Process Strategy

Process StrategyThe process by which a firm converts inputs

into goods and servicesThe purpose is to build a production process

that meets customer requirements and product specifications within the budget and other constraints

Types of Process Strategy4 Types:

1. Process Focus2. Repetitive Focus3. Product Focus4. Mass Customization

Process Focus StrategyLow volume, high varietyJob shopsMeeting individual customer requirementsHigh flexibility of operationAKA Intermittent ProcessExamples:

PrintHospitals

Process Focus

Many inputs

Many variety

of output

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Job Shop

Man

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men

ts

an

d m

an

y ro

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Repetitive FocusClassic assembly line modelModulesMore customized product productionLess flexibilityStructuredExamples

RestaurantsAutomobiles

Repetitive Focus

Raw materials

and module inputs

Modules combine

d for many output options

Few modules

Automobile Assembly Line

Repetitive Focus: Harley Davidson

Product FocusAKA Continuous ProcessVery long continuous production runsHigh volume, low varietyStandardized productionHigh qualityExamples:

GlassLight bulb

Product Focus

Few inputs

Output variations in size, shape,

and packagin

g

Continuous Work Flow

Mass CustomizationRapid, low cost productionWhat and when the customer wants itRequires sophisticated operations

capabilitiesBTOExamples:

Dell ComputersToyota

Dell Computers

Comparison of ProcessesProcess Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Small quantity, large variety of products

Long runs, standardized product made from modules

Large quantity, small variety of products

Large quantity, large variety of products

General purpose equipment

Special equipment aids in use of assembly line

Special purpose equipment

Rapid changeover on flexible equipment

Comparison of ProcessesProcess Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Operators are broadly skilled

Employees are modestly trained

Operators are less broadly skilled

Flexible operators are trained for the necessary customization

Many job instructions as each job changes

Repetition reduces training and changes in job instructions

Few work orders and job instructions because jobs standardized

Custom orders require many job instructions

Comparison of ProcessesProcess Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Raw material inventories high

JIT procurement techniques used

Raw material inventories are low

Raw material inventories are low

Work-in-process is high

JIT inventory techniques used

Work-in-process inventory is low

Work-in-process inventory driven down by JIT, lean production

Comparison of ProcessesProcess Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Units move slowly through the plant

Movement is measured in hours and days

Swift movement of unit through the facility is typical

Goods move swiftly through the facility

Finished goods made to order

Finished goods made to frequent forecast

Finished goods made to forecast and stored

Finished goods often build-to-order (BTO)

Comparison of ProcessesProcess Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Scheduling is complex, trade-offs between inventory, availability, customer service

Scheduling based on building various models from a variety of modules to forecasts

Relatively simple scheduling, establishing output rate to meet forecasts

Sophisticated scheduling required to accommodate custom orders

Comparison of ProcessesProcess Focus

(Low volume, high variety)

Repetitive Focus

(Modular)

Product Focus

(High-volume, low-variety)

Mass Customization

(High-volume, high-variety)

Fixed costs low, variable costs high

Fixed costs dependent on flexibility of the facility

Fixed costs high, variable costs low

Fixed costs high, variable costs must be low

Costing estimated before job, known only after the job

Costs usually known due to extensive experience

High fixed costs mean costs dependent on utilization of capacity

High fixed costs and dynamic variable costs make costing a challenge

Process Analysis and DesignThe following questions should be answered:

What type of competitive advantage is the process design trying to achieve?

Does the process eliminate steps that do not add value?

Does the process maximize value as perceived by the customer?

Will the process win orders?

Tools of Process AnalysisFlow Diagram

Drawing showing the movement of inputsHelps in understanding, analysis and

communication of processTime-Function Mapping

AKA Time-Function Mapping and Process Mapping

Same as flow diagram with the addition of time taken between processes

Helps in identifying and eliminating waste

Tools of Process AnalysisValue-Stream Mapping (VSM)

Similar to process mapping, with the addition of an expansion of looking at where value is added in the entire production process

Process ChartUse symbols, time and distance for analysisAllows analyst to focus on value added

activities

CapacityThe number of units a facility can hold,

receive, store or produce in a given period of time

Determines:Capital requirements (fixed costs)Satisfaction of demandFacility usage

Capacity PlanningLong-Range

Over one yearAdding facilitiesAdding long lead time equipment

Intermediate Planning3 to 18 MonthsSubcontractingAdding :

Equipment Shifts Personnel

Capacity PlanningShort Range Planning

Scheduling jobsScheduling personnelAllocating machinery