Process Strategies

Process Strategies….

Please start by watching the following video:

https://www.youtube.com/watch?v=QBE7l07HZsk

Once you have completed the video, please identify a business/company of your choice that meets each one of the process strategies and explain why you choice each business.  The highest scores will be given to the students who think outside the box and find businesses that are not listed on the power point or in the video.  This will require you to do a little research and demonstrate your understanding of what you learned from the video, power point, and text.

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Process Strategy

PowerPoint presentation to accompany

Heizer and Render

Operations Management, Eleventh Edition

Principles of Operations Management, Ninth Edition

 

PowerPoint slides by Jeff Heyl

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© 2014 Pearson Education, Inc.

 

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© 2014 Pearson Education, Inc.

Outline

Global Company Profile:
Harley-Davidson

  • Four Process Strategies
  • Selection of Equipment
  • Process Analysis and Design
  • Special Consideration for Service Process Design

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Outline – Continued

Production Technology

Technology in Services

Process Redesign

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Learning Objectives

When you complete this chapter you should be able to:

  • Describe four process strategies
  • Compute crossover points for different processes
  • Use the tools of process analysis
  • Describe customer interaction in service processes
  • Identify recent advances in production technology

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Harley-Davidson

Repetitive manufacturing works

  • The only major U.S. motorcycle company
  • Emphasizes quality and lean manufacturing
  • Materials as Needed system
  • Many variations possible
  • Tightly scheduled repetitive production line

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Process Flow Diagram

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Process Strategy

The objective is to create a process to produce products that meets customer requirements within cost and other managerial constraints

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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

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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)

Figure 7.1

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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

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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

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Process Focus

Figure 7.2(a)

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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

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Repetitive Focus

Figure 7.2(b)

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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

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Product Focus

Figure 7.2(c)

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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

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Mass Customization

TABLE 7.1 Mass Customization Provides More Choices Than Ever
NUMBER OF CHOICES
ITEM 1970s 21ST CENTURY
Vehicle styles 18 1,212
Bicycle types 8 211,000
Software titles 0 400,000
Web sites 0 255,000,000
Movie releases per year 267 744
New book titles 40,530 300,000
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in supermarkets 14,000 150,000
LCD TVs 0 102

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Mass Customization

Figure 7.2(d)

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Mass Customization

  • Imaginative product design
  • Flexible process design
  • Tightly controlled inventory management
  • Tight schedules
  • Responsive supply-chain partners

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Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types 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 and large variety of products Long runs, usually a standardized product from modules Large quantity and small variety of products Large quantity and large variety of products
Broadly skilled operators Moderately trained employees Less broadly skilled operators Flexible operators

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Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY) REPETITIVE FOCUS (MODULAR) PRODUCT FOCUS (HIGH-VOLUME, LOW-VARIETY) MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY)
Instructions for each job Few changes in the instructions Standardized job instructions Custom orders requiring many job instructions
High inventory Low inventory Low inventory Low inventory relative to the value of the product

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Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY) REPETITIVE FOCUS (MODULAR) PRODUCT FOCUS (HIGH-VOLUME, LOW-VARIETY) MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY)
Finished goods are made to order and not stored Finished goods are made to frequent forecasts Finished goods are made to a forecast and stored Finished goods are build-to-order (BTO)
Scheduling is complex Scheduling is routine Scheduling is routine Sophisticated scheduling accommodates custom orders

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© 2014 Pearson Education, Inc.

Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types 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 are low and variable costs high Fixed costs are dependent on flexibility of the facility Fixed costs are high and variable costs low Fixed costs tend to be high and variable costs low

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Crossover Chart Example

  • Evaluate three different accounting software products
  • Calculate crossover points between software A and B and between software B and C
TOTAL FIXED COST DOLLARS REQUIRED PER ACCOUNTING REPORT
Software A $200,000 $60
Software B $300,000 $25
Software C $400,000 $10

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Crossover Chart Example

  • Software A is most economical from 0 to 2,857 reports
  • Software B is most economical from 2,857 to 6,666 reports

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Crossover Charts

Figure 7.3

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Focused Processes

Focus brings efficiency

Focus on depth of product line rather than breadth

Focus can be

Customers

Products

Service

Technology

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Selection of Equipment

  • Decisions can be complex as alternate methods may be available
  • Important factors may be

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Equipment and Technology

  • Possible competitive advantage
  • Flexibility may be a competitive advantage
  • May be difficult and expensive and may require starting over
  • Important to get it right

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© 2014 Pearson Education, Inc.

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?

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Process Analysis and Design

  • Flowcharts
  • Shows the movement of materials
  • Harley-Davidson flowchart
  • Time-Function Mapping
  • Shows flows and time frame

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“Baseline” Time-Function Map

Figure 7.4(a)

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“Target” Time-Function Map

Figure 7.4(b)

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© 2014 Pearson Education, Inc.

Process Analysis and Design

  • Value-Stream Mapping
  • Where value is added in the entire production process, including the supply chain
  • Extends from the customer back to the suppliers

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Value-Stream Mapping

Begin with symbols for customer, supplier, and production to ensure the big picture

Enter customer order requirements

Calculate the daily production requirements

Enter the outbound shipping requirements and delivery frequency

Determine inbound shipping method and delivery frequency

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Value-Stream Mapping

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Value-Stream Mapping

Figure 7.5

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Process Chart

Figure 7.6

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Service Blueprinting

  • Focuses on the customer and provider interaction
  • Defines three levels of interaction
  • Each level has different management issues
  • Identifies potential failure points

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Service Blueprint

Level

#3

Figure 7.7

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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

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Service Process Matrix

Figure 7.8

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Service Process Matrix

  • Labor involvement is high
  • Focus on human resources
  • Selection and training highly important
  • Personalized services

Mass Service and Professional Service

 

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Service Process Matrix

Service Factory and Service Shop

  • Automation of standardized services
  • Restricted offerings
  • Low labor intensity responds well to process technology and
    scheduling
  • Tight control required to
    maintain standards

 

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Improving Service Productivity

TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Separation Structuring service so customers must go where the 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
Postponement Customizing at delivery Customizing vans at delivery rather than at production
Focus Restricting the offerings Limited-menu restaurant

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Improving Service Productivity

TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Modules Modular selection of service Modular production Investment and insurance selection Prepackaged food modules in restaurants
Automation Separating 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

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Production Technology

  • Machine technology
  • Automatic identification systems (AISs) and RFID
  • Process control
  • Vision systems
  • Robots
  • Automated storage and retrieval systems (ASRSs)
  • Automated guided vehicles (AGVs)
  • Flexible manufacturing systems (FMSs)
  • Computer-integrated manufacturing (CIM)

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Machine Technology

  • Increased precision
  • Increased productivity
  • Increased flexibility
  • Improved environmental impact
  • Reduced changeover time
  • Decreased size
  • Reduced power requirements

Computer numerical

control (CNC)

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Automatic Identification Systems (AISs)

  • Improved data acquisition
  • Reduced data entry errors
  • Increased speed
  • Increased scope
    of process
    automation

Bar codes and RFID

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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

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Vision Systems

  • Particular aid to inspection
  • Consistently
    accurate
  • Never bored
  • Modest cost
  • Superior to
    individuals performing the same tasks

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Robots

  • Perform monotonous or dangerous tasks
  • Perform tasks
    requiring significant
    strength or
    endurance
  • Generally enhanced
    consistency and
    accuracy

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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

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Automated Guided Vehicle (AGVs)

  • Electronically guided and controlled carts
  • Used for movement of products and/or individuals

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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

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Computer-Integrated Manufacturing (CIM)

  • Extend flexible manufacturing
  • 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

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Computer-Integrated Manufacturing (CIM)

Figure 7.9

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Technology in Services

TABLE 7.4 Examples of Technology’s Impact on Services
SERVICE INDUSTRY EXAMPLE
Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading, on-line banking via cell phone
Education Electronic 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
Communications Interactive TV, e-books via Kindle

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Technology in Services

TABLE 7.4 Examples of Technology’s Impact on Services
SERVICE INDUSTRY EXAMPLE
Hotels Electronic check-in/check-out, electronic key/lock systems, mobile Web bookings
Wholesale/retail trade Point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar-coded data, RFID
Transportation Automatic toll booths, satellite-directed navigation systems, Wi-Fi in automobiles
Health care Online patient-monitoring systems, online medical information systems, robotic surgery
Airlines Ticketless travel, scheduling, Internet purchases, boarding passes downloaded as two-dimensional bar codes on smart phones

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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

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Printed in the United States of America.

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200,000+ 60( )V1 = 300,000+ 25( )V1 35V1 =100,000 V1 = 2,857

 

200,000+60

()

V

1

=300,000+25

()

V

1

35V

1

=100,000

V

1

=2,857

 

300,000+ 25( )V2 = 400,000+ 10( )V2 15V2 =100,000 V2 = 6,666

 

300,000+25

()

V

2

=400,000+10

()

V

2

15V

2

=100,000

V

2

=6,666

 

288 PART 2 | DESIGNING OPERATIONS

Technology in Services Just as we have seen rapid advances in technology in the manufacturing sector, so we also find dramatic changes in the service sector. These range from electronic diagnostic equipment at auto repair shops, to blood- and urine-testing equipment in hospitals, to retinal security scan- ners at airports. The hospitality industry provides other examples, as discussed in the OM in Action box “Technology Changes the Hotel Industry.” The McDonald’s approach is to use self-serve kiosks. The labor savings when ordering and speedier checkout service provide valu- able productivity increases for both the restaurant and the customer.

In retail stores, POS terminals download prices quickly to re!ect changing costs or market conditions, and sales are tracked in 15-minute segments to aid scheduling. Drug companies, such

Management decides to make a product

OM runs production process, purchasing components, coordinating suppliers, planning and scheduling operations, overseeing quality and the workforce, and shipping to customers.

Computer-aided manufacturing (CAM) converts raw materials into components or products

Robots and specialized equipment weld, insert, and assemble components.

Robots test it and box the finished product.

Information flows

Material flows

ASRS (above) and AGVs move incoming materials and parts, work-in-process, and complete product.

Computer-aided design (CAD) designs the product and programs the automated production equipment.

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Figure 7.9 Computer-Integrated Manufacturing (CIM) CIM includes computer-aided design (CAD), computer-aided manufacturing (CAM), flexible manufacturing systems (FMSs), automated storage and retrieval systems (ASRSs), automated guided vehicles (AGVs), and robots to provide an integrated and flexible manufacturing process.

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