Operations
Management
Chapter 7 –
Process Strategy
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc.
7–1
Outline
 Global Company Profile: Dell
Computer Corp.
 Four Process Strategies
 Process Focus
 Repetitive Focus
 Product Focus
 Mass Customization Focus
 Comparison of Process Choices
© 2008 Prentice Hall, Inc.
7–2
Outline – Continued
 Process Analysis and Design
 Flow Diagrams
 Time-Function Mapping
 Value-Stream Mapping
 Process Charts
 Service Blueprinting
© 2008 Prentice Hall, Inc.
7–3
Outline – Continued
 Service Process Design
 Customer Interaction and Process
Design
 More Opportunities to Improve
Service Processes
 Selection of Equipment and
Technology
© 2008 Prentice Hall, Inc.
7–4
Outline – Continued
 Production Technology
 Machine Technology
 Automatic Identification Systems
(AISs) and RFID
 Process Control
 Vision Systems
 Robots
© 2008 Prentice Hall, Inc.
7–5
Outline – Continued
 Production Technology (cont.)
 Automated Storage and Retrieval
Systems (ASRSs)
 Automated Guided Vehicles (AGVs)
 Flexible Manufacturing Systems
(FMSs)
 Computer-Integrated Manufacturing
(CIM)
© 2008 Prentice Hall, Inc.
7–6
Outline – Continued
 Technology in Services
 Process Redesign
 Ethics and Environmentally
Friendly Processes
© 2008 Prentice Hall, Inc.
7–7
Learning Objectives
When you complete this chapter you
should be able to:
1. Describe four production processes
2. Compute crossover points for
different processes
3. Use the tools of process analysis
4. Describe customer interaction in
process design
5. Identify recent advances in
production technology
© 2008 Prentice Hall, Inc.
7–8
Dell Computer Company
Mass customization provides a
competitive advantage
 Sell custom-built PCs directly to consumer
 Lean production processes and good
product design allow responsiveness
 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
© 2008 Prentice Hall, Inc.
7–9
Process, Volume, and Variety
Volume
Figure 7.1
Low
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
© 2008 Prentice Hall, Inc.
Repetitive
Process
Process Focus
projects, job shops
(machine, print,
carpentry)
Standard Register
High
Volume
Mass Customization
(difficult to achieve,
but huge rewards)
Dell Computer
Repetitive
(autos, motorcycles)
Harley-Davidson
Poor Strategy
(Both fixed and
variable costs
are high)
Product Focus
(commercial
baked goods,
steel, glass)
Nucor Steel
7 – 10
Process Strategies
 How 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
© 2008 Prentice Hall, Inc.
7 – 11
Process Strategies
Four basic strategies
 Process focus
 Repetitive focus
 Product focus
 Mass customization
Within these basic strategies there are
many ways they may be implemented
© 2008 Prentice Hall, Inc.
7 – 12
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
© 2008 Prentice Hall, Inc.
7 – 13
Process Focus
Many
inputs
© 2008 Prentice Hall, Inc.
Many departments and
many routings
Job Shop
Many
variety
of
outputs
7 – 14
Process Flow Diagram
Customer
Accounting
Purchasing
Customer sales
representative
Vendors
PREPRESS DEPT
Receiving
PRINTING DEPT
Warehouse
Information flow
Material flow
COLLATING
DEPT
GLUING, BINDING,
STAPLING, LABELING
POLYWRAP DEPT
SHIPPING
Customer
© 2008 Prentice Hall, Inc.
Figure 7.2
7 – 15
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
© 2008 Prentice Hall, Inc.
7 – 16
Repetitive Focus
Automobile Assembly Line
Modules
combined
for many
output
options
Raw
materials
and
module
inputs
Few
modules
© 2008 Prentice Hall, Inc.
7 – 17
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
Figure 7.3
© 2008 Prentice Hall, Inc.
7 – 18
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
© 2008 Prentice Hall, Inc.
7 – 19
Product Focus
Continuous Work Flow
Few
inputs
© 2008 Prentice Hall, Inc.
Output
variations
in size,
shape,
and
packaging
7 – 20
Product Focus
D
Continuous caster
Nucor Steel Plant
C
Scrap
steel
A
B
Ladle of molten steel
Electric
furnace
Continuous cast steel
sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
E
F
Hot mill for finishing, cooling, and coiling
H
G
I
© 2008 Prentice Hall, Inc.
7 – 21
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
© 2008 Prentice Hall, Inc.
7 – 22
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
LCD TVs
© 2008 Prentice Hall, Inc.
Number of Choices
1970s
21st Century
140
286
18
1,212
8
19
0
400,000
0
98,116,993
267
458
40,530
77,446
5
185
160
340
14,000
150,000
0
102
7 – 23
Mass Customization
Repetitive Focus
Figure 7.5
Flexible people
and equipment
Supportive
supply
chains
Modular techniques
Mass Customization
Effective
scheduling
techniques
Rapid
throughput
techniques
Process-Focused
Product-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
© 2008 Prentice Hall, Inc.
7 – 24
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
© 2008 Prentice Hall, Inc.
7 – 25
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
© 2008 Prentice Hall, Inc.
7 – 26
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
© 2008 Prentice Hall, Inc.
7 – 27
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
build-to-order
(BTO)
Table 7.2
© 2008 Prentice Hall, Inc.
7 – 28
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
a variety of
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
© 2008 Prentice Hall, Inc.
7 – 29
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,
known only
after the job
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
© 2008 Prentice Hall, Inc.
7 – 30
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
Figure 7.6
© 2008 Prentice Hall, Inc.
(2,857)
V1
V2 (6,666)
Fixed cost
Process B
Fixed cost
Process C
Volume
7 – 31
Focused Processes
 Focus brings efficiency
 Focus on depth of product line
rather than breadth
 Focus can be




© 2008 Prentice Hall, Inc.
Customers
Products
Service
Technology
7 – 32
Changing Processes
 Difficult and expensive
 May mean starting over
 Process strategy determines
transformation strategy for an
extended period
 Important to get it right
© 2008 Prentice Hall, Inc.
7 – 33
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
© 2008 Prentice Hall, Inc.
7 – 34
“Baseline” Time-Function Map
Customer
Order
product
Sales
Process
order
Production
control
Receive
product
Wait
Plant A
Print
Warehouse
Wait
Wait
Extrude
Plant B
Move
Transport
Figure 7.7
Wait
12 days
13 days
1 day
4 days 1 day 10 days
Move
1 day
0 day
1 day
52 days
© 2008 Prentice Hall, Inc.
7 – 35
“Target” Time-Function Map
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
Figure 7.7
© 2008 Prentice Hall, Inc.
7 – 36
Value-Stream Mapping
Figure 7.8
© 2008 Prentice Hall, Inc.
7 – 37
Process Chart
Figure 7.9
© 2008 Prentice Hall, Inc.
7 – 38
Service Blueprint
 Focuses on the customer and
provider interaction
 Defines three levels of interaction
 Each level has different
management issues
 Identifies potential failure points
© 2008 Prentice Hall, Inc.
7 – 39
Service Blueprint
Personal Greeting
Level
#1
Service Diagnosis
Perform Service
Customer arrives
for service
Customer departs
F
Warm greeting
and obtain
service request
Determine
specifics
No
Standard
request
Level
#2
Direct customer
to waiting room
F
Level
#3
Friendly Close
Can
service be
done and does
customer
approve?
F
F
Yes
Yes
Notify
customer
and recommend
an alternative
provider
Customer pays bill
F
F
No
Notify
customer the
car is ready
Perform
required work
F
Prepare invoice
Figure 7.10
© 2008 Prentice Hall, Inc.
F
7 – 40
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 detail
 Service blueprint focuses on
customer interaction
© 2008 Prentice Hall, Inc.
7 – 41
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
Fine-dining
restaurants
Shop
Hospitals
Airlines
Figure 7.11
© 2008 Prentice Hall, Inc.
No-frills
airlines
7 – 42
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
© 2008 Prentice Hall, Inc.
7 – 43
Improving Service
Productivity
Strategy
Technique
Example
Separation
Structure service so
customers must go
where service is
offered
Bank customers go to
a manager to open a
new account, to loan
officers for loans, and
to tellers for deposits
Self-service
Self-service so
customers examine,
compare, and
evaluate at their own
pace
Supermarkets and
department stores,
Internet ordering
Table 7.3
© 2008 Prentice Hall, Inc.
7 – 44
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
Table 7.3
© 2008 Prentice Hall, Inc.
7 – 45
Improving Service
Productivity
Strategy
Technique
Example
Automation
Separating services
that may lend
themselves to
automation
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, aftersale maintenance
personnel
Table 7.3
© 2008 Prentice Hall, Inc.
7 – 46
Improving Service
Processes
 Layout
 Product exposure, customer
education, product enhancement
 Human Resources
 Recruiting and training
 Impact of flexibility
© 2008 Prentice Hall, Inc.
7 – 47
Equipment and Technology
 Often complex decisions
 Possible competitive advantage
 Flexibility
 Stable processes
 May allow enlarging the scope of the
processes
© 2008 Prentice Hall, Inc.
7 – 48
Production Technology
 Machine technology
 Automatic identification
systems (AISs)
 Process control
 Vision system
 Robot
 Automated storage and retrieval systems
(ASRSs)
 Automated guided vehicles (AGVs)
 Flexible manufacturing systems (FMSs)
 Computer-integrated manufacturing (CIM)
© 2008 Prentice Hall, Inc.
7 – 49
Machine Technology
 Increased precision
 Increased productivity
 Increased flexibility
 Improved environmental impact
 Reduced changeover time
 Decreased size
 Reduced power requirements
© 2008 Prentice Hall, Inc.
7 – 50
Automatic Identification
Systems (AISs)
 Improved data acquisition
 Reduced data entry errors
 Increased speed
 Increased scope
of process
automation
Example – Bar codes and RFID
© 2008 Prentice Hall, Inc.
7 – 51
Process Control
 Increased process stability
 Increased process precision
 Real-time provision of information
for process evaluation
 Data available in many forms
© 2008 Prentice Hall, Inc.
7 – 52
Process Control Software
© 2008 Prentice Hall, Inc.
7 – 53
Vision Systems
 Particular aid to inspection
 Consistently accurate
 Never bored
 Modest cost
 Superior to individuals performing
the same tasks
© 2008 Prentice Hall, Inc.
7 – 54
Robots
 Perform monotonous or dangerous
tasks
 Perform tasks requiring significant
strength or endurance
 Generally enhanced consistency
and accuracy
© 2008 Prentice Hall, Inc.
7 – 55
Automated Storage and
Retrieval Systems (ASRSs)
 Automated placement and
withdrawal of parts and products
 Reduced errors and labor
 Particularly useful in inventory and
test areas of manufacturing firms
© 2008 Prentice Hall, Inc.
7 – 56
Automated Guided Vehicle
(AGVs)
 Electronically guided and controlled
carts
 Used for movement of products
and/or individuals
© 2008 Prentice Hall, Inc.
7 – 57
Flexible Manufacturing
Systems (FMSs)
 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
© 2008 Prentice Hall, Inc.
7 – 58
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
© 2008 Prentice Hall, Inc.
7 – 59
ComputerIntegrated
Manufacturing
(CIM)
Figure 7.12
© 2008 Prentice Hall, Inc.
7 – 60
Technology in Services
Service Industry
Example
Financial
Services
Debit cards, electronic funds transfer, ATMs,
Internet stock trading
Education
Electronic bulletin boards, on-line journals,
WebCT and Blackboard
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
© 2008 Prentice Hall, Inc.
Table 7.4
7 – 61
Technology in Services
Service Industry
Example
Hotels
Electronic check-in/check-out, electronic
key/lock system
Wholesale/retail
trade
ATM-like kiosks, point-of-sale (POS)
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
© 2008 Prentice Hall, Inc.
Table 7.4
7 – 62
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
© 2008 Prentice Hall, Inc.
7 – 63
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
© 2008 Prentice Hall, Inc.
7 – 64