1. © 2008 Prentice Hall, Inc.7 – 1 Operations Management Chapter 7 – Process Strategy PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e

2. © 2008 Prentice Hall, Inc.7 – 2 Process Strategies The objective of a process strategy is to build a production process to transform resources into goods and services so that customer requirements and product specifications will be met within cost and other managerial constraints The objective of a process strategy is to build a production process to transform resources into goods and services so that customer requirements and product specifications will be met within cost and other managerial constraints

3. © 2008 Prentice Hall, Inc.7 – 3 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

4. © 2008 Prentice Hall, Inc.7 – 4 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

5. © 2008 Prentice Hall, Inc.7 – 5 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) Low Volume Repetitive Process High Volume Volume Figure 7.1

6. © 2008 Prentice Hall, Inc.7 – 6 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. © 2008 Prentice Hall, Inc.7 – 7 Process Focus Many inputs Many variety of outputs Job Shop Many departments and many routings

8. © 2008 Prentice Hall, Inc.7 – 8 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. © 2008 Prentice Hall, Inc.7 – 9 Repetitive Focus Raw materials and module inputs Modules combined for many output options Few modules Automobile Assembly Line

10. © 2008 Prentice Hall, Inc.7 – 10 Product 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 From Milwaukee on a JIT arrival schedule Engines and transmissionsFrame tube bending Frame-building work cells Frame machining Hot-paint frame painting Crating Figure 7.3

11. © 2008 Prentice Hall, Inc.7 – 11 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

12. © 2008 Prentice Hall, Inc.7 – 12 Product Focus Few inputs Output variations in size, shape, and packaging Continuous Work Flow

13. © 2008 Prentice Hall, Inc.7 – 13 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 DE F G H I Scrap steel Ladle of molten steel Electric furnace A B C

14. © 2008 Prentice Hall, Inc.7 – 14 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

15. © 2008 Prentice Hall, Inc.7 – 15 Mass Customization Vehicle models140286 Vehicle types181,212 Bicycle types819 Software titles0400,000 Web sites098,116,993 Movie releases267458 New book titles40,53077,446 Houston TV channels5185 Breakfast cereals160340 Items (SKUs) in 14,000150,000 supermarkets supermarkets LCD TVs0102 Number of Choices Item1970s21 st Century Table 7.1

16. © 2008 Prentice Hall, Inc.7 – 16 Requirements To Achieve 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

17. © 2008 Prentice Hall, Inc.7 – 17 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

18. © 2008 Prentice Hall, Inc.7 – 18 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

19. © 2008 Prentice Hall, Inc.7 – 19 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

20. © 2008 Prentice Hall, Inc.7 – 20 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

21. © 2008 Prentice Hall, Inc.7 – 21 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

22. © 2008 Prentice Hall, Inc.7 – 22 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

23. © 2008 Prentice Hall, Inc.7 – 23 Crossover Charts Fixed costs Variable costs $ High volume, low variety Process C Fixed costs Variable costs $ Repetitive Process B Fixed costs Variable costs $ Low volume, high variety Process A Fixed cost Process A Fixed cost Process B Fixed cost Process C Total cost V1V1V1V1 (2,857) V2V2V2V2 (6,666) 400,000300,000200,000 Volume$ Figure 7.6

24. © 2008 Prentice Hall, Inc.7 – 24 Focused Processes  Focus brings efficiency by building a core competence on  Customers (Winterhalter Gastronom, a German Company)  Products (Bosch)  Service (Arnold Palmer Hospital in Orlondo focuses on women and children)  Technology (Texas Instruments focus on only specialized kinds of semiconductors)

25. © 2008 Prentice Hall, Inc.7 – 25 Changing Processes  Difficult and expensive  May mean starting over  Process strategy determines transformation strategy for an extended period  Important to get it right

26. © 2008 Prentice Hall, Inc.7 – 26 Tools to Use in 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

27. © 2008 Prentice Hall, Inc.7 – 27 “Baseline” Time-Function Map Customer Sales Production control Plant A Warehouse Plant B Transport Move Receive product Extrude Wait 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

28. © 2008 Prentice Hall, Inc.7 – 28 “Target” Time-Function Map Customer Sales Production control Plant Warehouse Transport Move Receive product Extrude Wait Print Order product Process order Wait 1 day 2 days 1 day 6 days Figure 7.7

29. © 2008 Prentice Hall, Inc.7 – 29 Value-Stream Mapping Figure 7.8

30. © 2008 Prentice Hall, Inc.7 – 30 Process Chart Figure 7.9

31. © 2008 Prentice Hall, Inc.7 – 31 Service Blueprint  Focuses on the customer and provider interaction  Defines three levels of interaction  Each level has different management issues  Identifies potential failure points

32. © 2008 Prentice Hall, Inc.7 – 32 Notify customer the car is ready Customer departs Customer pays bill F F Service Blueprint Personal GreetingService DiagnosisPerform ServiceFriendly CloseLevel#3Level#1 Level#2 Figure 7.10 No Notify customer and recommend an alternative provider Customer arrives for service Warm greeting and obtain service request F Direct customer to waiting room F Perform required work Prepare invoiceYesYes F F Standard request Determine specificsNo Can service be done and does customer approve? FF

33. © 2008 Prentice Hall, Inc.7 – 33 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

34. © 2008 Prentice Hall, Inc.7 – 34 Service Factory Service Shop Degree of Customization Low High Degree of Labor Low High Mass Service Professional Service Service Process Matrix Gives Operations Managers Insight in Service Process Design 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 airlines Figure 7.11

35. © 2008 Prentice Hall, Inc.7 – 35 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

36. © 2008 Prentice Hall, Inc.7 – 36 Techniques for Improving Service Productivity StrategyTechniqueExample 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

37. © 2008 Prentice Hall, Inc.7 – 37 StrategyTechniqueExample 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 insurance selection, prepackaged food modules in restaurants Improving Service Productivity Table 7.3

38. © 2008 Prentice Hall, Inc.7 – 38 StrategyTechniqueExample *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 Improving Service Productivity Table 7.3

39. © 2008 Prentice Hall, Inc.7 – 39 Other Opportunities to Improve Service Productivity  Layout In restaurants (dining experience) In restaurants (dining experience) In banks (more comfort for waiting customers, better work flow) In banks (more comfort for waiting customers, better work flow)  Human Resources cross-trained workers cross-trained workers

40. © 2008 Prentice Hall, Inc.7 – 40 Selection ofEquipment and Technology  Often involves complex decisions  Possible competitive advantage  Flexibility  Stable processes  May allow enlarging the scope of the processes

41. © 2008 Prentice Hall, Inc.7 – 41 Production Technology  CNC Machines  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)

42. © 2008 Prentice Hall, Inc.7 – 42 CNC Machine Technology  Increased precision  Increased productivity  Increased flexibility  Reduced changeover time

43. © 2008 Prentice Hall, Inc.7 – 43 Automatic Identification Systems (AISs)  Improved data acquisition  Reduced data entry errors  Increased speed  Increased scope of process automation Example – Bar codes and RFID

44. © 2008 Prentice Hall, Inc.7 – 44 Process Control  Process Control is the use of information technology to monitor and control a physical process (sensors) - Automated control of temperature, moisture, pressure in heating, in petroleum refineries and in cement plants - Automated control of temperature, moisture, pressure in heating, in petroleum refineries and in cement plants

45. © 2008 Prentice Hall, Inc.7 – 45 Process Control Software

46. © 2008 Prentice Hall, Inc.7 – 46 Vision Systems Vision systems combine video cameras and computer technologyand they particularly aid to inspection. Vision systems combine video cameras and computer technologyand they particularly aid to inspection. Unlike individuals performing the same tasks, vision systems are Unlike individuals performing the same tasks, vision systems are  Consistently accurate  Never bored  Modest cost

47. © 2008 Prentice Hall, Inc.7 – 47 Robots  Perform monotonous or dangerous tasks  Perform tasks requiring significant strength or endurance  Generally enhanced consistency and accuracy

48. © 2008 Prentice Hall, Inc.7 – 48 Automated Storage and Retrieval Systems (ASRSs)  ASRSs are computer-controlled warehouses  Automated placement and withdrawal of parts and products  Reduced errors and labor

49. © 2008 Prentice Hall, Inc.7 – 49 Automated Guided Vehicle (AGVs)  Electronically guided and controlled driverless carts  Used for movement of products and/or individuals

50. © 2008 Prentice Hall, Inc.7 – 50 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

51. © 2008 Prentice Hall, Inc.7 – 51 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

52. © 2008 Prentice Hall, Inc.7 – 52 Computer- Integrated Manufacturing (CIM) Figure 7.12

53. © 2008 Prentice Hall, Inc.7 – 53 Sustainability in Production Processes It implies the selection and management of the process in such a way that it will support conservation an renewal of resources.It implies the selection and management of the process in such a way that it will support conservation an renewal of resources.

54. © 2008 Prentice Hall, Inc.7 – 54 © Sustainability  Sustainability in production processes 1.Resources 2.Recycling 3.Regulations 4.Reputation

55. © 2008 Prentice Hall, Inc.7 – 55 Sustainability  Resources  Operations is primary user  Reducing use is win-win  Recycling  Burn, bury, or reuse waste  Recycling begins at design

56. © 2008 Prentice Hall, Inc.7 – 56 Sustainability  Regulations  Laws affect transportation, waste, and noise  Increasing regulatory pressure  Reputation  Leadership may be rewarded  Bad reputation can have negative consequences