Process Stratergy

7/28/2019 Process Stratergy

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2006 Prentice Hall, Inc. 7 1

Process Strategy

Chapter7


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What is a process strategy?

A process strategy is an organizations

approach to transforms resources into

goods and services.

The objective of a process strategy is to

find a way to produce goods and services

that meet customers requirements and

product specifications within cost andother managerial constraints.


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Process Strategies

How to produce a product or providea service that

Meets or exceeds customerrequirements

Meets cost and managerial goals

Has long term effects on Efficiency and production flexibility

Costs and quality


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Dell Computer Company

How can we make the process ofbuying a computer better?

Sell custom-built PCs directly to consumer

Build computers rapidly, at low cost, andonly when ordered

Integrate the Web into every aspect of its

business Focus research on software designed to

make installation and configuration of itsPCs fast and simple


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Process Strategies

Virtually every good or service is made byusing some variation of one of four processstrategies:

1. process focus2. repetitive focus

3. product focus

4. mass customization

Within these basic strategies there are manyways they may be implemented


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Process, Volume, and Variety

Process Focusprojects, job shops

(machine, print,

carpentry)Standard Register

Repetitive(autos, motorcycles)

Harley Davidson

Product Focus(commercialbaked goods,steel, glass)Nucor Steel

High Varietyone or fewunits per run,high variety(allowscustomization)

Changes inModulesmodest runs,standardized

modulesChanges inAttributes(such as grade,quality, size,thickness, etc.)

long runs only

Mass Customization(difficult to achieve,but huge rewards)

Dell Computer Co.

Poor Strategy(Both fixed andvariable costs

are high)

LowVolume

RepetitiveProcess

HighVolume

VolumeFigure 7.1


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Process Focus

Facilities are organized around specificactivities 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 achallenge



Accounting

PRINTING DEPT

COLLATINGDEPT GLUING, BINDING,STAPLING, LABELING

POLYWRAP DEPT

SHIPPING

Vendors

Receiving

Warehouse

Purchasing

PREPRESS DEPT

Process Flow DiagramCustomer

Customer salesrepresentative

Information flowMaterial flow

Figure 7.2



Process Focus

Manyinputs

Highvariety

ofoutputs

Print Shop


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Repetitive Focus

Rawmaterials

andmodule

inputs

Modulescombinedfor manyoutput

options

Fewmodules

Automobile Assembly Line



13

Process Flow Diagram

THE ASSEMBLY LINETESTING28 tests

Oil tank work cell

Shocks and forks

Handlebars

Fender work cell

Air cleaners

Fluids and mufflers

Fuel tank work cell

Wheel work cell

Roller testing

Incoming parts

From Milwaukeeon a J IT arrival

schedule

Engines andtransmissions

Frame tubebending

Frame-buildingwork cells

Framemachining

Hot-paintframe painting

Crating

Figure 7.3



14



(machine, print,



Harley Davidson


High Varietyone or fewunits per run,high variety

(allowscustomization)


modulesChanges inAttributes(such as grade,quality, size,thickness, etc.)long runs only


Dell Computer Co.


are high)

LowVolume

RepetitiveProcess

HighVolume

VolumeFigure 7.1



15

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 lowvariable cost

Generally less skilled labor



16

Product Focus

Manyinputs

Outputvariationin size,shape,

and

packaging

Bottling Plant



17

Product Focus

Nucor Steel Plant

Continuouscaster

Continuous cast steelsheared into 24-ton slabs

Hot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coiling

D

E F

GHI

Scrapsteel

Ladle of molten steel

Electric

furnace

A

BC


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(machine, print,



Harley Davidson


High Varietyone or fewunits per run,high variety

(allowscustomization)


modulesChanges inAttributes(such as grade,quality, size,thickness, etc.)long runs only


Dell Computer Co.


are high)

LowVolume

RepetitiveProcess

HighVolume

VolumeFigure 7.1


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Mass Customization

The rapid, low-cost production ofgoods and service to satisfy

increasingly unique customerdesires

Combines the flexibility of aprocess focus with the efficiencyof a product focus


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Mass Customization

Modular techniques

Mass Customization

Effectiveschedulingtechniques

Rapidthroughputtechniques

Repetitive FocusModular design

Flexible equipment

Process-FocusedHigh variety, low volume

Low utilization (5% to 25%)General-purpose equipment

Product-FocusedLow variety, high volume

High utilization (70% to 90%)Specialized equipment

Figure 7.5


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Comparison of Processes

Process Focus

(Job shop)

(Low volume,

high variety)

Repetitive

Focus(Harley-

Davidson

(Modular)

Product Focus

(Paper-beer)

(High-volume,

low-variety)

Mass

Customization

(Dell Computer)

(High-volume,

high-variety)

Small quantity,

large variety of

products

Long runs,

standardized

product made

from modules

Large quantity,

small variety of

products

Large quantity,

large variety of

products

General

purpose

equipment

Special

equipment aids

in use of

assembly line

Special

purpose

equipment

Rapid

changeover on

flexible

equipment

Table 7.2


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Process Focus

(Job shop)

(Low volume,

high variety)

Repetitive

Focus (Harley-

Davidson

(Modular)

Product Focus

(Paper-beer)

(High-volume,

low-variety)

Mass

Customization

(Dell Computer)

(High-volume,

high-variety)

Units move

slowly through

the plant

Movement is

measured in

hours and days

Swift

movement of

unit through the

facility is typical

Goods move

swiftly through

the facility

Finished goods

made to order

Finished goods

made to

frequent

forecast

Finished goods

made to

forecast and

stored

Finished goods

often made to

order

Table 7.2


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Process Focus

(Job shop)

(Low volume,

high variety)

Repetitive

Focus(Harley-

Davidson

(Modular)

Product Focus

(Paper-beer)

(High-volume,

low-variety)

Mass

Customization

(Dell Computer)

(High-volume,

high-variety)

Scheduling is

complex,

trade-offs

between

inventory,availability,

customer

service

Scheduling

based on

building

various models

from modulesto forecasts

Relatively

simple

scheduling,

establishing

output rate tomeet forecasts

Sophisticated

scheduling

required to

accommodate

custom orders

Table 7.2


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Process Focus

(Job shop)

(Low volume,

high variety)

Repetitive

Focus(Harley-

Davidson

(Modular)

Product Focus

(Paper-beer)

(High-volume,

low-variety)

Mass

Customization

(Dell Computer)

(High-volume,

high-variety)

Fixed costs

low, variable

costs high

Fixed costs

dependent on

flexibility of the

facility

Fixed costs

high, variable

costs low

Fixed costs

high, variable

costs must be

low

Costing

estimated

before job, not

known until

after job is

complete

Costs usually

known due to

extensive

experience

High fixed costs

mean costs

dependent on

utilization of

capacity

High fixed costs

and dynamic

variable costs

make costing a

challenge

Table 7.2


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Crossover Charts

Fixed costs

Variablecosts

$

High volume, low varietyProcess C

Fixed costs

Variablecosts$

RepetitiveProcess B

Fixed costs

Variablecosts$

Low volume, high varietyProcess A

Fixed costProcess A

Fixed costProcess B

Fixed costProcess C

V1(2,857) V2(6,666)

400,000300,000

200,000

Volume

$

Figure 7.6


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Process Analysis and Design

Flow Diagrams - Shows the movementof materials

Time-Function Mapping - Shows flows

and time frame Value Stream Mapping - Shows flows

and time and value added beyond theimmediate organization

Process Charts - Uses symbols to showkey activities

Service Blueprinting - focuses on

customer/provider interaction


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Time-Function Mapping (Before processimprovement at American National Can Company)

Customer

Sales

Productioncontrol

Plant A

Warehouse

Plant B

Transport Move

Receiveproduct

Extrude

Wait

Move

Wait

Print

Wait

Orderproduct

Processorder

Wait

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

52 daysFigure 7.7


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Time-Function Mapping (After processimprovement at American National Can Company)

Customer

Sales

Production

control

Plant

Warehouse

Transport Move

Receiveproduct

Extrude

Wait

Print

Orderproduct

Processorder

Wait

1 day 2 days 1 day 1 day 1 day

6 days

Figure 7.7


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Process Chart

Figure 7.8


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Service Blueprint

Focuses on the customer andprovider interaction

Defines three levels of interaction

Each level has differentmanagement issues

Identifies potential failure points


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Service Blueprint

Personal Greeting Service Diagnosis Perform Service Friendly Close

Customer arrivesfor service

Warm greeting

and obtainservice request

Direct customerto waiting room Notify

customer thecar is ready

Customer departs

Customer pays bill

Performrequired work

Prepare invoice

YesYes

Level#3

Level#1

Level#2

Potential failure point

Figure 7.9

No

Notifycustomer

and recommendan alternative

providerStandardrequest

Determinespecifics

No

Canservice be

done and doescustomerapprove?


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Service Factory Service Shop

Degree of Customization

Low High

De

greeofLabor

Low

High

Mass Service Professional Service

Service Process Matrix

Commercialbanking

Privatebanking

General-purpose law firms

Law clinics

Specializedhospitals

Hospitals

Full-servicestockbroker

Limited-service

stockbroker

Retailing

Boutiques

Warehouse andcatalog stores

Fast foodrestaurants

Fine-diningrestaurants

Airlines

No frillsairlines

Figure 7.10


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Improving Service Productivity

Strategy Technique Example

Separation Structure service so

customers must gowhere service is offered

Bank customers go to a

manager to open a newaccount, to loan officers

for loans, and to tellers

for deposits

Self-service Self-service so

customers examine,compare, and evaluate

at their own pace

Supermarkets and

department stores,internet ordering

Table 7.3


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Postponement Customizing at delivery Customizing vans at

delivery rather than atproduction

Focus Restricting the offerings Limited-menu

restaurant

Modules Modular selection ofservice, modular

production

Investment andinsurance selection,

prepackaged food

modules in restaurants


Table 7.3


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Automation Precise personnel

scheduling

Automatic teller

machines

Scheduling Precise personnelscheduling

Scheduling ticket

counter personnel at

15-minute intervals at

airlines

Training Clarifying the serviceoptions, explaining howto avoid problems

Investment counselor,

funeral directors, after-

sale maintenance

personnel


Table 7.3


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Equipment and Technology

Often complex decisions

Possible competitive advantage

Flexibility

Stable processes

May allow enlarging the scope of theprocesses


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Improving Service Processes

Layout

Product exposure, customereducation, 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):These systems help us move

data into electronic form, whereby it is easily manipulated.

Improved data acquisition

Reduced data entry errors

Increased speed

Increased scope of process

automation Example: Radio frequency

identification for tracking

everything!


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Process Control: Use of Information Technology tomonitor and control a physical process.

Increased process stability

Increased process precision

Real-time provision of informationfor process evaluation

Data available in many forms

Example: Sensors, ComputerPrograms read file and analyze thedata.


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Process Control Software: controlsthe flow of sugars and fruits into a juice mixer.


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Robots

Perform monotonous or dangeroustasks

Perform tasks requiring significantstrength or endurance

Generally enhanced consistency

and accuracy


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Robotic

Surgery


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Automated Storage andRetrieval Systems (ASRS)

Provide for the automated placement andwithdrawal of parts and products

Reduced errors and labor

Particularly useful in inventory and testareas of manufacturing firms

Such systems are commonly used indistribution facilities of retailers such asWal-Mart.


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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 ManufacturingSystems (FMS)

Computer controls both the workstationand 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 inventorycontrol

Forward into warehousing and shipping

Can also include financial and customerservice areas

Reducing the distinction between low-volume/high-variety, and high-volume/low-variety production


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Computer Integrated

Manufacturing (CIM)Top management decides to make a product

OM runs theproductionprocess

Computer-

aided design(CAD) designsthe product

Computer-aidedmanufacturing(CAM)

Robots putthe producttogether

Automated storage andretrieval system (ASRS)and automated guided

vehicles (AGVs)

ManagementInformation

System

FMS

CIM

Figure 7.11


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Technology in Services

Service Industry Example

Financial Services Debit cards, electronic funds transfer, ATMs,

Internet stock trading

Education Electronic bulletin boards, on-line journals

Utilities andgovernment

Automated one-man garbage trucks, opticalmail and bomb scanners, flood warningsystems

Restaurants and

foods

Wireless orders from waiters to kitchen, robot

butchering, transponders on cars that tracksales at drive-throughs

Communications Electronic publishing, interactive TV

Table 7.4


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Technology in Services

Service Industry Example

Hotels Electronic check-in/check-out, electronic

key/lock system

Wholesale/retail

trade

Point-of-sale terminals, e-commerce, electronic

communication between store and supplier, barcoded data

Transportation Automatic toll booths, satellite-directednavigation systems

Health care Online patient-monitoring, online medicalinformation systems, robotic surgery

Airlines Ticketless travel, scheduling, Internet

purchases

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