Process Management
MGT3303
MGT3303
Michel Leseure
Toyota Production System
Manufacturer
TGW (Things gone wrong)
in First Eight Months per 100 cars
Chrysler
285
GM
256
Ford
214
Japanese
(avg)
Toyota
132
55
Notion of Process Capital
MGT3303
Michel Leseure
Process Design
• Process design is about preparing
production
– A process is a sequence of steps
performed for a given purpose.
– More simply stated, process is what you
do. The process integrates people, tools
and procedures together
– More or less integrated with the product
design stage: this integration is a key
challenge!
MGT3303
Michel Leseure
Process Example
MGT3303
Michel Leseure
Overview of Process
Management
PROCESS MANAGEMENT
P rocess S trategy
T echnology M anagem ent
P rocesses
P rocedures
R outines
P rocess D esign/S election
P rocess
C apital
P rocess A nalysis/R e-engineering
P rocess V isibility
MGT3303
Michel Leseure
Process Strategy
• Process volume & Standardisation
• Capital Intensity
– The extent to which the selected process is mainly
dependent on capital investment (machinery, fixed
assets, automation) or not
• Process flexibility
– The ease with which employees and equipment can
handle a wide variety of products, output levels, duties,
and functions
• Vertical integration
– The degree to which a firm will handle the whole supply
chain process or only a certain stage of the supply chain
(e.g. assembly)
• Customer involvement
MGT3303
Michel Leseure
Process Volume & Standardisation
Source: Adapted from Robert Hay and Steven Wheelwright, Restoring Competitive Edge:
Competing through Manufacturing (New York: John Wiley & Sons, 1984).
MGT3303
Michel Leseure
Capital Intensity
• Process Selection with Break-Even
Analysis
– For a single process,
• find the breakeven point
– Among several processes,
• find the point of indifference
MGT3303
Michel Leseure
Break-Even Analysis
Total cost = total fixed cost + total variable cost
TC = cf + vcv
Total revenue = volume x price
TR = vp
Total profit = total revenue - total cost
Z = TR - TC = vp - (cf + vcv)
where, cf = fixed cost
v = volume
cv = variable cost per unit
p =price per unit
MGT3303
Michel Leseure
Solving For Break-Even Point
TR = TC
vp = (cf + vcv)
vp - vcv = cf
v(p - cv) = cf
v =
cf
p - cv
MGT3303
Michel Leseure
Break-Even Example
Fixed cost
Variable cost
Price
cf = $2,000
cv = $5 per raft
p = $10 per raft
cf
v =
= 2000
p - cv
10 - 5
= 400 rafts
MGT3303
Michel Leseure
Break-Even Graph
$5,000
Dollars
$4,000
$3,000
$2,000
TC
TR
$1,000
$0
Units
400
Break even point
© 1998 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 2/e
MGT3303
Michel Leseure
Choosing Between Two
Processes
• Find volume where
– Cost of process A = Cost of process
B
• Above point of indifference, choose
process with lowest variable cost
• Below point of indifference, choose
process with lowest fixed cost
MGT3303
Michel Leseure
Point Of Indifference
Process A Process B
$2,000 + $5v = $10,000 + $2v
$3v = $8,000
v = 2,667 rafts
Below 2,667 rafts, choose A
Above 2,667 rafts, choose B
MGT3303
Michel Leseure
Graphical Solution to
Process Selection
$25,000
Dollars
$20,000
B
$15,000
$10,000
A
$5,000
$0
0
1000
2000
3000
4000
Units
MGT3303
Michel Leseure
Process Flexibility
• Product flexibility:
– the ability to introduce a new product whilst incurring
only a minor reconfiguration of plant and equipment.
• Mix flexibility:
– the ability to simultaneously produce two different
versions of a product, or two different products.
• Volume flexibility:
– the ability to process simultaneously on the same
production line large and low volume series without any
major cost differences.
• Delivery flexibility:
– the ability to change scheduled delivery times when
needed without generating too many delays and too many
costs.
MGT3303
Michel Leseure
Process Flexibility
• Investment in process flexibility challenge
the volume/standardisation trade-off
• Allows firms to operate away from the
diagonal of the product process matrix
MGT3303
Michel Leseure
Make-Or-Buy Decisions
1. Cost
2. Capacity
3. Quality
4. Speed
5. Reliability
6. Expertise
MGT3303
Michel Leseure
Process Design/Selection
• Process selection
• Specific equipment selection
• Process plans
• Process analysis
MGT3303
Michel Leseure
Documents for Process Plans
• Blueprints - Drawings of product design
• Bill of Materials - List of materials and parts
• Assembly Diagram - Drawing of how parts are
combined to form final product
• Assembly Chart (Product Structure Diagram)
Top down view of product components
• Operations Process Chart - detailed list of
operations to make product
• Routing Sheet - ordered list of m/c’s
MGT3303
Michel Leseure
Product Structure Diagram
(Assembly Chart)
Packaged
Hand-Vac
Upholstery
tool
Crevice
tool
Forward
housing
assembly
Hand-Vac
Dusting
tool
Screw and
lock washer
assembly
Rear
housing
assembly
Package
MGT3303
Michel Leseure
Retaining
ring
Cable
Bulb
holder
Make base
Assemble base and feet
(sub-assembly 1)
Make feet (4)
Assemble sub-assemblies
1&2 (sub-assembly 3)
Shade
Stem
Product
Diagram
Make stem Inspect for
mis-wiring
Base
Cut cable
Purchase
bulb holder
Feet
Final
inspection
Purchase
shade
Assemble lamp
(final assembly)
Assemble cable, Make retaining
stem and bulb
ring
holder
(sub-assembly 2)
MGT3303
Michel Leseure
Operations Process Chart
Part name
Part no.
Usage Table
Assembly No.
Table leg
2410
437
Oper No. Description
10
Saw to rough length
20
Plane to size 043
30
Saw to finished length
40
Measure dimensions
50
Sand
Dept.
041
Machine Time
Tools
041
051
052
MGT3303
Michel Leseure
Process Flowchart Symbols
Operations
Inspection
Transportation
Delay
Storage
MGT3303
Michel Leseure
Process
Flowcharts
Description
of
process
1
Unload apples from truck
2
Move to inspection station
3
Weigh, inspect, sort
4
Move to storage
5
Wait until needed
6
Move to peeler
7
Apples peeled and cored
15
8
Soak in water until needed
20
9
Place in conveyor
5
10
Move to mixing area
11
Weigh, inspect, sort
30
Total
480
Page 1 0f 3
Distance
(feet)
Process: Apple Sauce
Time
(min)
Analyst: TLR
Operation
Transport
Inspect
Delay
Storage
Location: Graves Mountain
Step
Date: 9-30-00
20
100 ft
30
50 ft
360
20 ft
20 ft
190 ft
MGT3303
Michel Leseure
Process Analysis
• Continuous improvement
– Basic tool - process flowchart,
process analysis
– Incremental, continuous pressure
to improve
• Reengineering
– Basic tool - process map
– Radical redesign approach
MGT3303
Michel Leseure
The Reengineering Process
Strategic
directives
Benchmark
data
Design
Principles
Key Performance
Measures
Customer
requirements data
Goals & specifications
for process performance
Baseline
Data
High level
process map
Innovative
Ideas
Detailed
process map
Model
Validation
Pilot study
of new design
Full-scale implementation
MGT3303
Michel Leseure
High-level Process Map
Input
Subprocess
Subprocess
Subprocess
Output
Performance
Goal
Subprocess
MGT3303
Michel Leseure
Design Principles For
Reengineering
1. Organize around outcomes, not tasks
2. Capture information once, at the source
3. Centralize resources with info. tech.
4. Link parallel subprocesses
5. Design to do work right the first time
6. Remove complexity
7. Identify information & technology levers
MGT3303
Michel Leseure
Techniques For Generating
Innovative Ideas
• Vary entry point to a problem
• Draw analogies
• Change your perspective
• Try inverse brainstorming
• Chain forward as far as possible
• Use attribute brainstorming
MGT3303
Michel Leseure
Technology Management
MGT3303
Michel Leseure
Automated Material Handling
• Conveyors
• Robots
• Automated guided vehicle systems
(AGVS)
• Automated storage & retrieval systems
(ASRS)
MGT3303
Michel Leseure
Flexible Manufacturing Systems
(FMS)
• Programmable machine tools
• Controlled by common computer network
• Combines flexibility with efficiency
• Reduces setup & queue times
MGT3303
Michel Leseure
Flexible Manufacturing System
Computer
control
room
Tools
Conveyor
Pallet
CNC
Machine
Load
Parts
Unload
Terminal
Finished
goods
Robots
• Programmable manipulators that follow
specified paths
• Better than humans for
–
–
–
hostile environments
long hours
consistency
MGT3303
Michel Leseure
Components Of CIM
CAD
CAE
TQM
JIT/
kanban
DSS/ES/
AI
LAN, TOP,
satellites
NC/CNC/
DNC
DFM
Product
design
Bar codes,
EDI
MRP
GT
Systems
mgmt
Manuf
FMS
Robotics
CAD/CAM
Process
planning
CIM
AGV,
ASRS
IGES,
PDES
CAPP
Cellular
manuf
MAP,
STEP
Automated
Cells
inspection & centers
MGT3303
Michel Leseure
Adoption Of Technology
• Technology Readiness
• Need well-designed products & efficient processes
• Technology Design
• Know what to automate
• Technology Selection
• Choose the right level
• Technology Integration
• Have a strategy for incremental automation
MGT3303
Michel Leseure
Suggested Homework
• Problem 4.1, 4-2, 4-3, 4-4, 4-5, 4-6 p. 153
• Yellow Plates Process Mapping exercise
MGT3303
Michel Leseure