7 Process Strategy and Sustainability Power Point presentation

7 Process Strategy and Sustainability Power. Point presentation to accompany Heizer and Render Operations Management, 10 e Principles of Operations Management, 8 e Power. Point slides by Jeff Heyl © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -1

Outline u Global Company Profile: Harley. Davidson u Four Process Strategies u Process Focus u Repetitive Focus u Product Focus u Mass Customization Focus u Comparison of Process Choices © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -2

Learning Objectives When you complete this chapter you should be able to: 1. Describe four production processes 2. Compute crossover points for different processes 3. Use the tools of process analysis © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -3

Harley-Davidson Repetitive manufacturing works u The leading U. S. motorcycle company u Emphasizes quality and lean manufacturing u Materials as Needed system u Many variations possible u Tightly scheduled repetitive production line © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -4

Process Flow Diagram Frame tube bending Frame-building work cells Frame machining Hot-paint frame painting THE ASSEMBLY LINE TESTING 28 tests Incoming parts Air cleaners Oil tank work cell Fluids and mufflers Shocks and forks Fuel tank work cell Handlebars Wheel work cell Fender work cell Engines and transmissions From Milwaukee on a JIT arrival schedule Roller testing Crating © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -5

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 7 -6

Process, Volume, and Variety Volume Figure 7. 1 Low Volume High Variety one or few units per run, (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc. ) long runs only Repetitive Process Focus projects, job shops (machine, print, hospitals, restaurants) Arnold Palmer Hospital High Volume Mass Customization (difficult to achieve, but huge rewards) Dell Computer Repetitive (autos, motorcycles, home appliances) Harley-Davidson Poor Strategy (Both fixed and variable costs are high) © 2011 Pearson Education, Inc. publishing as Prentice Hall Product Focus (commercial baked goods, steel, glass, beer) Frito-Lay 7 -7

Process Strategies u How to produce a product or provide a service that u Meets or exceeds customer requirements u Meets cost and managerial goals u Has long term effects on u Efficiency and production flexibility u Costs and quality © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -8

Process Strategies Four 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 © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 -9

Process Focus u Facilities are organized around specific activities or processes u General purpose equipment and skilled personnel u High degree of product flexibility u Typically high costs and low equipment utilization u Product flows may vary considerably making planning and scheduling a challenge © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 10

Process Focus (low volume, high variety, intermittent processes) Many inputs (surgeries, sick patients, baby deliveries, emergencies) Many departments and many routings Arnold Palmer Hospital Figure 7. 2(a) © 2011 Pearson Education, Inc. publishing as Prentice Hall Many different outputs (uniquely treated patients) 7 - 11

Repetitive Focus u Facilities often organized as assembly lines u Characterized by modules with parts and assemblies made previously u Modules may be combined for many output options u Less flexibility than process-focused facilities but more efficient © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 12

Repetitive Focus Raw materials and module inputs (multiple engine models, wheel modules) Few modules (modular) Harley Davidson Figure 7. 2(b) © 2011 Pearson Education, Inc. publishing as Prentice Hall Modules combined for many Output options (many combinations of motorcycles) 7 - 13

Product Focus u Facilities are organized by product u High volume but low variety of products u Long, continuous production runs enable efficient processes u Typically high fixed cost but low variable cost u Generally less skilled labor © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 14

Product Focus Few Inputs (corn, potatoes, water, seasoning) (low-volume, high variety, continuous process) Frito-Lay Figure 7. 2(c) © 2011 Pearson Education, Inc. publishing as Prentice Hall Output variations in size, shape, and packaging (3 -oz, 5 -oz, 24 -oz package labeled for each material) 7 - 15

Product Focus D Continuous caster C Scrap steel A Nucor Steel Plant B Ladle of molten steel Continuous cast steel sheared into 24 -ton slabs Hot tunnel furnace - 300 ft E Electric furnace F Hot mill for finishing, cooling, and coiling H G I © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 16

Mass Customization u The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires u Combines the flexibility of a process focus with the efficiency of a product focus © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 17

Mass Customization Item Vehicle models Vehicle types Bicycle types Software titles Web sites Movie releases per year New book titles Houston TV channels Breakfast cereals Items (SKUs) in supermarkets LCD TVs Number of Choices 1970 s 21 st Century 140 18 8 0 0 267 40, 530 5 160 14, 000 286 1, 212 211, 000 400, 000 162, 000 765 300, 000 185 340 150, 000 0 102 Table 7. 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 18

Mass Customization Many parts and component inputs (chips, hard drives, software, cases) Many modules (high-volume, high-variety) Dell Computer Figure 7. 2(d) © 2011 Pearson Education, Inc. publishing as Prentice Hall Many output versions (custom PCs and notebooks) 7 - 19

Mass Customization Repetitive Focus Flexible people and equipment Figure 7. 3 Accommodating Product and Process Design Modular techniques Mass Customization Effective scheduling techniques Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment © 2011 Pearson Education, Inc. publishing as Prentice Hall Responsive Supply Chains Rapid throughput techniques Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment 7 - 20

Mass Customization u Imaginative and fast product design u Rapid process design u Tightly controlled inventory management u Tight schedules u Responsive supply chain partners © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 21

Comparison of Processes Mass Customization (high-volume, high-variety) Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) 1. Small quantity and large variety of products are produced 1. Long runs, usually a standardized product with options, produced from modules 1. Large quantity and small variety of products are produced 1. Large quantity and large variety of products are produced 2. Equipment used is general purpose 2. Special equipment aids in use of an assembly line 2. Equipment used is special purpose 2. Rapid changeover on flexible equipment © 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7. 2 7 - 22

Comparison of Processes Process Focus (low-volume, high-variety) Mass Customization (high-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) 3. Operators are broadly skilled 3. Employees are modestly trained 3. Operators are less broadly skilled 3. Flexible operators are trained for the necessary customization 4. There are many job instructions because each job changes 4. Repetitive operations reduce training and changes in job instructions 4. Work orders and job instructions are few because they are standardized 4. Custom orders require many job instructions © 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7. 2 7 - 23

Comparison of Processes Mass Customization (high-volume, high-variety) Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) 5. Raw-material inventories high relative to the value of the product 5. JIT procurement techniques are used 5. Raw material inventories are low relative to the value of the product 5. 6. Work-inprocess is high compared to output 6. JIT inventory techniques are used 6. Work-inprocess inventory is low compared to output 6. Work-inprocess inventory driven down by JIT, kanban, lean production © 2011 Pearson Education, Inc. publishing as Prentice Hall Raw material inventories are low relative to the value of the product Table 7. 2 7 - 24

Comparison of Processes Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) Mass Customization (high-volume, high-variety) 7. Units move slowly through the facility 7. Assembly is measured in hours and days 7. Swift movement of units through the facility is typical 7. Goods move swiftly through the facility 8. Finished goods are usually made to order and not stored 8. Finished goods made to frequent forecast 8. Finished goods are usually made to forecast and stored 8. Finished goods are often build-toorder (BTO) © 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7. 2 7 - 25

Comparison of Processes Mass Customization (high-volume, high-variety) Process Focus (low-volume, high-variety) Repetitive Focus (modular) Product Focus (high-volume, low-variety) 9. Scheduling is complex, concerned with tradeoffs between inventory, capacity, and customer service 9. Scheduling is based on building various models from a variety of modules to forecasts 9. Scheduling is relatively simple, concerned with establishing output rate sufficient to meet forecasts 9. Sophisticated scheduling is required to accommodate custom orders 10. Fixed costs tend to be low and variable costs high 10. Fixed costs dependent on flexibility of the facility 10. Fixed costs tend to be high and variable costs low 10. Fixed costs tend to be high, variable costs must be low © 2011 Pearson Education, Inc. publishing as Prentice Hall Table 7. 2 7 - 26

Crossover Charts Variable costs $ $ Fixed costs Repetitive Process B Low volume, high variety Process A To ta lc os t $ st ta To o lc High volume, low variety Process C ost al c Tot 400, 000 300, 000 200, 000 Fixed cost Process A Figure 7. 4 (2, 857) V 1 V 2 (6, 666) © 2011 Pearson Education, Inc. publishing as Prentice Hall Fixed cost Process B Fixed cost Process C Volume 7 - 27

Focused Processes u Focus brings efficiency u Focus on depth of product line rather than breadth u Focus can be u Customers u Products u Service u Technology © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 28

Process Chart © 2011 Pearson Education, Inc. publishing as Prentice Hall Figure 7 -7. 7 29

Process Analysis Tools u Flowcharts provide a view of the big picture u Time-function mapping adds rigor and a time element u Value-stream analysis extends to customers and suppliers u Process charts show detail u Service blueprint focuses on customer interaction © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 30

Process Redesign u The fundamental rethinking of business processes to bring about dramatic improvements in performance u Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions u Requires reexamination of the basic process and its objectives u Focuses on activities that cross functional lines u Any process is a candidate for redesign © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 31

Sustainability u Sustainability in production processes 1. Resources 2. Recycling 3. Regulations 4. Reputation © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 32

Sustainability u Resources u Operations is primary user u Reducing use is win-win u Recycling u Burn, bury, or reuse waste u Recycling begins at design © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 33

Sustainability u Regulations u Laws affect transportation, waste, and noise u Increasing regulatory pressure u Reputation u Leadership may be rewarded u Bad reputation can have negative consequences © 2011 Pearson Education, Inc. publishing as Prentice Hall 7 - 34