Process Strategy

7
PowerPoint presentation to accompany
Heizer, Render, Munson
Operations Management, Twelfth Edition
Principles of Operations Management, Tenth Edition

PowerPoint slides by Jeff Heyl

Copyright © 2017 Pearson Education, Inc. 7-1

 Process Strategy

The objective is to create a process

to produce offerings that meet
customer requirements within cost
and other managerial constraints

Copyright © 2017 Pearson Education, Inc. 7-2

 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

Copyright © 2017 Pearson Education, Inc. 7-3

 Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few units Process Focus Mass Customization
per run, projects, job shops (difficult to achieve, but
(allows (machine, print, huge rewards)
customization) hospitals, Dell Computer
restaurants)
Variety (flexibility)

Arnold Palmer
Hospital
Changes in
Modules
modest runs, Repetitive
standardized (autos, motorcycles,
modules home appliances)
Harley-Davidson

Changes in
Attributes (such as Poor Strategy
grade, quality, size, Product Focus
(Both fixed and (commercial baked goods,
thickness, etc.) variable costs
long runs only steel, glass, beer)
are high) Frito-Lay
Copyright © 2017 Pearson Education, Inc. 7-4
 Process Strategies
Four basic strategies
1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization

Within these basic strategies there are

many ways they may be implemented
Copyright © 2017 Pearson Education, Inc. 7-5
 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
Copyright © 2017 Pearson Education, Inc. 7-6
Process Focus Many inputs
(surgeries, sick patients,
baby deliveries, emergencies)

(low-volume, high-variety,
Many departments and
intermittent processes) many routings
Arnold Palmer Hospital

Figure 7.2(a) Many different outputs

(uniquely treated patients)
Copyright © 2017 Pearson Education, Inc. 7-7
 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

Copyright © 2017 Pearson Education, Inc. 7-8

 Raw materials and
Repetitive module inputs
(multiple engine models,

Focus wheel modules)

Few
modules

(modular)
Harley Davidson

Figure 7.2(b) Modules combined for many

Output options
(many combinations of motorcycles)
Copyright © 2017 Pearson Education, Inc. 7-9
 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

Copyright © 2017 Pearson Education, Inc. 7 - 10

Product Focus Few inputs
(corn, potatoes, water,
seasoning)

(high-volume, low-variety,
continuous process)
Frito-Lay

Output variations in size, shape,

Figure 7.2(c) and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
Copyright © 2017 Pearson Education, Inc. 7 - 11
 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

Copyright © 2017 Pearson Education, Inc. 7 - 12

 Many parts and
Mass component inputs
(chips, hard drives,

Customization software, cases)

Many modules

(high-volume, high-variety)
Dell Computer

Figure 7.2(b) Many output versions

(custom PCs and notebooks)
Copyright © 2017 Pearson Education, Inc. 7 - 13
 Mass Customization
► Imaginative product design
► Flexible process design
► Tightly controlled inventory
management
► Tight schedules
► Responsive partners in the supply-
chain

Copyright © 2017 Pearson Education, Inc. 7 - 14

 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

1. Small quantity 1. Long runs, a 1. Large 1. Large quantity

and large standardized quantity and and large
variety of product from small variety variety of
products modules of products products

2. Broadly 2. Moderately 2. Less broadly 2. Flexible

skilled trained skilled operators
operators employees operators

Copyright © 2017 Pearson Education, Inc. 7 - 15

 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

3. Instructions 3. Few changes 3. Standardized 3. Custom orders

for each job in the job requiring many
instructions instructions job instructions

4. High 4. Low inventory 4. Low 4. Low inventory

inventory inventory relative to the
value of the
product

Copyright © 2017 Pearson Education, Inc. 7 - 16

 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

5. Finished 5. Finished 5. Finished 5. Finished goods

goods are goods are goods are are build-to-
made to order made to made to a order (BTO)
and not frequent forecast and
stored forecasts stored

6. Scheduling is 6. Scheduling is 6. Scheduling is 6. Sophisticated

complex routine routine scheduling
accommodates
custom orders

Copyright © 2017 Pearson Education, Inc. 7 - 17

 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

7. Fixed costs 7. Fixed costs 7. Fixed costs 7. Fixed costs

are low and are dependent are high and tend to be high
variable costs on flexibility of variable costs and variable
high the facility low costs low

Copyright © 2017 Pearson Education, Inc. 7 - 18

 Crossover Charts

Variable Variable Variable

$ costs $ costs $ costs

Fixed costs Fixed costs

Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C
sts sts
co
co
B
sA

s
$ es
es

o c sts
pr co
oc

ta l ss C
pr

To c e
l pro
l
ta

Tota
To

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C
Figure 7.3
(2,857) V1 V2 (6,666) Volume
Copyright © 2017 Pearson Education, Inc. 7 - 19
 Selection of Equipment
▶ Decisions can be complex as alternate
methods may be available
▶ Important factors may be
► Cost ► Quality
► Cash flow ► Capacity
► Market stability ► Flexibility

Copyright © 2017 Pearson Education, Inc. 7 - 20

 Flexibility

► Flexibility is the ability to respond

with little penalty in time, cost, or
customer value
► May be a competitive advantage
► May be difficult and expensive
► Without it, change may mean starting
over

Copyright © 2017 Pearson Education, Inc. 7 - 21

 Process Analysis and Design
► Is the process designed to achieve a
competitive advantage?
► Does the process eliminate steps
that do not add value?
► Does the process maximize
customer value?
► Will the process win orders?

Copyright © 2017 Pearson Education, Inc. 7 - 22

 Process Analysis and Design

► Flowchart
► Shows the movement of materials
► Harley-Davidson flowchart
► Time-Function Mapping
► Shows flows and time frame

Copyright © 2017 Pearson Education, Inc. 7 - 23

 Process Chart

Figure 7.5

Copyright © 2017 Pearson Education, Inc. 7 - 24

 Process Analysis and Design
► Value-Stream Mapping (VSM)
► Where value is added in the entire
production process, including the supply
chain
► Extends from the customer back to the
suppliers

Copyright © 2017 Pearson Education, Inc. 7 - 25

 Value-Stream Mapping
1. Begin with symbols for customer, supplier,
and production to ensure the big picture
2. Enter customer order requirements
3. Calculate the daily production requirements
4. Enter the outbound shipping requirements
and delivery frequency
5. Determine inbound shipping method and
delivery frequency

Copyright © 2017 Pearson Education, Inc. 7 - 26

 Value-Stream Mapping
6. Add the process steps (i.e., machine,
assemble) in sequence, left to right
7. Add communication methods, add their
frequency, and show the direction with
arrows
8. Add inventory quantities between I
every step of the entire flow
9. Determine total working time (value-added
time) and delay (non-value-added time)

Copyright © 2017 Pearson Education, Inc. 7 - 27

 Value-Stream Mapping

Figure 7.6

Copyright © 2017 Pearson Education, Inc. 7 - 28

 Service Blueprinting

► Focuses on the customer and provider

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

Copyright © 2017 Pearson Education, Inc. 7 - 29

 Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close

Level Customer arrives

for service. Customer departs
#1
(3 min)

F
Determine Notify Customer pays bill.
specifics. customer (4 min)
Warm greeting (5 min)
and obtain No and recommend
an alternative F
service request.
(10 sec) provider.
Standard Can F
Level request. (7 min)
service be
#2 (3 min) done and does Notify
Direct customer customer No customer the
to waiting room. approve? car is ready.
(5 min) (3 min)

F F F F
Yes Yes
Perform
Level required work. F Prepare invoice.
#3 (varies) (3 min)

Figure 7.7
Copyright © 2017 Pearson Education, Inc. 7 - 30
 Special Considerations for
Service Process Design
► Some interaction with customer is
necessary, but this often affects
performance adversely
► The better these interactions are
accommodated in the process design, the
more efficient and effective the process
► Find the right combination of cost and
customer interaction

Copyright © 2017 Pearson Education, Inc. 7 - 31

 Service Process Matrix
Degree of Customization
Figure 7.8
Low High
Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking
High General-
Full-service purpose law firms
stockbroker
Degree of Labor

Digitized
Boutiques orthodontics
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
airlines

Copyright © 2017 Pearson Education, Inc. 7 - 32

 Service Process Matrix

Mass Service and Professional Service

► Labor involvement is high
► Focus on human resources
► Selection and training highly
important Degree of Customization
Low High

► Personalized services Mass Service

Commercial
banking
Professional Service
Private
banking
Traditional
orthodontics

High General-
Full-service purpose law
stockbroker firms
Digital

Degree of Labor
Boutiques orthodontics
Retailing
Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals

Airlines

No-frills
airlines

Copyright © 2017 Pearson Education, Inc. 7 - 33

 Service Process Matrix

Service Factory and Service Shop

► Automation of standardized services
► Restricted offerings
► Low labor intensity responds well to
process technology and
scheduling
Degree of Customization
Low High

Mass Service Professional Service

Private Traditional
banking orthodontics
Commercial

Tight control required to

banking

►
High General-
Full-service purpose law
stockbroker firms
Digital

Degree of Labor
Boutiques orthodontics

maintain standards
Retailing
Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals

Airlines

No-frills
airlines

Copyright © 2017 Pearson Education, Inc. 7 - 34

 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
Copyright © 2017 Pearson Education, Inc. 7 - 35
 All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher.
Printed in the United States of America.

Copyright © 2017 Pearson Education, Inc. 7 - 36