Chapter 07 process_strategy
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The document outlines the key topics to be covered in a chapter on process strategy. It discusses four main process strategies - process focus, repetitive focus, product focus, and mass customization. For each strategy, it describes the characteristics including production approach, equipment used, inventory levels, and scheduling complexity. It also provides examples of companies that employ each strategy and compares the main strategies across different factors. The learning objectives of the chapter are to describe the different production processes, tools for process analysis, and recent technology advances.
Chapter 07 process_strategy
- 1. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 1 Operations Management Chapter 7 – Process Strategy PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e 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
- 2. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 3 Outline – Continued Process Analysis and Design Flow Diagrams Time-Function Mapping Value-Stream Mapping Process Charts Service Blueprinting 7 – 4 Outline – Continued Service Process Design Customer Interaction and Process Design More Opportunities to Improve Service Processes Selection of Equipment and Technology
- 3. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 5 Outline – Continued Production Technology Machine Technology Automatic Identification Systems (AISs) and RFID Process Control Vision Systems Robots 7 – 6 Outline – Continued Production Technology (cont.) Automated Storage and Retrieval Systems (ASRSs) Automated Guided Vehicles (AGVs) Flexible Manufacturing Systems (FMSs) Computer-Integrated Manufacturing (CIM)
- 4. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 7 Outline – Continued Technology in Services Process Redesign Ethics and Environmentally Friendly Processes 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
- 5. OPERATION MANAGEMENT Low Volume International Executive MBA PGSM 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 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) Repetitive Process High Volume Figure 7.1 Volume
- 6. OPERATION MANAGEMENT International Executive MBA PGSM 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 7 – 12 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
- 7. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 13 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 7 – 14 Process Focus Many inputs Many variety of outputs Job Shop Many departments and many routings
- 8. OPERATION MANAGEMENT Process Flow Diagram Purchasing Vendors PREPRESS DEPT International Executive MBA PGSM 7 – 15 Accounting Information flow Material flow Figure 7.2 COLLATING DEPT PRINTING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING Customer Receiving Warehouse Customer Customer sales representative 7 – 16 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
- 9. OPERATION MANAGEMENT Automobile Assembly Line International Executive MBA PGSM 7 – 17 Repetitive Focus Raw materials and module inputs Modules combined for many output options Few modules 7 – 18 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 Engines and transmissions From Milwaukee on a JIT arrival schedule Frame tube bending Frame-building work cells Frame machining Hot-paint frame painting Crating Figure 7.3
- 10. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 19 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 7 – 20 Product Focus Few inputs Output variations in size, shape, and packaging Continuous Work Flow
- 11. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 21 Product Focus Nucor Steel Plant Continuous caster Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft Hot mill for finishing, cooling, and coiling D E F H G I Scrap steel Ladle of molten steel Electric furnace A C B 7 – 22 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
- 12. OPERATION MANAGEMENT Table 7.1 Item 1970s 21st Century International Executive MBA PGSM 7 – 23 Mass Customization Number of Choices 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 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
- 13. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 25 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 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
- 14. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 27 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 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
- 15. OPERATION MANAGEMENT International Executive MBA PGSM 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 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
- 16. OPERATION MANAGEMENT $ costs Variable $ costs 400,000 300,000 200,000 International Executive MBA PGSM 7 – 31 Crossover Charts Variable costs Fixed costs $ High volume, low variety Process C Variable Fixed costs Repetitive Process B Fixed costs Low volume, high variety Process A Fixed cost Process A Fixed cost Process B Fixed cost Process C (2,857) V1 V2 (6,666) Volume $ Figure 7.6 7 – 32 Focused Processes Focus brings efficiency Focus on depth of product line rather than breadth Focus can be Customers Products Service Technology
- 17. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 33 Changing Processes Difficult and expensive May mean starting over Process strategy determines transformation strategy for an extended period Important to get it right 7 – 34 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
- 18. OPERATION MANAGEMENT Print Order product Process order Wait International Executive MBA PGSM 7 – 35 “Baseline” Time-Function Map Customer Sales Production control Plant A Warehouse Plant B Receive product Extrude Wait Transport Move 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 7 – 36 “Target” Time-Function Map Customer Sales Production control Plant Warehouse Receive product Extrude Wait Transport Move 1 day 2 days 1 day 1 day 1 day 6 days Figure 7.7
- 19. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 37 Value-Stream Mapping Figure 7.8 7 – 38 Process Chart Figure 7.9
- 20. OPERATION MANAGEMENT Level #1 Level #2 F International Executive MBA PGSM 7 – 39 Service Blueprint Focuses on the customer and provider interaction Defines three levels of interaction Each level has different management issues Identifies potential failure points 7 – 40 Customer departs Customer pays bill F F Notify customer the car is ready Service Blueprint Personal Greeting Service Diagnosis Perform Service Friendly Close Level #3 Figure 7.10 No Notify customer and recommend an alternative provider Customer arrives for service Warm greeting and obtain service request Direct customer to waiting room F Perform required work F Prepare invoice Yes Yes F Standard request Determine specifics No Can service be done and does customer approve? F F
- 21. OPERATION MANAGEMENT Service Process Matrix Degree of Customization Low High High International Executive MBA PGSM 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 7 – 42 Service Factory Service Shop Degree of Labor Low Mass Service Professional Service 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 Figure 7.11 airlines
- 22. OPERATION MANAGEMENT Mass Service and Professional Service International Executive MBA PGSM 7 – 43 Service Process Matrix Labor involvement is high Selection and training highly important Focus on human resources Personalized services 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 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
- 23. OPERATION MANAGEMENT Improving Service Productivity Improving Service Productivity International Executive MBA PGSM 7 – 45 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 7 – 46 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
- 24. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 47 Improving Service Processes Layout Product exposure, customer education, product enhancement Human Resources Recruiting and training Impact of flexibility 7 – 48 Equipment and Technology Often complex decisions Possible competitive advantage Flexibility Stable processes May allow enlarging the scope of the processes
- 25. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 49 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) 7 – 50 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
- 26. OPERATION MANAGEMENT International Executive MBA PGSM 7 – 51 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 7 – 52 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
- 27. OPERATION MANAGEMENT Reduce the negative impact on the environment International Executive MBA PGSM 7 – 53 Ethics and Environmentally Friendly Processes Encourage recycling Efficient use of resources Reduction of waste by-products Use less harmful ingredients Use less energy