1. © 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

2. © 2006 Prentice Hall, Inc.7 – 2 Outline  Global Company Profile: Dell Computer Co.  Four Process Strategies  Process Analysis And Design  Service Process Design  Selection Of Equipment And Technology  Process Redesign

3. © 2006 Prentice Hall, Inc.7 – 3 Dell Computer Company “How can we make the process of buying a computer better?”  Sell custom-built PCs directly to consumer  Build computers rapidly, at low cost, and only when ordered  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

4. © 2006 Prentice Hall, Inc.7 – 4 Process  A process includes all machine activities, computer processing, human actions, transportation, storage and decisions that are taken from the time a task is authorized by a customer and the time when the product or finished service is delivered to the client.

5. © 2006 Prentice Hall, Inc.7 – 5 Types of Processes  Most ideas can be implemented in any of the four processes (after modifications to initial concept have been made) High-Low (III) Mass production High-High (IV) Mass custom. Low-Low (I) Job shop Low-High (II) Modular production Low High Low High Output variety Output volume

6. © 2006 Prentice Hall, Inc.7 – 6 Types of Processes  Most ideas can be implemented in any of the four processes (after modifications to initial concept have been made) High-Low Cars, Oil, Gas production High-High Digital CDs, PCs. Shoes Cable TV, Software, Low-Low Ship building Skyscrapers Airplanes Low-High Shoes, PCs, Clothing, Designer items Low High Low High Output variety Output volume

7. © 2006 Prentice Hall, Inc.7 – 7 Breakfast Factory Process Type I: Job Shop (Mobile Unit) Menu  Coffee w/o milk  Toast w/o eggs  Bread w/o eggs Production process  Pre-boiled eggs  Pre-brewed coffee  Pre-packaged Type II: Modular Production Menu  Coffee w/o milk  10 Toast types  10 Coffee brands Production process  Toast assembled to order  Coffee brand is brewed to order

8. © 2006 Prentice Hall, Inc.7 – 8 Breakfast Factory Process Type III: Mass Production Menu  Coffee w/o milk  Toast w/o eggs  Bread w/o eggs Production process  Continuous making of toast, coffee and eggs  Automated transportation Type IV: Mass Customization Production Menu  2 Toast types  3 Coffee brands  10 Coffee flavors Production process  Continuous brewing of coffee  Pre-packaged toast  Pre-brewed coffee is flavored to order

9. © 2006 Prentice Hall, Inc.7 – 9 Process Strategies Four basic strategies  Process focus (form of job shop process)  Repetitive focus (also called modular process)  Product focus (also called mass production process)  Mass customization (modified form of product focus process)

10. © 2006 Prentice Hall, Inc.7 – 10 Job Shop (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

11. © 2006 Prentice Hall, Inc.7 – 11 Accounting PRINTING DEPT COLLATING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING Vendors Receiving Warehouse Purchasing PREPRESS DEPT Job Shop Flow Diagram Customer Customer sales representative Information flow Material flow Figure 7.2

12. © 2006 Prentice Hall, Inc.7 – 12 Modular (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

13. © 2006 Prentice Hall, Inc.7 – 13 Modular Cells 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

14. © 2006 Prentice Hall, Inc.7 – 14 Exercise  Design a cup that will be made by job shop process

15. © 2006 Prentice Hall, Inc.7 – 15 Exercise  How would you modify the design to make the same cup using modular or mass production process?

16. © 2006 Prentice Hall, Inc.7 – 16 Mass Production 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

17. © 2006 Prentice Hall, Inc.7 – 17 Mass Production Process Flow 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

18. © 2006 Prentice Hall, Inc.7 – 18 Processes Rapid changeover on flexible equipment Special purpose equipment Special equipment aids in use of assembly line General purpose equipment Large quantity, large variety of products Large quantity, small variety of products Long runs, standardized product made from modules Small quantity, small variety of products Mass Customization (High-volume, high-variety) Product Focus (High-volume, low-variety) Repetitive Focus Low-volume, high-variety) Process Focus (Low volume, low variety) Parts, work processes fall into one standard class. Handful of assembly types Parts, work processes and assembly fall into one standard way Parts, work processes and assembly fall into few similar modules/groups Product parts, work processes and assembly are unique

19. © 2006 Prentice Hall, Inc.7 – 19 Processes  Video: Evolution of Mass production

20. © 2006 Prentice Hall, Inc.7 – 20 Process Analysis and Design  Flow Diagrams - Shows the movement of materials, people, products etc.  Time-Function Mapping - Shows flows and time frame  Value Stream Mapping - Shows flows, time and value added beyond the immediate organization  Process Charts - Uses symbols to show key activities and flows  Service Blueprinting - focuses on customer/provider interaction

21. © 2006 Prentice Hall, Inc.7 – 21 Process Analysis Tools  Flowcharts provide a view of the big picture at level of organization  Time-function mapping adds rigor and a time element  Value stream analysis extends to customers and suppliers  Process charts show detail at the level of a workplace  Service blueprint focuses on customer interaction

22. © 2006 Prentice Hall, Inc.7 – 22 Flow Chart (Example) Move Receive product Extrude Wait Move Wait Print Wait Order product Process order Wait

23. © 2006 Prentice Hall, Inc.7 – 23 Time-Function Mapping 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 9 days 1 day 52 days Figure 7.7 Is anything obviously wrong with this process?

24. © 2006 Prentice Hall, Inc.7 – 24 Time-Function Map (Target) Customer Sales Production control Plant A Warehouse Transport Move Receive product Extrude Wait Print Order product Process order Wait 1 day 0.5 day 0.5 day 1 day 0.5 day 0.5 day 1 day 6 days Figure 7.7 Time-function maps show the global view of a process

25. © 2006 Prentice Hall, Inc.7 – 25 Process Chart Figure 7.8 Micro view of process. Value-added proportion

26. © 2006 Prentice Hall, Inc.7 – 26 Value Stream Mapping (Example) www.epa.gov/lean/toolkit/ch3.htm

27. © 2006 Prentice Hall, Inc.7 – 27 Value Stream Mapping (key) www.epa.gov/lean/toolkit/ch3.htm

28. © 2006 Prentice Hall, Inc.7 – 28 Value Stream Mapping (Example) « Back to Chapter Back to Chapter www.epa.gov/lean/toolkit/ch3.htm

29. © 2006 Prentice Hall, Inc.7 – 29 Process Redesign Activity  Imagine that your group has to change the mailing process of the post office.  Document five to six steps of the old process.  Document five to six steps of the new process

30. © 2006 Prentice Hall, Inc.7 – 30 Process Redesign Solution  Old process  Customer brings mail to store  Customer waits in line  Employee takes mail and weighs it  Employee places stamp on letter  Customer pays for mail  Employee gives customer change  Customer leaves store  New process  Customer brings mail to store  Customer places mail on machine and enters zip code  Machine yields price to mail  Customer pays for mail  Machine pastes scan mark on mail and accepts it  Customer collects change  Customer leaves store

31. © 2006 Prentice Hall, Inc.7 – 31 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

32. © 2006 Prentice Hall, Inc.7 – 32 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

33. © 2006 Prentice Hall, Inc.7 – 33 Cost Patterns What is the difference between the cost you pay for rent and heating costs? How would you write a math equation for the total cost of renting and heating costs?

34. © 2006 Prentice Hall, Inc.7 – 34 Cost Patterns What is the difference between the cost you pay for rent and heating costs? - One is variable cost (changes with use) - The other is fixed cost (Constant with use) How would you write a math equation for the total cost of renting and heating costs? Total Cost = Fixed Cost + (Variable Cost x Usage time) TC = FC + VC x t

35. © 2006 Prentice Hall, Inc.7 – 35 Cost Calculations Find total cost for the following values FC = $1350; VC = $ 2 per hour; Usage Times: 175 hours; 280 hours; 350 hours Total Cost = Fixed Cost + (Variable Cost x Usage time) TC = FC + (VC x t)

36. © 2006 Prentice Hall, Inc.7 – 36 Cost Calculations Find Total cost for the following values FC = $1350; VC = $ 2 per hour; Usage Times: 175 hours; 280 hours; 350 hours Total Cost = Fixed Cost + Variable Cost x Usage time TC = $ 1350 + $ 2 per hour x 175 hours = TC = $ 1350 + $ 2 per hour x 280 hours = TC = $ 1350 + $ 2 per hour x 350 hours =

37. © 2006 Prentice Hall, Inc.7 – 37 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

38. © 2006 Prentice Hall, Inc.7 – 38 Breakeven Homework Introduce POM Software Homework Tasks: - Get the data that is provided to you online (excel sheet document) - Find the appropriate module of the software to use for assignment (Instructions for using software for this homework are online) -Enter the homework data (manually) - Print all the results and write your name on it.