Process Strategy

Overview

Process Strategy
❑ Process focus

❑ Repetitive focus

❑ Product focus

❑ Mass customization

Process Considerations

Process Analysis

Service productivity

Sustainability
7-1
 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
constraints

7-2
 Process Strategies :
Basic Strategies

1. Process focus

2. Repetitive focus

3. Product focus

4. Mass customization

Within these basic strategies there are many ways they may
be implemented

7-3
 Process Strategy :
Process, Volume & Variety Relationship
Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few units Process Focus Mass Customization
per run, projects, job shops (difficult to achieve, but
(allows (machine, print, huge rewards)
customization) hospitals, restaurants) Dell Computer
Arnold Palmer Hospital

Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles,
home appliances)
Harley-Davidson
Changes in
Attributes (such Product Focus
as grade, quality, (commercial baked
size, thickness, Poor Strategy goods, steel, glass,
etc.) (Both fixed and beer)
long runs only variable costs are Frito-Lay
high)

7-4
 Process Strategies :
Considerations
❑ 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

7-5
 Process Strategy
❑ Facilities are organized around specific activities or
processes

❑ General purpose equipment and skilled personnel

❑ High degree of product / service flexibility

❑ Typically high costs and low equipment utilization

❑ Product flows may vary considerably making planning

and scheduling a challenge

7-6
 Many inputs
Process Strategy (surgeries, sick patients,
baby deliveries, emergencies)

Many departments and

many routings
(low volume, high variety,
intermittent processes)

Many different outputs

(uniquely treated patients)
7-7
 Repetitive Strategy

❑ 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

7-8
 Raw materials and
module inputs
Repetitive (multiple engine models,
Strategy wheel modules)

Few
modules

(modular)

Modules combined for many

Output options
(many combinations of motorcycles)
7-9
 Product Focus Strategy

❑ 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

7 - 10
Product Focus Few Inputs
Strategy (corn, potatoes, water,
seasoning)

(low-volume, high variety,

continuous process)
Frito-Lay

Output variations in size,

shape, and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
7 - 11
 Product Focus Strategy
D A Scrap
Nucor Steel Plant steel
Continuous caster

B
C Electric
Ladle of molten steel 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

7 - 12
 Mass Customization Strategy

❑ 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

7 - 13
 Many parts and
Mass Customization component inputs
Strategy (chips, hard drives,
software, cases)

Many modules
(high-volume, high-variety)
Dell Computer

Many output versions

(custom PCs and notebooks)
7 - 14
 Mass Customization Strategy
Repetitive Focus
Flexible people
and equipment

Modular
techniques
Accommodating
Product and Process Responsive Supply
Design Chains
Mass Customization
Rapid
throughput
techniques
Effective
scheduling
techniques

Process-Focused Product-Focused
High variety, low volume Low variety, high volume
Low utilization (5% to 25%) High utilization (70% to 90%)
General-purpose equipment Specialized equipment

7 - 15
 Comparison of Processes
Process Focus Product Focus Mass Customization
(low-volume, high- Repetitive Focus (high-volume, low- (high-volume, high-
variety) (modular) variety) variety)

1. Small quantity and 1. Long runs, usually a 1. Large quantity 1. Large quantity and
large variety of standardized and small variety large variety of
products are product with options, of products are products are
produced produced from produced produced
modules

2. Equipment used is 2. Special equipment 2. Equipment used 2. Rapid changeover on

general purpose aids in use of an is special flexible equipment
assembly line purpose

3. Operators are 3. Employees are 3. Operators are less 3. Flexible operators

broadly skilled modestly trained broadly skilled are trained for the
necessary
customization

4. There are many 4. Repetitive 4. Work orders and 4. Custom orders

job instructions operations reduce job instructions are require many job
because each job training and few because they instructions
changes changes in job are standardized
instructions

7 - 16
 Comparison of Processes
Process Focus Product Focus Mass Customization
(low-volume, high- Repetitive Focus (high-volume, low- (high-volume, high-
variety) (modular) variety) variety)

5. Raw-material 5. JIT procurement 5. Raw material 5. Raw material

inventories high techniques are used inventories are low inventories are
relative to the value relative to the value low to the value
of the product of the product of the product

6. Work-in-process is 6. JIT inventory 6. Work-in-process 6. WIP inventory driven

high compared to techniques are used inventory is low by JIT, kanban, lean
output compared to output practice

7. Units move slowly 7. Assembly is 7. Swift movement of 7. Goods move swiftly

through the facility measured in hours & units through the through the facility
days facility is typical

8. Finished goods are 8. Finished goods 8. Finished goods are 8. Finished goods are
usually made to made to frequent usually made to often build-to-order
order & not stored forecast forecast and stored (BTO)

9. Complex 9. Scheduling is 9. Scheduling is 9. Sophisticated

scheduling based on building relatively simple, scheduling is required
concerned with various models concerned with to accommodate
trade-offs between from a variety of establishing output custom orders
inventory, capacity, modules to rate sufficient to
& customer service forecasts meet forecasts

10. Low fixed costs & 10. Fixed costs 10. Fixed costs tend 10. Fixed costs tend to
variable costs dependent on to be high & be high, variable
high facility flexibility variable costs low costs must be low
7 - 17
 Consideration :
Focused Processes
❑ Focus brings efficiency

❑ Focus on depth of product line rather than breadth

❑ Focus can be

❑ Customers

❑ Products

❑ Service

❑ Technology

7 - 18
 Consideration :
Changing Processes

❑ Difficult & expensive

❑ May mean starting over

❑ Process strategy determines

transformation strategy for an extended
period

❑ Important to get it right

7 - 19
 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?

❑ Flow Charts - Shows the movement of materials

❑ Time-Function Mapping - Shows flows and time frame

7 - 20
 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

7 - 21
 Time-Function Mapping :
“Baseline” Time-Function Map
Order Receive
Customer
product product

Process
Sales order
Order

Production Wait
control

Product
Order

Plant A Print

Product
WIP

Warehouse Wait Wait Wait

Product
WIP
WIP
WIP

Plant B Extrude

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

52 days
7 - 22
 Time-Function Mapping :
“Target” Time-Function Map
Order Receive
Customer
product product

Process
Sales order

Product
Order

Production
Wait
control Order

WIP
Plant Print Extrude

Product
Warehouse Wait

Product
Transport Move

1 day 2 days 1 day 1 day 1 day

6 days

7 - 23
Value-Stream Mapping

7 - 24
Process Chart

7 - 25
 Service Blueprinting

❑ Focuses on the customer and provider

interaction

❑ Defines three levels of interaction

❑ Each level has different management

issues

❑ Identifies potential failure points

7 - 26
 Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close

Level Customer arrives

for service. Customer departs
#1
(3 min)

F
Determine Notify Customer pays bill.
specifics. customer (4 min)
Warm greeting (5 min)
and obtain No and recommend
an alternative
F
service request.
(10 sec) provider.
Standard Can F
Level request. (7min)
service be
#2 (3 min) done and does Notify
Direct customer customer No customer the
to waiting room. approve? car is ready.
(5 min) (3 min)

F F F F
Yes Yes
Perform
Level required work. F Prepare invoice.
#3 (varies) (3 min)

7 - 27
 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

7 - 28
 Service Process Matrix
Degree of Customization
Low High
Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking
High General-
Full-service purpose law firms
stockbroker
Degree of Labor

Digital
Boutiques orthodontics
Retailing

Service Factory Law clinics Service Shop

Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines

No-frills
airlines

7 - 29
 Service Process Matrix :
Mass Service and Professional Service

❑ Labor involvement is high

❑ Selection and training highly

important

❑ Focus on human resources

❑ Personalized services

7 - 30
 Service Process Matrix :
Service Factory and Service Shop

❑ Automation of standardized services

❑ Low labor intensity responds well to

process technology & scheduling

❑ Tight control required to maintain

standards

7 - 31
 Improving Service Productivity
Strategy Technique Example

Separation Structure service so customers must go Bank customers go to a manager to

where the service is offered open a new account, to loan officers for
loans, and to tellers for deposits

Self-service Self-service so customers examine, Supermarkets and department stores

compare, and evaluate at their own Internet ordering
pace

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

Modular production Prepackaged food modules in
restaurants

Automation Separating services that may lend Automatic teller machines

themselves to some type of automation

Scheduling Precise personnel scheduling Scheduling ticket counter personnel at 15-

minute intervals at airlines

Training Clarifying the service options Investment counselor, funeral directors

Explaining how to avoid problems After-sale maintenance personnel

7 - 32
 Improving Processes :
Service
❑ Layout

❑ Product exposure, customer education,

product enhancement

❑ Human Resources

❑ Recruiting and training

❑ Impact of flexibility

7 - 33
 Improving Processes :
Production Technology
❑ Machine technology

❑ Automatic Identification Systems (AISs)

❑ Process control

❑ Vision system

❑ Robot

❑ Automated Storage & Retrieval Systems (ASRSs)

❑ Automated Guided Vehicles (AGVs)

❑ Flexible Manufacturing Systems (FMSs)

❑ Computer-Integrated Manufacturing (CIM)

7 - 34
 Improving Processes :
Machine Technology
❑ Increased precision

❑ Increased productivity

❑ Increased flexibility

❑ Improved environmental impact

❑ Reduced changeover time

❑ Decreased size

❑ Reduced power requirements

7 - 35
 Improving Processes :
Automatic Identification Systems (AISs)
Example – Bar codes and RFID

❑ Improved data acquisition

❑ Increased scope of process automation

❑ Reduced data entry errors

❑ Increased speed

7 - 36
 Improving Processes :
Process Control
❑ Real-time monitoring & control of processes

❑ Sensors collect data

❑ Devices read data on periodic basis

❑ Measurements translated into digital signals &

sent to a computer

❑ Computer programs analyze the data

❑ Resulting output may take numerous forms

7 - 37
 Improving Processes :
Vision Systems

❑ Particular aid to inspection

❑ Consistently accurate

❑ Superior to individuals performing the same tasks

❑ Never bored

❑ Modest cost

7 - 38
 Improving Processes :
Robots
❑ Perform monotonous or
dangerous tasks

❑ Perform tasks requiring

significant strength or
endurance

❑ Generally enhanced consistency

& accuracy

7 - 39
 Improving Processes :
Automated Storage and Retrieval Systems (ASRSs)

❑ Automated placement & withdrawal of parts

& products

❑ Reduced errors & labor

❑ Particularly useful in inventory & test areas

of manufacturing firms

7 - 40
 Improving Processes :
Automated Guided Vehicle (AGVs)

❑ Electronically guided and controlled

carts

❑ Used for movement of products and/or

individuals

7 - 41
 Improving Processes :
Flexible Manufacturing Systems (FMSs)
❑ Computer controls both the workstation & the
material handling equipment

❑ Enhance flexibility & reduced waste

❑ Can economically produce low volume at high

quality

❑ Reduced changeover time & increased utilization

❑ Stringent communication requirement between

components
7 - 42
 Improving Processes :
Computer-Integrated Manufacturing (CIM)
❑ Extension of flexible manufacturing systems

❑ Backwards to engineering & inventory control

❑ Forward into warehousing & shipping

❑ Can also include financial and customer service

areas

❑ Reducing the distinction between low-volume/high-variety,

& high-volume/low-variety production

7 - 43
 Improving Processes :
Computer-Integrated Manufacturing (CIM)

7 - 44
 Improving Processes :
Technology in Services
Service Industry Example

Financial Debit cards, electronic funds transfer, ATMs, Internet stock trading, on-line
Services banking via cell phone

Education Electronic bulletin boards, on-line journals, WebCT, Blackboard & smart phones

Utilities & Automated one-man garbage trucks, optical mail & bomb scanners, flood warning
government systems, meters for control energy usage & costs

Restaurants & Wireless orders from waiters to kitchen, robot butchering, transponders on cars
foods that track sales at drive-throughs

Communications Interactive TV, ebooks via Kindle 2

Hotels Electronic check-in/check-out, electronic key/lock system, mobile web booking

Wholesale/retail ATM-like kiosks, point-of-sale (POS) terminals, e-commerce, electronic

trade communication between store and supplier, bar coded data, RFID

Transportation Automatic toll booths, satellite-directed navigation systems, WiFi in automobile

Health care Online patient-monitoring, online medical information systems, robotic surgery

Airlines Ticketless travel, scheduling, Internet purchases, boarding passes two-

dimensional bar codes on smart phones

7 - 45
 Improving Process :
Process Redesign
❑ The fundamental rethinking of business processes to bring
about dramatic improvements

❑ Relies on reassessing the process & questioning both the

purpose & the underlying assumptions

❑ Requires reexamination of the basic process & its

objectives

❑ Focuses on activities that cross functional lines

❑ Any process is a candidate for redesign

7 - 46
 I. Sustainability

Sustainability in production processes

1. Resources
2. Recycling
3. Regulations
4. Reputation

© 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 47

 I1. Sustainability

◆ Resources
◆ 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 7 - 48

 I2. Sustainability
◆ Regulations
◆ 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 7 - 49