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© 2006 Prentice Hall, Inc. 7 – 1
Process, Volume, and VarietyProcess, Volume, and Variety
Process Focusprojects, job shops
(machine, print, carpentry)
Standard Register
Repetitive(autos, motorcycles)
Harley Davidson
Product Focus(commercial
baked goods, steel, glass)Nucor Steel
High VarietyHigh Varietyone or few one or few units per run, units per run, high varietyhigh variety(allows (allows customization)customization)
Changes in Changes in ModulesModulesmodest runs, modest runs, standardized standardized modulesmodules
Changes in Changes in Attributes Attributes (such as grade, (such as grade, quality, size, quality, size, thickness, etc.) thickness, etc.) long runs onlylong runs only
Mass Customization(difficult to achieve, but huge rewards)Dell Computer Co.
Poor Strategy Poor Strategy (Both fixed and (Both fixed and variable costs variable costs
are high)are high)
Low Low VolumeVolume
Repetitive Repetitive ProcessProcess
High High VolumeVolume
VolumeVolumeFigure 7.1Figure 7.1
© 2006 Prentice Hall, Inc. 7 – 2
Accounting
PRINTING DEPT
COLLATING DEPT
GLUING, BINDING, STAPLING, LABELING
POLYWRAP DEPT
SHIPPING
Vendors
Receiving
Warehouse
Purchasing
PREPRESS DEPT
Process Flow DiagramProcess Flow DiagramCustomer
Customer sales representative
Information flowInformation flowMaterial flowMaterial flow
Figure 7.2Figure 7.2
© 2006 Prentice Hall, Inc. 7 – 3
Process StrategiesProcess Strategies
How to produce a product or provide How to produce a product or provide a service thata service that Meets or exceeds customer Meets or exceeds customer
requirementsrequirements
Meets cost and managerial goalsMeets cost and managerial goals
Has long term effects onHas long term effects on Efficiency and production flexibilityEfficiency and production flexibility
Costs and qualityCosts and quality
© 2006 Prentice Hall, Inc. 7 – 4
Process StrategiesProcess Strategies
Four basic strategiesFour basic strategies
Process focusProcess focus
Repetitive focusRepetitive focus
Product focusProduct focus
Mass customizationMass customization
Within these basic strategies there are Within these basic strategies there are many ways they may be implementedmany ways they may be implemented
© 2006 Prentice Hall, Inc. 7 – 5
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
© 2006 Prentice Hall, Inc. 7 – 6
Process FocusProcess Focus
Many Many inputsinputs
High High variety variety
of of outputsoutputs
Print ShopPrint Shop
© 2006 Prentice Hall, Inc. 7 – 7
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
© 2006 Prentice Hall, Inc. 7 – 8
Repetitive FocusRepetitive Focus
Raw Raw materials materials
and and module module inputsinputs
Modules Modules combined combined for many for many
output output optionsoptions
Few Few modulesmodules
Automobile Assembly LineAutomobile Assembly Line
© 2006 Prentice Hall, Inc. 7 – 9
Process Flow DiagramProcess 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
Figure 7.3Figure 7.3
© 2006 Prentice Hall, Inc. 7 – 10
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
© 2006 Prentice Hall, Inc. 7 – 11
Product FocusProduct Focus
Many Many inputsinputs
Output Output variation variation in size, in size, shape, shape,
and and packagingpackaging
Bottling PlantBottling Plant
© 2006 Prentice Hall, Inc. 7 – 12
Product FocusProduct FocusNucor 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
© 2006 Prentice Hall, Inc. 7 – 13
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(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
© 2006 Prentice Hall, Inc. 7 – 14
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
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
© 2006 Prentice Hall, Inc. 7 – 15
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
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
© 2006 Prentice Hall, Inc. 7 – 16
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
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
© 2006 Prentice Hall, Inc. 7 – 17
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
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
© 2006 Prentice Hall, Inc. 7 – 18
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
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 – 19
Mass CustomizationMass Customization
The rapid, low-cost production of The rapid, low-cost production of goods and service to satisfy goods and service to satisfy increasingly unique customer increasingly unique customer desiresdesires
Combines the flexibility of a Combines the flexibility of a process focus with the efficiency process focus with the efficiency of a product focusof a product focus
© 2006 Prentice Hall, Inc. 7 – 20
Mass CustomizationMass Customization
Vehicle modelsVehicle models 140140 260260Vehicle typesVehicle types 1818 1,2121,212Bicycle typesBicycle types 88 1919Software titlesSoftware titles 00 300,000300,000Web sitesWeb sites 00 46,412,16546,412,165Movie releasesMovie releases 267267 458458New book titlesNew book titles 40,53040,530 77,44677,446Houston TV channelsHouston TV channels 55 185185Breakfast cerealsBreakfast cereals 160160 340340Items (SKUs) in Items (SKUs) in 14,00014,000 150,000150,000 supermarketssupermarkets
Number of ChoicesNumber of ChoicesEarly 21stEarly 21st
ItemItem Early 1970sEarly 1970s Century Century
Table 7.1Table 7.1
© 2006 Prentice Hall, Inc. 7 – 21
Mass CustomizationMass Customization
Modular techniquesModular techniques
Mass Customization
Effective Effective scheduling scheduling techniquestechniques
Rapid Rapid throughput throughput techniquestechniques
Repetitive FocusRepetitive FocusModular designModular design
Flexible equipmentFlexible equipment
Process-FocusedProcess-FocusedHigh variety, low volumeHigh variety, low volume
Low utilization Low utilization (5% to 25%)(5% to 25%)General-purpose equipmentGeneral-purpose equipment
Product-FocusedProduct-FocusedLow variety, high volumeLow variety, high volume
High utilization High utilization (70% to 90%)(70% to 90%)Specialized equipmentSpecialized equipment
Figure 7.5Figure 7.5
© 2006 Prentice Hall, Inc. 7 – 22
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$$
Low volume, high varietyLow volume, high varietyProcess AProcess A
Fixed cost Process A Fixed cost Fixed cost
Process BProcess BFixed cost Process C
Tota
l cos
t
Tota
l cos
t
Total cost
Total cost
Total costTotal cost
VV11(2,857)(2,857) VV22(6,666)(6,666)
400,000 400,000
300,000 300,000
200,000 200,000
VolumeVolume
$$
Figure 7.6Figure 7.6
© 2006 Prentice Hall, Inc. 7 – 23
Changing ProcessesChanging Processes
Difficult and expensiveDifficult and expensive
May mean starting overMay mean starting over
Process strategy determines Process strategy determines transformation strategy for an transformation strategy for an extended periodextended period
Important to get it rightImportant to get it right
© 2006 Prentice Hall, Inc. 7 – 24
Process Analysis and Process Analysis and DesignDesign
Flow Diagrams - Shows the movement Flow Diagrams - Shows the movement of materialsof materials
Time-Function Mapping - Shows flows Time-Function Mapping - Shows flows and time frameand time frame
Value Stream Mapping - Shows flows Value Stream Mapping - Shows flows and time and value added beyond the and time and value added beyond the immediate organizationimmediate organization
Process Charts - Uses symbols to show Process Charts - Uses symbols to show key activitieskey activities
Service Blueprinting - focuses on Service Blueprinting - focuses on customer/provider interactioncustomer/provider interaction
© 2006 Prentice Hall, Inc. 7 – 25
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
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 0 day0 day 1 day1 day
52 days52 daysFigure 7.7Figure 7.7
© 2006 Prentice Hall, Inc. 7 – 26
Time-Function MappingTime-Function Mapping
CustomerCustomer
SalesSales
Production Production controlcontrol
PlantPlant
WarehouseWarehouse
TransportTransport Move
Receive product
Extrude
Wait
Order product
Process order
Wait
1 day1 day 2 days2 days 1 day1 day 1 day1 day 1 day1 day
6 days6 days
Figure 7.7Figure 7.7
© 2006 Prentice Hall, Inc. 7 – 28
Service BlueprintService Blueprint
Focuses on the customer and Focuses on the customer and provider interactionprovider interaction
Defines three levels of interactionDefines three levels of interaction
Each level has different Each level has different management issuesmanagement issues
Identifies potential failure pointsIdentifies potential failure points
© 2006 Prentice Hall, Inc. 7 – 29
Service BlueprintService BlueprintPersonal Greeting Service Diagnosis Perform Service Friendly Close
Customer arrives for service
Warm greeting and obtain
service request
Direct customer to waiting room Notify
customer the car is ready
Customer departs
Customer pays bill
Perform required work
Prepare invoice
YesYesYesYes
LevelLevel#3#3
LevelLevel#1#1
LevelLevel#2#2
Potential failure pointPotential failure point
Figure 7.9Figure 7.9
NoNo
Notifycustomer
and recommendan alternative
providerStandard request
Determine specifics
NoNo
Canservice be
done and does customer approve?
© 2006 Prentice Hall, Inc. 7 – 30
Process Analysis ToolsProcess Analysis Tools
Flowcharts provide a view of the Flowcharts provide a view of the big picturebig picture
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 detailProcess charts show detail
Service blueprint focuses on Service blueprint focuses on customer interactioncustomer interaction
© 2006 Prentice Hall, Inc. 7 – 31
Service FactoryService Factory Service ShopService Shop
Degree of CustomizationDegree of Customization
LowLow HighHigh
Deg
ree
of
Lab
or
Deg
ree
of
Lab
or
LowLow
HighHigh
Mass ServiceMass Service Professional ServiceProfessional Service
Service Process MatrixService Process Matrix
Commercial banking
Private banking
General-purpose law firms
Law clinicsSpecialized hospitals
Hospitals
Full-service stockbroker
Limited-service stockbroker
Retailing
Boutiques
Warehouse and catalog stores
Fast food restaurants
Fine-dining restaurants
Airlines
No frills airlinesFigure 7.10Figure 7.10
© 2006 Prentice Hall, Inc. 7 – 32
Service Process MatrixService Process Matrix
Labor involvement is highLabor involvement is high Selection and training highly importantSelection and training highly important Focus on human resourcesFocus on human resources Personalized servicesPersonalized services
Mass Service and Professional ServiceMass Service and Professional Service
Service Factory and Service ShopService Factory and Service Shop Automation of standardized servicesAutomation of standardized services Low labor intensity responds well to Low labor intensity responds well to
process technology and schedulingprocess technology and scheduling Tight control required to maintain Tight control required to maintain
standardsstandards
© 2006 Prentice Hall, Inc. 7 – 33
Improving Service Improving Service ProductivityProductivity
StrategyStrategy TechniqueTechnique ExampleExample
SeparationSeparation Structure service so Structure service so customers must go customers must go where service is where service is offeredoffered
Bank customers go to Bank customers go to a manager to open a a manager to open a new account, to loan new account, to loan officers for loans, and officers for loans, and to tellers for depositsto tellers for deposits
Self-serviceSelf-service Self-service so Self-service so customers examine, customers examine, compare, and compare, and evaluate at their own evaluate at their own pacepace
Supermarkets and Supermarkets and department stores, department stores, internet orderinginternet ordering
Table 7.3Table 7.3
© 2006 Prentice Hall, Inc. 7 – 34
StrategyStrategy TechniqueTechnique ExampleExample
PostponementPostponement Customizing at Customizing at deliverydelivery
Customizing vans at Customizing vans at delivery rather than at delivery rather than at productionproduction
FocusFocus Restricting the Restricting the offeringsofferings
Limited-menu Limited-menu restaurantrestaurant
ModulesModules Modular selection of Modular selection of service, modular service, modular productionproduction
Investment and Investment and insurance selection, insurance selection, prepackaged food prepackaged food modules in modules in restaurantsrestaurants
Improving Service Improving Service ProductivityProductivity
Table 7.3Table 7.3
© 2006 Prentice Hall, Inc. 7 – 35
StrategyStrategy TechniqueTechnique ExampleExample
AutomationAutomation Precise personnel Precise personnel schedulingscheduling
Automatic teller Automatic teller machinesmachines
SchedulingScheduling Precise personnel Precise personnel schedulingscheduling
Scheduling ticket Scheduling ticket counter personnel at counter personnel at 15-minute intervals at 15-minute intervals at airlinesairlines
TrainingTraining Clarifying the service Clarifying the service options, explaining options, explaining how to avoid how to avoid problemsproblems
Investment counselor, Investment counselor, funeral directors, funeral directors, after-sale after-sale maintenance maintenance personnelpersonnel
Improving Service Improving Service ProductivityProductivity
Table 7.3Table 7.3
© 2006 Prentice Hall, Inc. 7 – 36
Equipment and TechnologyEquipment and Technology
Often complex decisionsOften complex decisions
Possible competitive advantagePossible competitive advantage FlexibilityFlexibility
Stable processesStable processes
May allow enlarging the scope of the May allow enlarging the scope of the processesprocesses
© 2006 Prentice Hall, Inc. 7 – 37
Improving Service Improving Service ProcessesProcesses
LayoutLayout Product exposure, customer Product exposure, customer
education, product enhancementeducation, product enhancement
Human ResourcesHuman Resources Recruiting and trainingRecruiting and training
Impact of flexibilityImpact of flexibility