Process Strategy

1
Process Strategy

• Topics
• Process choice
• Mass customization
• Service process design
• Process technology

2
Could you try to produce all Honda Accords in a
custom-car shop?

• Yes
• No

3
Could you try to produce custom racing cars on a
traditional assembly line?

• Yes
• No

4
Should you do either of these?AHonda Accords in
custom car shopBcustom race car on traditional
assembly line

• Yes for A, no for B
• No for A, yes for B
• Yes for both
• No for both

Why or why not?
5
Process Strategy
Transformation
Outputs
Inputs

• Process must
• meet customer requirements product specs
• operate within cost and other constraints
• Long-term effect on
• efficiency
• flexibility
• cost
• quality

6
Process Strategy

• What affects the process strategy selected?
• variety of products
• volume of production
• technology

7
King Soopers Bakery
8
King Soopers Bakery
9
Product - Process Matrix
Product Variety
10
Product - Process Matrix
Mass customization
Product Variety
11
Product - Process Matrix
Product Variety
12
Product - Process Matrix
technology
Wedding invitation
Product Variety
13
One Extreme

• Process focus
• Repetitive
• Product focus

• Low volume, high variety
• Focus?
• Organized by process or activity group like
  machines or activities
  
• General purpose equipment
• High labor requirement, broadly skilled labor
• High inventory levels
• Make to order
• Slow, jumbled movement
• Very low utilization
• Low fixed cost, high variable cost

14
One Extreme

• Process focus
• Repetitive
• Product focus

• Low volume, high variety
• Focus?
• Organized by process or activity group like
  machines or activities
  
• General purpose equipment
• High labor requirement, broadly skilled labor
• High inventory levels
• Make to order
• Slow, jumbled movement
• Very low utilization
• Low fixed cost, high variable cost

Drill presses
Sanding
Lathes
Welding
Grinders
15
The Other Extreme

• Process focus
• Repetitive
• Product focus

• Very high volume, very low variety
• Focus?
• Organized based on product
• Specialized equipment (fixed automation)
• Low labor requirement, less skill required
• Low inventory levels
• Make to stock based on forecast
• Fast, linear movement
• Very high utilization
• High fixed cost, low variable cost

Machine A
Machine C
Machine B
Machine D
Machine E
16
In Between

• Process focus
• Repetitive
• Product focus

• High volume, moderate variety
• Focus?
• Organized by product and process
• Specialized equipment (flexible automation)
• Low labor requirement, low to high skill
  required
  
• Low inventory levels (JIT)
• Make to frequent forecast
• Relatively fast, linear
• Moderate to high utilization
• High fixed cost, low variable cost

17
Cost Perspective on Process Choice
A
total cost

variable costs
fixed cost
Volume
General-purpose equipment Highly skilled labor H
igh material handling
18
Cost Perspective on Process Choice
B
total cost

variable costs
fixed cost
Volume
Flexible automation Moderate skill requirements
Moderate material handling
19
Cost Perspective on Process Choice
C
total cost

variable costs
fixed cost
Volume
Fixed automation Low skill requirements Low mate
rial handling
20
Cost Perspective on Process Choice
C
B
A
total cost
total cost
total cost



variable costs
variable costs
variable costs
fixed cost
fixed cost
fixed cost
Volume
Volume
Volume
A
B
C

Volume
21
Cost Perspective on Process Choice
C
B
A
total cost
total cost
total cost



variable costs
variable costs
variable costs
fixed cost
fixed cost
fixed cost
Volume
Volume
Volume
A
B
C

Volume
22
In-class example

• Making decisions about new business that you are
  opening. One important decision is what type of
  process to use. Choices
  
• General-purpose equipment, manual material
  handling, higher labor content, higher skills
  required costs 30,000 fixed and 40/unit
  (labor and manual material handling)
• Flexible automation, moderate manual material
  handling, moderate labor content, moderate skills
  required costs 300,000 fixed and 22/unit
  (labor and manual material handling)
• Fixed automation, automated material handling,
  low labor content, few skills required costs
  1,140,000 fixed and 8/unit (labor and manual
  material handling)
• Answer the following
• What are the cross-over points?
• What do you recommend if you have forecasted
  demand at 40,000 units

23
Cost Perspective on Process Choice
C
B
A
total cost
total cost
total cost



variable costs
variable costs
variable costs
fixed cost
fixed cost
fixed cost
Volume
Volume
Volume
A
B
A TC30,00040x B TC300,00022x C TC1,14
0,0008x
C

Volume
24
Cost Perspective on Process Choice
C
B
A
total cost
total cost
total cost



variable costs
variable costs
variable costs
fixed cost
fixed cost
fixed cost
Volume
Volume
Volume
A
B
A TC30,00040x B TC300,00022x C TC1,14
0,0008x
C

15,000
60,000
Volume
25
Mass Customization

• manufacturers are using technology to mix
  the characteristics of these processes
  continuous flow and job shop with the objective
  of gaining the cost advantage associated with
  continuous flow processes and the product variety
  of job shops

26
Mass Customization

• manufacturers are using technology to mix
  the characteristics of these processes with the
  objective of gaining the cost advantage
  associated with continuous flow processes and the
  product variety of job shops

27
What facilitates Mass Customization

• Use of technology for rapid data transfer
  (ordering, scheduling)
  
• Use of technology for rapid throughput (e.g., CNC
  machines)
  
• Modular design
• Make-to-order (lean or JIT) or delay
  customization
  
• Tight linkage between sales, production and
  logistics within an organization
  
• Tight supply chain relationships (suppliers,
  carriers)

Levis NikeID Dell
28
Results of Mass Customization

• Make-to-order rather than make-to-stock
• Dont need to rely on forecasts
• Reduced inventory levels

29
Designing for Services

• What makes services different?
• Customer involvement
• Higher labor content
• Greater customization
• Designing process with customer in mind
• What might be done?
• Training and focus on HR
• Pay attention to layout
• Limit choices (more standard offerings)
• Automate where possible
• Self-service

30
Technology
General purpose equipment
Fixed automation
Flexible Automation
31
Production Process Technology Alternatives
Demo
High
Flexible Manufacturing System
Different Products or Parts
Low
Low
High
Volume of Products or Parts
32
Technology
AIS
General purpose equipment
Fixed automation
Flexible Automation CNC machines Robots A
SRS AGV FMS
CIM