Chapter 7

Process Strategy

7-1
Chapter Outline
● Global Company Profile:
Harley-Davidson
1. Four Process Strategies
2. Selection of Equipment
3. Process Analysis and Design
4. Service Process Design
5. Production Technology
6. Technology in Services
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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

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 Learning Objectives
When you complete this chapter you should be able to:
7.1 Describe four types of process strategies

7.2 Determine crossover (break even) points for process

strategy selection

7.3 Use the tools of process analysis

7.4 Describe customer interaction in service processes

7.5 Identify recent advances in production technology

7-5
 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 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, Volume, and Variety
Figure 7.1 Volume
Low Repetitive High
Volume Process Volume
High Variety Process Focus Mass Customization
one or few units
Variety (flexibility)

projects, job shops (difficult to achieve, but

per run, (machine, print, huge rewards)
(allows hospitals, Dell Computer
customization) restaurants)
Changes in Arnold Palmer
Modules Hospital
modest runs, Repetitive
standardized (autos, motorcycles,
modules home appliances)
Harley-Davidson
Changes in Poor Strategy Product Focus
Attributes (such as (Both fixed and (commercial baked goods,
grade, quality, size, variable costs are steel, glass, beer)
thickness, etc.) high) Low Vol - Frito-Lay
long runs only Low Variety
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 Process
Strategies

7 - 10
 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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 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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 Product Focus
● Facilities are organized around products
● 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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 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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 Making Mass Customization Works
High volume system, build to-order >>>>> customer
orders, not forecast
Major challenges :
● Product design must be imaginative - variations needed
● Flexible process design - accommodate changes in design
and technology
● Inventory management need to be tightly controlled
● Tight schedules - goog planning and scheduling to track
orders
● Responsive partners in the supply-chain
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7 - 16
 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 ACCOUNTING
TOTAL FIXED COST REPORT
Software A $200,000 $60
Software B $300,000 $25
Software C $400,000 $10

7 - 17
 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

7 - 18
7 - 19
 Selection of Equipment
● Process Strategies requires decision of equipment and
technology
● 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

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 Process Analysis and Design
When designing and analyzing process we need to ask
these questions.
● 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?
- Able to analyze throughput, costs, quality issues.
Examine process and continuously improve
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 Process Analysis and Design

● Flowchart
○ Shows the movement
of materials
○ Harley-Davidson
flowchart

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 Process Analysis and Design

● Time-Function Mapping or Process Mapping

○ Shows flows and time frame
○ Nodes indicate activities
○ Arrow indicates flow direction
○ Time on horizontal axis
○ Can analyze waste, e.g. extra steps, duplication,
delay
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How long to
complete this
order /
process?

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How many days
to complete the
order after
analysis?

How many
days can be
reduced or
saved?

7 - 26
 Process Chart
Use symbols, time and
distance to analyze and
record activities that
make up a process

Focus on value-added
steps and try to
eliminate or change
non value -added
steps

Figure 7.5 7 - 27
 Process Analysis and Design

● Value-Stream Mapping (VSM)

○ Where value is added in the entire production
process, including the supply chain
○ Extends from the customer back to the
suppliers

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 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

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 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)

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 Value-Stream Mapping

Figure 7.6
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 Service Blueprinting
● Products with high service contents require different
technique
● Service blueprinting focuses on the customer and
provider interaction

● Defines three levels of interaction - customer control,

service provider interaction, service provider control
(away from customer)
● Each level has different management issues
● Identifies potential failure points
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 Service Blueprint

Can you identify the 3

Levels of activities?
What are they?

What are these from the chart ?

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 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
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Figure 7.8
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 Service Process Matrix

Mass Service and Professional Service

● Labor involvement is high
● Focus on human resources
● Selection and training highly important
●
Degree of Customization

Personalized services Low High

Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking General-
High
Full-service purpose law
stockbroker firms Digital
Boutiques

Degree of
orthodontics
Retailing

Labor
Service Factory Law clinics Service Shop
Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food
Low catalog stores Fine-dining
restaurants restaurants Hospitals
Airlines
No-frills
airlines

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 Service Process Matrix
Service Factory and Service Shop
● Automation of standardized services
● Restricted offerings
● Low labor intensity responds well to process
technology and Degree of Customization
Low High

scheduling High
Mass Service

Commercial
banking
Professional Service
Private
banking
Traditional
orthodontics
General-
Full-service purpose law

● Tight control required to

stockbroker firms Digital
Boutiques

Degree of
orthodontics
Retailing

Labor
Service Factory Law clinics Service Shop
Limited-service Specialized
stockbroker hospitals

maintain standards
Warehouse and Fast-food
Low catalog stores Fine-dining
restaurants restaurants Hospitals
Airlines
No-frills
airlines

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 Improving Service Productivity
TABLE 7.3 Techniques for Improving Service Productivity
STRATEGY TECHNIQUE EXAMPLE
Separation Structuring service so customers Bank customers go to a manager to
must go where the service is open a new account, to loan officers
offered for loans, and to tellers for deposits

Self-service Self-service so customers Supermarkets and department stores

examine, compare, and evaluate Internet ordering
at their own pace
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 service Investment and insurance selection
Modular production Prepackaged food modules in
restaurants

Automation Separating services that may lend Automatic teller machines

themselves to some type of
automation
Scheduling Precise personnel scheduling Scheduling ticket counter personnel
at 15-minute intervals at airlines

Training Clarifying the service options Investment counselor, funeral

Explaining how to avoid problems directors
After-sale maintenance personnel

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 Production 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,
productivity, and
flexibility
● 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

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Automatic Identification Systems
(AISs) and RFID
● Improved data acquisition
● Reduced data entry errors
● Increased speed
● Increased scope
of process
automation
Bar codes and RFID
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 Process Control
● 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 7 - 43
 Vision Systems

● Particular aid to inspection

● Consistently accurate
● Never bored
● Modest cost
● Superior to individuals performing the same
tasks

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 Robots
● Perform monotonous or dangerous tasks
● Perform tasks
requiring significant
strength or
endurance
● Generally enhanced
consistency and
accuracy
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Automated Storage and Retrieval
Systems (ASRSs)
● Automated placement
and withdrawal of parts
and products
● Reduced errors and
labor
● Particularly useful in inventory and test
areas of manufacturing firms
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Automated Guided Vehicle (AGVs)

● Electronically guided and

controlled carts
● Used for movement of
products and/or
individuals

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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

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Computer-Integrated
Manufacturing (CIM)

Figure 7.9
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 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
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 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 7 - 51