1. Operations Management
Chapter 7 –
Process Strategy
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e

2. Outline Global Company Profile: Dell Computer Corp.
Four Process Strategies
Process Focus
Repetitive Focus
Product Focus
Mass Customization Focus
Comparison of Process Choices

3. Outline – Continued Process Analysis and Design Flow Diagrams
Time-Function Mapping
Value-Stream Mapping
Process Charts
Service Blueprinting

4. Outline – Continued Service Process Design
Customer Interaction and Process Design
More Opportunities to Improve Service Processes
Selection of Equipment and Technology

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

6. Outline – Continued Production Technology (cont.)
Automated Storage and Retrieval Systems (ASRSs)
Automated Guided Vehicles (AGVs)
Flexible Manufacturing Systems (FMSs)
Computer-Integrated Manufacturing (CIM)

7. Outline – Continued Technology in Services Process Redesign
Ethics and Environmentally Friendly Processes

8. Learning Objectives
When you complete this chapter you should be able to:
Describe four production processes
Compute crossover points for different processes
Use the tools of process analysis
Describe customer interaction in process design
Identify recent advances in production technology

9. Mass customization provides a competitive advantage
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

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

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

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

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

14. Many departments and many routings Many variety of outputs
Process Focus
Job Shop
Many departments and many routings
Many inputs
Many variety of outputs

15. Customer sales representative GLUING, BINDING, STAPLING, LABELING
Process Flow Diagram
Customer
Customer sales representative
Vendors
Receiving
Warehouse
Purchasing
PRINTING DEPT
PREPRESS DEPT
Accounting
COLLATING DEPT
GLUING, BINDING, STAPLING, LABELING
POLYWRAP DEPT
SHIPPING
Customer
Information flow
Material flow
Figure 7.2

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

17. Repetitive Focus Automobile Assembly Line
Raw materials and module inputs
Modules combined for many output options
Few modules

18. Frame-building work cells Engines and transmissions
Process Flow Diagram
Frame tube bending
Frame-building work cells
Frame machining
Hot-paint
frame painting
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 JIT arrival schedule
Engines and transmissions
Crating
Figure 7.3

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

20. Output variations in size, shape, and packaging
Product Focus
Continuous Work Flow
Output variations in size, shape, and packaging
Few inputs

21. Hot mill for finishing, cooling, and coiling
Product Focus
Scrap steel
Ladle of molten steel
Electric furnace A B C
Continuous caster
Continuous cast steel sheared into 24-ton slabs
Hot tunnel furnace ft
Hot mill for finishing, cooling, and coiling D E F G H I
Nucor Steel Plant

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

23. Mass Customization Number of Choices Item 1970s 21st Century
Vehicle models
Vehicle types 18 1,212
Bicycle types 8 19
Software titles 0 400,000
Web sites 0 98,116,993
Movie releases
New book titles 40,530 77,446
Houston TV channels 5 185
Breakfast cereals
Items (SKUs) in 14, ,000
supermarkets
LCD TVs
Number of Choices
Item 1970s 21st Century
Table 7.1

24. Flexible people and equipment Supportive supply chains
Mass Customization
Repetitive Focus
Flexible people and equipment
Figure 7.5
Modular techniques
Supportive supply chains
Mass Customization
Effective scheduling techniques
Rapid throughput techniques
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

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

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

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
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

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

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

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

31. Low volume, high variety High volume, low variety
Crossover Charts
Fixed costs
Variable costs $
Low volume, high variety
Process A
Fixed costs
Variable costs $
Repetitive
Process B
Fixed costs
Variable costs $
High volume, low variety
Process C
Total cost
Total cost
Total cost
400,000
300,000
200,000
Volume $ V2
(6,666) V1
(2,857)
Fixed cost Process C
Fixed cost Process B
Fixed cost Process A
Figure 7.6

32. Focused Processes Focus brings efficiency
Focus on depth of product line rather than breadth
Focus can be
Customers
Products
Service
Technology

33. Changing Processes Difficult and expensive May mean starting over
Process strategy determines transformation strategy for an extended period
Important to get it right

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

35. “Baseline” Time-Function Map
Customer
Sales
Production control
Plant A
Warehouse
Plant B
Transport
Order product
Process order
Wait
Move
Receive product
Print
Wait
Move
Wait
Extrude
Wait
12 days
13 days
1 day
4 days
10 days
0 day
52 days
Figure 7.7

36. “Target” Time-Function Map
Customer
Sales
Production control
Plant
Warehouse
Transport
Order product
Process order
Wait
Move
Receive product
Extrude
Wait
Print
1 day
2 days
6 days
Figure 7.7

37. Value-Stream Mapping
Figure 7.8

38. Process Chart
Figure 7.9

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

40. Service Blueprint Figure 7.10 Personal Greeting Service Diagnosis
Perform Service
Friendly Close
Level #1
Customer arrives for service
Warm greeting and obtain service request F
Notify customer the car is ready
Customer departs
Customer pays bill F No
Notify customer and recommend an alternative provider
Standard request
Determine specifics No
Can service be done and does customer approve? F
Level #2
Direct customer to waiting room F
Perform required work
Prepare invoice
Yes F
Level #3
Figure 7.10

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

42. Service Process Matrix
Service Factory
Service Shop
Degree of Customization
Low
High
Degree of Labor
Mass Service
Professional Service
Commercial banking
Private banking
General-
purpose law firms
Law clinics
Full-service stockbroker
Limited-service stockbroker
Retailing
Boutiques
Warehouse and catalog stores
Specialized hospitals
Hospitals
Fast-food restaurants
Fine-dining restaurants
Airlines
No-frills airlines
Figure 7.11

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

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

45. Improving Service Productivity
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

46. Improving Service Productivity
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

47. Improving Service Processes
Layout
Product exposure, customer education, product enhancement
Human Resources
Recruiting and training
Impact of flexibility

48. Equipment and Technology
Often complex decisions
Possible competitive advantage
Flexibility
Stable processes
May allow enlarging the scope of the processes

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)

50. Machine Technology Increased precision Increased productivity
Increased flexibility
Improved environmental impact
Reduced changeover time
Decreased size
Reduced power requirements

51. Automatic Identification Systems (AISs)
Improved data acquisition
Reduced data entry errors
Increased speed
Increased scope of process automation
Example – Bar codes and RFID

52. Process Control Increased process stability
Increased process precision
Real-time provision of information for process evaluation
Data available in many forms

53. Process Control Software

54. Vision Systems Particular aid to inspection Consistently accurate
Never bored
Modest cost
Superior to individuals performing the same tasks

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

56. 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

57. Automated Guided Vehicle (AGVs)
Electronically guided and controlled carts
Used for movement of products and/or individuals

58. 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

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

60. Computer-Integrated Manufacturing (CIM)
Figure 7.12

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

62. 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

63. 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

64. 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