OutlineFour Process Strategies Process Focus Repetitive Focus Product Focus Mass Customization Focus

Capacity Forecasting Capacity Requirements Selection of Equipment and Technology Managing Demand Uncertainty

Break-Even Analysis Single-Product Case Multi-product Case

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

a computer better?”

Sells custom-build PCs directly to consumerIntegrated the Web into every aspect of its businessOperates with six days inventoryBuilds computers rapidly, at low cost, and only when orderedResearch focus on software designed to make installation and configuration of its PCs fast and simple

Process Fit: Volume vs. Variety

Process focus: job shops,(machine, print, carpentry)

Repetitive(autos, motorcycles)

Harley Davidson

Product focus(paper, steel, glass)

High VarietyOne or few units per run (customization)

Medium Variety(Change product withstandardized modules)

Low Variety(Similar products with minor changes)

Mass Customization

(difficult to achieve, but huge rewards)

Dell Computer Co.

Poor strategy

(High variable cost)

Low-Volume(Intermittent)

Medium-Volume(Modular)

High-Volume(Continuous)

Types of Process Strategies

ContinuumContinuum

Classify the process strategies by the level continuum:

Repetitive-Focused

Product-FocusedProcess-Focused

Process-Focused Strategy•Facilities are organized by process•Similar processes are together

•Example: All drills or lathes are together•Low volume, high variety products•‘Jumbled’ flow

OperationProduct A

Product B

1111 2222 3333•Other names

•Intermittent process•Job shop

Process-Focused Strategy Examples

Bank

© 1995 Corel Corp.

Machine Shop© 1995 Corel Corp.

Hospital© 1995 Corel Corp.

Process-Focused Production

Variances of Process Focused Production

•University education

•Swimming pool remodeling

Process Focused Strategy - Pros & Cons (p262)

Advantages Greater product flexibility Use more general purpose equipment Suitable for customization

Disadvantages More highly trained personnel More difficult production planning & control

(including inventory, machine and personnel scheduling, maintenance, quality control…)

Low equipment utilization (25% to 45%)

Process Automation and Flexible Manufacturing System

Production Technology Automated Guided Vehicles (AGV) Automated Storage and Retrieval

Systems (ASRSs)

Flexible Manufacturing Systems (FMS) Programmable process Control Vision Systems and Robots

Product-Focused Strategy•Facilities are organized to produce a small number of products•High volume, low variety products•Other names

•Continuous process manufacturing •Line flow production•Continuous production

Operation

Products A & B

11 22 33

Product-Focused Examples

© 1995 Corel Corp.

Light Bulbs (Discrete)Paper (Continuous)

© 1984-1994 T/Maker Co.

© 1995 Corel Corp.

Soft Drinks (Continuous, then Discrete)

Product Focused Process

Product-Focused Strategy Pros & Cons (p242)

Advantages Lower variable cost per unit Use more specialized equipments Easier production planning and control Higher equipment utilization (70% to 90%)

Disadvantages Lower product flexibility High shut-down cost Usually higher capital investment

Repetitive Focused Strategy

Facilities often organized by assembly linesCharacterized by modules Parts & assemblies made previously

Modules combined for many output options

Other names Assembly line Production line

Repetitive-Focused Strategy - Examples

Truck

© 1995 Corel Corp.

Clothes Dryer

© 1995 Corel Corp.

Fast Food

McDonald’sover 95 billion served

McDonald’sover 95 billion served

© 1984-1994 T/Maker Co.

Repetitive Focused Strategy -Considerations

More structured than process-focused, less structured than product focusedEnables quasi-customizationUsing modules, it enjoys economic advantage of continuous process, and custom advantage of low-volume, high-variety model

Harley-Davidson

Process Fit: Volume vs. Variety

Process focus: job shops,(machine, print, carpentry)

Repetitive(autos, motorcycles)

Harley Davidson

Product focus(paper, steel, glass)

High VarietyOne or few units per run (customization)

Medium Variety(Change product withstandardized modules)

Low Variety(Similar products with minor changes)

Mass Customization

(difficult to achieve, but huge rewards)

Dell Computer Co.

Poor strategy

(High variable cost)

Low-Volume(Intermittent)

Medium-Volume(Modular)

High-Volume(Continuous)

Mass CustomizationUsing 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.

Repetitive Focus Assembly line

Modular Design Flexible equipment

Mass Customization

Process focus Intermittent process

High variety, low volume

Product focus

Continuous ProcessLow variety, high volume

Modular techniques

Scheduling techniques

Rapid throughput

Automated Storage and Retrieval System (ASRS)

Provide for automatic placement and withdrawal of parts and products into and from designated places in a warehouse.Improve efficiency of material handling and inventory management in both production, distribution, and retail site

Material handling machinesUsed to move parts & equipment in manufacturingMay be used to deliver mail & meals in service facilities

© 1984-1994 T/Maker Co.

Automatic Guided Vehicles (AGV)

Using automated machines (DNC) & materials handling equipment togetherOften connected to centralized computerAlso called automated work cell

Computer

Machine 1

Machine 2

Robotor AGV

Auto ToolChg.

Auto ToolChg.

Production TechnologyFMS

Computer Integrated Manufacturing (CIM)

Process ReengineeringThe fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performanceRelies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptionsTools for process redesign across boundaries Flow Diagrams Process Charts Time-Function/Process Mapping Service Blueprint

Process Strategies (Ikea and McDonalds Examples)

Involve determining how to produce a product or provide a serviceObjective Is the process designed to achieve

competitive advantage? 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?

Time Function MapCustomer

Sales

Production control

Plant A

Warehouse

Plant B

Transport

Order Product

Process Order

Print

Extrude

Receive product

Wait

Move

Wait Wait Wait

Move

Ord

er

Ord

er

WIP

WIP

WIP W

IP

Prod

uct

Prod

uct

Prod

uct

12 days 1 day 1 day 1 day 1 day13 days 4 days 10 days 9 days

SUBJECT: Request tool purchase

Dist (ft) Time (min) Symbol Description

D Write order

On desk

75 D To buyer

D Examine

= Operation; = Transport; = Inspect; D = Delay; = Storage

Process Chart Example

Crossover Chart

Fixed cost - Process A

Fixed cost - Process BFixed cost - Process C

Total cost - Process CTotal cost - Process B

Total co

st - P

roce

ss A

Process A: low volume, high varietyProcess B: Repetitive

Process C: High volume, low variety

Process CProcess BProcess A Lowest cost process

How much long-range capacity is neededWhen more capacity is neededWhere facilities should be located (location)How facilities should be arranged (layout)

Facility planning answers:

Facility and Capacity Planning

Approaches to Capacity Expansion

Expected Demand

Time in Years

Dem

and

New Capacity

Attempts to have an average capacity, with an incremental expansion

Breakeven AnalysisTechnique for evaluating process & equipment alternativesObjective: Find the point ($ or units) at which total cost equals total revenueFixed costs: costs that continue even if no units are produced: depreciation, taxes, debt, mortgage paymentsVariable costs: costs that vary with the volume of units produced: labor, materials, portion of utilities

Breakeven Chart

Fixed cost

Variable cost

Total cost line

Total revenue line

ProfitBreakeven pointTotal cost = Total revenue

Volume (units/period)

Cos

t in

Dol

lars

(Tho

usan

ds)

Loss

Crossover Chart

Fixed cost - Process A

Fixed cost - Process BFixed cost - Process C

Total cost - Process CTotal cost - Process B

Total co

st - P

roce

ss A

Process A: low volume, high varietyProcess B: Repetitive

Process C: High volume, low variety

Process CProcess BProcess A Lowest cost process

Vary staffingChange equipment & processesChange methodsRedesign the product for faster processing

Capacity Management

Vary prices Vary promotion Change lead times

(e.g., backorders) Offer complementary

products

Demand Management

Managing Existing Capacity

Complementary Products

Time (Months)

Sales (Units)

Jet Skis

Snow-mobiles

Total

01,000

2,0003,0004,0005,000

J M M J S N J M M J S N J

Attaining Lean ProductionThe fundamental rethinking and radical

redesign of business processes to bring about dramatic improvements in performanceFocus on inventory reductionModulization, postponed differentiationDevelop close relationships with suppliersEliminate all but value-added activitiesReevaluating the process of planning, scheduling, and transportations across boundaries

Techniques for Improving Process Efficiency of Service

Separation

Self-service

Postponement

Focus

Structure service so customers must go where service is offeredSelf-service so customers examine, compare and evaluate at their own pace

Customizing at delivery

Restricting the offerings

Strategy Technique

Techniques for Improving Process Efficiency of Service

Modulizarion

Automation

SchedulingTraining

Modular selection of service. Modular productionSeparating services that lend themselves to automation

Precise personnel schedulingClarifying the service optionsExplaining problemsImproving employee flexibility