PRocess Plng

8/3/2019 PRocess Plng

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Processes, Technology, and Capacity


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Copyright 2006 John Wiley & Sons, Inc. 6-2

Outline

Process Planning

Process Analysis

Process Innovation

Technology Decisions

Capacity Decisions


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Process Planning

Process a group of related tasks with specific inputs and

outputs

Process design tasks need to be done and coordinated among

functions, people, and organizations

Process planning converts designs into workable instructions for

manufacture or delivery Process strategy

an organizations overall approach for physicallyproducing goods and services


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Process Strategy

Capital intensity mix of capital (i.e., equipment, automation) and labor

resources used in production process

Process flexibility ease with which resources can be adjusted in response to

changes in demand, technology, products or services, andresource availability

Vertical integration extent to which firm will produce inputs and control outputsof each stage of production process

Customer involvement role of customer in production process


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Make or Buy Decisions

Cost

Capacity

Quality

Speed

Reliability

Expertise


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Sourcing Continuum

Source: Adapted from Robert Hayes, Gary Pisano, David Upton, and

Steven Wheelwright, Operations Strategy and Technology: Pursuing

the Competitive Edge (Hoboken, NJ: 2005), p. 120

Arms-LengthRelationship

(short-term contractor

single purchasingdecision)

VerticalIntegration

(100%ownership)

JointVenture(equitypartner)

StrategicAlliance

(long-termsuppliercontract;

collaborative

relationship)


7/44Copyright 2006 John Wiley & Sons, Inc. 6-7

Process Selection

Projects one-of-a-kind production of a product to customer order

Batch production systems process many different jobs through the system in

groups or batches

Mass production produces large volumes of a standard product for a mass

market

Continuous production used for very-high volume commodity products



PROJECT BATCH

Types of Processes

Type of

product

UniqueMade-to-

order

(customized)

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for CompetitiveAdvantage(New York:McGraw-Hill, 2001), p. 210

Type ofcustomer

One-at-a-time

Fewindividual

customers

MASS

Made-to-stock

(standardized )

Mass

market

CONT.

Commodity

Mass

market

Productdemand Infrequent Fluctuates Stable Very stable



PROJECT BATCH

Types of Processes (cont.)

Demand

volume

Very lowLow to

medium


No. ofdifferentproducts

Infinitevariety

Many, varied

MASS

High

Few

CONT.

Very high

Very few

Productionsystem

Long-termproject

Discrete, jobshops

Repetitive,assembly

lines

Continuous,process

industries



PROJECT BATCH


Equipment VariedGeneral-

purpose


Primarytype ofwork

Specializedcontracts

Fabrication

MASS

Special-

purpose

Assembly

CONT.

Highly

automated

Mixing,treating,refining

Workerskills

Experts,crafts-

persons

Wide rangeof skills

Limitedrange of

skills

Equipmentmonitors



PROJECT BATCH


Advantages Custom work,latest technologyFlexibility,

quality

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage(NewYork:McGraw-Hill, 2001), p. 210

Dis-advantages

Non-repetitive,small customerbase, expensive

Costly, slow,

difficult to

manage

MASS

Efficiency,

speed,

low cost

Capital

investment;

lack of

responsiveness

CONT.

Highly efficient,

large capacity,

ease of control

Difficult to change,

far-reaching errors,

limited variety

ExamplesConstruction,shipbuilding,spacecraft

Machine shops,

print shops,

bakeries,

education

Automobiles,

televisions,

computers,

fast food

Paint, chemicals,foodstuffs



Cost Fixed costs

constant regardless of the number of units produced

Variable costs vary with the volume of units produced

Revenue price at which an item is sold

Total revenue is price times volume sold

Profit difference between total revenue and total cost

Process Selection with

Break-Even Analysis




Break-Even Analysis (cont.)

Total cost = fixed cost + total variable cost

TC = cf+ vcvTotal revenue = volume x price

TR = vp

Profit = total revenue - total costZ = TR TC = vp - (cf+ vcv)




Break-Even Analysis (cont.)

Solving for Break-Even Volume

TR = TC

vp = cf+ vcvvp - vcv = cf

v(p - cv) = cf

v = cf

p - cv



Break-Even Analysis: Example

Fixed cost = cf= $2,000Variable cost = cv = $5 per raft

Price =p = $10 per raft

Break-even point is

v = = = 400 raftscf

p - cv2000

10 - 5



Break-Even Analysis: Graph

Totalcostline

Totalrevenue

line

Break-even point400 Units

$3,000

$2,000

$1,000



Process Selection

Below 2,667, choose A

Above 2,667, choose B

$2,000 + $5v = $10,000 + $2v$3v = $8,000

v = 2,667 rafts

Process A Process B


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ProcessSelection:

Graph

Example 4.2

| | | |1000 2000 3000 4000 Units

$20,000

$15,000

$10,000

$5,000

Total cost ofprocess A

Total cost ofprocess B

Chooseprocess A

Chooseprocess B

Point of indifference = 2,667 Units


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Process Plans

Set of documents that detail manufacturingand service delivery specifications

assembly charts

operations sheets

quality-control check-sheets


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Process Analysis

Process flowcharts

Symbolic representation of processes Incorporate

nonproductive activities (inspection,transportation, delay, storage)

productive activities (operations)


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Process Flowchart

Symbols

Operations

Inspection

Transportation

Delay

Storage


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Step

Operation

Transport

Inspect

Delay

Storage

Distance

(feet)

Time

(min)Description

ofprocess

1

2

3

4

5

6

7

8

9

10

11

Unload apples from truck

Move to inspection stationWeigh, inspect, sort

Move to storage

Wait until needed

Move to peeler

Apples peeled and cored

Soak in water until needed

Place in conveyor

Move to mixing area

Weigh, inspect, sort

TotalPage 1 0f 3 480

30

5

20

15

360

30

20

190 ft

20 ft

20 ft

50 ft

100 ft

Date: 9-30-02

Analyst: TLR

Location: Graves Mountain

Process: Apple Sauce

ProcessFlowchart

of AppleProcessing


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Place order

Drink

Eat salad orsoup

Eat dinner

Receives check

Gives paymentto waiter

Collect change,leave tip

Fill in tipamount

Give orderto waiter

Prepare dinnerorder

Prepare soup orsalad order

Give orderto waiter

Is ordercomplete?

Give soup or salad order to chef

Give dinner order to chef

Get drinks for customer

Deliver salad or soup order to customer

Deliver dinner to customer

Deliver check to customer

Receive payment for meal

Cash orCredit?

Bring change to customer

Run credit card through

Return credit slip to customer

Collect tip

Y

N

Credit

Cash

Customer Waiter Salad Chef Dinner Chef

A Process

Map of

Restaurant

Service


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ServiceBlueprintfor anInstallmentLendingOperation

Source: Lynn Shostack, Service Positioning through Structural Change,Journal of Marketing 51 (January 1987), p.

36. Reprinted with permission by the American Marketing Association


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Process Innovation

BreakthroughImprovement

Continuous improvementrefines the breakthrough

Continuous improvement activities

peak; time to reengineer process

Total redesign of

a process for

breakthrough

improvements


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From Function to Process

Manufacturing

Accounting

Sales

Purchasing

Product Development

Order Fulfillment

Supply Chain Management

Customer Service

Function Process


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StrategicDirectives

Goals for ProcessPerformance

Pilot Studyof New Design

DetailedProcess Map

High - levelProcess map

GoalsMet?

InnovativeIdeas Design

Principles

ModelValidation

CustomerRequirements

KeyPerformance

Measures

Full ScaleImplementation

Baseline Data

BenchmarkData

No Yes

Process Innovation


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Principles for Redesigning

Processes Remove waste, simplify, and consolidate

similar activities

Link processes to create value

Let the swiftest and most capable enterpriseexecute the process

Flex process for any time, any place, any way Capture information digitally at the source and

propagate it through process


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Principles for Redesigning

Processes (cont.) Provide visibility through fresher and richer

information about process status

Fit process with sensors and feedback loopsthat can prompt action Add analytic capabilities to process Connect, collect, and create knowledge around

process through all who touch it Personalize process with preferences and

habits of participants


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Techniques for Generating

Innovative Ideas

Vary the entry point to a problem in trying to untangle fishing lines, its best to start

from the fish, not the poles

Draw analogies a previous solution to an old problem might work

Change your perspective think like a customer bring in persons who have no knowledge of

process


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Techniques for Generating

Innovative Ideas (cont.) Try inverse brainstorming

what would increasecost

what would displeasethe customer Chain forward as far as possible

if I solve this problem, what is the next problem

Use attribute brainstorming

how would this process operate if. . . our workers were mobile and flexible there were no monetary constraints we had perfect knowledge


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Technology Decisions

Financial justification of technology

Purchase cost

Operating Costs

Annual Savings

Revenue Enhancement

Replacement Analysis

Risk and Uncertainty

Piecemeal Analysis


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Components of e-Manufacturing


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A Technology Primer

Computer-aideddesign (CAD)

Group technology(GT)

Computer-aidedengineering (CAE)

Collaborativeproduct commerce

(CPC)

Creates and communicates designselectronically

Classifies designs into families for easyretrieval and modification

Tests functionality of CAD designselectronically

Facilitates electronic communication and

exchange of information among designersand suppliers

Product Technology


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Product datamanagement

(PDM) Product life cycle

management (PLC)

Product definition

Keeps track of design specs and revisionsfor the life of the product

Integrates decisions of those involved inproduct development, manufacturing, sales,customer service, recycling, and disposal

Confines products built by customers who

have selected among various options,usually from a Web site

Product Technology

A Technology Primer (cont.)


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Standard forexchange of

product model data(STEP)

Computer-aideddesign andmanufacture(CAD/CAM)

Computer aidedprocess (CAPP)

E-procurement

Set standards for communication amongdifferent CAD vendors; translates CAD data

into requirements for automated inspectionand manufacture

Electronic link between automated design(CAD) and automated manufacture (CAM)

Generates process plans based on

database of similar requirements Electronic procurement of items from e-

marketplaces, auctions, or companywebsites

Process Technology



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Computernumerically control(CNC)

Flexiblemanufacturingsystem (FMS)

Robots

Conveyors

Machines controlled by software code to perform avariety of operations with the help of automated

tool changers; also collects processing informationand quality data

A collection of CNC machines connected by anautomated material handling system to produce awide variety of parts

Manipulators that can be programmed to perform

repetitive tasks; more consistent than workers butless flexible

Fixed-path material handling; moves items along abelt or overhead chain; reads packages and

diverts them to different directions; can be very fast

Manufacturing Technology



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Automatic guidedvehicle (AGV)

Automated storageand retrieval system(ASRS)

Process Control

Computer-integratedmanufacturing (CIM)

A driverless truck that moves material along aspecified path; directed by wire or tape embeddedin floor or by radio frequencies; very flexible

An automated warehousesome 26 stores highin which items are placed in a carousel-typestorage system and retrieved by fast-movingstacker cranes; controlled by computer

Continuous monitoring of automated equipment;

makes real-time decisions on ongoing operation,maintenance, and quality

Automated manufacturing systems integratedthrough computer technology; also called e-manufacturing

Manufacturing Technology



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Business toBusiness (B2B)

Business toCustomer (B2C)

Internet

Intranet

Extranet

Electronic transactions between businesses

usually over the Internet

Electronic transactions between businesses and

their customers usually over the Internet

A global information system of computer networks

that facilitates communication and data transfer

Communication networks internal to an

organization; can be password (i.e., firewall)

protected sites on the Internet

Intranets connected to the Internet for shared

access with select suppliers, customers, and

trading partners

Information Technology



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Bar Codes

Radio Frequency

Identification tags(RFID)

Electronic datainterchange (EDI)

Extensive markuplanguage (XML)

Enterpriseresource planning(ERP)

A series of vertical lines printed on most packages thatidentifies item and other information when read by ascanner

An integrated circuit embedded in a tag that can sendand receive information; a twenty-first century bar codewith read/write capabilities

A computer-to-computer exchange of businessdocuments over a proprietary network; very expensiveand inflexible

A programming language that enables computer to -

computer communication over the Internet by taggingdata before its is sent

Software for managing basic requirements of anenterprise, including sales & marketing, finance andaccounting, production & materials management, andhuman resources




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Supply chainmanagement (SCM)

Customer relationshipmanagement (CRM)

Decision supportsystems (DSS)

Expert systems (ES)

Artificial intelligence(AI)

Software for managing flow of goods and informationamong a network of suppliers, manufacturers anddistributors

Software for managing interactions with customers andcompiling and analyzing customer data

An information system that helps managers makedecisions includes a quantitative modeling componentand an interactive component for what-if analysis

A computer system that uses an expert knowledge baseto diagnose or solve a problem

A field of study that attempts to replicate elements ofhuman thought in computer processes; includes expertsystems, genetic algorithms, neural networks, and fuzzylogic




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Capacity Decisions

Capacity maximum

capability toproduce rated

capacity istheoretical

effectivecapacityincludesefficiencyandutilization

Capacity utilization percent of available time spend

working

Capacity efficiency how well a machine or worker

performs compared to astandard output level

Capacity load standard hours of work

assigned to a facility

Capacity load percent ratio of load to capacity

Capacity Expansion Strategies


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Capacity Expansion Strategies


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Capacity Decisions (cont.)

Capacity increase depends on

volume and certainty of anticipated demand

strategic objectives costs of expansion and operation

Best operating level

% of capacity utilization that minimizes unit costs

Capacity cushion

% of capacity held in reserve for unexpectedoccurrences

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