Supply Chain
Applications
Chapter 7 –
Process Strategy
PowerPoint presentation to accompany
Heizer/Render Principles of Operations
Management, Operations Management, 11e
Learning Objectives
When you complete this chapter you
should be able to:
1. Describe four production processes
2. Use the tools of process analysis
3. Describe customer interaction in
process design
4. Identify recent advances in
production technology
Dell Computer Company
Mass customization provides a
competitive advantage
Sell custom-built PCs directly to consumer
Lean production processes and good
product design allow responsiveness
Integrate the Web into every aspect of its
business
Focus research on software designed to
make installation and configuration of its
PCs fast and simple
Process Strategies
How to produce a product or provide
a service that
Meets or exceeds customer
requirements
Meets cost and managerial goals
Has long term effects on
Efficiency and production flexibility
Costs and quality
Process Strategies
Four basic strategies
Process focus
Repetitive focus
Product focus
Mass customization
Within these basic strategies there are
many ways they may be implemented
Process Focus
Facilities are organized around specific
activities or processes
General purpose equipment and skilled
personnel
High degree of product flexibility
Typically high costs and low equipment
utilization
Product flows may vary considerably
making planning and scheduling a
challenge
Process Focus
Job Shop
Many departments and
many routings
Many
Many variety
inputs of
outputs
Process Flow Diagram
Customer
Customer sales
Purchasing
representative
Vendors PREPRESS DEPT
Accounting Receiving PRINTING DEPT
Warehouse COLLATING GLUING, BINDING,
DEPT STAPLING, LABELING
Information flow POLYWRAP DEPT
Material flow
SHIPPING
Customer Figure 7.2
Repetitive Focus
Facilities often organized as
assembly lines
Characterized by modules with parts
and assemblies made previously
Modules may be combined for many
output options
Less flexibility than process-focused
facilities but more efficient
Repetitive Focus
Automobile Assembly Line
Raw Modules
materials combined
and for many
module output
inputs options
Few
modules
Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
From Milwaukee
on a JIT arrival
Air cleaners Oil tank work cell schedule
Fluids and mufflers Shocks and forks
Fuel tank work cell Handlebars
Wheel work cell Fender work cell
Roller testing
Crating
Figure 7.3
Product Focus
Facilities are organized by product
High volume but low variety of
products
Long, continuous production runs
enable efficient processes
Typically high fixed cost but low
variable cost
Generally less skilled labor
Product Focus
Continuous Work Flow
Output
variations
Few in size,
inputs shape,
and
packaging
Product Focus
D A Scrap
Nucor Steel Plant steel
Continuous caster
B
C Electric
Ladle of molten steel furnace
Continuous cast steel
sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
E F
Hot mill for finishing, cooling, and coiling
H G
I
Mass Customization
The rapid, low-cost production of
goods and service to satisfy
increasingly unique customer
desires
Combines the
flexibility of a
process focus
with the efficiency
of a product focus
Mass Customization
Figure 7.5
Repetitive Focus
Flexible people
and equipment
Supportive
supply Modular techniques
chains
Mass Customization
Effective Rapid
scheduling throughput
techniques techniques
Process-Focused Product-Focused
High variety, low volume Low variety, high volume
Low utilization (5% to 25%) High utilization (70% to 90%)
General-purpose equipment Specialized equipment
Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few Process Focus Mass Customization
units per run, projects, job shops (difficult to achieve,
high variety (machine, print, but huge rewards)
(allows carpentry) Dell Computer
customization) Standard Register
Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles)
Harley-Davidson
Changes in
Attributes Product Focus
(such as grade, (commercial
quality, size, Poor Strategy baked goods,
thickness, etc.) (Both fixed and steel, glass)
long runs only variable costs Nucor Steel
are high)
Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)
Small Long runs, Large Large
quantity, large standardized quantity, small quantity, large
variety of product made variety of variety of
products from modules products products
General Special Special Rapid
purpose equipment purpose changeover
equipment aids in use of equipment on flexible
assembly line equipment
Table 7.2
Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)
Operators are Employees Operators are Flexible
broadly are modestly less broadly operators are
skilled trained skilled trained for the
necessary
customization
Many job Repetition Few work Custom
instructions reduces orders and job orders require
as each job training and instructions many job
changes changes in job because jobs instructions
instructions standardized
Table 7.2
Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)
Raw material JIT Raw material Raw material
inventories procurement inventories inventories
high techniques are low are low
used
Work-in- JIT inventory Work-in- Work-in-
process is techniques process process
high used inventory is inventory
low driven down
by JIT, lean
production
Table 7.2
Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)
Units move Movement is Swift Goods move
slowly measured in movement of swiftly
through the hours and unit through through the
plant days the facility is facility
typical
Finished Finished Finished Finished
goods made goods made goods made goods often
to order to frequent to forecast build-to-order
forecast and stored (BTO)
Table 7.2
Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)
Scheduling is Scheduling Relatively Sophisticated
complex, based on simple scheduling
trade-offs building scheduling, required to
between various establishing accommodate
inventory, models from output rate to custom orders
availability, a variety of meet forecasts
customer modules to
service forecasts
Table 7.2
Comparison of Processes
Process Repetitive Product Focus Mass
Focus Focus (High-volume, Customization
(Low volume, (Modular) low-variety) (High-volume,
high variety) high-variety)
Fixed costs Fixed costs Fixed costs Fixed costs
low, variable dependent on high, variable high, variable
costs high flexibility of costs low costs must be
the facility low
Costing Costs usually High fixed High fixed
estimated known due to costs mean costs and
before job, extensive costs dynamic
known only experience dependent on variable costs
after the job utilization of make costing
capacity a challenge
Table 7.2
Crossover Charts
Variable
costs
Variable Variable
$ costs $ costs $
Fixed costs Fixed costs
Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C
400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C
Figure 7.6 (2,857) V1 V2 (6,666) Volume
Focused Processes
Focus brings efficiency
Focus on depth of product line
rather than breadth
Focus can be
Customers
Products
Service
Technology
Changing Processes
Difficult and expensive
May mean starting over
Process strategy determines
transformation strategy for an
extended period
Important to get it right
Process Analysis and
Design
Flow Diagrams - Shows the movement
of materials
Value-Stream Mapping - Shows flows
and time and value added beyond the
immediate organization
Process Charts - Uses symbols to show
key activities
Service Blueprinting - focuses on
customer/provider interaction
Value-Stream Mapping
Figure 7.8
Process Chart
Figure 7.9
Service Blueprint
Focuses on the customer and
provider interaction
Defines three levels of interaction
Each level has different
management issues
Identifies potential failure points
Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close
Level Customer arrives
#1 for service Customer departs
F
Customer pays bill
Determine Notify
Warm greeting specifics customer
and obtain No and recommend
service request an alternative F
Standard provider
request Can
Level service be F
#2 done and does No
Direct customer customer
to waiting room approve? Notify
customer the
car is ready
F F F
Yes Yes
Perform
Level required work
#3
F
Prepare invoice
Figure 7.10 F
Service Process Matrix
Degree of Customization
Low High
Mass Service Professional Service
Private
banking
Commercial
banking
High General-
Full-service purpose law firms
Degree of Labor
stockbroker
Boutiques
Retailing
Service Factory Law clinics Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines
No-frills
Figure 7.11 airlines
Service Process Matrix
Mass Service and Professional Service
Labor involvement is high
Selection and training highly important
Focus on human resources
Personalized services
Service Factory and Service Shop
Automation of standardized services
Low labor intensity responds well to
process technology and scheduling
Tight control required to maintain
standards
Improving Service
Productivity
Strategy Technique Example
Separation Structure service so Bank customers go to
customers must go a manager to open a
where service is new account, to loan
offered officers for loans, and
to tellers for deposits
Self-service Self-service so Supermarkets and
customers examine, department stores,
compare, and Internet ordering
evaluate at their own
pace
Table 7.3
Improving Service
Productivity
Strategy Technique Example
Postponement Customizing at Customizing vans at
delivery delivery rather than at
production
Focus Restricting the Limited-menu
offerings restaurant
Modules Modular selection of Investment and
service, modular insurance selection,
production prepackaged food
modules in
restaurants
Table 7.3
Improving Service
Productivity
Strategy Technique Example
Automation Separating services Automatic teller
that may lend machines
themselves to
automation
Scheduling Precise personnel Scheduling ticket
scheduling counter personnel at
15-minute intervals at
airlines
Training Clarifying the service Investment counselor,
options, explaining funeral directors, after-
how to avoid sale maintenance
problems personnel
Table 7.3
Improving Service
Processes
Layout
Product exposure, customer
education, product enhancement
Human Resources
Recruiting and training
Impact of flexibility
Equipment and Technology
Often complex decisions
Possible competitive advantage
Flexibility
Stable processes
May allow enlarging the scope of the
processes
Production Technology
Machine technology
Automatic identification
systems (AISs)
Process control
Vision system
Robot
Automated storage and retrieval systems
(ASRSs)
Automated guided vehicles (AGVs)
Flexible manufacturing systems (FMSs)
Computer-integrated manufacturing (CIM)
Machine Technology
Increased precision
Increased productivity
Increased flexibility
Improved environmental impact
Reduced changeover time
Decreased size
Reduced power requirements
Automatic Identification
Systems (AISs)
Improved data acquisition
Reduced data entry errors
Increased speed
Increased scope
of process
automation
Example – Bar codes and RFID
Process Control
Increased process stability
Increased process precision
Real-time provision of information
for process evaluation
Data available in many forms
Process Control Software
Vision Systems
Particular aid to inspection
Consistently accurate
Never bored
Modest cost
Superior to individuals performing
the same tasks
Robots
Perform monotonous or dangerous
tasks
Perform tasks requiring significant
strength or endurance
Generally enhanced consistency
and accuracy
Automated Storage and
Retrieval Systems (ASRSs)
Automated placement and
withdrawal of parts and products
Reduced errors and labor
Particularly useful in inventory and
test areas of manufacturing firms
Automated Guided Vehicle
(AGVs)
Electronically guided and controlled
carts
Used for movement of products
and/or individuals
Flexible Manufacturing
Systems (FMSs)
Computer controls both the workstation
and the material handling equipment
Enhance flexibility and reduced waste
Can economically produce low volume at
high quality
Reduced changeover time and increased
utilization
Stringent communication requirement
between components
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 low-
volume/high-variety, and high-
volume/low-variety production
Computer-
Integrated
Manufacturing
(CIM)
Figure 7.12
Technology in Services
Service Industry Example
Financial Debit cards, electronic funds transfer, ATMs,
Services Internet stock trading
Education Electronic bulletin boards, on-line journals,
WebCT and Blackboard
Utilities and Automated one-man garbage trucks, optical
government mail and bomb scanners, flood warning
systems
Restaurants and Wireless orders from waiters to kitchen,
foods robot butchering, transponders on cars that
track sales at drive-throughs
Communications Electronic publishing, interactive TV
Table 7.4
Technology in Services
Service Industry Example
Hotels Electronic check-in/check-out, electronic
key/lock system
Wholesale/retail ATM-like kiosks, point-of-sale (POS)
trade 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
Table 7.4
Process Redesign
The fundamental rethinking 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
Focuses on activities that cross
functional lines
Any process is a candidate for redesign
Ethics and Environmentally
Friendly Processes
Reduce the negative impact on the
environment
Encourage recycling
Efficient use of resources
Reduction of waste by-products
Use less harmful ingredients
Use less energy
