Operations Management Process Strategy Chapter 7 7-1 Outline Four Process Strategies. Process Focus. Repetitive Focus. Product Focus. Mass Customization Focus. Service Process Design. Process Reengineering. 7-2 Process Strategy How to produce a product or provide a service. Objective: Meet or exceed customer requirements. Achieve competitive advantage. Has long-run effects: Product & volume flexibility. Costs & quality . 7-3 Four Process Strategies Four process strategies: 1. Process focused. 2. Product focused. 3. Repetitive focused. 4. Mass customization. Summary: Table 7-2. Several strategies may be used within one facility. Process strategies follow a continuum. 7-4 Fit of Process, Volume, and Variety High Volume Low Volume PROCESS FOCUS Small production runs (job shops, printing) High Variety MASS CUSTOMIZATION (Dell Computer) (allows customization) REPETITIVE FOCUS (autos, motorcycles) Low Variety Long production runs (standardization) PRODUCT FOCUS (steel, chemicals) POOR STRATEGY 7-5 1. Process Focus Examples Hospital Machine Shop 7-6 Bank Process Focus Facilities organized by process. Similar processes or equipment grouped together. (Example: All drill presses are together.) Low volume, high variety products. 75% of all global products. Products follow many different paths. Other names: Intermittent process. Job shop. 7-7 1 2 3 4 Process Focus - Pros & Cons Advantages: Greater product flexibility. More general purpose equipment. Lower initial capital investment. Disadvantages: High variable cost per unit. More highly trained personnel. More difficult production planning & control. Low equipment utilization (5% to 25%). 7-8 2. Product Focus Examples Soft Drinks (Continuous, then Discrete) Light Bulbs (Discrete) . Paper (Continuous) 7-9 Product Focus Facilities organized by product. High volume, low variety products. Long, continuous production runs. Discrete unit manufacturing. Continuous process manufacturing. Other names: Line flow production. Continuous production. 1 7-10 2 3 4 Product Focus: Steel Plant 7-11 Product Focus - Pros & Cons Advantages: Lower variable cost per unit. Lower but more specialized labor skills. Easier production planning and control. Higher equipment utilization (70% to 90%). Disadvantages: Lower product flexibility. More specialized equipment. Higher capital investment. 7-12 3. Repetitive Focus - Examples Fast Food Clothes Dryer McDonald’s over 95 billion served Truck 7-13 Repetitive Focus Facilities often organized by assembly lines. Characterized by modules. Parts & assemblies made previously. Modules combined for many output options. Other names: Assembly line. Production line. 7-14 Repetitive Focus - Harley Davidson 7-15 Repetitive Focus - Considerations More structured than process focus, less structured than product focus. Enables quasi-customization. Has advantages and disadvantages of process focus and product focus. 7-16 Process Continuum Process Focused (intermittent process) Repetitive Focus (assembly line) Product Focused (continuous process) Continuum High variety, low volume Low utilization (5% - 25%) General-purpose equipment Modular Flexible equipment 7-17 Low variety, high volume High utilization (70% - 90%) Specialized equipment Increasing Product Variety Early 1970s Item Vehicle models Vehicle styles Software titles Web sites Movie releases New book titles TV channels Breakfast cereals Items in supermarkets Early 2000s 140 260 18 1,212 0 300,000 0 >30,000,000 267 458 40,530 77,446 >300 5 160 340 150,000 14,000 7-18 4. Mass Customization Rapid, low-cost production to fulfill unique customer desires. Distinctions between process, repetitive and product focus blur, making variety and volume issues less significant. Very hard to achieve! 7-19 Mass Customization at Dell Computer Company Sells custom-built PCs directly to consumer. Builds computers rapidly, at low cost, and only when ordered. Operates with six days inventory. Integrates the Web into every aspect of business. Research focus on software to make installation and configuration of PCs fast and simple. 7-20 Process Analysis and Design Process should: Be designed to achieve competitive advantage: Differentiation. Response. Low cost. Eliminate steps that do not add value. Maximize value, as perceived by the customer. 7-21 Tools for Process Design Flow Diagrams - Figures 7.2, 7.3, 7.4 Process Charts - Figure 7.8 Time-Function/Process Mapping - Figure 7.7 Service Blueprint - Figure 7.9 7-22 Process Design for Services Consider customization and labor intensity. Degree of customization. High: Focus on specialization (equipment, training, etc.). Low: Focus on standardization and automation. Degree of labor intensity. High: Focus on personalization & human resources (selection, training, etc.) Low: Use technology and automation. 7-23 Process Design for Services Degree of Customization Degree of Labor Intensity High Low Low Mass Service High Professional Service Personal banking Commercial Banking General purpose law firms Boutiques Retailing Service Factory Warehouse and catalog stores Law clinics Service Shop Fine dining restaurants Fast food restaurants Vending machines 7-24 Improving Service Productivity Table 7.3 Separation: Different services in different places. Self-service: Customers serve themselves. Postponement: Customize at delivery. Focus: Restrict offerings. Automation: Automate where appropriate. Scheduling: Precise personnel scheduling. 7-25 Technology - Automation Production. CNC (Computer Numerical Control), Robots and FMS (Flexible Manufacturing Systems). Automatic Identification. Bar coding and RFID (Radio Frequency IDentification). Warehousing. ASRS (Automated Storage and Retrieval) and AGVs (Automated Guided Vehicles). Integration – CIM (computer integrated manufacturing) 7-26 Process Reengineering Fundamental rethinking and radical redesign of business processes. To produce dramatic improvements in performance. Re-examine the basic process and its objectives: Re-evaluate the purpose of the process. Question underlying assumptions. Focus on activities that cross boundaries. 7-27