© 2006 Prentice Hall, Inc.7 – 1 Operations Management Chapter 5 – Process Strategy © 2006...

© 2006 Prentice Hall, Inc. 7 – 1

Operations ManagementOperations ManagementChapter 5 – Process StrategyChapter 5 – 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


Process, Volume, and VarietyProcess, Volume, and Variety

Process Focusprojects, job shops

(machine, print, carpentry)

Repetitive(autos, motorcycles)

Harley Davidson

Product Focus(commercial

baked goods, steel, glass)Nucor Steel

High High CustomizationCustomization

Medium Medium CustomizatioCustomizationn

Low Low CustomizationCustomization

Mass Customization(difficult to achieve, but huge rewards)Dell Computer Co.

Low Low VolumeVolume

Repetitive Repetitive ProcessProcess

High High VolumeVolume

VolumeVolumeFigure 7.1Figure 7.1


Process FocusProcess 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


Repetitive FocusRepetitive 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


Product FocusProduct 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


Comparison of ProcessesComparison of Processes

Process Process FocusFocus

(Low volume, (Low volume, high variety)high variety)

Repetitive Repetitive FocusFocus

(Modular)(Modular)


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

Mass Mass CustomizationCustomization

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

Small Small quantity, quantity, large variety large variety of productsof products

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

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

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

General General purpose purpose equipmentequipment

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

Special Special purpose purpose equipmentequipment

Rapid Rapid changeover changeover on flexible on flexible equipmentequipment

Table 7.2Table 7.2






(Modular)(Modular)





Operators are Operators are broadly broadly skilledskilled

Employees Employees are modestly are modestly trainedtrained

Operators are Operators are less broadly less broadly skilledskilled

Flexible Flexible operators are operators are trained for the trained for the necessary necessary customizationcustomization

Many job Many job instructions instructions as each job as each job changeschanges

Repetition Repetition reduces reduces training and training and changes in job changes in job instructionsinstructions

Few work Few work orders and job orders and job instructions instructions because jobs because jobs standardizedstandardized

Custom Custom orders require orders require many job many job instructionsinstructions

Table 7.2Table 7.2






(Modular)(Modular)





Raw material Raw material inventories inventories highhigh

JIT JIT procurement procurement techniques techniques usedused

Raw material Raw material inventories inventories are loware low

Raw material Raw material inventories inventories are loware low

Work-in-Work-in-process is process is highhigh

JIT inventory JIT inventory techniques techniques usedused

Work-in-Work-in-process process inventory is inventory is lowlow

Work-in-Work-in-process process inventory inventory driven down driven down by JIT, lean by JIT, lean productionproduction

Table 7.2Table 7.2






(Modular)(Modular)





Units move Units move slowly slowly through the through the plantplant

Movement is Movement is measured in measured in hours and hours and daysdays

Swift Swift movement of movement of unit through unit through the facility is the facility is typicaltypical

Goods move Goods move swiftly swiftly through the through the facilityfacility

Finished Finished goods made goods made to orderto order

Finished Finished goods made goods made to frequent to frequent forecastforecast

Finished Finished goods made goods made to forecast to forecast and storedand stored

Finished Finished goods often goods often made to ordermade to order

Table 7.2Table 7.2






(Modular)(Modular)





Scheduling is Scheduling is complex, complex, trade-offs trade-offs between between inventory, inventory, availability, availability, customer customer serviceservice

Scheduling Scheduling based on based on building building various various models from models from modules to modules to forecastsforecasts

Relatively Relatively simple simple scheduling, scheduling, establishing establishing output rate to output rate to meet forecastsmeet forecasts

Sophisticated Sophisticated scheduling scheduling required to required to accommodate accommodate custom orderscustom orders

Table 7.2Table 7.2






(Modular)(Modular)





Fixed costs Fixed costs low, variable low, variable costs highcosts high

Fixed costs Fixed costs dependent on dependent on flexibility of flexibility of the facilitythe facility

Fixed costs Fixed costs high, variable high, variable costs lowcosts low

Fixed costs Fixed costs high, variable high, variable costs must be costs must be lowlow

Costing Costing estimated estimated before job, before job, not known not known until after job until after job is completeis complete

Costs usually Costs usually known due to known due to extensive extensive experienceexperience

High fixed High fixed costs mean costs mean costs costs dependent on dependent on utilization of utilization of capacitycapacity

High fixed High fixed costs and costs and dynamic dynamic variable costs variable costs make costing make costing a challengea challenge

Table 7.2Table 7.2

© 2006 Prentice Hall, Inc.7 – 1 Operations Management Chapter 5 – Process Strategy © 2006...

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