Operations Mang CASE 2

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process_strategy.ppt

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Process, Volume, and Variety

Process Focus

projects, job shops (machine, print, carpentry)

Standard Register

Repetitive

(autos, motorcycles)

Harley Davidson

Product Focus

(commercial baked goods, steel, glass)

Nucor Steel

High Variety

one or few units per run, high variety

(allows customization)

Changes in Modules

modest runs, standardized modules

Changes in Attributes (such as grade, quality, size, thickness, etc.)

long runs only

Mass Customization

(difficult to achieve, but huge rewards)

Dell Computer Co.

Poor Strategy (Both fixed and variable costs are high)

Figure 7.1

Volume

Low Volume

Repetitive Process

High Volume

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Process Flow Diagram

Figure 7.2

Accounting

PRINTING DEPT

COLLATING DEPT

GLUING, BINDING, STAPLING, LABELING

POLYWRAP DEPT

SHIPPING

Vendors

Receiving

Warehouse

Purchasing

PREPRESS DEPT

Customer

Customer sales representative

Information flow

Material flow

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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

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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

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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

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Process Focus

Print Shop

Many inputs

High variety of outputs

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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

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Repetitive Focus

Automobile Assembly Line

Raw materials and module inputs

Modules combined for many output options

Few modules

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Process Flow Diagram

Figure 7.3

Oil tank work cell

Shocks and forks

Handlebars

Fender work cell

Air cleaners

Fluids and mufflers

Fuel tank work cell

Wheel work cell

TESTING

28 tests

Roller testing

THE ASSEMBLY LINE

Engines and transmissions

Incoming parts

From Milwaukee on a JIT arrival schedule

Frame tube bending

Frame-building work cells

Frame machining

Hot-paint

frame painting

Crating

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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

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Product Focus

Bottling Plant

Many inputs

Output variation in size, shape, and packaging

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Product Focus

Nucor Steel Plant

Continuous caster

Continuous cast steel sheared into 24-ton slabs

Hot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coiling

Scrap steel

Ladle of molten steel

Electric furnace

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Comparison of Processes

Table 7.2

Process Focus (Low volume, high variety)	Repetitive Focus (Modular)	Product Focus (High-volume, low-variety)	Mass Customization (High-volume, high-variety)
Small quantity, large variety of products	Long runs, standardized product made from modules	Large quantity, small variety of products	Large quantity, large variety of products
General purpose equipment	Special equipment aids in use of assembly line	Special purpose equipment	Rapid changeover on flexible equipment

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Comparison of Processes

Table 7.2

Process Focus (Low volume, high variety)	Repetitive Focus (Modular)	Product Focus (High-volume, low-variety)	Mass Customization (High-volume, high-variety)
Operators are broadly skilled	Employees are modestly trained	Operators are less broadly skilled	Flexible operators are trained for the necessary customization
Many job instructions as each job changes	Repetition reduces training and changes in job instructions	Few work orders and job instructions because jobs standardized	Custom orders require many job instructions

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Comparison of Processes

Table 7.2

Process Focus (Low volume, high variety)	Repetitive Focus (Modular)	Product Focus (High-volume, low-variety)	Mass Customization (High-volume, high-variety)
Raw material inventories high	JIT procurement techniques used	Raw material inventories are low	Raw material inventories are low
Work-in-process is high	JIT inventory techniques used	Work-in-process inventory is low	Work-in-process inventory driven down by JIT, lean production

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Comparison of Processes

Table 7.2

Process Focus (Low volume, high variety)	Repetitive Focus (Modular)	Product Focus (High-volume, low-variety)	Mass Customization (High-volume, high-variety)
Units move slowly through the plant	Movement is measured in hours and days	Swift movement of unit through the facility is typical	Goods move swiftly through the facility
Finished goods made to order	Finished goods made to frequent forecast	Finished goods made to forecast and stored	Finished goods often made to order

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Comparison of Processes

Table 7.2

Process Focus (Low volume, high variety)	Repetitive Focus (Modular)	Product Focus (High-volume, low-variety)	Mass Customization (High-volume, high-variety)
Scheduling is complex, trade-offs between inventory, availability, customer service	Scheduling based on building various models from modules to forecasts	Relatively simple scheduling, establishing output rate to meet forecasts	Sophisticated scheduling required to accommodate custom orders

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Comparison of Processes

Table 7.2

Process Focus (Low volume, high variety)	Repetitive Focus (Modular)	Product Focus (High-volume, low-variety)	Mass Customization (High-volume, high-variety)
Fixed costs low, variable costs high	Fixed costs dependent on flexibility of the facility	Fixed costs high, variable costs low	Fixed costs high, variable costs must be low
Costing estimated before job, not known until after job is complete	Costs usually known due to extensive experience	High fixed costs mean costs dependent on utilization of capacity	High fixed costs and dynamic variable costs make costing a challenge

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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

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Mass Customization

Table 7.1

Vehicle models 140 260

Vehicle types 18 1,212

Bicycle types 8 19

Software titles 0 300,000

Web sites 0 46,412,165

Movie releases 267 458

New book titles 40,530 77,446

Houston TV channels 5 185

Breakfast cereals 160 340

Items (SKUs) in 14,000 150,000

supermarkets

Number of Choices

Early 21st
Item Early 1970s Century

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Mass Customization

Modular techniques

Effective scheduling techniques

Rapid throughput techniques

Figure 7.5

Mass Customization

Repetitive Focus

Modular design

Flexible equipment

Process-Focused

High variety, low volume

Low utilization (5% to 25%)

General-purpose equipment

Product-Focused

Low variety, high volume

High utilization (70% to 90%)

Specialized equipment

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Crossover Charts

Figure 7.6

Fixed costs

Variable costs

High volume, low variety

Process C

Fixed costs

Variable costs

Repetitive

Process B

Fixed costs

Variable costs

Low volume, high variety

Process A

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

Total cost

(2,857)

(6,666)

400,000

300,000

200,000

Volume

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Changing Processes

Difficult and expensive
May mean starting over
Process strategy determines transformation strategy for an extended period
Important to get it right

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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

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Time-Function Mapping

Figure 7.7

Customer

Sales

Production control

Plant A

Warehouse

Plant B

Transport

Move

Receive product

Extrude

Wait

Move

Wait

Order product

Process order

Wait

12 days

13 days

1 day

4 days

1 day

10 days

1 day

0 day

1 day

52 days

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Time-Function Mapping

Figure 7.7

Customer

Sales

Production control

Plant

Warehouse

Transport

Move

Receive product

Extrude

Wait

Order product

Process order

Wait

1 day

2 days

1 day

6 days

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Process Chart

Figure 7.8

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Service Blueprint

Focuses on the customer and provider interaction
Defines three levels of interaction
Each level has different management issues
Identifies potential failure points

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Service Blueprint

Level

Figure 7.9

Personal Greeting

Service Diagnosis

Perform Service

Friendly Close

Customer arrives for service

Warm greeting and obtain service request

Direct customer to waiting room

Notify customer the car is ready

Customer departs

Customer pays bill

Perform required work

Prepare invoice

Yes

Level

Potential failure point

Notify
customer
and recommend
an alternative
provider

Standard request

Determine specifics

Can
service be
done and does customer approve?

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Process Analysis Tools

Flowcharts provide a view of the big picture
Time-function mapping adds rigor and a time element
Value stream analysis extends to customers and suppliers
Process charts show detail
Service blueprint focuses on customer interaction

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Service Process Matrix

Figure 7.10

Degree of Customization

Low

High

Degree of Labor

Low

High

Mass Service

Professional Service

Service Factory

Service Shop

Private banking

Commercial banking

Law clinics

General-

purpose law firms

Specialized hospitals

Hospitals

Limited-service stockbroker

Full-service stockbroker

Boutiques

Warehouse and catalog stores

Retailing

Fast food restaurants

Fine-dining restaurants

No frills airlines

Airlines

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Service Process Matrix

Labor involvement is high
Selection and training highly important
Focus on human resources
Personalized services

Mass Service and Professional Service

Service Factory and Service Shop

Automation of standardized services
Low labor intensity responds well to process technology and scheduling
Tight control required to maintain standards

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Improving Service Productivity

Table 7.3

Strategy	Technique	Example
Separation	Structure service so customers must go where service is offered	Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits
Self-service	Self-service so customers examine, compare, and evaluate at their own pace	Supermarkets and department stores, internet ordering

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Improving Service Productivity

Table 7.3

Strategy	Technique	Example
Postponement	Customizing at delivery	Customizing vans at delivery rather than at production
Focus	Restricting the offerings	Limited-menu restaurant
Modules	Modular selection of service, modular production	Investment and insurance selection, prepackaged food modules in restaurants

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Improving Service Productivity

Table 7.3

Strategy	Technique	Example
Automation	Precise personnel scheduling	Automatic teller machines
Scheduling	Precise personnel scheduling	Scheduling ticket counter personnel at 15-minute intervals at airlines
Training	Clarifying the service options, explaining how to avoid problems	Investment counselor, funeral directors, after-sale maintenance personnel

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Equipment and Technology

Often complex decisions
Possible competitive advantage
Flexibility
Stable processes
May allow enlarging the scope of the processes

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Improving Service Processes

Layout
Product exposure, customer education, product enhancement
Human Resources
Recruiting and training
Impact of flexibility