Topic 7 Process Strategy

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

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Outline (continued)
• Production Technology
• Technology in Services
• Process Redesign

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Harley-Davidson
• The only major U.S. motorcycle company
• Emphasizes quality and lean manufacturing
• Materials as Needed (MAN) system
• Many variations possible
• Tightly scheduled repetitive production

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 Process Flow Diagram

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 Process Strategy
• An organization’s approach to transforming resources into
goods and services

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 (1 of 2)

• 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 (2 of 2)
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

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Process, Volume, and Variety
Figure 7.1

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Process Focus (1 of 2)
• Facilities are organized around specific activities or
processes
• General purpose equipment and skilled personnel
• High degree of product flexibility
• Typically high variable costs and low equipment utilization
• Product flows may vary considerably, making planning and
scheduling a challenge

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Process Focus (2 of 2)
Figure 7.2(a)

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Repetitive Focus (1 of 2)
• 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 (2 of 2)
Figure 7.2(b)

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Product Focus (1 of 2)

• 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 (2 of 2)
Figure 7.2(c)

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 Mass Customization (1 of 3)
• 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 (2 of 3)
Figure 7.2(d)

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 Mass Customization (3 of 3)
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
iPhone mobile game apps 0 1,200,000
Web sites 0 634,000,000
Movie releases per year 267 1551
New book titles 40,530 300,000+
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in supermarkets 14,000 150,000
High-definition TVs 0 102

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Making Mass Customization Work
• Imaginative product design
• Flexible process design
• Tightly controlled inventory management
• Digitized communication tracks orders and material
• Responsive partners in the supply chain

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Comparison of Processes (1 of 4)
Table 7.2 Comparison of the Characteristics of Four Types
of Processes
PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

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

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

2. Broadly skilled 2. Moderately 2. Less broadly 2. Flexible operators

operators trained skilled operators
employees

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Comparison of Processes (2 of 4)
Table 7.2 Comparison of the Characteristics of Four Types
of Processes
PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

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

each job the instructions job instructions requiring many job
instructions

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

relative to the
value of the
product

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Comparison of Processes (3 of 4)
Table 7.2 Comparison of the Characteristics of Four Types
of Processes

PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

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

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

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

complex routine routine scheduling
accommodates
custom orders

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Comparison of Processes (4 of 4)
Table 7.1 Comparison of the Characteristics of Four Types
of Processes

PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

7. Fixed costs 7. Fixed costs are 7. Fixed costs are 7. Fixed costs tend
are low and dependent on high and to be high and
variable costs flexibility of the variable costs variable costs low
high facility low

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Crossover Chart Example (1 of 2)
• Evaluate three different accounting software products
• Calculate crossover points between software A and B and
between software B and C

DOLLARS REQUIRED PER

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

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Crossover Chart Example (2 of 2)
( )
200,000 + 60 V1 = 300,000 + 25 V1 ( )
35V1 = 100,000
V1 = 2,857

• Software A is most economical from 0 to 2,857 reports

( )
300,000 + 25 V2 = 400,000 + 10 V2 ( )
15V2 = 100,000
V2 = 6,666
• Software B is most economical from 2,857 to 6,666 reports

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 Crossover Charts
Figure 7.3

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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 - Quality
- Cash flow - Capacity
- Market stability - Flexibility

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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

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Process Analysis and Design
When analyzing and designing processes, we ask questions
such as:
• 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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Tools for Process Analysis and
Design
• Flowchart - Shows movement of people or material
• Time-Function Mapping - Adds time on the horizontal
axis to a flowchart
• Process Charts - Use symbols to analyze movement of
people or material
• Value-stream mapping - Expands time-function mapping
to see where value is added in the entire supply chain
• Service blueprinting - Focuses on the customer and the
provider's interaction with the customer, and it identifies
potential failure points

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

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

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 Process Chart
Figure 7.5

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 Value-Stream Mapping (1 of 3)
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

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 Value-Stream Mapping (2 of 3)
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 every step of the
entire flow I
9. Determine total working time (value-added time)
and delay (non-value-added time)

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 Value-Stream Mapping (3 of 3)
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 (1 of 2) Figure 7.7

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 Service Blueprint (2 of 2)
Figure 7.7

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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 (1 of 3)
Figure 7.8

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Service Process Matrix (2 of 3)

Mass Service and

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

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Service Process Matrix (3 of 3)

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

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Improving Service Productivity (1 of 2)
Table 7.3 Techniques for Improving Service Productivity

STRATEGY TECHNIQUE EXAMPLE

Separation Structuring service so Bank customers go to a
customers must go where manager to open a new
the service is offered account, to loan officers
for loans, and to tellers
for deposits
Self-service Self-service so customers Supermarkets and
examine, compare, and department stores
evaluate at their own Internet ordering
pace
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 (2 of 2)
Table 7.3 Techniques for Improving Service Productivity

STRATEGY TECHNIQUE EXAMPLE

Modules Modular selection of Investment and insurance
service selection
Modular production Prepackaged food
modules in restaurants

Automation Separating services that Automatic teller machines

may lend themselves to Ordering via an app
some type of automation
Scheduling Precise personnel Scheduling airline ticket-
scheduling counter personnel at 15-
minute intervals
Training Clarifying the service Investment counselor,
options funeral directors
Explaining how to avoid After-sale maintenance
problems personnel
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 Production Technology
1. Machine technology
2. Automatic identification systems (AISs)
3. Process control
4. Vision systems
5. Robots
6. Automated storage and retrieval systems (ASRSs)
7. Automated guided vehicles (AGVs)
8. Flexible manufacturing systems (FMSs)
9. Computer-integrated manufacturing (CIM)

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Machine Technology
• Increased precision, productivity, and flexibility
• Reduced environmental impact
• Computer numerical control (CN C)
• Additive manufacturing produces products by adding
material, not removing it
• Supports innovative product design, minimal custom
tooling required, minimal assembly time, low inventory,
and reduced time to market

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 Automatic Identification Systems
(AISs) and RFID

• Improved data acquisition

• Reduced data entry errors
• Increased speed
• Increased scope of process
automation

Bar codes and RFID

https://www.youtube.com/watch?v=FeDcJgwHc6Q
Amazon Go
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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
- Such outputs are sending signals directly to other
parts of the process to help control them

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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

https://www.washingtonpost.com/technology/2019/03/25/how-gmu-students-eating-habits-changed-when-delive
ry-robots-invaded-their-campus/?noredirect=on&utm_term=.93fd66665b00

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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) (1 of 2)
• Extend flexible manufacturing
- Backwards to engineering and inventory control
- Forward into warehousing and shipping
- Reducing the distinction between low-volume/high-
variety, and high-volume/low-variety production

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 Computer-Integrated Manufacturing
(CIM) (2 of 2)
Figure 7.9

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Technology in Services (1 of 3)
Table 7.4 Examples of Technology's Impact on Services
SERVICE INDUSTRY EXAMPLE
Debit cards, electronic funds transfer, AT M s,
Financial Services Internet stock trading, online banking via cell phone,
Apple pay
Online journals and textbooks, interactive
Education assignments via Zoom, Blackboard, and
smartphones
Automated one-person garbage trucks, optical mail
Utilities and government scanners, flood-warning systems, meters that allow
homeowners to control energy usage and costs
Wireless orders from servers to kitchen, robot
Restaurants and foods butchering, transponders monitor traffic at drive-
throughs

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Technology in Services (2 of 3)
Table 7.4 Examples of Technology's Impact on Services
SERVICE INDUSTRY EXAMPLE
Communications Interactive T V, e-books, speech recognition

Hotels Electronic check-in/check-out, electronic key/lock

systems, mobile Web bookings
Wholesale/retail trade Point-of-sale (P O S) technology, e-commerce,
electronic communication between store, supplier,
and customer, bar-coded data; R F I D; self-
checkout; pay via facial recognition
Transportation Automatic toll booths, satellite-directed navigation
systems, autonomous automobiles

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Technology in Services (3 of 3)
Table 7.4 Examples of Technology's Impact on Services

SERVICE INDUSTRY EXAMPLE

Health care Online patient-monitoring systems, online medical
information systems, robotic surgery, artificial
intelligence for medical diagnoses
Airlines Ticketless travel, scheduling, Internet purchases,
boarding passes downloaded as 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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