Chapter 4

Processes and Technologies

2000 by Prentice-Hall, Inc 2

Process Strategy

Overall approach to producing goods and Overall approach to producing goods and servicesservices

Defines:Defines: Capital intensityCapital intensity Process flexibilityProcess flexibility Vertical integrationVertical integration Customer involvementCustomer involvement

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From Function to Process

Ma

nu

fact

uri

ng

Ac

co

un

tin

g

Sa

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Pu

rch

as

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Product Development

Order Fulfillment

Supply Chain Management

Customer Service

FunctionFunction ProcessProcess

Figure 4.1Figure 4.1

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Types of Processes

ProjectsProjects Batch productionBatch production Mass productionMass production Continuous productionContinuous production

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PROJECT PROJECT BATCHBATCH MASS MASS CONTINUOUSCONTINUOUS

ProductProduct UniqueUnique Made to order Made to order Made to stock Made to stock CommodityCommodityCustomerCustomer One-at-a-timeOne-at-a-time Few individualsFew individuals Mass marketMass market Mass marketMass marketDemandDemand InfrequentInfrequent FluctuatesFluctuates StableStable Very stableVery stableVolumeVolume Very lowVery low Low to medLow to med HighHigh Very highVery highNo. of differentNo. of different InfiniteInfinite Many, variedMany, varied FewFew Very lowVery low productsproductsSystemSystem Long-termLong-term Discrete, jobDiscrete, job Repetitive, Repetitive, Process industryProcess industry

assembly linesassembly linesEquipmentEquipment VariedVaried General-purposeGeneral-purpose Special-purposeSpecial-purpose Highly automatedHighly automatedType of workType of work ContractsContracts FabricationFabrication AssemblyAssembly Mix, treat, refineMix, treat, refineSkillsSkills Experts,Experts, Wide rangeWide range Limited rangeLimited range EquipmentEquipment

craftspeoplecraftspeople of skillsof skills of skillsof skills monitorsmonitorsAdvantagesAdvantages Custom work,Custom work, Flexibility,Flexibility, Efficiency,Efficiency, Highly efficientHighly efficient

technologytechnology qualityquality speed, low costspeed, low cost large capacitylarge capacityDis-Dis- Nonrepetitive,Nonrepetitive, Costly, slow,Costly, slow, Capital investment,Capital investment, Difficult toDifficult to advantagesadvantages small customersmall customer difficult todifficult to lack of lack of changechange

base, expensivebase, expensive managemanage responsivenessresponsivenessExampleExample Construction,Construction, Machine shops, Machine shops, Autos, TV’s,Autos, TV’s, Paint, chemicals, Paint, chemicals,

shipbuildingshipbuilding printing, bakeryprinting, bakery fast foodfast food foodfood

Types of ProcessesTypes of Processes

Table 4.1Table 4.1

2000 by Prentice-Hall, Inc 6

Process Selection with Break-Even Analysis

ccff = fixed cost= fixed cost

vv = volume (i.e., number of units produced and = volume (i.e., number of units produced and sold)sold)ccvv = variable cost per unit= variable cost per unit

pp = price per unit= price per unit

Total costTotal cost = fixed cost + total variable cost= fixed cost + total variable costTCTC = = ccff + + vcvcvv

Total revenueTotal revenue == volume x pricevolume x priceTRTR = = vpvp

ProfitProfit = total revenue - total cost= total revenue - total costZZ == TR - TCTR - TC

= = vpvp - ( - (ccff + + vcvcvv))

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Process Planning

Make-or-buy decisionsMake-or-buy decisions Process selectionProcess selection Specific equipment selectionSpecific equipment selection Process plansProcess plans Process analysisProcess analysis

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Make-or-Buy Decisions

1. Cost1. Cost

2. Capacity2. Capacity

3. Quality3. Quality

4. Speed4. Speed

5. Reliability5. Reliability

6. Expertise6. Expertise

Make?

Buy?

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Specific Equipment Selection

1.1. Purchase costPurchase cost

2.2. Operating costOperating cost

3.3. Annual savingsAnnual savings

4.4. Revenue enhancementRevenue enhancement

5.5. Replacement analysisReplacement analysis

6.6. Risk and uncertaintyRisk and uncertainty

7.7. Piecemeal analysisPiecemeal analysis

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Process Plans BlueprintsBlueprints Bill of materialBill of material Assembly chart /Assembly chart /

product structure diagramproduct structure diagram Operations process chartOperations process chart Routing sheetRouting sheet

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Process Plans

Figure 4.2Figure 4.2

Bottom bunBottom bun

Beef pattyBeef pattySaltSaltCheeseCheese

LettuceLettuceSauceSauceOnionsOnions

Middle bunMiddle bun

Beef pattyBeef pattySaltSaltCheeseCheese

LettuceLettuceSauceSauceOnionsOnionsPicklesPickles

Sesame seed top bunSesame seed top bun

WrapperWrapper

SASA

SASA

First-layer assemblyFirst-layer assembly

Second-layer assemblySecond-layer assembly

Completed Big MacCompleted Big Mac

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Operations Process ChartPart name Crevice Tool

Part No. 52074

Usage Hand-Vac

Assembly No. 520

Oper. No. Description Dept. Machine/Tools Time

10 Pour in plastic bits 041 Injection molding 2 min

20 Insert mold 041 #076 2 min

30 Check settings 041 113, 67, 650 20 min& start machine

40 Collect parts & lay flat 051 Plastics finishing 10 min

50 Remove & clean mold 042 Parts washer 15 min

60 Break off rough edges 051 Plastics finishing 10 min

Figure 4.3Figure 4.3

2000 by Prentice-Hall, Inc 13

Process Analysis

The systematic examination of all aspects The systematic examination of all aspects of a process to improve its operationof a process to improve its operation FasterFaster More efficientMore efficient Less costlyLess costly More responsiveMore responsive

Basic toolsBasic tools Process flowchartProcess flowchart Process diagramsProcess diagrams Process mapsProcess maps

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Process Flowchart Symbols

OperationsOperations

InspectionInspection

TransportationTransportation

DelayDelay

StorageStorage

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Process Flowchart

Ste

p

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Tra

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Insp

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Del

ay

Sto

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Dis

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eet)

Tim

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in)Description

ofprocess

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Unload apples from truck

Move to inspection station

Weigh, inspect, sort

Move to storage

Wait until needed

Move to peeler

Apples peeled and cored

Soak in water until needed

Place in conveyor

Move to mixing area

Weigh, inspect, sort

TotalPage 1 0f 3 480

30

5

20

15

360

30

20

190 ft

20 ft

20 ft

50 ft

100 ft

Date: 9-30-02Analyst: TLR

Location: Graves MountainProcess: Apple Sauce

Figure 4.4Figure 4.4

2000 by Prentice-Hall, Inc 16

Process Diagram

Reserve Storage

Quality Assurance

Back to Vendor

UPS

Parcel Post

Next-Day UPS

Mono-gramming

Embroid-ering

Hemming

Gift Boxing

Receiving Active Bins Picking Packing Shipping

Figure 4.5Figure 4.5

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Process Map

Figure 4.6Figure 4.6

Place order

Drink

Eat salad or soup

Eat dinner

Receives check

Gives payment to waiter

Collect change, leave tip

Fill in tip amount

Give order to waiter

Prepare dinner order

Prepare soup or salad order

Give order to waiter

Is order complete?

Give soup or salad order to chef

Give dinner order to chef

Get drinks for customer

Deliver salad or soup order to customer

Deliver dinner to customer

Deliver check to customer

Receive payment for meal

Cash or Credit?

Bring change to customer

Run credit card through

Return credit slip to customer

Collect tip

YY

NN

CreditCredit

CashCash

CustomerCustomer WaiterWaiter Salad ChefSalad Chef Dinner ChefDinner Chef

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Continuous Improvement and Breakthroughs

Breakthrough Breakthrough ImprovementImprovement

Continuous improvement Continuous improvement refines the breakthroughrefines the breakthrough

Continuous improvement activities Continuous improvement activities peak; time to reengineer processpeak; time to reengineer process

Figure 4.9Figure 4.9

2000 by Prentice-Hall, Inc 19

Process Reengineering

Model validation

Key performance

measures

Detailed process map

Detailed process map

Pilot study of new design

Full-scale implementation

Innovative ideas

Design principle

s

High-level process map

High-level process map

Customer requirements

data

Strategic directive

Baseline analysis

Benchmark data

Goals & specifications for process performance

Figure 4.10Figure 4.10

2000 by Prentice-Hall, Inc 20

Principles for Redesigning Processes

1.1. Remove waste, simplify, consolidateRemove waste, simplify, consolidate2.2. Link processes to create valueLink processes to create value3.3. Let the swiftest and most capable executeLet the swiftest and most capable execute4.4. Flex the processFlex the process5.5. Capture information digitally and propagateCapture information digitally and propagate

Table 4.2Table 4.2

2000 by Prentice-Hall, Inc 21

Principles for Redesigning Processes

6.6. Provide visibility through information about Provide visibility through information about process statusprocess status

7.7. Fit the process with sensors and feedback loopsFit the process with sensors and feedback loops8.8. Add analytic capabilitiesAdd analytic capabilities9.9. Connect, collect and create knowledge around Connect, collect and create knowledge around

the processthe process10.10. Personalize the processPersonalize the process

Table 4.2Table 4.2

2000 by Prentice-Hall, Inc 22

Techniques for Generating Innovative Ideas

Vary entry point to a problemVary entry point to a problem Draw analogiesDraw analogies Change your perspectiveChange your perspective Try inverse brainstormingTry inverse brainstorming Chain forward as far as possibleChain forward as far as possible Use attribute brainstormingUse attribute brainstorming

Table 4.3Table 4.3

2000 by Prentice-Hall, Inc 23

e-Manufacturing

Real-time sharing of data with trading partners Real-time sharing of data with trading partners and customers to drive collaborative decisionsand customers to drive collaborative decisions

CAD -CAD - uses software to create & modify designsuses software to create & modify designs GT-GT- classifies designs to benefit from prior experienceclassifies designs to benefit from prior experience STEP - sets standards for communicationSTEP - sets standards for communication CAPP - creates processing instructions for CAMCAPP - creates processing instructions for CAM CAM -CAM - uses programmable automation in manufacturinguses programmable automation in manufacturing