Process Management

MGT3303

MGT3303
Michel Leseure
 Toyota Production System

Manufacturer TGW (Things gone wrong)

in First Eight Months per 100 cars

Chrysler 285

GM 256

Ford 214

Japanese 132
(avg)
Toyota 55

Notion of Process Capital

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Michel Leseure
 Process Design
• Process design is about preparing
production
– A process is a sequence of steps
performed for a given purpose.
– More simply stated, process is what you
do. The process integrates people, tools
and procedures together
– More or less integrated with the product
design stage: this integration is a key
challenge!

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Michel Leseure
Process Example

MGT3303
Michel Leseure
Overview of Process
Management
PROCESS M ANAGEM ENT

P rocess S trategy

Technology M anagem ent

P rocesses
P roced ures P rocess
Process D esign/Selection
R outines C apital

P roce ss Analysis/R e-engineering

P ro cess Visibility

MGT3303
Michel Leseure
 Process Strategy
• Process volume & Standardisation
• Capital Intensity
– The extent to which the selected process is mainly dependent on
capital investment (machinery, fixed assets, automation) or not
• Process flexibility
– The ease with which employees and equipment can handle a
wide variety of products, output levels, duties, and functions
• Vertical integration
– The degree to which a firm will handle the whole supply chain
process or only a certain stage of the supply chain (e.g.
assembly)
• Customer involvement

MGT3303
Michel Leseure
Process Volume & Standardisation

Source: Adapted from Robert Hay and Steven Wheelwright, Restoring Competitive Edge:
Competing through Manufacturing (New York: John Wiley & Sons, 1984).

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Michel Leseure
 Capital Intensity

• Process Selection with Break-Even

Analysis
– For a single process,
• find the breakeven point
– Among several processes,
• find the point of indifference

MGT3303
Michel Leseure
 Break-Even Analysis
Total cost = total fixed cost + total variable cost
TC = cf + vcv

Total revenue = volume x price

TR = vp

Total profit = total revenue - total cost

Z = TR - TC = vp - (cf + vcv)

cf = fixed cost
where,
v = volume
cv = variable cost per unit
p =price per unit

MGT3303
Michel Leseure
Solving For Break-Even Point

TR = TC

vp = (cf + vcv)

vp - vcv = cf

v(p - cv) = cf
cf
v = p - cv
MGT3303
Michel Leseure
 Break-Even Example

Fixed cost cf = $2,000

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

cf 2000
v = p - c = 10 - 5
v

= 400 rafts

MGT3303
Michel Leseure
 Break-Even Graph

$5,000
$4,000
TC
Dollars

$3,000
$2,000
TR
$1,000
$0
Units 400
Break even point

© 1998 by Prentice-Hall Inc MGT3303

Russell/Taylor Oper Mgt 2/e Michel Leseure
 Choosing Between Two
Processes
• Find volume where
– Cost of process A = Cost of process
B

• Above point of indifference, choose

process with lowest variable cost

• Below point of indifference, choose

process with lowest fixed cost

MGT3303
Michel Leseure
 Point Of Indifference

Process A Process B
$2,000 + $5v = $10,000 + $2v
$3v = $8,000
v = 2,667 rafts
Below 2,667 rafts, choose A
Above 2,667 rafts, choose B
MGT3303
Michel Leseure
 Graphical Solution to
Process Selection

$25,000
$20,000
Dollars

$15,000 B
$10,000
A
$5,000
$0
0 1000 2000 3000 4000
Units

MGT3303
Michel Leseure
 Process Flexibility
• Product flexibility:
– the ability to introduce a new product whilst incurring only
a minor reconfiguration of plant and equipment.
• Mix flexibility:
– the ability to simultaneously produce two different versions
of a product, or two different products.
• Volume flexibility:
– the ability to process simultaneously on the same
production line large and low volume series without any
major cost differences.
• Delivery flexibility:
– the ability to change scheduled delivery times when needed
without generating too many delays and too many costs.

MGT3303
Michel Leseure
 Process Flexibility

• Investment in process flexibility challenge

the volume/standardisation trade-off
• Allows firms to operate away from the
diagonal of the product process matrix

MGT3303
Michel Leseure
 Make-Or-Buy Decisions

1. Cost
2. Capacity
3. Quality
4. Speed
5. Reliability
6. Expertise

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Michel Leseure
 Process Design/Selection

• Process selection

• Specific equipment selection

• Process plans

• Process analysis

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Michel Leseure
 Documents for Process Plans

• Blueprints - Drawings of product design

• Bill of Materials - List of materials and parts
• Assembly Diagram - Drawing of how parts are
combined to form final product
• Assembly Chart (Product Structure Diagram)
Top down view of product components
• Operations Process Chart - detailed list of
operations to make product
• Routing Sheet - ordered list of m/c’s

MGT3303
Michel Leseure
 Product Structure Diagram
(Assembly Chart)
Packaged
Hand-Vac

Upholstery Crevice Dusting

Hand-Vac Package
tool tool tool

Forward Screw and Rear

housing lock washer housing
assembly assembly assembly

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Michel Leseure
 Make base
Retaining Assemble base and feet
ring (sub-assembly 1)

Cable Bulb Make feet (4)

holder

Assemble sub-assemblies
Shade
1&2 (sub-assembly 3)

Product
Stem
Diagram Make stem Inspect for
mis-wiring Final
inspection

Purchase Assemble lamp

Base Cut cable shade
(final assembly)
Purchase
bulb holder Assemble cable, Make retaining
stem and bulb ring
holder
Feet (sub-assembly 2)

MGT3303
Michel Leseure
 Operations Process Chart

Part name Table leg

Part no. 2410
Usage Table
Assembly No. 437

Oper No. Description Dept. Machine Time Tools

10 Saw to rough length 041
20 Plane to size 043
30 Saw to finished length 041
40 Measure dimensions 051
50 Sand 052

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Michel Leseure
Process Flowchart Symbols

Operations
Inspection

Transportation

Delay

Storage

MGT3303
Michel Leseure
 Date: 9-30-00 Location: Graves Mountain
Analyst: TLR Process: Apple Sauce

Distance
Operation
Transport
Description

Storage
Inspect

(feet)
(min)
Time
Delay
Step
of
process

1 Unload apples from truck 20

2 Move to inspection station 100 ft

Process 3
4
Weigh, inspect, sort
Move to storage
30
50 ft
Flowcharts 5 Wait until needed 360
6 Move to peeler 20 ft
7 Apples peeled and cored 15
8 Soak in water until needed 20
9 Place in conveyor 5
10 Move to mixing area 20 ft
11 Weigh, inspect, sort 30
Page 1 0f 3 Total 480 190 ft

MGT3303
Michel Leseure
 Process Analysis

• Continuous improvement
– Basic tool - process flowchart,
process analysis
– Incremental, continuous pressure
to improve
• Reengineering
– Basic tool - process map
– Radical redesign approach

MGT3303
Michel Leseure
 The Reengineering Process
Strategic Customer
directives requirements data

Benchmark Goals & specifications Baseline

data for process performance Data

Design High level Innovative

Principles Ideas
process map

Key Performance Detailed Model

Measures process map Validation

Pilot study
of new design

Full-scale implementation MGT3303

Michel Leseure
 High-level Process Map

Subprocess Subprocess Output

Input Performance
Goal
Subprocess Subprocess

MGT3303
Michel Leseure
 Design Principles For
Reengineering
1. Organize around outcomes, not tasks
2. Capture information once, at the source
3. Centralize resources with info. tech.
4. Link parallel subprocesses
5. Design to do work right the first time
6. Remove complexity
7. Identify information & technology levers

MGT3303
Michel Leseure
 Techniques For Generating
Innovative Ideas
• Vary entry point to a problem
• Draw analogies
• Change your perspective
• Try inverse brainstorming
• Chain forward as far as possible
• Use attribute brainstorming

MGT3303
Michel Leseure
Technology Management

MGT3303
Michel Leseure
 Automated Material Handling

• Conveyors
• Robots

• Automated guided vehicle systems

(AGVS)
• Automated storage & retrieval systems
(ASRS)

MGT3303
Michel Leseure
 Flexible Manufacturing Systems
(FMS)

• Programmable machine tools

• Controlled by common computer network

• Combines flexibility with efficiency

• Reduces setup & queue times

MGT3303
Michel Leseure
Flexible Manufacturing System
Computer
control
room
Tools
Conveyor

Pallet

CNC
Machine

Load Unload
Finished
Parts Terminal goods
 Robots

• Programmable manipulators that follow

specified paths
• Better than humans for
– hostile environments
– long hours
– consistency

MGT3303
Michel Leseure
 Components Of CIM
IGES,
CAD CAE GT DFM
PDES

TQM Product
Bar codes, design CAD/CAM
EDI
MRP CAPP
Systems Process
JIT/ mgmt CIM planning Cellular
kanban manuf
DSS/ES/
AI MAP,
LAN, TOP, Manuf STEP
satellites

NC/CNC/ AGV, Automated Cells

FMS Robotics
DNC ASRS inspection & centers
MGT3303
Michel Leseure
 Adoption Of Technology

• Technology Readiness
• Need well-designed products & efficient processes

• Technology Design
• Know what to automate

• Technology Selection
• Choose the right level

• Technology Integration
• Have a strategy for incremental automation

MGT3303
Michel Leseure
 Suggested Homework

• Problem 4.1, 4-2, 4-3, 4-4, 4-5, 4-6 p. 153

• Yellow Plates Process Mapping exercise

MGT3303
Michel Leseure