Operations
Management
Chapter 7 –
Process Strategy
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e
© 2006
Prentice
Hall, Inc. Hall, Inc.
©
2006
Prentice
7–1
Process, Volume, and Variety
Volume
Figure 7.1
Low
Volume
High
Customization
Medium
Customizatio
n
Low
Customization
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Repetitive
Process
Process Focus
projects, job shops
(machine, print,
carpentry)
High
Volume
Mass Customization
(difficult to achieve,
but huge rewards)
Dell Computer Co.
Repetitive
(autos, motorcycles)
Harley Davidson
Product Focus
(commercial
baked goods,
steel, glass)
Nucor Steel
7–2
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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7–3
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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7–4
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
© 2006 Prentice Hall, Inc.
7–5
Comparison of Processes
Process
Focus
Repetitive
Focus
Product Focus
Mass
Customization
(Low volume,
high variety)
(Modular)
(High-volume,
low-variety)
Small
quantity, large
variety of
products
Long runs,
standardized
product made
from modules
Large
quantity, small
variety of
products
Large
quantity, large
variety of
products
General
purpose
equipment
Special
equipment
aids in use of
assembly line
Special
purpose
equipment
Rapid
changeover
on flexible
equipment
(High-volume,
high-variety)
Table 7.2
© 2006 Prentice Hall, Inc.
7–6
Comparison of Processes
Process
Focus
Repetitive
Focus
(Low volume,
high variety)
(Modular)
Product Focus
(High-volume,
low-variety)
Mass
Customization
(High-volume,
high-variety)
Operators are
broadly
skilled
Employees
are modestly
trained
Operators are
less broadly
skilled
Flexible
operators are
trained for the
necessary
customization
Many job
instructions
as each job
changes
Repetition
reduces
training and
changes in job
instructions
Few work
orders and job
instructions
because jobs
standardized
Custom
orders require
many job
instructions
Table 7.2
© 2006 Prentice Hall, Inc.
7–7
Comparison of Processes
Process
Focus
Repetitive
Focus
(Low volume,
high variety)
(Modular)
Product Focus
(High-volume,
low-variety)
Mass
Customization
(High-volume,
high-variety)
Raw material
inventories
high
JIT
procurement
techniques
used
Raw material
inventories
are low
Raw material
inventories
are low
Work-inprocess is
high
JIT inventory
techniques
used
Work-inprocess
inventory is
low
Work-inprocess
inventory
driven down
by JIT, lean
production
Table 7.2
© 2006 Prentice Hall, Inc.
7–8
Comparison of Processes
Process
Focus
Repetitive
Focus
(Low volume,
high variety)
(Modular)
Product Focus
(High-volume,
low-variety)
Mass
Customization
(High-volume,
high-variety)
Units move
slowly
through the
plant
Movement is
measured in
hours and
days
Swift
movement of
unit through
the facility is
typical
Goods move
swiftly
through the
facility
Finished
goods made
to order
Finished
goods made
to frequent
forecast
Finished
goods made
to forecast
and stored
Finished
goods often
made to order
Table 7.2
© 2006 Prentice Hall, Inc.
7–9
Comparison of Processes
Process
Focus
Repetitive
Focus
(Low volume,
high variety)
(Modular)
Scheduling is
complex,
trade-offs
between
inventory,
availability,
customer
service
Scheduling
based on
building
various
models from
modules to
forecasts
Product Focus
(High-volume,
low-variety)
Relatively
simple
scheduling,
establishing
output rate to
meet forecasts
Mass
Customization
(High-volume,
high-variety)
Sophisticated
scheduling
required to
accommodate
custom orders
Table 7.2
© 2006 Prentice Hall, Inc.
7 – 10
Comparison of Processes
Process
Focus
Repetitive
Focus
(Low volume,
high variety)
(Modular)
Product Focus
(High-volume,
low-variety)
Mass
Customization
(High-volume,
high-variety)
Fixed costs
low, variable
costs high
Fixed costs
dependent on
flexibility of
the facility
Fixed costs
high, variable
costs low
Fixed costs
high, variable
costs must be
low
Costing
estimated
before job,
not known
until after job
is complete
Costs usually
known due to
extensive
experience
High fixed
costs mean
costs
dependent on
utilization of
capacity
High fixed
costs and
dynamic
variable costs
make costing
a challenge
Table 7.2
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7 – 11
Mass Customization
 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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7 – 12
Mass Customization
Table 7.1
Item
Vehicle models
Vehicle types
Bicycle types
Software titles
Web sites
Movie releases
New book titles
Houston TV channels
Breakfast cereals
Items (SKUs) in
supermarkets
© 2006 Prentice Hall, Inc.
Number of Choices
Early 21st
Early 1970s
Century
140
260
18
1,212
8
19
0
300,000
0
46,412,165
267
458
40,530
77,446
5
185
160
340
14,000
150,000
7 – 13
Changing Processes
 Difficult and expensive
 May mean starting over
 Important to get it right
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7 – 14
Process Analysis Tools
 Flowcharts provide a view of the
big picture
 Process diagrams show detail
 Service blueprint focuses on
customer interaction
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7 – 15
Service Blueprint
 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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7 – 16
Service Blueprint
Personal Greeting
Level
#1
Service Diagnosis
Perform Service
Customer arrives
for service
Warm greeting
and obtain
service request
Customer departs
Determine
specifics
No
Standard
request
Level
#2
Friendly Close
Direct customer
to waiting room
Can
service be
done and does
customer
approve?
Yes
Level
#3
Potential failure point
Yes
Notify
customer
and recommend
an alternative
provider
Customer pays bill
No
Notify
customer the
car is ready
Perform
required work
Prepare invoice
Figure 7.9
© 2006 Prentice Hall, Inc.
7 – 17