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

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

Repetitive Focus (modular) Harley Davidson Raw materials and module inputs Modules combined for many Output options (many combinations of motorcycles) Few modules (multiple engine models, wheel modules) (modular) Harley Davidson Figure 7.2(b) © 2011 Pearson Education, Inc. publishing as Prentice Hall

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

Product Focus (low-volume, high variety, continuous process) Frito-Lay Few Inputs (corn, potatoes, water, seasoning) Output variations in size, shape, and packaging (3-oz, 5-oz, 24-oz package labeled for each material) (low-volume, high variety, continuous process) Frito-Lay Figure 7.2(c) © 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 (high-volume, high-variety) Dell Computer 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

Mass Customization Repetitive Focus Mass Customization Process-Focused Flexible people and equipment Figure 7.3 Modular techniques Accommodating Product and Process Design Responsive Supply Chains 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

Mass Customization Imaginative and fast product design Rapid process design Tightly controlled inventory management Tight schedules Responsive supply chain partners © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 and large variety of products are produced Long runs, usually a standardized product with options, produced from modules Large quantity and small variety of products are produced Large quantity and large variety of products are produced Equipment used is general purpose Special equipment aids in use of an assembly line Equipment used is special purpose Rapid changeover on flexible equipment Table 7.2 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 There are many job instructions because each job changes Repetitive operations reduce training and changes in job instructions Work orders and job instructions are few because they are standardized Custom orders require many job instructions Table 7.2 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 relative to the value of the product JIT procurement techniques are used Raw material inventories are low relative to the value of the product Work-in-process is high compared to output JIT inventory techniques are used Work-in-process inventory is low compared to output Work-in-process inventory driven down by JIT, kanban, lean production Table 7.2 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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 facility Assembly is measured in hours and days Swift movement of units through the facility is typical Goods move swiftly through the facility Finished goods are usually made to order and not stored Finished goods made to frequent forecast Finished goods are usually made to forecast and stored Finished goods are often build-to-order (BTO) Table 7.2 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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, concerned with trade-offs between inventory, capacity, and customer service Scheduling is based on building various models from a variety of modules to forecasts Scheduling is relatively simple, concerned with establishing output rate sufficient to meet forecasts Sophisticated scheduling is required to accommodate custom orders Fixed costs tend to be low and variable costs high Fixed costs dependent on flexibility of the facility Fixed costs tend to be high and variable costs low Fixed costs tend to be high, variable costs must be low Table 7.2 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Low volume, high variety High volume, low variety 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

Changing Processes Difficult and expensive May mean starting over Process strategy determines transformation strategy for an extended period Important to get it right © 2011 Pearson Education, Inc. publishing as Prentice Hall

© 2011 Pearson Education, Inc. publishing as Prentice Hall

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Process Analysis and Design Is the process designed to achieve a competitive advantage? Does the process eliminate steps that do not add value? Does the process maximize customer value? Will the process win orders? © 2011 Pearson Education, Inc. publishing as Prentice Hall

Process Analysis and Design Flow Charts - Shows the movement of materials Time-Function Mapping - Shows flows and time frame © 2011 Pearson Education, Inc. publishing as Prentice Hall

“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

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

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

Process Chart Figure 7.7 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Service Blueprint Figure 7.8 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

Service Process Matrix Service Factory Service Shop Degree of Customization Low High Degree of Labor Mass Service Professional Service Commercial banking Private banking Digital orthodontics Traditional orthodontics General- purpose law firms Law clinics Full-service stockbroker Limited-service stockbroker Retailing Boutiques Warehouse and catalog stores Specialized hospitals Hospitals Fast-food restaurants Fine-dining restaurants Airlines No-frills airlines Figure 7.9 © 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 Modular production Investment and insurance selection Prepackaged food modules in restaurants 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, funeral directors After-sale maintenance personnel Table 7.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Equipment and Technology Often complex decisions Possible competitive advantage Flexibility Stable processes May allow enlarging the scope of the processes © 2011 Pearson Education, Inc. publishing as Prentice Hall

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) © 2011 Pearson Education, Inc. publishing as Prentice Hall

Machine Technology Increased precision Increased productivity Increased flexibility Improved environmental impact Reduced changeover time Decreased size Reduced power requirements © 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

Process Control Real-time monitoring and control of processes Sensors collect data Devices read data on periodic basis Measurements translated into digital signals then sent to a computer Computer programs analyze the data Resulting output may take numerous forms © 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

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

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

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

Sustainability Resources Recycling Operations is primary user Reducing use is win-win Recycling Burn, bury, or reuse waste Recycling begins at design © 2011 Pearson Education, Inc. publishing as Prentice Hall

Sustainability Regulations Reputation Laws affect transportation, waste, and noise Increasing regulatory pressure Reputation Leadership may be rewarded Bad reputation can have negative consequences © 2011 Pearson Education, Inc. publishing as Prentice Hall