Operations Management: Sustainability

and Supply Chain Management

Twelfth Edition

Chapter 7
Process Strategy

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Outline (1 of 2)
• Global Company Profile: Harley-Davidson
• Four Process Strategies
• Selection of Equipment
• Process Analysis and Design
• Special Considerations for Service Process Design

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Outline (2 of 2)
• 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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Learning Objectives
7.1 Describe four process strategies
7.2 Compute crossover points for different processes
7.3 Use the tools of process analysis
7.4 Describe customer interaction in service processes
7.5 Identify recent advances in production technology

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Process Strategy
The objective is to create a process to produce
offerings that meet 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, Volume, and Variety
Figure 7.1 Process Selected Must Fit with Volume and Variety

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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 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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Figure 7.2(a) Process Focus

(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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Figure 7.2(b) Repetitive Focus

(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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Figure 7.2(c) Product Focus

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

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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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Figure 7.2(d) Mass Customization

(high-volume, high-variety)
Dell Computer

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Mass Customization (2 of 3)
Table 7.1 Mass Customization Provides More Choices Than Ever
Blank Number of Choices 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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Mass Customization (3 of 3)
• Imaginative product design
• Flexible process design
• Tightly controlled inventory management
• Tight schedules
• 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 Repetitive Focus Product Mass

Focus (Modular Focus Customization
(Low-volume, Harley- (High-volume, (High-volume,
High-variety Davidson) Low-variety High-variety
Arnold Palmer Frito-Lay) Dell Computer)
Hospital)

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

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

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

operators trained skilled
employees operators

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Comparison of Processes (2 of 4)
Table 7.2 [Continued]

Process Focus Repetitive Product Mass

(Low-volume, Focus Focus Customization
High-variety (Modular (High-volume, (High-volume,
Arnold Palmer Harley- Low-variety High-variety
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 [Continued]

Process Focus Repetitive Product Mass

(Low-volume, Focus Focus Customization
High-variety (Modular (High-volume, (High-volume,
Arnold Palmer Harley- Low-variety High-variety
Hospital) davidson) Frito-lay) Dell Computer)

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

are made to order are made to are made to a build-to-order (BTO)
and not stored frequent forecasts forecast and
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 7.2 [Continued]

Process Focus Repetitive Product Mass

(Low-volume, Focus Focus Customization
High-variety (Modular (High-volume, (High-volume,
Arnold Palmer Harley- Low-variety High-variety
Hospital) davidson) Frito-lay) Dell Computer)

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

Blank 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 (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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Figure 7.3 Crossover Charts

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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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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 (1 of 2)
• 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 (2 of 2)
• Flowchart
– Shows the movement of materials
– Harley-Davidson flowchart
• Time-Function Mapping
– Shows flows and time frame

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

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

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Process Chart
Figure 7.5 Process Chart Showing a Hamburger Assembly Process at
a Fast-Food Restaurant

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Process Analysis and Design
• Value-Stream Mapping (VSM)
– 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 (1 of 2)
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 2)
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
9. Determine total working time (value-added time) and
delay (non-value-added time)

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Figure 7.6 Value-Stream Mapping

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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
Figure 7.7 Service Blueprint for Service at Speedy Lube, Inc.

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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 Services Moving Toward Specialization and Focus Within
the Service Process Matrix

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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 the manager to open a new
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 pace Internet ordering
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 [Continued]

Strategy Technique Example

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

Automation Separating services that Automatic teller machines

may lend themselves to
some type of automation
Scheduling Precise personnel Scheduling ticket counter
scheduling personnel at 15-minute
intervals at airlines
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 (A ISs)
3. Process control
4. Vision systems
5. Robots
6. Automated storage and retrieval systems (A SRSs)
7. Automated guided vehicles (A GVs)
8. Flexible manufacturing systems (F MSs)
9. Computer-integrated manufacturing (C IM)
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Machine Technology
• Increased precision, productivity, and flexibility
• Reduced environmental impact
• 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
Computer numerical control (CNC)

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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

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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 (F MSs)
• Computer controls both the workstation and the material
handling equipment
• Enhance flexibility and reduced waste
• Can economically produce low volume but high variety
• Reduced changeover time and increased utilization
• Stringent communication requirement between
components

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Computer-Integrated Manufacturing (CIM)

• Extend flexible manufacturing

– Backward 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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Figure 7.9 Computer-Integrated
Manufacturing (CIM)

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Technology in Services (1 of 2)
Table 7.4 Examples of Technology’s Impact on Services
Service Industry Example
Financial Services Debit cards, electronic funds transfer, A TMs, Internet
stock trading, online banking via cell phone

Education Online newspapers and journals, interactive

assignments via WebCT, Blackboard, and
smartphones
Utilities and government Automated one-person garbage trucks, optical mail
scanners, flood-warning systems, meters that allow
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 (2 of 2)
Table 7.4 [Continued]
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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Copyright

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