NATIONAL ECONOMICS UNIVERSITY

OPERATIONS MANAGEMENT

PROCESS STRATEGY MSc. Le Phan Hoa

 CONTENT

1. PROCESS STRATEGY DEFINITION

2. TYPES OF PROCESS STRATEGY
3. PROCESS ANALYSIS AND DESIGN
4. PRODUCT TECHNOLOGY
LEARNING OBJECTIVES
When you complete this chapter you should be able to :
1. Describe four production processes
2. Compute crossover points for different processes
3. Use the tools of process analysis
4. Describe customer interaction in process design
5. Identify recent advances in production technology
DEFINITION
Process Strategies
• A process (or transformation) strategy is an organization’s approach
to transform resources into goods and services.
TYPES OF PROCESS STRATEGY
Criteria
• Volume
• Variety
• Level of specialization
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
Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few Process Focus Mass Customization
units per run, projects, job shops (difficult to achieve, but
high variety (machine, print, huge rewards)
(allows carpentry) Dell Computer
customization) Standard Register
Appy for service
Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles)
Harley-Davidson
Changes in
Attributes Product Focus
(such as grade, (commercial
quality, size, Poor Strategy baked goods,
thickness, etc.) (Both fixed and steel, glass)
long runs only variable costs Nucor Steel
are high)
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
Process Focus
Job Shop

Many departments and

many routings
Many
Many variety
inputs of
outputs
Process Flow Diagram
Customer

Customer sales
Purchasing
representative

Vendors PREPRESS DEPT

Accounting Receiving PRINTING DEPT

Warehouse COLLATING DEPT GLUING, BINDING,

STAPLING, LABELING

Information flow POLYWRAP DEPT

Material flow
SHIPPING

Customer Figure 7.2

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
 Repetitive Focus
Automobile Assembly Line

Raw Modules
materials combined
and for many
module output
inputs options

Few
modules
 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
From Milwaukee
on a JIT arrival
Air cleaners Oil tank work cell schedule

Fluids and mufflers Shocks and forks

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Roller testing
Crating

Figure 7.3
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
 Product Focus
Continuous Work Flow

Output
variations
Few in size,
inputs shape,
and
packaging
 Product Focus
D A Scrap
Nucor Steel Plant steel

Continuous caster

B
C Electric
Ladle of molten steel furnace

Continuous cast steel

sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
E F

Hot mill for finishing, cooling, and coiling

H G
I
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
Mass Customization
Table 7.1 Number of Choices
Item 1970s 21st Century
Vehicle models 140 286
Vehicle types 18 1,212
Bicycle types 8 19
Software titles 0 400,000
Web sites 0 98,116,993
Movie releases 267 458
New book titles 40,530 77,446
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in 14,000 150,000
supermarkets
LCD TVs 0 102
Mass Customization
Figure 7.5
Repetitive Focus
Flexible people
and equipment
Supportive
supply Modular techniques
chains

Mass Customization
Effective Rapid
scheduling throughput
techniques techniques

Process-Focused Product-Focused
High variety, low volume Low variety, high volume
Low utilization (5% to 25%) High utilization (70% to 90%)
General-purpose equipment Specialized equipment
Work in group to fill in this table
Process Repetiti Product Mass
Focus ve Focus Customization
Example
Quantity & variety
Type of
equipment
Skills of labor
Raw material
Inventories
Work-in-process
inventory
Costs (fix and
variable)
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Small Long runs, Large Large

quantity, large standardized quantity, small quantity, large
variety of product made variety of variety of
products from modules products products

General Special Special Rapid

purpose equipment purpose changeover
equipment aids in use of equipment on flexible
assembly line equipment

Table 7.2
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Operators are Employees Operators are Flexible

broadly are modestly less broadly operators are
skilled trained skilled trained for the
necessary
customization

Many job Repetition Few work Custom

instructions reduces orders and job orders require
as each job training and instructions many job
changes changes in job because jobs instructions
instructions standardized

Table 7.2
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Raw material JIT Raw material Raw material

inventories procurement inventories inventories
high techniques are low are low
used

Work-in- JIT inventory Work-in- Work-in-

process is techniques process process
high used inventory is inventory
low driven down
by JIT, lean
production

Table 7.2
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Units move Movement is Swift Goods move

slowly measured in movement of swiftly
through the hours and unit through through the
plant days the facility is facility
typical

Finished Finished Finished Finished

goods made goods made goods made goods often
to order to frequent to forecast build-to-order
forecast and stored (BTO)

Table 7.2
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Scheduling is Scheduling Relatively Sophisticated

complex, based on simple scheduling
trade-offs building scheduling, required to
between various establishing accommodate
inventory, models from output rate to custom orders
availability, a variety of meet forecasts
customer modules to
service forecasts

Table 7.2
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

Fixed costs Fixed costs Fixed costs Fixed costs

low, variable dependent on high, variable high, variable
costs high flexibility of costs low costs must be
the facility low

Costing Costs usually High fixed High fixed

estimated known due to costs mean costs and
before job, extensive costs dynamic
known only experience dependent on variable costs
after the job utilization of make costing
capacity a challenge

Table 7.2
PROCESS ANALYSIS AND DESIGN
Process Analysis and Design
 Flow Diagrams - 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
Process Analysis Tools
 Flowcharts provide a view of the
big picture
 Time-function mapping adds rigor
and a time element
 Value-stream analysis extends to
customers and suppliers
 Process charts show detail
 Service blueprint focuses on
customer interaction
Service Process Matrix
Mass Service and Professional Service
 Labor involvement is high
 Selection and training highly important
 Focus on human resources
 Personalized services
Service Factory and Service Shop
 Automation of standardized services
 Low labor intensity responds well to process
technology and scheduling
 Tight control required to maintain standards
Improving Service Productivity

Strategy Technique Example

Separation Structure service so Bank customers go to
customers must go a manager to open a
where service is new account, to loan
offered officers for loans, and
to tellers for deposits
Self-service Self-service so Supermarkets and
customers examine, department stores,
compare, and Internet ordering
evaluate at their own
pace

Table 7.3
Improving Service Productivity

Strategy Technique Example

Postponement Customizing at Customizing vans at
delivery delivery rather than at
production
Focus Restricting the Limited-menu
offerings restaurant
Modules Modular selection of Investment and
service, modular insurance selection,
production prepackaged food
modules in
restaurants

Table 7.3
Improving Service Productivity

Strategy Technique Example

Automation Separating services Automatic teller
that may lend machines
themselves to
automation
Scheduling Precise personnel Scheduling ticket
scheduling counter personnel at
15-minute intervals at
airlines
Training Clarifying the service Investment counselor,
options, explaining funeral directors, after-
how to avoid sale maintenance
problems personnel
Table 7.3
Improving Service Processes

 Layout
 Product exposure, customer education,
product enhancement
 Human Resources
 Recruiting and training
 Impact of flexibility
PRODUCT TECHNOLOGY
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)
Machine Technology
 Increased precision
 Increased productivity
 Increased flexibility
 Improved environmental impact
 Reduced changeover time
 Decreased size
 Reduced power requirements
Technology in Services
Service Industry Example
Financial Debit cards, electronic funds transfer, ATMs,
Services Internet stock trading
Education Electronic bulletin boards, on-line journals,
WebCT and Blackboard
Utilities and Automated one-man garbage trucks, optical
government mail and bomb scanners, flood warning
systems
Restaurants and Wireless orders from waiters to kitchen,
foods robot butchering, transponders on cars that
track sales at drive-throughs
Communications Electronic publishing, interactive TV

Table 7.4
Technology in Services
Service Industry Example
Hotels Electronic check-in/check-out, electronic
key/lock system
Wholesale/retail ATM-like kiosks, point-of-sale (POS)
trade terminals, e-commerce, electronic
communication between store and supplier,
bar coded data
Transportation Automatic toll booths, satellite-directed
navigation systems
Health care Online patient-monitoring, online medical
information systems, robotic surgery
Airlines Ticketless travel, scheduling, Internet
purchases

Table 7.4
THANK YOU!