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Lessons 7 to 9: Process & layout i. Strategy

Operations

Management

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The objective of a process strategy is to build aproduction process that meets customerrequirements and product specifications withincost and other managerial constraints (such as

quality, efficiency, flexibility)

Process: Is any part of an organization that

takes inputs and transforms them into outputs

Aim of a process strategy

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According to Krajewski and Ritzman (1999):

1. Process choice (how resources are organized toimplement the flow strategy)

2. Vertical integration

3. Customer involvement

4. Resource flexibility

5. Capital intensity

Major decisions for effective processes

Process Structure

Product-process position(manufacturing)

Layout

Resource Flexibility

Specialized

Enlarged

Customer Involvement

Low involvement

High involvement

Effective Process

Design

Strategy for Change

Process reengineering

Process improvement

Capital Intensity

Low automation

High automation

Make-to-order

Assemble-to-order

Make-to-stock

Project, job, batch, line, continuous

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It brings together: Volume, Product customization, Process characteristics

Product-process matrix

(1) (2) (3) (4) (5)

One o f a k ind Low vo lum e, Mu l tip le Few m ajo r High vo lum e

products, m ade low products products, high

to cu stomer stan dar di zati on mo derate h ig her stan dar di zati on ,o rder vo lum e vo lum e comm od i ty

products

Process

Character ist ics

(1)

Complex and high ly

customized process,

uni que sequence oftasks

(2)

Jumb led flows,comp lex work wi th

m any exceptions

(3)

Disconn ected lin ef lows, mo derately

comp lex work

(4)

Connected l ine,

rout ine work

(5)

Cont inuous

f lows, highly

repetit ive work

Less

Comp

lex

ity,

Less

Divergence,

More

Line

Flows

Less Customization and Higher Volume

Product Design

Cont inuous

process

Project

process

Line

process

Batch

process

Job

process

Flexibi l i ty (High )

Uni t Cost (High)

Flexibi l i ty (Low)

Uni t Cost (Low )

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Source: J.G. Monks Op erations Management, Adapted from Ro bert Hay

and Steven Wheelwrigh t, Restoring Competit ive Edge: Competing

throu gh Manufactu ring (New York: Jo hn Wiley & So ns, 1984).

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OM in action: Process strategy

Source: Krajewski and Ritzman, Operations Management (1999)

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According to Heizer & Render:

Four basic strategies (there are many ways they may be

implemented):

1. Process focus

2. Repetitive focus

3. Product focus4. Mass customization

Types of process strategies

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Projects

Job shops(mach ine, prin t,

ho sp itals, restaurants)Arno ld Palmer Hospi ta l

Repetit ive(autos, moto rcyc les,home appl iances)Har ley-Davidson

(commercialbaked good s,

steel, glass , beer)Frito-Lay

High Varietyone or fewunits per run,(allows

customization)

Changes inModulesmodest runs,standardizedmodules

Changes inAttributes(such as grade,quality, size,thickness, etc.)long runs only

Mass Custom izat ion(dif f icul t to achieve,bu t huge rewards)

Del l Computer

LowVolume

HighVolume

Volume

Assemblyl ine

Cont inuous process

Variety

ProcessFocus

Product

Focus

Volume and variety based strategy

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In term ittent vs Con tinuous

(Focus Funct ion) (Focus F low)

Produc t ion sys tems

Project process

Process that focuses on making one-of-a-kind

products.

Intermittent process

Process that produces products in small lot sizes (e.g.,

job and batch operations).

Line-flow process

Continuous process that produces high volume,

highly standardized products (e.g., assembly-line and

continuous operations). Source: J.G. Monks Operations Management

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Fixed-position (project) layout

Process-oriented layout (job-shop, functional layout)

Product-oriented layout (flow-shop layout, line layout)

Work-cell layout

Facility Layout

. Facility layout can be defined as the process by which the

physical arrangement of human and capital resources,related to the flow of materials are determined, including

placement of departments, workstations, machines, and

stock-holding points.

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Facilities are organized around specific activitiesor processes

General purpose equipment and skilled personnel

High degree of product flexibility

Typically high costs and low equipment utilization

Product flows may vary considerably makingplanning and scheduling a challenge

Low volume, high variety, intermittent processes

Many inputs, many different outputs

Strategy: 1. Process focus (job process)

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A project process lies at the high-customization, low-

volume end of the process-choice continuum. The sequence of operations and the process involved

in each one are unique to each process, creating one-of-a-kind products or services made specifically tocustomer order

Firms with project processes sell themselves on thebasis of their capabilities rather than on specificproducts.

Projects tend to be complex, take a long time and belarge

Close coordination

Resources are assembled (at particular stages) andthen released

Flexible flow strategy, work flows defined each new

project

Strategy: 1b. Project process

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Product remains in one place

Workers and equipment come to site

Addresses the layout requirements of large, bulky

projects such as ships and buildings

The product, because of its size and/orweight, remains in one location and

processes are brought to it.

Fixed position layout

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Like machines and equipment are grouped together

Flexible and capable of handling a wide variety ofproducts or services

Scheduling can be difficult and setup, materialhandling, and labor costs can be high

Low utilization (5-25%)

Process-oriented layout(process layout, functional layout)

Layout Type

Process Similar operations are performed in acommon or functional area, regardless ofthe product in which the parts are used.

FoundryMillingmachines

LathesGrinding

Painting Drills

Office

Welding

Forging

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Deals with low-volume, high-variety production (also called jobshop or intermittent production)

Process-oriented layout(process layout, functional layout)

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Facilities may be organized as assembly lines

Characterized by modules with parts and assembliesmade previously. Modules may be combined for manyoutput options (customization)

Modules give the economic advantage of a

continuous process and the advantage of makingmany outputs with not many inputs

Less flexibility than process-focused facilities butmore efficient

Strategy: 2. Repetitive focus

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(modular)

Harley Davidson

Automobile

Assembly

Line

Strategy: repetitive focus

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Differs from the job process with respect to volume,

variety and quantity: higher volumes; narrower rangeof products; variety is achieved more through anassemble-to-order strategy than the job processsmake-to-order; production lots are handled in largerquantities or batches than they are with job

processes. A batch of one product is processed and then

production is switched to the next one.

Intermediate flow strategy. Average or moderatevolume and variety too great to devote resources to

each product. Jumbled flow pattern, with no standardsequence of operations through the facility. Somesegments of the process have a line flow.

Strategy: 2. Batch process

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Facilities are organized by product

High volume but low variety of products (additionof standard options to the main product).

Long or continuous production runs enableefficient processes

Typically high fixed cost but low variable cost

Generally less skilled labor

Line flow strategy (or intermediate flow strategywhen mass customization or assemble-to-order are

pursued).

High utilization (70-90%)

Easier scheduling

Low flexibility and specialized equipment

Strategy: 3. product focus/line process

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Few Inputs

(corn, potatoes, water,seasoning)

Output variations in size,shape, and packaging

(low-volume, high variety,continuous process)

Frito-Lay

Strategy: product focus

Automobile

Assembly

Line

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Nucor Steel Plant

Cont

inuouscas

ter

Continuous c ast steelsheared into 24-ton slabs

Hot tunnel furnace - 300 ft

Hot mi l l for finish ing, cool ing, and coi l ing

Scrapsteel

Ladle of mol ten steel

Electr icfurnace

Strategy: 3b. Continuous process

The extreme end of high-volume, standardized productionwith rigid line flows.

Usually one primary material moves without stopping throughthe facility.

The process is often capital intensive and opearted round theclock to maximize utilization

Fit perfectly a line flow strategy

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1. Volume is adequate for high equipment utilization

2. Product demand is stable enough to justify high

investment in specialized equipment3. Product is standardized or approaching a phase of life

cycle that justifies investment

4. Supplies of raw materials and components are adequateand of uniform quality

Organized around products or families of similar high-volume,low-variety products. Seeks the best personnel and machineutilizations in repetitive or continuous productions

Product(Flow-shop layout)

Equipment/operations are locatedaccording to the progressive steps requiredto make the product.

Repetitive and product layout/line layout

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1. Low variable cost per unit

2. Low material handling costs

3. Reduced work-in-process inventories

4. Easier training and supervision5. Rapid throughput

Advantages

1. High volume is required2. Work stoppage at any point ties up the

whole operation

3. Lack of flexibility in product or productionrates

Disadvantages

Repetitive and product layout/line layout

Layout of a production line

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The rapid, low-cost production of goods and service to

satisfy increasingly unique customer desiresCombines the flexibility of a process focus with theefficiency of a product focus

Strategy: 4. Mass customization

Many parts andcomponent inputs

Many output versions(custom PCs and notebooks)

Many modules

(chips, hard drives,software, cases)

(high-volume, high-variety)

Dell Computer

Mass Customization

Effectiveschedulingtechniques

Rapidthroughputtechniques

Repetitive Focus

Flexible peopleand equipment

Process-FocusedHigh variety, low volume

Low utilization (5% to 25%)General-purpose equipment

Product-FocusedLow variety, high volume

High utilization (70% to 90%)Specialized equipment

ModulartechniquesAccommodating

Product andProcess Design

ResponsiveSupply Chains

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Mass customization atJapans National Bicycle Co.

CAM

CAM

CAM

TUBE CUTTING

FRONT ASSEMBLY

REAR ASSEMBLY

3-D MEASUREMENT

Quality Assurance

Marketing

ORDER DATA

INCLUDINGCUSTOMERS

MEASUREMENTS

AND OPTIONS

CAD

COMPUTER

INSTRUCTIONSPAINTINGASSEMBLY

2-WEEK LEAD TIME

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One-Worker, Multiple-Machines (OWMM) Cell

Work cell layout: Arranges machinery and equipment to focuson production of a single product or group of related products

Group Technology(GT) or Cellular

Groups of dissimilar machines are brought

together in a work cell to perform tasks on afamily of products that share commoninterests.

Alternative strategies and hybrid layouts

5. (Group Technology) cells:

Cellular manufacturing

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People and machines are organized in cells that

focus on single products or product groups (grouptechnology identifies products that have similarcharacteristics).

Cells can be reconfigured as designs or volumechanges

Alternative strategies and hybrid layouts

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889910101111

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Current layout - straightlines make it hard to balancetasks because work may notbe divided evenly

Improved layout - in Ushaped work cell, withcross-trained work.Cells may reduce employeemovement and spacerequirements whileenhancing communication,reducing the number of workers, and facilitating

inspection

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Alternative strategies and hybrid layouts

Advantages of cell manufacturing:

1. Reduced work-in-process inventory2. Less floor space required

3. Reduced raw material and finished goodsinventory

4. Reduced direct labor

5. Heightened sense of employee participation6. Increased use of equipment and machinery

7. Reduced investment in machinery and equipment

Requirements:

1. Identification of families of products2. A high level of training, flexibility and empowerment

of employees

3. Being self-contained, with its own equipment andresources

4. Quality at each station in the cell

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6. Flexible Manufacturing System (FMS)

Alternative strategies and hybrid layouts

Computer controls both the workstation and the material handlingequipment

Enhance flexibility and reduced waste

Can economically produce low volume at high quality

Reduced changeover time and increased utilizationComputer-Integrated Manufacturing (CIM) (Extension of FMS)