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Chapter 7

Process Design

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Instructor: Truong Quang Duoc, Ph.D
© 2006 Prentice Hall, Inc.

Learning Objectives
When you complete this lecture, you
should be able to:
1. Describe four process strategies
2. Compute crossover points for different
processes
3. Use the tools of process analysis
4. Describe customer interaction in service
processes
5. Identify recent advances in production
technology 2

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Harley-Davidson
Repetitive manufacturing works
 The only leading U.S. motorcycle company
 Emphasizes quality and lean
manufacturing
 Materials as needed system
 Many variations possible
 Tightly scheduled repetitive production
line
© 2011 Pearson Education, Inc. 3
publishing as Prentice Hall

Process Flow Diagram

Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests

Arrive on a JIT
Air cleaners Oil tank work cell schedule from a
10-station work
cell in
Fluids and mufflers Shocks and forks Milwaukee

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Roller testing
Crating

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Process Design

The objective is to create a process

to produce products that meets
customer requirements within cost
and other managerial constraints

Process Strategy
 Approach to transform resources into goods
and services
 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 Selection and System Design

Facilities and
Forecasting Capacity Equipment
Planning

Product and Layout

Service Design

Process
Technological Selection Work
Change Design

Four Process Strategy

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
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Process, Volume, and Variety

Figure 7.1
Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few units Process Focus Mass Customization
per run, high projects, job shops (difficult to achieve, but
variety (machine, print, huge rewards)
(allows hospital, restaurant) Dell Computer
customization) Arnold Palmer
Variety (flexibility)

Hospital
Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles,
home appliances)
Changes in Harley Davidson
Attributes (such Product Focus
as grade, quality, (commercial baked
size, thickness, Poor Strategy goods, steel, glass,
etc.) (Both fixed and beer)
long runs only variable costs are Frito-Lay
high) 9

Process Focus
 Facilities are organized around specific
activities or processes (intermittent process/
job shop)
 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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Many inputs
Process Focus (surgeries, sick patients,
baby deliveries, emergencies)

Many departments and

many routings

(low volume, high variety,

intermittent processes)
Arnold Palmer Hospital
Many different outputs
Figure 7.2(a) (uniquely treated patients)
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Repetitive Focus
 Facilities often organized as assembly/
production 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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Raw materials and

module inputs
Repetitive (multiple engine models,
wheel modules)
Focus

Few
modules

(modular)
Harley Davidson

Figure 7.2(b) Modules combined for many

Output options
(many combinations of motorcycles) 13

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Product Focus
 Facilities are organized by product:
continuous process
 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 14

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Few Inputs
Product Focus (corn, potatoes,
water, seasoning)

(high-volume, low-variety,
continuous process)
Frito-Lay

Output variations in size,

Figure 7.2(c) shape, and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material) 15

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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
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LCD TVs 0 102

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Many parts and

Mass component inputs
(chips, hard drives,
Customization software, cases)

Many modules

(high-volume, high-variety)
Dell Computer

Many output versions

(custom PCs and notebooks) 18

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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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Requirements to achieve
Mass Customization
Repetitive Focus
Flexible people
And equipment
Supportive
supply Modular techniques
chains

Mass Customization
Effective Rapid
scheduling throughput
techniques techniques

Process-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Product-Focused
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PRODUCT MASS
PROCESS FOCUS REPETITIVE FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

1. Small quantity 1. Long runs, 1. Large 1. Large quantity

and large usually a quantity and and large
variety of standardized small variety variety of
products product from of products products
modules

2. Broadly 2. Moderately 2. Less broadly 2. Flexible

skilled trained skilled operators
operators employees operators

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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

MASS
PROCESS FOCUS REPETITIVE PRODUCT FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

3. Instructions for 3. Few changes 3. Standardized 3. Custom orders

each job in the job requiring many
instructions instructions job instructions

4. High inventory 4. Low inventory 4. Low inventory 4. 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

PRODUCT MASS
PROCESS FOCUS REPETITIVE FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

5. Finished 5. Finished 5. Finished 5. Finished goods

goods are goods are goods are are build-to-
made to order made to made to a order (BTO)
and not frequent forecast and
stored forecasts stored

6. Scheduling is 6. Scheduling is 6. Scheduling is 6. Sophisticated

complex routine routine scheduling
accommodates
custom orders

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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PRODUCT MASS
PROCESS FOCUS REPETITIVE FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

7. Fixed costs 7. Fixed costs 7. Fixed costs 7. Fixed costs

are low and are dependent are high and tend to be high
variable costs on flexibility of variable costs and variable
high the facility low 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

DOLLARS REQUIRED PER

TOTAL FIXED COST
ACCOUNTING REPORT

Software A $200,000 $60

Software B $300,000 $25
Software C $400,000 $10

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Crossover Chart Example

200,000 + ( 60)V = 300,000 + ( 25)V
1 1

35V1 = 100,000
V1 = 2,857
 Software A is most economical from 0 to 2,857 reports

( )
300,000 + 25 V2 = 400,000 + 10 V2( )
15V2 = 100,000
V2 = 6,666
 Software B is most economical from 2,857 to
6,666 reports
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Crossover Charts
Variable
costs
Variable Variable
$ costs $ costs $
Fixed costs Fixed costs
Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Figure 7.3 Process A Process B Process C

(2,857) V1 V2 (6,666) Volume 27

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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

• Cost • Quality
• Cash flow • Capacity
• Market stability • Flexibility

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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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Changing Processes

 Difficult and expensive

 May mean starting over
 Process strategy determines
transformation strategy for an
extended period
 Important to get it right at the first
time
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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 Tools

1. Flow Charts - Shows the movement of
materials, product or people
2. Time-Function Mapping/ process mapping
- Shows flows and time frame
3. Value Stream Mapping - Shows flows and
time and value added beyond the immediate
organization
4. Process Charts - Uses symbols to show key
activities
5. Service Blueprinting - focuses on
customer/provider interaction
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“Baseline” Time-Function Map

Order Receive
Customer
product product

Process
Sales order
Order

Production Wait
control
Product
Order

Plant A Print
Product
WIP

Warehouse Wait Wait Wait

Product
WIP
WIP
WIP

Plant B Extrude

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

Figure 7.4(a) 52 days 34

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“Target” Time-Function Map

Order Receive
Customer
product product

Process
Sales order

Product
Order
Production
Wait
control

Order
WIP
Plant Print Extrude

Product
Warehouse Wait

Product
Transport Move

1 day 2 days 1 day 1 day 1 day

6 days
Figure 7.4(b)
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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
1. Begin with symbols for customer, supplier,
and production to ensure the big picture
2. Enter customer order requirements
3. Calculate the daily production
requirements
4. Enter the outbound shipping requirements
and delivery frequency
5. Determine inbound shipping method and
delivery frequency
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Value-Stream Mapping
6. Add the process steps (i.e., machine,
assemble) in sequence, left to right
7. Add communication methods, add their
frequency, and show the direction with
arrows
8. Add inventory quantities (shown with I )
between every step of the entire flow
9. Determine total working time (value-added
time) and delay (non-value-added time)

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Value-Stream Mapping

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Process Chart

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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
Personal Greeting Service Diagnosis Perform Service Friendly Close

Level Customer arrives

for service. Customer departs
#1
(3 min)
CUSTOMER IS IN CONTROL
F
Determine Notify Customer pays bill.
specifics. (4 min)
Warm greeting customer
(5 min)
and obtain No and recommend
an alternative
F
service request.
(10 sec) provider.
Standard Can F
Level request. (7 min)
service be
#2 (3 min) done and does Notify
Direct customer customer No customer the
to waiting room. approve? car is ready.
(5 min) (3 min)

CUSTOMER INTERACT WITH SERVICE PROVIDER

F F F F
Yes Yes
Perform
Level required work. F Prepare invoice.
#3 (varies) (3 min)

Figure 7.7 42
SERVICE IS REMOVED FROM CUSTOMER’S CONTROL

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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

Degree of Customization
Figure 7.8 Low High
Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking
General-
High purpose law firms
Full-service
stockbroker
Degree of Labor

Digital
Boutiques orthodontics
Retailing

Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines

No-frills
airlines
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Service Process Matrix

Mass Service and Professional Service
 Labor involvement is high
 Selection and training highly important
 Focus on human resources
 Personalized services
Degree of Customization
Low High

Mass Service Professional Service

Private banking
Traditional orthodontics

Commercial banking

High General-
purpose law firms
Full-service
stockbroker
Digital orthodontics
Boutiques

Retailing
Degree of Labor

Law clinics
Service Factory Service Shop

Limited-service stockbroker Specialized hospitals

Warehouse and catalog

stores Fast-food restaurants
Fine-dining restaurants
Low
Hospitals

Airlines

No-frills airlines
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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 Degree of Customization
Low High

Mass Service Professional Service

Private banking
Traditional orthodontics

Commercial banking

High General-
purpose law firms
Full-service
stockbroker
Digital orthodontics
Boutiques

Retailing
Degree of Labor

Law clinics
Service Factory Service Shop
Limited-service stockbroker Specialized hospitals

Warehouse and catalog

stores Fast-food restaurants
Fine-dining restaurants
Low
Hospitals

Airlines

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No-frills airlines

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Improving Service Productivity

TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Separation Structuring service so Bank customers go to a
customers must go where manager to open a new
the service is offered account, to loan officers for
loans, and to tellers for
deposits

Self-service Self-service so customers Supermarkets and

examine, compare, and department stores
evaluate at their own pace
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 Investment and insurance
service selection
Modular production Prepackaged food modules
in restaurants
Automation Separating services that Automatic teller machines
may lend themselves to
some type of automation
Scheduling Precise personnel Scheduling ticket counter
scheduling personnel at 15-minute
intervals at airlines
Training Clarifying the service Investment counselor,
options funeral directors
Explaining how to avoid After-sale maintenance
problems personnel
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Improving Service Processes

 Layout
 Product exposure, customer
education, product enhancement
 Human Resources
 Recruiting and training
 Impact of flexibility

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Production Technology
1. Machine technology
2. Automatic identification
systems (AISs) and RFID
3. Process control
4. Vision systems
5. Robots
6. Automated storage and retrieval systems (ASRSs)
7. Automated guided vehicles (AGVs)
8. Flexible manufacturing systems (FMSs)
9. 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
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Automatic Identification
Systems (AIS)
 Improved data acquisition
 Reduced data entry errors
 Increased speed
 Increased scope of
process automation

Bar codes and RFID 52

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Process Control
 The use of IT to control a physical process
 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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Robotic
Surgery

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Automated Storage and

Retrieval Systems (ASRS)
 Automated placement and withdrawal of
parts and products in a warehouse
 Reduced errors and labor
 Particularly useful in inventory and test areas
of manufacturing firms

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Automated Guided Vehicle

(AGV)
 Electronically guided and controlled carts
 Used for movement of products and/ or
individuals

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Flexible Manufacturing
Systems (FMSs)
 Central 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 59

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Flexible Manufacturing System

Center computer
control room
Tools
Conveyor

Pallet

Machine

Load Unload
Finished
Parts Terminal goods 60

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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)

ASRS and AGVs

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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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Ethics and Environmentally

Friendly Processes
Reduce the negative impact
on the environment
 Encourage recycling
 Efficient use of resources
 Reduction of waste by-products
 Use less harmful ingredients
 Use less energy
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Questions?

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