Process Strategy

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Operations Management
Chapter 7 Process Strategy
PowerPoint presentation to accompany
Heizer/Render Principles of Operations
Management, 7e Operations Management, 9e
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Outline

• Global Company Profile Dell Computer Corp.
• Four Process Strategies
• Process Focus
• Repetitive Focus
• Product Focus
• Mass Customization Focus
• Comparison of Process Choices

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Outline Continued

• Process Analysis and Design
• Flow Diagrams
• Time-Function Mapping
• Value-Stream Mapping
• Process Charts
• Service Blueprinting

4
Outline Continued

• Service Process Design
• Customer Interaction and Process Design
• More Opportunities to Improve Service Processes
• Selection of Equipment and Technology

5
Outline Continued

• Production Technology
• Machine Technology
• Automatic Identification Systems (AISs) and RFID
• Process Control
• Vision Systems
• Robots

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Outline Continued

• Production Technology (cont.)
• Automated Storage and Retrieval Systems (ASRSs)
• Automated Guided Vehicles (AGVs)
• Flexible Manufacturing Systems (FMSs)
• Computer-Integrated Manufacturing (CIM)

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Outline Continued

• Technology in Services
• Process Redesign
• Ethics and Environmentally Friendly Processes

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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

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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

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Process, Volume, and Variety
Figure 7.1
High Variety one or few units per run, high
variety (allows customization)
Process Focus projects, job shops (machine,
print, carpentry) Standard Register
Mass Customization (difficult to achieve, but
huge rewards) Dell Computer
Changes in Modules modest runs, standardized
modules
Repetitive (autos, motorcycles) Harley-Davidson
Changes in Attributes (such as grade, quality,
size, thickness, etc.) long runs only
Product Focus (commercial baked goods, steel,
glass) Nucor Steel
Poor Strategy (Both fixed and variable costs are
high)
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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

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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
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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

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Process Focus
Job Shop
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Process Flow Diagram
Figure 7.2
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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

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Repetitive Focus
Automobile Assembly Line
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Process Flow Diagram
Figure 7.3
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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

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Product Focus
Continuous Work Flow
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Product Focus
Nucor Steel Plant
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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

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Mass Customization
Table 7.1
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Mass Customization
Figure 7.5
Effective scheduling techniques
Rapid throughput techniques
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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
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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
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
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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 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
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Comparison of Processes
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 build-to-order (BTO)
Table 7.2
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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 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
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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 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
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Crossover Charts
Figure 7.6
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Focused Processes

• Focus brings efficiency
• Focus on depth of product line rather than
  breadth
• Focus can be
• Customers
• Products
• Service
• Technology

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Changing Processes

• Difficult and expensive
• May mean starting over
• Process strategy determines transformation
  strategy for an extended period
• Important to get it right

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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

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Baseline Time-Function Map
Figure 7.7
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Target Time-Function Map
Figure 7.7
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Value-Stream Mapping
Figure 7.8
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Process Chart
Figure 7.9
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Service Blueprint

• Focuses on the customer and provider interaction
• Defines three levels of interaction
• Each level has different management issues
• Identifies potential failure points

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Service Blueprint
Level 3
Figure 7.10
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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

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Service Process Matrix
Figure 7.11
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Service Process Matrix
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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
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Improving Service Productivity
Strategy Technique Example
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
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Improving Service Productivity
Strategy Technique Example
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
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Improving Service Processes

• Layout
• Product exposure, customer education, product
  enhancement
• Human Resources
• Recruiting and training
• Impact of flexibility

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Equipment and Technology

• Often complex decisions
• Possible competitive advantage
• Flexibility
• Stable processes
• May allow enlarging the scope of the processes

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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)

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Machine Technology

• Increased precision
• Increased productivity
• Increased flexibility
• Improved environmental impact
• Reduced changeover time
• Decreased size
• Reduced power requirements

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Automatic Identification Systems (AISs)

• Improved data acquisition
• Reduced data entry errors
• Increased speed
• Increased scope of process automation

Example Bar codes and RFID
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Process Control

• Increased process stability
• Increased process precision
• Real-time provision of information for process
  evaluation
• Data available in many forms

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Process Control Software
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Vision Systems

• Particular aid to inspection
• Consistently accurate
• Never bored
• Modest cost
• Superior to individuals performing the same tasks

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Robots

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

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Automated Storage and Retrieval Systems (ASRSs)

• Automated placement and withdrawal of parts and
  products
• Reduced errors and labor
• Particularly useful in inventory and test areas
  of manufacturing firms

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Automated Guided Vehicle (AGVs)

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

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Flexible Manufacturing Systems (FMSs)

• 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

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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
  low-volume/high-variety, and high-volume/low-varie
  ty production

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Computer-Integrated Manufacturing (CIM)
Figure 7.12
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Technology in Services
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
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Technology in Services
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
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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

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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