Operations Management: Sustainability
and Supply Chain Management
Third Canadian Edition
Chapter 7
Process Strategy and
Sustainability
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Harley-Davidson
• Repetitive manufacturing works
– The leading U.S. motorcycle company
– Emphasizes quality and lean manufacturing
– Materials as Needed (MAN) system
– Many variations possible
– Tightly scheduled repetitive production line
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Process Flow Diagram
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Process Strategies
The objective of a process strategy is to build a
production process that meets customer
requirements and product specifications within
cost and other managerial constraints
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Process, Volume, and Variety
Figure 7.1
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Process Strategies (1 of 2)
• 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
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Process Strategies (2 of 2)
• Four basic strategies
1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization
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Process Focus (1 of 2)
• 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
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Process Focus (2 of 2)
Figure 7.2a
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Repetitive Focus (1 of 2)
• 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
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Repetitive Focus (2 of 2)
Figure 7.2b
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Product Focus (1 of 2)
• 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 labour
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Product Focus (2 of 2)
Figure 7.2c
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Mass Customization (1 of 6)
• 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
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Mass Customization (2 of 6)
Figure 7.2d
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Mass Customization (3 of 6)
Table 7.1 Mass Customization Provides More Choices
Than Ever
Blank Number of Choicesa
Item 1970s 21st Century
Vehicle models 140 286
Vehicle styles 18 1 212
Bicycle types 8 211 000c
Software titles 0 400 000
Websites 0 162 000 000d
Movie releases per year 267 765e
New book titles 40 530 300 000+
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Mass Customization (4 of 6)
Table 7.1 Continued
Blank Number of Choicesa
Item 1970s 21st Century
TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in supermarkets 14 000b 150 000f
LCD TVs 0 102
a
Variety available in the U.S.; worldwide, the variety increases even more.
b
1989.
c
Possible combinations for one manufacturer.
d
Royal Pingdom Estimate (2008).
e
[Link] (2009).
f
SKUs managed by H. E. Butts grocery chain.
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Mass Customization (5 of 6)
Figure 7.3
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Mass Customization (6 of 6)
• Imaginative and fast product design
• Rapid process design
• Tightly controlled inventory management
• Tight schedules
• Responsive supply chain partners
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Comparison of Processes (1 of 5)
Table 7.2 Comparison of the Characteristics of Four Types of Processes
Process Focus Product Focus Mass Customization
(low-volume, high- Repetitive (high-volume, (high-volume,
variety) Focus (modular) low-variety) high-variety)
1. Small quantity 1. Long runs, 1. Large quantity 1. Large quantity and
and large usually a and small variety large variety of
variety of standardized of products are products are
products are product with produced produced
produced options,
produced
from modules
2. Equipment 2. Special 2. Equipment used 2. Rapid changeover
used is general equipment is special on flexible
purpose aids in use of purpose equipment
an assembly
line
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Comparison of Processes (2 of 5)
Table 7.2 Continued
Process Focus Product Focus Mass Customization
(low-volume, Repetitive Focus (high-volume, low- (high-volume,
high-variety) (modular) variety) high-variety)
3. Operators are 3. Employees are 3. Operators are 3. Flexible operators
broadly skilled modestly less broadly are trained for the
trained skilled necessary
customization
4. There are many 4. Repetitive 4. Work orders 4. Custom orders
job instructions operations and job require many job
because each reduce training instructions are instructions
job changes and changes few because
in job they are
instructions standardized
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Comparison of Processes (3 of 5)
Table 7.2 Continued
Process Focus Repetitive Focus Product Focus Mass Customization
(low-volume, high- (modular) (high-volume, (high-volume, high-
variety) low-variety) variety)
5. Raw-material 5. JIT procurement 5. Raw material 5. Raw material
inventories high techniques are inventories are inventories are
relative to the used low relative to low relative to
value of the the value of the the value of the
product product product
6. Work-in-process 6. JIT inventory 6. Work-in-process 6. Work-in-process
is high compared techniques are inventory is low inventory driven
to output used compared to down by JIT,
output kanban, lean
production
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Comparison of Processes (4 of 5)
Table 7.2 Continued
Process Focus Repetitive Focus Product Focus Mass
(low-volume, high- (modular) (high-volume, Customization
variety) low-variety) (high-volume, high-
variety)
7. Units move slowly 7. Assembly is 7. Swift movement 7. Goods move
through the facility measured in hours of units through swiftly through
and days the facility is the facility
typical
8. Finished goods 8. Finished goods 8. Finished goods 8. Finished goods
are usually made made to frequent are usually are often build-to-
to order and not forecast made to order (BTO)
stored forecast and
stored
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Comparison of Processes (5 of 5)
Table 7.2 Continued
Process Focus Repetitive Focus Product Focus Mass
(low-volume, high- (modular) (high-volume, low- Customization
variety) variety) (high-volume,
high-variety)
9. Scheduling is 9. Scheduling is based 9. Scheduling is 9. Sophisticated
complex, on building various relatively simple, scheduling is
concerned with models from a concerned with required to
trade-offs variety of modules establishing accommodate
between to forecasts output rate custom orders
inventory, sufficient to meet
capacity, and forecasts
customer service
10. Fixed costs tend 10. Fixed costs 10. Fixed costs tend 10. Fixed costs tend
to be low and dependent on to be high and to be high,
variable costs flexibility of the variable costs variable costs
high facility low must be low
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Focused Processes
• Focus brings efficiency
• Focus on depth of product line rather than breadth
• Focus can be
– Customers
– Products
– Service
– Technology
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Changing Processes
• Difficult and expensive
• May mean starting over
• Process strategy determines transformation
strategy for an extended period
• Important to get it right
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Process Analysis and Design
• Is the process designed to achieve a competitive
advantage?
• Does the process eliminate steps that do not add
value?
• Does the process maximize customer value?
• Will the process win orders?
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Process Chart
Figure 7.7
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Service Blueprinting
• Focuses on the customer and provider interaction
• Defines three levels of interaction
• Each level has different management issues
• Identifies potential failure points
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Service Blueprint
Figure 7.8
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Special Considerations for Service
Process Design
• Some interaction with customer is necessary, but
this often affects performance adversely
• The better these interactions are accommodated
in the process design, the more efficient and
effective the process
• Find the right combination of cost and customer
interaction
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Improving Service Productivity (1 of 3)
Table 7.3 Techniques for Improving Service Productivity
Strategy Technique Example
Separation Structure service so Bank customers go to a
customers must go manager to open a new
where the service is account, to loan officers
offered for loans, and to tellers
for deposits
Self-service Self-service so Supermarkets and
customers examine, department stores
compare, and evaluate Internet ordering
at their own pace
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Improving Service Productivity (2 of 3)
Table 7.3 Continued
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 Investment and
service insurance selection
Modular production Prepackaged food
modules in restaurants
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Improving Service Productivity (3 of 3)
Table 7.3 Continued
Strategy Technique Example
Automation Separating services that may Automatic teller machines
lend themselves to some type
of automation
Scheduling Precise personnel scheduling Scheduling ticket counter
personnel at 15-minute
intervals at airlines
Training Clarifying the service options Investment counsellor,
Explaining how to avoid funeral directors
problems After-sale maintenance
personnel
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Production Technology
• Machine technology
• Automatic identification systems (AISs) and RFID
• Process control
• Vision system
• Robots
• Automated storage and retrieval systems (ASRSs)
• Automated guided vehicles (AGVs)
• Flexible manufacturing systems (FMSs)
• Computer-integrated manufacturing (CIM)
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Machine Technology
• Increased precision
• Increased productivity
• Increased flexibility
• Improved environmental impact
• Reduced changeover time
• Decreased size
• Reduced power requirements
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Automatic Identification Systems (AISs)
• Improved data acquisition
• Reduced data entry errors
• Increased speed
• Increased scope of process automation
Example – Bar codes and RFID
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Process Control
• Real-time monitoring and control of processes
– Sensors collect data
– Devices read data on periodic basis
– Measurements translated into digital signals then sent
to a computer
– Computer programs analyze the data
– Resulting output may take numerous forms
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Vision Systems
• Particular aid to inspection
• Consistently accurate
• Never bored
• Modest cost
• Superior to individuals performing the same tasks
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Robots
• Perform monotonous or dangerous tasks
• Perform tasks requiring significant strength or
endurance
• Generally enhanced consistency and accuracy
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Automated Storage and Retrieval
Systems (ASRSs)
• Automated placement and withdrawal of parts and
products
• Reduced errors and labour
• Particularly useful in inventory and test areas of
manufacturing firms
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Automated Guided Vehicle (AGVs)
• Electronically guided and controlled carts
• Used for movement of products and/or individuals
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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
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Computer-Integrated Manufacturing
(CIM) (1 of 2)
• 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
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Computer-Integrated Manufacturing
(CIM) (2 of 2)
Figure 7.10
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Technology in Services (1 of 2)
Table 7.4 Examples of Technology’s Impact on Services
Service Industry Example
Financial services Debit cards, electronic funds transfer, automated
teller machines, internet stock trading, online banking
via cell phone.
Education Online newspapers, online journals, interactive
assignments via Web CT, Blackboard, and
smartphones.
Utilities and government Automated one-man garbage trucks, optical mail
scanners, flood-warning systems, meters allowing
homeowners to control energy usage and costs.
Restaurants and foods Wireless orders from waiters to the kitchen, robot
butchering, transponders on cars that track sales at
drive-throughs.
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Technology in Services (2 of 2)
Table 7.4 Continued
Service Industry Example
Communications Interactive TV, ebooks via Kindle 2.
Hotels Electronic check-in/checkout, electronic key/lock
systems, mobile web bookings.
Wholesale/retail trade Point-of-sale (POS) terminals, ecommerce, electronic
communication between store and supplier, bar-
coded data, RFID.
Transportation Automatic toll booths, satellite-directed navigation
systems, Wi-Fi in automobiles.
Health care Online patient-monitoring systems, online medical
information systems, robotic surgery.
Airlines Ticketless travel, scheduling, internet purchases,
boarding passes downloaded as two-dimensional bar
codes on smartphones.
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