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  2. INTRODUCTION  We have studied selection, definition and design of goods and services  Now we will look at their production  It is important to find the best way to produce
  3. PROCESS STRATEGY  It is an organization’s approach to transform resources into goods and services.  The main objective is to find a way to produce products and services that meet customer’s requirements / and product specifications within cost and other managerial constraints.  The process thus selected will have a long term effect on efficieny and production, as well as flexibility, cost and quality of goods.
  4. TYPES OF PROCESS STRATEGIES  Process Focus (Standard Register)  Repetitive Focus (Harley Davidson)  Product Focus (Nucor Steel)  Mass Customization (DELL)
  5. PROCESS MATCHING WITH VOLUME & VARIETY Low Volume High Volume Repetitive Process Process Focus Projects, Job Shops Mass Customization Difficult to achieve but huge rewards Repetitive Assembly lines Product Focus Bakery, Steel, Glass Poor Strategy Variable Costs High High variety Changes in Modules Changes in attributes variety volume
  6. PROCESS FOCUS  A production facility organized around processes to facilitate low-volume, high variety production  High degree of product flexibility  High variable costs  Extremely low utilization of facilities  Examples: restaurants, hospitals, machine shops
  7. REPETITIVE FOCUS  A product oriented production process that uses modules. It’s the classic assembly line  More structured and less flexible than product focus  Examples: Automobiles, Home Appliances, Fast Food
  8. PRODUCT FOCUS  A production facility organized around products; a product oriented, high volume, low variety process  Also called Continuous Processes, as they have very long continuous process runs  Standardization and effective quality control essential  Examples: glass, paper, bulbs, drinks, cornea transplants
  9. MASS CUSTOMIZATION FOCUS  Rapid, low-cost production that caters to constantly changing unique customer desires  There is high demand for individualized goods and services, e.g. automobiles, movies, cereals etc  Economically producing precisely what the customer wants and when he wants it  It provides the variety of process focused (low volume) manufacture to product focused (high volume) production  Examples: DELL, NIKE
  10. COMPARISON OF PROCESS STRATEGIES  Each strategy, when matched to volume and variety can produce a low cost advantage, fast responsiveness and differentiated products
  11. PROCESS ANALYSIS AND DESIGN  Questions to be asked:  Is the process designed and capable to achieve competitive advantage in terms of low cost, response and differentiation?  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?
  12. TOOLS FOR PROCESS ANALYSIS  Flow Diagrams: A drawing used to analyse movement of people and material  Time-Function Mapping: A flow diagram but with time added on the horizontal axis  Process Chart: Charts using symbols to analyse the movement of people or material  Service Blueprinting: A process analysis technique that focuses on the customer and supplier’s interaction with the customer
  13. SERVICE PROCESS DESIGN  Mass Service  Professional Service  Ways to improve service processes:  Layout  Human Resources  Technology
  14. PROCESS REENGINEERING  It is the fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance  It can be a factory layout, a purchasing procedure or an entirely new way of making products  It focuses on dramatic improvements in cost, time and value.
  15. ENVIRONMENTALLY FRIENDLY PROCESSES  Environmentally friendly ingredients  Elimination of animal testing  Energy efficiency  Recyclable products and packaging  Renewable energy sources  Low effluent emission designs
  16. SELECTION OF EQUIPMENT & TECHNOLOGY  Considerations:  Cost  Quality  Capacity  Flexibility
  17. DESIGN CAPACITY  Regardless of process type, OMs have to determine capacity  It is a large portion of fixed cost  Too large plant, increased downtime  Too small, customers lost  It is the maximum theoretical output of a system in a given period
  18. EFFECTIVE CAPACITY  The capacity a firm can expect to achieve given its product mix, methods of scheduling, maintenance and standards of quality  It is often lower than design capacity as the plant may have been designed for a different product mix  Measures of system performance:  Utilization = Actual Output Design Capacity  Efficiency = Actual Output Effective Capacity
  19. FORECASTING CAPACITY REQUIREMENTS  Determining future capacity requirements can be a complicated procedure as it is based on future demand.  When demand can be forecast with a reasonable degree of precision, determining capacity reqs. Can be straightforward.  First Phase: Future demand is forecast  Second Phase: Forecast used for capacity requirements
  20. MANAGING DEMAND  Demand exceeds Capacity:  The firm may be able to curtail demand by raising prices, scheduling long lead times and discouraging small margins. Long term solution is capacity increase.  Capacity exceeds Demand:  The firm may stimulate demand by price reductions or aggressive marketing  Adjusting to Seasonal Demands:  The firm may offer products with complimentary demand patterns
  21. BREAK-EVEN ANALYSIS  Break Even Point:  The point in cash terms where the costs equal revenues.  Fixed Costs:  Costs that continue even if no units are produced, e.g. debt, taxes, depreciation  Variable Costs:  Costs that vary with the volume of units produced, e.g. labour, materials