Chapter 7: Process Strategy

The objective is to create a process that can produce products that meets customer
requirements within cost and other managerial constraints.

 Process Focused: low volume, high variety, intermittent process

o Many inputs -> Many outputs
o Ex.: surgeries, sick patients, baby deliveries, emergencies -> uniquely
treated patients
 Repetitive Focus: modular
o Raw material and module inputs -> modules combined for many
outputs
o Ex: Harley Davidson:
 Multiple engine and wheel modules -> motorcycle
combinations
 Product Focus: high volume, low-variety, continuous process
o Few inputs -> output varies in size/packaging
o Ex: Lay’s
 Corn, potatoes, water, seasoning -> 3oz. – 24oz. packages
 Mass Customization: high-volume, high-variety
o Many part and component inputs -> many output versions
o Ex: Dell Computer
 Chips, hard drive, software, cases -> custom PCs and notebooks

Focused Processes
In an ongoing quest for efficiency, industrialized societies continue towards
specialization. Focus contributes to building a core competence that fosters market
and financial success. The focus can be:
 Customers: a company that focuses on customers is Winterhalter Gastronom
who focuses its dishwashers to hotels and restaurants who need spotless
dishes.
 Products with similar attributes
 Service: an example of this Sick Kids Hospital
 Technology: an example is Texas Instruments who focus on calculators and
other semiconductors

Process Analysis and Design

When analyzing and designing processes, we ask questions based on the following:
 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 eliminate steps that do not add value?
 Does the process maximize customer value as perceived by the customer?
 Will the process win orders?
Design Tools:
 Flow Chart: a schematic or drawing of the movement of the material,
product or people
 Time-Function Mapping: nodes indicate the activities and arrows indicate
the flow direction, with time on the horizontal axis. This type of analysis
allows users to identify and eliminate waste such as extra steps, duplication,
and delay.
 Value-Stream Mapping: a process that helps managers understand how to
add value in the flow of material and information through the entire
production process.

Service Blueprinting
 A process analysis technique that focuses on the customer and the provider’s
interaction with the customer. Suggests educating the customer on modifying
expectations
 The second level is activities of the service provider interacting with the
customer. Requires a focus on personnel selection and training.
 The third level includes activities that are performed away from and not
immediately visible to the customer. Lends itself to more typical process
innovations. Also notes potential failure points and shows how poka-yoke
techniques can be added to improve quality.

Production Technology
Nine areas of technology:
1. Machine technology
2. Automatic identification systems
3. Process control
4. Vision systems
5. Robots
6. Automated storage and retrieval systems
7. Automated guided vehicles
8. Flexible manufacturing systems
9. Computer integrated manufacturing
 Supplement 7: Capacity and Constraint Management

Capacity: the throughput, or the number of units a facility can hold, receive, store,
or produce in a given time. Capacity decisions often determine capital requirements
and therefore a large portion of fixed cost.

Capacity Considerations
 Forecast demand accurately: Product additions and deletions, competition
actions, product life-cycle, and unknown sales volumes all add challenge to
accurate forecasting
 Match technology increments and sales volume: some capacity
increments may be large, which complicates the difficult, but necessary job of
matching capacity to sales.
 Find the optimum operating size: Economies and diseconomies of scale
often dictate an optimal size for a facility.
 Build for change: manager builds flexibility into facilities and equipment;
changes will occur in processes, as well as products, product volume, and
product mix.

Managing Demand
 Demand Exceeds Capacity: when this happens, the firm may be able to
curtail demand by raising prices, scheduling long lead times, and
discouraging marginally profitable businesses.
 Capacity Exceeds Demand: the firm may want to stimulate demand through
price reductions, aggressive marketing or product changes
 Adjusting to Seasonal Demand: offer products with complementary
demand patterns-that is, products for which the demand is high for one and
low for the other.
 Tactics for Matching Capacity to Demand
1. Making staffing changes
2. Adjusting equipment
3. Improving processes to increase throughput
4. Redesigning products to facilitate more throughput
5. Adding process flexibility to better meet changing product
preferences
6. Closing facilities

Service Sector Demand and Capacity Management

 Demand Management: Appointment systems, reservation systems to
minimize customer waiting time and reduces disappointment, first-come
first-served
  Capacity Management: when managing demand isn’t feasible, managing
capacity through changes in full-time, temporary, or part-time staff may be
an option.
Bottleneck Analysis
 Capacity Analysis: a means of determining throughput capacity of
workstations or an entire production system.
 Bottleneck: the limiting factor or constraint on a system
 Bottleneck Time: the longest, slowest process; the bottleneck.
o Drum, Buffer, Rope Concept: the drum is the beat of the system
(pace of production), the buffer is the resource, usually inventory
which may be helpful to keep the bottleneck operating at the pace of
the drum, and the rope which provides the synchronization or
communication necessary to pull units through the system.

Theory of Constraints: a body of knowledge that deals with anything that limits an
organization’s ability to achieve its goals. There are 5 steps to managing these
limitations:
1) Identify constraints
2) Develop a plan for overcoming identified constraints
3) Focus resources on accomplishing step 2
4) Reduce the effects of the constraintsTh by offloading work or by expanding
capability. Make sure that the constraints are recognized by all those who
have an impact on them
5) When one set of constraints is overcome, go back to step 1 and identify new
constraints.