Processes and Technologies

Process (Definition of) Process: Any part of an organization that takes inputs and transforms them into outputs

Process Flowcharting (definition of) Process flowcharting is the use of a diagram to present the major elements of a process The basic elements can include tasks or operations, flows of materials or customers, decision points and storage areas or queues It is an ideal methodology by which to begin analyzing a process

Flowchart Symbols (1 of 2) Tasks or operations Examples: Giving an admission ticket to a customer, installing an engine in a car, etc. Decision Points Examples: How much change should be offered to a customer, which tool should be used, etc.

Flowchart Symbols (2 of 2) Storage areas or queues Examples: Sheds, lines of people waiting for a service, etc. Flows of materials or customers Examples: Customers moving to a seat, mechanic getting a tool, etc.

Example 2: Flowchart for Inspection Process Material Received from Supplier No, Continue… Inspect Material for Defects Defects found? Yes Return to Supplier for Credit

Process Terminology (1 of 2) Single-stage Process Stage 1 Stage 1 Stage 2 Stage 3 Multi-stage Process 4

Process Terminology (2 of 2) A buffer refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage. Allows stages to operate independently Stage 1 Stage 2 Buffer Multi-stage Process with Buffer 4

Process Planning Process selection Make-or-buy decisions Specific equipment selection Process plans Process analysis

Process Selection Process Selection: Deciding on the way production of goods or services will be organized Process selection can involve substantial investment in Equipment Layout of facilities

Major Implications of Process Selection Capacity planning Layout of facilities Equipment Design of work systems

Factors that Affect Process Decisions Required Variety, Required Volume (how many) Required Flexibility (degree of)

Process Strategy Overall approach to produce goods and services Defines: Capital intensity Process flexibility Vertical integration Customer involvement

Process Selection and System Design Forecasting Product and Service Design Technological Change Capacity Planning Process Selection Facilities and Equipment Layout Work Design

From Function to Process Manufacturing Accounting Sales Purchasing Product Development Order Fulfillment Supply Chain Management Customer Service Function Process

Process Selection Variety How much Flexibility What degree Volume Batch Variety How much Flexibility What degree Volume Expected output Job Shop Repetitive Continuous

Types of Processes (Process Flow Structures) Projects Job shop Batch production Mass production Continuous flow production

Types of Processes (1 of 2) Determine how to produce a product or provide a service Projects (nonroutine jobs) Job shop Small scale (e.g. copy center making a single copy of a student term paper) Batch Moderate volume (e.g. copy center making 10,000 copies of an ad piece for a business)

Types of Processes (2 of 2) Repetitive- Mass production/assembly High volumes of standardized goods or services (e.g. Automobile manufacturer) Continuous Flow Line Very high volumes of non-discrete goods (eg. Petroleum manufacturer)

Product and Service Processes Process Type Job Shop Appliance repair Emergency room Ineffective Batch Commercial baking Classroom Lecture Repetitive Automotive assembly Automatic carwash Continuous (flow) Steel Production Water purification

Process-Focused Strategy Examples Bank © 1995 Corel Corp. Machine Shop Hospital

Repetitive-Focused Strategy - Examples Truck © 1995 Corel Corp. Clothes Dryer Fast Food McDonald’s over 95 billion served © 1984-1994 T/Maker Co.

Product-Focused Examples Paper (Continuous) © 1984-1994 T/Maker Co.

Product – Process Matrix Dimension Job shop Batch Repetitive Continuous Job variety Very High Moderate Low Very low Process flexibility Unit cost Volume of output Very Low High

Process Selection with Break-even Analysis A standard approach to choosing among alternative processes or equipment Model seek to determine the point in units produced (and sold) where we will start making profit on the process or equipment Model seeks to determine the point in units produced (and sold) where total revenue and total cost are equal

Process Selection with Break-Even Analysis Total cost = fixed cost + total variable cost TC = cf + vcv Total revenue = volume x price TR = vp Profit = total revenue - total cost Z = TR - TC = vp - (cf + vcv) cf = fixed cost v = volume (i.e., number of units produced and sold) cv = variable cost per unit p = price per unit

Solving for Break-Even Volume TR = TC vp = cf + vcv vp - vcv = cf v(p - cv) = cf v = cf p - cv

Break-Even Analysis: Example 1 Fixed cost = cf = $2,000 Variable cost = cv = $5 per raft Price = p = $10 per raft The break-even point is v = = = 400 rafts cf p - cv 2000 10 - 5

Break-Even Analysis: Example 1 Total cost line Total revenue line Break-even point 400 Units $3,000 — $2,000 — $1,000 —

Break-Even Analysis: Example 2 Choosing Between Two Processes $2,000 + $5v = $10,000 + $2v $3v = $8,000 v = 2,667 rafts Process A Process B Below 2,667, choose A Above 2,667, choose B

Break-Even Analysis: Example 2 Choosing Between Two Processes | | | | 1000 2000 3000 4000 Units $20,000 — $15,000 — $10,000 — $5,000 — Total cost of process A Total cost of process B Choose process A Choose process B Point of indifference = 2,667 Units

Choosing Between Three Processes $ Fixed cost Variable cost Fixed cost – Process A Fixed cost – Process B Fixed cost – Process C 200,000 300,000 400,000 Total process C costs Total process A costs Process A Process B Process C V1(2,857) V2 (6,666) Volume Total process B costs

Make-or-Buy Decisions 1. Cost 2. Available Capacity 3. Quality Considerations 4. Speed 5. Reliability Expertise Nature of Demand

Specific Equipment Selection Purchase cost Operating cost Annual savings Revenue enhancement Replacement analysis Risk and uncertainty Piecemeal analysis Breakeven analysis

Transition From Product Design to Process Design: Product and Production Documents

Product Documents Engineering drawings Shows dimensions, tolerances, & materials Shows codes for Group Technology Assembly drawing -- Shows exploded view of product Bill of Material Lists components, quantities & where used Shows product structure

Engineering Drawings - Show Dimensions, Tolerances, etc.

Assembly Drawing Head Neck End Cap Handle

Bill of Material Example

Assembly Chart (Gozinto Chart) Bottom bun Beef patty Salt Cheese Lettuce Sauce Onions Middle bun Pickles Sesame seed top bun Wrapper SA First-layer assembly Second-layer assembly Completed Big Mac

Assembly Drawing and Assembly Chart

Process Analysis The systematic examination of all aspects of a process to improve its operation to make it: Faster More efficient Less costly More responsive Basic tools Process flowchart Process diagrams Process maps

Process Flowchart Symbols Operations Inspection Transportation Delay Storage

Process Flowchart: Example 1 SUBJECT: Request tool purchase Dist (ft) Time (min) Symbol Description lðo D Ñ Write order ¡ðo On desk 75 ¡ è o To buyer ¡ðn Examine ¡ = Operation; ð = Transport; o = Inspect; D = Delay; Ñ = Storage

Process Flow Chart: Example 2: Hamburger Assembly Dist. (Ft) Time (Mins) Chart Symbols Process Description - Meat Patty in Storage 1.5 .05 Transfer to Broiler 2.50 Broiler Visual Inspection 1.0 Transfer to Rack .15 Temporary Storage .5 .10 Obtain Buns, Lettuce, etc. .20 Assemble Order Place in Finish Rack 3.5 3.15 TOTALS Value-added time = Operation time/Total time = (2.50+.20)/3.15=85.7% ðⅮ 2 4 1 - 2

Process Flowchart: Example 3 Operation Transport Inspect Step Delay Storage Distance (feet) Time (min) Description of process 1 2 3 4 5 6 7 8 9 10 11 Unload apples from truck Move to inspection station Weigh, inspect, sort Move to storage Wait until needed Move to peeler Apples peeled and cored Soak in water until needed Place in conveyor Move to mixing area Total Page 1 0f 3 480 30 20 15 360 190 ft 20 ft 50 ft 100 ft Date: 9-30-02 Analyst: TLR Location: Graves Mountain Process: Apple Sauce

Service Process Design

Techniques for Improving Service Productivity (1 of 2) Strategy Technique Separation Self-service Postponement Focus Structure service so customers must go where service is offered Self-service so customers examine, compare and evaluate at their own pace Customizing at delivery Restricting the offerings

Techniques for Improving Service Productivity (2 of 2) Modules Automation Scheduling Training Modular selection of service. Modular production Separating services that lend themselves to automation Precise personnel scheduling Clarifying the service options Explaining problems Improving employee flexibility

More Opportunities to Improve Service Processes Methods Layout Human Resource Technology

Technologies

Technology Technology: The application of scientific discoveries to the development and improvement of products and services and operations processes. Technology innovation: The discovery and development of new or improved products, services, or processes for producing or providing them.

Kinds of Technology Operations management is primarily concerned with three kinds of technology: Product and service technology Process technology Information technology All three have a major impact on: Costs Productivity Competitiveness

Technology as a Competitive Advantage Innovations in Products and services Cell phones PDAs Wireless computing Processing technology Increasing productivity Increasing quality Lowering costs Eases flexibility

Technology Acquisition Technology can have benefits but … Technology risks include: What technology will and will not do Technical issues Economic issues Initial costs, space, cash flow, maintenance Consultants and/or skilled employees Integration cost, time resources Training, safety, job loss

Advantages Created by HighTechnology Increased precision Increased productivity Increased flexibility, increased product variety Decreased cost (labor, material, inventory, transportation and quality costs) Improved product features and quality Decreased pollution Decreased size Decreased power requirements.

Information Technology Management Information Systems (MIS) Move large amounts of data Decision Support Systems (DSS) Add decision making support Expert System Recommend decision based on expert knowledge

Enterprise Software Collect, analyze, and make decisions based on data ERP - Enterprise Resource Planning Managing wide range of processes Human resources, materials management, supply chains, accounting, finance, manufacturing, sales force automation, customer service, customer order entry Finding hidden patterns through data mining

Advanced Communications Electronic data interchange (EDI) Internet, extranets Wireless communications Teleconferencing & telecommuting Bar coding, RFT Virtual reality

Process Technology: Automation Machinery that has sensing and control devices that enables it to operate - Fixed automation - Programmable automation

Manufacturing Hardware Technology Numerically controlled (NC) machines Controlled by punched tape Computer numerical controlled (CNC) Controlled by attached computer Direct numerical control (DNC) Several NC machines controlled by single computer Robotics Flexible manufacturing systems (FMS) Includes automated material handling

Production Process & Technology Alternatives # Different Products or Parts High General Purpose, NC, CNC CIM Flexible Manufacturing System Dedicated Automation Low Low High Volume of Products or Parts

Flexible Manufacturing Systems (FMS) Programmable machine tools Controlled by common computer network Combines flexibility with efficiency Reduces setup & queue times

Flexible Manufacturing System Parts Finished goods Computer control room Terminal CNC Machine Pallet Automatic tool changer

Manufacturing Software Technology Computer Aided Design and Computer Aided Manufacturing (CAD/CAM) Computer Integrated Manufacturing (CIM)

CAM refers to the use of specialized computer programs to direct and control manufacturing equipment. When CAD information is translated into instructions for computer aided manufacturing, CAM, the result of these two technologies is known as CAD/CAM