Operations Management Chapter 7 Process Strategy Power Point

Operations Management Chapter 7 – Process Strategy Power. Point presentation to accompany Heizer/Render Principles of Operations Management, 6 e Operations Management, 8 e © 2006 Prentice Hall, Inc. © 2006 Prentice 7–

Outline þ Global Company Profile: Dell Computer Co. þ Four Process Strategies þ Process Focus þ Repetitive Focus þ Product Focus þ Mass Customization Focus þ Comparison of Process Choices © 2006 Prentice Hall, Inc. 7–

Outline – Continued þ Process Analysis And Design þ Flow Diagrams þ Time-Function Mapping þ Value Stream Mapping þ Process Charts þ Service Blueprinting © 2006 Prentice Hall, Inc. 7–

Outline – Continued þ Service Process Design þ Customer Interaction and Process Design þ More Opportunities to Improve Service Processes þ Selection Of Equipment And Technology © 2006 Prentice Hall, Inc. 7–

Outline – Continued þ Production Technology þ Machine Technology þ Process Control þ Vision Systems þ Automated Storage and Retrieval System þ Automated Guided Vehicle (AGV) þ Flexible Manufacturing System (FMS) þ Computer-Integrated Manufacturing (CIM) © 2006 Prentice Hall, Inc. 7–

Outline – Continued þ Technology In Services þ Process Redesign þ Ethics And Environmentally Friendly Processes © 2006 Prentice Hall, Inc. 7–

Learning Objectives When you complete this chapter, you should be able to: Identify or Define: þ Process focus þ Repetitive focus þ Product focus þ Process reengineering þ Service process issues þ Environmental issues © 2006 Prentice Hall, Inc. 7–

Learning Objectives When you complete this chapter, you should be able to: Describe or Explain: þ Process Analysis þ Service Design þ Production Technology þ Process Redesign þ Ethics and Environmentally Friendly Processes © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

Process, Volume, and Variety Volume Repetitive Process Figure 7. 1 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 © 2006 Prentice Hall, Inc. 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 7 – 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 © 2006 Prentice Hall, Inc. Figure 7. 2 7 – 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 © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

Process Focus 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 © 2006 Prentice Hall, Inc. 7–

Process Focus Print Shop Many inputs © 2006 Prentice Hall, Inc. High variety of outputs 7–

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 © 2006 Prentice Hall, Inc. 7–

Repetitive Focus Automobile Assembly Line Modules combined for many output options Raw materials and module inputs Few modules © 2006 Prentice Hall, Inc. 7–

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 Figure 7. 3 © 2006 Prentice Hall, Inc. 7–

Product Focus 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 © 2006 Prentice Hall, Inc. 7–

Product Focus Bottling Plant Many inputs © 2006 Prentice Hall, Inc. Output variation in size, shape, and packaging 7–

Product Focus D Continuous caster Nucor Steel Plant C Scrap steel A 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 © 2006 Prentice Hall, Inc. 7–

Comparison of Processes Process Focus Repetitive Focus Product Focus (Low volume, high variety) (Modular) 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 (High-volume, low-variety) Mass Customization (High-volume, high-variety) Table 7. 2 © 2006 Prentice Hall, Inc. 7 – 22

Comparison of Processes Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high variety) (Modular) (High-volume, low-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 (High-volume, high-variety) Table 7. 2 © 2006 Prentice Hall, Inc. 7 – 23

Comparison of Processes Process Focus Repetitive Focus (Low volume, high variety) (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 Table 7. 2 © 2006 Prentice Hall, Inc. 7 – 24

Comparison of Processes Process Focus Repetitive Focus (Low volume, high variety) (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 Table 7. 2 © 2006 Prentice Hall, Inc. 7 – 25

Comparison of Processes Process Focus Repetitive Focus (Low volume, high variety) (Modular) Scheduling is complex, trade-offs between inventory, availability, customer service Scheduling based on building various models from modules to forecasts Product Focus (High-volume, low-variety) Relatively simple scheduling, establishing output rate to meet forecasts Mass Customization (High-volume, high-variety) Sophisticated scheduling required to accommodate custom orders Table 7. 2 © 2006 Prentice Hall, Inc. 7 – 26

Comparison of Processes Process Focus Repetitive Focus (Low volume, high variety) (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 Table 7. 2 © 2006 Prentice Hall, Inc. 7 – 27

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 © 2006 Prentice Hall, Inc. 7–

Mass Customization Table 7. 1 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 © 2006 Prentice Hall, Inc. 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 7–

Mass Customization Repetitive Focus Figure 7. 5 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 © 2006 Prentice Hall, Inc. Rapid throughput techniques Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment 7–

Crossover Charts Variable costs $ $ $ Fixed costs Repetitive Process B To ta lc os t Low volume, high variety Process A $ Variable costs High volume, low variety Process C t os c ost tal al c t o To T 400, 000 300, 000 200, 000 Fixed cost Process A Figure 7. 6 © 2006 Prentice Hall, Inc. (2, 857) V 1 V 2 (6, 666) Fixed cost Process B Fixed cost Process C Volume 7 – 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 © 2006 Prentice Hall, Inc. 7 – 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 © 2006 Prentice Hall, Inc. 7–

Time-Function Mapping Customer Order product Sales Process order Production control Receive product Wait Plant A Print Warehouse Wait Extrude Plant B Move Transport Figure 7. 7 © 2006 Prentice Hall, Inc. Wait 12 days 13 days 1 day 4 days 1 day 10 days Move 1 day 0 day 1 day 52 days 7 – 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 Figure 7. 7 © 2006 Prentice Hall, Inc. 7 – 35

Process Chart Figure 7. 8 © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

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 Figure 7. 9 © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

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 Fine-dining restaurants Shop Hospitals Airlines Figure 7. 10 © 2006 Prentice Hall, Inc. No frills airlines 7–

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 © 2006 Prentice Hall, Inc. 7–

Improving Service Productivity Strategy Technique Example Separation Structure service so customers must go where 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 so customers examine, compare, and evaluate at their own pace Supermarkets and department stores, internet ordering Table 7. 3 © 2006 Prentice Hall, Inc. 7 – 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 Table 7. 3 © 2006 Prentice Hall, Inc. 7 – 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, after -sale maintenance personnel Table 7. 3 © 2006 Prentice Hall, Inc. 7 – 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 © 2006 Prentice Hall, Inc. 7 – 45

Improving Service Processes þ Layout þ Product exposure, customer education, product enhancement þ Human Resources þ Recruiting and training þ Impact of flexibility © 2006 Prentice Hall, Inc. 7–

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) © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

Automatic Identification Systems (AIS) þ Improved data acquisition þ Reduced data entry errors þ Increased speed þ Increased scope of process automation © 2006 Prentice Hall, Inc. 7–

Process Control þ Increased process stability þ Increased process precision þ Real-time provision of information for process evaluation þ Data available in many forms © 2006 Prentice Hall, Inc. 7–

Process Control Software © 2006 Prentice Hall, Inc. 7 – 51

Vision Systems þ Particular aid to inspection þ Consistently accurate þ Never bored þ Modest cost þ Superior to individuals performing the same tasks © 2006 Prentice Hall, Inc. 7–

Robots þ Perform monotonous or dangerous tasks þ Perform tasks requiring significant strength or endurance þ Generally enhanced consistency and accuracy © 2006 Prentice Hall, Inc. 7–

Robotic Surgery © 2006 Prentice Hall, Inc. 7 – 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 © 2006 Prentice Hall, Inc. 7–

Automated Guided Vehicle (AGV) þ Electronically guided and controlled carts þ Used for movement of products and/or individuals © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–

Computer Integrated Manufacturing (CIM) Figure 7. 11 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) © 2006 Prentice Hall, Inc. Automated storage and retrieval system (ASRS) and automated guided vehicles (AGVs) Robots put the product together 7–

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 © 2006 Prentice Hall, Inc. Table 7. 4 7–

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 © 2006 Prentice Hall, Inc. Table 7. 4 7–

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 © 2006 Prentice Hall, Inc. 7–

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 © 2006 Prentice Hall, Inc. 7–