Operations Management Process Strategy Chapter 7

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Operations ManagementProcess Strategy Chapter 7
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Outline

• Four Process Strategies.
• Process Focus.
• Repetitive Focus.
• Product Focus.
• Mass Customization Focus.
• Service Process Design.
• Process Reengineering.

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Process Strategy

• How to produce a product or provide a service.
• Objective
• Meet or exceed customer requirements.
• Achieve competitive advantage.
• Has long-run effects
• Product volume flexibility.
• Costs quality .

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Four Process Strategies

• Four process strategies
• 1. Process focused.
• 2. Product focused.
• 3. Repetitive focused.
• 4. Mass customization.
• Summary Table 7-2.
• Several strategies may be used within one
  facility.
• Process strategies follow a continuum.

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Fit of Process, Volume, and Variety
High Volume
Low Volume
PROCESS FOCUS (job shops, printing)
High Variety Small production runs (allows
customization)
MASS CUSTOMIZATION (Dell Computer)
REPETITIVE FOCUS (autos, motorcycles)
Low Variety Long production runs
(standardization)
PRODUCT FOCUS (steel, chemicals)
POOR STRATEGY
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1. Process Focus Examples
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Process Focus

• Facilities organized by process.
• Similar processes or equipment grouped together.
  (Example All drill presses are together.)
• Low volume, high variety products.
• 75 of all global products.
• Products follow many different paths.
• Other names
• Intermittent process.
• Job shop.

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Process Focus - Pros Cons

• Advantages
• Greater product flexibility.
• More general purpose equipment.
• Lower initial capital investment.
• Disadvantages
• High variable cost per unit.
• More highly trained personnel.
• More difficult production planning control.
• Low equipment utilization (5 to 25).

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2. Product Focus Examples
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Product Focus

• Facilities organized by product.
• High volume, low variety products.
• Long, continuous production runs.
• Discrete unit manufacturing.
• Continuous process manufacturing.

• Other names
• Line flow production.
• Continuous production.

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Product Focus Steel Plant
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Product Focus - 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.
• Higher capital investment.

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3. Repetitive Focus - Examples
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Repetitive Focus

• 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.

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Repetitive Focus - Harley Davidson
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Repetitive Focus - Considerations

• More structured than process focus, less
  structured than product focus.
• Enables quasi-customization.
• Has advantages and disadvantages of process focus
  and product focus.

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Process Continuum
Product Focused (continuous process)
Process Focused (intermittent process)
Repetitive Focus (assembly line)
Continuum
Low variety, high volume High utilization (70 -
90) Specialized equipment
High variety, low volume Low utilization (5 -
25) General-purpose equipment
Modular Flexible equipment
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Increasing Product Variety
Early
Early
Item
1970s
2000s
Vehicle models
140
260
Vehicle styles
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1,212
Software titles
0
300,000
Web sites
0
gt30,000,000
Movie releases
267
458
New book titles
40,530
77,446
gt300
TV channels
5
Breakfast cereals
160
340
150,000
Items in
supermarkets
14,000
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4. Mass Customization

• Rapid, low-cost production to fulfill unique
  customer desires.
• Distinctions between process, repetitive and
  product focus blur, making variety and volume
  issues less significant.
• Very hard to achieve!

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Mass Customization at Dell Computer Company

• Sells custom-built PCs directly to consumer.
• Builds computers rapidly, at low cost, and only
  when ordered.
• Operates with six days inventory.
• Integrates the Web into every aspect of business.
• Research focus on software to make installation
  and configuration of PCs fast and simple.

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Process Analysis and Design

• Process should
• Be designed to achieve competitive advantage
• Differentiation.
• Response.
• Low cost.
• Eliminate steps that do not add value.
• Maximize value, as perceived by the customer.

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Tools for Process Design

• Flow Diagrams - Figures 7.2, 7.3, 7.4
• Process Charts - Figure 7.8
• Time-Function/Process Mapping - Figure 7.7
• Service Blueprint - Figure 7.9

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Process Design for Services

• Consider customization and labor intensity.
• Degree of customization.
• High Focus on specialization (equipment,
  training, etc.).
• Low Focus on standardization and automation.
• Degree of labor intensity.
• High Focus on personalization human resources
  (selection, training, etc.)
• Low Use technology and automation.

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Process Design for Services
Degree of Customization
Low
High
Mass Service
Professional Service
Commercial Banking
Personal banking
General purpose law firms
Boutiques
Retailing
Degree of Labor Intensity
Low High
Service Factory
Service Shop
Law clinics
Fine dining restaurants
Warehouse and catalog stores
Fast food restaurants
Vending machines
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Improving Service Productivity - Table 7.3

• Separation Different services in different
  places.
• Self-service Customers serve themselves.
• Postponement Customize at delivery.
• Focus Restrict offerings.
• Automation Automate where appropriate.
• Scheduling Precise personnel scheduling.

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Technology - Automation

• Production.
• CNC (Computer Numerical Control), Robots and FMS
  (Flexible Manufacturing Systems).
• Automatic Identification.
• Bar coding and RFID (Radio Frequency
  IDentification).
• Warehousing.
• ASRS (Automated Storage and Retrieval) and AGVs
  (Automated Guided Vehicles).
• Integration CIM (computer integrated
  manufacturing)

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Process Reengineering

• Fundamental rethinking and radical redesign of
  business processes.
• To produce dramatic improvements in performance.
• Re-examine the basic process and its objectives
• Re-evaluate the purpose of the process.
• Question underlying assumptions.
• Focus on activities that cross boundaries.