Process Designs: Topic 7

Topic 7
Process Designs
• Readings:
1. Chapter 7: Heizer, J., Render, B. & Munson, C. (2017).
Operations Management, 12th Edition. Upper saddle
River, New Jersey: Pearson.
2. Chapter 6: Stevenson W.J., & Chee Chuong S.C. (2014).
Operations Management, Second Edition (Asia). Mc
Graw Hill Education
Learning Objectives
When you complete this chapter you should be able to:
1. Describe four process strategies

2. Compute crossover points for different
processes
Cost-volume or Break-even Analysis
3. Describe special Considerations for Service

Process Design
WRWH/MGT6240/Chapter 7 2
Harley-Davidson
► The only major U.S. motorcycle

company
► Emphasizes quality and lean
manufacturing
► Materials as Needed (MAN) system
► Many variations possible
► Tightly scheduled repetitive production
Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
Arrive on a JIT
schedule from a
Air cleaners Oil tank work cell 10-station work
cell in
Milwaukee
Fluids and mufflers Shocks and forks
Fuel tank work cell Handlebars
Wheel work cell Fender work cell

Roller testing
Crating
Process Strategy
 The objective
 To create a process to produce products or provide service that
a) meets or exceeds customer requirements
b) within cost and other managerial constraints
 Process selection
 Decide the way transformation process will be organized
 Usually made when new products or services are being planned
 Periodically made due to technological changes in products or
equipment or competitive pressures
 Major implications
 Capacity planning; Interrelated to capacity decisions
 Layout of facilities
 Equipment
 Design of work systems
 Long term effects on efficiency, production flexibility, cost, quality
Process Strategy
Facilities and
Forecasting Capacity Equipment
Planning
Product and Layout

Service Design
Process
Technological Selection Work
Change Design
Stevenson & Chuong, 2014

Process Strategy
 Key aspects of process strategy
 Organisation makes process selection based on their process
strategy which include
a) Capital intensity; manual vs automated
 The mix of equipment and labour that will be used
b) Process flexibility; workforce and machine
 The degree to which the system can be adjusted to changes in
processing requirements
 Due to factors e.g. changes in design or volume processed or technology
c) Adjust to changes
i. Product design
ii. Volume
iii. Technology
 Other dimensions: degree of vertical integration, degree of consumer involvement
in the process (self-service or customization)
Stevenson & Chuong, 2014
Process Strategy
 4 basic strategies
1. Process focus
2. Repetitive focus
3. Product focus
4. Mass customization
 Within these basic strategies there are many ways they
may be implemented
Heizer et. al, 2017

Process Strategy on
Product Volume/Variety Matric
Volume
Low Repetitive High
Volume Process Volume
High Variety Process Focus

one or few units Mass Customization
Projects, job shops (difficult to achieve, but
per run, (machine, print, hospitals, huge rewards)
(allows restaurants) Dell Computer
customization) Arnold Palmer Hospital
Variety (flexibility)
Changes in Repetitive
Modules (autos, motorcycles,
modest runs, home appliances)
Harley-Davidson
standardized
modules
Changes in Poor Strategy Product Focus

Attributes (such (Both fixed and variable (commercial baked goods,
as grade, quality, costs are high) steel, glass)
Frito-Lay
size, thickness,
etc.)
long runs only Heizer et. al, 2017, Figure 7.1
1st Process Focus
 Facilities are organized around specific activities or processes
 A product or customer has no pre-defined flow
 Any particular product/service may undertake a unique route through system
 Some processes having long waiting lines while other processes may be empty
i. Factory; processes might be departments for welding, grinding, painting
ii. Office; processes might be accounts payable, sales, and payroll
iii. Restaurant; processes might be bar, grill, and bakery
 Use of general purpose equipment and skilled personnel

 High degree of product flexibility
 Typically high costs and low equipment utilization
 Product flows may vary considerably

 planning and scheduling a challenge
 Job shop facility
 The process focuses on low volume, high variety products
 These facilities are process focus in terms of equipment, layout, and
supervision
1st Process Focus Many inputs
(surgeries, sick patients,
baby deliveries, emergencies)
Many departments and

(low-volume, high-variety, many routings
intermittent processes)
Arnold Palmer Hospital
Heizer et. al, 2017, Figure 7.2(a)

Many different outputs
(uniquely treated patients)
1st Process Focus
https://image.slidesharecdn.com/process-capacity-2-1213683913991502-9/95/process-capacity-2-6-728.jpg?cb=1213664212
2nd Repetitive Focus
 Facilities often organized as assembly lines
 Is a product-oriented production process that uses modules
 Falls between the product and process focus
 A typical batch flow system
 Fast-food firms are an example of repetitive process using modules
 Characterized by modules
 Modules are parts or components of a product previously
manufactured or prepared, often in a continuous process
 Modules are used to assemble different combination of parts to
produce variety of products
 Less flexibility than process-focused facilities but more

efficient
 Some flexibility in creating output variety but are limited by the
variety of subassemblies that reach the assembly line
2nd Repetitive Raw materials and
module inputs
Focus (multiple engine models,
wheel modules)
Few
modules
(modular)
Harley Davidson
Modules combined for many

Heizer et. al, 2017, Figure 7.2(b)
Output options
(many combinations of motorcycles)
2nd Repetitive Focus
https://image.slidesharecdn.com/process-capacity-2-1213683913991502-9/95/process-capacity-2-15-728.jpg?cb=1213664212
3rd Product Focus
 Facilities are organized by product
 Product-focused operations are often called continuous flow
systems; may run 24 hours per day, not stopping for changeovers for
weeks at a time
 High volume but low variety of products

 Creating very high volume in the most efficient way possible
 Long, continuous production runs enable efficient processes
 Typically high fixed cost but low variable cost; high facility
utilization
 Generally less skilled labour
3rd Product Few Inputs
Focus (corn, potatoes, water,
seasoning)
(high-volume, low-variety,
continuous process)
Frito-Lay
Output variations in size,

Heizer et. al, 2017, Figure 7.2(c) shape, and packaging
(3-oz, 5-oz, 24-oz package
labeled for each material)
3rd Product Focus
https://http://www.pginvestor.com/Interactive/newlookandfeel/4004124/images/pg_company_strategy_5_full.jpg?h=360&la=en-
US&w=698&v=1-201508070948
4th Mass Customization Focus
 Rapid, low-cost production of goods and service to
satisfy increasingly unique customer desires
 Caters to constantly changing unique customer desires
 It is not only about variety but making precisely what the
customer wants when the customer wants it economically
 Challenging and requires sophisticated operational

capabilities
 Combines the flexibility of a process focus with the
efficiency of a product focus
 The key to successful implementation
 The design of products and processes that incorporate common
subassemblies
 Final customized assembly can occur very quickly to create a
unique product, yet
 Does not have to produce and hold every product option in
inventory (postponement)
 Necessary conditions for successful mass customization

a) Imaginative product design
b) Flexible process design
c) Tightly controlled inventory management
d) Tight schedules
e) Responsive supply-chain partners
Heizer et. al, 2017

4th
Mass Many parts and
Customization component inputs
(chips, hard drives, software,
cases)
Many modules
(high-volume, high-variety)
Dell Computer
Heizer et. al, 2017, Figure 7.2(d)

Many output versions
(custom PCs and notebooks)
https://assets.entrepreneur.com/content/16x9/822/mass-customization-future-retail.jpg
Achieving Mass Customization
Figure 7.5
Repetitive Focus
Flexible people
and equipment
Supportive
supply chains Modular techniques
Mass Customization
Effective Rapid
scheduling throughput
techniques techniques
Process-Focused Product-Focused
High variety, low volume Low variety, high volume
Low utilization (5% to 25%) High utilization (70% to 90%)
General-purpose equipment Specialized equipment
Comparison of Processes
Heizer et. al, 2017

Class Activity #1: Match!
https://image.slidesharecdn.com/presentacinmartayjorgeprocessstrategy-141206045747-conversion-gate01/95/presentacin-marta-y-jorge-
process-strategy-23-638.jpg?cb=1417842023
Crossover Chart : Example 1
𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕 = 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕 + (𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕 𝒙 𝑽𝒐𝒍𝒖𝒎𝒆)

Variable
costs
Variable Variable
$ costs $ costs $
Fixed costs Fixed costs
Fixed costs
Low volume, high variety Repetitive High volume, low variety
Process A Process B Process C
 Evaluate the 3 accounting software products:

1. Calculate and plot the total cost for the 3 software
2. Determine the volume at the relevant crossover points
a) Software A and B
b) Software B and C
400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
V1 V2 Volume
Determining volumes (BEPs) at the relevant crossover points:
Crossover point Software A-Software B:

200,000 + 60𝑉1 = 300,000 + 25𝑉1
35𝑉1 = 100,000
𝑉1 = 𝑟𝑒𝑝𝑜𝑟𝑡𝑠
► Software A is most economical from
Crossover point Software B-Software C:

300,000 + 25𝑉2 = 400,000 + 10𝑉2
15𝑉2 = 100,000
𝑉2 = 𝑟𝑒𝑝𝑜𝑟𝑡𝑠
► Software B is most economical from
Conclusion:
The best option is Software A when 0 ≤ 𝑅𝑒𝑝𝑜𝑟𝑡𝑠 ≤

The best option is Software B when ≤ 𝑅𝑒𝑝𝑜𝑟𝑡𝑠 ≤
The best option is Software C when ≤ 𝑅𝑒𝑝𝑜𝑟𝑡𝑠
400,000
300,000
200,000
Fixed cost Fixed cost Fixed cost
(2,857) V1 V2 (6,666) Volume

Focused Processes
 Focus brings efficiency
 Focusing on processes implies a move towards specialization
 limiting the number of activities, products, and/or technologies
 Often a reason why firms outsource so many activities
 Focus on depth of product line rather than breadth

 Focus can be on
a) Customers
b) Products
c) Service
d) Technology
Equipment and Technology
 Technology decisions can be complex as alternate methods
may be available
 Important factors may be
a) Cost d) Quality
b) Cash flow e) Capacity
c) Market stability f) Flexibility
 Flexibility is the ability to respond with little penalty in time, cost,

or customer value  competitive advantage (flexible equipment)
a) Provides the ability to respond to new orders/make different
products with little penalty in time, cost, or customer value
b) May allow managers to enlarge the scope of their processes
 Changing processes or equipment can be difficult and
expensive
 Best to get this critical decision right the first time
Equipment and Technology
 OM is primarily concerned with the technology of
a) Product and service technology
 Discovery and development of new products and services
b) Process technology
 Methods, procedures and equipment used in processes within
organisation and supply chain
c) Information technology
 The science and use of electronic equipment to store + process +
send information
 All three have major impact on:

a) Costs
b) Productivity
c) Competitiveness
Process Analysis and Design
 Important questions to ask when analysing and
designing a process
i. Is the process designed to achieve a competitive advantage?
ii. Does the process eliminate steps that do not add value?
iii. Does the process maximize customer value?
iv. Will the process win orders?
 Tools for analysing processes

1. Flowcharts
2. Time-Function Mapping
3. Value-Stream Mapping
4. Process Chart
5. Service Blueprint
Process Analysis and
Design: Tools
1. Flowcharts
 Shows the movement of materials
 Typical first step in any design or analysis effort
 Example: Figure 7.1 on Process Flow diagram for Harley Davidson
2. Time-Function Mapping
 Shows flows and time frame
 A flowchart with time included on the x-axis
 Example: Figure 7.4 the use of time-function map in process improvement at
American National Can Company
1st Process Flow Diagram
Frame tube Frame-building Frame Hot-paint
bending work cells machining frame painting
THE ASSEMBLY LINE
TESTING Engines and
Incoming parts transmissions
28 tests
Arrive on a JIT
schedule from a
Air cleaners Oil tank work cell 10-station work
cell in
Milwaukee
Fluids and mufflers Shocks and forks
Fuel tank work cell Handlebars
Wheel work cell Fender work cell

Roller testing
Crating
Heizer et. al, 2017, Figure 7.1 WRWH/MGT6240/Chapter 7 36

2nd Time Function Map: Baseline
Order Receive
Customer product product
Process
Sales order
Order
Production Wait
control
Product
Order
Plant A Print
Product
WIP
Warehouse Wait Wait Wait
Product
WIP
WIP
WIP
Plant B Extrude
Transport Move Move
12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

52 days
Heizer et. al, 2017, Figure 7.4(a) WRWH/MGT6240/Chapter 7 37
2nd Time Function Map: Target
Order Receive
Customer product product
Process
Sales order
Product
Order
Production
control Wait
Order
WIP
Plant Print Extrude
Product
Warehouse Wait
Product
Transport Move
1 day 2 days 1 day 1 day 1 day

6 days
The firm was able to eliminate the significant waiting that had slowed
things down before improvement was implemented
Heizer et. al, 2017, Figure 7.4(b) WRWH/MGT6240/Chapter 7 38
Design: Tools
3. Value-Stream Mapping
 Where value is added in the entire production process,
including the supply chain
 Can appear complicated because the full supply chain is
included in the picture
 Extends from the customer back to the suppliers
4. Process Chart
 A process chart breaks down steps into detail
 Can provide a structured way to examine value-added vs. non-
value added activities
Value-Stream Mapping: Steps
Heizer et. al, 2017

3rd Value-Stream Mapping: Example

3rd Value-Stream Mapping: Example
It seems a significant amount of inventory & large

Percentage of non-value added time
 to reduce raw materials inventory
Example: deliveries twice per week instead of once per week

4th Process Chart: Example

Design: Tools
5. Service Blueprinting
 Focuses on the customer and provider interaction
 Defines three levels of interaction
 Each level has different management issues
 Identifies potential failure points
5th Service Blueprint: Example
Personal Greeting Service Diagnosis Perform Service Friendly Close
Level Customer arrives

for service. Customer departs
#1
(3 min)
F
Determine Notify Customer pays bill.
specifics. customer (4 min)
Warm greeting (5 min)
and obtain No and recommend
an alternative
F
service request.
(10 sec) provider.
Standard Can F
Level request. (7 min)
service be
#2 (3 min) done and does Notify
Direct customer customer No customer the
to waiting room. approve? car is ready.
(5 min) (3 min)
F F F F
Yes Yes
Perform
Level required work. F Prepare invoice.
#3 (varies) (3 min)

Special Considerations for
Service Process Design
Some interaction with customer is necessary, but this
often affects performance adversely
The better these interactions are accommodated in the
process design, the more efficient and effective the
process
Find the right combination of cost and customer
interaction
Service Process Matrix
Degree of Customization
Low High
Mass Service Professional Service
Private Traditional
banking orthodontics
Commercial
banking
High General-
Full-service purpose law firms
stockbroker
Degree of Labor
Digital
Boutiques orthodontics
Retailing
Service Factory Law clinics Service Shop

Limited-service Specialized
stockbroker hospitals
Warehouse and Fast-food Fine-dining
catalog stores restaurants Hospitals
Low restaurants
Airlines
No-frills
airlines

Mass Service and Professional Service
 Labor involvement is high
 Focus on human resources
 Selection and training highly important
 Personalized services Degree of Customization
Low High
Mass Service Professional Service

Private Traditional
Commercial
banking
High General-
Full-service purpose law
stockbroker firms
Digital
Degree of Labor
Retailing
Law clinics
Service Factory Service Shop
Limited-service Specialized
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals
Airlines
No-frills
airlines
Heizer et. al, 2017

Service Factory and Service Shop
 Automation of standardized services
 Restricted offerings
 Low labor intensity responds well to process
technology and
scheduling Low
Mass Service
Degree of Customization
High
Professional Service
Private Traditional
 Tight control required to

Commercial
banking
High General-
Full-service purpose law
stockbroker firms
Digital
Degree of Labor
maintain standards Retailing
Service Factory
Limited-service
Law clinics
Service Shop
Specialized
Warehouse and Fast-food
catalog stores Fine-dining
Low restaurants restaurants Hospitals
Airlines
No-frills
airlines
Heizer et. al, 2017

Improving Service Productivity
Heizer et. al, 2017

Production Technology
1. Machine technology
2. Automatic identification systems (AISs) and RFID
3. Process control
4. Vision systems
5. Robots
6. Automated storage and retrieval systems (ASRSs)
7. Automated guided vehicles (AGVs)
8. Flexible manufacturing systems (FMSs)
9. Computer-integrated manufacturing (CIM)
Heizer et. al, 2017
1st Machine Technology
1. Increased precision
2. Increased productivity
3. Increased flexibility
4. Improved environmental impact
5. Reduced changeover time
6. Decreased size
7. Reduced power requirements
Heizer et. al, 2017

2nd Automatic Identification
Systems (AISs)
 Improved data acquisition
 Reduced data entry errors
 Increased speed
 Increased scope of process automation
Bar codes and RFID
Heizer et. al, 2017

rd
3 Process Control
 Real-time monitoring and control of processes
 Sensors collect data
 Devices read data
on periodic basis
 Measurements translated into
digital signals then sent to a computer
 Computer programs analyze the data
 Resulting output may take numerous forms
Heizer et. al, 2017

4th Vision Systems
 Particular aid to inspection
 Consistently accurate
 Never bored
 Modest cost
 Superior to individuals performing the same tasks
Heizer et. al, 2017

5th Robots
 Perform monotonous or dangerous tasks
 Perform tasks requiring significant
strength or endurance
 Generally enhanced
consistency and accuracy
Heizer et. al, 2017

6th Automated Storage and
Retrieval Systems (ASRSs)
 Automated placement and withdrawal of parts and
products
 Reduced errors and labor
 Particularly useful in inventory and test areas of
manufacturing firms
Heizer et. al, 2017

7th Automated Guided Vehicle
(AGVs)
 Electronically guided and
controlled carts
 Used for movement of
products and/or individuals
Heizer et. al, 2017

8th Flexible Manufacturing
Systems (FMSs)
 Computer controls both the workstation and the
material handling equipment
 Enhance flexibility and reduced waste
 Can economically produce low volume at high
quality
 Reduced changeover time and increased utilization
 Stringent communication requirement between
components
Heizer et. al, 2017
9th Computer-Integrated
Manufacturing (CIM)
 Extend flexible manufacturing
 Backwards to engineering and inventory control
 Forward into warehousing and shipping
 Can also include financial and customer service
areas
 Reducing the distinction between low-
volume/high-variety, and high-volume/low-variety
production
Heizer et. al, 2017

10th Computer-
Integrated
Manufacturing
(CIM)
ASRS and AGVs
Heizer et. al, 2017, Figure 7.9

Technology in Services
Heizer et. al, 2017

Process Redesign
 The fundamental rethinking of business processes to
bring about dramatic improvements in performance
 Relies on reevaluating the purpose of the process and
questioning both the purpose and the underlying
assumptions
 Requires reexamination of the basic process and its
objectives
 Focuses on activities that cross functional lines
 Any process is a candidate for redesign
Heizer et. al, 2017

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Topic 7

1. Describe four process strategies

3. Describe special Considerations for Service

► The only major U.S. motorcycle

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Product and Layout

Stevenson & Chuong, 2014

Heizer et. al, 2017

High Variety Process Focus

Changes in Poor Strategy Product Focus

 Use of general purpose equipment and skilled personnel

 Product flows may vary considerably

Many departments and

Heizer et. al, 2017, Figure 7.2(a)

 Less flexibility than process-focused facilities but more

Modules combined for many

 High volume but low variety of products

Output variations in size,

 Challenging and requires sophisticated operational

 Necessary conditions for successful mass customization

Heizer et. al, 2017

Heizer et. al, 2017, Figure 7.2(d)

Heizer et. al, 2017

𝑻𝒐𝒕𝒂𝒍 𝑪𝒐𝒔𝒕 = 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕 + (𝑽𝒂𝒓𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕 𝒙 𝑽𝒐𝒍𝒖𝒎𝒆)

 Evaluate the 3 accounting software products:

Crossover point Software A-Software B:

Crossover point Software B-Software C:

The best option is Software A when 0 ≤ 𝑅𝑒𝑝𝑜𝑟𝑡𝑠 ≤

(2,857) V1 V2 (6,666) Volume

 Focus on depth of product line rather than breadth

 Flexibility is the ability to respond with little penalty in time, cost,

 All three have major impact on:

 Tools for analysing processes

Fuel tank work cell Handlebars

Wheel work cell Fender work cell

Heizer et. al, 2017, Figure 7.1 WRWH/MGT6240/Chapter 7 36

Warehouse Wait Wait Wait

Transport Move Move

12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day

1 day 2 days 1 day 1 day 1 day

Heizer et. al, 2017

Heizer et. al, 2017, Figure 7.5 WRWH/MGT6240/Chapter 7 41

It seems a significant amount of inventory & large

Heizer et. al, 2017, Figure 7.5 WRWH/MGT6240/Chapter 7 42

Heizer et. al, 2017, Figure 7.6 WRWH/MGT6240/Chapter 7 43

Level Customer arrives

Heizer et. al, 2017, Figure 7.7 WRWH/MGT6240/Chapter 7 45

Service Factory Law clinics Service Shop

Heizer et. al, 2017, Figure 7.8 WRWH/MGT6240/Chapter 7 47

Mass Service Professional Service

Heizer et. al, 2017

 Tight control required to

maintain standards Retailing

Heizer et. al, 2017

Heizer et. al, 2017

Heizer et. al, 2017

Bar codes and RFID

Heizer et. al, 2017

Heizer et. al, 2017

Heizer et. al, 2017

Heizer et. al, 2017