OP 2202 Introduction to Operations Management Process Design

OP 2202: Introduction to Operations Management Process Design

OP 2202: Introductions to Operations Management Lesson 5, Page 2 Outline for the Week Five þ Global Company Profile: Dell Computer Company þ Four Process Strategies þ Process Analysis And Design þ Service Process Design þ Selection Of Equipment And Technology þ Production Technology þ Technology In Services þ Process Redesign þ Ethics And Environmentally Friendly Processes

OP 2202: Introductions to Operations Management Lesson 5, Page 3 Dell Computer Company “How can we make the process of buying a computer better? ” þ Sell custom-built PCs directly to consumer þ Build computers rapidly, at low cost, and only when ordered þ Integrate the Web into every aspect of its business þ Focus research on software designed to make installation and configuration of its PCs fast and simple

of manufa cturing flexibili ty, Product variety, and high advantages: Volume increased due to Parts quality standardization and mechanized fabrication Limitati flexibility and Limitations: Manufacturing ons: product variety suffered. Low advantages: Manufacturing volume flexibility and product and variety highimproved Limitations: Low cost volume and high cost OP 2202: Introductions to Operations Management Lesson 5, Page 4 Stages of Manufacturing Technology Craf tsma n Mass (Pre 1870) Man A. ufact B. Sc Va uring ale rie (1870 St ty 1945) ra St te Autom ra gy ation te Techno gy logy (1945 Present) advantages: Decreased cost and improved quality, flexibility & product variety Limitations: difficulty of achieving coordination between individual automation

OP 2202: Introductions to Operations Management Lesson 5, Page 5 Evolution of Manufacturing Technology Improvement

OP 2202: Introductions to Operations Management Lesson 5, Page 6 Internal Performance Attributes ь ь ь ь Speed Power Accuracy Repeatability Flexibility Judgement Learning

OP 2202: Introductions to Operations Management Lesson 5, Page 7 Internal Performance Attributes Comparison of capabilities: Humans vs. automated machines

OP 2202: Introductions to Operations Management Lesson 5, Page 8 Trends in Product Complexity Space Shuttle Harvard Mark 1 B 747 Calculator (25, 000 parts) DC 3 Pianoforte Sewing Machine Bicycle Springfield rifle (140 parts) Musket (51 parts, 10, 000 units) Automobile

OP 2202: Introductions to Operations Management Lesson 5, Page 9 Process, Volume, and Variety Volume Low Volume High Variety one or few units per run, high variety (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, carpentry) Standard Register High Volume Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co. Repetitive (autos, motorcycles) Harley Davidson Poor Strategy (Both fixed and variable costs are high) Product Focus (commercial baked goods, steel, glass) Nucor Steel

OP 2202: Introductions to Operations Management Lesson 5, Page 10 Process Flow Diagram Customer Purchasing Customer sales representative Vendors PREPRESS DEPT Accounting Receiving PRINTING DEPT Warehouse COLLATING DEPT Information flow Material flow GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING

OP 2202: Introductions to Operations Management Lesson 5, Page 11 Process Strategies þ How to produce a product or provide a service that þ Meets or exceeds customer requirements þ Meets cost and managerial goals þ Has long term effects on þ Efficiency and production flexibility þ Costs and quality

OP 2202: Introductions to Operations Management Lesson 5, Page 12 Process Strategies Four basic strategies þ Process focus þ Repetitive focus þ Product focus þ Mass customization Within these basic strategies there are many ways they may be implemented

Process Focus OP 2202: Introductions to Operations Management Lesson 5, Page 13 þ Facilities are organized around specific activities or processes þ General purpose equipment and skilled personnel þ High degree of product flexibility þ Typically high costs and low equipment utilization þ Product flows may vary considerably making planning and scheduling a challenge

Process Focus OP 2202: Introductions to Operations Management Lesson 5, Page 14 Print Shop Many inputs High variety of outputs

OP 2202: Introductions to Operations Management Lesson 5, Page 15 Repetitive Focus þ Facilities often organized as assembly lines þ Characterized by modules with parts and assemblies made previously þ Modules may be combined for many output options þ Less flexibility than process-focused facilities but more efficient

OP 2202: Introductions to Operations Management Lesson 5, Page 17 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

Product Focus OP 2202: Introductions to Operations Management Lesson 5, Page 18 þ Facilities are organized by product þ High volume but low variety of products þ Long, continuous production runs enable efficient processes þ Typically high fixed cost but low variable cost þ Generally less skilled labor

OP 2202: Introductions to Operations Management Lesson 5, Page 20 Product Focus D Continuous caster Nucor Steel Plant C B Ladle of molten steel Continuous cast steel sheared into 24 -ton slabs Hot tunnel furnace - 300 ft E Hot mill for finishing, cooling, and coiling H I Scrap steel A G F Electric furnace

OP 2202: Introductions to Operations Management Lesson 5, Page 21 Mass Customization þ The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires þ Combines the flexibility of a process focus with the efficiency of a product focus

OP 2202: Introductions to Operations Management Lesson 5, Page 22 Mass Customization Item Vehicle models Vehicle types Bicycle types Software titles Web sites Movie releases New book titles Houston TV channels Breakfast cereals Items (SKUs) in supermarkets Number of Choices Early 21 st Early 1970 s Century 140 260 18 1, 212 8 19 0 300, 000 0 46, 412, 165 267 458 40, 530 77, 446 5 185 160 340 14, 000 150, 000

OP 2202: Introductions to Operations Management Lesson 5, Page 23 Mass Customization Repetitive Focus Modular design Flexible equipment Modular techniques Mass Customization Effective scheduling techniques Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment Rapid throughput techniques Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment

OP 2202: Introductions to Operations Management Lesson 5, Page 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) 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

OP 2202: Introductions to Operations Management Lesson 5, Page 25 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

OP 2202: Introductions to Operations Management Lesson 5, Page 26 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-inprocess is high JIT inventory techniques used Work-inprocess inventory is low Work-inprocess inventory driven down by JIT, lean production

OP 2202: Introductions to Operations Management Lesson 5, Page 27 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 made to order

OP 2202: Introductions to Operations Management Lesson 5, Page 28 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 modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Sophisticated scheduling required to accommodate custom orders

OP 2202: Introductions to Operations Management Lesson 5, Page 29 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, not known until after job is complete 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

OP 2202: Introductions to Operations Management Lesson 5, Page 30 Crossover Charts Variable costs $ Fixed costs Repetitive Process B Low volume, high variety Process A $ Variable costs $ To ta lc os t $ Variable costs High volume, low variety Process C st co t l ta cos l o a t T To 400, 000 300, 000 200, 000 Fixed cost Process A (2, 857) V 1 V 2 (6, 666) Fixed cost Process B Fixed cost Process C Volume

OP 2202: Introductions to Operations Management Lesson 5, Page 31 Changing Processes þ Difficult and expensive þ May mean starting over þ Process strategy determines transformation strategy for an extended period þ Important to get it right

OP 2202: Introductions to Operations Management Lesson 5, Page 32 Process Analysis and Design þ Flow Diagrams - Shows the movement of materials þ Time-Function Mapping - Shows flows and time frame þ Value Stream Mapping - Shows flows and time and value added beyond the immediate organization þ Process Charts - Uses symbols to show key activities þ Service Blueprinting - focuses on customer/provider interaction

OP 2202: Introductions to Operations Management Lesson 5, Page 33 Time-Function Mapping Customer Order product Sales Process order Production control Receive product Wait Plant A Print Warehouse Wait Extrude Plant B Move Transport 12 days Wait 13 days 1 day 4 days 1 day 10 days 52 days Move 1 day 0 day 1 day

OP 2202: Introductions to Operations Management Lesson 5, Page 34 Time-Function Mapping Customer Order product Sales Process order Production control Receive product Wait Plant Print Extrude Warehouse Wait Transport Move 1 day 2 days 1 day 6 days 1 day

Process Chart OP 2202: Introductions to Operations Management Lesson 5, Page 35

OP 2202: Introductions to Operations Management Lesson 5, Page 36 Service Blueprint þ Focuses on the customer and provider interaction þ Defines three levels of interaction þ Each level has different management issues þ Identifies potential failure points

OP 2202: Introductions to Operations Management Lesson 5, Page 37 Service Blueprint Personal Greeting Level #1 Service Diagnosis Perform Service Customer arrives for service Warm greeting and obtain service request Customer departs No Standard request Level #2 Friendly Close Direct customer to waiting room Determine specifics Can service be done and does customer approve? Yes Level #3 Potential failure point Yes Notify customer and recommend an alternative provider Customer pays bill No Notify customer the car is ready Perform required work Prepare invoice

OP 2202: Introductions to Operations Management Lesson 5, Page 38 Process Analysis Tools þ Flowcharts provide a view of the big picture þ Time-function mapping adds rigor and a time element þ Value stream analysis extends to customers and suppliers þ Process charts show detail þ Service blueprint focuses on customer interaction

OP 2202: Introductions to Operations Management Lesson 5, Page 39 Service Process Matrix Degree of Customization High Low Mass Service Degree of Labor High Professional Service Private banking Commercial banking Full-service stockbroker Generalpurpose law firms Boutiques Retailing Service Factory Law clinics Service Specialized Limited-service hospitals stockbroker Low Warehouse and catalog stores Fast food restaurants Airlines No frills airlines Fine-dining restaurants Shop Hospitals

OP 2202: Introductions to Operations Management Lesson 5, Page 40 Service Process Matrix Mass Service and Professional Service þ Labor involvement is high þ Selection and training highly important þ Focus on human resources þ Personalized services Service Factory and Service Shop þ Automation of standardized services þ Low labor intensity responds well to process technology and scheduling þ Tight control required to maintain standards

OP 2202: Introductions to Operations Management Lesson 5, Page 41 Improving Service Productivity Strategy Technique Example Separation Structure service so Bank customers go to a customers must go manager to open a new where service is offered account, to loan officers for loans, and to tellers for deposits Self-service so customers examine, compare, and evaluate at their own pace Supermarkets and department stores, internet ordering

OP 2202: Introductions to Operations Management Lesson 5, Page 42 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

OP 2202: Introductions to Operations Management Lesson 5, Page 43 Improving Service Productivity Strategy Technique Example Automation Precise personnel scheduling 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, aftersale maintenance personnel

OP 2202: Introductions to Operations Management Lesson 5, Page 44 Equipment and Technology þ Often complex decisions þ Possible competitive advantage þ Flexibility þ Stable processes þ May allow enlarging the scope of the processes

OP 2202: Introductions to Operations Management Lesson 5, Page 45 Improving Service Processes þ Layout þ Product exposure, customer education, product enhancement þ Human Resources þ Recruiting and training þ Impact of flexibility

OP 2202: Introductions to Operations Management Lesson 5, Page 46 Production Technology þ þ þ Machine technology Automatic identification systems (AIS) Process control Vision system Robot Automated storage and retrieval systems (ASRS) þ Flexible manufacturing systems (FMS) þ Computer-integrated manufacturing (CIM)

OP 2202: Introductions to Operations Management Lesson 5, Page 47 Machine Technology þ Increased precision þ Increased productivity þ Increased flexibility þ Improved environmental impact þ Reduced changeover time þ Decreased size þ Reduced power requirements

OP 2202: Introductions to Operations Management Lesson 5, Page 48 Automatic Identification Systems (AIS) þ Improved data acquisition þ Reduced data entry errors þ Increased speed þ Increased scope of process automation

Process Control OP 2202: Introductions to Operations Management Lesson 5, Page 49 þ Increased process stability þ Increased process precision þ Real-time provision of information for process evaluation þ Data available in many forms

OP 2202: Introductions to Operations Management Lesson 5, Page 50 Process Control Software

Vision Systems OP 2202: Introductions to Operations Management Lesson 5, Page 51 þ Particular aid to inspection þ Consistently accurate þ Never bored þ Modest cost þ Superior to individuals performing the same tasks

Robots OP 2202: Introductions to Operations Management Lesson 5, Page 52 þ Perform monotonous or dangerous tasks þ Perform tasks requiring significant strength or endurance þ Generally enhanced consistency and accuracy

Robotic Surgery OP 2202: Introductions to Operations Management Lesson 5, Page 53

OP 2202: Introductions to Operations Management Lesson 5, Page 54 Automated Storage and Retrieval Systems (ASRS) þ Automated placement and withdrawal of parts and products þ Reduced errors and labor þ Particularly useful in inventory and test areas of manufacturing firms

OP 2202: Introductions to Operations Management Lesson 5, Page 55 Automated Guided Vehicle (AGV) þ Electronically guided and controlled carts þ Used for movement of products and/or individuals

OP 2202: Introductions to Operations Management Lesson 5, Page 56 Flexible Manufacturing Systems (FMS) þ Computer controls both the workstation and the material handling equipment þ Enhance flexibility and reduced waste þ Can economically produce low volume at high quality þ Reduced changeover time and increased utilization þ Stringent communication requirement between components

OP 2202: Introductions to Operations Management Lesson 5, Page 57 Computer Integrated Manufacturing (CIM) þ Extension of flexible manufacturing systems þ Backwards to engineering and inventory control þ Forward into warehousing and shipping þ Can also include financial and customer service areas þ Reducing the distinction between lowvolume/high-variety, and highvolume/low-variety production

OP 2202: Introductions to Operations Management Lesson 5, Page 58 Computer Integrated Manufacturing (CIM) CIM Top management decides to make a product Computeraided design (CAD) designs the product OM runs the production process FMS Management Information System Computer-aided manufacturing (CAM) Automated storage and retrieval system (ASRS) and automated guided vehicles (AGVs) Robots put the product together

OP 2202: Introductions to Operations Management Lesson 5, Page 59 Technology in Services Service Industry Example Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading Education Electronic bulletin boards, on-line journals Utilities and government Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems Restaurants and foods Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs Communications Electronic publishing, interactive TV

OP 2202: Introductions to Operations Management Lesson 5, Page 60 Technology in Services Service Industry Example Hotels Electronic check-in/check-out, electronic key/lock system Wholesale/retail trade Point-of-sale terminals, e-commerce, electronic communication between store and supplier, bar coded data Transportation Automatic toll booths, satellite-directed navigation systems Health care Online patient-monitoring, online medical information systems, robotic surgery Airlines Ticketless travel, scheduling, Internet purchases

OP 2202: Introductions to Operations Management Lesson 5, Page 61 Process Redesign þ The fundamental rethinking of business processes to bring about dramatic improvements in performance þ Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions þ Requires reexamination of the basic process and its objectives þ Focuses on activities that cross functional lines þ Any process is a candidate for redesign

OP 2202: Introductions to Operations Management Lesson 5, Page 62 Ethics and Environmentally Friendly Processes Reduce the negative impact on the environment þ Encourage recycling þ Efficient use of resources þ Reduction of waste by-products þ Use less harmful ingredients þ Use less energy