Operations Management Process Strategy Power Point presentation to

Operations Management Process Strategy Power. Point presentation to accompany Heizer/Render Principles of Operations Management, 7 e Operations Management, 9 e © 2008 Prentice Hall, Inc. 7– 1

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 4. Describe customer interaction in process design 5. Identify recent advances in production technology © 2008 Prentice Hall, Inc. 7– 2

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 © 2008 Prentice Hall, Inc. 7– 3

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 © 2008 Prentice Hall, Inc. 7– 4

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 © 2008 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 Repetitive (autos, motorcycles) Harley-Davidson Poor Strategy (Both fixed and variable costs are high) Product Focus (commercial baked goods, steel, glass) Nucor Steel 7– 5

Process Focus (Equipment come to products) 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 © 2008 Prentice Hall, Inc. 7– 6

Process Focus Many inputs © 2008 Prentice Hall, Inc. Many departments and many routings Job Shop Many variety of outputs 7– 7

Process Flow Diagram Customer Purchasing Accounting Customer sales representative Vendors PREPRESS DEPT Receiving PRINTING DEPT Warehouse Information flow Material flow COLLATING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING Customer © 2008 Prentice Hall, Inc. Figure 7. 2 7– 8

Repetitive Focus (products come to equipment) 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 © 2008 Prentice Hall, Inc. 7– 9

Repetitive Focus Automobile Assembly Line Modules combined for many output options Raw materials and module inputs Few modules © 2008 Prentice Hall, Inc. 7 – 10

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 © 2008 Prentice Hall, Inc. 7 – 11

Product Focus (Flow) 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 © 2008 Prentice Hall, Inc. 7 – 12

Product Focus Continuous Work Flow Few inputs © 2008 Prentice Hall, Inc. Output variations in size, shape, and packaging 7 – 13

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 © 2008 Prentice Hall, Inc. 7 – 14

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 © 2008 Prentice Hall, Inc. 7 – 15

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 LCD TVs © 2008 Prentice Hall, Inc. Number of Choices 1970 s 21 st Century 140 286 18 1, 212 8 19 0 400, 000 0 98, 116, 993 267 458 40, 530 77, 446 5 185 160 340 14, 000 150, 000 0 102 7 – 16

Mass Customization Repetitive Focus Figure 7. 5 Flexible people and equipment Supportive supply chains Modular techniques Mass Customization Effective scheduling techniques Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment © 2008 Prentice Hall, Inc. Rapid throughput techniques Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment 7 – 17

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 © 2008 Prentice Hall, Inc. 7 – 18

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 © 2008 Prentice Hall, Inc. 7 – 19

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 © 2008 Prentice Hall, Inc. 7 – 20

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 build-to-order (BTO) Table 7. 2 © 2008 Prentice Hall, Inc. 7 – 21

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 a variety of 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 © 2008 Prentice Hall, Inc. 7 – 22

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, known only after the job 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 © 2008 Prentice Hall, Inc. 7 – 23

Focused Processes þ Focus brings efficiency þ Focus on depth of product line rather than breadth þ Focus can be þ Customers (American Express card) þ Products (YKK) þ Service (Maternity Hospitals) þ Technology (Microsoft – software) © 2008 Prentice Hall, Inc. 7 – 24

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 © 2008 Prentice Hall, Inc. 7 – 25

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 © 2008 Prentice Hall, Inc. 7 – 26

“Baseline” Time-Function Map Customer Order product Sales Process order Production control Receive product Wait Plant A Print Warehouse Wait Extrude Plant B Move Transport Figure 7. 7 © 2008 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 – 27

“Target” Time-Function Map 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 © 2008 Prentice Hall, Inc. 7 – 28

Value-Stream Mapping Figure 7. 8 © 2008 Prentice Hall, Inc. 7 – 29

Process Chart Figure 7. 9 © 2008 Prentice Hall, Inc. 7 – 30

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 © 2008 Prentice Hall, Inc. 7 – 31

Service Blueprint Personal Greeting Level #1 Service Diagnosis Perform Service Customer arrives for service Customer departs F Warm greeting and obtain service request No Standard request Level #2 Direct customer to waiting room F Level #3 Friendly Close Determine specifics Can service be done and does customer approve? F F Yes Notify customer and recommend an alternative provider Customer pays bill F F No Notify customer the car is ready Perform required work F Prepare invoice Figure 7. 10 © 2008 Prentice Hall, Inc. F 7 – 32

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 © 2008 Prentice Hall, Inc. 7 – 33

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. 11 © 2008 Prentice Hall, Inc. No-frills airlines 7 – 34

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 © 2008 Prentice Hall, Inc. 7 – 35

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 © 2008 Prentice Hall, Inc. 7 – 36

Improving Service Productivity Strategy Technique Example Automation Separating services that may lend themselves to automation 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 Table 7. 3 © 2008 Prentice Hall, Inc. 7 – 37

Improving Service Processes þ Layout þ Product exposure, customer education, product enhancement þ Human Resources þ Recruiting and training þ Impact of flexibility © 2008 Prentice Hall, Inc. 7 – 38

Technology in Services Service Industry Example Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading Education Electronic bulletin boards, on-line journals, Web. CT and Blackboard 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 © 2008 Prentice Hall, Inc. Table 7. 4 7 – 39

Technology in Services Service Industry Example Hotels Electronic check-in/check-out, electronic key/lock system Wholesale/retail trade ATM-like kiosks, point-of-sale (POS) 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 © 2008 Prentice Hall, Inc. Table 7. 4 7 – 40

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 © 2008 Prentice Hall, Inc. 7 – 41

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 © 2008 Prentice Hall, Inc. 7 – 42