Operations Management (BMG2439)
Fourteenth Edition, Global Edition
Chapter 3
Process
Management
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Operations Management (BMG2439)
Fourteenth Edition, Global Edition
Chapter 3
[Link] of processes
[Link] flow analysis
[Link] consideration
[Link] concept
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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
Strategies
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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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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 Flow Diagram
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1. Process Strategy
• An organization’s approach to transforming resources
into goods and services
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 (continued)
Four basic strategies
1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization
Within these basic strategies are many ways for
implementation
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Process, Volume, and Variety
Figure
7.1
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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 variable costs and low equipment
utilization
• Product flows may vary considerably, making planning
and scheduling a challenge
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Process Focus (continued)
Figure
7.2(a)
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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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Repetitive Focus (continued)
Figure 7.2(b)
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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 (continued)
Figure
7.2(c)
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Mass Customization
• The rapid, low-cost
production of goods and
services to satisfy
increasingly unique
customer desires
• Combines the flexibility of
a
process focus with the
efficiency of a product
focus
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Mass Customization (continued)
Figure
7.2(d)
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Making Mass Customization Work
• Imaginative product design
• Flexible process design
• Tightly controlled inventory management
• Digitized communication tracks orders and material
• Responsive partners in the supply chain
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Comparison of Processes (1 of 4)
Table 7.1 Comparison of the Characteristics of Four Types
of Processes
PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)
1. Small quantity 1. Long runs, a 1. Large quantity 1. Large quantity
and large standardized and small variety and large variety
variety of product from of products of products
products modules
2. Broadly skilled 2. Moderately 2. Less broadly 2. Flexible operators
operators trained skilled operators
employees
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Comparison of Processes (2 of 4)
Table 7.1 Comparison of the Characteristics of Four Types
of Processes
PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)
3. Instructions for 3. Few changes in 3. Standardized 3. Custom orders
each job the instructions job instructions requiring many job
instructions
4. High inventory 4. Low inventory 4. Low inventory 4. Low inventory
relative to the
value of the
product
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Comparison of Processes (3 of 4)
Table 7.1 Comparison of the Characteristics of Four Types
of Processes
PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)
5. Finished 5. Finished goods 5. Finished goods 5. Finished goods
goods are are made to are made to a are build-to-order
made to order frequent forecast and (BTO)
and not stored forecasts stored
6. Scheduling is 6. Scheduling is 6. Scheduling is 6. Sophisticated
complex routine routine scheduling
accommodates
custom orders
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Comparison of Processes (4 of 4)
Table 7.1 Comparison of the Characteristics of Four Types
of Processes
PROCESS
FOCUS PRODUCT MASS
(LOW-VOLUME, REPETITIVE FOCUS CUSTOMIZATION
HIGH-VARIETY; FOCUS (HIGH-VOLUME, (HIGH-VOLUME,
e.g., ARNOLD (MODULAR; e.g., LOW-VARIETY; HIGH-VARIETY;
PALMER HARLEY- e.g., e.g.,
HOSPITAL) DAVIDSON) FRITO-LAY) DELL COMPUTER)
7. Fixed costs 7. Fixed costs are 7. Fixed costs are 7. Fixed costs tend
are low and dependent on high and to be high and
variable costs flexibility of the variable costs variable costs low
high facility low
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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
– Flexibility
stability
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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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2. Process Analysis and Design
When analyzing and designing processes, we ask
questions such as:
• 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?
• Below slide defines the five process design tools
presented in the chapter. Drawing a flow chart should
typically be the first step in any design or analysis
effort.
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Tools for Process Analysis and
Design
• Flowchart - Shows movement of people or material
• Time-Function Mapping - Adds time on the horizontal
axis to a flowchart
• Process Charts - Use symbols to analyze movement of
people or material
• Value-stream mapping - Expands time-function
mapping to see where value is added in the entire supply
chain
• Service blueprinting - Focuses on the customer and the
provider's interaction with the customer, and it identifies
potential failure points
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• The difference between a flow chart and a time-function
map is that time-function mapping is a flowchart with time
included on the x-axis.
• The two charts in Slides 32 and 33 come from Figure 7.4
of the text, illustrating a before and after time-function map
used in process improvement at American National Can
Company.
• The firm was able to eliminate the significant waiting that
had slowed things down before improvement was
implemented.
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"Baseline" Time-Function Map
Figure
7.4(a)
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"Target" Time-Function Map
Figure
7.4(b)
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• A process chart, like the one shown in this slide (Figure
7.5), breaks down steps into detail and can provide a
structured way to examine value-added vs. non-value-
added activities.
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Process Chart
Figure 7.5
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Value-Stream Mapping Steps
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 - Figure 7.6
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Value-Stream Mapping Steps
(continued)
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 every step of the
entire flow
9. Determine total working time (value-added time) and
delay (non-value-added time)
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• These slides describe value-stream mapping, which can
appear complicated because the full supply chain is
included in the picture.
• The nine steps to creating a value-stream map are shown
in Slides 35-36. Slide 37 (Figure 7.6) displays the value-
stream map created in Example 2.
• From this example, we see what looks like a significant
amount of inventory, as well as a large percentage of non-
value-added time. As the text suggests, one way to reduce
raw materials inventory might be to have deliveries twice
per week instead of once per week.
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Service Blueprint
• These slides illustrate service blueprinting, which is
applicable for processes with a high amount of service
content. Level 1 activities are under the control of the
customer, Level 2 activities represent interactions, and
Level 3 activities include activities not visible to the
customer.
• The identification of potential failure points is particularly
useful. Slide 39 describes several poka-yokes that can
address potential failure points.
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Figure
Service Blueprint 7.7
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Service Blueprint (continued)
Figure 7.7
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3. CAPACITY CONSIDERATION
• Capacity is the maximum output a system can produce in a given period.
Importance of capacity:
• Helps in production planning
• Ensures efficient use of resources
• Meets customer demand
Types of capacity:
• Design capacity: maximum theoretical output
• Effective capacity: realistic output after considering constraints
• Actual output: real production achieved
Relationship:
• Design Capacity ≥ Effective Capacity ≥ Actual Output
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CAPACITY MEASUREMENT
• Utilization = Actual Output / Design Capacity
• Efficiency = Actual Output / Effective Capacity
Example:
• Design capacity = 100 units
• Effective capacity = 90 units
• Actual output = 80 units
• Utilization = 80 / 100 = 80%
• Efficiency = 80 / 90 = 88.9%
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INTERPRETATION AND APPLICATION
• High utilization:
1. Good use of resources
2. Risk of overload
• Low utilization:
1. Flexible
2. Possible waste
• High efficiency: Good performance
• Factors affecting capacity:
1. Machine breakdown
2. Worker skills
3. Maintenance
4. Demand changes
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4. BOTTLENECK CONCEPT
• Bottleneck is the slowest process in a system that limits overall output.
• It determines the maximum capacity of the entire process.
• Simple meaning:
• The process that causes delay.
• Example:
• Machine A = 10 units/hour
• Machine B = 5 units/hour
• Machine C = 8 units/hour
Bottleneck = Machine B
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IMPACT OF BOTTLENECK
Effects of bottleneck:
• Slows down production
• Causes waiting time (queue)
• Reduces overall output
Why bottleneck is important:
• Limits system performance
• Affects customer service
• Increases lead time
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MANAGING BOTTLENECK
Ways to improve bottleneck:
• Increase capacity at bottleneck
• Add more workers or machines
• Improve process efficiency
• Reduce idle time
Example: If Machine B is slow → improve or add machine
Conclusion:
• To improve performance, focus on the bottleneck first.
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