© 2008 Prentice Hall, Inc.7 – 1 Operations Management Chapter 7 – Process Strategy PowerPoint presentation to accompany Heizer/Render Principles of Operations

© 2008 Prentice Hall, Inc. 7 – 1

Operations ManagementOperations ManagementChapter 7 – Chapter 7 – Process StrategyProcess Strategy

PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 7ePrinciples of Operations Management, 7eOperations Management, 9e Operations Management, 9e


Process StrategiesProcess Strategies

The objective of a process strategy The objective of a process strategy is to build a production process is to build a production process to to

transform resources into goods and transform resources into goods and services so services so that customer that customer requirements and product requirements and product

specifications specifications will be met will be met within cost within cost and other managerial constraintsand other managerial constraints



How to produce a product or provide How to produce a product or provide a service thata service that Meets or exceeds customer Meets or exceeds customer

requirementsrequirements

Meets cost and managerial goalsMeets cost and managerial goals

Has long term effects onHas long term effects on Efficiency and production flexibilityEfficiency and production flexibility

Costs and qualityCosts and quality



Four basic strategiesFour basic strategies

Process focusProcess focus

Repetitive focusRepetitive focus

Product focusProduct focus

Mass customizationMass customization

Within these basic strategies there are Within these basic strategies there are many ways they may be implementedmany ways they may be implemented


Process, Volume, and VarietyProcess, Volume, and Variety

Process Focusprojects, job shops

(machine, print, carpentry)

Standard Register

Repetitive(autos, motorcycles)

Harley-Davidson

Product Focus(commercial

baked goods, steel, glass)Nucor Steel

High VarietyHigh Varietyone or few one or few units per run, units per run, high varietyhigh variety(allows (allows customization)customization)

Changes in Changes in ModulesModulesmodest runs, modest runs, standardized standardized modulesmodules

Changes in Changes in Attributes Attributes (such as grade, (such as grade, quality, size, quality, size, thickness, etc.) thickness, etc.) long runs onlylong runs only

Mass Customization(difficult to achieve, but huge rewards)

Dell Computer

Poor Strategy Poor Strategy (Both fixed and (Both fixed and variable costs variable costs

are high)are high)

Low Low VolumeVolume

Repetitive Repetitive ProcessProcess

High High VolumeVolume

VolumeVolumeFigure 7.1Figure 7.1


Process FocusProcess Focus

Facilities are organized around specific Facilities are organized around specific activities or processesactivities or processes

General purpose equipment and skilled General purpose equipment and skilled personnelpersonnel

High degree of product flexibilityHigh degree of product flexibility

Typically high costs and low equipment Typically high costs and low equipment utilizationutilization

Product flows may vary considerably Product flows may vary considerably making planning and scheduling a making planning and scheduling a challengechallenge


Process FocusProcess Focus

Many Many inputsinputs

Many Many variety variety

of of outputsoutputs

Job ShopJob Shop

Ma

ny

de

par

tme

nts

an

d

man

y r

ou

tin

gs


Repetitive FocusRepetitive Focus

Facilities often organized as Facilities often organized as assembly linesassembly lines

Characterized by modules with parts Characterized by modules with parts and assemblies made previouslyand assemblies made previously

Modules may be combined for many Modules may be combined for many output optionsoutput options

Less flexibility than process-Less flexibility than process-focused facilities but more efficientfocused facilities but more efficient


Repetitive FocusRepetitive Focus

Raw Raw materials materials

and and module module inputsinputs

Modules Modules combined combined for many for many

output output optionsoptions

Few Few modulesmodules

Automobile Assembly LineAutomobile Assembly Line


ProProductduct Flow Diagram Flow Diagram

THE ASSEMBLY LINETHE ASSEMBLY LINETESTING28 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 From Milwaukee on a JIT arrival on a JIT arrival scheduleschedule

Engines and transmissions

Frame tube bending

Frame-building work cells

Frame machining

Hot-paint frame painting

Crating

Figure 7.3Figure 7.3


Product FocusProduct Focus

Facilities are organized by productFacilities are organized by product

High volume but low variety of High volume but low variety of productsproducts

Long, continuous production runs Long, continuous production runs enable efficient processesenable efficient processes

Typically high fixed cost but low Typically high fixed cost but low variable costvariable cost

Generally less skilled laborGenerally less skilled labor



Few Few inputsinputs

Output Output variations variations

in size, in size, shape, shape,

and and packagingpackaging

Continuous Work FlowContinuous Work Flow


Product FocusProduct FocusNucor Steel PlantNucor Steel Plant

Co

nti

nu

ou

s ca

ster

Co

nti

nu

ou

s ca

ster

Continuous cast steel Continuous cast steel sheared into 24-ton slabssheared into 24-ton slabs

Hot tunnel furnace - 300 ftHot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coilingHot mill for finishing, cooling, and coiling

DD

EE FF

GGHHII

Scrap Scrap steelsteel

Ladle of molten steelLadle of molten steelElectric Electric furnacefurnace

AA

BBCC


Mass CustomizationMass Customization

The rapid, low-cost production of The rapid, low-cost production of goods and service to satisfy goods and service to satisfy increasingly unique customer increasingly unique customer desiresdesires

Combines the Combines the flexibility of a flexibility of a process focus process focus with the efficiency with the efficiency of a product focusof a product focus


Mass CustomizationMass Customization

Vehicle modelsVehicle models 140140 286286Vehicle typesVehicle types 1818 1,2121,212Bicycle typesBicycle types 88 1919Software titlesSoftware titles 00 400,000400,000Web sitesWeb sites 00 98,116,99398,116,993Movie releasesMovie releases 267267 458458New book titlesNew book titles 40,53040,530 77,44677,446Houston TV channelsHouston TV channels 55 185185Breakfast cerealsBreakfast cereals 160160 340340Items (SKUs) in Items (SKUs) in 14,00014,000 150,000150,000 supermarketssupermarketsLCD TVsLCD TVs 00 102102

Number of ChoicesNumber of Choices

ItemItem 1970s1970s 2121stst Century Century Table 7.1Table 7.1


Requirements To Achieve Requirements To Achieve Mass CustomizationMass Customization

Mass Customization

Effective Effective scheduling scheduling techniquestechniques

Rapid Rapid throughput throughput techniquestechniques

Repetitive FocusRepetitive FocusFlexible peopleFlexible peopleand equipmentand equipment

Process-FocusedProcess-FocusedHigh variety, low volumeHigh variety, low volume

Low utilization Low utilization (5% to 25%)(5% to 25%)General-purpose equipmentGeneral-purpose equipment

Product-FocusedProduct-FocusedLow variety, high volumeLow variety, high volume

High utilization High utilization (70% to 90%)(70% to 90%)Specialized equipmentSpecialized equipment


Modular techniquesModular techniquesSupportive Supportive

supply supply chainschains


Comparison of ProcessesComparison of Processes

Process Process FocusFocus

(Low volume, (Low volume, high variety)high variety)

Repetitive Repetitive FocusFocus

(Modular)(Modular)


(High-volume, (High-volume, low-variety)low-variety)

Mass Mass CustomizationCustomization

(High-volume, (High-volume, high-variety)high-variety)

Small Small quantity, quantity, large variety large variety of productsof products

Long runs, Long runs, standardized standardized product made product made from modulesfrom modules

Large Large quantity, small quantity, small variety of variety of productsproducts

Large Large quantity, large quantity, large variety of variety of productsproducts

General General purpose purpose equipmentequipment

Special Special equipment equipment aids in use of aids in use of assembly lineassembly line

Special Special purpose purpose equipmentequipment

Rapid Rapid changeover changeover on flexible on flexible equipmentequipment

Table 7.2Table 7.2






(Modular)(Modular)





Operators are Operators are broadly broadly skilledskilled

Employees Employees are modestly are modestly trainedtrained

Operators are Operators are less broadly less broadly skilledskilled

Flexible Flexible operators are operators are trained for the trained for the necessary necessary customizationcustomization

Many job Many job instructions instructions as each job as each job changeschanges

Repetition Repetition reduces reduces training and training and changes in job changes in job instructionsinstructions

Few work Few work orders and job orders and job instructions instructions because jobs because jobs standardizedstandardized

Custom Custom orders require orders require many job many job instructionsinstructions

Table 7.2Table 7.2






(Modular)(Modular)





Raw material Raw material inventories inventories highhigh

JIT JIT procurement procurement techniques techniques usedused

Raw material Raw material inventories inventories are loware low

Raw material Raw material inventories inventories are loware low

Work-in-Work-in-process is process is highhigh

JIT inventory JIT inventory techniques techniques usedused

Work-in-Work-in-process process inventory is inventory is lowlow

Work-in-Work-in-process process inventory inventory driven down driven down by JIT, lean by JIT, lean productionproduction

Table 7.2Table 7.2






(Modular)(Modular)





Units move Units move slowly slowly through the through the plantplant

Movement is Movement is measured in measured in hours and hours and daysdays

Swift Swift movement of movement of unit through unit through the facility is the facility is typicaltypical

Goods move Goods move swiftly swiftly through the through the facilityfacility

Finished Finished goods made goods made to orderto order

Finished Finished goods made goods made to frequent to frequent forecastforecast

Finished Finished goods made goods made to forecast to forecast and storedand stored

Finished Finished goods often goods often build-to-order build-to-order (BTO)(BTO)

Table 7.2Table 7.2






(Modular)(Modular)





Scheduling is Scheduling is complex, complex, trade-offs trade-offs between between inventory, inventory, availability, availability, customer customer serviceservice

Scheduling Scheduling based on based on building building various various models from models from a variety of a variety of modules to modules to forecastsforecasts

Relatively Relatively simple simple scheduling, scheduling, establishing establishing output rate to output rate to meet forecastsmeet forecasts

Sophisticated Sophisticated scheduling scheduling required to required to accommodate accommodate custom orderscustom orders

Table 7.2Table 7.2






(Modular)(Modular)





Fixed costs Fixed costs low, variable low, variable costs highcosts high

Fixed costs Fixed costs dependent on dependent on flexibility of flexibility of the facilitythe facility

Fixed costs Fixed costs high, variable high, variable costs lowcosts low

Fixed costs Fixed costs high, variable high, variable costs must be costs must be lowlow

Costing Costing estimated estimated before job, before job, known only known only after the jobafter the job

Costs usually Costs usually known due to known due to extensive extensive experienceexperience

High fixed High fixed costs mean costs mean costs costs dependent on dependent on utilization of utilization of capacitycapacity

High fixed High fixed costs and costs and dynamic dynamic variable costs variable costs make costing make costing a challengea challenge

Table 7.2Table 7.2


Crossover ChartsCrossover Charts

Fixed costs

Variable Variable costscosts

$$

High volume, low varietyHigh volume, low varietyProcess CProcess C

Fixed costs

Variable Variable costscosts$$

RepetitiveRepetitiveProcess BProcess B

Fixed costs

Variable Variable costscosts$$

Low volume, high varietyLow volume, high varietyProcess AProcess A

Fixed cost Process A Fixed cost Fixed cost

Process BProcess BFixed cost Process C

Tota

l cos

t

Tota

l cos

t

Total cost

Total cost

Total costTotal cost

VV11(2,857)(2,857) VV22(6,666)(6,666)

400,000 400,000

300,000 300,000

200,000 200,000

VolumeVolume

$$



Focused ProcessesFocused Processes

Focus brings efficiencyFocus brings efficiency by building a core by building a core competence on competence on

CustomersCustomers (Winterhalter Gastronom, a (Winterhalter Gastronom, a German Company)German Company)

ProductsProducts (Bosch) (Bosch)

ServiceService (Arnold Palmer Hospital in (Arnold Palmer Hospital in Orlondo focuses on women and Orlondo focuses on women and children)children)

TechnologyTechnology (Texas Instruments focus (Texas Instruments focus on only specialized kinds of on only specialized kinds of semiconductors)semiconductors)


Changing ProcessesChanging Processes

Difficult and expensiveDifficult and expensive

May mean starting overMay mean starting over

Process strategy determines Process strategy determines transformation strategy for an transformation strategy for an extended periodextended period

Important to get it rightImportant to get it right


Tools to Use in Tools to Use in Process Process Analysis and DesignAnalysis and Design

Flow DiagramsFlow Diagrams - Shows the movement - Shows the movement of materialsof materials

Time-Function MappingTime-Function Mapping - Shows flows - Shows flows and time frameand time frame

Value-Stream MappingValue-Stream Mapping - Shows flows - Shows flows and time and value added beyond the and time and value added beyond the immediate organizationimmediate organization

Process ChartsProcess Charts - Uses symbols to show - Uses symbols to show key activitieskey activities

Service BlueprintingService Blueprinting - focuses on - focuses on customer/provider interactioncustomer/provider interaction


““Baseline” Time-Function MapBaseline” Time-Function Map

CustomerCustomer

SalesSales

Production Production controlcontrol

Plant APlant A

WarehouseWarehouse

Plant BPlant B

TransportTransport Move

Receive product

Extrude

Wait

Move

Wait

Print

Wait

Order product

Process order

Wait

12 days12 days 13 days13 days 1 day1 day 4 days4 days 1 day1 day 10 days10 days 1 day1 day 0 day0 day 1 day1 day

52 days52 daysFigure 7.7Figure 7.7


““Target” Time-Function MapTarget” Time-Function Map

CustomerCustomer

SalesSales

Production Production controlcontrol

PlantPlant

WarehouseWarehouse

TransportTransport Move

Receive product

Extrude

Wait

Print

Order product

Process order

Wait

1 day1 day 2 days2 days 1 day1 day 1 day1 day 1 day1 day

6 days6 days



Value-Stream MappingValue-Stream Mapping



Process ChartProcess Chart



Service BlueprintService Blueprint

Focuses on the customer and Focuses on the customer and provider interactionprovider interaction

Defines three levels of interactionDefines three levels of interaction

Each level has different Each level has different management issuesmanagement issues

Identifies potential failure pointsIdentifies potential failure points


Notify customer the car is ready

Customer departs

Customer pays bill

F

F

Service BlueprintService BlueprintPersonal Greeting Service Diagnosis Perform Service Friendly Close

LevelLevel#3#3

LevelLevel#1#1

LevelLevel#2#2


NoNo

Notifycustomer

and recommendan alternative

provider

Customer arrives for service

Warm greeting and obtain

service request

F

Direct customer to waiting room

F

Perform required work

Prepare invoice

YesYesYesYes

F

F

Standard request

Determine specifics

NoNo

Canservice be

done and does customer approve?

F F


Process Analysis ToolsProcess Analysis Tools

Flowcharts provide a view of the Flowcharts provide a view of the big picturebig picture

Time-function mapping adds rigor Time-function mapping adds rigor and a time elementand a time element

Value-stream analysis extends to Value-stream analysis extends to customers and supplierscustomers and suppliers

Process charts show detailProcess charts show detail

Service blueprint focuses on Service blueprint focuses on customer interactioncustomer interaction


Service FactoryService Factory Service ShopService Shop

Degree of CustomizationDegree of Customization

LowLow HighHigh

Deg

ree

of

Lab

or

Deg

ree

of

Lab

or

LowLow

HighHigh

Mass ServiceMass Service Professional ServiceProfessional Service

Service Process MatrixService Process Matrix Gives Operations Gives Operations Managers Insight in Service Process DesignManagers Insight in Service Process Design

Commercial banking

Private banking

General-purpose law firms

Law clinicsSpecialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores

Fast-food restaurants

Fine-dining restaurants

Airlines

No-frills airlinesFigure 7.11Figure 7.11


Service Process MatrixService Process Matrix

Labor involvement is highLabor involvement is high Selection and training highly importantSelection and training highly important Focus on human resourcesFocus on human resources Personalized servicesPersonalized services

Mass Service and Professional ServiceMass Service and Professional Service

Service Factory and Service ShopService Factory and Service Shop Automation of standardized servicesAutomation of standardized services Low labor intensity responds well to Low labor intensity responds well to

process technology and schedulingprocess technology and scheduling Tight control required to maintain Tight control required to maintain

standardsstandards


Techniques for ITechniques for Improving mproving Service ProductivityService Productivity

StrategyStrategy TechniqueTechnique ExampleExample

SeparationSeparation Structure service so Structure service so customers must go customers must go where service is where service is offeredoffered

Bank customers go to Bank customers go to a manager to open a a manager to open a new account, to loan new account, to loan officers for loans, and officers for loans, and to tellers for depositsto tellers for deposits

**Self-serviceSelf-service Self-service so Self-service so customers examine, customers examine, compare, and compare, and evaluate at their own evaluate at their own pacepace

Supermarkets and Supermarkets and department stores, department stores, Internet orderingInternet ordering

Table 7.3Table 7.3



PostponementPostponement Customizing at Customizing at deliverydelivery

Customizing vans at Customizing vans at delivery rather than at delivery rather than at productionproduction

FocusFocus Restricting the Restricting the offeringsofferings

Limited-menu Limited-menu restaurantrestaurant

**ModulesModules Modular selection of Modular selection of service, modular service, modular productionproduction

insurance selection, insurance selection, prepackaged food prepackaged food modules in modules in restaurantsrestaurants

Improving Service Improving Service ProductivityProductivity

Table 7.3Table 7.3



**AutomationAutomation Separating services Separating services that may lend that may lend themselves to themselves to automationautomation

Automatic teller Automatic teller machinesmachines

**SchedulingScheduling Precise personnel Precise personnel schedulingscheduling

Scheduling ticket Scheduling ticket counter personnel at counter personnel at 15-minute intervals at 15-minute intervals at airlinesairlines

TrainingTraining Clarifying the service Clarifying the service options, explaining options, explaining how to avoid how to avoid problemsproblems

Investment counselor, Investment counselor, funeral directors, after-funeral directors, after-sale maintenance sale maintenance personnelpersonnel

Improving Service Improving Service ProductivityProductivity

Table 7.3Table 7.3


Other Opportunities to Other Opportunities to ImprovImprovee Service ProService Productivityductivity

LayoutLayout

In restaurants (dining experience)In restaurants (dining experience)

In banks (more comfort for In banks (more comfort for waiting customers, better work waiting customers, better work flow)flow)

Human ResourcesHuman Resources

cross-trained workerscross-trained workers


Selection ofSelection ofEquipment and Equipment and TechnologyTechnology

Often Often involves involves complex decisionscomplex decisions

Possible competitive advantagePossible competitive advantage FlexibilityFlexibility

Stable processesStable processes

May allow enlarging the scope of the May allow enlarging the scope of the processesprocesses


Production TechnologyProduction Technology

CNC MachinesCNC Machines Automatic identification Automatic identification

systems (AISs)systems (AISs) Process controlProcess control Vision systemVision system RobotRobot Automated storage and retrieval systems Automated storage and retrieval systems

(ASRSs)(ASRSs) Automated guided vehicles (AGVs)Automated guided vehicles (AGVs) Flexible manufacturing systems (FMSs)Flexible manufacturing systems (FMSs) Computer-integrated manufacturing (CIM)Computer-integrated manufacturing (CIM)


CNC CNC Machine TechnologyMachine Technology

Increased precisionIncreased precision

Increased productivityIncreased productivity

Increased flexibilityIncreased flexibility

Reduced changeover timeReduced changeover time


Automatic Identification Automatic Identification Systems (AISs)Systems (AISs)

Improved data acquisitionImproved data acquisition

Reduced data entry errorsReduced data entry errors

Increased speedIncreased speed

Increased scope Increased scope of process of process automationautomation

Example – Bar codes and RFIDExample – Bar codes and RFID


Process ControlProcess Control

Process ControlProcess Control is the use of is the use of information technology to monitor and information technology to monitor and control a physical process (sensors)control a physical process (sensors)

- Automated control of - Automated control of temperature, moisture, pressure in temperature, moisture, pressure in heating, in petroleum refineries heating, in petroleum refineries and in cement plantsand in cement plants


Process Control SoftwareProcess Control Software


Vision SystemsVision Systems

Vision systems combine video Vision systems combine video cameras and computer cameras and computer technologyand they ptechnologyand they particulararticularlyly aid aid to inspectionto inspection..

Unlike Unlike individuals performing the individuals performing the same taskssame tasks, vision systems are, vision systems are

Consistently accurateConsistently accurate

Never boredNever bored

Modest costModest cost


RobotsRobots

Perform monotonous or dangerous Perform monotonous or dangerous taskstasks

Perform tasks requiring significant Perform tasks requiring significant strength or endurancestrength or endurance

Generally enhanced consistency Generally enhanced consistency and accuracyand accuracy


Automated Storage and Automated Storage and Retrieval Systems (ASRSs)Retrieval Systems (ASRSs)

ASRSsASRSs are computer-controlled are computer-controlled warehouseswarehouses

Automated placement and Automated placement and withdrawal of parts and productswithdrawal of parts and products

Reduced errors and laborReduced errors and labor


Automated Guided Vehicle Automated Guided Vehicle (AGVs)(AGVs)

Electronically guided and controlled Electronically guided and controlled driverless driverless cartscarts

Used for movement of products Used for movement of products and/or individualsand/or individuals


Flexible Manufacturing Flexible Manufacturing Systems (FMSs)Systems (FMSs)

Computer controls both the workstation Computer controls both the workstation and the material handling equipmentand the material handling equipment

Enhance flexibility and reduced wasteEnhance flexibility and reduced waste

Can economically produce low volume at Can economically produce low volume at high qualityhigh quality

Reduced changeover time and increased Reduced changeover time and increased utilizationutilization

Stringent communication requirement Stringent communication requirement between componentsbetween components


Computer-Integrated Computer-Integrated Manufacturing (CIM)Manufacturing (CIM)

Extension of flexible manufacturing Extension of flexible manufacturing systemssystems Backwards to engineering and inventory Backwards to engineering and inventory

controlcontrol

Forward into warehousing and shippingForward into warehousing and shipping

Can also include financial and customer Can also include financial and customer service areasservice areas

Reducing the distinction between low-Reducing the distinction between low-volume/high-variety, and volume/high-variety, and high-volume/low-variety productionhigh-volume/low-variety production


Computer-Computer-Integrated Integrated

Manufacturing Manufacturing (CIM)(CIM)



SustainabilitySustainability in Production in Production ProcessesProcesses

• It implies the selection and It implies the selection and management of the process management of the process in such a way that it will in such a way that it will support conservation an support conservation an renewal of resources.renewal of resources.

© 2008 Prentice Hall, Inc. 7 – 54©

SustainabilitySustainability

Sustainability in production processes

1. Resources

2. Recycling

3. Regulations

4. Reputation



Resources Operations is primary user

Reducing use is win-win

Recycling Burn, bury, or reuse waste

Recycling begins at design



Regulations Laws affect transportation,

waste, and noise

Increasing regulatory pressure

Reputation Leadership may be rewarded

Bad reputation can have negative consequences

Documents

© 2008 Prentice Hall, Inc.7 – 1 Operations Management Chapter 7 – Process Strategy PowerPoint presentation to accompany Heizer/Render Principles of Operations