Operations Management

Process Strategies and Layout Strategies Chapter 5

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Outline
FOUR PROCESS STRATEGIES

PROCESS ANALYSIS AND DESIGN

SERVICE PROCESS DESIGN SELECTION OF EQUIPMENT AND TECHNOLOGY PRODUCTION TECHNOLOGY TECHNOLOGY IN SERVICES ENVIRONMENTALLY FRIENDLY PROCESSES PROCESS REENGINEERING

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Learning Objectives
When you complete this chapter, you should be able to : Identify or Define:

Process focus Repetitive focus Product focus Process reengineering Service process issues Environmental issues Process analysis Service design Green manufacturing Production technology
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Describe or Explain:

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Fit of Process, Volume, and Variety

Low-Volume (Intermittent)
Repetitive Process (Modular)

High-Volume (Continuous)

High Variety One or few units per run, high variety (allows customization) Changes in modules Modest runs, standardized modules Changes in attributes (such as grade, quality, size, thickness, etc.) Long runs only

Process focus projects, job shops,(machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley Davidson

Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co.

Poor strategy

Product focus (commercial baked goods, steel, glass) Nucor Steel

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Process Strategies
Involve determining how to produce a product or provide a service Objective

Meet or exceed customer requirements Meet cost & managerial goals

Has long-run effects

Product & volume flexibility Costs & quality

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Types of Process Strategies

Process strategies that follow a continuum Within a given facility, several strategies may be used These strategies are often classified as:
Process-Focused RepetitiveFocused Product-Focused

Continuum
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Process-Focused Strategy
Facilities are organized by process Similar processes are together

Example: All drill presses are together

Low volume, high variety products Jumbled flow Other names

Intermittent process Job shop

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Operation 1

Product A 2 3

Product B
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Process Focus

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Process Focused Strategy Pros & Cons

Advantages
Greater product flexibility More general purpose equipment Lower initial capital investment

Disadvantages
High variable costs More highly trained personnel More difficult production planning & control Low equipment utilization (5% to 25%)
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Repetitive Focused Strategy

Facilities often organized by assembly lines Characterized by modules

Parts & assemblies made previously

Modules combined for many output options Other names

Assembly line Production line

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Repetitive Focus

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Repetitive Focused Strategy Considerations

More structured than process-focused, less structured than product focused Enables quasi-customization Using modules, it enjoys economic advantage of continuous process, and custom advantage of low-volume, high-variety model

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Product-Focused Strategy
Facilities are organized by product High volume, low variety products Where found
Discrete unit manufacturing Continuous process manufacturing

Other names
Line flow production Continuous production

Products A & B 1 2 3 Operation

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Product Focus

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 Advantages

Product-Focused Strategy Pros & Cons

Lower variable cost per unit Lower but more specialized labor skills Easier production planning and control Higher equipment utilization (70% to 90%)

Disadvantages
Lower product flexibility More specialized equipment Usually higher capital investment

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Process Continuum
Process Focused (intermittent process) Repetitive Focus (assembly line) Product Focused (continuous process)

Continuum High variety, low volume Low utilization (5% - 25%) General-purpose equipment Modular Flexible equipment Low variety, high volume High utilization (70% - 90%) Specialized equipment

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Process Strategies
Repetitive Focus Modular design Flexible equipment Modular techniques Mass Customization Effective scheduling techniques Process-focused High variety, low volume Low utilization (5% - 20%) General purpose equipment
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Rapid throughput techniques

Product-focused Low variety, high volume High utilization (70% - 80%) Specialized equipment
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Mass Customization
Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires. Under mass customization the three process models become so flexible that distinctions between them blur, making variety and volume issues less significant.

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Volume and Variety of Products

Volume and Variety of Products One or very few units per lot Very small runs, high variety Modest runs, modest variety Long runs, modest variations Very long runs, changes in attributes Equipment utilization
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Low Volume High Variety Process (Intermittent) Projects

Repetitive Process (Modular)

High Volume Low Variety Process (Continuous)

Job Shops

Mass Customization

Poor Strategy (High variable costs) 5%-25%

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Disconnected Repetitive Connected Repetitive Continuous

20%-75% 70%-80%
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A Comparison (1)
Process Focus (Low volume, High variety) 1. Small quantity, large variety of products 2. General purpose equipment Repetitive Focus (Modular) Product focus (High-volume, low-variety) Large quantity, small variety of products Mass Customization (High-volume, high-variety Large quantity, large variety of products Rapid changeover on flexible equipment

Long runs, standardized product, from modules

Special Special purpose equipment aids in equipment use of assembly line

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A Comparison (2)
Process Focus Repetitive Focus Product focus Mass Customization Flexible operators trained for customization 3 Broadly skilled operators Modestly trained employees Operators less broadly skilled

4 Many instructions Reduced training Few work because of change and number of job orders and job in jobs instructions instructions 5 Raw material high relative to product value
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Custom orders require many instructions Raw material low relative to product value
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JIT techniques used

Raw material low relative to product value

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A Comparison (3)
Process Focus Repetitive Focus Product focus Mass Customization 6 WIP high relative JIT techniques to output used WIP low relative to WIP driven output down by JIT, kanban, lean production Units move swiftly Goods move thru facility swiftly thru facility Finished goods made to forecast, then stored Finished goods made to order
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7 Units move slowly thru plant 8 Finished goods made to order, not stored
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Movement measured in hours & days Finished goods made to frequent forecasts
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A Comparison (4)
Process Focus Repetitive Focus Product focus Mass Customization

9 Scheduling complex and concerned with trade-off between inventory, capacity, and customer service

Scheduling based on building models from a variety of forecasts

Scheduling relatively simple, concerns establishing sufficient rate of output to meet forecasts Fixed costs high, variable costs low

Scheduling sophisticated to accommodate customization

10 Fixed costs low, Fixed costs variable costs high dependent on flexibility of facilities
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Fixed costs high; variable costs must be low

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A Comparison (5)
Process Focus 11 Costing, done by job, is estimated prior to doing job but only known after doing job Repetitive Focus Costs usually known based on experience Product focus Because of high fixed costs, cost dependent on utilization of capacity Mass Customization High fixed costs and dynamic variable costs

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Questions for Process Analysis and Design

Is the process designed to achieve competitive advantage in terms of differentiation, response, or low cost? Does the process eliminate steps that do not add value? Does the process maximize customer value as perceived by the customer? Will the process win orders?
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Tools for Process Design

Flow Diagrams Process Charts Time-Function/Process Mapping Work Flow Analysis

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Production Process Flow Diagram

Customer Purchasing (order inks, paper, other supplies) Vendors Accounting Receiving Warehousing (ink, paper, etc.) Customer sales representative take order Prepress Department (Prepare printing plates and negatives) Printing Department Collating Department Gluing, binding, stapling, labeling Polywrap Department Shipping
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Information flow Material flow

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Process Chart Example

SUBJECT: Request tool purchase Dist (ft) Time (min) Symbol Description D Write order

D On desk
75

D To buyer
D Examine = Operation; = Transport; = Inspect; D = Delay; = Storage

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Time Function Map (Target)

Customer
Order Product Process Order
Order

Receive product

Sales Production control Plant

Wait
Order Product

Print

WIP

Extrude

Warehouse

Wait
Product

Transport

Move

1 day

2 days

1 day

1 day

1 day

6 days
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Work Flow Analysis - Four Phases

Request from a customer or an offer to provide services by a performer Negotiation, allowing the customer and the performer to agree on how the work should be done and what will constitute customer satisfaction Performance of the assignment and completion Acceptance, closing the transaction provided the customer expresses satisfaction and agrees that the conditions were met.
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Attaining Lean Production

Focus on inventory reduction Build systems that help employees Reduce space requirements Develop close relationships with suppliers Educate suppliers Eliminate all but value-added activities Develop the workforce Make jobs more challenging Set sights on perfection!
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Customer Interaction and Process Strategy

Low High

Mass Service
Commercial Banking Personal banking

Professional Service

High

Degree of Labor Intensity

Full-service stockbroker Retailing Boutiques

General purpose law firms

Service Factory
Limited service stockbroker Warehouse and catalog stores No frills airlines Airlines

Law clinics

Service Shop
For-profit hospitals Fine dining restaurants Hospitals

Low

Fast food restaurants

Degree of Interaction and Customization

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Techniques for Improving Service Productivity

Strategy
Separation Self-service

Technique
Structure service so customers must go where service is offered Self-service so customers examine, compare and evaluate at their own pace Customizing at delivery

Postponement

Focus
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Restricting the offerings

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Techniques for Improving Service Productivity - Continued

Modules
Automation Scheduling Training
Modular selection of service. Modular production
Separating services that lend themselves to automation Precise personnel scheduling Clarifying the service options Explaining problems Improving employee flexibility

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Outline
THE STRATEGIC IMPORTANCE OF LAYOUT DECISIONS TYPES OF LAYOUT
Fixed-position layout
Process-oriented layout Office layout Retail layout Warehousing and storage layouts Repetitive and product-oriented layout
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Learning Objectives
When you complete this chapter, you should be able to : Identify or Define:
Fixed-position layout Process-oriented layout Work cells Focused work center Office layout Retail layout Warehouse layout Product-oriented layout Assembly-line factory

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Learning Objectives
When you complete this chapter, you should be able to : Describe or explain:

How to achieve a good layout for the process facility How to balance production flow in a repetitive or product-oriented facility

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What is Facility Layout

Location or arrangement of everything within & around buildings Objectives are to maximize
Customer

satisfaction Utilization of space, equipment, & people Efficient flow of information, material, & people Employee morale & safety
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Objectives of the Layout Strategy

To develop an economical layout which will meet the requirements of :

product design and volume (product strategy) process equipment and capacity (process strategy) quality of work life (human resource strategy) building and site constraints (location strategy)
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Strategic Importance of Layout

Proper layout enables:
Higher utilization of space, equipment,and people Improved flow of information, materials, or people Improved employee morale and safer working conditions Improved customer/client interaction Flexibility
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Six Types of Layout Strategies

1. Fixed-position layout
large bulky projects such as ships and buildings

2. Process-oriented layout
deals with low-volume, high-variety production (job shop, intermittent production)

3. Office layout
positions workers, their equipment, and spaces/ offices to provide for movement of information
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Six Types of Layout Strategies cont

4. Retail/service layout

allocates shelf space and responds to customer behavior

5. Warehouse layout

addresses trade-offs between space and material handling

6. Product-oriented layout

seeks the best personnel and machine use in repetitive or continuous production
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Requirements of a Good Layout

an understanding of capacity and space requirements selection of appropriate material handling equipment decisions regarding environment and aesthetics identification and understanding of the requirements for information flow identification of the cost of moving between the various work areas
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Constraints on Layout Objectives

Product design & volume Process equipment & capacity Quality of work life Building and site

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Areas of Concern in Layout Strategy

Communication Service Areas Warehousing Safety Layout Strategy Material Attributes Work Cell

Material Flow

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1. Fixed-Position Layout
Design is for stationary project Workers and equipment come to site Complicating factors:

There is limited space at virtually all sites At different stages in the construction process, different materials are needed therefore, different items become critical as the project develops
The volume of materials needed is dynamic

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2. Process-Oriented Layout
Design places departments with large flows of material or people together Department areas having similar processes located in close proximity

e.g., All x-ray machines in same area

Used with process-focused processes

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Steps in Developing a Process-Oriented Layout

1. Construct a from-to matrix 2. Determine space requirements for each department 3. Develop an initial schematic diagram 4. Determine the cost of this layout 5. By trial-and-error (or more sophisticated means), try to improve the initial layout 6. Prepare a detailed plan that evaluates factors in addition to transportation cost
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a) Cellular Layout - Work Cells

Special case of product-oriented layout in what is ordinarily a process-oriented facility Consists of different machines brought together to make a product Temporary arrangement only Example: Assembly line set up to produce 3000 identical parts in a job shop
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Improving Layouts by Moving to the Work Cell Concept

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Work Cells - Some Advantages

Reduced work-in-process inventory Less floor space required Reduced raw material and finished goods inventories required Reduced direct labor costs Heightened sense of employee participation Increased utilization of equipment machinery Reduced investment in machinery and equipment
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Work Cell Advantages

Inventory Floor space Direct labor costs

Equipment utilization Employee participation Quality

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Work Cell Floor Plan

Saws Drills Office

Tool Room

Work Cell

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Requirements for Cellular Production

Identification of families of products group technology codes High level of training and flexibility on the part of the employees Either staff support or flexible, imaginative employees to establish the work cells initially Test (poka-yoke) at each station in the cell
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Work Cells, Focused Work Centers and the Focused Factory

Work Cell
A temporary assembly-line-oriented arrangement of machines and personnel in what is ordinarily a processoriented facility Example: job shop with rearranged machinery and personnel to produce 30 unique control panels A permanent assembly-line-oriented arrangement of machines and personnel in what is ordinarily a processoriented facility Example: manufacturing of pipe brackets at a shipyard A permanent facility to produce a product or component in a product-oriented facility Example: a plant to produce window mechanisms for automobiles
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Focused Work Center

Focused Factory

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3. Office Layout
Design positions people, equipment, & offices for maximum information flow Arranged by process or product

Example: Payroll dept. is by process

Relationship chart used Examples

Insurance company Software company

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Office Relationship Shart

1 President
2 Chief Technology Officer 3 Engineers Area 4 Secretary 5 Office entrance 7 Equipment cabinet 8 Photocopy equipment O A U
Val. Closeness

O
A X

I
I

A
I

I I

O
U E

9 Storage room
9 Storage room
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U I O O A E U O E E U U A O U I O X A E

Absolutely necessary Especially important Important Ordinary OK Unimportant Not desirable

E I O U X

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4. Retail/Service Layout
Design maximizes product exposure to customers Decision variables

Store flow pattern Allocation of (shelf) space to products Grid design Free-flow design Vid eo

Types

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Retail Layouts Some Rules of Thumb

Locate high-draw items around the periphery of the store Use prominent locations such as the first or last aisle for high-impulse and high margin items Remove crossover aisles that allow customers the opportunity to move between aisles Distribute what are known in the trade as power items (items that may dominate a shopping trip) to both sides of an aisle, and disperse them to increase the viewing of other items Use end aisle locations because they have a very high exposure rate
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Retail Store Shelf Space Planogram

Computerized tool for shelf-space management Generated from stores scanner data on sales Often supplied by manufacturer Example: P&G
5 facings
PERT PERT PERT

VO-5

VO-5

PERT

PERT
VO-5

SUAVE

VO-5 VO-5

2 ft.
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SUAVE
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A Good Service Layout (Servicescape) Considers

Ambient conditions - background characteristics such as lighting, sound, smell, and temperature. Spatial layout and functionality - which involve customer circulation path planning Signs, Symbols, and Artifacts characteristics of building design that carry social significance
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5. Warehouse Layout
Design balances space (cube) utilization & handling cost Similar to process layout Items moved between dock & various storage areas Optimum layout depends on
Variety

of items stored Number of items picked

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a) Cross Docking
Transferring goods

Avoids placing goods into storage Requires suppliers provide effective addressing (bar codes) and packaging that provides for rapid transhipment
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from incoming trucks at receiving docks to outgoing trucks at shipping docks

Incoming

Outgoing

1984-1994 T/Maker Co. 1995 Corel Corp.

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b)

Random Stocking Systems Often:

Maintain a list of open locations Maintain accurate records of existing inventory and its locations Sequence items on orders to minimize travel time required to pick orders Combine orders to reduce picking time Assign certain items or classes of items, such as high usage items, to particular warehouse areas so that distance traveled is minimized
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6. Product-Oriented Layout
Facility organized around product Design minimizes line imbalance

Delay between work stations

Types: Fabrication line; assembly line Requirements:

Standardized product High production volume Stable production quantities Uniform quality of raw materials & components
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Product-Oriented Layout Assumptions

Volume is adequate for high equipment utilization Product demand is stable enough to justify high investment in specialized equipment Product is standardized or approaching a phase of its life cycle that justifies investment in specialized equipment Supplies of raw materials and components are adequate and of uniform quality to ensure they will work with specialized equipment
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Product-Oriented Layout Types

Fabrication Line

Builds components Uses series of machines Repetitive process Machine paced Balanced by physical redesign

Assembly Line
Assembles fabricated parts Uses workstation Repetitive process Paced by tasks Balanced by moving tasks

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Product-Oriented Layout Advantages

Lower variable cost per unit Lower material handling costs Lower work-in-process inventories Easier training & supervision Rapid throughput

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Product-Oriented Layout Disadvantages

Higher capital investment Special equipment Any work stoppage stops whole process Lack of flexibility Volume Product
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Assembly Line Balancing

Analysis of production lines Nearly equally divides work between workstations while meeting required output Objectives

Maximize efficiency Minimize number of work stations

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Assembly Line Balancing The General Procedure

Determine cycle time by taking the demand (or production rate) per day and dividing it into the productive time available per day Calculate the theoretical minimum number of work stations by dividing total task time by cycle time Perform the line balance and assign specific assembly tasks to each work station
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Assembly Line Balancing Steps

1. 2. 3. 4. 5. 6. 7. 8. Determine tasks (operations) Determine sequence Draw precedence diagram Estimate task times Calculate cycle time Calculate number of work stations Assign tasks Calculate efficiency

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Assembly Line Balancing Equations

Cycle time Minimum number of work stations = Production time available Demand per day Task times

Cycle time Task times (Actual number * (Cycle time) of work stations)

Efficiency

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Layout Heuristics for Assigning Tasks in Assembly Line Balancing

a) Longest task time - choose task with longest operation time b) Most following tasks - choose task with largest number of following tasks c) Ranked positional weight - choose task where the sum of the times for each following task is longest d) Shortest task time - choose task with shortest operation time e) Least number of following tasks - choose task with fewest subsequent tasks
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