Outline

Four 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
consumer
Integrated the Web into every aspect of
its business
Operates with six days inventory
Builds computers rapidly, at low cost, and
only when ordered
Research focus on software designed to
make installation and configuration of its
PCs fast and simple
Process Fit: Volume vs.
Variety
Low-Volume Medium- High-Volume
(Intermittent) Volume (Continuous)
(Modular)

High Variety Process Mass

Customizatio
One or few focus: job n
units per run shops, (difficult to
(customizatio
(machine, achieve, but
n) huge
Medium Variety print, Repetitive rewards)
(Change carpentry)
(autos, motorcycles) Dell
product with Harley DavidsonComputer Co.
standardized
modules)
Low Variety Poor strategy Product focus
(Similar (paper, steel,
products with (High
variable cost) glass)
minor
changes)
Types of Process
Strategies
Classify the process strategies by the level continuum:

Process- Repetitive- Product-

Focused Focused Focused

Continuu
m
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

Product
•Other names Operati A
on
•Intermittent process 11 22 33
•Job shop
Product
B
Process-Focused Strategy
Examples

Bank

Hospital
1995
Corel
Corp.

Machi
© 1995 Corel Corp.
ne
Shop © 1995 Corel Corp.
Process-Focused
Production
Variances of Process
Focused Production
•University
education
•Swimming pool
remodeling
-
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
Products A &
B
11 22 33
Operatio
n
Product-Focused Examples
Soft Drinks
(Continuou
s, then
Discrete)

© 1995
Corel Corp.

Light Bulbs
Paper
© 1984-1994 T/Maker Co.
(Discrete)
(Continuous) © 1995 Corel Corp.
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 lines
Characterized by modules
 Parts & assemblies made previously
Modules combined for many
output options
Other names
 Assembly line
 Production line
Repetitive-Focused
Strategy - Examples
Clothe Fas
s t
Dryer McDonald’s Foo
McDonald’s
d
over 95 billion served
over 95 billion served

© 1995 Corel Corp.

Truc
k

© 1984-1994 T/Maker Co.

© 1995 Corel Corp.

Strategy -
Considerations
More structured than process-focused,
less structured than product focused
Enables quasi-customization
Using modules, it enjoys economic
advantage of continuous process, and
custom advantage of low-volume, high-
variety model
Harley-Davidson
Process Fit: Volume vs.
Variety
Low-Volume Medium- High-Volume
(Intermittent) Volume (Continuous)
(Modular)

High Variety Process Mass

Customizatio
One or few focus: job n
units per run shops, (difficult to
(customizatio
(machine, achieve, but
n) huge
Medium Variety print, Repetitive rewards)
(Change carpentry)
(autos, motorcycles) Dell
product with Harley DavidsonComputer Co.
standardized
modules)
Low Variety Poor strategy Product focus
(Similar (paper, steel,
products with (High
variable cost) glass)
minor
changes)
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.
 Repetitive Focus
Assembly line
Modular Design
Flexible
equipment
Modular
techniq
ues

Mass
Customization
Scheduling Rapid
techniques throughp
ut
Process focus Product focus
Intermittent Continuous
process Process
High variety, low Low variety, high
volume volume
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
Automatic Guided Vehicles
(AGV)
Material handling
machines
© 1984-1994 T/Maker Co.

Used to move parts

& equipment in
manufacturing
May be used to
deliver mail & meals
in service facilities
Production Technology
FMS
Using automated
Auto Tool
machines (DNC) & Chg.
materials handling
equipment together Machine 1

Often connected to Robot

centralized computer or AGV
Also called automated Computer
work cell
Auto Tool
Chg.
Machine 2
Computer Integrated
Manufacturing (CIM)
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
Tools 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 service
Objective
 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 Map
Order Recei
Customer Produ ve
ct produ
Proce ct
Sales ss
Order
Order

Producti Wait
on
control
Order

Product
Plant A Print
WIP

Product
Warehouse Wait Wait Wait

Product
WIP
Plant B Extru
WIP
WIP

de

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 9 days 1 day

Process Chart Example
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
Showing Sensitivity to
the Environment
Make products recyclable
Use recycled materials
Use less harmful ingredients
Use light components
Use less energy
Use less materials
 Crossover Chart
Process A: low volume, high variety
Process B: Repetitive
Process C: High volume, lowA variety
s s
ce
ro e ssB
P c
- Pr o
st c ost -
o al C
c Tot r o cess
t al l cost
- P
To t a
To

Fixed cost - Process C

Fixed cost - Process B
Fixed cost - Process A

Process A Process B Process C Lowest cost process

Facility and Capacity
Planning
Facility planning answers:
How much long-range capacity is
needed
When more capacity is needed
Where facilities should be located
(location)
How facilities should be arranged
(layout)
Definition and Measures of
Capacity
Capacit The maximum output of a
y: given in a
system
period
Designed The maximum capacity that
Capacity: achieved
can be under ideal
conditions
Effective The percent of design capacity
capacity: expect
actually
ed
Utilization
Measure of planned or actual
capacity usage of a facility, work
center, or machine
Expected capacity
Utilization=
Capacity
Planned hours to be used
=
Total hours available
Efficiency
Measure of how well a facility or
machine is performing when used
Actual output
Efficiency =
Effectivecapacity
Actual output in units
=
Standard output in units
Average actual time
=
Standard time
Capacity Planning Process
(Apply to Examples)
Develop Quantitative
Forecast
Alternative Factors
Demand
Plans (e.g., Cost)

Compute Evaluate Qualitative

Effective Capacity Factors
Capacity Plans (e.g., Skills)

Compute Select Best

Implement
Needed Capacity
Best Plan
Capacity Plan
 Approaches to Capacity
Expansion
Expected Demand

New Capacity
Demand

Time in Years

Capacity leads demand with an incremental expansion

 Approaches to Capacity
Expansion
Expected Demand
New Capacity
Demand

Time in Years
Capacity lags demand with an incremental expansion
 Approaches to Capacity
Expansion
Expected Demand
New Capacity
Demand

Time in Years
Attempts to have an average capacity,
with an incremental expansion
Breakeven Analysis
Technique for evaluating process & equipment
alternatives
Objective: Find the point ($ or units) at which total
cost equals total revenue
Fixed costs: costs that continue even if no units are
produced: depreciation, taxes, debt, mortgage
payments
Variable costs: costs that vary with the volume of
units produced: labor, materials, portion of utilities
Breakeven Chart
Cost in Dollars (Thousands)

Total revenue line

Breakeven point Profit
Total cost = Total revenue
Total cost line

Variable cost

Loss Fixed cost

Volume (units/period)
 Crossover Chart
Process A: low volume, high variety
Process B: Repetitive
Process C: High volume, lowA variety
s s
ce
ro e ssB
P c
- Pr o
st c ost -
o al C
c Tot r o cess
t al l cost
- P
To t a
To

Fixed cost - Process C

Fixed cost - Process B
Fixed cost - Process A

Process A Process B Process C Lowest cost process

Managing Existing
Capacity
Demand Capacity
Management
♦ Vary prices Management
Vary staffing
♦ Vary promotion Change equipment
& processes
♦ Change lead Change methods
times Redesign the
(e.g., backorders) product for faster
♦ Offer processing
complementary
products
Complementary Products
Sales (Units)
5,000
Total
4,000
Snow-
3,000 mobiles
2,000
1,000 Jet Skis
0
J M M J S N J M M J S N J
Time (Months)
Attaining Lean Production
The fundamental rethinking and radical redesign
of business processes to bring about dramatic
improvements in performance
Focus on inventory reduction
Modulization, postponed differentiation
Develop close relationships with suppliers
Eliminate all but value-added activities
Reevaluating the process of planning,
scheduling, and transportations across
boundaries
Techniques for Improving
Process Efficiency of
Service
Strategy Technique
Separation Structure service so
customers must go where
service is offered
Self-service so customers
Self-service examine, compare and
evaluate at their own pace
Customizing at delivery
Restricting the offerings
Postponement
Focus
Techniques for Improving
Process Efficiency of
Service
Modular selection of service. Modular
Modulizarion production
Separating services that lend
themselves to automation
Automation
Precise personnel scheduling
Clarifying the service options
Explaining problems
Scheduling Improving employee flexibility
Training