2008 Prentice Hall, Inc.

7 1
Operations
Management
Chapter 7
Process Strategy
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc. 7 2
Outline
Global Company Profile: Dell
Computer Corp.
Four Process Strategies
Process Focus
Repetitive Focus
Product Focus
Mass Customization Focus
Comparison of Process Choices
2008 Prentice Hall, Inc. 7 3
Outline Continued
Process Analysis and Design
Flow Diagrams
Time-Function Mapping
Value-Stream Mapping
Process Charts
Service Blueprinting
2008 Prentice Hall, Inc. 7 4
Outline Continued
Service Process Design
Customer Interaction and Process
Design
More Opportunities to Improve
Service Processes
Selection of Equipment and
Technology
2008 Prentice Hall, Inc. 7 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)
2008 Prentice Hall, Inc. 7 7
Outline Continued
Technology in Services
Process Redesign
Ethics and Environmentally
Friendly Processes
2008 Prentice Hall, Inc. 7 8
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
2008 Prentice Hall, Inc. 7 9
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
2008 Prentice Hall, Inc. 7 10
Process, Volume, and Variety
Process Focus
projects, job shops
(machine, print,
carpentry)
Standard Register
Repetitive
(autos, motorcycles)
Harley-Davidson
Product Focus
(commercial
baked goods,
steel, glass)
Nucor Steel
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
Mass Customization
(difficult to achieve,
but huge rewards)
Dell Computer
Poor Strategy
(Both fixed and
variable costs
are high)
Low
Volume
Repetitive
Process
High
Volume
Volume
Figure 7.1
2008 Prentice Hall, Inc. 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
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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
Many
inputs
Many
variety
of
outputs
J ob Shop
M
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y

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m
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s

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2008 Prentice Hall, Inc. 7 15
Accounting
Process Flow Diagram
Information flow
Material flow
Figure 7.2
COLLATING
DEPT
GLUING, BINDING,
STAPLING, LABELING
POLYWRAP DEPT
SHIPPING
Customer
PRINTING DEPT
PREPRESS DEPT
Vendors
Receiving
Warehouse
Purchasing
Customer
Customer sales
representative
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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
Raw
materials
and
module
inputs
Modules
combined
for many
output
options
Few
modules
Automobile Assembly Line
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Process Flow Diagram
THE ASSEMBLY LINE
TESTING
28 tests
Oil tank work cell
Shocks and forks
Handlebars
Fender work cell
Air cleaners
Fluids and mufflers
Fuel tank work cell
Wheel work cell
Roller testing
Incoming parts
From Milwaukee
on a J IT arrival
schedule
Engines and
transmissions

Frame tube
bending

Frame-building
work cells

Frame
machining

Hot-paint
frame painting
Crating
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
Few
inputs
Output
variations
in size,
shape,
and
packaging
Continuous Work Flow
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Product Focus
Nucor Steel Plant
C
o
n
t
i
n
u
o
u
s

c
a
s
t
e
r

Continuous cast steel
sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
Hot mill for finishing, cooling, and coiling
D
E
F
G
H
I
Scrap
steel
Ladle of molten steel
Electric
furnace
A
B
C
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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
2008 Prentice Hall, Inc. 7 23
Mass Customization
Vehicle models 140 286
Vehicle types 18 1,212
Bicycle types 8 19
Software titles 0 400,000
Web sites 0 98,116,993
Movie releases 267 458
New book titles 40,530 77,446
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in 14,000 150,000
supermarkets
LCD TVs 0 102
Number of Choices
Item 1970s 21
st
Century
Table 7.1
2008 Prentice Hall, Inc. 7 24
Mass Customization
Mass Customization
Effective
scheduling
techniques
Rapid
throughput
techniques
Repetitive Focus
Flexible people
and equipment
Process-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Product-Focused
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
Figure 7.5
Modular techniques
Supportive
supply
chains
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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
2008 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)
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
J IT
procurement
techniques
used
Raw material
inventories
are low
Raw material
inventories
are low
Work-in-
process is
high
J IT inventory
techniques
used
Work-in-
process
inventory is
low
Work-in-
process
inventory
driven down
by J IT, lean
production
Table 7.2
2008 Prentice Hall, Inc. 7 28
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
2008 Prentice Hall, Inc. 7 29
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
2008 Prentice Hall, Inc. 7 30
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
2008 Prentice Hall, Inc. 7 31
Crossover Charts
Fixed costs
Variable
costs
$
High volume, low variety
Process C
Fixed costs
Variable
costs
$
Repetitive
Process B
Fixed costs
Variable
costs
$
Low volume, high variety
Process A
Fixed cost
Process A

Fixed cost
Process B

Fixed cost
Process C
V
1

(2,857)
V
2

(6,666)
400,000
300,000
200,000
Volume
$
Figure 7.6
2008 Prentice Hall, Inc. 7 32
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
2008 Prentice Hall, Inc. 7 35
Baseline Time-Function Map
Customer
Sales
Production
control
Plant A
Warehouse
Plant B
Transport Move
Receive
product
Extrude
Wait
Move
Wait
Print
Wait
Order
product
Process
order
Wait
12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day
52 days
Figure 7.7
2008 Prentice Hall, Inc. 7 36
Target Time-Function Map
Customer
Sales
Production
control
Plant
Warehouse
Transport
Move
Receive
product
Extrude
Wait
Print
Order
product
Process
order
Wait
1 day 2 days 1 day 1 day 1 day
6 days
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
2008 Prentice Hall, Inc. 7 40
Notify
customer the
car is ready
Customer departs
Customer pays bill
F
F
Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close
Level
#3
Level
#1
Level
#2
Figure 7.10
No
Notify
customer
and recommend
an alternative
provider
Customer arrives
for service
Warm greeting
and obtain
service request
F
Direct customer
to waiting room
F
Perform
required work
Prepare invoice
Yes Yes
F
F
Standard
request
Determine
specifics
No
Can
service be
done and does
customer
approve?
F F
2008 Prentice Hall, Inc. 7 41
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
2008 Prentice Hall, Inc. 7 42
Service Factory Service Shop
Degree of Customization
Low
High
D
e
g
r
e
e

o
f

L
a
b
o
r

Low
High
Mass Service Professional Service
Service Process Matrix
Commercial
banking
Private
banking
General-
purpose law firms
Law clinics
Specialized
hospitals
Hospitals
Full-service
stockbroker
Limited-service
stockbroker
Retailing
Boutiques
Warehouse and
catalog stores
Fast-food
restaurants
Fine-dining
restaurants
Airlines
No-frills
airlines
Figure 7.11
2008 Prentice Hall, Inc. 7 43
Service Process Matrix
Labor involvement is high
Selection and training highly important
Focus on human resources
Personalized services
Mass Service and Professional Service
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
2008 Prentice Hall, Inc. 7 44
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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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
Improving Service
Productivity
Table 7.3
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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
Improving Service
Productivity
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)
2008 Prentice Hall, Inc. 7 50
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
2008 Prentice Hall, Inc. 7 59
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-variety production
2008 Prentice Hall, Inc. 7 60
Computer-
Integrated
Manufacturing
(CIM)
Figure 7.12
2008 Prentice Hall, Inc. 7 61
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
2008 Prentice Hall, Inc. 7 64
Ethics and Environmentally
Friendly Processes
Encourage recycling
Efficient use of resources
Reduction of waste by-products
Use less harmful ingredients
Use less energy
Reduce the negative impact on the
environment