Process Strategy

Outline
 GLOBAL COMPANY PROFILE: DELL COMPUTER CO.  FOUR PROCESS STRATEGIES
 Process Focus  Repetitive Focus  Product Focus  Mass Customization Focus  Comparison of Process Choices
2

Outline - Continued
 PROCESS ANALYSIS AND DESIGN
    Flow Diagrams Time-Function Mapping Process Charts Service Blueprinting

 SERVICE PROCESS DESIGN

  Customer Interaction and Process Design More Opportunities to Improve Service Processes

 SELECTION OF EQUIPMENT AND TECHNOLOGY

Outline - Continued
 PRODUCTION TECHNOLOGY
 Machine Technology  Process Control  Vision Systems  Automated Storage and Retrieval System  Automated Guided Vehicle (AGV)  Flexible Manufacturing Systems (FMS)  Computer-Integrated Manufacturing (CIM)
4

Outline - Continued
 TECHNOLOGY IN SERVICES  ENVIRONMENTALLY FRIENDLY PROCESSES  PROCESS REENGINEERING

Learning Objectives
When you complete this chapter, you should be able to : Identify or Define:
      Process focus Repetitive focus Product focus Process reengineering Service process issues Environmental issues
6

Learning Objectives Continued

When you complete this chapter, you should be able to: Describe or Explain:
    Process analysis Service design Green manufacturing Production technology

Dell Computer Company

How can we make the process of buying a computer better?
     Sell custom-build PCs directly to consumer Integrate the Web into every aspect of its business Operate with six days inventory Build computers rapidly, at low cost, and only when ordered Focus research on software designed to make installation and configuration of its PCs fast and simple
8

Fit of Process, Volume, and Variety

Low-Volume (Intermittent) Repetitive Process (Modular) 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

High-Volume (Continuous)

Process focus projects, job shops,(machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley Davidson

Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co.

Poor strategy

Product focus (commercial baked goods, steel, glass) Nucor Steel

9

Production Process Flow Diagram

Customer Purchasing (order inks, paper, other supplies) Vendors Accounting Receiving Warehousing (ink, paper, etc.) Customer sales representative (take order) Prepress Department (Prepare printing plates & negatives) Printing Department Collating Department Gluing, binding, stapling, labeling Polywrap Department Shipping
10

Information flow Material flow

Process Strategies
 Involve determining how to produce a product or provide a service  Objective
 Meet or exceed customer requirements  Meet cost & managerial goals

 Has long-run effects

 Product & volume flexibility  Costs & quality
11

Types of Process Strategies

Process strategies that follow a continuum Within a given facility, several strategies may be used These strategies are often classified as:
Process-Focused RepetitiveFocused

Product-Focused

Continuum
12

Process-Focused Strategy
Facilities are organized by process Similar processes are together
j

Example: All drill presses are together

Low volume, high variety products Product A Jumbled flow Operation Other names 1 2
Intermittent process Job shop

Product B
13

Process Focus

14

Process-Focused Strategy Examples

Bank Hospital Machine Shop
1995 Corel Corp. 1995 Corel Corp.

1995 Corel Corp.

15

Process Focused Strategy Pros & Cons

 Advantages
 Greater product flexibility  More general purpose equipment  Lower initial capital investment

 Disadvantages
    High variable costs More highly trained personnel More difficult production planning & control Low equipment utilization (5% to 25%)
16

Repetitive Focused Strategy

 Facilities often organized by assembly lines  Characterized by modules
 Parts & assemblies made previously

 Modules combined for many output options  Other names

 Assembly line  Production line
17

Repetitive Focus

18

Repetitive Focused Strategy Considerations

 More structured than process-focused, less structured than product focused  Enables quasi-customization  Using modules, it enjoys economic advantage of continuous process, and custom advantage of low-volume, highvariety model
19

Repetitive-Focused Strategy Examples

Clothes Dryer
McDonalds
over 95 billion served

Fast Food

Truck
1995 Corel Corp.

1984-1994 T/Maker Co.

1995 Corel Corp.

20

Flow Diagram Showing the Production Process for Harley Davidson, York, PA.

21

Product-Focused Strategy
Facilities are organized by product High volume, low variety products Where found
Discrete unit manufacturing Continuous process manufacturing

Other names
Line flow production Continuous production

Products A & B 1 2 3

Operation
22

Product Focus

23

Product-Focused Strategy Pros & Cons

 Advantages
    Lower variable cost per unit Lower but more specialized labor skills Easier production planning and control Higher equipment utilization (70% to 90%)

 Disadvantages
 Lower product flexibility  More specialized equipment  Usually higher capital investment
24

Product-Focused Examples
Soft Drinks (Continuous, then Discrete) Light Bulbs (Discrete)
1995 Corel Corp. 1995 Corel Corp.

Paper (Continuous)

1984-1994 T/Maker Co.

25

Flow Diagram Showing the Steelmaking Process at NUCOR

26

A Comparison (1)
Process Focus (Low volume, High variety) 1. Small quantity, large variety of products 2. General purpose equipment Repetitive Focus (Modular) Long runs, standardized product, from modules Special equipment aids in use of assembly line Product focus (High-volume, low-variety) Large quantity, small variety of products Mass Customization (High-volume, high-variety Large quantity, large variety of products

Special purpose Rapid equipment changeover on flexible equipment

27

A Comparison (2)
Process Focus Repetitive Focus Product focus Mass Customization 3 Broadly skilled Modestly trained Operators less Flexible operators operators employees broadly skilled trained for customization 4 Many instructions because of change in jobs 5 Raw material high relative to product value Reduced training and number of job instructions JIT techniques used Few work orders and job instructions Custom orders require many instructions

Raw material Raw material low low relative to relative to product product value value
28

A Comparison (3)
Process Focus Repetitive Focus Product focus Mass Customizatio n 6 WIP high JIT techniques relative to output used WIP low relative WIP driven to output down by JIT, kanban, lean production Units move swiftly thru facility Finished goods made to forecast, then stored Goods move swiftly thru facility Finished goods made to order
29

7 Units move slowly thru plant

Movement measured in hours & days

8 Finished goods Finished goods made to order, made to frequent not stored forecasts

A Comparison (4)
Process Focus 9 Scheduling complex and concerned with trade-off between inventory, capacity, and customer service 10 Fixed costs low, variable costs high Repetitive Focus Scheduling based on building models from a variety of forecasts Product focus Scheduling relatively simple, concerns establishing sufficient rate of output to meet forecasts Mass Customization Scheduling sophisticated to accommodate customization

Fixed costs dependent on flexibility of facilities

Fixed costs high, Fixed costs high; variable costs variable costs low must be low
30

A Comparison (5)
Process Focus Repetitive Focus Product focus Because of high fixed costs, cost dependent on utilization of capacity Mass Customization High fixed costs and dynamic variable costs 11 Costing, done Costs usually known based on by job, is experience estimated prior to doing job but only known after doing job

31

Process Continuum
Process Focused (intermittent process) Repetitive Focus (assembly line) Product Focused (continuous process)

Continuum High variety, low volume Low utilization (5% - 25%) General-purpose equipment Low variety, high volume High utilization (70% - 90%) Specialized equipment

Modular Flexible equipment

32

Volume and Variety of Products

Volume and Variety of Products

Low Volume High Variety Process (Intermittent) Projects Job Shops Repetitive Process (Modular)

High Volume Low Variety Process (Continuous)

One or very few units per lot Very small runs, high variety Modest runs, modest variety Long runs, modest variations Very long runs, changes in attributes Equipment utilization

Mass Customization

Poor Strategy (High variable costs) 5%-25%

Disconnected Repetitive Connected Repetitive Continuous 20%-75% 70%-80%

33

Mass Customization
 Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires.  Under mass customization the three process models become so flexible that distinctions between them blur, making variety and volume issues less significant.
34

Mass Customization - More Choices Than even

Item
Vehicle models Vehicle styles Bicycle types Software titles Web sites Movie releases New book titles Houston TV channels Breakfast cereals Item SKUs in supermarkets

Number of Choices Early 21st Early Century 1970s

140 18 8 0 0 267 40,530 5 160 14,000 260 1,212 19 300,000 30,727,296 458 77,446 185 340 150,000
35

Process Strategies
Repetitive Focus Modular design Flexible equipment Modular techniques Mass Customization Effective scheduling techniques Process-focused High variety, low volume Low utilization (5% - 20%) General purpose equipment Rapid throughput techniques Product-focused Low variety, high volume High utilization (70% - 80%) Specialized equipment
36

Questions for Process Analysis and Design

 Is the process designed to achieve competitive advantage in terms of differentiation, response, or low cost?  Does the process eliminate steps that do not add value?  Does the process maximize customer value as perceived by the customer?  Will the process win orders?
37

Crossover Charts
Fixed cost
$ $

Variable cost
$

Process A

Process B

Process C

$
400,000 300,000 200,000
V1(2,857) V2 (6,666)

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

Volume

38

Tools for Process Design

    Flow Diagrams Process Charts Time-Function/Process Mapping Work Flow Analysis

39

Production Process Flow Diagram

Customer Purchasing (order inks, paper, other supplies) Vendors Accounting Receiving Warehousing (ink, paper, etc.) Customer sales representative take order Prepress Department (Prepare printing plates and negatives) Printing Department Collating Department Gluing, binding, stapling, labeling Polywrap Department Shipping
40

Information flow Material flow

Time Function Map (Baseline)

Customer Order Product Process Order
Order

Receive product

Sales Production control Plant A

Wait
Order Product

Print
WIP Product

Warehouse Plant B

Wait

Wait
WIP

Wait
Product

Transport
12 days 13 days 1 day 4 days

WIP

Move
1 day 10 days 1 day 9 days

WIP

Extrude

Move
1 day

52 days 41

Time Function Map (Target)

Customer Order Product Process Order
Order

Receive product

Sales Production control Plant

Wait
Order

Print

WIP

Extrude

Warehouse

Wait
Product

Transport

Move

1 day

2 days

1 day

1 day

1 day

6 days 42

Product

Process Chart Example

SUBJECT: Request tool purchase Dist (ft) Time (min) Symbol   75  Description

D Write order D On desk D To buyer

  D Examine  = Operation; = Transport; = Inspect; D = Delay; = Storage

43

Process Chart Hamburger Dist. Time Chart Process Description (Ft) (Mins) Symbols Assemblyin Storage Meat Patty  
1.5 .05 2.50 .05 1.0 .05 .15 .5 .10 .20 .5 .05

        

        

Transfer to Broiler Broiler Visual Inspection Transfer to Rack Temporary Storage Obtain Buns, Lettuce, etc. Assemble Order Place in Finish Rack

TOTALS Value-added time = Operation time/Total time = (2.50+.20)/3.15=85.7%

3.5

3.15

2 4 1 - 2

44

Service Blueprint for Service at Ten Minute Lube, Inc.

45

Work Flow Analysis - Four Phases

  Request from a customer or an offer to provide services by a performer Negotiation, allowing the customer and the performer to agree on how the work should be done and what will constitute customer satisfaction Performance of the assignment and completion Acceptance, closing the transaction provided the customer expresses satisfaction and agrees that the conditions were met.

 

46

Attaining Lean Production

         Focus on inventory reduction Build systems that help employees Reduce space requirements Develop close relationships with suppliers Educate suppliers Eliminate all but value-added activities Develop the workforce Make jobs more challenging Set sights on perfection!

47

Customer Interaction and Process Strategy

Low High

Mass Service
Commercial Banking Personal banking

Professional Service
High

Degree of Labor Intensity

Full-service stockbroker Retailing Boutiques

General purpose law firms

Service Factory
Limited service stockbroker Warehouse and catalog stores Airlines No frills airlines

Law clinics

Service Shop
For-profit hospitals Fine dining restaurants Hospitals

Low

Fast food restaurants

Degree of Interaction and Customization 48

Techniques for Improving Service Productivity



Strategy Separation
Self-service

Technique Structure service so

customers must go where service is offered Self-service so customers examine, compare and evaluate at their own pace Customizing at delivery Restricting the offerings

 

Postponement Focus
 

49

Techniques for Improving Service Productivity Continued

    Modules Automation
  Modular selection of service. Modular production Separating services that lend themselves to automation Precise personnel scheduling Clarifying the service options Explaining problems 50

Scheduling Training
  

Improving employee

More Opportunities to Improve Service Processes

 Layout  Human Resources  Technology

51

Production Process & Technology Alternatives

# Different Products or Parts High
General Purpose, NC, CNC CIM
Flexible Manufacturing System

Dedicated Automation

Low

Low Volume of Products or Parts

High
52

Areas of Technology
Machine technology Automatic identification systems (AIS) Process control Vision system Robot Automated storage and retrieval systems (ASRS)  Flexible manufacturing systems (FMS) 53  Computer-integrated manufacturing (CIM)      

Machine Technology
      Increased precision Increased productivity Increased flexibility Decreased pollution Decreased size Decreased power requirements
54

Process Control
 Increased process stability  Increased process precision  Real-time provision of information for process evaluation  Multi-mode information presentation

55

Automatic Identification Systems (AIS)

 Improved data acquisition  Increased scope of process automation

56

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

57

Robots
 Perform monotonous, or dangerous tasks, or those requiring significant strength or endurance  Enhanced consistency, accuracy, speed strength, power when substituted for human effort

58

Automated Storage and Retrieval Systems (ASRS)

 Automated placement and withdrawal of parts and products  Particularly useful in inventory and test areas of manufacturing firms

59

Automated Guided Vehicle (AGV)

 Electronically controlled movement of products and/or individuals

60

Flexible Manufacturing Systems (FMS)

 Computer controls both the workstation and the material handling equipment  Computer control enhance flexibility  Can economically produce low volume at high quality  Reduced costs of changeover and low utilization  Stringent communication requirement between components within it
61

Computer Integrated Manufacturing (CIM)

 Extension of flexible manufacturing systems
 Backwards to engineering and inventory control  Forward into warehousing and shipping  Can also include financial and customer service areas

 Reducing the distinction between lowvolume/high-variety, and highvolume/low-variety production

62

Computer Integrated Manufacturing

63

Technology in Services
Service Industry Financial services Education Utilities and government Restaurants and foods Communication Hotels Example Debit cards, electronic funds transfer, ATMs, Internet stock trading Electronic bulletin boards, on-line journals Automated one-man garbage trucks, optical mail sorters, scanners, flood warning systems Wireless orders from waiters to kitchen, robot butchering, transponders on cars to track drive-thrus Electronic publishing, interactive TV

Electronic check-in/check-out, electronic key/lock systems Wholesale/retail Point-of-sale terminals, e-commerce, electronic communication between store and supplier, bar coded trade data 64

Service Industry

Technology in Services Continued

Example Automatic toll booths, satellite-directed navigation systems, route planning, progress monitoring On-line patient monitoring, on-line medical information systems, robotic surgery, expert system diagnosis assistance Ticketless travel, scheduling, Internet ticket sales, improved navigation and route planning

Transportation Health care

Airlines

65

Process Reengineering
 The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance  Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions  Requires reexamination of the basic process and its objectives 66

Showing Sensitivity to the Environment

      Make products recyclable Use recycled materials Use less harmful ingredients Use light components Use less energy Use less materials
67

Factors Affecting Process Alternatives

Production flexibility Product volume Product variety Technology Cost Human resources Quality Reliability
These factors reduce the number of alternatives!

1984-1994 T/Maker Co.

68