Operations and

supply chain dynamics

Presented by
Team Teaching
IPB university
Operation Strategy:
Process Analysis and Design
 Process Strategy

The objective is to create a

process to produce products
that meets customer
requirements within cost and
other managerial constraints

© 2014 Pearson Education, Inc. 6-3

 Process Strategies

► How to manufacture goods or provide

services that
► Meets or exceeds customer requirements
► Meets managerial goals
► Has long term effects on
► Efficiency and production flexibility
► Costs and quality

© 2014 Pearson Education, Inc. 6-4

 Process, Volume, and Variety
Volume
Low Volume Repetitive Process High Volume

High Variety Process Focus

one or few units projects, job shops Mass Customization
per run, (machine, print, hospitals, (difficult to achieve, but
(allows restaurants) huge rewards)
customization) Arnold Palmer Hospital Dell Computer

Changes in Repetitive
Modules (autos, motorcycles,
modest runs, home appliances)
standardized Harley-Davidson
modules
Changes in Poor Strategy Product Focus
Attributes (such (Both fixed and (commercial baked
as grade, quality, variable costs are goods, steel, glass,
size, thickness, high) beer)
etc.) Frito-Lay
long runs only
 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
© 2014 Pearson Education, Inc. 6-6
 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
© 2014 Pearson Education, Inc. 6-7
[Link]
 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)
© 2014 Pearson Education, Inc. 6-9
 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
© 2014 Pearson Education, Inc. 6 - 10
[Link]
 Raw materials and
module inputs
(multiple engine models,
Repetitive Focus wheel modules)

Few
modules

(modular)
Harley Davidson

Figure 7.2(b) Modules combined for many

Output options
(many combinations of motorcycles)
© 2014 Pearson Education, Inc. 6 - 12
 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
© 2014 Pearson Education, Inc. 6 - 13
[Link]
 Product Focus Few Inputs
(corn, potatoes, water,
seasoning)

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

Output variations in size, shape,

and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
© 2014 Pearson Education, Inc. 6 - 15
 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

© 2014 Pearson Education, Inc. 6 - 16

 Mass Customization
Mass Customization Provides More Choices Than Ever
NUMBER OF CHOICES
ITEM 1970s 21ST CENTURY
Vehicle styles 18 1,212
Bicycle types 8 211,000
Software titles 0 400,000
Web sites 0 255,000,000
Movie releases per year 267 744
New book titles 40,530 300,000
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in supermarkets 14,000 150,000
LCD TVs 0 102
© 2014 Pearson Education, Inc. 6 - 18
 Many parts and
Mass Customization component inputs
(chips, hard drives, software,
cases)

Many modules
(high-volume, high-variety)
Dell Computer

Figure 7.2(d)
Many output versions
(custom PCs and notebooks)
© 2014 Pearson Education, Inc. 6 - 19
 Mass Customization

► Imaginative product design

► Flexible process design
► Tightly controlled inventory
management
► Tight schedules
► Responsive supply-chain partners

© 2014 Pearson Education, Inc. 6 - 20

 Comparison of Processes
Comparison of the Characteristics of Four Types of Processes
PRODUCT MASS
PROCESS FOCUS REPETITIVE FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

[Link] quantity [Link] runs, [Link] [Link] quantity

and large usually a quantity and and large
variety of standardized small variety variety of
products product from of products products
modules
[Link] [Link] [Link] broadly [Link]
skilled trained skilled operators
operators employees operators
 Comparison of Processes
Comparison of the Characteristics of Four Types of Processes
PROCESS PRODUCT MASS
FOCUS REPETITIVE FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

[Link] [Link] changes [Link] [Link] orders

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

[Link] [Link] inventory [Link] inventory [Link] inventory

inventory relative to the
value of the
product
 Comparison of Processes
Comparison of the Characteristics of Four Types of Processes
MASS
PROCESS FOCUS REPETITIVE PRODUCT FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

[Link] [Link] goods [Link] [Link] goods

goods are are made to goods are are build-to-
made to order frequent made to a order (BTO)
and not stored forecasts forecast and
stored
[Link] is [Link] is [Link] is [Link]
complex routine routine scheduling
accommodates
custom orders
 Comparison of Processes

Comparison of the Characteristics of Four Types of Processes

PROCESS PRODUCT MASS

FOCUS REPETITIVE FOCUS CUSTOMIZATION
(LOW-VOLUME, FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
HIGH-VARIETY) (MODULAR) LOW-VARIETY) HIGH-VARIETY)

[Link] costs [Link] costs [Link] costs [Link] costs

are low and are dependent are high and tend to be high
variable costs on flexibility of variable and variable
high the facility costs low costs low
 Crossover Chart Example
▶ Evaluate three different accounting software products
▶ Calculate crossover points between software A and B
and between software B and C

TOTAL FIXED DOLLARS REQUIRED PER

COST ACCOUNTING REPORT
Software A $200,000 $60

Software B $300,000 $25

Software C $400,000 $10

© 2014 Pearson Education, Inc. 6 - 25

 Crossover Chart Example
( ) ( )
200,000 + 60 V1 = 300,000 + 25 V1
35V1 = 100,000
V1 = 2,857
► Software A is most economical from 0 to 2,857 reports
( ) ( )
300,000 + 25 V2 = 400,000 + 10 V2
15V2 = 100,000
V2 = 6,666

► Software B is most economical from 2,857 to 6,666 reports

© 2014 Pearson Education, Inc. 6 - 26

 Crossover Charts
Variable
costs
Variable Variable
$ costs $ costs $
Fixed costs Fixed costs
Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C

sts
sts

co
co
B

A
s
$ es

ss
oc ts

ce
pr cos
tal C

ro
ss
To roce
lp
l p
ta Tota
To

400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
Process A Process B Process C

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

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

© 2014 Pearson Education, Inc. 6 - 28

[Link]
[Link]
[Link]
 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

© 2014 Pearson Education, Inc. 6 - 32

 Equipment and Technology

► Possible competitive advantage

► Flexibility may be a competitive advantage
► May be difficult and expensive and may
require starting over
► Important to get it right
 Process Analysis and Design
► 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?

© 2014 Pearson Education, Inc. 6 - 34

 Process Analysis and Design

► Flowcharts
► Shows the movement of materials
► Harley-Davidson flowchart
► Time-Function Mapping
► Shows flows and time frame

© 2014 Pearson Education, Inc. 6 - 35

 “Baseline” Time-Function Map
Order Receive
Customer product product

Process
Sales order

Production

Order
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 0 day 1 day

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

Process
Sales order

Product
Production

Order
control Wait

WIP

Order
Plant Print Extrude

Product
Warehouse Wait

Product
Transport Move

1 day 2 days 1 day 1 day 1 day

6 days
 Process Analysis and Design

► Value-Stream Mapping
► Where value is added in the entire production
process, including the supply chain
► Extends from the customer back to the
suppliers

© 2014 Pearson Education, Inc. 6 - 39

 Value-Stream Mapping

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

© 2014 Pearson Education, Inc. 6 - 40

 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 (shown with I ) between
every step of the entire flow
9. Determine total working time (value-added time) and
delay (non-value-added time)
[Link]
© 2014 Pearson Education, Inc. 6 - 41
 Value-Stream Mapping

© 2014 Pearson Education, Inc. 6 - 42

 Process Chart

© 2014 Pearson Education, Inc. Figure 7.6 7 - 43

[Link]
Group Project

Based on the case you have chosen

● Discuss the process analysis and design
Thank You