Chapter 1

Processes and Technology

6-1
 Learning Outcomes
• Evaluate startegic options in process planning
• Differenticate among different types of production
processes
• Understand the effect of standardization on process
selection
• Appreciate the difficulties in translating a design to a
process
• Investigate the use of technology in manufacturing
and service processes

6-2
 Lecture Outline

• Process Planning
• Process Analysis
• Process Innovation
• Technology Decisions

Copyright 2011 John Wiley & Sons, Inc. 6-3

 Process Planning
• Process
Group of related tasks with specific inputs & outputs. Processes
exist to create value for the customer, stakeholder, society.
• Process design
Tasks to be done & how they are coordinated among functions,
people, & organizations
• Process strategy
An organization’s overall approach to transforming resources into
goods and services
• Process planning
Converts designs into workable instructions for manufacture or
delivery

=> Planning, analyzing and improving processes is the essence of

operations management.

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 Process Strategy

• Vertical integration
• extent to which firm will produce inputs and control outputs of
each stage of production process
• Capital intensity
• mix of capital (i.e., equipment, automation) and labor
resources used in production process
• Process flexibility
• ease with which resources can be adjusted in response to
changes in demand, technology, products or services, and
resource availability
• Customer involvement
• role of customer in production process

Copyright 2011 John Wiley & Sons, Inc. 6-5

 Outsourcing
• Cost • Speed
• Capacity • Reliability
• Quality • Expertise

Copyright 2011 John Wiley & Sons, Inc. 6-6

 Process Selection
• Projects
• one-of-a-kind production of a product to customer order
• Batch production
• process many different jobs at the same time in groups
or batches
• Mass production
• produce large volumes of a standard product for a
mass market
• Continuous production
• used for very-high volume commodity products

Copyright 2011 John Wiley & Sons, Inc. 6-7

 Sourcing Continuum

• Single contract are used if the outsourcing decision is

temporary or products are standardized => suppliers are
chosen at lowest cost
• Strategic alliance is an long-term partner
• Joint ventures are used when entering a foreign country for
the first time. Risks, sources and rewards are shared among
partners of a joint venture

Copyright 2011 John Wiley & Sons, Inc. 6-8

 Product-Process Matrix

Copyright 2011 John Wiley & Sons, Inc. 6-9

 Types of Processes

PROJECT BATCH MASS CONT.

Type of Made-to- Made-to-

Unique order stock Commodity
product
(customized) (standardized )

One-at-a- Few
Type of Mass Mass
customer time individual
market market
customers

Product
demand Infrequent Fluctuates Stable Very stable

Copyright 2011 John Wiley & Sons, Inc. 6-10

 Types of Processes

PROJECT BATCH MASS CONT.

Demand Low to
Very low High Very high
volume medium

No. of Infinite
different Many, varied Few Very few
products variety

Repetitive, Continuous,
Production Long-term Discrete, job
system assembly process
project shops
lines industries

Copyright 2011 John Wiley & Sons, Inc. 6-11

 Types of Processes

PROJECT BATCH MASS CONT.

Varied General- Special- Highly

Equipment
purpose purpose automated

Mixing,
Primary type Specialized
of work Fabrication Assembly treating,
contracts
refining

Experts, Limited
Worker skills Wide range Equipment
crafts- range of
of skills monitors
persons skills

Copyright 2011 John Wiley & Sons, Inc. 6-12

 Types of Processes

PROJECT BATCH MASS CONT.

Efficiency, Highly efficient,

Custom work, Flexibility,
Advantages latest technology quality
speed, large capacity,
low cost ease of control

Capital
Non-repetitive, Costly, slow, Difficult to change,
Dis- investment;
small customer difficult to far-reaching errors,
advantages lack of
base, expensive manage limited variety
responsiveness
Machine shops, Automobiles,
Construction,
print shops, televisions, Paint, chemicals,
Examples shipbuilding,
bakeries, computers, foodstuffs
spacecraft
education fast food

Copyright 2011 John Wiley & Sons, Inc. 6-13

 Process Selection With
Break-Even Analysis
• Study cost trade-offs based on demand volume
• Cost
• Fixed costs
• constant regardless of the number of units produced
• Variable costs
• vary with the volume of units produced
• Revenue
• price at which an item is sold

Copyright 2011 John Wiley & Sons, Inc. 6-14

 Process Selection With
Break-Even Analysis
• Total revenue
• price times volume sold
• Profit
• difference between total revenue and total cost

Copyright 2011 John Wiley & Sons, Inc. 6-15

 Process Selection With
Break-Even Analysis
Total cost = fixed cost + total variable cost
TC = cf + vcv
Total revenue = volume x price
TR = vp
Profit = total revenue - total cost
Z = TR – TC = vp - (cf + vcv)
cf = fixed cost
V = volume (i.e., number of units produced and sold)
cv = variable cost per unit
p = price per unit

Copyright 2011 John Wiley & Sons, Inc. 6-16

 Process Selection With
Break-Even Analysis

TR = TC
vp = cf + vcv
vp - vcv = cf
v(p - cv) = cf
cf
v = p - cv
Solving for Break-Even Point (Volume)

Copyright 2011 John Wiley & Sons, Inc. 6-17

 Break-Even Analysis

Fixed cost = cf = $2,000

Variable cost = cv = $50 per unit
Price = p = $100 per unit

Break-even point is
cf 2000
v= = = 40 units
p - cv 100 - 50

Copyright 2011 John Wiley & Sons, Inc. 6-18

 Break-Even Analysis: Graph

Dollars

Total
$3,000 — cost
line

$2,000 —

$1,000 —
Total
revenue
line
40 Units
Break-even point

Copyright 2011 John Wiley & Sons, Inc. 6-19

Process Selection – Multiple Processes
Process A Process B
$2,000 + $50v = $10,000 + $30v
$20v = $8,000
v = 400 units

Below or equal to 400, choose A

Above or equal to 400, choose B

Copyright 2011 John Wiley & Sons, Inc. 6-20

 Process Plans
• Set of documents that detail manufacturing and
service delivery specifications
• assembly charts
• operations sheets
• quality-control check-sheets

Copyright 2011 John Wiley & Sons, Inc. 6-21

 Assembly Chart

Copyright 2011 John Wiley & Sons, Inc. 6-22

 Process Analysis
• Systematic study of all aspects of a process
• make it faster
• more efficient
• less costly
• more responsive
• Basic tools
• process flowcharts
• diagrams
• maps

Copyright 2011 John Wiley & Sons, Inc. 6-23

 Building a Flowchart
• Determine objectives
• Define process boundaries
• Define units of flow
• Choose type of chart
• Observe process and collect data
• Map out process
• Validate chart

Copyright 2011 John Wiley & Sons, Inc. 6-24

 Process Flowcharts
• Look at manufacture of product or delivery of
service from broad perspective
• Incorporate
• nonproductive activities (inspection, transportation,
delay, storage)
• productive activities (operations)

Copyright 2011 John Wiley & Sons, Inc. 6-25

 Process Flowchart Symbols

Operation
Inspection
Transportation
Delay
Storage

Copyright 2011 John Wiley & Sons, Inc. 6-26

Process Flowchart of Apple Processing

Copyright 2011 John Wiley & Sons, Inc. 6-27

 Flowcharts in Excel

Copyright 2011 John Wiley & Sons, Inc. 6-28

 Process Map
or Swimlane
Chart of
Restaurant
Service

Copyright 2011 John Wiley & Sons, Inc. 6-29

 Simple Value Chain Flowchart

Copyright 2011 John Wiley & Sons, Inc. 6-30

 Process Innovation
Total redesign of a process for breakthrough improvements

Continuous
improvement refines
the breakthrough

Breakthrough
Improvement

Continuous improvement
activities peak; time to
reengineer process

Copyright 2011 John Wiley & Sons, Inc. 6-31

 From Function to Process

Product Development

Manufacturing
Purchasing
Accounting

Order Fulfillment

Sales
Supply Chain Management

Customer Service

Function Process

Copyright 2011 John Wiley & Sons, Inc. 6-32

Process Strategic
Innovation Directives

Baseline Data
Customer Goals for Process Benchmark
Requirements Performance
Data

High - level Innovative

Process map Ideas Design
Principles

Detailed Model
Process Map Validation Key
Performance
Measures
Pilot Study
of New Design

Goals Full Scale

No Met? Yes Implementation

Copyright 2011 John Wiley & Sons, Inc. 6-33

 Principles for Redesigning Processes
• Remove waste, simplify, and consolidate similar
activities
• Link processes to create value
• Let the swiftest and most capable enterprise
execute the process
• Flex process for any time, any place, any way
• Capture information digitally at the source and
propagate it through process

Copyright 2011 John Wiley & Sons, Inc. 6-34

 Principles for Redesigning Processes

• Provide visibility through fresher and richer

information about process status
• Fit process with sensors and feedback loops
that can prompt action
• Add analytic capabilities to the process
• Connect, collect, and create knowledge around
process through all who touch it
• Personalize process with preferences and habits
of participants

Copyright 2011 John Wiley & Sons, Inc. 6-35

 Components of e-Manufacturing

Copyright 2011 John Wiley & Sons, Inc. 6-36

 Product Technology
• Computer-aided design (CAD)
• Creates and communicates designs electronically
• Group technology (GT)
• Classifies designs into families for easy retrieval and
modification
• Computer-aided engineering (CAE)
• Tests functionality of CAD designs electronically
• Collaborative product commerce (CPC)
• Facilitates electronic communication and exchange of
information among designers and suppliers

Copyright 2011 John Wiley & Sons, Inc. 6-37

 Product Technology

• Product data management (PDM)

• Keeps track of design specs and revisions for the life
of the product
• Product life cycle management (PLM)
• Integrates decisions of those involved in product
development, manufacturing, sales, customer service,
recycling, and disposal
• Product configuration
• Defines products “configured” by customers who have
selected among various options, usually from a Web
site

Copyright 2011 John Wiley & Sons, Inc. 6-38

 Process Technology
• Standard for exchange of product model data (STEP)
• Set standards for communication among different CAD vendors;
translates CAD data into requirements for automated inspection and
manufacture
• Computer-aided design and manufacture (CAD/CAM)
• Electronic link between automated design (CAD) and automated
manufacture (CAM)
• Computer aided process (CAPP)
• Generates process plans based on database of similar requirements
• E-procurement
• Electronic purchasing of items from e-marketplaces, auctions, or
company websites

Copyright 2011 John Wiley & Sons, Inc. 6-39

 Manufacturing Technology
• Computer numerically control (CNC)
• Machines controlled by software to perform a range of operations
with the help of automated tool changers; collects processing
information and quality data
• Flexible manufacturing system (FMS)
• A collection of CNC machines connected by an automated
material handling system to produce a wide variety of parts
• Robots
• Programmable manipulators that can perform repetitive tasks;
more consistent than workers but less flexible
• Conveyors
• Fixed-path material handling; move items along a belt or chain;
“reads” package labels and diverts them to correct destination

Copyright 2011 John Wiley & Sons, Inc. 6-40

 Manufacturing Technology
• Automatic guided vehicle (AGV)
• Driverless trucks that move material along a specified path;
directed by wire or tape embedded in floor or by radio frequencies
• Automated storage and retrieval system (ASRS)
• An automated warehouse; items placed in a storage system and
retrieved by fast-moving stacker cranes; controlled by computer
• Process Control
• Continuous monitoring of automated equipment; makes real-time
decisions on ongoing operation, maintenance, and quality
• Computer-integrated manufacturing (CIM)
• Automated manufacturing systems integrated through computer
technology; also called e-manufacturing

Copyright 2011 John Wiley & Sons, Inc. 6-41

 Information Technology
• Business – to –Business (B2B)
• E-transactions between businesses usually via the Internet
• Business – to –Consumer (B2C)
• E-transactions between businesses and their customers usually via
the Internet
• Internet
• A global information system of computer networks that facilitates
communication and data transfer
• Intranet
• Communication networks internal to an organization; can also be
password (i.e., firewall) protected sites on the Internet

Copyright 2011 John Wiley & Sons, Inc. 6-42

 Information Technology
• Extranet
• Intranets connected to the Internet for shared access with select
suppliers, customers, and trading partners
• Bar Codes
• Series of vertical lines printed on packages that identify item and other
information
• Radio Frequency Identification tags (RFID)
• Integrated circuit embedded in a tag; can send and receive information; a
“twenty-first century bar code” with read/write capabilities
• Electronic data interchange (EDI)
• Computer-to-computer exchange of business documents over a proprietary
network; very expensive and inflexible

Copyright 2011 John Wiley & Sons, Inc. 6-43

 Information Technology
• Extensible markup language (XML)
• A markup language that facilitates computer–to–computer communication
over the Internet by tagging data before its is sent
• Enterprise resource planning (ERP)
• Software for managing key functions of an enterprise, including sales,
marketing, finance, accounting, production, materials management & human
resources
• Supply chain management (SCM)
• Software to manage flow of goods and information among a network of
suppliers, manufacturers and distributors
• Customer relationship management (CRM)
• Software to manage interactions with customers; compiling and analyzing
customer data

Copyright 2011 John Wiley & Sons, Inc. 6-44