7 Process Strategy and Sustainability PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl © 2011 Pearson Education, Inc. publishing as Prentice Hall

Process Strategies The objective of a process strategy is to build a production process that meets customer requirements and product specifications within cost and other managerial constraints © 2011 Pearson Education, Inc. publishing as Prentice Hall

Process, Volume, and Variety Low Volume Repetitive Process High Volume Volume Figure 7.1 High Variety one or few units per run, (allows customization) Process Focus projects, job shops (machine, print, hospitals, restaurants) Arnold Palmer Hospital Mass Customization (difficult to achieve, but huge rewards) Dell Computer Changes in Modules modest runs, standardized modules Repetitive (autos, motorcycles, home appliances) Harley-Davidson Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only Product Focus (commercial baked goods, steel, glass, beer) Frito-Lay Poor Strategy (Both fixed and variable costs are high) © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Manufacturing Process Layout D G A Receiving and Shipping Assembly Painting Department Lathe Department Milling Department Drilling Department Grinding P

Process Focus (low volume, high variety, intermittent processes) Many inputs (surgeries, sick patients, baby deliveries, emergencies) Many different outputs (uniquely treated patients) Many departments and many routings (low volume, high variety, intermittent processes) Arnold Palmer Hospital Figure 7.2(a) © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Product Focus Raw materials Finished item or customer Station 1 Station 2 Station 3 Station 4 Finished item Material and/or labor Material and/or labor Material and/or labor Material and/or labor Used for Repetitive or Continuous Processing

Product Layout Product layout sets up production equipment along a product-flow line, and the work in process moves along this line past workstations. Efficiently produces large numbers of similar items.

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Hot mill for finishing, cooling, and coiling Product Focus Scrap steel Ladle of molten steel Electric furnace A B C Continuous caster Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft Hot mill for finishing, cooling, and coiling D E F G H I Nucor Steel Plant © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Mass Customization Number of Choices Item 1970s 21st Century Vehicle models 140 286 Vehicle types 18 1,212 Bicycle types 8 211,000 Software titles 0 400,000 Web sites 0 162,000,000 Movie releases per year 267 765 New book titles 40,530 300,000 Houston TV channels 5 185 Breakfast cereals 160 340 Items (SKUs) in 14,000 150,000 supermarkets LCD TVs 0 102 Number of Choices Item 1970s 21st Century Table 7.1 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Mass Customization Dell Computer (high-volume, high-variety) Many parts and component inputs Many output versions (custom PCs and notebooks) Many modules (chips, hard drives, software, cases) (high-volume, high-variety) Dell Computer Figure 7.2(d) © 2011 Pearson Education, Inc. publishing as Prentice Hall

Requirements to Achive Mass Customization/Build-to-Order Repetitive Focus Flexible people and equipment (CIM) Figure 7.3 Modular techniques Fast Product and Process Design CAD Responsive Supply Chains ERP Mass Customization Rapid throughput techniques Effective scheduling techniques Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment © 2011 Pearson Education, Inc. publishing as Prentice Hall

Comparison of Product and Process Layouts Description Type of process Product Demand Volume Equipment Sequential arrangement of activities Continuous, mass production, mainly assembly Standardized, made to stock Stable High Special purpose Functional grouping of activities Intermittent, job shop, batch production, mainly fabrication Varied, made to order Fluctuating Low General purposee

Comparison of Product and Process Layouts Workers Inventory Material handling Aisles Scheduling Goal Advantage Limited skills Low in-process, high finished goods Fixed path (conveyor) Narrow Line balancing Equalize work at each station Efficiency Varied skills High in-process, low finished goods Variable path (forklift) Wide Dynamic Minimize material handling cost Flexibility

Comparison of Three Processes Using Crossover Charts Fixed costs Variable costs $ Low volume, high variety Process A Fixed costs Variable costs $ Repetitive Process B Fixed costs Variable costs $ High volume, low variety Process C Total cost Total cost Total cost 400,000 300,000 200,000 Volume $ V2 (6,666) V1 (2,857) Fixed cost Process C Fixed cost Process B Fixed cost Process A Figure 7.4 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Focused Processes Focus brings Less overhead costs Less complexity More efficiency © 2011 Pearson Education, Inc. publishing as Prentice Hall

Focused Processes Focus can be on: Customers (Hotel owners: dishwashers) Products (Caterpillar) Service (Children hospital) Technology (SAP: software) Quality (Rolls-Royce) © 2011 Pearson Education, Inc. publishing as Prentice Hall

Analyzing and Designing Processes Design the process to achieve a competitive advantage Analyze the process to eliminate the steps that do not add value © 2011 Pearson Education, Inc. publishing as Prentice Hall

Tools Used for Process Analysis and Design Flow Charts - 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Flow Chart Operator takes phone order. Orders wait to be picked up. Supervisor inspects orders. Order is fulfilled. Order waits for sales rep. Is order complete? Yes No Orders are moved to supervisor’s in-box. Orders wait for supervisor.

“Baseline” Time-Function Map Customer Sales Production control Plant A Warehouse Plant B Transport Order product Process order Wait Order Move Receive product Product Print Wait Order WIP Extrude Wait WIP Product Move Wait WIP 12 days 13 days 1 day 4 days 10 days 0 day 52 days Figure 7.5 © 2011 Pearson Education, Inc. publishing as Prentice Hall

“Target” Time-Function Map Customer Sales Production control Plant Warehouse Transport Order product Process order Wait Order Move Receive product Product Extrude Wait Print Order WIP Product 1 day 2 days 6 days Figure 7.5 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Value-Stream Mapping Figure 7.6 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Process Charts (Allow us to focus on value-added activities) Figure 7.7 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Service Blueprinting Helps to identify potential failure points in customer and service provider interaction Defines three levels of interaction Level 1: Activities under the control of the customer Level 2: Interaction between the customer and service provider Level 3: Activities performed invisibly to the customer Each level has different management issues © 2011 Pearson Education, Inc. publishing as Prentice Hall

Service Blueprint Poka-Yoke (level 1): Put a bell in driveway so that customer will be noticed Personal Greeting Service Diagnosis Perform Service Friendly Close Customer arrives for service. (3 min) Warm greeting and obtain service request. (10 sec) F Level #1 Notify customer the car is ready. (3 min) Customer departs Customer pays bill. (4 min) F Perform required work. (varies) Prepare invoice. No Notify customer and recommend an alternative provider. (7min) Standard request. (3 min) Determine specifics. (5 min) No Can service be done and does customer approve? Yes F Level #2 Direct customer to waiting room. F Yes F Level #3 Figure 7.8 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Improving Service Productivity Strategy Technique Example Separation Structure service so customers must go where the 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 Investment and insurance selection, cell phone billing Table 7.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Improving Service Productivity Strategy Technique Example Automation Separating services that may lend themselves to some type of 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, wedding organizer After-sale maintenance personnel Table 7.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Technologies to Improve Production and Productivity CNC Machinery Automatic identification systems (AISs), RFIS Vision system - inspection (video camera & computers) Robots Automated storage and retrieval systems (ASRSs) Automated guided vehicles (AGVs) Flexible manufacturing systems (FMSs) Computer-integrated manufacturing (CIM) © 2011 Pearson Education, Inc. publishing as Prentice Hall

CNC Machinery Increased precision Increased productivity Increased flexibility Reduced changeover time © 2011 Pearson Education, Inc. publishing as Prentice Hall

CNC Machinery © 2011 Pearson Education, Inc. publishing as Prentice Hall

Automatic Identification Systems (AISs) Improved data acquisition Reduced data entry errors Increased speed Increased scope of process automation Example – Bar codes and RFID © 2011 Pearson Education, Inc. publishing as Prentice Hall

Vision Systems Particular aid to inspection Consistently accurate Never bored Modest cost Superior to individuals performing the same tasks © 2011 Pearson Education, Inc. publishing as Prentice Hall

Robots Perform monotonous or dangerous tasks Perform tasks requiring significant strength or endurance Generally enhanced consistency and accuracy © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Illustrated concept of a high-rise AS/RS warehouse AS/RS High-Rise Warehouse

Automated Guided Vehicle (AGVs) Electronically guided and controlled carts Used for movement of products and/or individuals © 2011 Pearson Education, Inc. publishing as Prentice Hall

Automated Guided Vehicle (AGVs) Electronically guided and controlled carts Used for movement of products and/or individuals © 2011 Pearson Education, Inc. publishing as Prentice Hall

© 2011 Pearson Education, Inc. publishing as Prentice Hall

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 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Flexible Manufacturing System A schematic illustration of a flexible manufacturing system showing machining centers, a measuring and inspection station. And automated guided vehicles. Source: After J. T. Black. Manufacturing, Engineering & Technology, Fifth Edition, by Serope Kalpakjian and Steven R. Schmid. ISBN 0-13-148965-8. © 2006 Pearson Education, Inc., Upper Saddle River, NJ. All rights reserved.

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 low-volume/high-variety, and high-volume/low-variety production © 2011 Pearson Education, Inc. publishing as Prentice Hall

Computer-Integrated Manufacturing (CIM) Figure 7.10 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Sustainability (Four Rs) Sustainability in production processes Resources Recycling Regulations Reputation © 2011 Pearson Education, Inc. publishing as Prentice Hall

Sustainability Resources - doing laundry atnight to reduce electricity costs (hotels) Recycling BMW uses recycled plastics © 2011 Pearson Education, Inc. publishing as Prentice Hall

Sustainability Reputation - Frito-Lay built a plant powered by solar energy in California and advertised this in its products Regulations Cars with higher CO2 emissions pay higher taxes © 2011 Pearson Education, Inc. publishing as Prentice Hall