Process Design

Dr. R K Singh
MDI, Gurgaon

1
Lecture Outline

 Process Planning
 Process Analysis
 Process Innovation
 Technology Decisions

6-2
Process Planning

 Process
 a group of related tasks with specific inputs
and outputs
 Process design
 what tasks need to be done and how they are
coordinated among functions, people, and
organizations
 Process strategy
 an organization’s overall approach for
physically producing goods and services
 Process planning
 converts designs into workable instructions for
manufacture or delivery
6-3
Process Strategy
 Vertical integration
 extent to which firm will produce inputs and control
outputs of each stage of production process
 Capital intensity
 mix of capital (i.e., equipment, automation) and
labor resources used in production process
 Process flexibility
 ease with which resources can be adjusted in
response to changes in demand, technology,
products or services, and resource availability
 Customer involvement
 role of customer in production process

6-4
Outsourcing

 Cost  Speed
 Capacity  Reliability
 Quality  Expertise

6-5
Sourcing Continuum

6-6
Production Systems

Source: Adapted from Robert Hayes and Steven Wheelwright, Restoring the
Competitive Edge Competing through Manufacturing (New York, John Wiley & Sons,
1984), p. 209.
Process Selection

 Projects
 one-of-a-kind production of a product to customer
order
 Batch production
 processes many different jobs at the same time in
groups or batches
 Mass production
 produces large volumes of a standard product for a
mass market
 Continuous production
 used for very-high volume commodity products
6-8
Planning Premises in Process
Design
 Three generic planning premises are in use
in operations management;
 Make-to-Stock: more amenable for systems with
fewer product varieties and high production
volume as in the case of continuous and
streamlined flow systems
 Assemble-to-order: useful for intermittent flow
systems catering to the mid-volume mid-variety
situations
 Make-to-order: organisations typically belong to
manufacturer of high product variety (jumbled
flow process systems) use this planning
methodology 9
 Types of Processes
PROJECT BATCH MASS CONT.

Made-to- Made-to-
Type of
Unique order stock Commodity
product
(customized) (standardized )

One-at-a- Few
Type of Mass Mass
customer time individual
market market
customers

Product
demand Infrequent Fluctuates Stable Very stable

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Types of Processes (cont.)

PROJECT BATCH MASS CONT.

Varied General- Special- Highly

Equipment
purpose purpose automated

Primary Mixing,
type of Specialized
Fabrication Assembly treating,
work contracts
refining

Experts, Limited
Worker Wide range Equipment
skills crafts- range of
of skills monitors
persons skills

6-11
 Types of Processes (cont.)
PROJECT BATCH MASS CONT.

Custom work, Efficiency, Highly efficient,

Advantages latest Flexibility, speed, large capacity,
technology
low cost ease of control

Capital
Non-repetitive, Costly, slow, Difficult to change,
Dis- investment;
small customer difficult to far-reaching errors,
advantages lack of
base, expensive manage limited variety
responsiveness
Machine shops, Automobiles,
Construction, print shops, televisions, Paint, chemicals,
Examples shipbuilding,
bakeries, computers, foodstuffs
spacecraft
education fast food

6-12
 Process Analysis

• systematic examination of all aspects of process to improve

operation

 Building a flowchart
 Determine objectives
 Define process boundaries
 Define units of flow
 Choose type of chart
 Observe process and collect data
 Map out process
 Validate chart
6-13
Process Flowcharts

 look at manufacture of product or

delivery of service from broad
perspective
 Incorporate
 nonproductive activities (inspection,
transportation, delay, storage)
 productive activities (operations)

6-14
Simple Value Chain Flowchart

Copyright 2009 John 6-15

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Process Plans
 Set of documents that detail
manufacturing and service delivery
specifications
 assembly charts
 operations sheets
 quality-control check-sheets

Copyright 2009 John 6-16

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Process Flowchart Symbols

Operations
Inspection
Transportation
Delay
Storage
6-17
Process Flowchart of Apple Processing

6-18
Continuous Improvement

 A process mapping exercise

 Provides vital clues for improvement
 Enables organisations to segregate value added activities from
non-value added
 Concentrate efforts on eliminating non-value added activities
 Business Process Reengineering (BPR) enables organisations to
fundamentally rethink and redesign their business processes.
 Irrespective of the exact methodology used for a BPR exercise
they adopt a three-step approach: Understand – Simplify –
Automate.
 Activity Based Management is a useful management tool to
channelise continuous improvement efforts in an organisation.
 While the cost view in ABM links the cost incidences to various
activities and points to areas that require improvement, the
process view shows how exactly the improvement could be made.

19
 Implementing BPR
A three-step methodology

Understand Simplify the

Automate
the existing Process by
the Process
Process eliminating NVA

Tools used in each step

Process Mapping NVA Analysis EDI

Brainstorming “Should-be” ERP
“As-is” analysis analysis Internet tools
20
 Process Innovation

Continuous improvement
refines the breakthrough

Breakthrough
Improvement

Total redesign Continuous improvement activities

of a process for peak; time to reengineer process

breakthrough
improvements
6-21
 From Function to Process

Product Development
Manufacturing
Purchasing
Accounting

Sales Order Fulfillment

Supply Chain Management

Customer Service

Function Process

6-22
Principles for Redesigning
Processes
 Remove waste, simplify, and consolidate similar
activities
 Link processes to create value
 Capture information digitally at the source and
propagate it through process
 Fit process with sensors and feedback loops that can
prompt action

 Add analytic capabilities to process

 Connect, collect, and create knowledge around process

through all who touch it

Copyright 2009 John 6-23

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Techniques for Generating
Innovative Ideas

 Draw analogies
 a previous solution to an old problem might
work
 Change your perspective
 think like a customer
 bring in persons who have no knowledge of
process
 Try inverse brainstorming
 what would increase cost
 what would displease the customer
Copyright 2009 John 6-24
Wiley & Sons, Inc.
Technology Decisions
 Financial justification of technology
 Purchase cost
 Operating Costs
 Annual Savings
 Revenue Enhancement
 Replacement Analysis
 Risk and Uncertainty

6-25
Process Selection with
Break-Even Analysis
 examines cost trade-offs associated with demand
volume
 Cost
 Fixed costs
 constant regardless of the number of units produced
 Variable costs
 vary with the volume of units produced
 Revenue
 price at which an item is sold
 Total revenue
 is price times volume sold
 Profit
 difference between total revenue and total
cost
Process Selection with
Break-Even Analysis (cont.)

Total cost = fixed cost + total variable

cost
TC = cf + vcv
Total revenue = volume x price
TR = vp
Profit = total revenue - total cost
Z = TR – TC = vp - (cf + vcv)
 Process Selection with
Break-Even Analysis (cont.)

TR = TC
vp = cf + vcv
vp - vcv = cf
v(p - cv) = cf
cf
v= p - cv
Solving for Break-Even Point (Volume)
Break-Even Analysis: Example

Fixed cost = cf = $2,000

Variable cost = cv = $5 per raft
Price = p = $10 per raft

Break-even point is
cf 2000
v=p-c = = 400 rafts
v 10 - 5
Break-Even Analysis: Graph

Dollars

$3,000 — Total cost

line

$2,000 —

$1,000 —

Total revenue
line

400 Units
Break-even point
Process Selection

Process A Process B
$2,000 + $5v = $10,000 + $3v
$2v = $8,000
v = 4,000 rafts

Below or equal to 4,000, choose A

Above or equal to 4,000, choose B
6-31
Components of e-Manufacturing

Copyright 2009 John 6-32

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 A Technology Primer

Product Technology
 Computer-aided  Creates and communicates designs
design (CAD) electronically
 Group  Classifies designs into families for easy
technology (GT) retrieval and modification
 Computer-aided  Tests functionality of CAD designs
engineering electronically
(CAE)
 Collaborative  Facilitates electronic communication and
product exchange of information among designers
commerce and suppliers
(CPC)

Copyright 2009 John 6-33

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A Technology Primer (cont.)

Product Technology
 Product data  Keeps track of design specs and revisions
management
(PDM) for the life of the product
 Product life  Integrates decisions of those involved in
cycle product development, manufacturing, sales,
management customer service, recycling, and disposal
(PLM)
 Defines products “configured” by customers
 Product
configuration who have selected among various options,
usually from a Web site

Copyright 2009 John 6-34

Wiley & Sons, Inc.
A Technology Primer (cont.)

Process Technology
 Standard for  Set standards for communication among
exchange of different CAD vendors; translates CAD data
product model into requirements for automated inspection
data (STEP) and manufacture
 Computer-aided  Electronic link between automated design
design and (CAD) and automated manufacture (CAM)
manufacture
(CAD/CAM)
 Computer aided  Generates process plans based on
process (CAPP) database of similar requirements
 E-procurement  Electronic purchasing of items from e-
marketplaces, auctions, or company
websites

Copyright 2009 John 6-35

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 A Technology Primer (cont.)
Manufacturing Technology
 Computer  Machines controlled by software code to perform a
numerically variety of operations with the help of automated
control (CNC) tool changers; also collects processing information
and quality data
 Flexible  A collection of CNC machines connected by an
manufacturing automated material handling system to produce a
system (FMS)
wide variety of parts
 Manipulators that can be programmed to perform
 Robots
repetitive tasks; more consistent than workers but
less flexible
 Conveyors
 Fixed-path material handling; moves items along a
belt or overhead chain; “reads” packages and
diverts them to different directions; can be very fast
Copyright 2009 John 6-36
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 A Technology Primer (cont.)
Manufacturing Technology
 Automatic guided  A driverless truck that moves material along a
vehicle (AGV) specified path; directed by wire or tape embedded
in floor or by radio frequencies; very flexible
 Automated storage  An automated warehouse—some 26 stores high—
and retrieval in which items are placed in a carousel-type
system (ASRS) storage system and retrieved by fast-moving
stacker cranes; controlled by computer
 Process Control  Continuous monitoring of automated equipment;
makes real-time decisions on ongoing operation,
 Computer- maintenance, and quality
integrated  Automated manufacturing systems integrated
manufacturing through computer technology; also called e-
(CIM)
manufacturing
Copyright 2009 John 6-37
Wiley & Sons, Inc.
A Technology Primer (cont.)
Information Technology
 Business – to –  Electronic transactions between businesses
Business (B2B) usually over the Internet
 Business – to –  Electronic transactions between businesses and
Consumer their customers usually over the Internet
(B2C)  A global information system of computer networks
 Internet that facilitates communication and data transfer
 Communication networks internal to an
 Intranet organization; can be password (i.e., firewall)
protected sites on the Internet
 Intranets connected to the Internet for shared
access with select suppliers, customers, and
 Extranet trading partners
Copyright 2009 John 6-38
Wiley & Sons, Inc.
A Technology Primer (cont.)
Information Technology
 Bar Codes  A series of vertical lines printed on most packages that
identifies item and other information when read by a
 Radio Frequency scanner
Identification tags
(RFID)  An integrated circuit embedded in a tag that can send
and receive information; a twenty-first century bar code
 Electronic data with read/write capabilities
interchange (EDI)  A computer-to-computer exchange of business
documents over a proprietary network; very expensive
 Extensive markup and inflexible
language (XML)
 A programming language that enables computer – to -
 Enterprise resource computer communication over the Internet by tagging
planning (ERP) data before its is sent
 Software for managing basic requirements of an
enterprise, including sales & marketing, finance and
accounting, production & materials management, and
human resources
Copyright 2009 John 6-39
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A Technology Primer (cont.)
Information Technology
 Software for managing flow of goods and information
 Supply chain among a network of suppliers, manufacturers and
management distributors
(SCM)
 Software for managing interactions with customers and
 Customer compiling and analyzing customer data
relationship  An information system that helps managers make
management decisions; includes a quantitative modeling component
(CRM)
and an interactive component for what-if analysis
 Decision support  A computer system that uses an expert knowledge base
systems (DSS) to diagnose or solve a problem
 A field of study that attempts to replicate elements of
 Expert systems human thought in computer processes; includes expert
(ES) systems, genetic algorithms, neural networks, and fuzzy
logic
 Artificial
intelligence (AI)
Copyright 2009 John 6-40
Wiley & Sons, Inc.
Thank you

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