© 2006 Prentice Hall, Inc.7 – 1 Operations Management Chapter 7 – Process Strategy © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render

© 2006 Prentice Hall, Inc. 7 – 1

Operations ManagementOperations ManagementChapter 7 – Process StrategyChapter 7 – Process Strategy

© 2006 Prentice Hall, Inc.

PowerPoint presentation to accompanyPowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 6ePrinciples of Operations Management, 6eOperations Management, 8e Operations Management, 8e


OutlineOutline

Global Company Profile: Dell Global Company Profile: Dell Computer Co.Computer Co.

Four Process StrategiesFour Process Strategies

Process Analysis And DesignProcess Analysis And Design

Service Process DesignService Process Design

Selection Of Equipment And Selection Of Equipment And TechnologyTechnology

Process Redesign Process Redesign


Dell Computer CompanyDell Computer Company““How can we make the process of How can we make the process of

buying a computer better?”buying a computer better?”

Sell custom-built PCs directly to consumerSell custom-built PCs directly to consumer

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

Integrate the Web into every aspect of its Integrate the Web into every aspect of its businessbusiness

Focus research on software designed to Focus research on software designed to make installation and configuration of its make installation and configuration of its PCs fast and simplePCs fast and simple


ProcessProcess

A process includes all machine A process includes all machine activities, computer processing, human activities, computer processing, human actions, transportation, storage and actions, transportation, storage and decisions that are taken from the time a decisions that are taken from the time a task is authorized by a customer and the task is authorized by a customer and the time when the product or finished time when the product or finished service is delivered to the client. service is delivered to the client.


Types of ProcessesTypes of Processes

Most ideas can be implemented in any of the four processes Most ideas can be implemented in any of the four processes (after (after modifications to initial concept have been made)modifications to initial concept have been made)

High-Low(III)

Massproduction

High-High(IV)

Masscustom.

Low-Low(I)

Job shop

Low-High(II)

Modularproduction

Low

High

Low High

Output variety

Outputvolume


Types of ProcessesTypes of Processes

Most ideas can be implemented in any of the four processes Most ideas can be implemented in any of the four processes (after (after modifications to initial concept have been made)modifications to initial concept have been made)

High-LowCars, Oil, Gas

production

High-HighDigital CDs,PCs. ShoesCable TV, Software,

Low-LowShip buildingSkyscrapers

Airplanes

Low-HighShoes, PCs,

Clothing, Designer items

Low

High

Low High

Output variety

Outputvolume


Breakfast Factory ProcessBreakfast Factory ProcessType I: Job Shop (Mobile Unit)Type I: Job Shop (Mobile Unit)

MenuMenu

Coffee w/o milkCoffee w/o milk

Toast w/o eggsToast w/o eggs

Bread w/o eggsBread w/o eggs

Production processProduction process

Pre-boiled eggsPre-boiled eggs

Pre-brewed coffeePre-brewed coffee

Pre-packaged Pre-packaged

Type II: Modular ProductionType II: Modular ProductionMenuMenu

Coffee w/o milk Coffee w/o milk

10 Toast types 10 Toast types

10 Coffee brands10 Coffee brands


Toast assembled to order Toast assembled to order

Coffee brand is brewed to Coffee brand is brewed to orderorder


Breakfast Factory ProcessBreakfast Factory ProcessType III: Mass ProductionType III: Mass Production

MenuMenu

Coffee w/o milkCoffee w/o milk

Toast w/o eggsToast w/o eggs

Bread w/o eggsBread w/o eggs


Continuous making of toast, Continuous making of toast, coffee and eggscoffee and eggs

Automated transportation Automated transportation

Type IV: Mass Customization ProductionType IV: Mass Customization ProductionMenuMenu

2 Toast types 2 Toast types

3 Coffee brands 3 Coffee brands

10 Coffee flavors10 Coffee flavors


Continuous brewing of coffeeContinuous brewing of coffee

Pre-packaged toast Pre-packaged toast

Pre-brewed coffee is flavored Pre-brewed coffee is flavored to orderto order


Process StrategiesProcess StrategiesFour basic strategiesFour basic strategies Process focusProcess focus

(form of job shop process)(form of job shop process)

Repetitive focusRepetitive focus(also called modular process)(also called modular process)

Product focusProduct focus(also called mass production process)(also called mass production process)

Mass customization Mass customization (modified form of product focus process)(modified form of product focus process)


Job Shop (Process) FocusJob Shop (Process) Focus

Facilities are organized around specific Facilities are organized around specific activities or processesactivities or processes

General purpose equipment and skilled General purpose equipment and skilled personnelpersonnel

High degree of product flexibilityHigh degree of product flexibility

Typically high costs and low equipment Typically high costs and low equipment utilizationutilization

Product flows may vary considerably Product flows may vary considerably making planning and scheduling a making planning and scheduling a challengechallenge


Accounting

PRINTING DEPT

COLLATING DEPT

GLUING, BINDING, STAPLING, LABELING

POLYWRAP DEPT

SHIPPING

Vendors

Receiving

Warehouse

Purchasing

PREPRESS DEPT

Job Shop Flow DiagramJob Shop Flow DiagramCustomer

Customer sales representative

Information flowInformation flowMaterial flowMaterial flow

Figure 7.2Figure 7.2


Modular (Repetitive) FocusModular (Repetitive) Focus

Facilities often organized as Facilities often organized as assembly linesassembly lines

Characterized by modules with parts Characterized by modules with parts and assemblies made previouslyand assemblies made previously

Modules may be combined for many Modules may be combined for many output optionsoutput options

Less flexibility than process-Less flexibility than process-focused facilities but more efficientfocused facilities but more efficient


Modular Cells Flow DiagramModular Cells Flow Diagram

THE ASSEMBLY LINETHE 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 Milwaukee From Milwaukee on a JIT arrival on a JIT arrival scheduleschedule

Engines and transmissions

Frame tube bending

Frame-building work cells

Frame machining

Hot-paint frame painting

Crating



ExerciseExercise

Design a cup that will be made by Design a cup that will be made by job shop processjob shop process


ExerciseExercise

How would you modify the design How would you modify the design to make the same cup using to make the same cup using modular or mass production modular or mass production process?process?


Mass Production FocusMass Production Focus

Facilities are organized by productFacilities are organized by product

High volume but low variety of High volume but low variety of productsproducts

Long, continuous production runs Long, continuous production runs enable efficient processesenable efficient processes

Typically high fixed cost but low Typically high fixed cost but low variable costvariable cost

Generally less skilled laborGenerally less skilled labor


Mass Production Process FlowMass Production Process Flow

Nucor Steel PlantNucor Steel Plant

Co

nti

nu

ou

s ca

ster

Co

nti

nu

ou

s ca

ster

Continuous cast steel Continuous cast steel sheared into 24-ton slabssheared into 24-ton slabs

Hot tunnel furnace - 300 ftHot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coilingHot mill for finishing, cooling, and coiling

DD

EE FF

GGHHII

Scrap Scrap steelsteel

Ladle of molten steelLadle of molten steelElectric Electric furnacefurnace

AA

BBCC


ProcessesProcesses

Rapid Rapid changeover changeover on flexible on flexible equipmentequipment

Special Special purpose purpose equipmentequipment

Special Special equipment equipment aids in use of aids in use of assembly lineassembly line

General General purpose purpose equipmentequipment

Large Large quantity, large quantity, large variety of variety of productsproducts

Large Large quantity, small quantity, small variety of variety of productsproducts

Long runs, Long runs, standardized standardized product made product made from modulesfrom modules

Small Small quantity, quantity, smallsmall variety variety of productsof products

Mass Mass CustomizationCustomization

(High-volume, (High-volume, high-variety)high-variety)

Product FocusProduct Focus

(High-volume, (High-volume, low-variety)low-variety)

Repetitive Repetitive FocusFocus

LowLow-volume, -volume, highhigh-variety)-variety)

Process Process FocusFocus

(Low volume, (Low volume, lowlow variety) variety)

Parts, work Parts, work processes fall processes fall into one standard into one standard class. Handful of class. Handful of assembly typesassembly types

Parts, work Parts, work processes and processes and assembly fall into assembly fall into one standard wayone standard way

Parts, work Parts, work processes and processes and assembly fall into assembly fall into few similar few similar modules/groupsmodules/groups

Product parts, Product parts, work processes work processes and assembly and assembly are unique are unique


ProcessesProcesses

Video: Evolution of Mass Video: Evolution of Mass productionproduction


Process Analysis and DesignProcess Analysis and Design

Flow DiagramsFlow Diagrams - Shows the movement - Shows the movement of materials, people, products etc.of materials, people, products etc.

Time-Function MappingTime-Function Mapping - Shows flows - Shows flows and time frameand time frame

Value Stream MappingValue Stream Mapping - Shows flows, - Shows flows, time and value added beyond the time and value added beyond the immediate organizationimmediate organization

Process Charts - Uses symbols to show Process Charts - Uses symbols to show key activities and flowskey activities and flows

Service Blueprinting - focuses on Service Blueprinting - focuses on customer/provider interactioncustomer/provider interaction


Process Analysis ToolsProcess Analysis Tools

Flowcharts provide a view of the Flowcharts provide a view of the big picture at level of organizationbig picture at level of organization

Time-function mapping adds rigor Time-function mapping adds rigor and a time elementand a time element

Value stream analysis extends to Value stream analysis extends to customers and supplierscustomers and suppliers

Process charts show detail at the Process charts show detail at the level of a workplacelevel of a workplace

Service blueprint focuses on Service blueprint focuses on customer interactioncustomer interaction


Flow Chart (Example)Flow Chart (Example)

Move Receive product

Extrude

Wait

MoveWait

Print

Wait

Order product

Process order Wait


Time-Function MappingTime-Function Mapping

CustomerCustomer

SalesSales

Production Production controlcontrol

Plant APlant A

WarehouseWarehouse

Plant BPlant B

TransportTransport Move

Receive product

Extrude

Wait

Move

Wait

Print

Wait

Order product

Process order

Wait

12 days12 days 13 days13 days 1 day1 day 4 days4 days 1 day1 day 10 days10 days 1 day1 day 9 days9 days 1 day1 day

52 days52 daysFigure 7.7Figure 7.7

Is anything obviously wrong

with this process?


Time-Function Map (Target)Time-Function Map (Target)

CustomerCustomer

SalesSales

Production Production controlcontrol

Plant APlant A

WarehouseWarehouse

TransportTransport Move

Receive product

Extrude

Wait

Print

Order product

Process order

Wait

1 day1 day 0.5 day0.5 day 1 day1 day 1 day1 day 1 day1 day 0.5 day0.5 day 1 day1 day

6 days6 daysFigure 7.7Figure 7.7

Time-functionmaps show the global view of a

process


Process ChartProcess Chart


Micro view of process.

Value-added proportion


Value Stream Mapping (Example)Value Stream Mapping (Example)

www.epa.gov/lean/toolkit/ch3.htm


Value Stream Mapping (key)Value Stream Mapping (key)

www.epa.gov/lean/toolkit/ch3.htm


Value Stream Mapping Value Stream Mapping (Example)(Example)

« Back to Chapter www.epa.gov/lean/toolkit/ch3.htm


Process Redesign ActivityProcess Redesign Activity

Imagine that your group has to change Imagine that your group has to change the mailing process of the post office. the mailing process of the post office. Document five to six steps of the oldDocument five to six steps of the old process. process. Document five to six steps of theDocument five to six steps of the new process new process


Process Redesign SolutionProcess Redesign Solution Old processOld process

Customer brings mail to storeCustomer brings mail to store Customer waits in lineCustomer waits in line Employee takes mail and weighs itEmployee takes mail and weighs it Employee places stamp on letterEmployee places stamp on letter Customer pays for mailCustomer pays for mail Employee gives customer changeEmployee gives customer change Customer leaves storeCustomer leaves store

New processNew process Customer brings mail to storeCustomer brings mail to store Customer places mail on machine and enters zip codeCustomer places mail on machine and enters zip code Machine yields price to mail Machine yields price to mail Customer pays for mailCustomer pays for mail Machine pastes scan mark on mail and accepts itMachine pastes scan mark on mail and accepts it Customer collects changeCustomer collects change Customer leaves storeCustomer leaves store


Process RedesignProcess Redesign

The fundamental rethinking of business The fundamental rethinking of business processes to bring about dramatic processes to bring about dramatic improvements in performanceimprovements in performance

Relies on reevaluating the purpose of the Relies on reevaluating the purpose of the process and questioning both the process and questioning both the purpose and the underlying assumptionspurpose and the underlying assumptions

Requires reexamination of the basic Requires reexamination of the basic process and its objectivesprocess and its objectives

Focuses on activities that cross Focuses on activities that cross functional linesfunctional lines

Any process is a candidate for redesignAny process is a candidate for redesign


Ethics and Environmentally Ethics and Environmentally Friendly ProcessesFriendly Processes

Encourage recyclingEncourage recycling

Efficient use of resourcesEfficient use of resources

Reduction of waste by-productsReduction of waste by-products

Use less harmful ingredientsUse less harmful ingredients

Use less energyUse less energy

Reduce the negative impact on the Reduce the negative impact on the environmentenvironment


Cost PatternsCost Patterns

What is the difference between the cost What is the difference between the cost you pay for rent and heating costs?you pay for rent and heating costs?

How would you write a math equation for How would you write a math equation for the total cost of renting and heating the total cost of renting and heating costs?costs?


Cost PatternsCost Patterns

What is the difference between the cost What is the difference between the cost you pay for rent and heating costs?you pay for rent and heating costs?

- One is variable cost (changes with use)One is variable cost (changes with use)- The other is fixed cost (Constant with use)- The other is fixed cost (Constant with use)

How would you write a math equation for the How would you write a math equation for the total cost of renting and heating costs?total cost of renting and heating costs?

Total Cost = Fixed Cost + (Variable Cost x Usage Total Cost = Fixed Cost + (Variable Cost x Usage time)time)

TC = FC + VC x t TC = FC + VC x t


Cost CalculationsCost Calculations

Find total cost for the following valuesFind total cost for the following values

FC = $1350; VC = $ 2 per hour; FC = $1350; VC = $ 2 per hour;

Usage Times: 175 hours; 280 hours; 350 hoursUsage Times: 175 hours; 280 hours; 350 hours

Total Cost = Fixed Cost + (Variable Cost x Usage Total Cost = Fixed Cost + (Variable Cost x Usage time)time)

TC = FC + (VC x t) TC = FC + (VC x t)


Cost CalculationsCost Calculations

Find Total cost for the following valuesFind Total cost for the following values

FC = $1350; VC = $ 2 per hour; FC = $1350; VC = $ 2 per hour;

Usage Times: 175 hours; 280 hours; 350 hoursUsage Times: 175 hours; 280 hours; 350 hours

Total Cost = Fixed Cost + Variable Cost x Usage timeTotal Cost = Fixed Cost + Variable Cost x Usage time

TC = $ 1350 + $ 2 per hour x 175 hours = TC = $ 1350 + $ 2 per hour x 175 hours =




Crossover ChartsCrossover Charts

Fixed costs

Variable Variable costscosts

$$

High volume, low varietyHigh volume, low varietyProcess CProcess C

Fixed costs

Variable Variable costscosts$$

RepetitiveRepetitiveProcess BProcess B

Fixed costs

Variable Variable costscosts$$

Low volume, high varietyLow volume, high varietyProcess AProcess A

Fixed cost Process A Fixed cost Fixed cost

Process BProcess BFixed cost Process C

Tota

l cos

t

Tota

l cos

t

Total cost

Total cost

Total costTotal cost

VV11(2,857)(2,857) VV22(6,666)(6,666)

400,000 400,000

300,000 300,000

200,000 200,000

VolumeVolume

$$



Breakeven HomeworkBreakeven Homework

Introduce POM SoftwareIntroduce POM Software

Homework Tasks:Homework Tasks:

- Get the data that is provided to you online (excel - Get the data that is provided to you online (excel sheet document)sheet document)- Find the appropriate module of the software to use - Find the appropriate module of the software to use for assignment (Instructions for using software for for assignment (Instructions for using software for this homework are online)this homework are online)-Enter the homework data (manually) -Enter the homework data (manually) - Print all the results and write your name on it.- Print all the results and write your name on it.

Documents

© 2006 Prentice Hall, Inc.7 – 1 Operations Management Chapter 7 – Process Strategy © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render