productivity
Increased flexibility Improved environmental impact Reduced changeover time Decreased size

Reduced power requirements

2006 Prentice Hall, Inc. 7 48

Automatic Identification Systems (AIS)

Improved data acquisition

Reduced data entry errors

Increased speed

Increased scope of process automation

2006 Prentice Hall, Inc.

7 49

Process Control
Increased process stability

Increased process precision

Real-time provision of information for process evaluation Data available in many forms

2006 Prentice Hall, Inc.

7 50

Process Control Software

2006 Prentice Hall, Inc.

7 51

Vision Systems
Particular aid to inspection Consistently accurate

Never bored
Modest cost

Superior to individuals performing the same tasks

2006 Prentice Hall, Inc.

7 52

Robots
Perform monotonous or dangerous tasks
Perform tasks requiring significant strength or endurance Generally enhanced consistency and accuracy

2006 Prentice Hall, Inc.

7 53

Robotic Surgery

2006 Prentice Hall, Inc.

7 54

Automated Storage and Retrieval Systems (ASRS)

Automated placement and withdrawal of parts and products

Reduced errors and labor

Particularly useful in inventory and test areas of manufacturing firms

2006 Prentice Hall, Inc.

7 55

Automated Guided Vehicle (AGV)

Electronically guided and controlled carts Used for movement of products and/or individuals

2006 Prentice Hall, Inc.

7 56

Flexible Manufacturing Systems (FMS)

Computer controls both the workstation and the material handling equipment Enhance flexibility and reduced waste Can economically produce low volume at high quality Reduced changeover time and increased utilization Stringent communication requirement between components
2006 Prentice Hall, Inc. 7 57

Computer Integrated Manufacturing (CIM)

Extension of flexible manufacturing systems
Backwards to engineering and inventory control Forward into warehousing and shipping Can also include financial and customer service areas

Reducing the distinction between lowvolume/high-variety, and highvolume/low-variety production

2006 Prentice Hall, Inc. 7 58

Computer Integrated Manufacturing (CIM)

Top management decides to make a product

Figure 7.11

OM runs the production process Management Information System

Computeraided design (CAD) designs the product

FMS

CIM

Computer-aided manufacturing (CAM)

Automated storage and retrieval system (ASRS) and automated guided vehicles (AGVs)

Robots put the product together

7 59

2006 Prentice Hall, Inc.

Technology in Services
Service Industry Financial Services Education Utilities and government Restaurants and foods Example Debit cards, electronic funds transfer, ATMs, Internet stock trading Electronic bulletin boards, on-line journals Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs

Communications Electronic publishing, interactive TV

2006 Prentice Hall, Inc.

Table 7.4

7 60

Technology in Services
Service Industry Hotels Wholesale/retail trade Transportation Health care Airlines Example Electronic check-in/check-out, electronic key/lock system Point-of-sale terminals, e-commerce, electronic communication between store and supplier, bar coded data Automatic toll booths, satellite-directed navigation systems Online patient-monitoring, online medical information systems, robotic surgery Ticketless travel, scheduling, Internet purchases

2006 Prentice Hall, Inc.

Table 7.4

7 61

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
2006 Prentice Hall, Inc. 7 62

Ethics and Environmentally Friendly Processes

Reduce the negative impact on the environment Encourage recycling Efficient use of resources Reduction of waste by-products Use less harmful ingredients Use less energy
2006 Prentice Hall, Inc. 7 63