Processes and Processes and TechnologiesTechnologies

Process Process (Definition of)(Definition of)

Process: Any part of an organization that takes inputs and transforms them into outputs

Process Flowcharting (definition of)Process Flowcharting (definition of)

• Process flowcharting is the use of a diagram to present the major elements of a process

• The basic elements can include tasks or operations, flows of materials or customers, decision points and storage areas or queues

• It is an ideal methodology by which to begin analyzing a process

Flowchart SymbolsFlowchart Symbols (1 of 2)(1 of 2)

Tasks or operations Examples: Giving an admission ticket to a customer, installing an engine in a car, etc.

Examples: Giving an admission ticket to a customer, installing an engine in a car, etc.

Decision Points Examples: How much change should be offered to a customer, which tool should be used, etc.

Examples: How much change should be offered to a customer, which tool should be used, etc.

Examples: Sheds, lines of people waiting for a service, etc.

Examples: Sheds, lines of people waiting for a service, etc.

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Storage areas or queues

Flows of materials or customers

Flowchart SymbolsFlowchart Symbols (2 of 2) (2 of 2)

Example 2: Flowchart for Inspection Example 2: Flowchart for Inspection Process Process

Material Received from Supplier

Inspect Material for Defects Defects

found?

Return to Supplier for Credit

Yes

No, Continue…

Process Terminology (1 of 2)Process Terminology (1 of 2)

Single-stage Process

Stage 1

Stage 1 Stage 2 Stage 3

Multi-stage Process

Process Terminology (2 of 2)Process Terminology (2 of 2)

Stage 1 Stage 2

Buffer

Multi-stage Process with Buffer

A buffer refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage. Allows stages to operate independently

Process PlanningProcess Planning

Process selection Make-or-buy decisions Specific equipment selection Process plans Process analysis

Process SelectionProcess Selection

Process Selection: Deciding on the way production of goods or services will be organized

Process selection can involve substantial investment in Equipment Layout of facilities

To Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.

Major Implications of Process SelectionMajor Implications of Process Selection

• Capacity planning• Layout of facilities• Equipment• Design of work systems

Required Variety,

Required Volume (how many)

Required Flexibility (degree of)

Factors that Affect Process Factors that Affect Process DecisionsDecisions

Process StrategyProcess Strategy

Overall approach to produce goods and services

Defines:Capital intensityProcess flexibilityVertical integrationCustomer involvement

Forecasting

Product andService Design

TechnologicalChange

CapacityPlanning

ProcessSelection

Facilities andEquipment

Layout

WorkDesign

Process Selection and System Process Selection and System DesignDesign

From Function to ProcessFrom Function to Process

Ma

nu

fact

uri

ng

Ac

co

un

tin

g

Sa

les

Pu

rch

as

ing

Product Development

Order Fulfillment

Supply Chain Management

Customer Service

Function Process

• Variety– How much

• Flexibility– What degree

• Volume – Expected output

Job Shop

Batch

Repetitive

Continuous

Process SelectionProcess Selection

Types of ProcessesTypes of Processes(Process Flow Structures)(Process Flow Structures)

Projects Job shopBatch productionMass productionContinuous flow

production

Projects (nonroutine jobs)Job shop

Small scale (e.g. copy center making a single copy of a student term paper)

Batch

Moderate volume (e.g. copy center making 10,000 copies of an ad piece for a business)

Types of Processes (1 of 2)Types of Processes (1 of 2)

Determine how to produce a product or provide a service

Repetitive- Mass production/assembly

High volumes of standardized goods or services (e.g. Automobile manufacturer)

Continuous Flow Line

Very high volumes of non-discrete goods (eg. Petroleum manufacturer)

Types of Processes (2 of 2)Types of Processes (2 of 2)

Process Type

Job Shop Appliance repair

Emergency room

Ineffective

Batch Commercialbaking

ClassroomLecture

Repetitive Automotiveassembly

Automaticcarwash

Continuous(flow)

Ineffective Steel Production

Water purification

Product and Service ProcessesProduct and Service Processes

Process-Focused Strategy ExamplesProcess-Focused Strategy Examples

Bank

© 1995 Corel Corp.

Machine Shop© 1995 Corel Corp.

Hospital© 1995 Corel Corp.

Repetitive-Focused Strategy - ExamplesRepetitive-Focused Strategy - Examples

Truck

© 1995 Corel Corp.

Clothes Dryer

© 1995 Corel Corp.

Fast Food

McDonald’sover 95 billion served

McDonald’sover 95 billion served

© 1984-1994 T/Maker Co.

Product-Focused ExamplesProduct-Focused Examples

Paper (Continuous)© 1984-1994 T/Maker Co.

Dimension Job shop Batch Repetitive Continuous

Job variety Very High Moderate Low Very low

Process flexibility

Very High Moderate Low Very low

Unit cost Very High Moderate Low Very low

Volume of output

Very Low Low High Very High

Product – Process MatrixProduct – Process Matrix

Process Selection with Break-even Process Selection with Break-even AnalysisAnalysis

A standard approach to choosing among alternative processes or equipment

Model seek to determine the point in units produced (and sold) where we will start making profit on the process or equipment

Model seeks to determine the point in units produced (and sold) where total revenue and total cost are equal

Process Selection with Process Selection with Break-Even AnalysisBreak-Even Analysis

cf = fixed costv = volume (i.e., number of units produced and sold)cv = variable cost per unitp = price per unit

Total cost = fixed cost + total variable costTC = cf + vcv

Total revenue = volume x priceTR = vp

Profit = total revenue - total costZ = TR - TC

= vp - (cf + vcv)

Solving for Solving for Break-Even VolumeBreak-Even Volume

TRTR = TC= TCvpvp = = ccff + + vcvcvv

vpvp - - vcvcvv = = ccff

vv((p - cp - cvv)) = = ccff

vv ==

ccff

p p -- c cvv

Break-Even AnalysisBreak-Even Analysis: Example 1: Example 1

Fixed cost = cf = $2,000Variable cost = cv = $5 per raft

Price = p = $10 per raft

The break-even point is

v v == = = 400 rafts= = 400 raftsccff

p p - - ccvv

20002000

10 - 510 - 5

Break-Even AnalysisBreak-Even Analysis: Example 1: Example 1

Total cost line

Total revenue

line

Break-even point400 Units

$3,000 —

$2,000 —

$1,000 —

Break-Even Analysis: Example 2 Break-Even Analysis: Example 2 Choosing Between Two ProcessesChoosing Between Two Processes

Below 2,667, choose ABelow 2,667, choose AAbove 2,667, chooseAbove 2,667, choose B B

$2,000 + $5v= $10,000 + $2v$3v = $8,000v = 2,667 rafts

Process A Process B

Break-Even Analysis: Example 2Break-Even Analysis: Example 2Choosing Between Two ProcessesChoosing Between Two Processes

| | | |1000 2000 3000 4000 Units

$20,000 —

$15,000 —

$10,000 —

$5,000 —

Total cost of process A

Total cost of process B

Choose process A

Choose process B

Point of indifference = 2,667 Units

Choosing Between TChoosing Between Threehree Processes Processes

$$$

Fixed cost Variable cost

Fixed cost – Process A

Fixed cost – Process B

Fixed cost – Process C200,000

300,000

400,000

$ Total process C costs

Total p

roces

s A

costs

Process A Process B Process C

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

Total process B costs

Make-or-Buy DecisionsMake-or-Buy Decisions

1.1. Cost2. Available Capacity3. Quality Considerations4. Speed5. Reliability6. Expertise7. Nature of Demand

Make?

Buy?

Specific Equipment SelectionSpecific Equipment Selection1. Purchase cost

2. Operating cost

3. Annual savings

4. Revenue enhancement

5. Replacement analysis

6. Risk and uncertainty

7. Piecemeal analysis

8. Breakeven analysis

Transition From Product Design to Transition From Product Design to Process Design:Process Design:

Product and Production DocumentsProduct and Production Documents

• Engineering drawings– Shows dimensions, tolerances, & materials– Shows codes for Group Technology

• Assembly drawing

-- Shows exploded view of product• Bill of Material

– Lists components, quantities & where used– Shows product structure

Product DocumentsProduct Documents

Engineering Drawings - Show Engineering Drawings - Show Dimensions, Tolerances, etc.Dimensions, Tolerances, etc.

Head Neck

Handle

End Cap

Assembly DrawingAssembly Drawing

Bill of MaterialP/N: 1000 Name: Bicycle

P/N Desc Qty Units Level1001 Handle Bars 1 Each 11002 Frame Assy 1 Each 1

1003 Wheels 2 Each 2 1004 Frame 1 Each 2

Bill of MaterialP/N: 1000 Name: Bicycle

P/N Desc Qty Units Level1001 Handle Bars 1 Each 11002 Frame Assy 1 Each 1

1003 Wheels 2 Each 2 1004 Frame 1 Each 2

Bill of Material ExampleBill of Material Example

Assembly Chart (Gozinto Chart)Assembly Chart (Gozinto Chart)Bottom bun

Beef pattySaltCheese

LettuceSauceOnions

Middle bun

Beef pattySaltCheese

LettuceSauceOnionsPickles

Sesame seed top bun

Wrapper

SASA

SASA

First-layer assembly

Second-layer assembly

Completed Big Mac

Assembly Drawing and Assembly Assembly Drawing and Assembly ChartChart

Process AnalysisProcess Analysis

The systematic examination of all aspects of a process to improve its operation to make it:FasterMore efficientLess costlyMore responsive

Basic toolsProcess flowchartProcess diagramsProcess maps

Process Flowchart SymbolsProcess Flowchart Symbols

OperationsOperations

InspectionInspection

TransportationTransportation

DelayDelay

StorageStorage

SUBJECT: Request tool purchase

Dist (ft) Time (min) Symbol Description

D Write order

D On desk

75 D To buyer

D Examine

= Operation; = Transport; = Inspect; D = Delay; = Storage

Process Process FlowcFlowcharthart:: Example Example 1 1

Process Process Flow Flow ChartChart: Example 2: : Example 2: Hamburger AssemblyHamburger AssemblyDist. (Ft)

Time (Mins)

Chart Symbols

Process Description

- Meat Patty in Storage

1.5 .05 Transfer to Broiler

2.50 Broiler

.05 Visual Inspection

1.0 .05 Transfer to Rack

.15 Temporary Storage

.5 .10 Obtain Buns, Lettuce, etc.

.20 Assemble Order

.5 .05 Place in Finish Rack

3.5 3.15 TOTALS

Value-added time = Operation time/Total time = (2.50+.20)/3.15=85.7%

Ⅾ

Ⅾ

ⅮⅮⅮⅮ

ⅮⅮⅮ

Ⅾ

2 4 1 - 2

Process FlowchartProcess Flowchart: Example 3: Example 3

Ste

p

Op

erat

ion

Tra

nsp

ort

Insp

ect

Del

ay

Sto

rag

e

Dis

tan

ce(f

eet)

Tim

e(m

in)Description

ofprocess

1

2

3

4

5

6

7

8

9

10

11

Unload apples from truck

Move to inspection station

Weigh, inspect, sort

Move to storage

Wait until needed

Move to peeler

Apples peeled and cored

Soak in water until needed

Place in conveyor

Move to mixing area

Weigh, inspect, sort

TotalPage 1 0f 3 480

30

5

20

15

360

30

20

190 ft

20 ft

20 ft

50 ft

100 ft

Date: 9-30-02Analyst: TLR

Location: Graves MountainProcess: Apple Sauce

Service Process DesignService Process Design

Techniques for Improving Service Techniques for Improving Service ProductivityProductivity (1 of 2) (1 of 2)

• Separation

• Self-service

• Postponement

• Focus

• Structure service so customers must go where service is offered

• Self-service so customers examine, compare and evaluate at their own pace

• Customizing at delivery

• Restricting the offerings

Strategy Technique

Techniques for Improving Service Techniques for Improving Service Productivity Productivity (2 of 2)(2 of 2)

• Modules

• Automation

• Scheduling• Training

• Modular selection of service.

Modular production• Separating services that lend

themselves to automation• Precise personnel scheduling• Clarifying the service options• Explaining problems• Improving employee flexibility

More Opportunities to Improve More Opportunities to Improve Service ProcessesService Processes

MethodsLayoutHuman ResourceTechnology

TechnologiesTechnologies

TechnologyTechnology

Technology: The application of scientific discoveries to the development and improvement of products and services and operations processes.

Technology innovation: The discovery and development of new or improved products, services, or processes for producing or providing them.

Kinds of TechnologyKinds of Technology

Operations management is primarily concerned with three kinds of technology:Product and service technologyProcess technologyInformation technology

All three have a major impact on:CostsProductivityCompetitiveness

Technology Technology as a as a Competitive Competitive AdvantageAdvantage

Innovations inProducts and services

Cell phonesPDAsWireless computing

Processing technologyIncreasing productivityIncreasing qualityLowering costsEases flexibility

Technology AcquisitionTechnology Acquisition

Technology can have benefits but …Technology risks include:

What technology will and will not doTechnical issuesEconomic issues

Initial costs, space, cash flow, maintenanceConsultants and/or skilled employeesIntegration cost, time resourcesTraining, safety, job loss

Advantages Created by Advantages Created by HighHighTechnology Technology

Advantages: Increased precision Increased productivity Increased flexibility, increased product variety Decreased cost (labor, material, inventory,

transportation and quality costs) Improved product features and quality Decreased pollution Decreased size Decreased power requirements.

Information TechnologyInformation Technology

Management Information Systems (MIS) Move large amounts of data

Decision Support Systems (DSS) Add decision making support

Expert System Recommend decision based on expert

knowledge

Enterprise SoftwareEnterprise Software

Collect, analyze, and make decisions based on data

ERP - Enterprise Resource PlanningManaging wide range of processes

Human resources, materials management, supply chains, accounting, finance, manufacturing, sales force automation, customer service, customer order entry

Finding hidden patterns through data mining

Advanced CommunicationsAdvanced Communications

Electronic data interchange (EDI) Internet, extranets Wireless communications Teleconferencing &

telecommuting Bar coding, RFT Virtual reality

Process Technology: AutomationProcess Technology: Automation Machinery that has sensing and control devices

that enables it to operate

- Fixed automation

- Programmable automation

Manufacturing Manufacturing Hardware Hardware TechnologyTechnology

Numerically controlled (NC) machines Controlled by punched tape

Computer numerical controlled (CNC) Controlled by attached computer

Direct numerical control (DNC) Several NC machines controlled by single

computer Robotics Flexible manufacturing systems (FMS)

Includes automated material handling

Production ProcessProduction Process & & Technology AlternativesTechnology Alternatives

# Different Products or Parts# Different Products or Parts

CIMCIMFlexible

Manufacturing System

Low HighHigh

General Purpose, NC, General Purpose, NC, CNCCNC

Volume of Products or PartsVolume of Products or Parts

Low

HighHigh

DedicatedDedicatedAutomationAutomation

Flexible Manufacturing Systems Flexible Manufacturing Systems (FMS)(FMS)

Programmable machine tools Controlled by common computer network Combines flexibility with efficiency Reduces setup & queue times

Flexible Manufacturing SystemFlexible Manufacturing System

Parts

Finishedgoods

Computercontrolroom

TerminalTerminal

CNC Machine

CNC Machine

PalletPallet

Automatic Automatic tool changertool changer

Manufacturing Software TechnologyManufacturing Software Technology

Computer Aided Design and Computer Aided Manufacturing (CAD/CAM)

Computer Integrated Manufacturing (CIM)

CAM refers to the use of specialized computer programs to direct and control manufacturing equipment. When CAD information is translated into instructions for computer aided manufacturing, CAM, the result of these two technologies is known as CAD/CAM