Presentación marta y jorge process strategy

OPERATIONS
MANAGEMENT 1
PROCESS STRATEGY
PROCESS FOCUS
MARTA ALARCÓN TAMAYO JORGE MORENO FUENTES

What is a proccess strategy?
• A process(or transformation) strategy is an organization’s approach to transforming resources into goods and services.
 Objective: How to produce a product or provide a service that:
Meets or exceeds customer requirements
Meets cost and managerial goals
Has long term effects on
Efficiency and production flexibility
Costs and quality

• In understanding Process strategy there are three principles that are particularly
important:
The key to successful process decisions is to make choices that fit the situation.
Individual processes are the building blocks that eventually create the firm's whole
supply chain.
Management must pay close attention to all interfaces between processes in the
supply chain, whether they are performed internally or externally.
It can be utilized to guide a variety of process decisions, operations strategy, and your
business' ability to obtain the resources necessary to support them.

A process involves the use of an organization’s resources to provide something of
value.
• Major process decisions include:
 Process Structure
 Customer Involvement
 Resource flexibility
 Capital intensity

Key Role of the Manager: assess whether the advantages
outweigh disadvantages
It is particularly important if your business involves a high level of customer contact.
Negative aspects:
• Can be disruptive thereby making the process less efficient.
• Quality measurement also becomes more difficult
• can also mean greater expenses :employees with greater
interpersonal skills and possibly consider revising your facility
layout
Positive aspects:
• Some customers seek active participation in and control over the
service process, particularly if they will enjoy savings in both price
and time
• Can mean better quality, faster delivery, greater flexibility, and even
lower cost.

Resource Flexibility
Workforce
Equipment

Capital Intensity
Capital intensity ratio of a company is a measure of the amount of capital needed per dollar of revenue.
 A high capital intensity ratio may due to lower utilization of the company's assets or it may be because the company's
business is more capital intensive and less labor intensive (for example, because it is automated).
 However, for companies in the same industry and following similar business model and production processes, the company
with lower capital intensity is better because it generates more revenue using less assets.
Total Assets
Sales incomes generated at a specified period

Example of capital intensity:
• Coca Cola Company (NYSE: KO) earned $46,542 million in financial year 2011-2012. Total assets at the end of the period
were $79,974 million. PepsiCo's total asset turnover ratio for equivalent period was 0.94. Compare capital intensity of both
the companies and conclude which one is more efficient using this single metric.
• Solution
• Coca Cola Company's capital intensity ratio
= Total Assets ÷ Sales
= $79,974M ÷ $46,542M
= 1.72
• PepsiCo's capital intensity ratio
= 1 ÷ Asset Turnover
= 1 ÷ 0.94 = 1.06
• PepsiCo seems to be using its assets more efficiently. It used only $1.06 dollars per $1 of revenue. Coca Cola Company on
the other hand utilized $1.72 of assets to generate $1 of revenue.

There are four process strategies:
1) Process Focus
2) Repetitive Focus
3) Product Focus
4) Mass Customization
PROCESS STRATEGY OVERVIEW

What is process focus?
• A production facility organized around processes to facilitate low-volumen high-variety
productions.
• All operations are grouped according to the type of process.
• The system is also called ‘job or intermitent
• It is usually used to produce small quantity of different items on general purpose machines.

What are the main characteristics of the
process focus?
Facilities are organized around specific activities or
processes
General purpose equipment and skilled personnel
High degree of product flexibility
Typically high costs and low equipment utilization
Product flows may vary considerably making planning
and scheduling a challenge

WORKCASE: ARNOLD PALMER HOSPITAL
(low volume, high variety,
intermittent processes)
Arnold Palmer Hospital
Many departments
and many routings
Many different outputs
(uniquely treated patients)
Many inputs
(surgeries, sick
patients,
baby deliveries,
emergencies)

WORKCASE: ARNOLD PALMER HOSPITAL
The Heart Center
•The Heart Center
• Pediatric Hybrid Cardiac Catheterization Lab
• Cardiac Surgery
• Pediatric Cardiac Anesthesia
• Pediatric Cardiovascular Intensive Care Unit
• Pediatric Cardiac Home Monitoring Program
Cardiology Endocrinology Neurology Orthopaedics

To summarize:
Positive Negative
 Greater product flexibility
 More general propose equipment
 Lower initial capital investment
 More highly trained personal
 More difficult production planning and control
 Low equipment utilization(5%)
 Requires more time if the system operates on
one or more processes at a time
 High Variable costs

 Facilities often organized as assembly lines
 Characterized by modules with parts and
assemblies made previously
 Modules may be combined for many output options
 Less flexibility than process-focused facilities but
more efficient
Repetitive Focus

Repetitive Focus

Product Focus
 Facilities are organized by product
 High volume but low variety of products
 Long, continuous production runs enable
efficient processes
 Typically high fixed cost but low variable
cost
 MARTA Generally ALARCÓN TAMAYO JORGE less MORENO FUENTES
skilled labor

Product Focus

Mass Customization
 The rapid, low-cost production of goods and
service to satisfy increasingly unique
customer desires
 Combines the flexibility of a process focus
with the efficiency of a product focus

Mass Customization Focus

Mass Customization
Mass Customization
Effective scheduling
techniques
Modular techniques
Rapid throughput
techniques
Repetitive Focus
Flexible people
and equipment
Process-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Product-Focused
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
Supportive
supply chains

PROCESS FOCUS
REPETITIVE FOCUS
PRODUCT FOCUS
MASS CUSTOMIZATION

Main differences of the Process Focus
Strategy and other process strategies.
Process Focus
(Low volume,
high variety)
Repetitive Focus
(Modular)
Product Focus
(High-volume, low-variety)
Mass Customization
(High-volume, high-variety)
Small quantity,
large variety of
products
Long runs,
standardized product
made from modules
Large quantity, small
variety of products
Large quantity, large
variety of products
General purpose
equipment
Special equipment aids
in use of assembly line
Special purpose
equipment
Rapid changeover on
flexible equipment

Process Focus
(Low volume,
high variety)
Repetitive Focus
(Modular)
Product Focus
Mass Customization
Operators are
broadly skilled
Employees are
modestly trained
Operators are less
broadly skilled
Flexible operators are
trained for the
necessary
customization
Many job
instructions as
each job changes
Repetition reduces
training and changes
in job instructions
Few work orders and job
instructions because jobs
standardized
Custom orders require
many job instructions

Process Focus
(Low volume,
high variety)
Repetitive Focus
(Modular)
Product Focus
Mass Customization
Raw material
inventories high
JIT procurement
techniques used
Raw material inventories
are low
Raw material
inventories are low
Work-in-process
is high
JIT inventory
techniques used
Work-in-process
inventory is low
Work-in-process
inventory driven down
by JIT, lean production

Process Focus
(Low volume,
high variety)
Repetitive Focus
(Modular)
Product Focus
Mass Customization
Units move slowly
through the plant
Movement is
measured in hours
and days
Swift movement of unit
through the facility is
typical
Goods move swiftly
through the facility
Finished goods
made to order
Finished goods made
to frequent forecast
Finished goods made to
forecast and stored
Finished goods often
made to order

Process Focus
(Low volume, high
variety)
Repetitive Focus
(Modular)
Product Focus
Mass Customization
Scheduling is
complex, trade-offs
between inventory,
availability,
customer service
Scheduling based on
building various
models from
modules to forecasts
Relatively simple
scheduling, establishing
output rate to meet
forecasts
Sophisticated
scheduling required to
accommodate custom
orders
Fixed costs low,
variable costs high
Fixed costs
dependent on
flexibility of the
facility
Fixed costs high,
variable costs low
Fixed costs high,
variable costs must be
low
Costing estimated
before job, not
known until after
job is complete
Costs usually known
due to extensive
experience
High fixed costs mean
costs dependent on
utilization of capacity
High fixed costs and
dynamic variable costs
make costing a
challenge

Multiple choice activities

1. Which of the following statements regarding Dell Computer
is false?
a. Dell is a practitioner of the mass customization process.
b. Dell builds its computers overseas in order to gain a low-cost
advantage.
c. Dell keeps very little inventory of finished goods.
d. Dell utilizes a global supply chain, but assembles its computers in
the U.S.
e. Dell's research focuses on manufacturing issues, not computer part
design

2. A job shop is an example of a(n)
a. repetitive process
b. continuous process
c. line process
d. process focus
e. specialized process

3. Three types of processes are
a. goods, services, and hybrids
b. manual, automated, and service
c. process focus, repetitive focus, and product focus
d. modular, continuous, and technological
e. input, transformation, and output

4. A process focused strategy is commonly used to produce
a. high-volume, high-variety products
b. low-volume, high-variety products
c. high-volume, low-variety products
d. low-variety products at either high- or low-volume
e. high-volume products of either high- or low-variety

5. Which of the following products is likely to be assembled on a repetitive process
line?
a. automobiles
b. personal computers
c. dishwashers
d. television sets
e. all of the above

6. An assembly line is an example of a
a. product-focused process
b. process-focused process
c. repetitive process
d. line process
e. specialized process

7 Which of the following is false regarding repetitive processes?
a. They use modules.
b. They allow easy switching from one product to the other.
c. They are the classic assembly lines.
d. They have more structure and less flexibility than a job shop
layout.
e. They include the assembly of basically all automobiles.

8. Utilization in process-oriented facilities is frequently low because
a. the postponement strategy for improving service productivity is being used
b. scheduling in process-oriented facilities is not very complex
c. with high fixed costs, utilization is not very important
d. excess capacity for peak demands is desirable
e. low raw material inventories cause machines to be inactive

9. Which of the following characteristics best describes repetitive focus?
a. It uses sophisticated scheduling to accommodate custom orders.
b. Its output is a standardized product produced from modules.
c. It is too expensive when volumes are low or flexibility is required.
d. It is widely used for the manufacture of steel.
e. Its costs are often known only after a job is done.

10. When done correctly, mass customization
a. increases pressure on supply chain performance
b. helps eliminate the guesswork that comes with sales forecasting
c. drives down inventories
d. increases pressure on scheduling
e. all of the above

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