Assignment

Process Strategies….

Please start by watching the following video:

Once you have completed the video, please identify a business/company of your choice that meets each one of the process strategies and explain why you choice each business.  The highest scores will be given to the students who think outside the box and find businesses that are not listed on the power point or in the video.  This will require you to do a little research and demonstrate your understanding of what you learned from the video, power point, and text.

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Process Strategy
PowerPoint presentation to accompany
Heizer and Render
Operations Management, Eleventh Edition
Principles of Operations Management, Ninth Edition
PowerPoint slides by Jeff Heyl
7
© 2014 Pearson Education, Inc.

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© 2014 Pearson Education, Inc.

Outline
Global Company Profile:
Harley-Davidson
Four Process Strategies
Selection of Equipment
Process Analysis and Design
Special Consideration for Service Process Design

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Outline – Continued
Production Technology
Technology in Services
Process Redesign

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Learning Objectives
When you complete this chapter you should be able to:
Describe four process strategies
Compute crossover points for different processes
Use the tools of process analysis
Describe customer interaction in service processes
Identify recent advances in production technology

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Harley-Davidson
Repetitive manufacturing works
The only major U.S. motorcycle company
Emphasizes quality and lean manufacturing
Materials as Needed system
Many variations possible
Tightly scheduled repetitive production line
© 2014 Pearson Education, Inc.

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Process Flow Diagram
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
Arrive on a JIT schedule from a 10-station work cell in Milwaukee
Frame tube bending
Frame-building work cells
Frame machining
Hot-paint
frame painting

Crating

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Process Strategy
The objective is to create a process to produce products that meets customer requirements within cost and other managerial constraints

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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, Volume, and Variety
Process Focus
projects, job shops (machine, print, hospitals, restaurants)
Arnold Palmer Hospital
Repetitive
(autos, motorcycles, home appliances)
Harley-Davidson
Product Focus
(commercial baked goods, steel, glass, beer)
Frito-Lay
High Variety
one or few units per run,
(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
Poor Strategy (Both fixed and variable costs are high)
Figure 7.1
Volume
Low Volume
Repetitive Process
High Volume

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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
Figure 7.2(a)

Many departments and many routings

Many inputs
(surgeries, sick patients,
baby deliveries, emergencies)
Many different outputs
(uniquely treated patients)
(low-volume, high-variety, intermittent processes)
Arnold Palmer Hospital

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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
Figure 7.2(b)

Raw materials and module inputs

Modules combined for many
Output options
(many combinations of motorcycles)

Few modules
(multiple engine models, wheel modules)
(modular)
Harley Davidson

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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
Figure 7.2(c)

Few Inputs
(corn, potatoes, water, seasoning)
Output variations in size, shape, and packaging
(3-oz, 5-oz, 24-oz package labeled for each material)

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

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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 Mass Customization Provides More Choices Than Ever
NUMBER OF CHOICES
ITEM 1970s 21ST CENTURY
Vehicle styles 18 1,212
Bicycle types 8 211,000
Software titles 0 400,000
Web sites 0 255,000,000
Movie releases per year 267 744
New book titles 40,530 300,000
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in supermarkets 14,000 150,000
LCD TVs 0 102

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Mass Customization
Figure 7.2(d)
Many parts and component inputs
Many output versions
(custom PCs and notebooks)

Many modules
(chips, hard drives, software, cases)
(high-volume, high-variety)
Dell Computer

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Mass Customization
Imaginative product design
Flexible process design
Tightly controlled inventory management
Tight schedules
Responsive supply-chain partners

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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS
(LOW-VOLUME, HIGH-VARIETY) REPETITIVE FOCUS
(MODULAR) PRODUCT FOCUS
(HIGH-VOLUME, LOW-VARIETY) MASS CUSTOMIZATION
(HIGH-VOLUME, HIGH-VARIETY)
Small quantity and large variety of products Long runs, usually a standardized product from modules Large quantity and small variety of products Large quantity and large variety of products
Broadly skilled operators Moderately trained employees Less broadly skilled operators Flexible operators

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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS
(LOW-VOLUME, HIGH-VARIETY) REPETITIVE FOCUS
(MODULAR) PRODUCT FOCUS
(HIGH-VOLUME, LOW-VARIETY) MASS CUSTOMIZATION
(HIGH-VOLUME, HIGH-VARIETY)
Instructions for each job Few changes in the instructions Standardized job instructions Custom orders requiring many job instructions
High inventory Low inventory Low inventory Low inventory relative to the value of the product

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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS
(LOW-VOLUME, HIGH-VARIETY) REPETITIVE FOCUS
(MODULAR) PRODUCT FOCUS
(HIGH-VOLUME, LOW-VARIETY) MASS CUSTOMIZATION
(HIGH-VOLUME, HIGH-VARIETY)
Finished goods are made to order and not stored Finished goods are made to frequent forecasts Finished goods are made to a forecast and stored Finished goods are build-to-order (BTO)
Scheduling is complex Scheduling is routine Scheduling is routine Sophisticated scheduling accommodates custom orders

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Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes
PROCESS FOCUS
(LOW-VOLUME, HIGH-VARIETY) REPETITIVE FOCUS
(MODULAR) PRODUCT FOCUS
(HIGH-VOLUME, LOW-VARIETY) MASS CUSTOMIZATION
(HIGH-VOLUME, HIGH-VARIETY)
Fixed costs are low and variable costs high Fixed costs are dependent on flexibility of the facility Fixed costs are high and variable costs low Fixed costs tend to be high and variable costs low

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Crossover Chart Example
Evaluate three different accounting software products
Calculate crossover points between software A and B and between software B and C

TOTAL FIXED COST DOLLARS REQUIRED PER ACCOUNTING REPORT
Software A $200,000 $60
Software B $300,000 $25
Software C $400,000 $10

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Crossover Chart Example
Software A is most economical from 0 to 2,857 reports
Software B is most economical from 2,857 to 6,666 reports

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Crossover Charts
Figure 7.3

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 process A costs

Total process B costs

Total process C costs
V1
(2,857)
V2
(6,666)

400,000
300,000
200,000
Volume
$

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Focused Processes
Focus brings efficiency
Focus on depth of product line rather than breadth
Focus can be
Customers
Products
Service
Technology

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Selection of Equipment
Decisions can be complex as alternate methods may be available
Important factors may be
Cost
Cash flow
Market stability
Quality
Capacity
Flexibility

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Equipment and Technology
Possible competitive advantage
Flexibility may be a competitive advantage
May be difficult and expensive and may require starting over
Important to get it right

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© 2014 Pearson Education, Inc.

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?

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Process Analysis and Design
Flowcharts
Shows the movement of materials
Harley-Davidson flowchart
Time-Function Mapping
Shows flows and time frame

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“Baseline” Time-Function Map
Figure 7.4(a)

Customer
Sales
Production control
Plant A
Warehouse
Plant B
Transport
12 days
13 days
1 day
4 days
1 day
10 days
1 day
0 day
1 day
52 days

Move
Receive product

Product
Product
Extrude
Wait

WIP
Product
Move
Wait

WIP
WIP
Print
Wait

Order
WIP
Order product
Process order
Wait
Order

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© 2014 Pearson Education, Inc.

“Target” Time-Function Map
Figure 7.4(b)

Customer
Sales
Production control
Plant
Warehouse
Transport
1 day
2 days
1 day
1 day
1 day
6 days

Move
Receive product

Product
Product
Extrude
Wait
Print

Order
WIP
Product
Order product
Process order
Wait
Order

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© 2014 Pearson Education, Inc.

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

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

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

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Value-Stream Mapping
Figure 7.5

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Process Chart
Figure 7.6

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Service Blueprinting
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
#3
Figure 7.7
Personal Greeting
Service Diagnosis
Perform Service
Friendly Close
Level
#1
Level
#2

Notify
customer
and recommend
an alternative
provider.
(7 min)

No

Customer arrives for service.
(3 min)
Warm greeting and obtain service request.
(10 sec)

F
Direct customer to waiting room.
F

Notify customer the car is ready.
(3 min)
Customer departs
Customer pays bill.
(4 min)
F
F
Perform required work.
(varies)
Prepare invoice.
(3 min)
F
F

F
Yes

F
Yes

Standard request.
(3 min)
Determine specifics.
(5 min)
Can
service be
done and does customer approve?
(5 min)

No

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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

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Service Process Matrix
Figure 7.8
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
Digital orthodontics
Traditional orthodontics

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Service Process Matrix
Labor involvement is high
Focus on human resources
Selection and training highly important
Personalized services
Mass Service and Professional Service
Service Factory
Service Shop
Degree of Customization
Low
High
Degree of Labor
Low
High
Mass Service
Professional Service

Commercial banking
Private banking
General-
purpose law firms
Law clinics

Specialized hospitals
Hospitals
Full-service stockbroker
Limited-service stockbroker

Retailing
Boutiques
Warehouse and catalog stores

Fast-food restaurants
Fine-dining restaurants
Airlines
No-frills airlines
Digital orthodontics
Traditional orthodontics

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Service Process Matrix
Service Factory and Service Shop
Automation of standardized services
Restricted offerings
Low labor intensity responds well to process technology and
scheduling
Tight control required to
maintain standards

Service Factory
Service Shop
Degree of Customization
Low
High
Degree of Labor
Low
High
Mass Service
Professional Service

Commercial banking
Private banking
General-
purpose law firms
Law clinics

Specialized hospitals
Hospitals
Full-service stockbroker
Limited-service stockbroker

Retailing
Boutiques
Warehouse and catalog stores

Fast-food restaurants
Fine-dining restaurants
Airlines
No-frills airlines
Digital orthodontics
Traditional orthodontics

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Improving Service Productivity
TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Separation Structuring service so customers must go where the 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
Postponement Customizing at delivery Customizing vans at delivery rather than at production
Focus Restricting the offerings Limited-menu restaurant

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Improving Service Productivity
TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Modules Modular selection of service
Modular production Investment and insurance selection
Prepackaged food modules in restaurants
Automation Separating services that may lend themselves to some type of automation 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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Production Technology
Machine technology
Automatic identification systems (AISs) and RFID
Process control
Vision systems
Robots
Automated storage and retrieval systems (ASRSs)
Automated guided vehicles (AGVs)
Flexible manufacturing systems (FMSs)
Computer-integrated manufacturing (CIM)

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Machine Technology
Increased precision
Increased productivity
Increased flexibility
Improved environmental impact
Reduced changeover time
Decreased size
Reduced power requirements
Computer numerical
control (CNC)

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Automatic Identification Systems (AISs)
Improved data acquisition
Reduced data entry errors
Increased speed
Increased scope
of process
automation
Bar codes and RFID

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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

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Vision Systems
Particular aid to inspection
Consistently
accurate
Never bored
Modest cost
Superior to
individuals performing the same tasks

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Robots
Perform monotonous or dangerous tasks
Perform tasks
requiring significant
strength or
endurance
Generally enhanced
consistency and
accuracy

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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

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

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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

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Computer-Integrated Manufacturing (CIM)
Extend flexible manufacturing
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

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Computer-Integrated Manufacturing (CIM)
Figure 7.9
ASRS and AGVs

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Technology in Services
TABLE 7.4 Examples of Technology’s Impact on Services
SERVICE INDUSTRY EXAMPLE
Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading, on-line banking via cell phone
Education Electronic bulletin boards, on-line journals, WebCT, Blackboard, and smart phones
Utilities and government Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems, meters allowing homeowners to control energy usage and costs
Restaurants and foods Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs
Communications Interactive TV, e-books via Kindle

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Technology in Services
TABLE 7.4 Examples of Technology’s Impact on Services
SERVICE INDUSTRY EXAMPLE
Hotels Electronic check-in/check-out, electronic key/lock systems, mobile Web bookings
Wholesale/retail trade Point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar-coded data, RFID
Transportation Automatic toll booths, satellite-directed navigation systems, Wi-Fi in automobiles
Health care Online patient-monitoring systems, online medical information systems, robotic surgery
Airlines Ticketless travel, scheduling, Internet purchases, boarding passes downloaded as two-dimensional bar codes on smart phones

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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

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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.

200,000+ 60( )V1 =300,000+ 25( )V1
35V1 =100,000
V1 =2,857

200,000+60
()
V
1
=300,000+25
()
V
1
35V
1
=100,000
V
1
=2,857

300,000+ 25( )V2 = 400,000+ 10( )V2
15V2 =100,000
V2 =6,666

300,000+25
()
V
2
=400,000+10
()
V
2
15V
2
=100,000
V
2
=6,666

288 P A R T 2 | D E S I G N I N G O P E R AT I O N S

Technology in Services
Just as we have seen rapid advances in technology in the manufacturing sector, so we also find
dramatic changes in the service sector. These range from electronic diagnostic equipment at
auto repair shops, to blood- and urine-testing equipment in hospitals, to retinal security scan-
ners at airports. The hospitality industry provides other examples, as discussed in the OM in
Action box “Technology Changes the Hotel Industry.” The McDonald’s approach is to use
self-serve kiosks. The labor savings when ordering and speedier checkout service provide valu-
able productivity increases for both the restaurant and the customer.

In retail stores, POS terminals download prices quickly to re!ect changing costs or market
conditions, and sales are tracked in 15-minute segments to aid scheduling. Drug companies, such

Management decides to make a product

OM runs production process,
purchasing components,
coordinating suppliers,
planning and scheduling
operations, overseeing
quality and the workforce,
and shipping to customers.

Computer-aided manufacturing
(CAM) converts raw materials into
components or products

Robots and specialized
equipment weld, insert,
and assemble components.

Robots test it and box the finished
product.

Information flows

Material flows

ASRS (above) and AGVs
move incoming materials
and parts, work-in-process,
and complete product.

Computer-aided design (CAD)
designs the product and programs
the automated production equipment.

C
o

m
p

u
te

r
in

te
g

ra
te

d
m

an
u

fa
ct

u
ri

n
g

(
C

IM
)

F
le

xi
b

le
m

an
u

fa
ct

u
ri

n
g

s
ys

te
m

(
F

M
S

)

Figure 7.9
Computer-Integrated Manufacturing (CIM)
CIM includes computer-aided design (CAD), computer-aided manufacturing (CAM), flexible manufacturing systems (FMSs), automated storage
and retrieval systems (ASRSs), automated guided vehicles (AGVs), and robots to provide an integrated and flexible manufacturing process.

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