© 2006 Prentice Hall, Inc.7 – 1 Operations Management Chapter 7 – Process Strategy © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e

© 2006 Prentice Hall, Inc.7 – 2 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

© 2006 Prentice Hall, Inc.7 – 3 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

© 2006 Prentice Hall, Inc.7 – 4 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 Co. Poor Strategy (Both fixed and variable costs are high) Low Volume Repetitive Process High Volume Volume Figure 7.1

© 2006 Prentice Hall, Inc.7 – 5 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

© 2006 Prentice Hall, Inc.7 – 6 Process Focus Many inputs High variety of outputs Print Shop

© 2006 Prentice Hall, Inc.7 – 7 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

© 2006 Prentice Hall, Inc.7 – 8 Repetitive Focus Raw materials and module inputs Modules combined for many output options Few modules Automobile Assembly Line

© 2006 Prentice Hall, Inc.7 – 9 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

© 2006 Prentice Hall, Inc.7 – 10 Product Focus Many inputs Output variation in size, shape, and packaging Bottling Plant

© 2006 Prentice Hall, Inc.7 – 11 Comparison of Processes See Table 7.2 on page 262 Table 7.2

© 2006 Prentice Hall, Inc.7 – 12 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

© 2006 Prentice Hall, Inc.7 – 13 Mass Customization Vehicle models Vehicle types181,212 Bicycle types819 Software titles0300,000 Web sites046,412,165 Movie releases New book titles40,53077,446 Houston TV channels5185 Breakfast cereals Items (SKUs) in 14,000150,000 supermarkets supermarkets Number of Choices Early 21st ItemEarly 1970sCentury Table 7.1

© 2006 Prentice Hall, Inc.7 – 14 Changing Processes  Difficult and expensive  May mean starting over  Process strategy determines transformation strategy for an extended period  Important to get it right

© 2006 Prentice Hall, Inc.7 – 15 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

© 2006 Prentice Hall, Inc.7 – 16 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

© 2006 Prentice Hall, Inc.7 – 17 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

© 2006 Prentice Hall, Inc.7 – 18 Improving Service Productivity StrategyTechniqueExample SeparationStructure 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-serviceSelf-service so customers examine, compare, and evaluate at their own pace Supermarkets and department stores, internet ordering Table 7.3

© 2006 Prentice Hall, Inc.7 – 19 StrategyTechniqueExample PostponementCustomizing at deliveryCustomizing vans at delivery rather than at production FocusRestricting the offeringsLimited-menu restaurant ModulesModular selection of service, modular production Investment and insurance selection, prepackaged food modules in restaurants Improving Service Productivity Table 7.3

© 2006 Prentice Hall, Inc.7 – 20 StrategyTechniqueExample AutomationSeparating services that may lend themselves to some type of 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

© 2006 Prentice Hall, Inc.7 – 21 Production Technology  Machine technology  Automatic identification systems (AIS)  Process control  Vision system  Robot  Automated storage and retrieval systems (ASRS)  Automated Guided Vehicles  Flexible manufacturing systems (FMS)  Computer-integrated manufacturing (CIM)

© 2006 Prentice Hall, Inc.7 – 22 Automated Guided Vehicle (AGV)  Electronically guided and controlled carts  Used for movement of products and/or individuals  Which sector would this be important in?

© 2006 Prentice Hall, Inc.7 – 23 Technology in Services Service IndustryExample Financial ServicesDebit cards, electronic funds transfer, ATMs, Internet stock trading EducationElectronic bulletin boards, on-line journals 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 CommunicationsElectronic publishing, interactive TV Table 7.4

© 2006 Prentice Hall, Inc.7 – 24 Technology in Services Service IndustryExample HotelsElectronic check-in/check-out, electronic key/lock system Wholesale/retail trade Point-of-sale terminals, e-commerce, electronic communication between store and supplier, bar coded data TransportationAutomatic toll booths, satellite-directed navigation systems Health careOnline patient-monitoring, online medical information systems, robotic surgery AirlinesTicketless travel, scheduling, Internet purchases Table 7.4

© 2006 Prentice Hall, Inc.7 – 25 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

© 2006 Prentice Hall, Inc.7 – 26 Ethics and Environmentally Friendly Processes  Encourage recycling  Efficient use of resources  Reduction of waste by-products  Use less harmful ingredients  Use less energy Reduce the negative impact on the environment