Unit 2.

Part 1. Process Design

A process strategy is an organization’s approach to transforming resources into goods and

services. The objective is to create a process that can produce products that meet customer
requirements within cost and other managerial constraints. The process selected will have a
long term effect on efficiency and flexibility of production as well as on cost and quality.
There are four main processes: process focus, repetitive focus, product focus and mass
customization.

Process focus
Has low volume and high variety, with facilities organized around specific activities or
processes. These facilities are process focused in terms of equipment, layout and
supervision. They have a high degree of product flexibility. Each process is designed to
perform a variety of activities and handle frequent change.
Mass Customization Focus
Has high variety and high volume.
Produces a vast array of goods and services with rapid and low cost production fulfilling
increasingly unique customer desires. It brings the variety of products traditionally provided
by low volume manufacture at the cost of standardized high volume. But it requires
sophisticated operational capabilities, with agile processes that rapidly and inexpensively
produce custom products requires a limited product line and modular design with a tight link
between sales, design, production, supply chain and logistics. It is Built To Order which
means they produce to customer orders and not forecasts, challenges are:
-​ Product design must be imaginative but limited.
-​ Process design must be flexible and able to accommodate changes in both design
and technology. Postponement allows for customization late in the production
process
-​ Inventory management requires tight control to avoid being stuck with unpopular or
obsolete components.
-​ Tight schedules that track orders and materials
-​ Responsive partners in the supply chain.
Its advantages are that as it products to order, they trim costs because of wrong forecasting

Repetitive focus
Has medium variety and medium volume (mix of process focus and mass customization)
They use modules, which are parts or components previously prepared often in a
product-focused process. The repetitive focus in the classic assembly line with more
structure and less flexibility than a process focused facility, allowing more customization and
obtaining both the economic advantages of the product focused model and the customer
advantage of the low volume high variety model.

Product focus
Has high volume and low variety.
The facilities are organized around products and have long, continuous production runs (also
called continuous processes). It has standardization and effective quality control. It also has
high fixed cost but low variable costs reward high facility utilization.

Aspect Process focus Repetitive focus Product focus Mass customiz

Volume and Small quantity Long runs and Large quantity Large quantity
variety and large standardized and small and large
variety product variety variety

Skills of Broadly skilled Moderately Less skilled Flexible

employees trained

Instructions Instructions for Few changes in Standardized Custom (many

required each job job instructions job instructions)

Inventory levels High Low Low Low (relative to

of raw materials value)
 Inventory levels Made to order Made to Made to Built to Order
of final product (not stored) frequent forecast and (BTO)
forecasts stored

Scheduling Complex Routine Routine Sophisticated

complexity

Fixed versus Fixed costs are Fixed costs are Fixed costs are Fixed costs
variable costs low and variable dependent on high and tend to be high
importance high flexibility of the variable costs and variable
facility low costs low

Process comparison
We can compare processes by looking at the point where the total cost of the processes
changes with the crossover chart, which shows costs at possible volumes for more than one
process but at a given time only one will have the lowest cost.

Focused processes contribute to efficiency as managers focus on a limited number of

activities. As the variety of products increases, the overhead costs also increase and also
complexity and with these the resources required increase too, so the focus on depth
instead of breadth is advised. The focus can be:
-​ Customers
-​ Products with similar attributes
-​ Service
-​ Technology
The key is to move toward specialization and excel at that speciality.
Selection of equipment
There are many alternatives and understanding of the specific industry and available
processes and technology is needed. Adding flexibility to the production process can be a
major competitive advantage, being flexibility the ability to respond with little penalty in time,
cost or customer value (but it can be difficult and expensive)

Service blueprinting: Process analysis technique that focuses on the customer and the
provider’s interaction with him.

Special considerations for service process design

Interaction with customers often affects process performance adversely but a service implies
some interaction or customization is needed so the more the manager designs the process
to accommodate these requirements, the more effective and efficient he will be. When labor
content is high, manager should focus on human resources with high labor involvement and
significant personnel selection and training. With low customization they tend to standardize
or restrict some offerings, automate (may require innovations) or remove some services.
As customer feedback is lower if there is low customization, tight control is required to
maintain quality standards. In low labor intensity, innovations in process technology and
scheduling may be easier.

Techniques to improve service productivity:

-​ Separation: Structuring service so customers must go where the service is offered
(Ex: Separate more and less demanded services)
-​ Self service: So customers can examine, compare and check at their pace
-​ Postponement: Customizing at delivery
-​ Focus: Restricting the offerings
-​ Modules: Modular selection of service or modular production
-​ Automation: Separating services that may lend themselves to automation
-​ Scheduling: Precise personnel scheduling
-​ Training: Clarifying service options and explaining how to avoid problems
Part 2. JIT
The difference between JIT, TPS and lean is:
-​ JIT emphasizes forced problem solving via focus on throughput and reduced
inventory
-​ TPS emphasizes employee learning, respect for people and standard work practices
-​ Lean operations emphasize understanding the customer wants and continuous
improvement
But in practice there is little difference as they all address the three issues of eliminate
waste, remove variability and improve throughput:
-​ Eliminate waste: Any activity that does not add value is waste (overproduction,
queues, transportation, inventory, useless motion, overprocessing and defective
product)
-​ Remove variability: It is any deviation from the optimum process, source of it can be
poor production processes, unknown customer demands and inaccuracy in
documents.
-​ Improve throughput: It is the rate at which units move through a production process.
The manufacturing cycle time is the time that an order is in a shop, so the time
between the arrival of raw materials and the shipping of the finished product. One
technique is a pull system where they use signals to pull products to stations where
production capacity is available (opposite to push, where they move the product
regardless)

JIT is focused on throughput and reduced inventory where materials only arrive where they
are needed only when they are needed. Some techniques are having few suppliers, work
cells, small lot cells, no deviation from schedules, preventive maintenance, process and
quality control, trained employees and commitment. All of these result in rapid throughput,
quality improvement, less waste, cost reduction and variability and rework reduction which
results in faster response at lower cost and higher quality so a competitive advantage.

JIT partnerships are when a supplier and a purchaser work together to remove waste.
Specific goals are:
-​ Removal of unnecessary activities
-​ Removal of in-plant inventory
-​ Removal of in-transit inventory
-​ Obtain improved quality and reliability

Concerns of suppliers are:

-​ Diversification: They reduce their risk by having a variety of customers.
-​ Scheduling: Little faith in purchaser ordering smoothly and coordinated
-​ Lead time
-​ Quality
-​ Lot sizes

JIT layouts look to reduce the waste of movement by:

-​ Distance reduction: Several machines in a U shape.
-​ Increased flexibility: Work cells easily rearranged to adapt to changes in volume or
new designs.
 -​ Impact on employees: Employees working together can tell each other about
problems and opportunities for improvement. Poka yoke functions detect defects and
stop automatically when they occur.
-​ Reduced space and inventory: Reduce inventory by removing space for inventory

JIT inventory
Inventories in production often exist just in case something goes wrong or some variation
from the production plan occurs. In JIT it is the minimum necessary to keep a perfect system
running. One of the steps towards JIT is removing inventory and reducing lot sizes to reduce
waste. Reducing the size of batches can help reduce inventory and inventory costs. Ideally
order size would be one but it is not realistic as process, transportation time and containers
for transport need to be considered when analyzing it, but frequent orders do reduce
average inventory (ilustrado en graph pag 71, basicamente reordering more often 100 keeps
the peaks lower than if you reordered 200) and lower setup costs lower the total cost as
more frequent orders lead to more frequent setups. The changes in this aspect should be
material handling and work flow improvement and then a reduction in setup times. usually
managers order large batches to avoid frequent setup costs as each unit order absorbs a
small part of the setup cost so the only way to reduce lot sizes and reduce average inventory
is to reduce setup cost.

Effective scheduling is required for an effective use of capital and personnel in JIT.

Level schedules
Means to process frequent small batches rather than a few large batches, but as lots get
smaller, the constraints may change and become increasingly challenging.

Kanban
Is one way to achieve small lot sizes and moves inventory through the shop only as needed
rather than pushing it. They often use a card to signal the need for another container of the
material (there isn’t always a card). To determine the number of kanban cards or containers
we should know the lead time needed to produce a container and then the amount of safety
stock needed. Its advantages are that containers are often very small and have just a few
hours’s worth of production, so it requires tight schedules with small quantities being
produced various times a day, needing a smooth process with little variability and lead time
as any shortage has immediate impact.

JIT quality
JIT and quality are related in 3 ways:
-​ JIT cuts the cost of obtaining good quality as fewer bad units are produced.
-​ JIT improves quality due to the early warning system for quality problems.
-​ Better quality means fewer buffers are needed so a better, easier to employ JIT
system can exist.