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© 2006 Prentice Hall, Inc. 7 – 1
Operations ManagementOperations ManagementChapter 5 – Process StrategyChapter 5 – Process Strategy
© 2006 Prentice Hall, Inc.
PowerPoint presentation to accompanyPowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 6ePrinciples of Operations Management, 6eOperations Management, 8e Operations Management, 8e
© 2006 Prentice Hall, Inc. 7 – 2
Process, Volume, and VarietyProcess, Volume, and Variety
Process Focusprojects, job shops
(machine, print, carpentry)
Repetitive(autos, motorcycles)
Harley Davidson
Product Focus(commercial
baked goods, steel, glass)Nucor Steel
High High CustomizationCustomization
Medium Medium CustomizatioCustomizationn
Low Low CustomizationCustomization
Mass Customization(difficult to achieve, but huge rewards)Dell Computer Co.
Low Low VolumeVolume
Repetitive Repetitive ProcessProcess
High High VolumeVolume
VolumeVolumeFigure 7.1Figure 7.1
© 2006 Prentice Hall, Inc. 7 – 3
Process FocusProcess Focus
Facilities are organized around specific Facilities are organized around specific activities or processesactivities or processes
General purpose equipment and skilled General purpose equipment and skilled personnelpersonnel
High degree of product flexibilityHigh degree of product flexibility
Typically high costs and low equipment Typically high costs and low equipment utilizationutilization
Product flows may vary considerably Product flows may vary considerably making planning and scheduling a making planning and scheduling a challengechallenge
© 2006 Prentice Hall, Inc. 7 – 4
Repetitive FocusRepetitive Focus
Facilities often organized as Facilities often organized as assembly linesassembly lines
Characterized by modules with parts Characterized by modules with parts and assemblies made previouslyand assemblies made previously
Modules may be combined for many Modules may be combined for many output optionsoutput options
Less flexibility than process-Less flexibility than process-focused facilities but more efficientfocused facilities but more efficient
© 2006 Prentice Hall, Inc. 7 – 5
Product FocusProduct Focus
Facilities are organized by productFacilities are organized by product
High volume but low variety of High volume but low variety of productsproducts
Long, continuous production runs Long, continuous production runs enable efficient processesenable efficient processes
Typically high fixed cost but low Typically high fixed cost but low variable costvariable cost
Generally less skilled laborGenerally less skilled labor
© 2006 Prentice Hall, Inc. 7 – 6
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
Small Small quantity, quantity, large variety large variety of productsof products
Long runs, Long runs, standardized standardized product made product made from modulesfrom modules
Large Large quantity, small quantity, small variety of variety of productsproducts
Large Large quantity, large quantity, large variety of variety of productsproducts
General General purpose purpose equipmentequipment
Special Special equipment equipment aids in use of aids in use of assembly lineassembly line
Special Special purpose purpose equipmentequipment
Rapid Rapid changeover changeover on flexible on flexible equipmentequipment
Table 7.2Table 7.2
© 2006 Prentice Hall, Inc. 7 – 7
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
Operators are Operators are broadly broadly skilledskilled
Employees Employees are modestly are modestly trainedtrained
Operators are Operators are less broadly less broadly skilledskilled
Flexible Flexible operators are operators are trained for the trained for the necessary necessary customizationcustomization
Many job Many job instructions instructions as each job as each job changeschanges
Repetition Repetition reduces reduces training and training and changes in job changes in job instructionsinstructions
Few work Few work orders and job orders and job instructions instructions because jobs because jobs standardizedstandardized
Custom Custom orders require orders require many job many job instructionsinstructions
Table 7.2Table 7.2
© 2006 Prentice Hall, Inc. 7 – 8
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
Raw material Raw material inventories inventories highhigh
JIT JIT procurement procurement techniques techniques usedused
Raw material Raw material inventories inventories are loware low
Raw material Raw material inventories inventories are loware low
Work-in-Work-in-process is process is highhigh
JIT inventory JIT inventory techniques techniques usedused
Work-in-Work-in-process process inventory is inventory is lowlow
Work-in-Work-in-process process inventory inventory driven down driven down by JIT, lean by JIT, lean productionproduction
Table 7.2Table 7.2
© 2006 Prentice Hall, Inc. 7 – 9
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
Units move Units move slowly slowly through the through the plantplant
Movement is Movement is measured in measured in hours and hours and daysdays
Swift Swift movement of movement of unit through unit through the facility is the facility is typicaltypical
Goods move Goods move swiftly swiftly through the through the facilityfacility
Finished Finished goods made goods made to orderto order
Finished Finished goods made goods made to frequent to frequent forecastforecast
Finished Finished goods made goods made to forecast to forecast and storedand stored
Finished Finished goods often goods often made to ordermade to order
Table 7.2Table 7.2
© 2006 Prentice Hall, Inc. 7 – 10
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
Scheduling is Scheduling is complex, complex, trade-offs trade-offs between between inventory, inventory, availability, availability, customer customer serviceservice
Scheduling Scheduling based on based on building building various various models from models from modules to modules to forecastsforecasts
Relatively Relatively simple simple scheduling, scheduling, establishing establishing output rate to output rate to meet forecastsmeet forecasts
Sophisticated Sophisticated scheduling scheduling required to required to accommodate accommodate custom orderscustom orders
Table 7.2Table 7.2
© 2006 Prentice Hall, Inc. 7 – 11
Comparison of ProcessesComparison of Processes
Process Process FocusFocus
(Low volume, (Low volume, high variety)high variety)
Repetitive Repetitive FocusFocus
(Modular)(Modular)
Product FocusProduct Focus
(High-volume, (High-volume, low-variety)low-variety)
Mass Mass CustomizationCustomization
(High-volume, (High-volume, high-variety)high-variety)
Fixed costs Fixed costs low, variable low, variable costs highcosts high
Fixed costs Fixed costs dependent on dependent on flexibility of flexibility of the facilitythe facility
Fixed costs Fixed costs high, variable high, variable costs lowcosts low
Fixed costs Fixed costs high, variable high, variable costs must be costs must be lowlow
Costing Costing estimated estimated before job, before job, not known not known until after job until after job is completeis complete
Costs usually Costs usually known due to known due to extensive extensive experienceexperience
High fixed High fixed costs mean costs mean costs costs dependent on dependent on utilization of utilization of capacitycapacity
High fixed High fixed costs and costs and dynamic dynamic variable costs variable costs make costing make costing a challengea challenge
Table 7.2Table 7.2
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