BITS Pilani
Pilani|Dubai|Goa|Hyderabad
Process Strategy
1
Process, Volume, and Variety
Volume
Figure 7.1 Low Repetitive High
Volume Process Volume
High Variety
one or few units Process Focus
per run, high projects, job shops Mass Customization
variety (machine, print, (difficult to achieve, but
(allows carpentry) huge rewards)
customization) Standard Register Dell Computer
Changes in
Modules
modest runs,
standardized Repetitive
modules (autos, motorcycles)
Harley-Davidson
Changes in
Attributes (such Product Focus
as grade, quality, (commercial baked
size, thickness, Poor Strategy (Both goods, steel, glass)
etc.) fixed and variable Nucor Steel
long runs only costs are high)
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 of
inputs outputs
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 in
Few size, shape,
inputs 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 chains Modular techniques
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
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, standardized quantity, small quantity, large
large variety product made variety of variety of
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
$ o st
st
lc t
cos
co
ta l
To Tota
al
t
To
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
Crossover Charts
Variable $10
$60 $25 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
$ o st
st
lc t
cos
co
ta l
To Tota
al
t
To
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
Cross over charts
23
Practice Problems # Process Strategy
Problem 1
A product is currently made in a process-focused shop,
where fixed costs are $9,000 per year and variable cost is
$50 per unit. The firm is considering a fundamental shift in
process, to repetitive manufacture. The new process would
have fixed costs of $90,000, and variable costs of $5. What
is the crossover point for these processes? For what range
of outputs is each process appropriate?
24
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Practice Problems # Process Strategy
Problem 2
A firm is about to undertake the manufacture of a product, and is
weighing the process configuration options. There are two
intermittent processes under consideration, as well as a
repetitive focus. The smaller intermittent process has fixed costs
of $3,000 per month, and variable costs of $10 per unit. The
larger intermittent process has fixed costs of $12,000 and
variable costs of $2 per unit. A repetitive focus plant has fixed
costs of $50,000 and variable costs of $1 per unit.
a. At what output does the large intermittent process become
cheaper than the small one?
b. At what output does the repetitive process become cheaper
than the larger intermittent process?
25
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Solutions
1. The crossover is at 1800 units annually. For
volumes under 1800, the process focus is cheaper;
for volumes over 1800 units, the repetitive focus is
cheaper. (Four process choices, moderate)
{AACSB: Analytic Skills}
2. (a) at 1125 units, the large job shop becomes
cheaper than the small job shop; (b) at 38,000 units,
the repetitive shop is cheaper than the larger job
shop.
26
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Process Analysis and Design
Questions to be asked while analyzing:
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?
Process analysis and design not only address these issues, but also
related OM issues such as throughput, cost, and quality.
The process is key.
Examine the process; then continuously
improve the process.
Process Analysis and Design
Flow Diagrams - Shows the movement of
materials
Time-Function Mapping - Shows flows and
time frame
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
Flow Diagram
Customer
Purchasing Customer sales
(order inks, paper, representative
other supplies) take order
Vendors Prepress Department
(Prepare printing plates
Accounting Receiving and negatives)
Warehousing Printing Department
(ink, paper, etc.)
Collating Gluing, binding,
Department stapling, labeling
Information flow Polywrap
Department
Material flow
Shipping
“Baseline” Time-Function Map
Order Receive
Customer product product
Process
Sales order
Production Wait
control
Plant A Print
Warehouse Wait Wait Wait
Plant B Extrude
Transport Move Move
12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day
Figure 7.7
52 days
“Target” Time-Function Map
Order Receive
Customer product product
Process
Sales order
Production
control Wait
Plant Print Extrude
Warehouse Wait
Transport Move
1 day 2 days 1 day 1 day 1 day
6 days
Figure 7.7
Process mapping
• Used to identify different types of activities.
• Shows the flow of material, people or information.
• Critical analysis of process maps can improve the
process.
Process mapping symbols
Operation (an activity Beginning or end of process
that directly adds value)
Inspection (a check of Activity
some sort)
Transport (a movement Input or Output from the process
of some thing)
Delay (a wait, e.g. for materials) Direction of flow
Storage (deliberate storage, Decision (exercising discretion)
as opposed to a delay)
Process mapping symbols derived Process mapping symbols derived from
from “Scientific Management” Systems Analysis
Process Chart
Figure 7.9
Value-Stream Mapping
Figure 7.8
