Chapter 7: Process Strategies

1. Four Process Strategies

• Process strategy is the approach of an organization in transforming
resources into goods and services.
• Objective: create a process that can produce offerings that meet the
costumer requirements within constraints.
• Long term effect on efficiency, flexibility, quality and cost of goods
and services.
• Four process strategies:
▪ Process focus
▪ Repetitive focus
▪ Product focus
▪ Mass Customization

1. Process Focus
▪ Low volume and high variety
▪ Organized around specific activities.
▪ Restaurant: bar, grill and bakery (example)
▪ Factory: welding, grinding and painting (example)
▪ Office: accounts payables, payrolls and sales (example)
▪ Process focused in terms of equipment, layout and supervision.
 ▪ High degree of product flexibility.
▪ Products move between specialized processes.
▪ Each process is designed to handle frequent changes and a high
number of activities.
▪ High variable costs with low utilization of facilities.
2. Repetitive Focus
▪ Moderate volume and variety
▪ Uses Modules
▪ Modules are parts of components previously prepared in a
product focused process.
▪ Classic assembly line.
▪ Usually used in automobile and fast-food joints.
▪ Low flexibility as it has a lot of structure.
▪ Modules are assembled in quasi-custom product (like assembling a
hamburger in a fast-food restaurant.)
▪ Company can obtain economic advantages of the product focused
model and the custom advantage of the process focused model.
3. Product Focus
▪ High volume and low variety
▪ Facilities organized around products.
▪ Continuous and very long production runs.
▪ Can be organized around one specific product: such organizations
can set standards and maintain a given quality.
▪ A chips company can focus on the bag of chips it produces.
▪ Organizations that produce a new product every time cannot
have their leisure.
▪ The point above applies to printshops.
▪ Requires high fixed costs and low variable costs with high facility
utilization.
4. Mass Customization
▪ High volume combined with high variety.
▪ Concept is to create highly individualized goods and services in
quantity for the new sophisticated world we live in.
▪ Improve the quality of product while reducing cost has allowed
operation managers to grow the products.
▪ Mass customization is the rapid and low-cost production of goods
and services that fulfill increasingly unique costumer desires.
▪ It is also about knowing what the costumer wants and when
(economically) does the costumer want that product.
▪ This process brings the variety of process focus with cost of product
focused production with the consistency of the repetitive focus.
▪ Requires sophisticated production capabilities.
▪ Requires limited product line with modular design.
▪ Tight link between sales, design and production.
▪ Need to respond to changes effectively: need flexibility.
▪ Making mass customization work
▪ Build-to-order or BTO is producing to costumer orders not
forecast.
▪ High volume build-to-order is difficult to achieve.
▪ Some challenges are:
• Product Design
▪ Must be imaginative.
▪ BTO include limited modules.
• Process Design
▪ Flexible and able to accommodate changes.
▪ Changes in technology.
▪ Postponement (delaying modifications or
customization in a product as much as possible.)
allows for customization late in the process.
• Inventory Management
▪ Requires tight control.
▪ Avoid being stuck with obsolete components.
• Tight Schedules
▪ Track order from design to delivery.
• Responsive partners
▪ Lead to effective collaborations.
• Comparing Processes
▪ The table on the previous page concludes by a visual comparison
of the processes.
▪ Each one has a strategic advantage.
▪ In order to choose a design one can use crossover charts:

▪ Uses a method where each process is translated to a linear

equation 𝑦 = 𝑎𝑥 + 𝑏 where:
• 𝑦 is the total cost put in the process.
• 𝑥 is the amount of the product produced.
• 𝑎 is the variable cost.
• 𝑏 is the fixed cost.
▪ Can be plotted on graphs to show result visually.
 ▪ Meeting points are where the profitability of a certain option vis-
à-vis the other changes.
• Focused Processes
▪ Result of continuous process in moving towards specialization.
▪ Focus of specialization leads to efficiency.
▪ Focus can be on the following levels.
• Costumers
• Products
• Services
• Technologies
2. Selection of Equipment
• Selecting a process means selecting a specific set of equipment that will
help.
• Understanding the industry is mandatory to select the best equipment.
• In the age of rapid technological change, adding flexibility to
production process can be a major competitive advantage.
▪ Flexibility is the ability to respond to change with the least
penalty in time, cost and costumer satisfaction.
 ▪ Modular, movable, and digitally controlled equipment.
▪ Building flexibility can be difficult and expensive. It may require
change in the ten operation management decisions.
▪ Challenges may arise in
• Purchasing
• Quality Standards
• Equipment
• Layout
• Training
• Maintenance
3. Process Analysis and Design
• Important questions to remember when designing a process:
▪ Does it achieve competitive advantage or differentiation?
▪ Does it eliminate steps that do not add value?
▪ Does the process maximize costumer value?
▪ Will the process win orders?
• Can also address issues such as throughput, cost and quality, which are
more related to operations management.
• The following tools can help in analyzing a process.
▪ Flowcharts
 • Schematic drawing of the movement of material, product
or people.
▪ Time-Function Map

• Flowchart with the time added on the horizontal axis.

• Nodes indicate the activities.
• Arrows indicate flow direction.
• Allows to identify and eliminate useless steps, delays and
duplication.
▪ Process Charts
 • Use symbols, time and distance to provide an objective
and structured way to analyze and record activities.
• Allows focus on value added activities.
▪ Value-Stream Mapping.

• Variation of time-function mapping.

• Expanded look at where value is added or not added.
• Includes the supply chain.
• Takes in account of the process and the management
decisions and information systems.
▪ Service Blueprinting
• Focus on the costumer and the provider interactions.
• Divided on three levels.
▪ Level 1: Activities under the control of the
costumer.
▪ Level 2: Activities of the costumer interacting with
the provider.
▪ Level 3: Activities performed away from the
costumer by the provider.
• Each level has its own management issues.
▪ Notes those potential failures with the F sign on the
blueprint.
▪ Level 1 failures suggest modifying expectations.
 ▪ Level 2 failures suggest focus on personnel
selection and training.
▪ Level 3 failures suggest typical process innovations.
4. Special Considerations for Service Process Strategies.
• Interactions with the costumer often affects process performance.
▪ Services, by their nature, imply interactions with the costumer
that is inevitable.
• Costumer’s unique desires play a role in the process.
▪ Process should be designed to accommodate this important
element.
• Will increase efficiency.
• Trick is to find the right combination.
• The services can be modified according to four quadrants.

▪ When degree of labor is high, we expect managers to focus

extensively on human resources.
• Personalized services.
▪ When degree of customization is low, we expect managers to
• Standardize some of the offerings.
 • Automate.
• Remove some services.
• Offload some of the aspects of the service.
• May require changes in different areas too.
• Requires tight control over quality standards.
5. Production Technology
• Enhancements in technology improve designs and how things are made
and distributed around the world.
• Technologies can help link the company members to each other, and
the company to the global market.
• Machine Technologies
▪ Machines that
• Removes material and modifies it (cut it, drills it,…)
• Progress and precision control much higher.
• Can be five time more productive than machines from
previous generations by using less space and less power.
▪ Computer intelligence is usually behind these machines.
▪ Computer Numerical Control CNC is a machine with its own
computer and memory.
▪ Suggested development suggest that adding material may be
more efficient than removing it.
• Additive manufacturing or 3D printing is an example.
• Being increasingly used in markets today due to
▪ Minimal costume tooling.
▪ Low inventory.
▪ Reduced time to market.
• Automatic Identification Systems (AIS) and RFID
▪ Numerically controlled manufacturing machinery Like ATMs
▪ Controlled by digital electronic signals.
▪ Restriction: most OM information can’t be transmitted.
• Need to make data digital.
• Through barcodes, computers…
▪ Radio Frequency Identification RFID uses radio waves to
transmit the same information.
• Allows tracking and monitoring.
• Small range.
 • Doesn’t require line of sight between tag and reader.
• Process Control
▪ The use of information technology to monitor and control
physical process.
▪ Control temperatures, pressures, and quantities.
▪ Operation of sensors:
• Collect data that is read on periodic basis.
• Transmitted into digital signals, which are sent to a
computer.
• Computer programs analyze it.
• Vision Systems
▪ Combination of video systems and computer technology.
▪ Used in visual inspections.
• Less error prone.
• Robots
▪ Machine that can move, hold, and grab items.
▪ They are mechanical devices that can use electronic impulses to
activate motors and switches.
▪ Robots can perform dangerous or tedious tasks.
▪ Have increased accuracy, speed, strength, and consistency.
• Automated Storage and Retrieval Systems (ASRS)
▪ Automated warehousing that is less prone to errors and
tremendous labor.
• Automated Guided Vehicles (AGV)
▪ Can take form of monorails, conveyors, robots and automated
guided vehicles.
▪ They are electronically guided carts commonly used in
manufacturing and warehousing.
• Flexible Manufacturing Systems (FMS)
▪ Central computer that gives information to each workstation and
material handling equipment’s such as robots.
▪ Flexible because they are controlled by easily changed electronic
signals.
• Computer Generated Manufacturing (CIM)
▪ Consists of computer aided designs (CAD) that generates the
necessary electronic instructions to run numerically controlled
instructions.
▪ When integrated with warehousing and inventory control, it is
called CIM.