Process

Strategy
by
Dr. Francisco Javier Moctezuma Montao

2015 FJMM

What is Process Strategy?

Process Strategy
The pattern of
decisions made in
managing processes,
so that the processes
will achieve their
competitive
priorities.
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Supply Chain Processes

Process

Description

Process

Outsourcing

Customer
Service

Warehousing

Logistics

Sourcing

Cross-Docking

Description

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Process Strategy Decisions

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Process Structure in Manufacturing

Job Process
Batch

Small or Large
Line

Continuous Flow
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Process Structure in Services

Customer Contact
Customization

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Production and Inventory Strategies

Make-to-Order
Assemble-to-Order
Postponement
Mass Customization

Make-to-Stock
Mass Production
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Mass Customization
Mass customization:
A strategy of producing standardized goods or
services, but incorporating some degree of
customization.
Delayed differentiation.

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Delayed Differentiation
Delayed differentiation is a postponement
tactic:
Producing but not quite completing a product
or service until customer preferences or
specifications are known.

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Layout
Layout - The physical arrangement of human
and capital resources.
Operation - A group of resources performing
all or part of one or more processes.
Layout involves three basic steps
1. Gather information.
2. Develop a block plan.
3. Design a detailed layout.
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Layout
Gather information on:
Space requirements
Available space
Closeness Factors

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Layout
Develop a Block Plan:

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Layout
Use a Closeness Matrix

Layout
Use a Closeness Matrix:

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Basic Production Layout Formats

Process Layout (also called job-shop or functional
layout)
Product Layout (also called flow-shop layout)
Group Technology (Cellular) Layout

Fixed-Position Layout
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Four Types of Layout

a) Process Layout
Lathes

Grinders

Drills

Product A
Product B
Product C

Raw
Materials
Store
Mills

Planers

Assembl
y
Finished Good
Stores
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Four Types of Layout

b) Product Layout
WS11

Raw
Materials
Store

WS21

Product A
Product B

WS12

WS13

WS22

WS14

WS15

WS23

Finished
Materials
Stores

WS = Work Station
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Four Types of Layout

c) Cellular Layout

C Shaped Cell

U Shaped Cell

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Group Technology:
Benefits
1. Better human relations.
2. Improved operator expertise.

3. Less in-process inventory and material

handling
4. Faster production setup.
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Four Types of Layout

d) Fixed Position Layout
Raw Materials
Grinders

Workers

Drills
Cutters
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Welding Machines

Process Layout:
Systematic Layout Planning
Numerical flow of items between departments

Can be impractical to obtain.

Does not account for the qualitative factors that may
be crucial to the placement decision.

Systematic Layout Planning

Accounts for the importance of having each

department located next to every other department.
Is also guided by trial and error:

Switching departments then checking the results of the

closeness score.

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Example of Systematic Layout Planning:

Reasons for Closeness
Code

Reason

Type of customer

Ease of supervision

Common personnel

Contact necessary

Share same price

Psychology
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Example of Systematic Layout

Planning: Importance of Closeness
Line
code

Numerical
weights

Value

Closeness

Absolutely necessary

16

Especially important

Important

Ordinary closeness OK

Unimportant

Undesirable

80
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Example of Systematic Layout Planning:

Relating Reasons and Importance
From
1. Credit department
2. Toy department
3. Wine department
4. Camera department
5. Candy department
Closeness rating

Letter

Reason for rating Number

2
I
6

3
U
-U
--

Note here
that the (1)
Credit Dept.
and (2) Toy
Dept. are
given a high
rating of 6.

To

4
A
4
I
1
U
--

5
U
-A
1,6
X
1

Area
(sq. ft.)
100
400
300

Note
X here that
100
the 1(2) Toy Dept.
and the (5)
100
Candy Dept. are
given a high
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rating of 6.

Example of Systematic Layout Planning:

Initial Relationship Diagram
E

I
2

3
4

U
5

A
Note here again, Depts. (1) and
(2) are linked together, and
Depts. (2) and (5) are linked
together by multiple lines or
required transactions.

The number of lines

here represent paths
required to be taken in
transactions between
the departments. The
more lines, the more
the interaction between
departments.

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Example of Systematic Layout Planning:

Initial and Final Layouts
5

2
3

20 ft

4
50 ft

Initial Layout

Final Layout

Ignoring space and

building constraints

Adjusted by square
footage and building
size

Note in the
Final Layout
that Depts.
(1) and (5)
are not both
placed
directly next
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to Dept.
(2).

Competitive Imperatives Impacting Location

The need to produce close to the customer
due to time-based competition, trade
agreements, and shipping costs.
The need to locate near the appropriate labor
pool to take advantage of low wage costs
and/or high technical skills.
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Issues in Facility Location

Proximity to Customers
Business Climate
Total Costs
Infrastructure
Quality of Labor
Suppliers
Other Facilities

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Issues in Facility Location

Free Trade Zones

Political Risk
Government Barriers
Trading Blocs
Environmental Regulation
Host Community
Competitive Advantage

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Product and Service Design

Major factors in design strategy:
Cost
Quality
Time-to-market
Customer satisfaction
Competitive advantage
Product and service design or redesign should be
closely tied to an organizations strategy.
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Reasons for Product or Service Design

Economic
Social and demographic
Political, liability, or legal
Competitive

Cost or availability
Technological
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Objectives of Product
and Service Design
Main focus:
Customer satisfaction
Understand what the customer wants

Secondary focus:
Function of product/service
Cost/profit
Quality
Appearance
Ease of production/assembly
Ease of maintenance/service
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Legal, Ethical, and Environmental Issues

Legal
Product liability
Uniform commercial code

Ethical
Releasing products with defects

Environmental

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Product Design
Product Life Cycles
Robust Design

Concurrent Engineering
Reverse Engineering

Computer-Aided Design

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Life Cycles of Products or Services

Saturation

Demand

Maturity

Decline
Growth

Introduction

Time
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Robust Design
Robust Design: Design that results in
products or services that can function
over a broad range of conditions.

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Concurrent Engineering
Concurrent engineering
is the bringing together
of engineering design and
manufacturing personnel
early in the design phase.

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Reverse Engineering
Reverse engineering is the
dismantling and inspecting
of a competitors product to discover
product improvements.

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Computer-Aided Design
Computer-Aided Design (CAD) is product
design using computer graphics.

increases productivity of designers, 3 to 10

times.

creates a database for manufacturing

information on product specifications.

provides possibility of engineering and cost

analysis on proposed designs.
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Product design

Design for manufacturing (DFM)

Design for assembly (DFA)
Design for recycling (DFR)
Remanufacturing
Design for disassembly (DFD)
Robust design
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Remanufacturing
Remanufacturing: Refurbishing used products by
replacing worn-out or defective components.
Remanufactured products can be sold for 50% of the
cost of a new product.
Remanufacturing can use unskilled labor.
Some governments require manufacturers to take
back used products.

Design for Disassembly (DFD): Designing

products so that they can be easily taken apart.
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Quality Function Deployment

Quality Function Deployment:
Voice of the customer
House of quality

QFD: An approach that integrates the voice of the

customer into the product and service development
process.
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The House of Quality

Correlation
matrix
Design
requirements

Customer
requirements

Relationship
matrix

Competitive
assessment

Specifications
or
target values
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House of Quality Example

Correlation:
X
X

Water resistance

Accoust. Trans.
Window

Check force
on level
ground
Energy needed
to open door

Door seal
resistance

Energy needed
to close door

Engineering
Characteristics

X
X

Strong positive
Positive
Negative
Strong negative

Competitive evaluation
X = Us
A = Comp. A
B = Comp. B
(5 is best)
1 2 3 4

Customer
Requirements
Easy to close

Stays open on a hill

X AB

Easy to open

Doesnt leak in rain

No road noise
Importance weighting

XAB
A XB

BA
X

9
Reduce energy
to 7.5 ft/lb.

B
A
X

B
X
A

3
Maintain
current level

B
A

Maintain
current level

5
4
3
2
1

6
Maintain
current level

Reduce energy
level to 7.5 ft/lb

10

Reduce force
to 9 lb.

X A

Target values

Technical evaluation
(5 is best)

AB

BXA

BA
X

Relationships:
Strong = 9
Medium = 3
Small = 1

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Service Design
Service is an act.
Service delivery system:
Facilities
Processes
Skills

Many services are bundled with products.

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Service Systems
Service systems range from those with little or
no customer contact to very high degree of
customer contact such as:
Insulated technical core (software development)
Production line (automatic car wash)
Personalized service (hair cut, medical service)
Consumer participation (diet program)
Self service (supermarket)
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Characteristics of Well Designed

Service Systems
1.
2.
3.
4.
5.
6.
7.
8.
9.

Consistent with the organization mission.

User friendly.
Robust.
Easy to sustain.
Cost effective.
Value to customers.
Effective linkages between back operations.
Single unifying theme.
Ensure reliability and high quality.
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