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Operations Management. Process Strategy. Alan D. Smith. © 2006 Prentice Hall, Inc. Outline. Global Company Profile: Dell Computer Co. Four Process Strategies Process Focus Repetitive Focus Product Focus Mass Customization Focus Comparison of Process Choices. Outline – Continued.

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Operations Management

Process Strategy

Alan D. Smith

© 2006 Prentice Hall, Inc.


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Outline

  • Global Company Profile: Dell Computer Co.

  • Four Process Strategies

    • Process Focus

    • Repetitive Focus

    • Product Focus

    • Mass Customization Focus

    • Comparison of Process Choices


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Outline – Continued

  • Process Analysis And Design

    • Flow Diagrams

    • Time-Function Mapping

    • Value Stream Mapping

    • Process Charts

    • Service Blueprinting


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Outline – Continued

  • Service Process Design

    • Customer Interaction and Process Design

    • More Opportunities to Improve Service Processes

  • Selection Of Equipment And Technology


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Outline – Continued

  • Production Technology

    • Machine Technology

    • Process Control

    • Vision Systems

    • Automated Storage and Retrieval System

    • Automated Guided Vehicle (AGV)

    • Flexible Manufacturing System (FMS)

    • Computer-Integrated Manufacturing (CIM)


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Outline – Continued

  • Technology In Services

  • Process Redesign

  • Ethics And Environmentally Friendly Processes


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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


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Learning Objectives

When you complete this chapter, you should be able to:

Describe or Explain:

  • Process Analysis

  • Service Design

  • Production Technology

  • Process Redesign

  • Ethics and Environmentally Friendly Processes


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Dell Computer Company

“How can we make the process of buying a computer better?”

  • Sell custom-built PCs directly to consumer

  • Build computers rapidly, at low cost, and only when ordered

  • 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


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Volume

Low Volume

Repetitive Process

High Volume

Process, Volume, and Variety

Figure 7.1

High Variety

one or few units per run, high variety

(allows customization)

Process Focus

projects, job shops (machine, print, carpentry)

Standard Register

Mass Customization

(difficult to achieve, but huge rewards)

Dell Computer Co.

Changes in Modules

modest runs, standardized modules

Repetitive

(autos, motorcycles)

Harley Davidson

Changes in Attributes (such as grade, quality, size, thickness, etc.)

long runs only

Product Focus

(commercial baked goods, steel, glass)

Nucor Steel

Poor Strategy (Both fixed and variable costs are high)


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Customer

Customer sales representative

Purchasing

Vendors

PREPRESS DEPT

Receiving

Accounting

PRINTING DEPT

Warehouse

COLLATING DEPT

GLUING, BINDING, STAPLING, LABELING

Information flow

Material flow

POLYWRAP DEPT

SHIPPING

Process Flow Diagram

Figure 7.2


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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


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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


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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


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High variety of outputs

Many inputs

Process Focus

Print Shop


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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


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Modules combined for many output options

Raw materials and module inputs

Few modules

Repetitive Focus

Automobile Assembly Line


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Frame tube bending

Frame-building work cells

Frame machining

Hot-paint

frame painting

THE ASSEMBLY LINE

Engines and transmissions

TESTING

28 tests

Incoming parts

From Milwaukee on a JIT arrival schedule

Air cleaners

Oil tank work cell

Fluids and mufflers

Shocks and forks

Fuel tank work cell

Handlebars

Wheel work cell

Fender work cell

Roller testing

Crating

Process Flow Diagram

Figure 7.3


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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


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Output variation in size, shape, and packaging

Many inputs

Product Focus

Bottling Plant


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D

Scrap steel

A

B

C

Electric furnace

Continuous caster

Ladle of molten steel

Continuous cast steel sheared into 24-ton slabs

Hot tunnel furnace - 300 ft

E

F

Hot mill for finishing, cooling, and coiling

G

H

I

Product Focus

Nucor Steel Plant








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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


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Number of Choices

Early 21st Item Early 1970s Century

Vehicle models 140 260

Vehicle types 18 1,212

Bicycle types 8 19

Software titles 0 300,000

Web sites 0 46,412,165

Movie releases 267 458

New book titles 40,530 77,446

Houston TV channels 5 185

Breakfast cereals 160 340

Items (SKUs) in 14,000 150,000

supermarkets

Mass Customization

Table 7.1


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Repetitive Focus

Modular design

Flexible equipment

Mass Customization

Process-Focused

High variety, low volume

Low utilization (5% to 25%)

General-purpose equipment

Product-Focused

Low variety, high volume

High utilization (70% to 90%)

Specialized equipment

Mass Customization

Figure 7.5

Modular techniques

Effective scheduling techniques

Rapid throughput techniques


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Variable costs

Variable costs

Variable costs

$

$

$

Fixed costs

Fixed costs

Fixed costs

Repetitive

Process B

High volume, low variety

Process C

Low volume, high variety

Process A

$

Total cost

Total cost

Total cost

400,000

300,000

200,000

Fixed cost Process C

Fixed cost Process B

Fixed cost Process A

V1

V2

(6,666)

(2,857)

Volume

Crossover Charts

Figure 7.6


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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

  • 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


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Customer

Sales

Production control

Plant A

Extrude

Order product

Process order

Wait

Wait

Wait

Wait

Print

Warehouse

Move

Move

Receive product

Plant B

Transport

12 days

13 days

1 day

4 days

1 day

10 days

1 day

0 day

1 day

52 days

Time-Function Mapping

Figure 7.7


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Order product

Receive product

Customer

Process order

Sales

Production control

Wait

Print

Plant

Wait

Warehouse

Extrude

Transport

Move

1 day

2 days

1 day

1 day

1 day

6 days

Time-Function Mapping

Figure 7.7


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Process Chart

Figure 7.8


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Service Blueprint

  • 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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Personal Greeting

Service Diagnosis

Perform Service

Friendly Close

Level

#1

Customer arrives for service

Customer departs

Customer pays bill

Notifycustomerand recommendan alternativeprovider

Determine specifics

Warm greeting and obtain service request

No

Standard request

Canservice bedone and does customer approve?

Level

#2

No

Direct customer to waiting room

Notify customer the car is ready

Perform required work

Yes

Yes

Prepare invoice

Potential failure point

Service Blueprint

Level

#3

Figure 7.9


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Process Analysis Tools

  • Flowcharts provide a view of the big picture

  • Time-function mapping adds rigor and a time element

  • Value stream analysis extends to customers and suppliers

  • Process charts show detail

  • Service blueprint focuses on customer interaction


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Degree of Customization

High

Low

Mass Service

Professional Service

Private banking

Commercial banking

High

General-

purpose law firms

Full-service stockbroker

Boutiques

Retailing

Degree of Labor

Service Factory

Service Shop

Law clinics

Specialized hospitals

Limited-service stockbroker

Warehouse and catalog stores

Fine-dining restaurants

Fast food restaurants

Low

Hospitals

Airlines

No frills airlines

Service Process Matrix

Figure 7.10


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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

Service Process Matrix





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Equipment and Technology

  • Often complex decisions

  • Possible competitive advantage

    • Flexibility

    • Stable processes

  • May allow enlarging the scope of the processes


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Improving Service Processes

  • Layout

    • Product exposure, customer education, product enhancement

  • Human Resources

    • Recruiting and training

    • Impact of flexibility


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Production Technology

  • Machine technology

  • Automatic identification systems (AIS)

  • Process control

  • Vision system

  • Robot

  • Automated storage and retrieval systems (ASRS)

  • Flexible manufacturing systems (FMS)

  • 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 (AIS)

  • Improved data acquisition

  • Reduced data entry errors

  • Increased speed

  • Increased scope of process automation


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Process Control

  • Increased process stability

  • Increased process precision

  • Real-time provision of information for process evaluation

  • Data available in many 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 (ASRS)

  • Automated placement and withdrawal of parts and products

  • Reduced errors and labor

  • Particularly useful in inventory and test areas of manufacturing firms


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Automated Guided Vehicle (AGV)

  • Electronically guided and controlled carts

  • Used for movement of products and/or individuals


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Flexible Manufacturing Systems (FMS)

  • 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)

  • 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 cim59 l.jpg

Top management decides to make a product

Computer-aided design (CAD) designs the product

OM runs the production process

CIM

Management Information System

FMS

Computer-aided manufacturing (CAM)

Automated storage and retrieval system (ASRS) and automated guided vehicles (AGVs)

Robots put the product together

Computer Integrated Manufacturing (CIM)

Figure 7.11




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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


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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


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