Process Strategy Ch 8 Production Planning and Control

Process Strategy Ch 8 Production Planning and Control

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

Process Strategies þ Process strategy is the pattern of decisions made in managing processes to achieve competitive advantage. þ Involves using organization’s resources to provide something of value þ A strategy 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

Four Process Strategies þ Process Focused (Low Volume/High Variety) þ Repetitive Focus (falls between Process & Repetitive focuses Classic assembly line) þ Product Focused (High Volume/Low variety, facilities are organized around products) þ Mass Customization Focus (high Volume & variety)

Process, Volume, and Variety 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 Volume Repetitive Process Low Volume Process Focus projects, job shops (machine, print, , carpentry ) Machine Shop 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

Process Focused Strategy Machine Shop Hospitals Banking

Process Focus þ Facilities are organized by 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 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

Process Focus Print Shop Many inputs High variety of outputs

Process Focus Strategy Pros & Cons • Advantages • Greater product flexibility • More general purpose equipment • Lower initial capital investment • Disadvantages • More highly trained personnel • More difficult production planning and control • Low equipment utilization (5% to 25%)

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

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

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 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

Product Focus Bottling Plant Few inputs Output variation in size, shape, and packaging

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

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

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 18 8 0 0 267 40, 530 5 160 14, 000 260 1, 212 19 300, 000 46, 412, 165 458 77, 446 185 340 150, 000

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

Comparison of Processes Process Focus Repetitive Focus Product Focus (Low volume, high variety) (Modular) (High-volume, lowvariety) 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

Comparison of Processes Process Focus Repetitive Focus Product Focus (Low volume, high variety) (Modular) (High-volume, lowvariety) 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

Comparison of Processes Process Focus Repetitive Focus Product Focus (Low volume, high variety) (Modular) (High-volume, lowvariety) Mass Customization (High-volume, high -variety) Raw material inventories high JIT procurement techniques used Raw material inventories are low Work-in-process is high JIT inventory techniques used Work-in-process inventory is low Work-in-process inventory driven down by JIT, lean production

Comparison of Processes Process Focus Repetitive Focus Product Focus Mass Customization (Low volume, high variety) (Modular) (High-volume, lowvariety) 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 (High-volume, high -variety)

Comparison of Processes Process Focus Repetitive Focus Product Focus (Low volume, high variety) (Modular) (High-volume, lowvariety) Scheduling is complex, tradeoffs between inventory, availability, customer service Scheduling based on building various models from modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Mass Customization (High-volume, high-variety) Sophisticated scheduling required to accommodate custom orders

Comparison of Processes Process Focus Repetitive Focus Product Focus (Low volume, high variety) (Modular) (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

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 t os c st tal l co a t To o T 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

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

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

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 13 days 1 day 4 days 1 day 10 days 52 days Move 1 day 0 day 1 day

Time-Function Mapping Customer Order product Sales Process order Production control Receive product Wait Print Plant Extrude Warehouse Wait Transport Move 1 day 2 days 1 day 6 days 1 day

Process Chart

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

Service Blueprint Personal Greeting Level #1 Service Diagnosis Perform Service Customer arrives for service Warm greeting and obtain service request Customer departs Determine specifics No Standard request Level #2 Friendly Close Direct customer to waiting room 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

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 details þ Service blueprint focuses on customer interaction

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

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

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 Supermarkets and examine, compare, and department stores, internet evaluate at their own pace ordering

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

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

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

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

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)

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

Automatic Identification Systems (AIS) þ Improved data acquisition þ Reduced data entry errors þ Increased speed þ Increased scope of process automation

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

Process Control Software

Vision Systems þ Particular aid to inspection þ Consistently accurate þ Never bored þ Modest cost þ Superior to individuals performing the same tasks

Robots þ Perform monotonous or dangerous tasks þ Perform tasks requiring significant strength or endurance þ Generally enhanced consistency and accuracy

Robotic Surgery

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

Automated Guided Vehicle (AGV) þ Electronically guided and controlled carts þ Used for movement of products and/or individuals

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

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 high-volume/low -variety production

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

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

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

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

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