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7-1
Operations
Operations
Management
Management
Process Strategy
Process Strategy
Chapter 7
Chapter 7
7-2
Outline
Outline
 Four Process Strategies.
 Process Focus.
 Repetitive Focus.
 Product Focus.
 Mass Customization Focus.
 Service Process Design.
 Process Reengineering.
7-3
Process Strategy
Process Strategy
 How to produce a product or provide a
service.
 Objective:
 Meet or exceed customer requirements.
 Achieve competitive advantage.
 Has long-run effects:
 Product & volume flexibility.
 Costs & quality .
7-4
Four Process Strategies
Four Process Strategies
 Four process strategies:
 1. Process focused.
 2. Product focused.
 3. Repetitive focused.
 4. Mass customization.
 Summary: Table 7-2.
 Several strategies may be used within one facility.
 Process strategies follow a continuum.
7-5
Fit of Process, Volume, and Variety
Fit of Process, Volume, and Variety
PROCESS FOCUS
(job shops, printing)
REPETITIVE FOCUS
(autos, motorcycles)
PRODUCT FOCUS
(steel, chemicals)
High Variety
Small production runs
(allows customization)
Low Variety
Long production runs
(standardization)
MASS
CUSTOMIZATION
(Dell Computer)
POOR STRATEGY
Low Volume High Volume
7-6
1. Process Focus Examples
1. Process Focus Examples
Bank
Machine
Shop
Hospital
7-7
Process Focus
Process Focus
 Facilities organized by process.
 Similar processes or equipment grouped together.
(Example: All drill presses are together.)
 Low volume, high variety products.
 75% of all global products.
 Products follow many different paths.
 Other names:
 Intermittent process.
 Job shop.
1
3 4
2
7-8
Process Focus - Pros & Cons
Process Focus - Pros & Cons
 Advantages:
 Greater product flexibility.
 More general purpose equipment.
 Lower initial capital investment.
 Disadvantages:
 High variable cost per unit.
 More highly trained personnel.
 More difficult production planning & control.
 Low equipment utilization (5% to 25%).
7-9
2. Product Focus Examples
2. Product Focus Examples
Light Bulbs
(Discrete)
Paper (Continuous)
.
Soft Drinks
(Continuous,
then Discrete)
7-10
Product Focus
Product Focus
 Facilities organized by product.
 High volume, low variety products.
 Long, continuous production runs.
 Discrete unit manufacturing.
 Continuous process manufacturing.
 Other names:
 Line flow production.
 Continuous production.
1 2 3 4
7-11
Product Focus: Steel Plant
Product Focus: Steel Plant
7-12
Product Focus - Pros & Cons
Product Focus - 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.
 Higher capital investment.
7-13
3. Repetitive Focus - Examples
3. Repetitive Focus - Examples
Truck
Clothes
Dryer
Fast
Food
McDonald’s
over 95 billion served
7-14
Repetitive Focus
Repetitive Focus
 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.
7-15
Repetitive Focus - Harley Davidson
Repetitive Focus - Harley Davidson
7-16
Repetitive Focus - Considerations
Repetitive Focus - Considerations
 More structured than process focus, less
structured than product focus.
 Enables quasi-customization.
 Has advantages and disadvantages of
process focus and product focus.
7-17
Process Continuum
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
Low variety, high volume
High utilization (70% - 90%)
Specialized equipment
Modular
Flexible
equipment
7-18
Increasing Product Variety
Increasing Product Variety
Item Early
1970s
Early
2000s
Vehicle models 140 260
Vehicle styles 18 1,212
Software titles 0 300,000
Web sites 0 >30,000,000
Movie releases 267 458
New book titles 40,530 77,446
TV channels 5 >300
Breakfast cereals 160 340
Items in supermarkets 14,000 150,000
7-19
4. Mass Customization
4. Mass Customization
 Rapid, low-cost production to fulfill unique
customer desires.
 Distinctions between process, repetitive and
product focus blur, making variety and
volume issues less significant.
 Very hard to achieve!
7-20
Mass Customization at Dell
Mass Customization at Dell
Computer Company
Computer Company
 Sells custom-built PCs directly to consumer.
 Builds computers rapidly, at low cost, and only
when ordered.
 Operates with six days inventory.
 Integrates the Web into every aspect of business.
 Research focus on software to make installation
and configuration of PCs fast and simple.
7-21
Process Analysis and Design
Process Analysis and Design
 Process should:
 Be designed to achieve competitive advantage:
 Differentiation.
 Response.
 Low cost.
 Eliminate steps that do not add value.
 Maximize value, as perceived by the customer.
7-22
Tools for Process Design
Tools for Process Design
 Flow Diagrams - Figures 7.2, 7.3, 7.4
 Process Charts - Figure 7.8
 Time-Function/Process Mapping - Figure 7.7
 Service Blueprint - Figure 7.9
7-23
Process Design for Services
Process Design for Services
 Consider customization and labor intensity.
 Degree of customization.
 High: Focus on specialization (equipment, training,
etc.).
 Low: Focus on standardization and automation.
 Degree of labor intensity.
 High: Focus on personalization & human resources
(selection, training, etc.)
 Low: Use technology and automation.
7-24
Process Design for Services
Process Design for Services
Mass Service Professional Service
Service Factory Service Shop
Commercial
Banking
General purpose
law firms
Fine dining
restaurants
Retailing
Personal
banking
Boutiques
Degree of Customization
Degree
of
Labor
Intensity
Low High
Low
High
Law clinics
Warehouse and
catalog stores
Fast food
restaurants
Vending
machines
7-25
Improving Service Productivity -
Improving Service Productivity -
Table 7.3
Table 7.3
 Separation: Different services in different places.
 Self-service: Customers serve themselves.
 Postponement: Customize at delivery.
 Focus: Restrict offerings.
 Automation: Automate where appropriate.
 Scheduling: Precise personnel scheduling.
7-26
Technology - Automation
Technology - Automation
 Production.
 CNC (Computer Numerical Control), Robots and FMS
(Flexible Manufacturing Systems).
 Automatic Identification.
 Bar coding and RFID (Radio Frequency IDentification).
 Warehousing.
 ASRS (Automated Storage and Retrieval) and AGVs
(Automated Guided Vehicles).
 Integration – CIM (computer integrated manufacturing)
7-27
Process Reengineering
Process Reengineering
 Fundamental rethinking and radical redesign
of business processes.
 To produce dramatic improvements in performance.
 Re-examine the basic process and its
objectives:
 Re-evaluate the purpose of the process.
 Question underlying assumptions.
 Focus on activities that cross boundaries.

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Understanding the Operation Management.ppt

  • 2. 7-2 Outline Outline  Four Process Strategies.  Process Focus.  Repetitive Focus.  Product Focus.  Mass Customization Focus.  Service Process Design.  Process Reengineering.
  • 3. 7-3 Process Strategy Process Strategy  How to produce a product or provide a service.  Objective:  Meet or exceed customer requirements.  Achieve competitive advantage.  Has long-run effects:  Product & volume flexibility.  Costs & quality .
  • 4. 7-4 Four Process Strategies Four Process Strategies  Four process strategies:  1. Process focused.  2. Product focused.  3. Repetitive focused.  4. Mass customization.  Summary: Table 7-2.  Several strategies may be used within one facility.  Process strategies follow a continuum.
  • 5. 7-5 Fit of Process, Volume, and Variety Fit of Process, Volume, and Variety PROCESS FOCUS (job shops, printing) REPETITIVE FOCUS (autos, motorcycles) PRODUCT FOCUS (steel, chemicals) High Variety Small production runs (allows customization) Low Variety Long production runs (standardization) MASS CUSTOMIZATION (Dell Computer) POOR STRATEGY Low Volume High Volume
  • 6. 7-6 1. Process Focus Examples 1. Process Focus Examples Bank Machine Shop Hospital
  • 7. 7-7 Process Focus Process Focus  Facilities organized by process.  Similar processes or equipment grouped together. (Example: All drill presses are together.)  Low volume, high variety products.  75% of all global products.  Products follow many different paths.  Other names:  Intermittent process.  Job shop. 1 3 4 2
  • 8. 7-8 Process Focus - Pros & Cons Process Focus - Pros & Cons  Advantages:  Greater product flexibility.  More general purpose equipment.  Lower initial capital investment.  Disadvantages:  High variable cost per unit.  More highly trained personnel.  More difficult production planning & control.  Low equipment utilization (5% to 25%).
  • 9. 7-9 2. Product Focus Examples 2. Product Focus Examples Light Bulbs (Discrete) Paper (Continuous) . Soft Drinks (Continuous, then Discrete)
  • 10. 7-10 Product Focus Product Focus  Facilities organized by product.  High volume, low variety products.  Long, continuous production runs.  Discrete unit manufacturing.  Continuous process manufacturing.  Other names:  Line flow production.  Continuous production. 1 2 3 4
  • 11. 7-11 Product Focus: Steel Plant Product Focus: Steel Plant
  • 12. 7-12 Product Focus - Pros & Cons Product Focus - 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.  Higher capital investment.
  • 13. 7-13 3. Repetitive Focus - Examples 3. Repetitive Focus - Examples Truck Clothes Dryer Fast Food McDonald’s over 95 billion served
  • 14. 7-14 Repetitive Focus Repetitive Focus  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.
  • 15. 7-15 Repetitive Focus - Harley Davidson Repetitive Focus - Harley Davidson
  • 16. 7-16 Repetitive Focus - Considerations Repetitive Focus - Considerations  More structured than process focus, less structured than product focus.  Enables quasi-customization.  Has advantages and disadvantages of process focus and product focus.
  • 17. 7-17 Process Continuum 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 Low variety, high volume High utilization (70% - 90%) Specialized equipment Modular Flexible equipment
  • 18. 7-18 Increasing Product Variety Increasing Product Variety Item Early 1970s Early 2000s Vehicle models 140 260 Vehicle styles 18 1,212 Software titles 0 300,000 Web sites 0 >30,000,000 Movie releases 267 458 New book titles 40,530 77,446 TV channels 5 >300 Breakfast cereals 160 340 Items in supermarkets 14,000 150,000
  • 19. 7-19 4. Mass Customization 4. Mass Customization  Rapid, low-cost production to fulfill unique customer desires.  Distinctions between process, repetitive and product focus blur, making variety and volume issues less significant.  Very hard to achieve!
  • 20. 7-20 Mass Customization at Dell Mass Customization at Dell Computer Company Computer Company  Sells custom-built PCs directly to consumer.  Builds computers rapidly, at low cost, and only when ordered.  Operates with six days inventory.  Integrates the Web into every aspect of business.  Research focus on software to make installation and configuration of PCs fast and simple.
  • 21. 7-21 Process Analysis and Design Process Analysis and Design  Process should:  Be designed to achieve competitive advantage:  Differentiation.  Response.  Low cost.  Eliminate steps that do not add value.  Maximize value, as perceived by the customer.
  • 22. 7-22 Tools for Process Design Tools for Process Design  Flow Diagrams - Figures 7.2, 7.3, 7.4  Process Charts - Figure 7.8  Time-Function/Process Mapping - Figure 7.7  Service Blueprint - Figure 7.9
  • 23. 7-23 Process Design for Services Process Design for Services  Consider customization and labor intensity.  Degree of customization.  High: Focus on specialization (equipment, training, etc.).  Low: Focus on standardization and automation.  Degree of labor intensity.  High: Focus on personalization & human resources (selection, training, etc.)  Low: Use technology and automation.
  • 24. 7-24 Process Design for Services Process Design for Services Mass Service Professional Service Service Factory Service Shop Commercial Banking General purpose law firms Fine dining restaurants Retailing Personal banking Boutiques Degree of Customization Degree of Labor Intensity Low High Low High Law clinics Warehouse and catalog stores Fast food restaurants Vending machines
  • 25. 7-25 Improving Service Productivity - Improving Service Productivity - Table 7.3 Table 7.3  Separation: Different services in different places.  Self-service: Customers serve themselves.  Postponement: Customize at delivery.  Focus: Restrict offerings.  Automation: Automate where appropriate.  Scheduling: Precise personnel scheduling.
  • 26. 7-26 Technology - Automation Technology - Automation  Production.  CNC (Computer Numerical Control), Robots and FMS (Flexible Manufacturing Systems).  Automatic Identification.  Bar coding and RFID (Radio Frequency IDentification).  Warehousing.  ASRS (Automated Storage and Retrieval) and AGVs (Automated Guided Vehicles).  Integration – CIM (computer integrated manufacturing)
  • 27. 7-27 Process Reengineering Process Reengineering  Fundamental rethinking and radical redesign of business processes.  To produce dramatic improvements in performance.  Re-examine the basic process and its objectives:  Re-evaluate the purpose of the process.  Question underlying assumptions.  Focus on activities that cross boundaries.

Editor's Notes

  • #3: This slide can be used to introduce the concept of trade-off in process design.
  • #4: This slide can be used to begin discussion of two points: - one seldom employs a pure process strategy (process, repetitive, or product) - but rather a strategy which has elements of each of the pure strategies - i.e., practical strategies lie along a continuum. - one seldom employs only a single strategy.
  • #5: It may be most useful to begin discussion of this slide with the repetitive process since most student seem to have a concept of an assembly line. Once the repetitive process is introduced, one can then view changing one of the parameters, volume or length of run, and argue the need for process- or product-focus systems. Once the three types of processes have been introduced, it is probably useful to discuss precisely why the low-volume/long run, and high-volume/short run options are poor choices.
  • #7: You can use this slide to introduce a discussion of process-focused strategy. Examples are suggested in the following slide or may be requested of students.
  • #8: Select one of the examples you have presented of process-focused strategy, and ask students to identify the sources of advantage and disadvantage.
  • #9: Some examples of products produced using a product-focused strategy.
  • #10: You can use this slide to begin a discussion of product-focused strategy. The following slide outlines some advantages/disadvantages of this approach.
  • #13: At this point, you might compare in more detail, McDonalds (which uses a batch system) with Wendy’s (which, at least at high volumes, perhaps more closely resembles a simple assembly line).
  • #14: You can use this slide to begin your discussion of repetitive strategies; the next suggests additional characteristics; the slide following that, some examples.
  • #17: Another slide which may be used to summarize differences between the process strategies.
  • #19: Once students understand what mass customization is, they should be asked to consider whether such an approach will move from an “option” at present, to a “necessity” in the future.
  • #20: Discussion of NUCOR should center around the difference between their product-oriented process and an integrated facility. The next slide highlights some of the differences.
  • #21: You might use this slide to frame a discussion on process evaluation. Once you have discussed the questions posed on the slide, you might ask students to suggest additional questions or “tests” by which one might evaluate the “quality” of a process.
  • #22: This slide introduces tools for process design. While examples of flow diagrams and process charts have arisen earlier in the presentation, they are repeated in the next two slides.
  • #23: This slide introduces tools for process design. While examples of flow diagrams and process charts have arisen earlier in the presentation, they are repeated in the next two slides.
  • #24: This slide can be used to introduce the design of service processes, or to frame a discussion of the impact of customer interaction on the design of process in general. Here it is probably useful to ask that students define the nature of the customer interaction represented in each quadrant, and identify ways in which the process must be modified in light of these interactions.
  • #25: Students should be asked to suggest examples of companies/products employing the techniques listed on this and the next two slides.
  • #26: This slide merits discussion. While Process Reengineering has the potential to significantly improve both efficiency and effectiveness of an organization’s processes, its actual implementation often results in failure. Some of the points to be made: - process reengineering, if successful, will result in significant change in process, responsibilities, patterns of communication, and other organization staples. - process reengineering cannot be implemented top down - the workers actually performing the process should be the ones to redesign it. - process reengineering requires that fundamental questions (e.g., “Why are we doing this?” and “Why are we doing this this way?”) must be asked and answered.
  • #27: This slide merits discussion. While Process Reengineering has the potential to significantly improve both efficiency and effectiveness of an organization’s processes, its actual implementation often results in failure. Some of the points to be made: - process reengineering, if successful, will result in significant change in process, responsibilities, patterns of communication, and other organization staples. - process reengineering cannot be implemented top down - the workers actually performing the process should be the ones to redesign it. - process reengineering requires that fundamental questions (e.g., “Why are we doing this?” and “Why are we doing this this way?”) must be asked and answered.