Process
Strategy Ch8
Production Planning
and Control
Dell Computer Company
“How can we make the process of buying a
computer better?”
 Sell custom-built PCs directly to consumer
 Build computers rapidly, at low cost, and only
when ordered
 Integrate the Web into every aspect of its
business
 Focus research on software designed to make
installation and configuration of its PCs fast
and simple
Process Strategies
 Process strategy is the pattern of decisions made in managing
processes to achieve competitive advantage.
 Involves using organization’s resources to provide something of
value
 A strategy 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
Four Process Strategies
 Process Focused (Low Volume/High Variety)
 Repetitive Focus (falls between Process & Repetitive focuses Classic
assembly line)
 Product Focused (High Volume/Low variety, facilities are organized
around products)
 Mass Customization Focus (high Volume & variety)
Process, Volume, and Variety
Volume
Low
Volume
Repetitive
Process
High
Volume
High Variety
one or few units per run,
high variety
(allows customization)
Changes in Modules
modest runs,
standardized modules
Changes in Attributes
(such as grade, quality,
size, thickness, etc.)
long runs only
Process Focus
projects, job shops
(machine, print,, carpentry )
Machine Shop
Mass Customization
(difficult to achieve,
but huge rewards)
Dell Computer Co.
Repetitive
(autos, motorcycles)
Harley Davidson
Poor Strategy (Both fixed
and variable costs are
high)
Product Focus
(commercial
baked goods,
steel, glass)
Nucor Steel
Process Focused Strategy
Hospitals
Machine Shop
Banking
Process Focus
 Facilities are organized by 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
Process Flow Diagram
Customer
Purchasing
Customer sales
representative
Vendors
PREPRESS DEPT
Accounting
Receiving
PRINTING DEPT
Warehouse
COLLATING
DEPT
Information flow
Material flow
GLUING, BINDING,
STAPLING, LABELING
POLYWRAP DEPT
SHIPPING
Process Focus
Print Shop
Many
inputs
High
variety
of
outputs
Process Focus Strategy Pros & Cons
• Advantages
• Greater product flexibility
• More general purpose equipment
• Lower initial capital investment
• Disadvantages
• More highly trained personnel
• More difficult production planning and control
• Low equipment utilization (5% to 25%)
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
Repetitive Focus
Automobile Assembly Line
Modules
combined
for many
output
options
Raw
materials
and
module
inputs
Few
modules
Process Flow Diagram
Frame tube
bending
Frame-building
work cells
Frame
machining
Hot-paint
frame painting
THE ASSEMBLY LINE
TESTING
28 tests
Incoming parts
Air cleaners
Oil tank work cell
Fluids and mufflers
Shocks and forks
Fuel tank work cell
Handlebars
Wheel work cell
Fender work cell
Engines and
transmissions
From Milwaukee
on a JIT arrival
schedule
Roller testing
Crating
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
Product Focus
Bottling Plant
Few
inputs
Output
variation in
size,
shape, and
packaging
Product Focus
D
Continuous caster
Nucor Steel Plant
C
Scrap
steel
A
B
Ladle of molten steel
Continuous cast steel sheared
into 24-ton slabs
Hot tunnel furnace - 300 ft
E
F
Hot mill for finishing, cooling, and coiling
H
I
G
Electric
furnace
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
Mass Customization
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
Number of Choices
Early 21st
Early 1970s
Century
140
18
8
0
0
267
40,530
5
160
14,000
260
1,212
19
300,000
46,412,165
458
77,446
185
340
150,000
Mass Customization
Repetitive Focus
Modular design
Flexible equipment
Modular techniques
Mass Customization
Effective
scheduling
techniques
Process-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Rapid
throughput
techniques
Product-Focused
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
Comparison of Processes
Process Focus
Repetitive Focus
Product Focus
(Low volume, high
variety)
(Modular)
(High-volume, lowvariety)
Mass
Customization
(High-volume,
high-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
Comparison of Processes
Process Focus
Repetitive Focus
Product Focus
(Low volume, high
variety)
(Modular)
(High-volume, lowvariety)
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
Comparison of Processes
Process Focus
Repetitive Focus
Product Focus
(Low volume,
high variety)
(Modular)
(High-volume, lowvariety)
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-in-process
is high
JIT inventory
techniques used
Work-in-process
inventory is low
Work-in-process
inventory driven
down by JIT, lean
production
Comparison of Processes
Process Focus
Repetitive Focus
Product Focus
Mass
Customization
(Low volume, high
variety)
(Modular)
(High-volume, lowvariety)
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
(High-volume,
high-variety)
Comparison of Processes
Process Focus
Repetitive Focus
Product Focus
(Low volume,
high variety)
(Modular)
(High-volume, lowvariety)
Scheduling is
complex, tradeoffs between
inventory,
availability,
customer service
Scheduling
based on
building various
models from
modules to
forecasts
Relatively simple
scheduling,
establishing
output rate to meet
forecasts
Mass
Customization
(High-volume,
high-variety)
Sophisticated
scheduling
required to
accommodate
custom orders
Comparison of Processes
Process Focus
Repetitive Focus
Product Focus
(Low volume,
high variety)
(Modular)
(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
Crossover Charts
Variable
costs
$
Variable
costs
Variable
costs
$
$
Fixed costs
Fixed costs
Fixed costs
Low volume, high variety
Process A
Repetitive
Process B
High volume, low variety
Process C
$
400,000
300,000
200,000
Fixed cost
Process A
(2,857)
V1
V2 (6,666)
Fixed cost
Process B
Fixed cost
Process C
Volume
Changing Processes
 Difficult and expensive
 May mean starting over
 Process strategy determines
transformation strategy for an
extended period
 Important to get it right
Process Analysis and Design
 Flow Diagrams - Shows the movement of
materials
 Time-Function Mapping - Shows flows and
time frame
 Value Stream Mapping - Shows flows and
time and value added beyond the
immediate organization
 Process Charts - Uses symbols to show
key activities
 Service Blueprinting - focuses on
customer/provider interaction
Time-Function Mapping
Customer
Order
product
Sales
Process
order
Production
control
Receive
product
Wait
Plant A
Print
Warehouse
Wait
Wait
Wait
Extrude
Plant B
Move
Transport
12 days
13 days
1 day
4 days 1 day 10 days
52 days
Move
1 day
0 day
1 day
Time-Function Mapping
Customer
Order
product
Sales
Process
order
Production
control
Receive
product
Wait
Plant
Print
Extrude
Warehouse
Wait
Transport
Move
1 day
2 days
1 day
6 days
1 day
1 day
Process Chart
Service Blueprint
 Focuses on the customer and
provider interaction
 Defines three levels of interaction
 Each level has different management
issues
 Identifies potential failure points
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
Process Analysis Tools
 Flowcharts provide a view of the big
picture
 Time-function mapping adds rigor
and a time element
 Value stream analysis extends to
customers and suppliers
 Process charts show details
 Service blueprint focuses on
customer interaction
Service Process Matrix
Degree of Customization
High
Low
Mass Service
Professional Service
Private
banking
Commercial
banking
Degree of Labor
High
Full-service
stockbroker
Generalpurpose law firms
Boutiques
Retailing
Service Factory
Law clinics
Service
Specialized
Limited-service
hospitals
stockbroker
Low
Warehouse and
catalog stores
Fast food
restaurants
Airlines
No frills
airlines
Fine-dining
restaurants
Shop
Hospitals
Service Process Matrix
Mass Service and Professional Service
 Labor involvement is high
 Selection and training highly important
 Focus on human resources
 Personalized services
Service Factory and Service Shop
 Automation of standardized services
 Low labor intensity responds well to
process technology and scheduling
 Tight control required to maintain standards
Improving Service Productivity
Strategy
Technique
Example
Separation
Structure service so
Bank customers go to a
customers must go where 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
Improving Service Productivity
Strategy
Technique
Example
Postponement
Customizing at delivery
Customizing vans at
delivery rather than at
production
Focus
Restricting the offerings
Limited-menu restaurant
Modules
Modular selection of
service, modular
production
Investment and insurance
selection, prepackaged
food modules in
restaurants
Improving Service Productivity
Strategy
Technique
Example
Automation
Precise personnel scheduling
Automatic teller machines
Scheduling
Precise personnel scheduling
Scheduling ticket counter
personnel at 15-minute
intervals at airlines
Training
Clarifying the service options,
explaining how to avoid
problems
Investment counselor, funeral
directors, after-sale
maintenance personnel
Equipment and Technology
 Often complex decisions
 Possible competitive advantage
 Flexibility
 Stable processes
 May allow enlarging the scope of the
processes
Improving Service Processes
 Layout
 Product exposure, customer
education, product enhancement
 Human Resources
 Recruiting and training
 Impact of flexibility
Production Technology






Machine technology
Automatic identification systems (AIS)
Process control
Vision system
Robot
Automated storage and retrieval systems
(ASRS)
 Flexible manufacturing systems (FMS)
 Computer-integrated manufacturing (CIM)
Machine Technology
 Increased precision
 Increased productivity
 Increased flexibility
 Improved environmental impact
 Reduced changeover time
 Decreased size
 Reduced power requirements
Automatic Identification
Systems (AIS)
 Improved data acquisition
 Reduced data entry errors
 Increased speed
 Increased scope of process
automation
Process Control
 Increased process stability
 Increased process precision
 Real-time provision of information for
process evaluation
 Data available in many forms
Process Control Software
Vision Systems
 Particular aid to inspection
 Consistently accurate
 Never bored
 Modest cost
 Superior to individuals performing the
same tasks
Robots
 Perform monotonous or dangerous
tasks
 Perform tasks requiring significant
strength or endurance
 Generally enhanced consistency and
accuracy
Robotic
Surgery
Automated Storage and Retrieval
Systems (ASRS)
 Automated placement and withdrawal
of parts and products
 Reduced errors and labor
 Particularly useful in inventory and test
areas of manufacturing firms
Automated Guided Vehicle (AGV)
 Electronically guided and controlled
carts
 Used for movement of products and/or
individuals
Flexible Manufacturing Systems
(FMS)
 Computer controls both the workstation and
the material handling equipment
 Enhance flexibility and reduced waste
 Can economically produce low volume at high
quality
 Reduced changeover time and increased
utilization
 Stringent communication requirement
between components
Computer Integrated
Manufacturing (CIM)
 Extension of flexible manufacturing
systems
 Backwards to engineering and inventory
control
 Forward into warehousing and shipping
 Can also include financial and customer
service areas
 Reducing the distinction between lowvolume/high-variety, and highvolume/low-variety production
Computer Integrated
Manufacturing (CIM)
CIM
Top management decides to make a product
Computeraided design
(CAD) designs
the product
OM runs the
production
process
FMS
Management
Information
System
Computer-aided
manufacturing
(CAM)
Automated storage and
retrieval system (ASRS)
and automated guided
vehicles (AGVs)
Robots put
the product
together
Technology in Services
Service Industry
Example
Financial Services
Debit cards, electronic funds transfer, ATMs,
Internet stock trading
Education
Electronic bulletin boards, on-line journals
Utilities and
government
Automated one-man garbage trucks, optical mail
and bomb scanners, flood warning systems
Restaurants and
foods
Wireless orders from waiters to kitchen, robot
butchering, transponders on cars that track sales
at drive-throughs
Communications
Electronic publishing, interactive TV
Technology in Services
Service Industry
Example
Hotels
Electronic check-in/check-out, electronic key/lock
system
Wholesale/retail
trade
Point-of-sale terminals, e-commerce, electronic
communication between store and supplier, bar
coded data
Transportation
Automatic toll booths, satellite-directed navigation
systems
Health care
Online patient-monitoring, online medical
information systems, robotic surgery
Airlines
Ticketless travel, scheduling, Internet purchases
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
Ethics and Environmentally
Friendly Processes
Reduce the negative impact on the
environment
 Encourage recycling
 Efficient use of resources
 Reduction of waste by-products
 Use less harmful ingredients
 Use less energy