Chapter 7

Process Design
Process Strategies
The objective of a process strategy is to
build a production process that meets
customer requirements and product
specifications within cost and other
managerial constraints
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
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
Process, Volume, and Variety
Process Focus
projects, job shops
(machine, print, hospitals,
restaurants)
Arnold Palmer Hospital
Repetitive
(autos, motorcycles,
home appliances)
Harley-Davidson
Product Focus
(commercial baked
goods, steel, glass,
beer)
Frito-Lay
High Variety
one or few units
per run,
(allows
customization)
Changes in
Modules
modest runs,
standardized
modules
Changes in
Attributes (such
as grade, quality,
size, thickness,
etc.)
long runs only
Mass Customization
(difficult to achieve, but
huge rewards)
Dell Computer
Poor Strategy (Both
fixed and variable
costs are high)
Low
Volume
Repetitive
Process
High
Volume
Volume
Figure 7.1
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
Process Focus
Many inputs
(surgeries, sick patients,
baby deliveries, emergencies)
Many different outputs
(uniquely treated patients)
Many departments and
many routings
Figure 7.2(a)
(low volume, high variety,
intermittent processes)
Hospital, Machine Shop
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
Repetitive
Focus
Raw materials and
module inputs
Modules combined for many
Output options
(many combinations of motorcycles)
Few
modules
(multiple engine models,
wheel modules)
Figure 7.2(b)
(modular)
Harley Davidson
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
Product Focus
Few Inputs
(corn, potatoes, water,
seasoning)
Output variations in size, shape,
and packaging
(3-oz, 5-oz, 24-oz package labeled
for each material)
Figure 7.2(c)
(low-volume, high variety,
continuous process)
Frito-Lay
Product Focus
Nucor Steel Plant
C
o
n
t
i
n
u
o
u
s

c
a
s
t
e
r

Continuous cast steel sheared
into 24-ton slabs
Hot tunnel furnace - 300 ft
Hot mill for finishing, cooling, and coiling
D
E
F
G
H
I
Scrap
steel
Ladle of molten steel
Electric
furnace
A
B
C
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
Mass Customization
Table 7.1
Vehicle models140 286
Vehicle types 18 1,212
Bicycle types 8 211,000
Software titles 0 400,000
Web sites 0 162,000,000
Movie releases per year 267 765
New book titles40,530 300,000
Houston TV channels 5 185
Breakfast cereals 160 340
Items (SKUs) in 14,000 150,000
supermarkets
LCD TVs 0 102
Number of Choices
Item 1970s 21
st
Century
Mass
Customization
Many parts and
component inputs
Many output versions
(custom PCs and notebooks)
Many modules
(chips, hard drives, software,
cases)
Figure 7.2(d)
(high-volume, high-variety)
Dell Computer
Mass Customization
Mass Customization
Effective
scheduling
techniques
Rapid
throughput
techniques
Repetitive Focus
Flexible people
and equipment
Process-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Product-Focused
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
Figure 7.3
Modular
techniques
Accommodating
Product and Process
Design
Responsive Supply
Chains
Mass Customization
Imaginative and fast product design
Rapid process design
Tightly controlled inventory
management
Tight schedules
Responsive supply chain partners

The comparison of processes can be further
enhanced by looking at the point where the total
cost of the processes changes.

Crossover Chart.
A chart of costs at the possible volumes for more
than one process.
Example 1:

Kleber Enterprises would like to evaluate 3 accounting
software (A, B and C) to support changes in its internal
accounting processes. The resulting processes will have
cost structure similar to these shown is the figure. The
costs of the software for these processes are
Total Fixed
Costs
$ required per
actg report
A $200,000 $60
B $300,000 $25
C $400,000 $10
Crossover Charts
Fixed costs
Variable
costs
$
High volume, low variety
Process C
Fixed costs
Variable
costs
$
Repetitive
Process B
Fixed costs
Variable
costs
$
Low volume, high variety
Process A
Fixed cost
Process A


Fixed cost
Process B




Fixed cost
Process C
V
1
(2,857) V
2

(6,666)
400,000
300,000
200,000
Volume
$
Figure 7.4
Focused Processes
Focus brings efficiency
Focus on depth of product line
rather than breadth
Focus can be
Customers
Products
Service
Technology
Changing Processes
Difficult and expensive
May mean starting over
Process strategy determines
transformation strategy for an
extended period
Important to get it right
Process Analysis and Design
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?
Process Analysis and Design
Flow Charts - Shows the movement of materials
Time-Function Mapping - Shows flows and time
frame
Tools that help us understand the complexities
of process design and redesign:

1. Flow Chart
2. Time-Function mapping
3. Value-Stream Mapping
4. Process Charts
5. Service Blueprinting
Flow Chart
A drawing used to analyze movement of people or
material.
Time-function Mapping (or process mapping)
A flow chart with time added on the horizontal axis.
Value-stream Mapping (VSM)
A process that helps managers understand how to
add value in the flow of material and information
through the entire production process.

Example 2
Motorola has received an order for 11,000 cell phones
per month and wants to understand how the order will
be processed through manufacturing.


Value-Stream Mapping - Shows
flows and time and value added
beyond the immediate organization
Value-Stream Mapping
Figure 7.6
Process Charts
Charts that use symbols to analyze the movement
of people or material.
Service Blueprinting
A process analysis technique that lends itself to a
focus on the customer and the providers
interaction with the customers.
Focuses on the customer and provider
interaction
Defines three levels of interaction
Each level has different management
issues
Identifies potential failure points
Process Analysis Tools
Flowcharts provide a view of the big
picture
Time-function mapping adds rigor and
a time element
Value-stream analysis extends to
customers and suppliers
Process charts show detail
Service blueprint focuses on customer
interaction
Service Factory Service Shop
Degree of Customization
Low
High
D
e
g
r
e
e

o
f

L
a
b
o
r

Low
High
Mass Service Professional Service
Service Process Matrix
Commercial
banking
Private
banking
General-
purpose law firms
Law clinics
Specialized
hospitals
Hospitals
Full-service
stockbroker
Limited-service
stockbroker
Retailing
Boutiques
Warehouse and
catalog stores
Fast-food
restaurants
Fine-dining
restaurants
Airlines
No-frills
airlines
Figure 7.9
Digital
orthodontics
Traditional
orthodontics
Service Process Matrix
Labor involvement is high
Selection and training highly important
Focus on human resources
Personalized services
Mass Service and Professional Service
Service Process Matrix
Service Factory and Service Shop
Automation of standardized services
Low labor intensity responds well to
process technology and scheduling
Tight control required to maintain
standards
Techniques for improving service productivity
Layout and Human Resources
Production Technology

1. Machine Technology
Computer numerical control (CNC) machinery
with its own computer and memory.
2. Automatic Identification Systems (AISs)
A system for transforming data into electronic
form, e.g., bar codes

Radio frequency identification (RFID)
A wireless system in which integrated circuits
with antennas send radio waves.
3. Process Control
Use of information technology to control process.
4. Vision Systems
Use of video camera and computer technology in
inspection.
5. Robots
6. Automated Storage and Retrieval Systems (ASRSs)
Computer-controlled warehouses that provide for
the automatic placement of parts into and from
designated places within a warehouse.
7. Automated Guided Vehicles (AGVs)
Electronically guided and controlled cart used to
move materials.
8. Flexible Manufacturing Systems (FMSs)
A system that uses an automated work cell
controlled by electronic signals from a
common centralized computer facility.
9. Computer Integrated Manufacturing (CIM)
A manufacturing system in which CAD, FMS,
inventory control, warehousing and shipping
are integrated.
Examples of Technology Impact on Service
Process Redesign
The fundamental rethinking of business
processes to bring about dramatic
improvements in performance
Relies on reevaluating the purpose of the
process and questioning both the purpose and
the underlying assumptions
Requires reexamination of the basic process
and its objectives
Focuses on activities that cross functional lines
Any process is a candidate for redesign
Sustainability
Resources
Operations is primary user
Reducing use is win-win
Recycling
Burn, bury, or reuse waste
Recycling begins at design
Sustainability
Regulations
Laws affect transportation, waste,
and noise
Increasing regulatory pressure
Reputation
Leadership may be rewarded
Bad reputation can have negative
consequences
Bagot Copy Shop has a volume of 125,000 black-
and-white copies per month. Two salesmen have
made presentations to Gordon Bagot for machines
of equal quality and reliability. The Print Shop 5 has
a cost of $2,000 per month and a variable cost of
$0.03. The other machine (a Super Copy 100) will
cost only $1,500 per month but the toner is more
expensive, driving the cost up to $0.035. If cost and
volume are the only considerations, which machine
should Bagot purchase?
Reference:

Operations Management by Jay Heizer and
Barry Render, 10
th
edition, 2011
Suppose a manufacturer has identified the following
options for obtaining a machined part:
1. It can buy the part at $200 per unit (including
materials).
2. It can make the part on a semi-automated lathe at $75
per unit (including materials).
3. It can make the part on a specialized machine at $15
per unit (including materials).
There is negligible fixed cost if the item is purchased;
$80,000 fixed costs for the semi-automatic lathe; and a
$200,000 fixed costs for the specialized machine.

a. Determine which option is best if the manufacturer
needs 1000 units of the part.
b. Determine the range for which each option is best.
(cross-over points).

A manager is trying to decide whether to purchase a certain
part or to have it produced internally. Internal production could
use either of the two processes. One would entail a variable cost
of $17 per unit and an annual fixed cost of $200,000; the other
would entail a variable cost of $14 per unit and an annual fixed
cost of $240,000. Three vendors are willing to provide the parts.
Vendor A has a price of $20 per unit for any volume up to
30,000 units. Vendor B has a price of $22 per unit for demand of
1,000 units or less, and $18 per unit for larger quantity. Vendor
C offers a price of $21 per unit for the 1
st
1,000 units and $19
per unit for additional units.

a. The manager anticipates an annual volume of 10,000 units,
which alternative is the best from a cost standpoint?
b. Determine the range for which each alternative is best. Are
there any alternatives that are never best? Why?