2
PRODUCTION & OPERATIONS MANAGEMENT – IM3013 LEARNING OUTCOMES
Chapter 5 L.O.2.11 Describe four process strategies.
L.O.2.12 Conduct Break-even point analysis & do
PROCESS SELECTION process selection/ make-buy decision
3 4
Objective: create a process
that can produce offerings
PROCESS STRATEGY that meet customer
An organization’s requirements within cost
approach to and other managerial FOUR PROCESS
transforming constraints.
resources into STRATEGIES
Long-term effect
goods and services.
Variety →Efficiency
→Flexibility of production
→Cost
→Quality
5 6
PROCESS OPTIONS PROCESS FOCUS
A production
facility organized
Classify by around processes
variety & to facilitate low
volume volume, high-
variety
production.
Source: Heizer, J., Render, B. & Munson, C. (2020). Operations
Management: Sustainability and Supply Chain management
(13th ed.). Pearson Education, Inc.
Intermittent process/
Job shops
7 8
PRODUCT FOCUS REPETIVE PROCESS
A facility
A product-
organized around
oriented
products; a
production
product-oriented,
process that uses
high-volume, low-
modules.
variety process.
Continuous process Module = part/ Module – previously prepared (often) in a
component of a product product-
product-focused process
previously prepared
9 10
Sales
High Design
Logistics
MASS CUSTOMIZATION collaboration
FOCUS
Supply
Rapid, low-cost Mass chain
Production
production that Customization
caters to
constantly = Make-to-stock ≠ Build-to-order
changing unique High volume Build-
Build- Challenges
customer desires. to-
to-order (BTO) Imaginative Product Design
Agile Process Design (Postponement)
Tight control of inventory (NO
unpopular/obsolete components)
What & when the MC = high variety + low cost Tight schedule
customer want precisely Responsive SCM
& economically
(Process focus) (Product focus)
11 12
selection of a particular
process strategy requires
decisions about equipment
TOOLS OF PROCESS and technology
Selection of
ANALYSIS equipment
The choice of equipment
requires considering cost,
cash flow, market stability,
quality, capacity, and
flexibility
13 14
Flowchart Process chart
Time-Function
Flowchart
Tools of process Mapping Value Stream
(Process Mapping Shows the
analysis Mapping) movement of people
or materials
Service
Blueprinting
15 16
Time-
Time-function
Mapping
Process chart
Shows flows and time
frame
Source: Heizer, J., Render, B. & Munson, C. (2020). Operations
Management: Sustainability and Supply Chain management
(13th ed.). Pearson Education, Inc.
Source: Heizer, J., Render, B. & Munson, C. (2020). Operations Instructor: Huynh Thi Phuong Lan
Management: Sustainability and Supply Chain management
(13th ed.). Pearson Education, Inc.
17 18
Where value is added in the
entire production process,
Source: Heizer, J., Render, B. & Munson, C. (2020).
Operations Management: Sustainability and Supply
Chain management (13th ed.). Pearson Education, Inc.
including the supply chain
Extends from the customer
back to the suppliers
Value Stream
Mapping
Source: Heizer, J., Render, B. & Munson, C. (2020). Instructor: Huynh Thi Phuong Lan
Operations Management: Sustainability and Supply
Chain management (13th ed.). Pearson Education, Inc.
Focuses on the customer and provider
19 20
interaction
Defines three levels of interaction
Each level has different management issues
Identifies potential failure points
Service
Blueprinting
Source: Heizer, J., Render, B. & Munson, C. (2020). Operations
Management: Sustainability and Supply Chain management
Source: Heizer, J., Render, B. & Munson, C. (2020). Instructor: Huynh Thi Phuong Lan (13th ed.). Pearson Education, Inc.
Operations Management: Sustainability and Supply
Chain management (13th ed.). Pearson Education, Inc.
21 22
Costs and revenue are linear
functions
→Generally not the case in the
BREAK-EVEN-POINT Break-even-point real world
analysis We actually know these costs
ANALYSIS →Very difficult to verify
Assumptions Time value of money is often
ignored
23 Example 1 24
Cf Fixed costs = $10,000 Material
Cv = $.75/unit
BEPx = v = (Formula 1) Direct Clabor
v
= $1.50/unit Selling price
p = $4.00 per unit
BREAK-EVEN-POINT ANLYSIS
Where:
A means of finding cf: fixed cost F $10,000
BEPx = = = 5,714
the point, in units P -V 4.00 – (1.50 + .75 )
or in dollars, at v: volume (i.e., number of
which costs equal units produced and sold)
revenues. cv: variable cost per unit F $10,000
BEP$ = =
p: price per unit 1 – (V / P) 1 – (1.50 + .75 ) / ( 4.00 )
$10,000
= = $22,857.14
BEP$ = *p (Formula 2) .4375
25 26
Identify min. volume/ price of
product produced & sold.
Select the appropriate process/
equipment
Application of Make-or-buy decision
BEP analysis
Example 2 27 28
dollars
Initial
Investment Variable cost
a) VacuClean System $ 250,000 $ 1.50
b) Wash n Scrub Model III $ 400,000 $ 1.20
c) DynoClean $ 550,000 $ 0.95
550,000
. x = 400,000 + 12
250,000 + 15 . x 400,000
a&b
∴ x = 500,000 250,000
. x = 550,000+ .95x
400,000 + 12
b&c
∴ x = 600,000 0 units
. x = 550,000+ .95x
250,000 + 15
a&c
∴ x = 545,454
Example 3 29 30
Initial
Investment Variable cost
a) In-house Production $ 300,000 $ 70
cost
b) Outsourcing $0 $ 150
BEP = ?
300×10 6
Buy Make
0
BEP = 3,750 volume
31 32
1. Heizer, J., Render, B. & Munson, C.
(2020). Operations Management:
Sustainability and Supply Chain
management (13th ed.). Pearson
Education, Inc.
references 2. Roberta S. Russell, Bernard W.
Taylor III, (2017), Operations
management – Creating Value
Along the Supply Chain, 7th
edition, Wiley.