Process Strategy The process by which a firm converts inputs into goods and services The purpose is to build a production process that meets customer requirements and product specifications within the budget and other constraints

Types of Process Strategy 4 Types: 1. Process Focus 2. Repetitive Focus 3. Product Focus 4. Mass Customization

Process Focus Strategy Low volume, high variety Job shops Meeting individual customer requirements High flexibility of operation AKA Intermittent Process Examples: Print Hospitals

Process Focus Many inputs Many variety of outputs Job Shop Many departments and many routings

Repetitive Focus Classic assembly line model Modules More customized product production Less flexibility Structured Examples Restaurants Automobiles

Repetitive Focus Raw materials and module inputs Modules combined for many output options Few modules Automobile Assembly Line

Repetitive Focus: Harley Davidson

Product Focus AKA Continuous Process Very long continuous production runs High volume, low variety Standardized production High quality Examples: Glass Light bulb

Product Focus Few inputs Output variations in size, shape, and packaging Continuous Work Flow

Mass Customization Rapid, low cost production What and when the customer wants it Requires sophisticated operations capabilities BTO Examples: Dell Computers Toyota

Dell Computers

Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) 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 (Low volume, high variety) Repetitive Focus (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

Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (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 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 (Low volume, high variety) Repetitive Focus (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)

Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Scheduling is complex, trade-offs between inventory, availability, customer service Scheduling based on building various models from a variety of modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Sophisticated scheduling required to accommodate custom orders

Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (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

Process Analysis and Design The following questions should be answered: What type of competitive advantage is the process design trying to achieve? Does the process eliminate steps that do not add value? Does the process maximize value as perceived by the customer? Will the process win orders?

Tools of Process Analysis Flow Diagram Drawing showing the movement of inputs Helps in understanding, analysis and communication of process Time-Function Mapping AKA Time-Function Mapping and Process Mapping Same as flow diagram with the addition of time taken between processes Helps in identifying and eliminating waste

Tools of Process Analysis Value-Stream Mapping (VSM) Similar to process mapping, with the addition of an expansion of looking at where value is added in the entire production process Process Chart Use symbols, time and distance for analysis Allows analyst to focus on value added activities

Capacity The number of units a facility can hold, receive, store or produce in a given period of time Determines: Capital requirements (fixed costs) Satisfaction of demand Facility usage

Capacity Planning Long-Range Over one year Adding facilities Adding long lead time equipment Intermediate Planning 3 to 18 Months Subcontracting Adding : Equipment Shifts Personnel

Capacity Planning Short Range Planning Scheduling jobs Scheduling personnel Allocating machinery