Operations Management Process Strategy and Capacity Planning Chapter 7 7-1
Outline ●
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FOUR PROCESS STRATEGIES ♦
Process Focus
♦
Repetitive Focus
♦
Product Focus
♦
Mass Customization Focus
♦
Comparison of Process Choices
PROCESS ANALYSIS AND DESIGN ♦
Flow Diagrams
♦
Time-Function Mapping
♦
Process Charts
♦
Service Blueprinting 7-2
Outline - Continued ●
SERVICE PROCESS DESIGN ♦
Customer Interaction and Process Design
♦
More Opportunities to Improve Service Processes
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PROCESS REENGINEERING
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ENVIRONMENTALLY FRIENDLY PROCESSES
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SELECTION OF EQUIPMENT AND TECHNOLOGY
●
CAPACITY ♦ Defining
Capacity
♦ Forecasting ♦ Applying
Capacity Requirements
Decision Trees to Capacity Decisions
♦ Managing
Demand 7-3
Outline - Continued ●
●
●
Break-Even Analysis ♦
Single-Product Case
♦
Multiproduct Case
Strategy-Driven Investments ♦
Investment, Variable Cost, and Cash Flow
♦
Net Present Value
PRODUCTION TECHNOLOGY ♦ Machine
Technology ♦ Process Control ♦ Vision Systems ♦ Automated Storage and Retrieval System ♦ Automated Guided Vehicle (AGV) ♦ Flexible Manufacturing Systems (FMS) ♦ Computer-Integrated Manufacturing (CIM) 7-4
Learning Objectives When you complete this chapter, you should be able to : Identify or Define: ♦ Process focus ♦ Repetitive focus ♦ Product focus ♦ Process reengineering ♦ Service process issues ♦ Environmental issues
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Learning Objectives Continued When you complete this chapter, you should be able to: Describe or Explain: ♦ Process analysis ♦ Lean production ♦ Green manufacturing ♦ The capacity issue ♦ Breakeven analysis ♦ Financial considerations ♦ Strategy-driven investments ♦ Production technology 7-6
Process Strategies ♦ Involve determining how to produce a product or provide a service ♦ Objective ♦ Meet
or exceed customer requirements ♦ Meet cost & managerial goals
♦ Has long-run effects ♦ Product
& volume flexibility ♦ Costs & quality 7-7
Types of Process Strategies ♦ Process strategies that follow a continuum ♦ Within a given facility, several strategies may be used ♦ These strategies are often classified as: Process-Focused
Repetitive-Focused
Continuum 7-8
Product-Focused
Process-Focused Strategy ♦ Facilities are organized by process ♦ Similar processes are together ♦
Example: All drill presses are together
♦ Low volume, high variety products ♦ ‘Jumbled’ flow ♦ Other names
Product A
Operation
Intermittent process ♦ Job shop ♦
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11 Product B
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33
Process Focus
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Process-Focused Strategy Examples Bank Hospital
© 1995 Corel Corp.
© 1995 Corel Corp.
Machine Shop © 1995 Corel Corp.
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Standard Register ♦ Billion dollar printer and document processor (11 US plants)
♦ Dayton, Ohio ♦ Product: paper business forms
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Production Process Flow Diagram Customer Purchasing (order inks, paper, other supplies)
Customer sales representative (take order)
Vendors Accounting
Prepress Department (Prepare printing plates & negatives)
Receiving
Printing Department
Warehousing (ink, paper, etc.)
Gluing, binding, stapling, labeling
Collating Department
Polywrap Department
Information flow Material flow
Shipping
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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%) 7-14
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 7-15
Repetitive Focus
7-16
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, highvariety model 7-17
Repetitive-Focused Strategy - Examples Fast Food
Household appliances McDonald’s McDonald’s over 95 billion served over 95 billion served
Truck
© 1995 Corel Corp.
© 1984-1994 T/Maker Co.
© 1995 Corel Corp.
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Fit of Process, Volume, and Variety Repetitive Process (Modular)
Low-Volume (Intermittent)
High Variety One or few units per run, high variety (allows customization)
Process focus projects, job shops, (machine, print, carpentry) Standard Register
Changes in modules Modest runs, standardized modules Changes in attributes (such as grade, quality, size, thickness, etc.) Long runs only
Repetitive (autos, motorcycles) Harley Davidson Poor strategy
High-Volume (Continuous)
Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co. Product focus (commercial baked goods, steel, glass) Nucor Steel
(Variable costs are high)
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Harley Davidson (figures) ♦ ♦ ♦ ♦
2 engine types (3 sizes) 20 models, 12 colors, 2 wheel options 95 total combinations 20000 pieces assembled into modules in work cells
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Flow Diagram Showing the Production Process for Harley Davidson, York, PA.
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Product-Focused Strategy ♦ Facilities are organized by product ♦ High volume, low variety products ♦ Where found Discrete unit manufacturing ♦ Continuous process manufacturing ♦
Products A & B
♦ Other names Line flow production ♦ Continuous production ♦
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11
22
Operation
33
Product Focus
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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
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Product-Focused Examples Soft Drinks (Continuous, then Discrete) Light Bulbs (Discrete) © 1995 Corel Corp.
© 1995 Corel Corp.
Mass Flu Shots (Discrete) © 1984-1994 T/Maker Co.
Paper (Continuous)
© 1995 Corel Corp.
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Product-Focused Examples ♦ Glass ♦ Paper ♦ Tin sheets ♦ Lightbulbs ♦ Beer ♦ Mineral water ♦ Bolts ♦ Standardization and quality control 7-26
Flow Diagram Showing the Steelmaking Process at NUCOR
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A Comparison (1) 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. General purpose equipment
Special equipment aids in use of assembly line
Special purpose equipment
Rapid changeover on flexible equipment
3 Broadly skilled operators
Modestly trained employees
Operators less broadly Flexible operators skilled trained for customization 4 Many instructions Reduced training and Few work orders and Custom orders require because of change in jobs number of job job instructions many instructions instructions 5 Raw material high JIT techniques used Raw material low Raw material low relative to product value relative to product relative to product value value 7-28
A Comparison (2) 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 Finished goods goods made to made to order forecast, then stored
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A Comparison (3) Process Focus
Repetitive Focus
Product focus
Mass Customization
9 Scheduling complex and concerned with tradeoff between inventory, capacity, and customer service
Scheduling based on building models from a variety of forecasts
Scheduling relatively simple, concerns establishing sufficient rate of output to meet forecasts
Scheduling sophisticated to accommodate customization
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
11 Costing, done by Costs usually known Because of high High fixed costs and job, is estimated prior based on experience fixed costs, cost dynamic variable to doing job but only dependent on costs known after doing job utilization of capacity 7-30
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
Modular Flexible equipment
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Low variety, high volume High utilization (70% - 90%) Specialized equipment
Mass Customization ● ●
●
●
Individualized goods and services Proliferation of products improving quality and reducing costs Making what the customer wants when the customer wants economically System: sales-design-productionsupply chain-logistic 7-32
Fit of Process, Volume, and Variety Repetitive Process (Modular)
Low-Volume (Intermittent)
High Variety One or few units per run, high variety (allows customization)
Process focus projects, job shops, (machine, print, carpentry) Standard Register
Changes in modules Modest runs, standardized modules Changes in attributes (such as grade, quality, size, thickness, etc.) Long runs only
Repetitive (autos, motorcycles) Harley Davidson Poor strategy
High-Volume (Continuous)
Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co. Product focus (commercial baked goods, steel, glass) Nucor Steel
(Variable costs are high)
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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.
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Mass Customization - More Choices Than even Number of Choices Early 21st Early Century 1970s
Item
Vehicle models Vehicle styles Bicycle types Software titles Web sites Movie releases New book titles Houston TV channels Breakfast cereals Item SKUs in supermarkets
140 260 18 1,212 8 19 0 300,000 0 30,727,296 267 458 40,530 77,446 5 185 160 340 14,000 150,000 7-35
Process Strategies Repetitive Focus Modular design Flexible equipment
Modular techniques Mass Customization
Effective scheduling techniques
Rapid throughput techniques
Process-focused
Product-focused
Low variety, high volume High utilization ● (70% - 80%) Specialized equipment
High variety, low volume Low utilization (5% - 20%) General purpose ● equipment 7-36
Mass customization + BTO ●
● ● ● ● ●
BTO (Build-to-order) Produce to costumer order rather than to a forecast Product design: imaginative and fast Process design: rapid and flexible Inventory management: control Tight schedules Responsive partners: effective collaboration
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Questions for Process Analysis and Design ●
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Is the process designed to achieve competitive advantage in terms of differentiation, response, or low cost? 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? 7-38
Tools for Process Design ● ● ● ●
Flow Diagrams Process Charts Time-Function/Process Mapping Work Flow Analysis
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Flow Diagram Drawing used to analyze movement of people, information or material
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Production Process Flow Diagram Customer Purchasing (order inks, paper, other supplies)
Customer sales representative (take order)
Vendors Accounting
Prepress Department (Prepare printing plates & negatives)
Receiving
Printing Department
Warehousing (ink, paper, etc.)
Gluing, binding, stapling, labeling
Collating Department
Polywrap Department
Information flow Material flow
Shipping
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Time Function Map/Process Mapping Flow diagram with time added at the horizontal basis
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Time Function Map (Baseline)
Transport
Extrude
Wait
Product
Wait
WIP
Plant B
Wait
WIP
Warehouse
Product
Print WIP
Plant A
Product
Wait
WIP
Production control
Process Order
Order
Sales
Receive product
Order Product
Order
Customer
Move
12 days
13 days
1 day
4 days
1 day
52 days
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Move
10 days
1 day
9 days
1 day
Process chart ● ●
●
Use symbols, time and distance Structured way to analyze and record process activities To reduce non-value-added items
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Process Chart Example SUBJECT: Request tool purchase Dist (ft)
Time (min)
Symbol
Description
D ∇ Write order ∇ On desk D 75
D ∇ To buyer D ∇ Examine = Operation; = Transport; = Inspect; D = Delay; ∇ = Storage
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Service Blueprinting ●
Process analysis tool that lends to focus on provider’s interaction with customer
●
http://www.youtube.com/watch?v=clN3lsztTNk
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Process improvements in services:
●
http://www.youtube.com/watch?v=-9hYCBz-q-U Cisco Video
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Service Blueprint for Service at Ten Minute Lube, Inc.
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Service Blueprinting ●
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●
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L1.- Activities at level 1 are under the control of the user. L2.- In the second level, activities of the service provider interacting with the customer. L3.- The third level, activities not visible to the customer. Potential Failures: F
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Service Blueprinting ●
L1.- Educating the customer
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L2.- Personnel selection and training.
●
L3.- Typical process improvements.
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Poka-yoke techniques to improve quality
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Work Flow Analysis - Four Phases ●
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Request from a customer or an offer to provide services by a performer Negotiation, allowing the customer and the performer to agree on how the work should be done and what will constitute customer satisfaction Performance of the assignment and completion Acceptance, closing the transaction provided the customer expresses satisfaction and agrees that the conditions were met.
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Techniques for Improving Service Productivity Strategy
Technique
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Separation
●
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Self-service
●
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Postponement
Structure service so customers must go where service is offered Self-service so customers examine, compare and evaluate at their own pace
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Customizing at delivery
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Restricting the offerings
●
Focus
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Techniques for Improving Service Productivity - Continued ●
Modules
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Automation
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● ●
Scheduling Training
● ●
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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
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More Opportunities to Improve Service Processes ● ● ●
Layout Human Resources Technology
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Production Process & Technology Alternatives # Different Products or Parts
High
General Purpose, NC, CNC CIM Flexible Manufacturing System
Dedicated Automation
Low Low
High Volume of Products or Parts 7-54
The role of technology in relation with process strategy ●
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Advances in technology enhance production and productivity Have a wide range of applications in both manufacturing and services Factors that influence OM process strategy depend on the area of technology that is going to be applied 7-55
Areas of Technology ● ● ● ● ● ● ● ●
Machine technology Automatic identification systems (AIS) Process control Vision system Robot Automated storage and retrieval systems (ASRS) Flexible manufacturing systems (FMS) Computer-integrated manufacturing (CIM)
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Machine Technology ● ● ● ● ● ●
Increased precision Increased productivity Increased flexibility Decreased pollution Decreased size Decreased power requirements 7-57
Process Control ● ● ●
●
Increased process stability Increased process precision Real-time provision of information for process evaluation Multi-mode information presentation
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Automatic Identification Systems (AIS) ● ●
Improved data acquisition Increased scope of process automation
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Vision Systems ● ● ● ● ●
Particular aid to inspection Consistently accurate Never bored Modest cost Superior to individuals performing the same tasks 7-60
Robots ●
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Perform monotonous, or dangerous tasks, or those requiring significant strength or endurance Enhanced consistency, accuracy, speed strength, power when substituted for human effort
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Automated Storage and Retrieval Systems (ASRS) ●
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Automated placement and withdrawal of parts and products Particularly useful in inventory and test areas of manufacturing firms
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Automated Guided Vehicle (AGV) ●
Electronically controlled movement of products and/or individuals
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Flexible Manufacturing Systems (FMS) ●
● ● ● ●
Computer controls both the workstation and the material handling equipment Computer control enhance flexibility Can economically produce low volume at high quality Reduced costs of changeover and low utilization Stringent communication requirement between components within it
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Computer Integrated Manufacturing (CIM) ●
Extension of flexible manufacturing systems ♦ Backwards
to engineering and inventory control ♦ Forward into warehousing and shipping ♦ Can also include financial and customer service areas ●
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Reducing the distinction between low-volume/high-variety, and high-volume/low-variety production Heavy reliance on information technology
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Computer Integrated Manufacturing
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Impact of the usage of Communication and Information Technology ●
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From the very beginning in the 70's it's grown exponentially In the last twenty years, the capacity of equipments has grown so much that IT offers improved solutions to business and engineering classical problems: ♦ database administration, mailing, information security, perimetral security, marketing, finantial analysis, web services, etc. In the last ten years, IT has been enriching its capabilities when combined with advances in radio and communications. This way new amazing solutions have appeared: ♦ social networks, instant messaging, RF inventory, electronic IDs, electronic vote, electronic public administration, web radio stations, interactive TV, virtual learning platforms, open universities, mobile office. In the last five years, recent improvements in mobile technology offer incredible new services and solutions to the general public: ♦ GPS, broadband data transmission (to the order of MB), large data storage (to the order of GB), mobile devices with full computing capabilities that really offer business solutions (like electronic secure payments, office production software)
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