Operations Management

Operations Management Chapter 7 – Process Strategy PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e

Outline • Global Company Profile: Dell Computer Corp. • Four Process Strategies • Process Focus • Repetitive Focus • Product Focus • Mass Customization Focus • Comparison of Process Choices

Outline – Continued • Process Analysis and Design • Flow Diagrams • Time-Function Mapping • Value-Stream Mapping • Process Charts • Service Blueprinting

Outline – Continued • Service Process Design • Customer Interaction and Process Design • More Opportunities to Improve Service Processes • Selection of Equipment and Technology

Outline – Continued • Production Technology • Machine Technology • Automatic Identification Systems (AISs) and RFID • Process Control • Vision Systems • Robots

Outline – Continued • Production Technology (cont.) • Automated Storage and Retrieval Systems (ASRSs) • Automated Guided Vehicles (AGVs) • Flexible Manufacturing Systems (FMSs) • Computer-Integrated Manufacturing (CIM)

Outline – Continued • Technology in Services • Process Redesign • Ethics and Environmentally Friendly Processes

Learning Objectives When you complete this chapter you should be able to: Describe four production processes Compute crossover points for different processes Use the tools of process analysis Describe customer interaction in process design Identify recent advances in production technology

Dell Computer Company Mass customization provides a competitive advantage • Sell custom-built PCs directly to consumer • Lean production processes and good product design allow responsiveness • Integrate the Web into every aspect of its business • Focus research on software designed to make installation and configuration of its PCs fast and simple

Volume Low Volume Repetitive Process High Volume Process, Volume, and Variety Figure 7.1 High Variety one or few units per run, high variety (allows customization) Process Focus projects, job shops (machine, print, carpentry) Standard Register Mass Customization (difficult to achieve, but huge rewards) Dell Computer Changes in Modules modest runs, standardized modules Repetitive (autos, motorcycles) Harley-Davidson Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only Product Focus (commercial baked goods, steel, glass) Nucor Steel Poor Strategy (Both fixed and variable costs are high)

Process Strategies • 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

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

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

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

Customer Customer sales representative Purchasing Vendors PREPRESS DEPT Accounting Receiving PRINTING DEPT Warehouse COLLATING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT Information flow Material flow SHIPPING Customer Process Flow Diagram Figure 7.2

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

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

Frame tube bending Frame-building work cells Frame machining Hot-paint frame painting THE ASSEMBLY LINE Engines and transmissions TESTING 28 tests Incoming parts From Milwaukee on a JIT arrival schedule Air cleaners Oil tank work cell Fluids and mufflers Shocks and forks Fuel tank work cell Handlebars Wheel work cell Fender work cell Roller testing Crating Process Flow Diagram Figure 7.3

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

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

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

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

Number of Choices Item 1970s 21st Century Vehicle models 140 286 Vehicle types 18 1,212 Bicycle types 8 19 Software titles 0 400,000 Web sites 0 98,116,993 Movie releases 267 458 New book titles 40,530 77,446 Houston TV channels 5 185 Breakfast cereals 160 340 Items (SKUs) in 14,000 150,000 supermarkets LCD TVs 0 102 Mass Customization Table 7.1

Repetitive Focus Flexible peopleand equipment Supportive supply chains Modular techniques Mass Customization 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 Mass Customization Figure 7.5 Effective scheduling techniques Rapid throughput techniques

Comparison of Processes Table 7.2

Variable costs Variable costs Variable costs $ $ $ Fixed costs Fixed costs Fixed costs Repetitive Process B High volume, low variety Process C Low volume, high variety Process A $ Total cost Total cost Total cost 400,000 300,000 200,000 Fixed cost Process C Fixed cost Process B Fixed cost Process A V1 V2 (6,666) (2,857) Volume Crossover Charts Figure 7.6

Focused Processes • Focus brings efficiency • Focus on depth of product line rather than breadth • Focus can be • Customers • Products • Service • Technology

Changing Processes • Difficult and expensive • May mean starting over • Process strategy determines transformation strategy for an extended period • Important to get it right

Process Analysis and Design • Flow Diagrams - 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

Customer Sales Production control Plant A Extrude Order product Process order Wait Wait Wait Wait Print Warehouse Move Move Receive product Plant B Transport 12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day 52 days “Baseline” Time-Function Map Figure 7.7

Order product Receive product Customer Process order Sales Production control Wait Print Plant Wait Warehouse Extrude Transport Move 1 day 2 days 1 day 1 day 1 day 6 days “Target” Time-Function Map Figure 7.7

Value-Stream Mapping Figure 7.8

Process Chart Figure 7.9

Service Blueprint • Focuses on the customer and provider interaction • Defines three levels of interaction • Each level has different management issues • Identifies potential failure points

Personal Greeting Service Diagnosis Perform Service Friendly Close Level #1 Customer arrives for service Customer departs F Customer pays bill Notifycustomerand recommendan alternativeprovider Determine specifics Warm greeting and obtain service request No F Standard request Canservice bedone and does customer approve? F Level #2 No Direct customer to waiting room Notify customer the car is ready F F F Perform required work Yes Yes F Prepare invoice F Service Blueprint Level #3 Figure 7.10

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

Degree of Customization High Low Mass Service Professional Service Private banking Commercial banking High General- purpose law firms Full-service stockbroker Boutiques Retailing Degree of Labor Service Factory Service Shop Law clinics Specialized hospitals Limited-service stockbroker Warehouse and catalog stores Fine-dining restaurants Fast-food restaurants Low Hospitals Airlines No-frills airlines Service Process Matrix Figure 7.11

Mass Service and Professional Service • Labor involvement is high • Selection and training highly important • Focus on human resources • Personalized services Service Factory and Service Shop • Automation of standardized services • Low labor intensity responds well to process technology and scheduling • Tight control required to maintain standards Service Process Matrix

Improving Service Productivity Table 7.3

Improving Service Processes • Layout • Product exposure, customer education, product enhancement • Human Resources • Recruiting and training • Impact of flexibility

Equipment and Technology • Often complex decisions • Possible competitive advantage • Flexibility • Stable processes • May allow enlarging the scope of the processes

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)

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

Operations Management