Chapter 7 Process Strategy

Operations
Management
Chapter 7 –
Process Strategy
PowerPoint presentation to accompany

Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 7–1
Outline
 Global Company Profile: Dell
Computer Corp.
 Four Process Strategies
 Process Focus
 Repetitive Focus
 Product Focus
 Mass Customization Focus
 Comparison of Process Choices
Outline – Continued
 Process Analysis and Design

 Flow Diagrams
 Time-Function Mapping
 Value-Stream Mapping
 Process Charts
 Service Blueprinting

 Service Process Design
 Customer Interaction and Process
Design
 More Opportunities to Improve
Service Processes
 Selection of Equipment and
Technology

 Production Technology
 Machine Technology
 Automatic Identification Systems
(AISs) and RFID
 Process Control
 Vision Systems
 Robots

 Production Technology (cont.)
 Automated Storage and Retrieval
Systems (ASRSs)
 Automated Guided Vehicles (AGVs)
 Flexible Manufacturing Systems
(FMSs)
 Computer-Integrated Manufacturing
(CIM)

 Technology in Services
 Process Redesign
 Ethics and Environmentally
Friendly Processes

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
Dell Computer Company
Mass customization provides a
competitive advantage
 Sell custom-built PCs directly to consumer
 Lean production processes and good
product design allow responsiveness
 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
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,
high variety (machine, print, but huge rewards)
(allows carpentry) Dell Computer
customization) Standard Register
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)
© 2008 Prentice Hall, Inc. 7 – 10
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

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 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 GLUING, BINDING,

DEPT 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

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
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
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
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
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
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
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
Process A Process B Process C
Figure 7.6 (2,857) V1 V2 (6,666) Volume
Focused Processes
 Focus brings efficiency
 Focus on depth of product line
rather than breadth
 Focus can be
 Customers
 Products
 Service
 Technology

Changing Processes
 Difficult and expensive

 May mean starting over
 Process strategy determines
transformation strategy for an
extended period
 Important to get it right

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
“Baseline” Time-Function Map
Order Receive
Customer product product
Process
Sales order
Production Wait
control
Plant A Print
Warehouse Wait Wait Wait
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 7.7
52 days
“Target” Time-Function Map
Order Receive
Customer product product
Process
Sales order
Production
control Wait
Plant Print Extrude
Warehouse Wait
Transport Move
1 day 2 days 1 day 1 day 1 day

6 days
Figure 7.7
Value-Stream Mapping
Figure 7.8
Process Chart
Figure 7.9
Service Blueprint
 Focuses on the customer and

provider interaction
 Defines three levels of interaction
 Each level has different
management issues
 Identifies potential failure points

Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close
Level Customer arrives
#1 for service Customer departs
F
Customer pays bill
Determine Notify
Warm greeting specifics customer
and obtain No and recommend
service request an alternative F
Standard provider
request Can
Level service be F
#2 done and does No
Direct customer customer
to waiting room approve? Notify
customer the
car is ready
F F F
Yes Yes
Perform
Level required work
#3
F
Prepare invoice
Figure 7.10 F
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
Degree of Customization
Low High
Mass Service Professional Service
Private
banking
Commercial
banking
High General-
Full-service purpose law firms
Degree of Labor
stockbroker
Boutiques
Retailing
Service Factory Law clinics Service Shop

Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines
No-frills
Figure 7.11 airlines
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
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
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

Equipment and Technology
 Often complex decisions

 Possible competitive advantage
 Flexibility
 Stable processes
 May allow enlarging the scope of the
processes

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
Automatic Identification
Systems (AISs)
 Improved data acquisition
 Reduced data entry errors
 Increased speed
 Increased scope
of process
automation
Example – Bar codes and RFID

Process Control
 Increased process stability

 Increased process precision
 Real-time provision of information
for process evaluation
 Data available in many forms

Process Control Software

Vision Systems
 Particular aid to inspection

 Consistently accurate
 Never bored
 Modest cost
 Superior to individuals performing
the same tasks

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

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

Automated Guided Vehicle
(AGVs)
 Electronically guided and controlled

carts
 Used for movement of products
and/or individuals

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
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
Computer-
Integrated
Manufacturing
(CIM)
Figure 7.12

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
© 2008 Prentice Hall, Inc.

Table 7.4 7 – 61
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
© 2008 Prentice Hall, Inc.

Table 7.4 7 – 62
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
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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Operations

PowerPoint presentation to accompany

 Process Analysis and Design

© 2008 Prentice Hall, Inc. 7–3

© 2008 Prentice Hall, Inc. 7–4

© 2008 Prentice Hall, Inc. 7–5

© 2008 Prentice Hall, Inc. 7–6

© 2008 Prentice Hall, Inc. 7–7

© 2008 Prentice Hall, Inc. 7 – 11

Many departments and

© 2008 Prentice Hall, Inc. 7 – 14

Vendors PREPRESS DEPT

Accounting Receiving PRINTING DEPT

Warehouse COLLATING GLUING, BINDING,

Information flow POLYWRAP DEPT

Customer Figure 7.2

 Facilities often organized as

© 2008 Prentice Hall, Inc. 7 – 17

Fluids and mufflers Shocks and forks

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

© 2008 Prentice Hall, Inc. 7 – 20

Continuous cast steel

Hot mill for finishing, cooling, and coiling

© 2008 Prentice Hall, Inc. 7 – 21

 The rapid, low-cost production of

© 2008 Prentice Hall, Inc. 7 – 24

Small Long runs, Large Large

General Special Special Rapid

Operators are Employees Operators are Flexible

Many job Repetition Few work Custom

Raw material JIT Raw material Raw material

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

Units move Movement is Swift Goods move

Finished Finished Finished Finished

Scheduling is Scheduling Relatively Sophisticated

Fixed costs Fixed costs Fixed costs Fixed costs

Costing Costs usually High fixed High fixed

© 2008 Prentice Hall, Inc. 7 – 32

 Difficult and expensive

© 2008 Prentice Hall, Inc. 7 – 33

Warehouse Wait Wait Wait

Transport Move Move

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

Plant Print Extrude

1 day 2 days 1 day 1 day 1 day

 Focuses on the customer and

© 2008 Prentice Hall, Inc. 7 – 39

Service Factory Law clinics Service Shop

© 2008 Prentice Hall, Inc. 7 – 47

 Often complex decisions

© 2008 Prentice Hall, Inc. 7 – 48

Example – Bar codes and RFID

 Increased process stability

© 2008 Prentice Hall, Inc. 7 – 52

© 2008 Prentice Hall, Inc. 7 – 53

 Particular aid to inspection

© 2008 Prentice Hall, Inc. 7 – 54

© 2008 Prentice Hall, Inc. 7 – 55

 Automated placement and

© 2008 Prentice Hall, Inc. 7 – 56

 Electronically guided and controlled

© 2008 Prentice Hall, Inc. 7 – 57

© 2008 Prentice Hall, Inc. 7 – 60