Process Strategy. Process, Volume, and Variety Process focus projects, job shops,(machine, print,...

Process Strategy

Process, Volume, and Variety

Process focusprojects, job shops,

(machine, print, carpentry)

Standard RegisterRepetitive

(autos, motorcycles)Harley Davidson

Product focus(commercial baked goods, steel, glass)

Nucor Steel

High VarietyOne or few units per run, high variety(allows customization)

Changes in modulesModest runs, standardized modules

Changes in attributes (such as grade, quality, size, thickness, etc.) Long runs only

Mass Customization

(difficult to achieve, but

huge rewards)

Dell Computer

Poor strategy

Low-Volume(Intermittent)

Repetitive Process(Modular)

High-Volume(Continuous)

Process Strategies

Involve determining how to produce a product or provide a service

Objectives:Meet or exceed customer requirementsMeet cost & managerial goals

Has long-run effectsProduct & volume flexibilityCosts & quality

Types of Process Strategies

ContinuumContinuum

Process strategies that follow a continuum Within a given facility, several strategies may

be used These strategies are often classified as:

Repetitive-Focused

Product-FocusedProcess-Focused

Process Focused Strategy

Facilities are organized by processSimilar processes are togetherFocus is on the work, tools, etc.Low volume, high variety products‘Jumbled’ flow

OperationProduct A

Product B

1111 2222 3333Other names

Intermittent process Job shop

Process Focus

Process Focus Pros & Cons

AdvantagesGreater product flexibilityMore general purpose equipmentLower initial capital investment

DisadvantagesHigh variable costsMore highly trained personnelMore difficult production planning & controlLow equipment utilization (5% to 25%)

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

Repetitive Focus

Repetitive Focus Considerations

More structured than process-focused, less structured than product focused

Enables quasi-customizationUsing modules, it enjoys economic

advantage of continuous process, and custom advantage of low-volume, high-variety model

Flow Diagram for Harley Davidson

Product Focused Strategy

Facilities are organized by productHigh volume, low variety productsWhere found

Discrete unit manufacturing Continuous process manufacturing

Operation

Products A & B

11 22 33

Other names Line flow production Continuous production

Product Focus

Product Focus Pros & Cons

AdvantagesLower variable cost per unitLower but more specialized labor skillsEasier production planning and controlHigher equipment utilization (70% to 90%)

DisadvantagesLower product flexibilityMore specialized equipmentUsually higher capital investment

Flow Diagram for NUCOR

A Comparison (1)

Process Focus

(Low volume, High variety)

Repetitive Focus

(Modular)

Product focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety

1. Small quantity, large variety of products

Long runs, standardized product, from modules

Large quantity, small variety of products

Large quantity, large variety of products

2. General purpose equipment

Special equipment aids in use of assembly line

Special purpose equipment

Rapid changeover on flexible equipment

A Comparison (2)

Process Focus Repetitive Focus

Product focus

Mass Customization

3 Broadly skilled operators

Modestly trained employees

Operators less broadly skilled

Flexible operators trained for customization

4 Many instructions because of change in jobs

Reduced training and number of job instructions

Few work orders and job instructions

Custom orders require many instructions

5 Raw material high relative to product value

JIT techniques used

Raw material low relative to product value

Raw material low relative to product value

A Comparison (3)


Product focus Mass Customization

6 WIP high relative to output

JIT techniques used

WIP low relative to output

WIP driven down by JIT, kanban, lean production

7 Units move slowly thru plant

Movement measured in hours & days

Units move swiftly thru facility

Goods move swiftly thru facility

8 Finished goods made to order, not stored

Finished goods made to frequent forecasts

Finished goods made to forecast, then stored

Finished goods made to order

A Comparison (4)



9 Scheduling complex and concerned with trade-off between inventory, capacity, and customer service

Scheduling based on building models from a variety of forecasts

Scheduling relatively simple, concerns establishing sufficient rate of output to meet forecasts

Scheduling sophisticated to accommodate customization

10 Fixed costs low, variable costs high

Fixed costs dependent on flexibility of facilities

Fixed costs high, variable costs low

Fixed costs high; variable costs must be low

A Comparison (5)



11 Costing, done by job, is estimated prior to doing job but only known after doing job

Costs usually known based on experience

Because of high fixed costs, cost dependent on utilization of capacity

High fixed costs and dynamic variable costs

Volume and Variety of Products

Volume andVariety ofProducts

Low Volume HighVariety Process

(Intermittent)

RepetitiveProcess

(Modular)

High VolumeLow Variety

Process(Continuous)

One or very fewunits per lot

Projects

Very small runs, highvariety

Job Shops

Modest runs, modestvariety

DisconnectedRepetitive

Long runs, modestvariations

ConnectedRepetitive

Very long runs,changes inattributes

Continuous

Equipment utilization 5%-25% 20%-75% 70%-80%

Poor Strategy(High variable

costs)

Mass Customization

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.

Mass Customization: More Choices

Early 21st Century

Item Early 1970s

Vehicle models 140 260Vehicle styles 18 1,212Bicycle types 8 19Software titles 0 300,000Web sites 0 30,727,296Movie releases 267 458New book titles 40,530 77,446Houston TV channels 5 185Breakfast cereals 160 340Item SKUs in supermarkets 14,000 150,000

Number of Choices

Process Strategies

Rapid throughput techniques

Mass Customization

Modular techniques

Repetitive FocusModular design

Flexible equipment

Product-focusedLow variety, high volume

High utilization (70% - 80%)Specialized equipment

Process-focusedHigh variety, low volume

Low utilization (5% - 20%)General purpose equipment

Effective scheduling techniques

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?

Crossover Charts

$$$

Fixed cost Variable cost

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C200,000

300,000

400,000

$ Total process C costs

Total p

roces

s A

costs

Process A Process B Process C

V1 V2 Volume

Total process B

costs

Crossover Chart Example #1

Process Fixed CostVariable Cost

per Unit

A $10,000 $5

B 15,000 3

C 20,000 2

Example #1 Solved

Example #1 Chart



per Unit

A $10,000 $8

B 30,000 3

C 40,000 2

Example #2 Solved

Example #2 Chart



per Unit

A $10,000 $8

B 30,000 6

C 40,000 2

Example #3 Solved

Example #3 Chart

Tools for Process Design

Flow DiagramsProcess ChartsTime-Function/Process MappingWork Flow Analysis

Process Flow Diagram

Shipping

Customer

Customer sales representative

take order

Prepress Department(Prepare printing

plates and negatives)

Printing Department

Collating Department

Gluing, binding, stapling, labeling

Polywrap Department

Purchasing(order inks, paper,

other supplies)

Vendors

Receiving

Warehousing(ink, paper, etc.)

Accounting

Information flowMaterial flow

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

Process Chart Example

Time Function Map (Baseline)

Customer

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

52 days

Time Function Map (Target)

1 day 1 day 1 day1 day 2 days

Customer

Sales

Production control

Plant

Warehouse

Transport

Order Product

Process Order

Print Extrude

Receive product

Wait

Wait

Move

Ord

er

Ord

er

Prod

uct

Prod

uct

WIP

6 days

Work Flow Analysis - 4 PhasesRequest from a customer or an offer to provide

services by a performerNegotiation, 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 completionAcceptance, closing the transaction provided the

customer expresses satisfaction and agrees that the conditions were met.

Attaining Lean Production

Focus on inventory reductionBuild systems that help employeesReduce space requirementsDevelop close relationships with suppliersEducate suppliersEliminate all but value-added activitiesDevelop the workforceMake jobs more challengingSet sights on perfection!

Customer Interaction and Process Strategy

Mass Service Professional Service

Service Factory Service Shop

Commercial Banking

General purpose law firms

Fine dining restaurants

Hospitals

Airlines

Full-service stockbroker

Retailing

Personal banking

Boutiques

Law clinics

Fast food restaurants

Warehouse and catalog stores

No frills airlines

Limited service stockbroker

For-profit hospitals

Degree of Interaction and Customization

Deg

ree

of L

abor

Inte

nsity

Low High

High Low

Improving Service Productivity

Separation

Self-service

PostponementFocus

Structure service so customers must go where service is offered

Self-serviceCustomizing at delivery

Restricting the offerings

Strategy Technique

Improving Service Productivity

Modules

Automation

Scheduling

Training

Modular selection of service.

Modular production Separating services that lend

themselves to automation

Precise personnel scheduling

Clarifying the service options Explaining problems Improving employee flexibility

Strategy Technique

Production Process & Technology Alternatives

# Different Products or Parts# Different Products or Parts

CIMCIMFlexible

Manufacturing System

Low HighHigh

General Purpose, NC, General Purpose, NC, CNCCNC

Volume of Products or PartsVolume of Products or Parts

Low

HighHigh

DedicatedDedicatedAutomationAutomation

Areas of Technology

Machine technologyAutomatic identification systems (AIS)Process controlVision systemRobotAutomated storage and retrieval systems

(ASRS)Flexible manufacturing systems (FMS)Computer-integrated manufacturing (CIM)

Machine Technology

Increased precisionIncreased productivityIncreased flexibilityDecreased pollutionDecreased sizeDecreased power requirements

Automatic Identification Systems

Improved data acquisitionIncreased scope of process automation

Process Control

Use of IT to monitor physical processesIncreased process stabilityIncreased process precisionReal-time provision of information for

process evaluationMulti-mode information presentation

Vision Systems

Particular aid to inspectionConsistently accurateNever boredModest costSuperior to individuals performing the

same tasks

Robots

Perform monotonous, or dangerous tasks, or those requiring significant strength or endurance

Enhanced consistency, accuracy, speed strength, power when substituted for human effort

Types of Robots

Automated Storage & Retrieval Systems (ASRS)

Automated placement and withdrawal of parts and products

Particularly useful in inventory and test areas of manufacturing firms

Automated Guided Vehicle

Electronically controlled movement of products and/or individuals

Flexible Manufacturing Systems

Electronic control of server DNC machines and robots or AGVs: Computer controls both the workstation and the material handling equipment

Computer control enhances flexibilityCan economically produce low volume at

high qualityStringent communication requirement

between components within it


AdvantagesFaster, lower cost changes from one part to

anotherLower direct labor costsReduced inventoryConsistent (and hopefully better) quality


DisadvantagesLimited ability to adapt to product or product

mix changesRequires substantial preplanning and

capital expendituresTechnological problems of exact component

positioning and precise timing

Computer Integrated Manufacturing

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

Computer Integrated Manufacturing

Technology in Services

Service ExampleFinancial services

Debit cards, electronic funds transfer, ATMs, Internet stock trading

Education Electronic bulletin boards, on-line journalsUtilities and government

Automated one-man garbage trucks, optical mail sorters, scanners, flood warning systems

Restaurants and foods

Wireless orders from waiters to kitchen, robot butchering, transponders on cars to track drive-thrus

Communication Electronic publishing, interactive TV

Hotels Electronic check-in/check-out, electronic key/lock systems

Technology in Services (cont.)

Service ExampleWholesale/retail trade

Point-of-sale terminals, e-commerce, electronic communication between store and supplier, bar coded data

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

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…Not to be undertaken lightly – expensive!

Sensitivity to the Environment

Make products recyclableUse recycled materialsUse less harmful ingredientsUse light componentsUse less energyUse less materials

Factors Affecting Process AlternativesProduction flexibility

Product volumeProduct variety

TechnologyCostHuman resourcesQualityReliability

These factors These factors reduce the number reduce the number of alternatives!of alternatives!

These factors These factors reduce the number reduce the number of alternatives!of alternatives!

© 1984-1994 T/Maker Co.

Process Strategy. Process, Volume, and Variety Process focus projects, job shops,(machine, print,...

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