BITS Pilani

Pilani|Dubai|Goa|Hyderabad

Process Strategy

1
Process, Volume, and Variety
Volume

Figure 7.1 Low Repetitive High

Volume Process Volume

High Variety
one or few units Process Focus
per run, high projects, job shops Mass Customization
variety (machine, print, (difficult to achieve, but
(allows carpentry) huge rewards)
customization) Standard Register Dell Computer

Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles)
Harley-Davidson
Changes in
Attributes (such Product Focus
as grade, quality, (commercial baked
size, thickness, Poor Strategy (Both goods, steel, glass)
etc.) fixed and variable Nucor Steel
long runs only costs are high)
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 of
inputs outputs
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 in
Few size, shape,
inputs 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
Figure 7.5
Repetitive Focus
Flexible people
and equipment
Supportive
supply chains Modular techniques

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, standardized quantity, small quantity, large
large variety product made variety of variety of
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
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

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
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

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
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

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
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

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
 Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)

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

$ o st
st

lc t
cos
co

ta l
To Tota
al
t
To

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
 Crossover Charts
Variable $10
$60 $25 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

$ o st
st

lc t
cos
co

ta l
To Tota
al
t
To

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
Cross over charts

23
Practice Problems # Process Strategy
Problem 1
A product is currently made in a process-focused shop,
where fixed costs are $9,000 per year and variable cost is
$50 per unit. The firm is considering a fundamental shift in
process, to repetitive manufacture. The new process would
have fixed costs of $90,000, and variable costs of $5. What
is the crossover point for these processes? For what range
of outputs is each process appropriate?

24

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Practice Problems # Process Strategy
Problem 2
A firm is about to undertake the manufacture of a product, and is
weighing the process configuration options. There are two
intermittent processes under consideration, as well as a
repetitive focus. The smaller intermittent process has fixed costs
of $3,000 per month, and variable costs of $10 per unit. The
larger intermittent process has fixed costs of $12,000 and
variable costs of $2 per unit. A repetitive focus plant has fixed
costs of $50,000 and variable costs of $1 per unit.
a. At what output does the large intermittent process become
cheaper than the small one?
b. At what output does the repetitive process become cheaper
than the larger intermittent process?
25

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Solutions

1. The crossover is at 1800 units annually. For

volumes under 1800, the process focus is cheaper;
for volumes over 1800 units, the repetitive focus is
cheaper. (Four process choices, moderate)
{AACSB: Analytic Skills}
2. (a) at 1125 units, the large job shop becomes
cheaper than the small job shop; (b) at 38,000 units,
the repetitive shop is cheaper than the larger job
shop.

26

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956

Process Analysis and Design
Questions to be asked while analyzing:
 Is the process designed to achieve competitive advantage in terms of
differentiation,
 response, or low cost?
 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?

 Process analysis and design not only address these issues, but also
related OM issues such as throughput, cost, and quality.

 The process is key.

 Examine the process; then continuously
improve the process.
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
Flow Diagram
Customer
Purchasing Customer sales
(order inks, paper, representative
other supplies) take order

Vendors Prepress Department

(Prepare printing plates
Accounting Receiving and negatives)

Warehousing Printing Department

(ink, paper, etc.)

Collating Gluing, binding,

Department stapling, labeling

Information flow Polywrap

Department
Material flow
Shipping
 “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
Process mapping
• Used to identify different types of activities.
• Shows the flow of material, people or information.
• Critical analysis of process maps can improve the
process.
Process mapping symbols
Operation (an activity Beginning or end of process
that directly adds value)

Inspection (a check of Activity

some sort)
Transport (a movement Input or Output from the process
of some thing)

Delay (a wait, e.g. for materials) Direction of flow

Storage (deliberate storage, Decision (exercising discretion)

as opposed to a delay)

Process mapping symbols derived Process mapping symbols derived from

from “Scientific Management” Systems Analysis
Process Chart

Figure 7.9
Value-Stream Mapping

Figure 7.8