3-1 McGraw-Hill/Irwin Operations Strategy Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. Process Technology Chapter 3

3-2 Process technology strategy addresses several issues  Experience and learning  Matching technology to business needs  Product-process and service-process matrix  Impacts of new technologies  Innovator or follower  Outsource or insource  Automation  Centralization and Standardization

3-3 Process Technology: In Manufacturing Companies Sources: Left photo: Reprinted with permission from Dallas Auto Painting & Collision Repair. Right photo: Reprinted with permission from Carnegie Mellon University, Biorobotics Lab.

3-4 Process Technology: In Manufacturing Companies Source: Reprinted with permission from General Motors Corporation.

3-5 Process Technology: In Manufacturing Companies Source: Reprinted with permission from Scharffen Berger Chocolate Maker.

3-6 Process Technology: In Service Companies Source: Reprinted with permission from Amazon.com.

3-7 Process Technology: In Service Companies Source: Reprinted with permission from Vanderlande Industries.

3-8 The Experience and Learning Curves  Experience: Relationship between unit cost and total number of units produced  Learning: Relationship between total labor hours and total number of units produced

3-9 The Experience Curve: Strategic implications  Understanding and capitalizing on sources  Improved labor efficiency  Process yields and improvements  Increased standardization, specialization  Process automation  Product or service redesign  Increased scale or volume  Improved value chain performance  Shared experience effects  Distinguishing between human resource and capital sources of improvement

3-10 Sources of improvement: ITT example

3-11 Example from Boeing

3-12 The Experience Curve: Competitive Effects

3-13 Process technology strategy addresses several issues  Experience and learning  Matching technology to business needs  Product-process and service-process matrix  Impacts of new technologies  Innovator or follower  Outsource or insource  Automation  Centralization and Standardization

3-14 Matching technology to business needs  Types of manufacturing processes  Project  Job Shop  Batch  Repetitive or continuous flow  Mass customization  Types of service processes  Demand-sensitive services  e.g., banks, restaurants, retail stores  Delivered services  e.g., fire and police protection  Quasi-manufacturing  e.g., banks’ back offices, call centers

3-15 Product-Process Matrix: Matching Processes to Product Needs

3-16 Product-Process Matrix: Mapping to Product Requirements Over Time

3-17 Service-Process Matrix: Adaptation of Product-Process Matrix

3-18 Service-Process Matrix: Labor Intensity, Interaction and Customization

3-19 Impacts of new technologies  Incremental improvements in efficiency, quality, etc.  Degree of flexibility  FMS systems  Modularity  Postponement  Set-up time reduction  Lean concepts  Major changes in business model  Skill levels  Scale inconsistent with plant network  Risks in both adoption and in not adopting

3-20 Managing Process Technology in the Face of Dynamic Change

3-21 Technology Choices: Innovate or Follow, Develop In-House or Outside  Innovation: Relationship of process and product innovation  Outsourcing:  Use VI framework  Importance of technology in competitive position  Market impact of technology leader

3-22 Factors in automation  Business issues such as flexibility and fit with strategy  Operational issues such as repeatability and precision and effect on performance drivers such as time to market (e.g Pharmaceutical)  Regulatory issues  Social issues such as technological environment and workforce implications  Labor costs  Sources of improvement and performance drivers

3-23 Process technology strategy addresses several issues  Experience and learning  Matching technology to business needs  Product-process and service-process matrix  Impacts of new technologies  Innovator or follower  Outsource or insource  Automation  Centralization and Standardization

3-24 Intel and copy exactly  Run multiple sites identically to lead plant  Process parameters  Equipment sets  Maintenance  Training  Specifications/documentation  Started when fab start-up yields lagged behind development fabs

3-25 Copy exactly requires additional structure  Structure  Joint engineering teams and control boards  Senior management review  Problem is problem for entire team  Issues?

3-26 Standardization factors  Product standardization (does it vary by market)  Stability of technology (do new technologies leapfrog or evolve)  Basis for learning (technology or worker based)  Levels of volume (eg cars in Brazil)  Ranges of technologies and impact of labor (can you use manual at low volumes)

3-27 Process Technology Strategy Development Approach  Understand the business strategy and competitive environment  Understand the technology trends in the industry  Understand the internal capabilities of the organization  Identify and assess process technology investment alternatives, including multi-plant and automation options, outsourcing, etc.  Develop an implementation plan  Implement, assess and measure benefits