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Operations Management Process Strategy

Operations Management Process Strategy. Dell Computer Company. “How can we make the process of buying a computer better?” Sell custom-build PCs directly to consumer Integrate the Web into every aspect of its business Operate with six days inventory

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Operations Management Process Strategy

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  1. Operations ManagementProcess Strategy © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  2. Dell Computer Company “How can we make the process of buying a computer better?” • Sell custom-build PCs directly to consumer • Integrate the Web into every aspect of its business • Operate with six days inventory • Build computers rapidly, at low cost, and only when ordered • Focus research on software designed to make installation and configuration of its PCs fast and simple © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  3. Repetitive Process (Modular) Low-Volume (Intermittent) High-Volume (Continuous) Process focus projects, job shops,(machine, print, carpentry) Standard Register Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co. High Variety One or few units per run, high variety (allows customization) Changes in modules Modest runs, standardized modules Repetitive (autos, motorcycles) Harley Davidson Changes in attributes (such as grade, quality, size, thickness, etc.) Long runs only Poor strategy Product focus (commercial baked goods, steel, glass) Nucor Steel Fit of Process, Volume, and Variety © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  4. Customer Purchasing (order inks, paper, other supplies) Customer sales representative (take order) Vendors Prepress Department (Prepare printing plates & negatives) Receiving Accounting Printing Department Warehousing (ink, paper, etc.) Gluing, binding, stapling, labeling Collating Department Information flow Material flow Polywrap Department Shipping Production Process Flow Diagram © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  5. 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 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  6. Continuum 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 Repetitive-Focused Product-Focused © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  7. Product A Operation 1 2 3 Product B 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 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  8. Process Focus © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  9. Bank © 1995 Corel Corp. Hospital Machine Shop © 1995 Corel Corp. © 1995 Corel Corp. Process-Focused Strategy Examples © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  10. 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%) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  11. 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 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  12. Repetitive Focus © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  13. 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 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  14. Fast Food Clothes Dryer McDonald’sover 95 billion served Truck © 1995 Corel Corp. © 1984-1994 T/Maker Co. © 1995 Corel Corp. Repetitive-Focused Strategy - Examples © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  15. Flow Diagram Showing the Production Process for Harley Davidson, York, PA. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  16. Products A & B 1 2 3 Operation 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 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  17. Product Focus © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  18. Product-Focused Strategy Pros & Cons • Advantages • 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 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  19. Soft Drinks (Continuous, then Discrete) Light Bulbs (Discrete) © 1995 Corel Corp. © 1995 Corel Corp. Mass Flu Shots (Discrete) © 1984-1994 T/Maker Co. Paper (Continuous) © 1995 Corel Corp. Product-Focused Examples © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  20. Flow Diagram Showing the Steelmaking Process at NUCOR © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  21. A Comparison (1) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  22. A Comparison (2) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  23. A Comparison (3) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  24. A Comparison (4) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  25. A Comparison (5) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  26. Product Focused (continuous process) Process Focused (intermittent process) Repetitive Focus (assembly line) Continuum Low variety, high volume High utilization (70% - 90%) Specialized equipment High variety, low volume Low utilization (5% - 25%) General-purpose equipment Modular Flexible equipment Process Continuum © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  27. Volume and Variety of Products Volume and Low Volume High Repetitive High Volume Variety of Variety Process Process Low Variety Products (Intermittent) (Modular) Process (Continuous) One or very few Projects Mass Customization units per lot Very small runs, high Job Shops variety Modest runs, modest Disconnected variety Repetitive Long runs, modest Connected Poor Strategy (High variable costs) variations Repetitive Very long runs, Continuous changes in attributes Equipment utilization 5%-25% 20%-75% 70%-80% © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  28. 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. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  29. Number of Choices Early 21st Century Item Early 1970s Vehicle models 140 260 Vehicle styles 18 1,212 Bicycle types 8 19 Software titles 0 300,000 Web sites 0 30,727,296 Movie releases 267 458 New book titles 40,530 77,446 Houston TV channels 5 185 Breakfast cereals 160 340 Item SKUs in supermarkets 14,000 150,000 Mass Customization - More Choices Than Ever © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  30. Repetitive Focus Modular design Flexible equipment Modular techniques Mass Customization Effective scheduling techniques Rapid throughput techniques Product-focused Low variety, high volume High utilization (70% - 80%) Specialized equipment Process-focused High variety, low volume Low utilization (5% - 20%) General purpose equipment Process Strategies © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  31. 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? © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  32. Fixed cost Variable cost $ $ $ Process A Process B Process C Total process C costs Total process A costs Total process B costs $ 400,000 300,000 Fixed cost – Process C Fixed cost – Process B 200,000 Fixed cost – Process A V1(2,857) V2 (6,666) Volume Crossover Charts © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  33. Tools for Process Design • Flow Diagrams • Process Charts • Time-Function/Process Mapping • Work Flow Analysis © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  34. Customer Purchasing (order inks, paper, other supplies) Customer sales representative take order Vendors Prepress Department (Prepare printing plates and negatives) Receiving Accounting Printing Department Warehousing (ink, paper, etc.) Gluing, binding, stapling, labeling Collating Department Information flow Material flow Polywrap Department Shipping Production Process Flow Diagram © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  35. Receive product Order Product Customer Process Order Sales Productioncontrol Order Wait Order Print Plant A Product WIP Wait Wait Wait Warehouse Product WIP Plant B Extrude Product WIP WIP Transport Move Move 12 days 13 days 1 day 4 days 1 day 10 days 9 days 1 day 1 day 52 days Time Function Map(Baseline) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  36. Order Product Receive product Customer Process Order Sales Productioncontrol Order Wait Order WIP Extrude Print Plant Product Wait Warehouse Product Move Transport 1 day 2 days 1 day 1 day 1 day 6 days Time Function Map(Target) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  37. SUBJECT: Request tool purchase Dist (ft) Time (min) Symbol Description Ñ Write order D lðo On desk Ñ ¡ðo D Ñ 75 To buyer D ¡ o è Ñ Examine D ¡ðn ¡ = Operation; ð = Transport; o = Inspect; D = Delay; Ñ = Storage Process Chart Example © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  38. ðⅮ ðⅮ ðⅮ ðⅮ ðⅮ ðⅮ ðⅮ ðⅮ ðⅮ ðⅮ 2 4 1 - 2 Process Chart – Hamburger Assembly © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  39. Service Blueprint for Service at Ten Minute Lube, Inc. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  40. 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. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  41. 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! © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  42. Low High Mass Service Professional Service Personal banking Commercial Banking General purpose law firms Full-service stockbroker Boutiques Retailing High Low Degree of Labor Intensity Service Factory Service Shop Law clinics Limited service stockbroker For-profit hospitals Fine dining restaurants Fast food restaurants Warehouse and catalog stores Hospitals Airlines No frills airlines Degree of Interaction and Customization Customer Interaction and Process Strategy © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  43. Separation Self-service Postponement Focus Structure service so customers must go where service is offered Self-service so customers examine, compare and evaluate at their own pace Customizingat delivery Restrictingthe offerings Techniques for Improving Service Productivity Strategy Technique © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  44. 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 employeeflexibility Techniques for Improving Service Productivity - Continued © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  45. More Opportunities to Improve Service Processes • Layout • Human Resources • Technology © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  46. General Purpose, NC, CNC CIM Dedicated Automation Production Process & Technology Alternatives # Different Products or Parts High Flexible Manufacturing System Low Low High Volume of Products or Parts © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  47. Areas of Technology • Machine technology • Automatic identification systems (AIS) • Process control • Vision system • Robot • Automated storage and retrieval systems (ASRS) • Flexible manufacturing systems (FMS) • Computer-integrated manufacturing (CIM) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  48. Machine Technology • Increased precision • Increased productivity • Increased flexibility • Decreased pollution • Decreased size • Decreased power requirements © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  49. Process Control • Increased process stability • Increased process precision • Real-time provision of information for process evaluation • Multi-mode information presentation © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  50. Automatic Identification Systems (AIS) • Improved data acquisition • Increased scope of process automation © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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