POM J7 Process Design

7/21/2019 POM J7 Process Design

1/49

Chapter 7

Process Design


2/49

Process Strategies

The objective of a process strategy is tobuild a production process that meets

customer requirements and productspecifications within cost and othermanagerial constraints


3/49

Process Strategies

How to produce a product or provide aservice that

Meets or exceeds customer requirements

Meets cost and managerial goals

Has long term effects on

Efficiency and production flexibility Costs and quality


4/49

Process Strategies

Four basic strategies

1. Process focus

2. Repetitive focus3. Product focus

4. Mass customization

Within these basic strategies there are manyways they may be implemented


5/49

Process, Volume, and Variety

Process Focusprojects, job shops

(machine, print, hospitals,restaurants)

Arnold Palmer Hospital

Repetitive(autos, motorcycles,

home appliances)Harley-Davidson

Product Focus(commercial bakedgoods, steel, glass,

beer)Frito-Lay

High Varietyone or few unitsper run,(allows

customization)

Changes inModulesmodest runs,standardizedmodules

Changes inAttributes (suchas grade, quality,size, thickness,etc.)long runs only

Mass Customization(difficult to achieve, but

huge rewards)Dell Computer

Poor Strategy (Bothfixed and variable

costs are high)

LowVolume

RepetitiveProcess

HighVolume

VolumeFigure 7.1


6/49

Process Focus

Facilities are organized around specificactivities or processes

General purpose equipment and skilled

personnel High degree of product flexibility

Typically high costs and low equipmentutilization

Product flows may vary considerably makingplanning and scheduling a challenge


7/49

Process Focus Many inputs(surgeries, sick patients,

baby deliveries, emergencies)

Many different outputs(uniquely treated patients)

Many departments andmany routings

Figure 7.2(a)

(low volume, high variety,intermittent processes)

Hospital, Machine Shop


8/49

Repetitive Focus

Facilities often organized as assembly lines

Characterized by modules with parts andassemblies made previously

Modules may be combined for manyoutput options

Less flexibility than process-focusedfacilities but more efficient


9/49

Repetitive

Focus

Raw materials andmodule inputs

Modules combined for manyOutput options

(many combinations of motorcycles)

Fewmodules

(multiple engine models,wheel modules)

Figure 7.2(b)

(modular)

Harley Davidson


10/49

Product Focus

Facilities are organized by product

High volume but low variety of products

Long, continuous production runs enableefficient processes

Typically high fixed cost but low variablecost

Generally less skilled labor


11/49

Product Focus Few Inputs(corn, potatoes, water,

seasoning)

Output variations in size, shape,and packaging

(3-oz, 5-oz, 24-oz package labeledfor each material)

Figure 7.2(c)

(low-volume, high variety,continuous process)

Frito-Lay


12/49

Product Focus

Nucor Steel Plant

Continuouscaster

Continuous cast steel shearedinto 24-ton slabs

Hot tunnel furnace - 300 ft

Hot mill for finishing, cooling, and coiling

D

E F

GH

I

Scrap

steel

Ladle of molten steelElectricfurnace

A

BC


13/49

Mass Customization

The rapid, low-cost production of goodsand service to satisfy increasinglyunique customer desires

Combines theflexibility of aprocess focuswith the efficiencyof a product focus


14/49

Mass Customization

Table 7.1

Vehicle models140 286

Vehicle types 18 1,212

Bicycle types 8 211,000

Software titles 0 400,000

Web sites 0 162,000,000

Movie releases per year 267 765

New book titles40,530 300,000

Houston TV channels 5 185

Breakfast cereals 160 340Items (SKUs) in 14,000 150,000

supermarketsLCD TVs 0 102

Number of ChoicesItem 1970s 21stCentury


15/49

Mass

Customization

Many parts andcomponent inputs

Many output versions(custom PCs and notebooks)

Many modules

(chips, hard drives, software,cases)

Figure 7.2(d)

(high-volume, high-variety)

Dell Computer


16/49

Mass Customization

Mass Customization

Effectivescheduling

techniques

Rapidthroughputtechniques

Repetitive FocusFlexible peopleand equipment

Process-FocusedHigh variety, low volume

Low utilization (5% to 25%)General-purpose equipment

Product-FocusedLow variety, high volume

High utilization (70% to 90%)Specialized equipment

Figure 7.3

Modulartechniques

AccommodatingProduct and Process

Design

Responsive Supply

Chains


17/49

Mass Customization

Imaginative and fast product design

Rapid process design

Tightly controlled inventorymanagement

Tight schedules

Responsive supply chain partners


18/49


19/49

The comparison of processes can be furtherenhanced by looking at the point where the total

cost of the processes changes.

Crossover Chart.A chart of costs at the possible volumes for more

than one process.


20/49

Example 1:

Kleber Enterprises would like to evaluate 3 accountingsoftware (A, B and C) to support changes in its internal

accounting processes. The resulting processes will have

cost structure similar to these shown is the figure. The

costs of the software for these processes are

Total Fixed

Costs

$ required per

actg report

A $200,000 $60

B $300,000 $25

C $400,000 $10


21/49

Crossover Charts

Fixed costs

Variablecosts

$

High volume, low variety

Process C

Fixed costs

Variablecosts$

Repetitive

Process B

Fixed costs

Variablecosts$

Low volume, high variety

Process A

Fixed costProcess A

Fixed costProcess B

Fixed costProcess C

V1(2,857) V2 (6,666)

400,000

300,000

200,000

Volume

$

Figure 7.4


22/49

Focused Processes

Focus brings efficiency

Focus on depth of product line

rather than breadth

Focus can be

Customers

Products

Service

Technology


23/49

Changing Processes

Difficult and expensive

May mean starting over

Process strategy determinestransformation strategy for anextended period

Important to get it right


24/49

Process Analysis and Design

Is the process designed to achieve acompetitive advantage?

Does the process eliminate steps that do notadd value?

Does the process maximize customer value?

Will the process win orders?


25/49

Process Analysis and Design

Flow Charts - Shows the movement of materials

Time-Function Mapping - Shows flows and time

frame


26/49

Tools that help us understand the complexities

of process design and redesign:

1. Flow Chart

2. Time-Function mapping

3. Value-Stream Mapping

4. Process Charts

5. Service Blueprinting


27/49

Flow Chart

A drawing used to analyze movement of people or

material.


28/49

Time-function Mapping (or process mapping)

A flow chart with time added on the horizontal axis.


29/49

Value-stream Mapping (VSM)

A process that helps managers understand how to

add value in the flow of material and informationthrough the entire production process.

Example 2

Motorola has received an order for 11,000 cell phones

per month and wants to understand how the order willbe processed through manufacturing.

Value-Stream Mapping - Showsflows and time and value addedbeyond the immediate organization


30/49

Value-Stream Mapping

Figure 7.6


31/49

Process Charts

Charts that use symbols to analyze the movement

of people or material.


32/49

Service Blueprinting

A process analysis technique that lends itself to a

focus on the customer and the providers

interaction with the customers.

Focuses on the customer and provider

interaction Defines three levels of interaction

Each level has different management

issues

Identifies potential failure points


33/49


34/49

Process Analysis Tools

Flowcharts provide a view of the bigpicture

Time-function mapping adds rigor and

a time element Value-stream analysis extends to

customers and suppliers

Process charts show detail Service blueprint focuses on customer

interaction


35/49

Service Factory Service Shop

Degree of Customization

Low High

DegreeofLabor

Low

High

Mass Service Professional Service

Service Process Matrix

Commercialbanking

Privatebanking

General-purpose law firms

Law clinics

Specializedhospitals

Hospitals

Full-servicestockbroker

Limited-servicestockbroker

Retailing

Boutiques

Warehouse andcatalog stores Fast-foodrestaurantsFine-diningrestaurants

Airlines

No-frillsairlines

Figure 7.9

Digitalorthodontics

Traditionalorthodontics


36/49


Labor involvement is high

Selection and training highly important

Focus on human resources

Personalized services

Mass Service and Professional Service


37/49


Service Factory and Service Shop

Automation of standardized services

Low labor intensity responds well toprocess technology and scheduling

Tight control required to maintainstandards


38/49

Techniques for improving service productivity

Layout and Human Resources


39/49

Production Technology

1. Machine TechnologyComputer numerical control (CNC)machinery

with its own computer and memory.

2. Automatic Identification Systems (AISs)

A system for transforming data into electronic

form, e.g., bar codes

Radio frequency identification (RFID)A wireless system in which integrated circuits

with antennas send radio waves.


40/49

3. Process Control

Use of information technology to control process.

4. Vision SystemsUse of video camera and computer technology in

inspection.

5. Robots

6. Automated Storage and Retrieval Systems (ASRSs)

Computer-controlled warehouses that provide for

the automatic placement of parts into and from

designated places within a warehouse.

7. Automated Guided Vehicles (AGVs)

Electronically guided and controlled cart used to

move materials.


41/49

8. Flexible Manufacturing Systems (FMSs)

A system that uses an automated work cellcontrolled by electronic signals from a

common centralized computer facility.

9. Computer Integrated Manufacturing (CIM)

A manufacturing system in which CAD, FMS,inventory control, warehousing and shipping

are integrated.


42/49

Examples of Technology Impact on Service


43/49

Process Redesign

The fundamental rethinking of businessprocesses to bring about dramaticimprovements in performance

Relies on reevaluating the purpose of the

process and questioning both the purpose andthe underlying assumptions

Requires reexamination of the basic processand its objectives

Focuses on activities that cross functional lines

Any process is a candidate for redesign


44/49

Sustainability

Resources

Operations is primary user

Reducing use is win-win Recycling

Burn, bury, or reuse waste

Recycling begins at design


45/49

Sustainability

Regulations

Laws affect transportation, waste,and noise

Increasing regulatory pressure

Reputation

Leadership may be rewarded

Bad reputation can have negativeconsequences


46/49

Bagot Copy Shop has a volume of 125,000 black-

and-white copies per month. Two salesmen havemade presentations to Gordon Bagot for machines

of equal quality and reliability. The Print Shop 5 has

a cost of $2,000 per month and a variable cost of

$0.03. The other machine (a Super Copy 100) willcost only $1,500 per month but the toner is more

expensive, driving the cost up to $0.035. If cost and

volume are the only considerations, which machine

should Bagot purchase?


47/49

Reference:

Operations Management by Jay Heizer and

Barry Render, 10thedition, 2011


48/49

Suppose a manufacturer has identified the following

options for obtaining a machined part:

1. It can buy the part at $200 per unit (including

materials).2. It can make the part on a semi-automated lathe at $75

per unit (including materials).

3. It can make the part on a specialized machine at $15

per unit (including materials).

There is negligible fixed cost if the item is purchased;

$80,000 fixed costs for the semi-automatic lathe; and a

$200,000 fixed costs for the specialized machine.

a. Determine which option is best if the manufacturer

needs 1000 units of the part.

b. Determine the range for which each option is best.

(cross-over points).


49/49

A manager is trying to decide whether to purchase a certain

part or to have it produced internally. Internal production could

use either of the two processes. One would entail a variable cost

of $17 per unit and an annual fixed cost of $200,000; the otherwould entail a variable cost of $14 per unit and an annual fixed

cost of $240,000. Three vendors are willing to provide the parts.

Vendor A has a price of $20 per unit for any volume up to

30,000 units. Vendor B has a price of $22 per unit for demand of1,000 units or less, and $18 per unit for larger quantity. Vendor

C offers a price of $21 per unit for the 1st1,000 units and $19

per unit for additional units.

a. The manager anticipates an annual volume of 10,000 units,which alternative is the best from a cost standpoint?

b. Determine the range for which each alternative is best. Are

there any alternatives that are never best? Why?

Documents

POM J7 Process Design