Operations

Management
Process Strategy
Chapter 7

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Principles of Operations Management, 5e, and Operations 7-1
Management, 7e
 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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Principles of Operations Management, 5e, and Operations 7-2
Management, 7e
 Outline - Continued
 PROCESS ANALYSIS AND DESIGN
 Flow Diagrams
 Time-Function Mapping
 Process Charts
 Service Blueprinting
 SERVICE PROCESS DESIGN
 Customer Interaction and Process Design
 More Opportunities to Improve Service Processes
 SELECTION OF EQUIPMENT AND TECHNOLOGY
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Management, 7e
 Outline - Continued
 PRODUCTION TECHNOLOGY
 Machine Technology
 Process Control
 Vision Systems
 Automated Storage and Retrieval System
 Automated Guided Vehicle (AGV)
 Flexible Manufacturing Systems (FMS)
 Computer-Integrated Manufacturing (CIM)

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Management, 7e
 Outline - Continued

 TECHNOLOGY IN SERVICES
 ENVIRONMENTALLY FRIENDLY PROCESSES
 PROCESS REENGINEERING

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Principles of Operations Management, 5e, and Operations 7-5
Management, 7e
 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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Principles of Operations Management, 5e, and Operations 7-6
Management, 7e
 Learning Objectives - Continued
When you complete this chapter, you should be
able to:
Describe or Explain:
 Process analysis
 Service design
 Green manufacturing
 Production technology

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Principles of Operations Management, 5e, and Operations 7-7
Management, 7e
 Dell Computer Company
“How can we make the process of buying a
computer better?”
 Sell custom-build PCs directly to consumer
 Integrate the Web into every aspect of its business
 Operate with six days inventory
 Build computers rapidly, at low cost, and only when
ordered
 Focus research on software designed to make
installation and configuration of its PCs fast and simple

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Principles of Operations Management, 5e, and Operations 7-8
Management, 7e
 Fit of Process, Volume, and Variety
Low-Volume Repetitive Process High-Volume
(Intermittent) (Modular) (Continuous)

Process focus Mass

High Variety projects, job Customization
One or few units per
shops,(machine, print, (difficult to achieve,
run, high variety
carpentry) but huge rewards)
(allows customization)
Standard Register Dell Computer Co.
Changes in modules
Modest runs, standardized Repetitive
modules (autos, motorcycles)
Harley Davidson
Changes in attributes Poor strategy Product focus
(such as grade, quality, (commercial baked
size, thickness, etc.)
goods, steel, glass)
Long runs only
Nucor Steel

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Principles of Operations Management, 5e, and Operations 7-9
Management, 7e
Production Process Flow Diagram
Customer
Purchasing Customer sales
(order inks, paper, representative
other supplies) (take order)

Vendors Prepress Department

(Prepare printing plates
Accounting Receiving & negatives)

Warehousing Printing Department

(ink, paper, etc.)

Collating Gluing, binding,

Department stapling, labeling

Information flow Polywrap

Department
Material flow
Shipping
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Principles of Operations Management, 5e, and Operations 7-10
Management, 7e
 Process Strategies

 Involve determining how to produce a product or

provide a service
 Objective
 Meet or exceed customer requirements
 Meet cost & managerial goals
 Has long-run effects
 Product & volume flexibility
 Costs & quality

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Principles of Operations Management, 5e, and Operations 7-11
Management, 7e
 Types of Process Strategies
 Process strategies that follow a continuum
 Within a given facility, several strategies may be used
 These strategies are often classified as:

Process-Focused Repetitive- Product-Focused

Focused

Continuum
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Principles of Operations Management, 5e, and Operations 7-12
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 Process-Focused Strategy

 Facilities are organized by process

 Similar processes are together
 Example: All drill presses are together
 Low volume, high variety products
 ‘Jumbled’ flow Product A
Operation
 Other names
1 2 3
 Intermittent process
 Job shop
Product B
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Principles of Operations Management, 5e, and Operations 7-13
Management, 7e
 Process Focus

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Principles of Operations Management, 5e, and Operations 7-14
Management, 7e
Process-Focused Strategy Examples

Bank
© 1995

Hospital Corel
Corp.

Machine
© 1995 Corel Corp. Shop
© 1995 Corel Corp.

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Principles of Operations Management, 5e, and Operations 7-15
Management, 7e
 Process Focused Strategy -
Pros & Cons
 Advantages
 Greater product flexibility
 More general purpose equipment
 Lower initial capital investment
 Disadvantages
 High variable costs
 More highly trained personnel
 More difficult production planning & control
 Low equipment utilization (5% to 25%)

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Principles of Operations Management, 5e, and Operations 7-16
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 Repetitive Focused Strategy

 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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Principles of Operations Management, 5e, and Operations 7-17
Management, 7e
 Repetitive Focus

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Principles of Operations Management, 5e, and Operations 7-18
Management, 7e
 Repetitive Focused Strategy -
Considerations

 More structured than process-focused, less

structured than product focused
 Enables quasi-customization
 Using modules, it enjoys economic advantage of
continuous process, and custom advantage of
low-volume, high-variety model

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Principles of Operations Management, 5e, and Operations 7-19
Management, 7e
 Repetitive-Focused Strategy -
Examples
Fast
Clothes
Food
Dryer
McDonald’s
over 95 billion served

Truck
© 1995 Corel Corp.

© 1984-1994 T/Maker Co.

© 1995 Corel Corp.

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Principles of Operations Management, 5e, and Operations 7-20
Management, 7e
Flow Diagram Showing the Production
Process for Harley Davidson, York, PA.

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Principles of Operations Management, 5e, and Operations 7-21
Management, 7e
 Product-Focused Strategy
 Facilities are organized by product
 High volume, low variety products
 Where found
 Discrete unit manufacturing
 Continuous process manufacturing

 Other names Products A & B

 Line flow production 1 2 3
 Continuous production
Operation

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Principles of Operations Management, 5e, and Operations 7-22
Management, 7e
 Product Focus

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Principles of Operations Management, 5e, and Operations 7-23
Management, 7e
 Product-Focused Strategy
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
 Usually higher capital investment

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Principles of Operations Management, 5e, and Operations 7-24
Management, 7e
 Product-Focused Examples
Soft Drinks
(Continuous,
then Discrete)
Light Bulbs
(Discrete)
© 1995 Corel © 1995 Corel Corp.
Corp.

Mass
Flu Shots
© 1984-1994 T/Maker Co.
(Discrete)
Paper (Continuous) © 1995 Corel Corp.

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Principles of Operations Management, 5e, and Operations 7-25
Management, 7e
 Flow Diagram Showing the
Steelmaking Process at NUCOR

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Principles of Operations Management, 5e, and Operations 7-26
Management, 7e
 A Comparison (1)
Process Focus Repetitive Focus Product focus Mass
(Low volume, High (Modular) (High-volume, Customization
variety) low-variety) (High-volume,
high-variety
1. Small quantity, Long runs, Large quantity, Large quantity,
large variety of standardized small variety of large variety of
products product, from products products
modules
2. General purpose Special Special purpose Rapid
equipment equipment aids in equipment changeover on
use of assembly flexible equipment
line

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Management, 7e
 A Comparison (2)
Process Focus Repetitive Focus Product focus Mass
Customization
3 Broadly skilled Modestly trained Operators less Flexible operators
operators employees broadly skilled trained for
customization
4 Many instructions Reduced training Few work Custom orders
because of change and number of job orders and job require many
in jobs instructions instructions instructions
5 Raw material JIT techniques Raw material Raw material low
high relative to used low relative to relative to product
product value product value value

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Principles of Operations Management, 5e, and Operations 7-28
Management, 7e
 A Comparison (3)
Process Focus Repetitive Focus Product focus Mass
Customization
6 WIP high relative JIT techniques WIP low relative to WIP driven
to output used output down by JIT,
kanban, lean
production
7 Units move Movement Units move swiftly Goods move
slowly thru plant measured in hours thru facility swiftly thru
& days facility
8 Finished goods Finished goods Finished goods Finished goods
made to order, not made to frequent made to forecast, made to order
stored forecasts then stored

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Management, 7e
 A Comparison (4)
Process Focus Repetitive Focus Product focus Mass
Customization
9 Scheduling Scheduling based Scheduling Scheduling
complex and on building models relatively simple, sophisticated to
concerned with from a variety of concerns accommodate
trade-off between forecasts establishing customization
inventory, capacity, sufficient rate of
and customer output to meet
service forecasts
10 Fixed costs low, Fixed costs Fixed costs high, Fixed costs high;
variable costs high dependent on variable costs low variable costs
flexibility of must be low
facilities
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Principles of Operations Management, 5e, and Operations 7-30
Management, 7e
 A Comparison (5)
Process Focus Repetitive Focus Product focus Mass
Customization
11 Costing, done Costs usually Because of high High fixed costs
by job, is known based on fixed costs, cost and dynamic
estimated prior to experience dependent on variable costs
doing job but only utilization of
known after doing capacity
job

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Principles of Operations Management, 5e, and Operations 7-31
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 Process Continuum

Process Focused Repetitive Focus Product Focused

(intermittent process) (assembly line) (continuous process)

Continuum

High variety, low volume Modular Low variety, high volume

Low utilization (5% - 25%) Flexible equipment High utilization (70% - 90%)
General-purpose equipment Specialized equipment

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Principles of Operations Management, 5e, and Operations 7-32
Management, 7e
 Volume and Variety of Products
Volume and Low Volume High Repetitive High Volume
Variety of Variety Process Process Low Variety
Products (Intermittent) (Modular) Process
(Continuous)
One or very few Projects
units per lot Mass
Very small runs, high Job Shops Customization
variety
Modest runs, modest Disconnected
variety Repetitive
Long runs, modest Poor Strategy Connected
variations Repetitive
(High variable
Very long runs, Continuous
changes in costs)
attributes
Equipment utilization 5%-25% 20%-75% 70%-80%
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Principles of Operations Management, 5e, and Operations 7-33
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 Mass Customization

 Using technology and imagination to rapidly

mass-produce products that cater to sundry
unique customer desires.
 Under mass customization the three process
models become so flexible that distinctions
between them blur, making variety and volume
issues less significant.

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Principles of Operations Management, 5e, and Operations 7-34
Management, 7e
 Mass Customization - More
Choices Than even
Number of Choices
Item Early Early 21st
1970s Century
Vehicle models 140 260
Vehicle styles 18 1,212
Bicycle types 8 19
Software titles 0 300,000
Web sites 0 30,727,296
Movie releases 267 458
New book titles 40,530 77,446
Houston TV channels 5 185
Breakfast cereals 160 340
Item SKUs in supermarkets 14,000 150,000
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Principles of Operations Management, 5e, and Operations 7-35
Management, 7e
 Process Strategies
Repetitive Focus
Modular design
Flexible equipment
Modular techniques

Mass Customization

Effective scheduling Rapid throughput

techniques techniques
Process-focused Product-focused
High variety, low volume Low variety, high volume
Low utilization (5% - 20%) High utilization (70% - 80%)
General purpose equipment Specialized equipment
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Principles of Operations Management, 5e, and Operations 7-36
Management, 7e
 Questions for Process Analysis
and Design
 Is the process designed to achieve competitive
advantage in terms of differentiation, response, or
low cost?
 Does the process eliminate steps that do not add
value?
 Does the process maximize customer value as
perceived by the customer?
 Will the process win orders?

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Principles of Operations Management, 5e, and Operations 7-37
Management, 7e
 Crossover Charts
Fixed cost Variable cost

$ $ $

Process A Process B Process C

400,000
300,000 Fixed cost –
Fixed cost – Process C
200,000 Fixed cost – Process B
V1(2,857) V2 (6,666)
Process A
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 Tools for Process Design

 Flow Diagrams
 Process Charts
 Time-Function/Process Mapping
 Work Flow Analysis

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Principles of Operations Management, 5e, and Operations 7-39
Management, 7e
Production Process Flow Diagram
Customer
Purchasing Customer sales
(order inks, paper, representative
other supplies) take order

Vendors Prepress Department

(Prepare printing plates
Accounting Receiving and negatives)

Warehousing Printing Department

(ink, paper, etc.)

Collating Gluing, binding,

Department stapling, labeling

Information flow Polywrap

Department
Material flow
Shipping

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Principles of Operations Management, 5e, and Operations 7-40
Management, 7e
 Time Function Map
(Baseline)
Order Receive
Customer Product product

Process
Sales Order
Order

Production Wait
control
Order

Product
Plant A Print
WIP

Product
Warehouse Wait Wait Wait

WIP

Product
Plant B Extrude
WIP
WIP

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 9 days 1 day

52 days
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 Time Function Map
(Target)
Customer Order Receive
Product product
Process
Sales Order
Order

Production Wait
control
Order

Product
Print WIP Extrude
Plant

Warehouse Wait

Product
Transport Move

1 day 2 days 1 day 1 day 1 day

6 days

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 Process Chart Example
SUBJECT: Request tool purchase
Dist (ft) Time (min) Symbol Description
 D  Write order
 D On desk
75  D  To buyer
 D  Examine
 = Operation;  = Transport;  = Inspect;
D = Delay;  = Storage

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Principles of Operations Management, 5e, and Operations 7-43
Management, 7e
Process Chart – Hamburger Assembly
Dist. Time Chart Process Description
(Ft) (Mins) Symbols
-  Meat Patty in Storage
1.5 .05  Transfer to Broiler
2.50  Broiler
.05  Visual Inspection
1.0 .05  Transfer to Rack
.15  Temporary Storage
.5 .10
 Obtain Buns, Lettuce, etc.
.20  Assemble Order
.5 .05  Place in Finish Rack

3.5 2 4 1 - 2 TOTALS
3.15
Value-added time = Operation time/Total time = (2.50+.20)/3.15=85.7%
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Principles of Operations Management, 5e, and Operations 7-44
Management, 7e
 Service Blueprint for Service at
Ten Minute Lube, Inc.

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Principles of Operations Management, 5e, and Operations 7-45
Management, 7e
Work Flow Analysis - Four Phases
 Request from a customer or an offer to provide services
by a performer
 Negotiation, allowing the customer and the performer to
agree on how the work should be done and what will
constitute customer satisfaction
 Performance of the assignment and completion
 Acceptance, closing the transaction provided the customer
expresses satisfaction and agrees that the conditions
were met.

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Management, 7e
 Attaining Lean Production
 Focus on inventory reduction
 Build systems that help employees
 Reduce space requirements
 Develop close relationships with suppliers
 Educate suppliers
 Eliminate all but value-added activities
 Develop the workforce
 Make jobs more challenging
 Set sights on perfection!

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Customer Interaction and Process
Strategy
Low High
Mass Service Professional Service
Commercial Personal
Banking banking

High
General purpose
Degree of Labor Intensity

Full-service law firms

stockbroker

Retailing Boutiques

Service Factory Service Shop

Law clinics
Limited service For-profit
stockbroker hospitals

Low
Warehouse and Fast food Fine dining
Hospitals
catalog stores restaurants restaurants
Airlines
No frills
airlines

Degree of Interaction and Customization

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Management, 7e
 Techniques for Improving Service
Productivity
Strategy Technique
 Separation  Structure service so customers
must go where service is
offered
 Self-service  Self-service so customers
examine, compare and
evaluate at their own pace
 Postponement  Customizing at delivery
 Focus  Restricting the offerings

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Techniques for Improving Service
Productivity - Continued
 Modules  Modular selection of service.
Modular production
 Automation  Separating services that lend
themselves to automation
 Scheduling  Precise personnel scheduling
 Training  Clarifying the service options
 Explaining problems
 Improving employee flexibility

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Principles of Operations Management, 5e, and Operations 7-50
Management, 7e
 More Opportunities to Improve
Service Processes

 Layout
 Human Resources
 Technology

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Management, 7e
 Production Process &
Technology Alternatives
# Different Products or Parts
High General Purpose, NC,
CNC

CIM
Flexible
Manufacturing
System
Dedicated
Automation

Low
Low High
Volume of Products or Parts
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Principles of Operations Management, 5e, and Operations 7-52
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 Areas of 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
 Decreased pollution
 Decreased size
 Decreased power requirements

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 Process Control

 Increased process stability

 Increased process precision
 Real-time provision of information for process
evaluation
 Multi-mode information presentation

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Automatic Identification Systems (AIS)

 Improved data acquisition

 Increased scope of process automation

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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, or

those requiring significant strength or endurance
 Enhanced consistency, accuracy, speed strength,
power when substituted for human effort

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 Automated Storage and Retrieval
Systems (ASRS)
 Automated placement and withdrawal of parts and
products
 Particularly useful in inventory and test areas of
manufacturing firms

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Management, 7e
 Automated Guided Vehicle (AGV)

 Electronically controlled movement of products

and/or individuals

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Principles of Operations Management, 5e, and Operations 7-60
Management, 7e
 Flexible Manufacturing Systems
(FMS)
 Computer controls both the workstation and the
material handling equipment
 Computer control enhance flexibility
 Can economically produce low volume at high
quality
 Reduced costs of changeover and low utilization
 Stringent communication requirement between
components within it

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Principles of Operations Management, 5e, and Operations 7-61
Management, 7e
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
 Heavy reliance on information technology
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Principles of Operations Management, 5e, and Operations 7-62
Management, 7e
Computer Integrated Manufacturing

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Principles of Operations Management, 5e, and Operations 7-63
Management, 7e
 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 and Automated one-man garbage trucks, optical mail sorters,
government scanners, flood warning systems
Restaurants and Wireless orders from waiters to kitchen, robot butchering,
foods transponders on cars to track drive-thrus
Communication Electronic publishing, interactive TV
Hotels Electronic check-in/check-out, electronic key/lock systems
Wholesale/retail Point-of-sale terminals, e-commerce, electronic
trade communication between store and supplier, bar coded data

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Principles of Operations Management, 5e, and Operations 7-64
Management, 7e
 Technology in Services - Continued
Service Industry Example
Transportation Automatic toll booths, satellite-directed navigation systems,
route planning, progress monitoring
Health care On-line patient monitoring, on-line medical information
systems, robotic surgery, expert system diagnosis
assistance
Airlines Ticketless travel, scheduling, Internet ticket sales, improved
navigation and route planning

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Principles of Operations Management, 5e, and Operations 7-65
Management, 7e
 Process Reengineering
 The fundamental rethinking and radical redesign
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 boundaries

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Principles of Operations Management, 5e, and Operations 7-66
Management, 7e
 Showing Sensitivity to the
Environment

 Make products recyclable

 Use recycled materials
 Use less harmful ingredients
 Use light components
 Use less energy
 Use less materials

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Principles of Operations Management, 5e, and Operations 7-67
Management, 7e
 Factors Affecting Process
Alternatives
 Production flexibility These factors
reduce the number
 Product volume
of alternatives!
 Product variety
 Technology
 Cost
 Human resources
 Quality
 Reliability © 1984-1994 T/Maker Co.

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Principles of Operations Management, 5e, and Operations 7-68
Management, 7e