Process Strategy

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 Outline
► Global Company Profile:
Harley-Davidson
► Four Process Strategies
► Selection of Equipment
► Process Analysis and Design
► Special Considerations for Service
Process Design

Copyright © 2017 Pearson Education, Inc. 7-2

 Outline - Continued

► Production Technology
► Technology in Services
► Process Redesign

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 Harley-Davidson

► The only major U.S. motorcycle

company
► Emphasizes quality and lean
manufacturing
► Materials as Needed (MAN) system
► Many variations possible
► Tightly scheduled repetitive production
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 Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
Arrive on a JIT
schedule from a
Air cleaners Oil tank work cell 10-station work
cell in
Milwaukee
Fluids and mufflers Shocks and forks

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Roller testing
Crating

Copyright © 2017 Pearson Education, Inc. 7-5

 Learning Objectives
When you complete this chapter you
should be able to:
7.1 Describe four process strategies
7.2 Compute crossover points for different
processes
7.3 Use the tools of process analysis
7.4 Describe customer interaction in service
processes
7.5 Identify recent advances in production
technology

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 Process Strategy

The objective is to create a process

to produce offerings that meet
customer requirements within cost
and other managerial constraints

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 Process Strategies
► How to produce a product or provide a
service that
► Meets or exceeds customer requirements
► Meets cost and managerial goals
► Has long term effects on
► Efficiency and production flexibility
► Costs and quality

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 Process, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety
one or few units Process Focus Mass Customization
per run, projects, job shops (difficult to achieve, but
(allows (machine, print, huge rewards)
customization) hospitals, Dell Computer
restaurants)
Variety (flexibility)

Arnold Palmer
Hospital
Changes in
Modules
modest runs, Repetitive
standardized (autos, motorcycles,
modules home appliances)
Harley-Davidson

Changes in
Attributes (such as Poor Strategy
grade, quality, size, Product Focus
(Both fixed and (commercial baked goods,
thickness, etc.) variable costs
long runs only steel, glass, beer)
are high) Frito-Lay
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 Process Strategies
Four basic strategies
1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization

Within these basic strategies there are

many ways they may be implemented
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 Process Focus
► Facilities are organized around specific
activities or processes
► General purpose equipment and skilled
personnel
► High degree of product flexibility
► Typically high costs and low equipment
utilization
► Product flows may vary considerably
making planning and scheduling a
challenge
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Process Focus Many inputs
(surgeries, sick patients,
baby deliveries, emergencies)

(low-volume, high-variety,
Many departments and
intermittent processes) many routings
Arnold Palmer Hospital

Figure 7.2(a) Many different outputs

(uniquely treated patients)
Copyright © 2017 Pearson Education, Inc. 7 - 12
 Repetitive Focus
► Facilities often organized as assembly
lines
► Characterized by modules with parts and
assemblies made previously
► Modules may be combined for many
output options
► Less flexibility than process-focused
facilities but more efficient

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 Raw materials and
Repetitive module inputs
(multiple engine models,

Focus wheel modules)

Few
modules

(modular)
Harley Davidson

Figure 7.2(b) Modules combined for many

Output options
(many combinations of motorcycles)
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 Product Focus
► Facilities are organized by product
► High volume but low variety of
products
► Long, continuous production runs
enable efficient processes
► Typically high fixed cost but low
variable cost
► Generally less skilled labor

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Product Focus Few inputs
(corn, potatoes, water,
seasoning)

(high-volume, low-variety,
continuous process)
Frito-Lay

Output variations in size, shape,

Figure 7.2(c) and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
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 Mass Customization
► The rapid, low-cost production of
goods and service to satisfy
increasingly unique customer desires
► Combines the
flexibility of a
process focus
with the efficiency
of a product focus

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 Many parts and
Mass component inputs
(chips, hard drives,

Customization software, cases)

Many modules

(high-volume, high-variety)
Dell Computer

Figure 7.2(b) Many output versions

(custom PCs and notebooks)
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 Mass Customization
TABLE 7.1 Mass Customization Provides More Choices Than Ever
NUMBER OF CHOICES
ITEM 1970s 21ST CENTURY
Vehicle styles 18 1,212
Bicycle types 8 211,000
iPhone mobile game apps 0 1,200,000
Web sites 0 634,000,000
Movie releases per year 267 1551
New book titles 40,530 300,000+
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in supermarkets 14,000 150,000
High-definition TVs 0 102

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 Mass Customization
► Imaginative product design
► Flexible process design
► Tightly controlled inventory
management
► Tight schedules
► Responsive partners in the supply-
chain

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 Comparison of Processes
Proper evaluation and selection of process strategies
are critical. Some of the useful things to consider:
• Crossover Charts
• Focused Processes
• Selection of Equipment
• Flexibility
• Process Analysis and Design

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 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

1. Small quantity 1. Long runs, a 1. Large 1. Large quantity

and large standardized quantity and and large
variety of product from small variety variety of
products modules of products products

2. Broadly 2. Moderately 2. Less broadly 2. Flexible

skilled trained skilled operators
operators employees operators

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 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

3. Instructions 3. Few changes 3. Standardized 3. Custom orders

for each job in the job requiring many
instructions instructions job instructions

4. High inventory 4. Low inventory 4. Low 4. Low inventory

inventory relative to the
value of the
product

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 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

5. Finished 5. Finished 5. Finished 5. Finished goods

goods are goods are goods are are build-to-
made to order made to made to a order (BTO)
and not stored frequent forecast and
forecasts stored

6. Scheduling is 6. Scheduling is 6. Scheduling is 6. Sophisticated

complex routine routine scheduling
accommodates
custom orders

Copyright © 2017 Pearson Education, Inc. 7 - 24

 Comparison of Processes
TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS REPETITIVE PRODUCT MASS

(LOW-VOLUME, FOCUS FOCUS CUSTOMIZATION
HIGH-VARIETY (MODULAR (HIGH-VOLUME, (HIGH-VOLUME,
ARNOLD PALMER HARLEY- LOW-VARIETY HIGH-VARIETY
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)

7. Fixed costs 7. Fixed costs 7. Fixed costs 7. Fixed costs

are low and are dependent are high and tend to be high
variable costs on flexibility of variable costs and variable
high the facility low costs low

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 Comparison of Processes
• The comparison of processes can be further
enhanced by looking at the point where the total
cost of the processes changes.
• For instance, next figure shows three alternative
processes compared on a single chart. Such a chart
is sometimes called a crossover chart.

Copyright © 2017 Pearson Education, Inc. 7 - 26

 Crossover Chart Example
▶ Evaluate three different accounting software
products
▶ Calculate crossover points between software A
and B and between software B and C

DOLLARS REQUIRED PER

TOTAL FIXED COST ACCOUNTING REPORT
Software A $200,000 $60
Software B $300,000 $25
Software C $400,000 $10

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 Crossover Chart Example

► Software A is most economical from 0 to 2,857 reports

► Software B is most economical from 2,857 to

6,666 reports
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 Comparison of Processes
• Process A has the lowest cost for volumes below V1,
process B has the lowest cost between V1 and V2,
and process C has the lowest cost at volumes
above V2.

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 Crossover Charts
Variable Variable Variable
$ costs $ costs $ costs

Fixed costs Fixed costs

Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C
s ts s ts
co
co
sA

B
ss
$ e
es

ro c sts
oc

p co
t al sC
pr

To pro ce s
al

l
Tota
t
To

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C
Figure 7.3
(2,857) V1 V2 (6,666) Volume
Copyright © 2017 Pearson Education, Inc. 7 - 30
 Crossover Charts
Variable Variable Variable
$ costs $ costs $ costs

Fixed costs Fixed costs

Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C

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 Focused Processes
► Focus brings efficiency
► Focus on depth of product line
rather than breadth
► Focus can be
► Customers
► Products
► Service
► Technology

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 Selection of Equipment
▶ Decisions can be complex as alternate
methods may be available
▶ Important factors may be
► Cost ► Quality
► Cash flow ► Capacity
► Market stability ► Flexibility

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 Flexibility

► Flexibility is the ability to respond

with little penalty in time, cost, or
customer value
► May be a competitive advantage
► May be difficult and expensive
► Without it, change may mean starting
over

Copyright © 2017 Pearson Education, Inc. 7 - 34

 Process Analysis and Design
When analyzing and designing processes,
we ask questions such as the following:
► Is the process designed to achieve a

competitive advantage?
► Does the process eliminate steps that do

not add value?

► Does the process maximize customer

value?
► Will the process win orders?

Copyright © 2017 Pearson Education, Inc. 7 - 35

 Process Analysis and Design
The following tools help us understand the complexities of
process design and redesign. They are simply ways of making
sense of what happens or must happen in a process.
• Flowchart
• Time-Function Mapping (Process Mapping)
• Process Charts
• Value-Stream Mapping
• Service Blueprinting

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 Process Analysis and Design
 Flowchart
► Is a schematic or drawing of the
movement of material, product, or people.
► Harley-Davidson flowchart

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 Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
Arrive on a JIT
schedule from a
Air cleaners Oil tank work cell 10-station work
cell in
Milwaukee
Fluids and mufflers Shocks and forks

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Roller testing
Crating

Copyright © 2017 Pearson Education, Inc. 7 - 38

 Process Analysis and Design
► Time-Function Mapping (Process
mapping)
► Is a modified flowchart with time added on the horizontal
axis.
► With time-function mapping, nodes indicate the activities,
and the arrows indicate the flow direction, with time on the
horizontal axis.
► his type of analysis allows users to identify and eliminate
waste such as extra steps, duplication, and delay.
► Next Figure 7.4 shows the use of process mapping before
and after process improvement at American National Can
Company.
► In this example, substantial reduction in waiting time and
process improvement in order processing contributed to a
savings of 46 days.
Copyright © 2017 Pearson Education, Inc. 7 - 39
 "Baseline" Time-Function Map
Order Receive
Customer product product

Process
Sales order
Order

Production Wait
control

Product
Order

Plant A Print

Product
WIP

Warehouse Wait Wait Wait

Product
WIP
WIP
Plant B Extrude
WIP

Transport Move Move

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

Figure 7.4(a) 52 days
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 "Target" Time-Function Map
Order Receive
Customer product product

Process
Sales order

Product
Order

Production
control Wait
Order

WIP
Plant Print Extrude

Product
Warehouse Wait

Product
Transport Move

1 day 2 days 1 day 1 day 1 day

6 days

Figure 7.4(b)
Copyright © 2017 Pearson Education, Inc. 7 - 41
 Process Analysis and Design
► Process Charts
► Uses symbols, time, and distance to provide an objective
and structured way to analyze and record the activities that
make up a process.
► They allow us to focus on value-added activities.
► Identifying all value-added operations (as opposed to
inspection, storage, delay, and transportation, which add no
value) allows us to determine the percent of value added to
total activities.
► The operations manager’s job is to reduce waste and
increase the percent of value added

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 Process Chart

Figure 7.5

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 Process Analysis and Design
► Value-Stream Mapping (VSM)
► A variation of time-function mapping is value-stream
mapping (VSM);
► Where value is added in the entire production process,
including the supply chain
► It Extends from the customer back to the suppliers
► As with time-function mapping, the idea is to start with the
customer and understand the production process.
► Value-stream mapping takes into account not only the process
but, as shown in next example, also the management decisions
and information systems that support the process.

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 Example

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 Value-Stream Mapping
Steps needed to complete the value-
stream map
1. Begin with symbols for customer, supplier,
and production to ensure the big picture
2. Enter customer order requirements
3. Calculate the daily production requirements
4. Enter the outbound shipping requirements
and delivery frequency
5. Determine inbound shipping method and
delivery frequency
Copyright © 2017 Pearson Education, Inc. 7 - 46
 Value-Stream Mapping
6. Add the process steps (i.e., machine,
assemble) in sequence, left to right
7. Add communication methods, add their
frequency, and show the direction with
arrows
8. Add inventory quantities between I
every step of the entire flow
9. Determine total working time (value-
added time) and delay (non-value-added
time)
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 Value-Stream Mapping

Figure 7.6

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 Example

Solution: Have delivery twice per week rather than once per week

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 Service Blueprinting
► Focuses on the customer and
provider’s interaction with the
customer.
► Defines three levels of interaction.
► Each level has different management
issues.
► Identifies potential failure points
► Shows how poka-yoke (Mistake-
proofing) techniques can be added to
improve quality
Copyright © 2017 Pearson Education, Inc. 7 - 50
 Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close

Level Customer arrives

for service. Customer departs
#1
(3 min)

F
Determine Notify Customer pays bill.
specifics. customer (4 min)
Warm greeting (5 min)
and obtain No and recommend
an alternative
F
service request.
(10 sec) provider.
Standard Can F
Level request. (7 min)
service be
#2 (3 min) done and does Notify
Direct customer customer No customer the
to waiting room. approve? car is ready.
(5 min) (3 min)

F F F F
Yes Yes
Perform
Level required work. F Prepare invoice.
#3 (varies) (3 min)

Figure 7.7
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 Service Blueprint
Personal Greeting Service Diagnosis Perform Service Friendly Close

Level Customer arrives

for service. Customer departs
#1
(3 min)

F
Determine Notify Customer pays bill.
specifics. customer (4 min)
Warm greeting (5 min)
and obtain No and recommend
an alternative
F
service request.
(10 sec) provider.
Standard Can F
Level request. (7 min)
service be
#2 (3 min) done and does Notify
Direct customer customer No customer the
to waiting room. approve? car is ready.
(5 min) (3 min)

F F F F
Yes Yes
Perform
Level required work. F Prepare invoice.
#3 (varies) (3 min)

Figure 7.7
Copyright © 2017 Pearson Education, Inc. 7 - 52
 Special Considerations for
Service Process Design
► Some interaction with customer is
necessary, but this often affects
performance adversely
► The better these interactions are
accommodated in the process design, the
more efficient and effective the process
► Find the right combination of cost and
customer interaction

Copyright © 2017 Pearson Education, Inc. 7 - 53

 Service Process Matrix
Degree of Customization
Figure 7.8
Low High
Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking
High General-
Full-service purpose law firms
stockbroker
Degree of Labor

Digitized
Boutiques orthodontics
Retailing

Service Factory Law clinics Service Shop

Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines

No-frills
airlines

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 Service Process Matrix
Upper Quadrant –
Mass Service and Professional Service
► Labor involvement is high
► Focus on human resources
► Selection and training highly
important Degree of Customization
Low High

► Personalized services Mass Service

Commercial
banking
Professional Service
Private
banking
Traditional
orthodontics

High General-
Full-service purpose law
stockbroker firms
Digital

Degree of Labor
Boutiques orthodontics
Retailing
Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals

Airlines

No-frills
airlines

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 Service Process Matrix
Lower Quadrant –
Service Factory and Service Shop
► Automation of standardized services
► Restricted offerings
► Low labor intensity responds well to
process technology and
scheduling
Degree of Customization
Low High

Mass Service Professional Service

Private Traditional
banking orthodontics
Commercial

Tight control required to

banking

►
High General-
Full-service purpose law
stockbroker firms
Digital

Degree of Labor
Boutiques orthodontics

maintain standards
Retailing
Law clinics
Service Factory Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals

Airlines

No-frills
airlines

Copyright © 2017 Pearson Education, Inc. 7 - 56

 Improving Service
Productivity
TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Separation Structuring service so Bank customers go to a
customers must go where manager to open a new
the service is offered account, to loan officers for
loans, and to tellers for
deposits
Self-service Self-service so customers Supermarkets and
examine, compare, and department stores
evaluate at their own pace Internet ordering
Postponement Customizing at delivery Customizing vans at delivery
rather than at production
Focus Restricting the offerings Limited-menu restaurant

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 Improving Service
Productivity
TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Modules Modular selection of Investment and insurance
service selection
Modular production Prepackaged food modules
in restaurants
Automation Separating services that Automatic teller machines
may lend themselves to
some type of automation
Scheduling Precise personnel Scheduling ticket counter
scheduling personnel at 15-minute
intervals at airlines
Training Clarifying the service Investment counselor,
options funeral directors
Explaining how to avoid After-sale maintenance
problems personnel
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 Production Technology
Advances in technology that enhance production and productivity are
changing how things are designed, made, and serviced around the world.
In this section, we introduce nine areas of technology:
1. Machine technology
2. Automatic identification systems (AISs)
3. Process control
4. Vision systems
5. Robots
6. Automated storage and retrieval systems (ASRSs)
7. Automated guided vehicles (AGVs)
8. Flexible manufacturing systems (FMSs)
9. Computer-integrated manufacturing (CIM)

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 Machine Technology
► Increased precision, Comp
productivity, and uter n
contro umerical
flexibility l (CNC
)
► Reduced environmental impact
► Additive manufacturing produces
products by adding material, not
removing it
► Supports innovative product design,
minimal custom tooling required, minimal
assembly time, low inventory, and
reduced time to market
Copyright © 2017 Pearson Education, Inc. 7 - 60
 Automatic Identification
Systems (AISs) and RFID
► Improved data acquisition
► Reduced data entry errors
► Increased speed
► Increased scope
of process
automation

Bar codes and RFID

Copyright © 2017 Pearson Education, Inc. 7 - 61
 Process Control
► Use of IT for Real-time monitoring and
control of processes
► Sensors collect data
► Devices read data
on periodic basis
► Measurements translated into digital
signals then sent to a computer
► Computer programs analyze the data
► Resulting output may take numerous
forms

Copyright © 2017 Pearson Education, Inc. 7 - 62

 Vision Systems
Vision systems combine video cameras and computer
technology and are often used in inspection roles.
► Particular aid to inspection
► Consistently accurate
► Never bored
► Modest cost
► Superior to individuals performing the
same tasks

Copyright © 2017 Pearson Education, Inc. 7 - 63

 Robots
Robots are mechanical devices that use electronic
impulses to activate motors and switches.
► Perform monotonous or dangerous
tasks
► Perform tasks
requiring significant
strength or
endurance
► Generally enhanced
consistency and
accuracy
Copyright © 2017 Pearson Education, Inc. 7 - 64
 Automated Storage and
Retrieval Systems (ASRSs)
► computer-controlled
warehouses
► Automated placement
and withdrawal of parts
and products
► Reduced errors and
labor
► Particularly useful in inventory and
test areas of manufacturing firms
Copyright © 2017 Pearson Education, Inc. 7 - 65
 Automated Guided Vehicle
(AGVs)
► Electronically guided
and controlled carts
► Used for movement
of products and/or
individuals

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 Flexible Manufacturing
Systems (FMSs)
► Computer controls both the workstation and
the material handling equipment
► Enhance flexibility and reduced waste
► Can economically produce low volume but
high variety
► Reduced changeover time and increased
utilization
► Stringent communication requirement between
components
Copyright © 2017 Pearson Education, Inc. 7 - 67
 Computer-Integrated
Manufacturing (CIM)
► Extend flexible manufacturing
► Backward to engineering and inventory
control
► Forward into warehousing and shipping
► Can also include financial and customer
service areas
► Reducing the distinction between low-
volume/high-variety, and
high-volume/low-variety production
Copyright © 2017 Pearson Education, Inc. 7 - 68
 Computer-
Integrated
Manufacturing
(CIM)

Figure 7.9
Copyright © 2017 Pearson Education, Inc. 7 - 69
 Technology in Services
TABLE 7.4 Examples of Technology's Impact on Services
SERVICE INDUSTRY EXAMPLE
Financial Services Debit cards, electronic funds transfer, ATMs,
Internet stock trading, online banking via cell
phone
Education Online newspapers and journals, interactive
assignments via WebCT, Blackboard, and
smartphones
Utilities and government Automated one-person garbage trucks, optical
mail scanners, flood-warning systems, meters
that allow homeowners to control energy usage
and costs
Restaurants and foods Wireless orders from waiters to kitchen, robot
butchering, transponders on cars that track
sales at drive-throughs
Communications Interactive TV, e-books via Kindle

Copyright © 2017 Pearson Education, Inc. 7 - 70

 Technology in Services
TABLE 7.4 Examples of Technology’s Impact on Services
SERVICE INDUSTRY EXAMPLE
Hotels Electronic check-in/check-out, electronic
key/lock systems, mobile Web bookings
Wholesale/retail trade Point-of-sale (POS) terminals, e-commerce,
electronic communication between store and
supplier, bar-coded data, RFID
Transportation Automatic toll booths, satellite-directed
navigation systems, Wi-Fi in automobiles
Health care Online patient-monitoring systems, online
medical information systems, robotic surgery
Airlines Ticketless travel, scheduling, Internet
purchases, boarding passes downloaded as
two-dimensional bar codes on smart phones

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 Process Redesign
► The fundamental rethinking 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
► Requires reexamination of the basic process
and its objectives
► Focuses on activities that cross functional
lines
► Any process is a candidate for redesign
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