process decision
TRANSCRIPT
-
8/2/2019 Process Decision
1/31
When process decisions made?
New or modified product/service to be offered
Quality to be improved
Competitive priorities have changed
Demand for product/service is changing
Cost/availability of inputs have changed
-
8/2/2019 Process Decision
2/31
Positioning
The positioning strategy - whether
resources are organised around the product
or process.
-
8/2/2019 Process Decision
3/31
Key variables
Factors
Vertical
integrationCustomer
involvement
Resource
flexibilityCapitalintensity
-
8/2/2019 Process Decision
4/31
Volume of production
Degree of customisation
Key variables
-
8/2/2019 Process Decision
5/31
Vertical Integration (VI)
The degree to which a firm owns (production)
system to handle the entire chain of processes.
Higher degree of handling, greater VI
Types of VI:
Backward integration: Firm moves towards sources of
raw materials and parts (e.g. buying out suppliers)
Forward integration: Firm acquires more channels of
distribution (e.g. own warehouse, distribution centres)
Rao
-
8/2/2019 Process Decision
6/31
Vertical Integration: Consider
Cost of producing resources
Efficiency in producing resources
Market penetration (see the IBM-Mitsubishi story)
Need for Resource flexibility (investmenttied up)
Tolerance of low range of acceptablebusiness opportunities
-
8/2/2019 Process Decision
7/31
Resource flexibility (RF)
The ease for employees and equipment to
be able to handle a wide variety of
products, output levels, duties and
functions.- Higher degree of ease, greater
flexibility
RF can be affected by vertical integration
when more resources are tied up in
covering new tasks.
-
8/2/2019 Process Decision
8/31
Customer involvement
The extent of involvement in the
production process
-
8/2/2019 Process Decision
9/31
Capital intensity
The degree of mixture of equipment and
skill in the production process.
The greater the relative cost of equipment,the greater is capital intensity.
-
8/2/2019 Process Decision
10/31
PROCESS STRATEGIES
-
8/2/2019 Process Decision
11/31
Process strategies
Involves determination of how to produce aproduct or provide a service
Objective
Meet or exceed customer requirements
Meet cost & managerial goals
Has long-run effects
Product & volume flexibility Costs & quality
-
8/2/2019 Process Decision
12/31
Fit ofProcess, Volume, and Variety
Process focus
projects, jobshops,(machine, print,
carpentry)
Standard Register
Repetitive
(autos, motorcycles)
Harley Davidson Product focus
(commercial baked
goods, steel, glass)
Nucor Steel
High Variety
One or few units perrun, high variety
(allows customization)
Changes in modules
Modest 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 Co.
Poor strategy
Low-Volume
(Intermittent)
Repetitive Process
(Modular)High-Volume
(Continuous)
-
8/2/2019 Process Decision
13/31
Types of process strategies
Process strategies follow a continuum. Within a
given facility, several strategies may be used
Continuum
Repetitive-Focused
Product-Focused
Process-Focused
-
8/2/2019 Process Decision
14/31
Process focused strategies
Facilities are organized by process
Similar processes are together
Example: All drill presses are together
Low volume, high variety products
Jumbled flow
Other names
Intermittent process
Job shop
OperationProduct A
Product B
11 22 33
-
8/2/2019 Process Decision
15/31
Process focused strategies: Example
Bank
1995 Corel Corp.
Machine
Shop 1995 Corel Corp.
Hospital 1995
Corel
Corp.
-
8/2/2019 Process Decision
16/31
Process Focused Strategy: Pros & Cons
Advantages
Greater product flexibility
More general purpose equipment
Lower initial capital investment
Disadvantages
More highly trained personnel More difficult production planning & control
Low equipment utilization (5% to 25%)
-
8/2/2019 Process Decision
17/31
Repetitive Focused Strategy
Facilities often organized by assembly lines
Characterized by modules
Parts & assemblies made previously
Modules combined for many outputoptions
Other names
Assembly line
Production line
-
8/2/2019 Process Decision
18/31
Repetitive Focused 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
-
8/2/2019 Process Decision
19/31
Repetitive-Focused Strategy: Examples
Truck
ClothesDryer
1995 Corel Corp.
FastFood
McDonaldsover 95 billion served
.
-
8/2/2019 Process Decision
20/31
Product-Focused Strategy
Facilities are organized by product
High volume, low variety products
Where found
Discrete unit manufacturing
Continuous process manufacturing
Other names
Line flow production Continuous production
Operation
Products A & B
1 2 3
-
8/2/2019 Process Decision
21/31
Product-Focused Strategy:
Pros & Cons
Advantages
Lower variable cost per unit
Lower but more specialized labor skills
Easier production planning and control
Higher equipment utilization (70% to 90%)
Disadvantages
Lower product flexibility More specialized equipment
Usually higher capital investment
-
8/2/2019 Process Decision
22/31
Product-Focused Examples
Light Bulbs
(Discrete)
Paper(Continuous)
.
1995 Corel
Corp.
Soft Drinks(Continuous,
thenDiscrete)
MassFlu Shots
(Discrete)
-
8/2/2019 Process Decision
23/31
Mass Customization
Using technology and imagination torapidly mass-produce products that cater tosatisfy unique customer desires.
Under mass customization the threeprocess models become so flexible thatdistinctions between them become blur,making variety and volume issues less
significant.
-
8/2/2019 Process Decision
24/31
Table of Summary
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. Generalpurpose
equipment
Specialequipment aids
in use of
assembly line
Specialpurpose
equipment
Rapidchangeover on
flexible
equipment
-
8/2/2019 Process Decision
25/31
Table of Summary (contd)
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
-
8/2/2019 Process Decision
26/31
Table of Summary (contd)
Process Focus Repetitive Focus 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
-
8/2/2019 Process Decision
27/31
Process
Focus
Repetitive
Focus
Product focus Mass
Customization
9 Scheduling
complex and
concerned withtrade-off
between
inventory,
capacity, and
customer
service
Scheduling
based on
buildingmodels from a
variety of
forecasts
Scheduling
relatively
simple,concerns
establishing
sufficient rate
of output to
meet forecasts
Scheduling
sophisticated to
accommodatecustomization
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
Table of Summary (contd)
-
8/2/2019 Process Decision
28/31
Process Focus Repetitive
Focus
Product focus Mass
Customization
11 Costing, done
by job, isestimated prior to
doing job but
only known after
doing job
Costs usually
known based onexperience
Because of high
fixed costs, costdependent on
utilization of
capacity
High fixed costs
and dynamicvariable costs
Table of Summary (contd)
-
8/2/2019 Process Decision
29/31
Process Continuum
Process Focused
(intermittent process)
Repetitive
Focus
(assembly
line)
Product Focused
(continuous
process)
Continuum
High variety, low volume
Low utilization (5% - 25%)
General-purpose equipment
Low variety, high volume
High utilization (70% - 90%)
Specialized equipment
Modular
Flexible equipment
-
8/2/2019 Process Decision
30/31
Volume and Variety ofProducts
ProductsVariety Process Process Low Variety
units per lot ProjectsVery small runs, high Job Shops
Modest runs, modestRepetitive
variations RepetitiveVery long runs, Continuous
Equipment utilization 20%-75% 70%-80%
Poor Strategy
(High variable
costs)
MassCustomization
One or very few
variety
variety
changes inattributes
Long runs, modest
5%-25%
Volume and Low Volume High Repetitive High VolumeVariety of
(Intermittent) (Modular)(Continuous)
Process
-
8/2/2019 Process Decision
31/31
Rapid throughputtechniques
Mass Customization
Modular techniques
Repetitive FocusModular design
Flexible equipment
Product-focusedLow variety, high volumeHigh utilization (70% - 80%)
Specialized equipment
Process-focusedHigh variety, low volumeLow utilization (5% - 20%)
General purpose equipment
Effective schedulingtechniques
Process Strategies