1. 7 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 7 Process Strategy and Sustainability PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl

2. 7 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall Harley-Davidson Repetitive manufacturing works  The leading U.S. motorcycle company  Emphasizes quality and lean manufacturing  Materials as Needed system  Many variations possible  Tightly scheduled repetitive production line

3. 7 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Strategies The objective of a process strategy is to build a production process that meets customer requirements and product specifications within cost and other managerial constraints

4. 7 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall Process, Volume, and Variety Process Focus projects, job shops (machine, print, hospitals, restaurants) Arnold Palmer Hospital Repetitive (autos, motorcycles, home appliances) Harley-Davidson Product Focus (commercial baked goods, steel, glass, beer) Frito-Lay High Variety one or few units per run, (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

5. 7 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

6. 7 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Strategies Four basic strategies 1.Process focus 2.Repetitive focus 3.Product focus 4.Mass customization Within these basic strategies there are many ways they may be implemented

7. 7 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

8. 7 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Focus Many inputs (surgeries, sick patients, baby deliveries, emergencies) Many different outputs (uniquely treated patients) Many departments and many routings Figure 7.2(a) (low volume, high variety, intermittent processes) Arnold Palmer Hospital

9. 7 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

10. 7 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall Repetitive Focus Raw materials and module inputs Modules combined for many Output options (many combinations of motorcycles) Few modules (multiple engine models, wheel modules) Figure 7.2(b) (modular) Harley Davidson

11. 7 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall 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. 7 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall 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 D E F G H I Scrap steel Ladle of molten steel Electric furnace A B C

13. 7 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

14. 7 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall Mass Customization Table 7.1 Vehicle models140286 Vehicle types181,212 Bicycle types8211,000 Software titles0400,000 Web sites0162,000,000 Movie releases per year267765 New book titles40,530300,000 Houston TV channels5185 Breakfast cereals160340 Items (SKUs) in 14,000150,000 supermarkets LCD TVs0102 Number of Choices Item1970s21 st Century

15. 7 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Mass Customization Many parts and component inputs Many output versions (custom PCs and notebooks) Many modules (chips, hard drives, software, cases) Figure 7.2(d) (high-volume, high-variety) Dell Computer

16. 7 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Mass Customization  Imaginative and fast product design  Rapid process design  Tightly controlled inventory management  Tight schedules  Responsive supply chain partners

17. 7 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) Mass Customization (high-volume, high-variety) 1.Small quantity and large variety of products are produced 1.Long runs, usually a standardized product with options, produced from modules 1.Large quantity and small variety of products are produced 1.Large quantity and large variety of products are produced 2.Equipment used is general purpose 2.Special equipment aids in use of an assembly line 2.Equipment used is special purpose 2.Rapid changeover on flexible equipment Table 7.2

18. 7 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) Mass Customization (high-volume, high-variety) 3.Operators are broadly skilled 3.Employees are modestly trained 3.Operators are less broadly skilled 3.Flexible operators are trained for the necessary customization 4.There are many job instructions because each job changes 4.Repetitive operations reduce training and changes in job instructions 4.Work orders and job instructions are few because they are standardized 4.Custom orders require many job instructions Table 7.2

19. 7 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) Mass Customization (high-volume, high-variety) 5.Raw-material inventories high relative to the value of the product 5.JIT procurement techniques are used 5.Raw material inventories are low relative to the value of the product 6.Work-in- process is high compared to output 6.JIT inventory techniques are used 6.Work-in- process inventory is low compared to output 6.Work-in- process inventory driven down by JIT, kanban, lean production Table 7.2

20. 7 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) Mass Customization (high-volume, high-variety) 7.Units move slowly through the facility 7.Assembly is measured in hours and days 7.Swift movement of units through the facility is typical 7.Goods move swiftly through the facility 8.Finished goods are usually made to order and not stored 8.Finished goods made to frequent forecast 8.Finished goods are usually made to forecast and stored 8.Finished goods are often build- to-order (BTO) Table 7.2

21. 7 - 21© 2011 Pearson Education, Inc. publishing as Prentice Hall Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) Mass Customization (high-volume, high-variety) 9.Scheduling is complex, concerned with trade- offs between inventory, capacity, and customer service 9.Scheduling is based on building various models from a variety of modules to forecasts 9.Scheduling is relatively simple, concerned with establishing output rate sufficient to meet forecasts 9.Sophisticated scheduling is required to accommodate custom orders 10.Fixed costs tend to be low and variable costs high 10.Fixed costs dependent on flexibility of the facility 10.Fixed costs tend to be high and variable costs low 10.Fixed costs tend to be high, variable costs must be low Table 7.2

22. 7 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall 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 V1V1 (2,857) V2V2 (6,666) 400,000 300,000 200,000 Volume $ Figure 7.4

23. 7 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Analysis and Design  Is the process designed to achieve a competitive advantage?  Does the process eliminate steps that do not add value?  Does the process maximize customer value?  Will the process win orders?

24. 7 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Analysis and Design  Flow Charts - Shows the movement of materials  Time-Function Mapping - Shows flows and time frame

25. 7 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall “Baseline” Time-Function Map Customer Sales Production control Plant A Warehouse Plant B Transport 12 days13 days1 day4 days1 day10 days1 day0 day1 day 52 days Figure 7.5 Move Receive product Product Extrude Wait WIP Product Move Wait WIP Print Wait Order WIP Order product Process order Wait Order

26. 7 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall “Target” Time-Function Map Customer Sales Production control Plant Warehouse Transport 1 day2 days1 day 6 days Figure 7.5 Move Receive product Product Extrude Wait Print Order WIP Product Order product Process order Wait Order

27. 7 - 27© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Analysis and Design  Flow Charts - 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

28. 7 - 28© 2011 Pearson Education, Inc. publishing as Prentice Hall Value-Stream Mapping Figure 7.6

29. 7 - 29© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Chart Figure 7.7

30. 7 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Blueprinting  Focuses on the customer and provider interaction  Defines three levels of interaction  Each level has different management issues  Identifies potential failure points

31. 7 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall Service Blueprint Personal GreetingService DiagnosisPerform ServiceFriendly Close Level #3 Level #1 Level #2 Figure 7.8 No Notify customer and recommend an alternative provider. (7min) Customer arrives for service. (3 min) Warm greeting and obtain service request. (10 sec) F Direct customer to waiting room. F Notify customer the car is ready. (3 min) Customer departs Customer pays bill. (4 min) F F Perform required work. (varies) Prepare invoice. (3 min) F F Yes F F Standard request. (3 min) Determine specifics. (5 min) No Can service be done and does customer approve? (5 min)

32. 7 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall Special Considerations for Service Process Design  Some interaction with customer is necessary, but this often affects performance adversely  The better these interactions are accommodated in the process design, the more efficient and effective the process  Find the right combination of cost and customer interaction

33. 7 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall Service FactoryService Shop Degree of Customization Low High Degree of Labor Low High Mass Service Professional Service Service Process Matrix 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 7.9 Digital orthodontics Traditional orthodontics

34. 7 - 34© 2011 Pearson Education, Inc. publishing as Prentice Hall 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)

35. 7 - 35© 2011 Pearson Education, Inc. publishing as Prentice Hall Machine Technology  Increased precision  Increased productivity  Increased flexibility  Improved environmental impact  Reduced changeover time  Decreased size  Reduced power requirements

36. 7 - 36© 2011 Pearson Education, Inc. publishing as Prentice Hall Automatic Identification Systems (AISs)  Improved data acquisition  Reduced data entry errors  Increased speed  Increased scope of process automation Example – Bar codes and RFID

37. 7 - 37© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Control  Real-time monitoring and control of processes  Sensors collect data  Devices read data on periodic basis  Measurements translated into digital signals then sent to a computer  Computer programs analyze the data  Resulting output may take numerous forms

38. 7 - 38© 2011 Pearson Education, Inc. publishing as Prentice Hall Vision Systems  Particular aid to inspection  Consistently accurate  Never bored  Modest cost  Superior to individuals performing the same tasks

39. 7 - 39© 2011 Pearson Education, Inc. publishing as Prentice Hall Robots  Perform monotonous or dangerous tasks  Perform tasks requiring significant strength or endurance  Generally enhanced consistency and accuracy

40. 7 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

41. 7 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall Automated Guided Vehicle (AGVs)  Electronically guided and controlled carts  Used for movement of products and/or individuals

42. 7 - 42© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

43. 7 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall 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

44. 7 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall Computer- Integrated Manufacturing (CIM) Figure 7.10

45. 7 - 45© 2011 Pearson Education, Inc. publishing as Prentice Hall Technology in Services Service IndustryExample Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading, on-line banking via cell phone EducationElectronic bulletin boards, on-line journals, WebCT, Blackboard and smart phones Utilities and government Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems, meters allowing homeowners to control energy usage and costs Restaurants and foods Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs CommunicationsInteractive TV, ebooks via Kindle 2 Table 7.4

46. 7 - 46© 2011 Pearson Education, Inc. publishing as Prentice Hall Technology in Services Service IndustryExample HotelsElectronic check-in/check-out, electronic key/lock system, mobile web booking Wholesale/retail trade ATM-like kiosks, point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar coded data, RFID TransportationAutomatic toll booths, satellite-directed navigation systems, WiFi in automobile Health careOnline patient-monitoring, online medical information systems, robotic surgery AirlinesTicketless travel, scheduling, Internet purchases, boarding passes two- dimensional bar codes on smart phones Table 7.4