Process Strategy and Capacity
Planning
Introduction
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What: Making process and capacity
decisions
Where: Produce goods and services
Why: Long term effects on company
Process Focus
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Complete jobs on demand
Low volume
High variety
“Job shop”
Products move between processes
High flexibility
Repetitive Focus
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Modules
Assemble Modules into finished
products
More structure
Less flexibility
Some customizing
Product Focus
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Produce one product
High volume
Low variety
Continuous process
Mass Customization Focus
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Individualized goods and services
What customer wants when they want
it
Volume of product focus with flexibility
of process focus
Comparing Process Choices
Process
Repetitive
Product
Mass Cust
Quantity/
Variety
Small /
Large
Long runs,
some options
Large / Small
Large / Large
Equipment
General
Special
Special
Flexible
People/Training
Skilled
Modest Train
Less skilled
Skilled
Job Instructions
Many
Some
Few
Many
Raw Materials
Large
JIT
Small
Small
Work in Process
High
JIT
Low
Low
Speed
Slow
Medium
Fast
Fast
Finished Goods
To order
To forecast
To forecast
To order
Scheduling
Complex
Forecast
Simple
Complex
Costs
Low fixed
High fixed
High fixed
High fixed
Costing
Hard
Easy
Easy
Hard
Process Analysis Tools
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Designed to achieve competitive
advantage?
Eliminate steps that do not add value?
Maximize customer value?
Win orders?
Flow Diagram
Customer
Customer sales
representative
take order
Purchasing
(order inks, paper,
other supplies)
Vendors
Accounting
Receiving
Warehousing
(ink, paper, etc.)
Prepress Department
(Prepare printing plates
and negatives)
Printing Department
Gluing, binding,
stapling, labeling
Collating
Department
Information flow
Material flow
Polywrap
Department
Shipping
Time-Function Mapping
Warehouse
WIP
Plant B
Wait
Transport
Wait
Wait
Extrude
Product
Print
WIP
Plant A
Product
Wait
Order
Production
control
Product
Process
Order
WIP
Sales
Receive
product
WIP
Order
Product
Order
Customer
Move
12 days
13 days
1 day
4 days
1 day
Move
10 days
1 day
9 days
1 day
Process Charts
SUBJECT: Request tool purchase
Dist (ft)
Time (min)
Symbol
Description
 D  Write order
 w On desk
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  D  To buyer
 D  Examine
 = Operation;  = Transport;  = Inspect;
D = Delay;  = Storage
Service Blueprinting
Process Design for Services
Low
High
Mass Service
Personal
banking
Commercial
Banking
Full-service
stockbroker
Boutiques
Retailing
Service Factory
Law clinics
Fast food
restaurants
Warehouse and
catalog stores
Service Shop
For-profit
hospitals
Fine dining
restaurants
Airlines
Degree of Interaction and Customization
Hospitals
Low
Limited service
stockbroker
No frills
airlines
General purpose
law firms
High
Degree of Labor Intensity
Professional Service
Process Design for Services
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Layout
Human Resources
Technology
Process Reengineering
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Design of Process based on initial
assumptions
Assumptions change!
Rethink and redesign
Flexibility
Capacity Planning
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Design Capacity = maximum theoretical
output of system
Effective Capacity = Capacity expected
in current operation
Utilization = Actual Output / Design
Capacity
Efficiency = Actual Output / Effective
Capacity
Capacity Planning
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Anticipated Production = Design
Capacity x Effective Capacity x
Efficiency
Capacity Expansion
Expected Demand
Demand
New Capacity
Time in Years
Capacity leads demand with an incremental expansion
Capacity Expansion
Expected Demand
Demand
New Capacity
Time in Years
Capacity leads demand with a one-step expansion
Capacity Expansion
Expected Demand
Demand
New Capacity
Time in Years
Capacity lags demand with an incremental expansion
Capacity Expansion
Demand
New Capacity
Expected Demand
Time in Years
Attempts to have an average capacity, with an incremental
expansion
Approaches to Capacity
Expansion
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May need to manage demand through:
Staffing changes
Adjusting equipment and processes
Increasing throughput
Break-even Analysis
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Fixed Costs
Variable Costs
Contribution
Revenue Function
Crossover Chart
Net Present Value
Operations Technology
Design Technology
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Internet
Intranet
CAD
DFMA
3-D Object Modelling
STEP
CAM
Virtual Reality
Production Technology
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Numerical Control
Process Control
Vision Systems
Robots
Automated Storage and Retrieval Systems
Automated Guided Vehicle
Flexible Manufacturing System
Computer Integrated Manufacturing
Information Technology
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Transaction Processing System
Automatic Identification System
Management Information System
Artificial Intelligence
Expert System
Fuzzy Logic
Neural Network
Information Technology
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Enterprise Resource Planning (ERP)
Automate and integrate processes
Share common data
SAP, JD Edwards, BAAN, PeopleSoft