Process Strategy

7 and Sustainability

PowerPoint presentation to accompany

Heizer and Render
Operations Management, 10e
Principles of Operations Management, 8e

PowerPoint slides by Jeff Heyl

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-1

 Outline
 Global Company Profile: Harley-
Davidson
 Four Process Strategies
 Process Focus
 Repetitive Focus
 Product Focus
 Mass Customization Focus
 Comparison of Process Choices

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-2

 Outline – Continued

 Process Analysis and Design

 Flow Charts
 Time-Function Mapping
 Value-Stream Mapping
 Process Charts
 Service Blueprinting

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-3

 Outline – Continued
 Special Consideration for Service
Process Design
 Customer Interaction and Process
Design
 More Opportunities to Improve
Service Processes
 Selection of Equipment and
Technology

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-4

 Outline – Continued
 Production Technology
 Machine Technology
 Automatic Identification Systems
(AISs) and RFID
 Process Control
 Vision Systems
 Robots

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-5

 Outline – Continued
 Production Technology (cont.)
 Automated Storage and Retrieval
Systems (ASRSs)
 Automated Guided Vehicles (AGVs)
 Flexible Manufacturing Systems
(FMSs)
 Computer-Integrated Manufacturing
(CIM)

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-6

 Outline – Continued

 Technology in Services
 Process Redesign
 Sustainability

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-7

 Learning Objectives
When you complete this chapter you
should be able to:

1. Describe four production processes

2. Compute crossover points for
different processes
3. Use the tools of process analysis

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-8

 Learning Objectives
When you complete this chapter you
should be able to:

4. Describe customer interaction in

process design
5. Identify recent advances in
production technology
6. Discuss the 4 Rs of sustainability

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7-9

 Harley-Davidson
Repetitive manufacturing works
 The leading U.S. motorcycle company
 Emphasizes quality and lean
manufacturing
 Materials as Needed system
 Many variations possible
 Tightly scheduled repetitive
production line

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 10

 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 11

 Process Strategies

The objective of a process strategy is

to build a production process that
meets customer requirements and
product specifications within cost
and other managerial constraints

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 12

 Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few Process Focus Mass Customization
units per run, projects, job shops (difficult to achieve,
(allows (machine, print, but huge rewards)
customization) hospitals, restaurants) Dell Computer
Arnold Palmer
Hospital
Changes in
Modules
modest runs, Repetitive
standardized (autos, motorcycles,
modules home appliances)
Changes in Harley-Davidson
Attributes Product Focus
(such as grade, (commercial
quality, size, Poor Strategy
(Both fixed and baked goods,
thickness, etc.) steel, glass, beer)
long runs only variable costs
are high) Frito-Lay
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 13
 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 14

 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 15

 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
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 16
 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)
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 17
 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 18

 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)
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 19
 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 20

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

(low-volume, high variety,

continuous process)
Frito-Lay

Output variations in size,

Figure 7.2(c) shape, and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 21
 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 22

 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 23

 Mass Customization
Number of Choices
Item 1970s 21st Century
Vehicle models 140 286
Vehicle types 18 1,212
Bicycle types 8 211,000
Software titles 0 400,000
Web sites 0 162,000,000
Movie releases per year 267 765
New book titles 40,530 300,000
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in 14,000 150,000
supermarkets
LCD TVs 0 102

Table 7.1
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 24
 Mass Many parts and
component inputs

Customization (chips, hard drives,

software, cases)

Many modules
(high-volume, high-variety)
Dell Computer

Figure 7.2(d)
Many output versions
(custom PCs and notebooks)
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 25
 Mass Customization
Repetitive Focus
Figure 7.3 Flexible people
and equipment
Modular
techniques
Accommodating
Product and Responsive
Process Design Supply Chains
Mass Customization
Rapid
throughput
Effective techniques
scheduling
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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 26

 Mass Customization
 Imaginative and fast product
design
 Rapid process design
 Tightly controlled inventory
management
 Tight schedules
 Responsive supply chain partners

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 27

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

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

quantity and usually a quantity and and large
large variety standardized small variety variety of
of products product with of products products are
are produced options, are produced
produced produced
from modules

2. Equipment 2. Special 2. Equipment 2. Rapid

used is equipment used is changeover on
general aids in use of special flexible
purpose an assembly purpose equipment
line

© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.2

7 - 28
 Comparison of Processes
Mass
Process Focus Repetitive Product Focus Customization
(low-volume, Focus (high-volume, (high-volume,
high-variety) (modular) low-variety) high-variety)

3. Operators 3. Employees 3. Operators 3. Flexible

are broadly are modestly are less operators are
skilled trained broadly trained for the
skilled necessary
customization

4. There are 4. Repetitive 4. Work orders 4. Custom

many job operations and job orders require
instructions reduce instructions many job
because training and are few instructions
each job changes in because they
changes job are
instructions standardized

© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.2

7 - 29
 Comparison of Processes
Mass
Process Focus Repetitive Product Focus Customization
(low-volume, Focus (high-volume, (high-volume,
high-variety) (modular) low-variety) high-variety)

5. Raw-material 5. JIT 5. Raw material 5. Raw

inventories procurement inventories material
high relative techniques are low inventories
to the value are used relative to the are low
of the value of the relative to
product product the value
of the
product

6. Work-in- 6. JIT inventory 6. Work-in- 6. Work-in-

process is techniques process process
high are used inventory is inventory
compared to low driven down
output compared to by JIT,
output kanban, lean
production

© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.2

7 - 30
 Comparison of Processes
Mass
Process Focus Repetitive Product Focus Customization
(low-volume, Focus (high-volume, (high-volume,
high-variety) (modular) low-variety) high-variety)

7. Units move 7. Assembly is 7. Swift 7. Goods move

slowly measured in movement of swiftly
through the hours and units through through the
facility days the facility is facility
typical

8. Finished 8. Finished 8. Finished 8. Finished

goods are goods made goods are goods are
usually made to frequent usually made often build-
to order and forecast to forecast to-order
not stored and stored (BTO)

© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.2

7 - 31
 Comparison of Processes
Mass
Process Focus Repetitive Product Focus Customization
(low-volume, Focus (high-volume, (high-volume,
high-variety) (modular) low-variety) high-variety)

9. Scheduling 9. Scheduling 9. Scheduling 9. Sophisticated

is complex, is based on is relatively scheduling is
concerned building simple, required to
with trade- various concerned accommodate
offs between models from with custom orders
inventory, a variety of establishing
capacity, and modules to output rate
customer forecasts sufficient to
service meet
forecasts

10. Fixed costs 10. Fixed costs 10. Fixed costs 10. Fixed costs
tend to be dependent tend to be tend to be
low and on flexibility high and high, variable
variable of the variable costs must be
costs high facility costs low low

© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.2

7 - 32
 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

st
$ co
st

l st
co

t a l co
To Tota
l
ta
To

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C
Figure 7.4 (2,857) V1 V2 (6,666) Volume
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 33
 Focused Processes
 Focus brings efficiency
 Focus on depth of product line
rather than breadth
 Focus can be
 Customers
 Products
 Service
 Technology
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 34
 Changing Processes

 Difficult and expensive

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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 35

 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?

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 36

 Process Analysis and
Design
 Flow Charts - Shows the movement of
materials
 Time-Function Mapping - Shows flows and
time frame

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 37

 “Baseline” Time-Function Map
Order Receive
Customer product product

Process
Sales order
Order

Production Wait
control

Product
Order

Plant A Print

Product
WIP

Warehouse Wait Wait Wait

Product
WIP
WIP
Extrude
WIP

Plant B

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

Figure 7.5
52 days
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 38
 “Target” Time-Function Map
Order Receive
Customer product product

Process
Sales order

Product
Order

Production
control Wait
Order

WIP
Plant Print Extrude

Product
Warehouse Wait

Product
Transport Move

1 day 2 days 1 day 1 day 1 day

6 days
Figure 7.5

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 39

 Process Analysis and
Design
 Flow Charts - 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
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 40
 Value-Stream Mapping

Figure 7.6

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 41

 Process Chart

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Figure
7 - 42
7.7
 Service Blueprinting

 Focuses on the customer and

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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 43

 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. (7min)
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 7.8
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 44
 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
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 45
 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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 46

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

Digital
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
Figure 7.9
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 47
 Service Process Matrix

Mass Service and Professional Service

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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 48

 Service Process Matrix

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

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 49

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

Table 7.3
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 50
 Improving Service
Productivity
Strategy Technique Example
Postponement Customizing at Customizing vans at
delivery delivery rather than at
production
Focus Restricting the Limited-menu
offerings restaurant
Modules Modular selection of Investment and
service insurance selection
Modular production Prepackaged food
modules in
restaurants

Table 7.3
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 51
 Improving Service
Productivity
Strategy Technique Example
Automation Separating services Automatic teller
that may lend machines
themselves to some
type of automation
Scheduling Precise personnel Scheduling ticket
scheduling counter personnel at
15-minute intervals at
airlines
Training Clarifying the service Investment counselor,
options funeral directors
Explaining how to After-sale maintenance
avoid problems personnel
Table 7.3
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 52
 Improving Service
Processes
 Layout
 Product exposure, customer
education, product enhancement
 Human Resources
 Recruiting and training
 Impact of flexibility

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 53

 Equipment and Technology

 Often complex decisions

 Possible competitive advantage
 Flexibility
 Stable processes
 May allow enlarging the scope of
the processes

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 54

 Production Technology
 Machine technology
 Automatic identification
systems (AISs)
 Process control
 Vision system
 Robot
 Automated storage and retrieval systems
(ASRSs)
 Automated guided vehicles (AGVs)
 Flexible manufacturing systems (FMSs)
 Computer-integrated manufacturing (CIM)
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 55
 Machine Technology
 Increased precision
 Increased productivity
 Increased flexibility
 Improved environmental impact
 Reduced changeover time
 Decreased size
 Reduced power requirements
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 56
 Automatic Identification
Systems (AISs)
 Improved data acquisition
 Reduced data entry errors
 Increased speed
 Increased scope
of process
automation

Example – Bar codes and RFID

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 57
 Process Control
 Real-time monitoring and control of
processes
 Sensors collect data
 Devices read data
on periodic basis
 Measurements translated into digital
signals then sent to a computer
 Computer programs analyze the data
 Resulting output may take numerous
forms
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 58
 Vision Systems
 Particular aid to inspection
 Consistently
accurate
 Never bored
 Modest cost
 Superior to
individuals performing the same
tasks

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 59

 Robots
 Perform monotonous or dangerous
tasks
 Perform tasks
requiring significant
strength or
endurance
 Generally enhanced
consistency and
accuracy
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 60
 Automated Storage and
Retrieval Systems (ASRSs)

 Automated placement and

withdrawal of parts and products
 Reduced errors and labor
 Particularly useful in inventory and
test areas of manufacturing firms

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 61

 Automated Guided Vehicle
(AGVs)
 Electronically guided and
controlled carts
 Used for movement of products
and/or individuals

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 62

 Flexible Manufacturing
Systems (FMSs)
 Computer controls both the workstation
and the material handling equipment
 Enhance flexibility and reduced waste
 Can economically produce low volume at
high quality
 Reduced changeover time and increased
utilization
 Stringent communication requirement
between components
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 63
 Computer-Integrated
Manufacturing (CIM)
 Extension of flexible manufacturing
systems
 Backwards to engineering and inventory
control
 Forward into warehousing and shipping
 Can also include financial and customer
service areas
 Reducing the distinction between low-
volume/high-variety, and high-
volume/low-variety production
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 64
 Computer-
Integrated
Manufacturing
(CIM)

Figure 7.10

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 65

 Technology in Services
Service Industry Example
Financial Debit cards, electronic funds transfer,
Services ATMs, Internet stock trading, on-line
banking via cell phone
Education Electronic bulletin boards, on-line journals,
WebCT, Blackboard and smart phones
Utilities and Automated one-man garbage trucks, optical
government mail and bomb scanners, flood warning
systems, meters allowing homeowners to
control energy usage and costs
Restaurants and Wireless orders from waiters to kitchen,
foods robot butchering, transponders on cars that
track sales at drive-throughs
Communications Interactive TV, ebooks via Kindle 2
© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.4
7 - 66
 Technology in Services
Service Industry Example
Hotels Electronic check-in/check-out, electronic
key/lock system, mobile web booking
Wholesale/retail ATM-like kiosks, point-of-sale (POS)
trade terminals, e-commerce, electronic
communication between store and supplier,
bar coded data, RFID
Transportation Automatic toll booths, satellite-directed
navigation systems, WiFi in automobile
Health care Online patient-monitoring, online medical
information systems, robotic surgery
Airlines Ticketless travel, scheduling, Internet
purchases, boarding passes two-
dimensional bar codes on smart phones

© 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7.4

7 - 67
 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
© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 68
 Sustainability
 Sustainability in production
processes
1. Resources
2. Recycling
3. Regulations
4. Reputation

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 69

 Sustainability
 Resources
 Operations is primary user
 Reducing use is win-win
 Recycling
 Burn, bury, or reuse waste
 Recycling begins at design

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 70

 Sustainability
 Regulations
 Laws affect transportation,
waste, and noise
 Increasing regulatory pressure
 Reputation
 Leadership may be rewarded
 Bad reputation can have
negative consequences

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 71

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