Operations

Management
Chapter 7
Process Strategy

PowerPoint presentation to accompany

Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc. 71
 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. 72
 Outline Continued

Process Analysis and Design

Flow Diagrams
Time-Function Mapping
Value-Stream Mapping
Process Charts
Service Blueprinting

2008 Prentice Hall, Inc. 73

 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. 74

 Outline Continued
Production Technology
Machine Technology
Automatic Identification Systems
(AISs) and RFID
Process Control
Vision Systems
Robots

2008 Prentice Hall, Inc. 75

 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. 76

 Outline Continued

Technology in Services
Process Redesign
Ethics and Environmentally
Friendly Processes

2008 Prentice Hall, Inc. 77

 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. 78
 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. 79
 Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few Process Focus Mass Customization
units per run, projects, job shops (difficult to achieve,
high variety (machine, print, but huge rewards)
(allows carpentry) Dell Computer
customization) Standard Register
Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles)
Harley-Davidson
Changes in
Attributes Product Focus
(such as grade, (commercial
quality, size, Poor Strategy baked goods,
thickness, etc.) (Both fixed and steel, glass)
long runs only variable costs Nucor Steel
are high)
2008 Prentice Hall, Inc. 7 10
 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

2008 Prentice Hall, Inc. 7 11

 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
2008 Prentice Hall, Inc. 7 12
 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
2008 Prentice Hall, Inc. 7 13
 Process Focus
Job Shop

Many departments and

many routings
Many
Many variety
inputs of
outputs

2008 Prentice Hall, Inc. 7 14

 Process Flow Diagram
Customer

Customer sales
Purchasing
representative

Vendors PREPRESS DEPT

Accounting Receiving PRINTING DEPT

Warehouse COLLATING GLUING, BINDING,

DEPT STAPLING, LABELING

Information flow POLYWRAP DEPT

Material flow
SHIPPING

Customer Figure 7.2

2008 Prentice Hall, Inc. 7 15
 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
2008 Prentice Hall, Inc. 7 16
 Repetitive Focus
Automobile Assembly Line

Raw Modules
materials combined
and for many
module output
inputs options

Few
modules

2008 Prentice Hall, Inc. 7 17

 Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
From Milwaukee
on a JIT arrival
Air cleaners Oil tank work cell schedule

Fluids and mufflers Shocks and forks

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Roller testing
Crating

Figure 7.3
2008 Prentice Hall, Inc. 7 18
 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
2008 Prentice Hall, Inc. 7 19
 Product Focus
Continuous Work Flow

Output
variations
Few in size,
inputs shape,
and
packaging

2008 Prentice Hall, Inc. 7 20

 Product Focus
D A Scrap
Nucor Steel Plant steel
Continuous caster

B
C Electric
Ladle of molten steel furnace

Continuous cast steel

sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
E F

Hot mill for finishing, cooling, and coiling

H G
I

2008 Prentice Hall, Inc. 7 21

 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 22
 Mass Customization
Table 7.1 Number of Choices
Item 1970s 21st Century
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
2008 Prentice Hall, Inc. 7 23
 Mass Customization
Figure 7.5
Repetitive Focus
Flexible people
and equipment
Supportive
supply Modular techniques
chains

Mass Customization
Effective Rapid
scheduling throughput
techniques techniques

Process-Focused Product-Focused
High variety, low volume Low variety, high volume
Low utilization (5% to 25%) High utilization (70% to 90%)
General-purpose equipment Specialized equipment

2008 Prentice Hall, Inc. 7 24

 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Small Long runs, Large Large

quantity, large standardized quantity, small quantity, large
variety of product made variety of variety of
products from modules products products

General Special Special Rapid

purpose equipment purpose changeover
equipment aids in use of equipment on flexible
assembly line equipment

Table 7.2
2008 Prentice Hall, Inc. 7 25
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Operators are Employees Operators are Flexible

broadly are modestly less broadly operators are
skilled trained skilled trained for the
necessary
customization

Many job Repetition Few work Custom

instructions reduces orders and job orders require
as each job training and instructions many job
changes changes in job because jobs instructions
instructions standardized

Table 7.2
2008 Prentice Hall, Inc. 7 26
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Raw material JIT Raw material Raw material

inventories procurement inventories inventories
high techniques are low are low
used

Work-in- JIT inventory Work-in- Work-in-

process is techniques process process
high used inventory is inventory
low driven down
by JIT, lean
production

Table 7.2
2008 Prentice Hall, Inc. 7 27
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Units move Movement is Swift Goods move

slowly measured in movement of swiftly
through the hours and unit through through the
plant days the facility is facility
typical

Finished Finished Finished Finished

goods made goods made goods made goods often
to order to frequent to forecast build-to-order
forecast and stored (BTO)

Table 7.2
2008 Prentice Hall, Inc. 7 28
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Scheduling is Scheduling Relatively Sophisticated

complex, based on simple scheduling
trade-offs building scheduling, required to
between various establishing accommodate
inventory, models from output rate to custom orders
availability, a variety of meet forecasts
customer modules to
service forecasts

Table 7.2
2008 Prentice Hall, Inc. 7 29
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Fixed costs Fixed costs Fixed costs Fixed costs

low, variable dependent on high, variable high, variable
costs high flexibility of costs low costs must be
the facility low

Costing Costs usually High fixed High fixed

estimated known due to costs mean costs and
before job, extensive costs dynamic
known only experience dependent on variable costs
after the job utilization of make costing
capacity a challenge

Table 7.2
2008 Prentice Hall, Inc. 7 30
 Crossover Charts
Variable
costs
Variable Variable
$ costs $ costs $
Fixed costs Fixed costs
Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C
Figure 7.6 (2,857) V1 V2 (6,666) Volume
2008 Prentice Hall, Inc. 7 31
 Focused Processes
Focus brings efficiency
Focus on depth of product line
rather than breadth
Focus can be
Customers
Products
Service
Technology

2008 Prentice Hall, Inc. 7 32

 Changing Processes

Difficult and expensive

May mean starting over
Process strategy determines
transformation strategy for an
extended period
Important to get it right

2008 Prentice Hall, Inc. 7 33

 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 34
 Baseline Time-Function Map
Order Receive
Customer product product

Process
Sales order

Production Wait
control

Plant A Print

Warehouse Wait Wait Wait

Plant B Extrude

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

Figure 7.7
52 days
2008 Prentice Hall, Inc. 7 35
 Target Time-Function Map
Order Receive
Customer product product

Process
Sales order

Production
control Wait

Plant Print Extrude

Warehouse Wait

Transport Move

1 day 2 days 1 day 1 day 1 day

6 days
Figure 7.7
2008 Prentice Hall, Inc. 7 36
 Value-Stream Mapping

Figure 7.8
2008 Prentice Hall, Inc. 7 37
 Process Chart

Figure 7.9
2008 Prentice Hall, Inc. 7 38
 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 39

 Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close
Level Customer arrives
#1 for service Customer departs

F
Customer pays bill
Determine Notify
Warm greeting specifics customer
and obtain No and recommend
service request an alternative F
Standard provider
request Can
Level service be F
#2 done and does No
Direct customer customer
to waiting room approve? Notify
customer the
car is ready
F F F
Yes Yes
Perform
Level required work
#3
F
Prepare invoice

Figure 7.10 F
2008 Prentice Hall, Inc. 7 40
 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 41
 Service Process Matrix
Degree of Customization
Low High
Mass Service Professional Service
Private
banking
Commercial
banking
High General-
Full-service purpose law firms
Degree of Labor

stockbroker
Boutiques
Retailing

Service Factory Law clinics Service Shop

Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines

No-frills
Figure 7.11 airlines
2008 Prentice Hall, Inc. 7 42
 Service Process Matrix
Mass Service and Professional Service
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
2008 Prentice Hall, Inc. 7 43
 Improving Service
Productivity
Strategy Technique Example
Separation Structure service so Bank customers go to
customers must go a manager to open a
where service is new account, to loan
offered officers for loans, and
to tellers for deposits
Self-service Self-service so Supermarkets and
customers examine, department stores,
compare, and Internet ordering
evaluate at their own
pace

Table 7.3
2008 Prentice Hall, Inc. 7 44
 Improving Service
Productivity
Strategy Technique Example
Postponement Customizing at Customizing vans at
delivery delivery rather than at
production
Focus Restricting the Limited-menu
offerings restaurant
Modules Modular selection of Investment and
service, modular insurance selection,
production prepackaged food
modules in
restaurants

Table 7.3
2008 Prentice Hall, Inc. 7 45
 Improving Service
Productivity
Strategy Technique Example
Automation Separating services Automatic teller
that may lend machines
themselves to
automation
Scheduling Precise personnel Scheduling ticket
scheduling counter personnel at
15-minute intervals at
airlines
Training Clarifying the service Investment counselor,
options, explaining funeral directors, after-
how to avoid sale maintenance
problems personnel
Table 7.3
2008 Prentice Hall, Inc. 7 46
 Improving Service
Processes
Layout
Product exposure, customer
education, product enhancement
Human Resources
Recruiting and training
Impact of flexibility

2008 Prentice Hall, Inc. 7 47

 Equipment and Technology

Often complex decisions

Possible competitive advantage
Flexibility
Stable processes
May allow enlarging the scope of the
processes

2008 Prentice Hall, Inc. 7 48

 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 49
 Machine Technology
Increased precision
Increased productivity
Increased flexibility
Improved environmental impact
Reduced changeover time
Decreased size
Reduced power requirements
2008 Prentice Hall, Inc. 7 50
 Automatic Identification
Systems (AISs)
Improved data acquisition
Reduced data entry errors
Increased speed
Increased scope
of process
automation

Example Bar codes and RFID

2008 Prentice Hall, Inc. 7 51
 Process Control

Increased process stability

Increased process precision
Real-time provision of information
for process evaluation
Data available in many forms

2008 Prentice Hall, Inc. 7 52

 Process Control Software

2008 Prentice Hall, Inc. 7 53

 Vision Systems

Particular aid to inspection

Consistently accurate
Never bored
Modest cost
Superior to individuals performing
the same tasks

2008 Prentice Hall, Inc. 7 54

 Robots
Perform monotonous or dangerous
tasks
Perform tasks requiring significant
strength or endurance
Generally enhanced consistency
and accuracy

2008 Prentice Hall, Inc. 7 55

 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

2008 Prentice Hall, Inc. 7 56

 Automated Guided Vehicle
(AGVs)

Electronically guided and controlled

carts
Used for movement of products
and/or individuals

2008 Prentice Hall, Inc. 7 57

 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 58
 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 59
 Computer-
Integrated
Manufacturing
(CIM)

Figure 7.12

2008 Prentice Hall, Inc. 7 60

 Technology in Services
Service Industry Example
Financial Debit cards, electronic funds transfer, ATMs,
Services Internet stock trading
Education Electronic bulletin boards, on-line journals,
WebCT and Blackboard
Utilities and Automated one-man garbage trucks, optical
government mail and bomb scanners, flood warning
systems
Restaurants and Wireless orders from waiters to kitchen,
foods robot butchering, transponders on cars that
track sales at drive-throughs
Communications Electronic publishing, interactive TV

2008 Prentice Hall, Inc.

Table 7.4 7 61
 Technology in Services
Service Industry Example
Hotels Electronic check-in/check-out, electronic
key/lock system
Wholesale/retail ATM-like kiosks, point-of-sale (POS)
trade 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

2008 Prentice Hall, Inc.

Table 7.4 7 62
 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 63
 Ethics and Environmentally
Friendly Processes
Reduce the negative impact on the
environment
Encourage recycling
Efficient use of resources
Reduction of waste by-products
Use less harmful ingredients
Use less energy
2008 Prentice Hall, Inc. 7 64