pom - j. galván 1 production and operations management ch. 7: process strategy

POM - J. GalvánPOM - J. Galván 11

PRODUCTION AND PRODUCTION AND OPERATIONS OPERATIONS

MANAGEMENTMANAGEMENT

Ch. 7: Process StrategyCh. 7: Process Strategy


Process StrategyProcess Strategy Process strategyProcess strategy is the pattern of decisions is the pattern of decisions

made in managing processes so that they will made in managing processes so that they will achieve their competitive priorities.achieve their competitive priorities.

A process involves the use of an A process involves the use of an organization’s resources to provide something organization’s resources to provide something of value.of value.

Major process decisions include:Major process decisions include:• Process StructureProcess Structure• Customer InvolvementCustomer Involvement• Resource FlexibilityResource Flexibility• Capital IntensityCapital Intensity


Major Decisions for Major Decisions for Effective Process DesignEffective Process Design


A good process strategy for a service process depends first and foremost on the type and amount of customer contact.

Customer contact is the extent to which the customer is present, is actively involved, and receives personal attention during the process.

PeoplePeople What is processedWhat is processed PossessionsPossessions

Active, visibleActive, visible Contact intensityContact intensity Passive, out of sightPassive, out of sight

PersonalPersonal Personal attentionPersonal attention ImpersonalImpersonal

Face-to-faceFace-to-face Method of deliveryMethod of delivery Regular mailRegular mail

PresentPresent Physical presencePhysical presence AbsentAbsent

High ContactHigh Contact DimensionDimension Low ContactLow Contact

Process Structures in Services Process Structures in Services


Customer-Contact Matrix for Customer-Contact Matrix for Service ProcessesService Processes

Less Customer Contact and CustomizationLess Customer Contact and Customization

ServiceService Package Package

Front office

Hybrid office

Back office

(1) (2) (3)High interaction with Some interaction with Low interaction withcustomers, highly customers, standard customers, standardizedcustomized service services with some options services

ProcessCharacteristics

(1)Flexible flows,complex work withmany exceptions

(2)Flexible flows withsome dominantpaths, moderate job complexity withsome exceptions

(3)Line flows, routinework easilyunderstood byemployeesL

ess

Co

mp

lexi

ty, L

ess

Div

erg

ence

, Mo

re L

ine

Flo

ws


Decision Patterns for Decision Patterns for Service ProcessesService Processes

Front office

Hybrid office

Back office

Low High

Low customer-contact process

• Less complexity, less divergence, more line flows

• Less customer involvement• Less resource flexibility• Capital intensity varies with

volume..

High customer-contact process

• More complexity, more divergence, more flexible flows

• More customer involvement• More resource flexibility• Capital intensity varies with

volume.

Major process decisions


Front office in servicesFront office in services


Back officeBack office


Product-Process Matrix for Product-Process Matrix for ProcessesProcesses

(1)(1) (2)(2) (3)(3) (4)(4)Low-volumeLow-volume Multiple products with low Multiple products with low Few majorFew major High volume, highHigh volume, highproducts, madeproducts, made to moderate volume to moderate volume productsproducts standardization,standardization,to customer to customer higherhigher Continuous Flow Continuous Flow orderorder volumevolume

ProcessProcessCharacteristicsCharacteristics

(1)(1)Complex and highly Complex and highly customized process, customized process, unique sequence of unique sequence of taskstasks

(2)(2)Disconnected line Disconnected line flows, moderately flows, moderately complex workcomplex work

(3)(3)Connected line, , Connected line, , highly repetitive workhighly repetitive work

(4)(4)Continuous flowsContinuous flows

Les

s C

om

ple

xity

, L

ess

Div

erg

ence

, M

ore

Lin

e F

low

sL

ess

Co

mp

lexi

ty,

Les

s D

ive

rgen

ce,

Mo

re L

ine

Flo

ws

Less Customization and Higher VolumeLess Customization and Higher Volume

Product DesignProduct Design

Continuousprocess

Jobprocess

Lineprocess

Large batchprocess

Small batchprocess

Batch Processes


Decision Patterns for Decision Patterns for Manufacturing ProcessesManufacturing Processes

Major process decisions

Continuousprocess

Jobprocess

Lineprocess

Large batchprocess

Small batchprocess

Batch Processes

High-Volume, make-to-stock process

• Less complexity, less divergence, more line flows

• Less customer involvement• Less resource flexibility• More capital intensity

Low-Volume, make-to-order process

• More complexity, more divergence, more flexible flows

• More customer involvement• More resource flexibility• Less capital intensity

Low High


The Big Picture King Soopers BakeryThe Big Picture King Soopers Bakery


Decision-making example Decision-making example


The Job ShopThe Job Shop


AIRPLANE JOB SHOPAIRPLANE JOB SHOP


SMALL JOB SHOPSMALL JOB SHOP


The Large Batch The Large Batch (Cell, Flow or Hybrid Shop)(Cell, Flow or Hybrid Shop)


The Assembly LineThe Assembly Line


ASSEMBLY LINE (1930)ASSEMBLY LINE (1930)


MODERN ASSEMBLY LINEMODERN ASSEMBLY LINE


CHINESE ASSEMBLY LINECHINESE ASSEMBLY LINE


CONTINUOUS PRODUCTION CONTINUOUS PRODUCTION PROCESS (OLD)PROCESS (OLD)


MODERN CONTINUOUS MODERN CONTINUOUS PRODUCTION PROCESSPRODUCTION PROCESS


Low Medium HighProduct Volume

Jumbled

Dominant

Line

Pro

cess

Cho

ice

Greater need for flexibility

Greater need for efficiency

Technology and the Product/Process MatrixTechnology and the Product/Process Matrix

Technology decisions tend to be long-term in nature and greatly influence which products and services a firm is capable of providing to its customers profitably.


Tools for Process DesignTools for Process Design

Flow DiagramsFlow Diagrams Process ChartsProcess Charts Time-Function/Process MappingTime-Function/Process Mapping Work Flow AnalysisWork Flow Analysis


Flow Flow DiagramsDiagrams



Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*

* = Points critical to the success of the service Figure 3.7



Repair authorized

Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*

Customer departs with car

Repair not authorized




Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*



Service visible to customerRepair authorized




Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*


Checkparts

availability†

Order parts

Parts available

Parts not available



Perform work†

* = Points critical to the success of the service † = Points at which failure is most often experienced Figure 3.7



Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*


Checkparts

availability†

Perform work†

Order parts

Inspect/ test and repair

Perform corrected

work

Corrective work necessary


Parts not available

Parts available


Repair complete




Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*


Checkparts

availability†

Order parts

Service not visible to customer


Parts available


Perform work†


Perform corrected

work


Parts not available

Repair complete




* = Points critical to the success of the service † = Points at which failure is most often experienced

Customer drops off

car

Mechanic makes

diagnosis*

Discuss needed

work with customer*


Collect payment

Notify customer

Checkparts

availability†

Order parts

Repair complete

Figure 3.7


Parts available


Service not visible to customer

Perform work†


Perform corrected

work


Parts not available


Process ChartsProcess Charts


Process: Emergency room admissionSubject: Ankle injury patientBeginning: Enter emergency roomEnding: Leave hospital

Step no.

Time (min)

Distance (ft)

Summary

Number of stepsActivity

Time (min)

Distance (ft)

Transport Operation

Inspect

StoreDelay

Step description

Insert Step

Append Step

Remove Step

Process ChartsProcess Charts


Process Process ChartsCharts


1 Enter emergency room, approach patient window 2 Sit down and fill out patient history3 Nurse escorts patient to ER triage room4 Nurse inspects injury5 Return to waiting room

6 Wait for available bed 7 Go to ER bed8 Wait for doctor9 Doctor inspects injury and questions patient

10 Nurse takes patient to radiology

11 Technician x-rays patient12 Return to bed in ER13 Wait for doctor to return14 Doctor provides diagnosis and advice15 Return to emergency entrance area

16 Check out17 Walk to pharmacy18 Pick up prescription 19 Leave the building

Step no.

Time (min)

Distance (ft)

Summary


Time (min)

Distance (ft)

Transport Operation

Inspect

StoreDelay

Step description

Insert Step

Append Step

Remove Step




1 0.50 15 X Enter emergency room, approach patient window 2 10.0 - X Sit down and fill out patient history3 0.75 40 X Nurse escorts patient to ER triage room4 3.00 - X Nurse inspects injury5 0.75 40 X Return to waiting room

6 1.00 - X Wait for available bed 7 1.00 60 X Go to ER bed8 4.00 - X Wait for doctor9 5.00 - X Doctor inspects injury and questions patient

10 2.00 200 X Nurse takes patient to radiology

11 3.00 - X Technician x-rays patient12 2.00 200 X Return to bed in ER13 3.00 - X Wait for doctor to return14 2.00 - X Doctor provides diagnosis and advice15 1.00 60 X Return to emergency entrance area

16 4.00 - X Check out17 2.00 180 X Walk to pharmacy18 4.00 - X Pick up prescription 19 1.00 20 X Leave the building

Step no.

Time (min)

Distance (ft)

Summary


Time (min)

Distance (ft)

Transport Operation

Inspect

StoreDelay

Step description

Insert Step

Append Step

Remove Step









Step no.

Time (min)

Distance (ft)

Summary


Time (min)

Distance (ft)

Transport 9 11 815 Operation 5 23 —

Inspect 2 8 —

Store — — —Delay 3 8 —

Step description

Insert Step

Append Step

Remove Step


SimulationSimulation



Figure 3.9(a)



Figure 3.9(b)



Figure 3.9(c)



Figure 3.9(d)


TOOLS FOR AUTOMATIONTOOLS FOR AUTOMATION

How has been automation How has been automation implemented through time?implemented through time?


Computer Numerically Controlled Machine Computer Numerically Controlled Machine ToolsTools

Locally programmable machines with dedicated computers

Generation 1: Numerically controlled machine tools:

developed at the MIT relieved the operator of the job of interpreting a blueprint in selecting machine settings. Machine motion is controlled by instructions on a punched tape. Operator must still select tools and load and unload the machine

Worker

Tools

Machine

Tape

Parts

Information


Generation 2: Automatic Tool Generation 2: Automatic Tool ChangingChanging

The next step in raising productivity of general-purpose machine tools. In this system the punched tape contains not only machine-guidance instructions but also information for selecting the right tool from a bank of from 20 to 100 tools. Tool-changing time can be as little as two seconds.

Worker Machine

Tape

Parts

Information

Tools


Generation 3: Computer Numerical Generation 3: Computer Numerical ControlControl

CNC III transferred information storage from punched tape to the more capacious and flexible memory of a computer. This change not only made editing and altering programs easier but also made a computer available for a variety of other tasks, such as logging the time each tool is in use.

Worker Machine

Computer

Parts

Information

Tools


Flexible Manufacturing Flexible Manufacturing SystemsSystems

A group of re-programmable machines linked by an automated material-handling system and a central computer. An FMS is designed to run for long periods with little or no operator attention

Machine 1Tools

Machine 2Tools

Machine 3Tools

Computer

WorkerParts

Load and Unload

Pallet transfer system


Computer Integrated Computer Integrated ManufacturingManufacturing

CIM is the integration of all computer systems in a

manufacturing facility. CIM includes the

integration of accounting, engineering, design,

production and equipment maintenance systems.

CAD

BusinessFunctions CAM

CIM


Breakeven AnalysisBreakeven Analysis

Used to determine Used to determine volume needed to volume needed to cover total costscover total costs

Often first step in Often first step in product development product development processprocess

Assumes linear costsAssumes linear costs

BreakevenF ixed t

un it price un it iab le t

co s

( ) ( v ar co s )

Fixed cost

Variable cost

Total cost

Revenue

Volume

Cost


Breakeven ExampleBreakeven ExampleA firm is considering marketing a new toothbrush. The firm expects to sell each toothbrush for $2.10. The per brush cost of material, labor and overhead equals $1.45. The required investment in plant and equipment is $50,000.How many brushes must be sold for the firm to breakeven?

5 0 0 0 0

2 1 0 1 4 57 6 9 2 3

,

. .,

If only 65,000 brushes are expected to sell, what must the variable costs be in order to allow the firm to breakeven?

6 5 0 0 0 2 1 0 5 0 0 0 0 6 5 0 0 0, ( . ) , , ( ) VC

VC 1 3 3 1.


Break-even Analysis ExampleBreak-even Analysis ExampleThe Stroudwater Street Service Station is looking to invest in a new fully automated car wash. They have collected the following information on three different models. Initial Variable

Investment Cost (car)a) VacuClean System 250,000 1.50b) Wash n Scrub Model III 400,000 1.20c) DynoClean 550,000 0.95

2 5 0 0 0 0 1 5 5 5 0 0 0 0 9 5

5 4 5 4 5 4

, . , .

,

x x

x

2 5 0 0 0 0 1 5 4 0 0 0 0 0 1 2

5 0 0 0 0 0

, . , .

,

x x

x

4 0 0 0 0 0 1 2 5 5 0 0 0 0 9 5

6 0 0 0 0 0

, . , .

,

x x

x

a & b

b & c

a & c


Car Wash Break-even Analysis Continued

250,000

400,000

550,000

0

500,

000

600,

000

545,

4 54

VacuCleanWash n Scrub

DynoClean

Volume

Tot

al C

ost


Car Wash Break-even Analysis Car Wash Break-even Analysis ContinuedContinued

If we were able to charge $1.75 for a car wash, at what volumes would we breakeven?

Initial VariableInvestment Cost (car)

a) VacuClean System 250,000 1.50b) Wash n Scrub Model III 400,000 1.20c) DynoClean 550,000 0.95

a) 250,000/1.75-1.50=1,000,000b) 400,000/1.75-1.20= 727,272c) 550,000/1.75-0.95= 687,500

Note that the best profit-making process decision is Dynoclean and only if demand is greater than 687,500

pom - j. galván 1 production and operations management ch. 7: process strategy

Documents