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Operations

Management
Process Strategy
Chapter 7
7-1
Outline
♦ Four Process Strategies.
♦ Process Focus.
♦ Repetitive Focus.
♦ Product Focus.
♦ Mass Customization Focus.
♦ Service Process Design.
♦ Process Reengineering.

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Process Strategy
♦ How to produce a product or
provide a service.
♦ Objective:
♦ Meet or exceed customer
requirements.
♦ Achieve competitive advantage.
♦ Has long-run effects:
♦ Product & volume flexibility.
♦ Costs & quality .

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Four Process
Strategies
♦ Four process strategies:
♦ 1. Process focused.
♦ 2. Product focused.
♦ 3. Repetitive focused.
♦ 4. Mass customization.
♦ Summary: Table 7-2.
♦ Several strategies may be used
within one facility.
♦ Process strategies follow a
7-4
continuum.
Fit of Process, Volume,
and Variety
Low Volume High Volume

High Variety PROCESS MASS


Small FOCUS CUSTOMIZA
TION (Dell
production (job shops, Computer)
runs printing)
(allows
customization)
REPETITIVE FOCUS
(autos, motorcycles)

Low Variety PRODUCT


Long POOR FOCUS
production STRATEGY (steel,
runs
(standardizati 7-5 chemicals)
1. Process Focus
Examples

Bank
Hospital

Machin
e Shop
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Process Focus
♦ Facilities organized by
process.
♦ Similar processes or equipment
grouped together. (Example: All
drill presses are together.)
♦ Low volume, high variety
products.
♦ 1
75% of all global products. 2
♦ Products follow many
different paths. 3 4

♦ Other names: 7-7


Process Focus - Pros &
Cons
♦ Advantages:
♦ Greater product flexibility.
♦ More general purpose equipment.
♦ Lower initial capital investment.
♦ Disadvantages:
♦ High variable cost per unit.
♦ More highly trained personnel.
♦ More difficult production planning &
control.
♦ Low equipment utilization (5% to 25%).

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2. Product Focus
Examples
Soft Drinks
(Continuou
s, then
Discrete)

Light Bulbs
(Discrete)
.
Paper
(Continuous)
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Product Focus
♦ Facilities organized by
product.
♦ High volume, low variety
products.
♦ Long, continuous production
runs. names:
♦ Other
♦ Discrete
♦ Line flowunit manufacturing.
11 22 33 44
♦ Continuous process manufacturing.
production.
♦ Continuous
production. 7-10
Product Focus: Steel
Plant

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Product Focus - Pros &
Cons
♦ Advantages:
♦ Lower variable cost per unit.
♦ Lower but more specialized labor skills.
♦ Easier production planning and control.
♦ Higher equipment utilization (70% to 90%).
♦ Disadvantages:
♦ Lower product flexibility.
♦ More specialized equipment.
♦ Higher capital investment.

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3. Repetitive Focus -
Examples
Fast
Clothe
Foo
s Dryer
d
McDonald’s
McDonald’s
over 95 billion served
over 95 billion served

Truck

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Repetitive Focus

♦ Facilities often organized by assembly


lines.
♦ Characterized by modules.
♦ Parts & assemblies made previously.

♦ Modules combined for many output


options.
♦ Other names:
♦ Assembly line.
♦ Production line.

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Repetitive Focus - Harley
Davidson

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Repetitive Focus -
Considerations
♦ More structured than process
focus, less structured than product
focus.
♦ Enables quasi-customization.
♦ Has advantages and disadvantages
of process focus and product focus.

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Process Continuum

Process Focused Repetitive Product


(intermittent process) Focus Focused
(assembly (continuous
line) process)

Continuum

igh variety, low volumeModular Low variety, high volume


w utilization (5% - 25%)Flexible High utilization (70% - 90%
neral-purpose equipmentequipment Specialized equipment

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Increasing Product
Variety
Early Early
Item
1970s 2000s
Vehicle models 140 260
Vehicle styles 18 1,212
Software titles 0 300,000
Web sites 0>30,000,000
Movie releases 267 458
New book titles 40,530 77,446
TV channels 5 >300
Breakfast cereals 160 340
Itemssupermarkets
in 14,000 150,000

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4. Mass Customization
♦ Rapid, low-cost production to
fulfill unique customer desires.

♦ Distinctions between process,


repetitive and product focus
blur, making variety and volume
issues less significant.

♦ Very hard to achieve!

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Mass Customization at
Dell Computer
Company
♦ Sells custom-built PCs directly to consumer.
♦ Builds computers rapidly, at low cost, and only
when ordered.
♦ Operates with six days inventory.
♦ Integrates the Web into every aspect of business.
♦ Research focus on software to make installation
and configuration of PCs fast and simple.

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Process Analysis and
Design
♦Process should:
♦ Be designed to achieve competitive
advantage:
♦ Differentiation.

♦ Response.

♦ Low cost.
♦ Eliminate steps that do not add value.
♦ Maximize value, as perceived by the
customer.

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Tools for Process
Design

♦ Flow Diagrams - Figures 7.2, 7.3,


7.4

♦ Process Charts - Figure 7.8

♦ Time-Function/Process Mapping -
Figure 7.7

♦ Service Blueprint - Figure 7.9


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Process Design for
Services
♦ Consider customization and labor
intensity.
♦ Degree of customization.
♦ High: Focus on specialization
(equipment, training, etc.).
♦ Low: Focus on standardization and
automation.
♦ Degree of labor intensity.
♦ High: Focus on personalization & human
resources (selection, training, etc.)
♦ Low: Use technology and automation.
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Process Design for
High Services
Degree of Customization
Low
MassHigh Professional
Degree of Labor Intensity

Service
Commercial Personal Service
Banking banking

General
purpose law
firms
Boutiques

Retailing

Service Law Service


Factory clinics Shop
Fine
Warehouse dining
and catalog restauran
stores Fast food
ts
restaura
nts
Vending
machines
Low

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Improving Service
Productivity -
Table 7.3
♦ Separation: Different services in different places.
♦ Self-service: Customers serve themselves.
♦ Postponement: Customize at delivery.
♦ Focus: Restrict offerings.
♦ Automation: Automate where appropriate.
♦ Scheduling: Precise personnel scheduling.

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Technology -
Automation
♦ Production.
♦ CNC (Computer Numerical Control), Robots
and FMS (Flexible Manufacturing Systems).
♦ Automatic Identification.
♦ Bar coding and RFID (Radio Frequency
IDentification).
♦ Warehousing.
♦ ASRS (Automated Storage and Retrieval) and
AGVs (Automated Guided Vehicles).
♦ Integration – CIM (computer integrated
manufacturing)

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Process Reengineering
♦ Fundamental rethinking and radical
redesign of business processes.
♦ To produce dramatic improvements in
performance.

♦ Re-examine the basic process and its


objectives:
♦ Re-evaluate the purpose of the process.
♦ Question underlying assumptions.

♦ Focus on activities that cross boundaries.

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