Outline

Four Process Strategies
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Process Focus Repetitive Focus Product Focus Mass Customization Focus Forecasting Capacity Requirements Selection of Equipment and Technology Managing Demand Uncertainty Single-Product Case Multi-product Case

Capacity
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Break-Even Analysis
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Dell Computer Company
“How can we make the process of buying a computer better?” Sells custom-build PCs directly to consumer Integrated the Web into every aspect of its business Operates with six days inventory Builds computers rapidly, at low cost, and only when ordered Research focus on software designed to make installation and configuration of its PCs fast and simple

Process Fit: Volume vs. Variety
Low-Volume (Intermittent) MediumVolume (Modular) High-Volume (Continuous)

Mass Process High Variety Customizatio One or few focus: job n units per run shops, (difficult to (customizatio achieve, but (machine, n) huge print, Repetitive Medium Variety rewards) (Change carpentry) (autos, motorcycles) Dell product with Harley Davidson Computer Co. standardized modules) Product focus Low Variety Poor strategy (Similar (paper, steel, (High products with glass) variable cost) minor changes)

Types of Process Strategies
Classify the process strategies by the level continuum:

ProcessFocused

RepetitiveFocused

ProductFocused

Continuu m

high variety products •‘Jumbled’ flow Product •Other names Operati A on •Intermittent process 1 2 1 2 •Job shop 3 3 Product B .Process-Focused Strategy •Facilities are organized by process •Similar processes are together •Example: All drills or lathes are together •Low volume.

© 1995 Corel Corp. © 1995 Corel Corp. .Process-Focused Strategy Examples Bank Hospital Machi ne Shop © 1995 Corel Corp.

Process-Focused Production Variances of Process Focused Production •University education •Swimming pool remodeling .

quality control…) Low equipment utilization (25% to 45%) Disadvantages    .Pros & Cons (p262) Advantages    Greater product flexibility Use more general purpose equipment Suitable for customization More highly trained personnel More difficult production planning & control (including inventory. maintenance. machine and personnel scheduling.

Process Automation and Flexible Manufacturing System Production Technology   Automated Guided Vehicles (AGV) Automated Storage and Retrieval Systems (ASRSs) Flexible Manufacturing Systems (FMS)   Programmable process Control Vision Systems and Robots .

low variety products •Other names •Continuous process manufacturing •Line flow production •Continuous production Products A & B 1 2 3 1 2 3 Operatio n .Product-Focused Strategy •Facilities are organized to produce a small number of products •High volume.

. Paper (Continuous) © 1984-1994 T/Maker Co. then Discrete) © 1995 Corel Corp.Product-Focused Examples Soft Drinks (Continuou s. Light Bulbs (Discrete) © 1995 Corel Corp.

Product Focused Process .

Product-Focused Strategy Pros & Cons (p242) Advantages     Lower variable cost per unit Use more specialized equipments Easier production planning and control Higher equipment utilization (70% to 90%) Lower product flexibility High shut-down cost Usually higher capital investment Disadvantages    .

Repetitive Focused Strategy Facilities often organized by assembly lines Characterized by modules  Parts & assemblies made previously Modules combined for many output options Other names   Assembly line Production line .

Repetitive-Focused Strategy . © 1995 Corel Corp. Fas t Foo McDonald’s McDonald’s over 95 billion served over 95 billion served d © 1995 Corel Corp.Examples Clothe s Dryer Truc k © 1984-1994 T/Maker Co. .

and custom advantage of low-volume.Strategy Considerations More structured than process-focused. it enjoys economic advantage of continuous process. highvariety model . less structured than product focused Enables quasi-customization Using modules.

Harley-Davidson .

steel. motorcycles) Dell product with Harley Davidson Computer Co. n) huge print. Repetitive Medium Variety rewards) (Change carpentry) (autos. (difficult to (customizatio achieve. Variety Low-Volume (Intermittent) MediumVolume (Modular) High-Volume (Continuous) Mass Process High Variety Customizatio One or few focus: job n units per run shops.Process Fit: Volume vs. standardized modules) Product focus Low Variety Poor strategy (Similar (paper. (High products with glass) variable cost) minor changes) . but (machine.

making variety and volume issues less significant. Under mass customization the three process models become so flexible that distinctions between them blur.Mass Customization Using technology and imagination to rapidly massproduce products that cater to sundry unique customer desires. .

low volume Product focus Continuous Process Low variety.Repetitive Focus Assembly line Modular Design Flexible equipment Modular techniq ues Mass Rapid Scheduling Customization techniques throughp ut Process focus Intermittent process High variety. high volume .

Automated Storage and Retrieval System (ASRS) Provide for automatic placement and withdrawal of parts and products into and from designated places in a warehouse. and retail site . Improve efficiency of material handling and inventory management in both production. distribution.

Automatic Guided Vehicles (AGV) Material handling machines Used to move parts & equipment in manufacturing May be used to deliver mail & meals in service facilities © 1984-1994 T/Maker Co. .

Machine 1 Robot or AGV Computer Auto Tool Chg.Production Technology FMS Using automated machines (DNC) & materials handling equipment together Often connected to centralized computer Also called automated work cell Auto Tool Chg. Machine 2 .

Computer Integrated Manufacturing (CIM) .

Process Reengineering The fundamental rethinking and radical redesign 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 Tools for process redesign across boundaries     Flow Diagrams Process Charts Time-Function/Process Mapping Service Blueprint .

Process Strategies (Ikea and McDonalds Examples) Involve determining how to produce a product or provide a service Objective     Is the process designed to achieve competitive advantage? Does the process eliminate steps that do not add value? Does the process maximize customer value as perceived by the customer? Will the process win orders? .

Time Function Map Order Customer Produ ct Proce Sales ss Order Producti on control Order Recei ve produ ct Wait Order Plant A Warehouse Plant B Transport Print WIP Wait WIP WIP Wait WIP Product Wait Product Extru de Move 1 day 4 days 1 day 10 days 1 day 9 days Move 1 day 12 days 13 days Product .

 = Inspect. ∇ = Storage .Process Chart Example SUBJECT: Request tool purchase Dist (ft) Time (min) Symbol Description  D ∇ Write order 75  ∇ On desk  ² D ∇ To buyer  D ∇ Examine  = Operation. D = Delay.  = Transport.

Showing Sensitivity to the Environment Make products recyclable Use recycled materials Use less harmful ingredients Use light components Use less energy Use less materials .

Process A Process A Process B Process C Lowest cost process .Process B Fixed cost . low variety s t os c P e oc r s l ta To tcos al ess C Tot Pr o c st tal co To B ess c Pr o Fixed cost .Process C Fixed cost . high variety Process B: Repetitive A Process C: High volume.Crossover Chart Process A: low volume.

Facility and Capacity Planning Facility planning answers: How much long-range capacity is needed When more capacity is needed Where facilities should be located (location) How facilities should be arranged (layout) .

Definition and Measures of Capacity Capacit y: Designed Capacity: Effective capacity: The maximum output of a given system in a period The maximum capacity that achieved under ideal can be conditions The percent of design capacity expect actually ed .

work center. or machine Expected capacity Utilization= Capacity Planned hours to be used = Total hours available .Utilization Measure of planned or actual capacity usage of a facility.

Efficiency Measure of how well a facility or machine is performing when used Actual output Efficiency = Effective capacity Actual output in units = Standard output in units Average actual time = Standard time .

g.. Skills) Implement Best Plan . Cost) Qualitative Factors (e..Capacity Planning Process (Apply to Examples) Forecast Demand Compute Effective Capacity Compute Needed Capacity Develop Alternative Plans Evaluate Capacity Plans Select Best Capacity Plan Quantitative Factors (e.g.

Approaches to Capacity Expansion Expected Demand New Capacity Demand Time in Years Capacity leads demand with an incremental expansion .

Approaches to Capacity Expansion Expected Demand New Capacity Time in Years Capacity lags demand with an incremental expansion Demand .

with an incremental expansion .Approaches to Capacity Expansion New Capacity Expected Demand Demand Time in Years Attempts to have an average capacity.

portion of utilities .Breakeven Analysis Technique for evaluating process & equipment alternatives Objective: Find the point ($ or units) at which total cost equals total revenue Fixed costs: costs that continue even if no units are produced: depreciation. mortgage payments Variable costs: costs that vary with the volume of units produced: labor. debt. taxes. materials.

Breakeven Chart Cost in Dollars (Thousands) Total revenue line Breakeven point Total cost = Total revenue Profit Total cost line Variable cost Loss Fixed cost Volume (units/period) .

low variety s t os c P e oc r s l ta To tcos al ess C Tot Pr o c st tal co To B ess c Pr o Fixed cost .Process B Fixed cost .Crossover Chart Process A: low volume.Process C Fixed cost .Process A Process A Process B Process C Lowest cost process . high variety Process B: Repetitive A Process C: High volume.

Managing Existing Capacity Demand Management ♦ Vary prices ♦ Vary promotion ♦ Change lead times (e..g. backorders) ♦ Offer complementary products Capacity Management Vary staffing Change equipment & processes Change methods Redesign the product for faster processing .

000 mobiles 2.Complementary Products Sales (Units) 5.000 Jet Skis 0 J M M J S N J M M J S N J Time (Months) .000 1.000 Snow3.000 Total 4.

postponed differentiation Develop close relationships with suppliers Eliminate all but value-added activities Reevaluating the process of planning.Attaining Lean Production The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance Focus on inventory reduction Modulization. scheduling. and transportations across boundaries .

Techniques for Improving Process Efficiency of Service Strategy Separation Self-service Structure service so customers must go where service is offered Self-service so customers examine. compare and evaluate at their own pace Customizing at delivery Restricting the offerings Technique Postponement Focus .

Techniques for Improving Process Efficiency of Service Modulizarion Automation Scheduling Training Modular selection of service. Modular production Separating services that lend themselves to automation Precise personnel scheduling Clarifying the service options Explaining problems Improving employee flexibility .

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