Chapter 5 „Process Strategies“ summary

Four Process Strategies

In Chapter 5, we examined the need for the selection, definition, and design of goods and services.
Our purpose was to create environmentally friendly goods and services that could be delivered in an
ethical, sustainable manner. We now turn to their production. A major deci­sion for an operations
manager is finding the best way to produce so as not to waste our plan­et's resources. Let's look at
ways to help managers design a process for achieving this goal.

A process strategy is an organization's approach to transforming resources into goods and ser­vices.
The objective is to create a process that can produce offerings that meet customer requirements
within cost and other managerial constraints. Tue process selected will have a long-term effect on
efficiency and flexibility of production, as well as on cost and quality of the goods produced.

Virtually every good or service is made by using some variation of one of four process strategies: (1)
process focus, (2) repetitive focus, (3) product focus, and (4) mass customization. The relationship of
these four strategies to volume and variety is shown in Figure 7.1. We ex­amine Arnold Palmer
Hospital as an example of a process-focused firm, Hm-ley-Davidson as a repetitive producer, Frito-
Lay as a product-focused operation, and Dell as a mass customizer.

Process Focus

The vast majority of global production is devoted to making low-volume, high-variety products in
places called "job shops." Such facilities are organized around specific activities or processes. In a
factory, these processes might be departments devoted to welding, grinding, and painting. In an
office, the processes might be accounts payable, sales, and payroll. In a restaurant, they might be
bar, grill, and bakery. Such facilities are process focused in terms of equipment, layout, and
supervision. They provide a high degree of product flexibility as products move between the
specialized processes. Each process is designed to perfom1 a variety of activities and handle frequent
changes. Consequently, they are also called intermittent processes.

Process-focused facilities have high variable costs with extremely low utilization of facilities, as Iow as
5%. This is the case for many restaurants, hospitals, and machine shops. However, facilities that lend
themselves to electronic controls can do somewhat better.

Repetitive Focus

Repetitive processes, as we saw in the Global Company Profile on Harley-Davidson, use modules.
Modules are parts or components previously prepared, often in a product-focused (continuous)
process.

The repetitive process is the classic assembly line. Widely used in the assembly of virtually all
automobiles and household appliances, it has more structure and consequently less flexibility than a
process-focused facility.

Fast-food firms are another example of a repetitive process using modules. This type of produc­tion
allows more customizing than a product-focused facility; modules (for example, meat, cheese, sauce,
tomatoes, onions) are assembled to get a quasi-custom product, a cheeseburger. In this man­ner, the
firm obtains both the economic advantages of the product-focused model (where many of the
modules are prepared) and the custom advantage of the low-volume, high-variety model.

Product Focus
High-volume, lovi-variety processes are product focused. The facilities are organized around
products. They are also called continuous processes because they have very long, continuous
pro­duction runs. Products such as glass, paper, tin sheets, lightbulbs, beer, and potato chips are
made via a continuous process. Some products, such as lightbulbs, are discrete; others, such as rolls
of paper, are made in a continuous flovi. Still others, such as repaired hernias at Canada's famous
Shouldice Hospital, are services. lt is only with standardization and effective quality control that fim1s
have established product-focused facilities. An organization producing the same lightbulb or hot dog
bun day after day can organize around a product. Such an organization has an inherent ability to set
standards and maintain a given quality, as opposed to an organization that is produc­ing unique
products every day, such as a print shop or general-purpose hospital. For example, Frito-Lay's family
of products is also produced in a product-focused facility. At Frito-Lay, corn, potatoes, water, and
seasoning are the relatively few inputs, but outputs (like Cheetos, Ruffles, Tostitos, and Fritos) vary in
seasoning and packaging within the product family.

A product-focused facility produces high volume and low variety. The specialized nature of the
facility requires high fixed cost, but low variable costs reward high facility utilization.

Mass Customization Focus

Our increasingly wealthy and sophisticated world demands individualized goods and services. A peek
at the rich variety of goods and services that operations managers are called on to sup­ply is shown
in Table 7 .1. The explosion of variety has taken place in automobiles, movies, breakfast cereals, and
thousands of other areas. Despite this proliferation of products, opera­tions managers have
improved product quality while reducing costs. Consequently, the variety of products continues to
grow. Operations managers use mass customization to produce this vast array of goods and services.
Mass customization is the rapid, low-cost production of goods and services that fulfill increasingly
unique customer desires. But mass customization (see the upper-right section of Figure 7. 1) is not
just about variety; it is about making precisely 1vhat the customer wants 1vhen the customer wants
it economically.

Mass customization brings us the variety of products traditionally provided by low-volume

manufacture (a process focus) at the cost of standardized high-volume (product-focused) production.
However, achieving mass customization is a challenge that requires sophisticated operational
capabilities. Building agile processes that rapidly and inexpensively produce custom products
requires a limited product line and modular design. The link between sales, design, production,
supply chain, and logistics must be tight.

Dell Computer has demonstrated that the payoff for mass customization can be substantial. More
traditional manufacturers include Toyota, which recently announced delivery of custom-ordered cars
in 5 days. Similarly, electronic controls allow designers in the textile industry to rapidly revamp their
lines and respond to changes.

The service industry is also moving toward mass customization. For instance, not very many years
ago, most people had the same telephone service. Now, not only is the phone ser­vice füll of options,
from caller ID to voice mail, but contemporary phones are hardly phones. They may also be part
camera, computer, game player, GPS, and Web browser. Insurance com-panies are adding and
tailoring new products with shortened development times to meet the unique needs of their
customers. And firms such as Apple Music, Spotify, Napster, Amazon, and eMusic maintain a music
inventory on the Internet that allows customers to select an almost unlimited number of songs of
their choosing and have them made into a custom play­list. Similarly, the number of new books and
movies increases each year. Mass customization places new demands on operations managers who
must create and align the processes that provide this expanding variety of goods and services.
Production Technology

Advances in technology that enhance production and productivity are changing how things are
designed, made, and serviced around the world. In this section, we introduce nine areas of technol
ogy: ( 1) machine technology, (2) automatic identification systems (AIS), (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), and (9) computer-integrated
manufacturing (OM). Consider the impact on operations managers as we digitally link these
tech­nologies within the fim1. Then consider the implications when they are combined and linked
globally in a seamless chain that can inm1ediately respond to changing consumer demands, supplier
dynamics, and producer innovations. Tue implications for the world economy and OM are huge.

Machine Technology

Much of the world's machinery perfom1s operations by removing material, perfom1ing opera­tions
such as cutting, drilling, boring, and milling. This technology is undergoing tremendous progress in
both precision and control. Machinery now turns out metal components that vary less than a micron-
1/76 the width of a human hair. They can accelerate water to three times the speed of sound to cut
titanium for surgical tools. Such machinery is often five times more productive than that of previous
generations while being smaller and using less power. And continuing advances in lubricants now
allow the use of water-based lubricants rather than oil-based. Water-based lubricants enhance
sustainability by eliminating hazardous waste and allowing shavings to be easily recovered and
recycled.

Computer intelligence often controls this new machinery, allowing more complex and pre­cise items
to be made faster. Such machinery, with its own computer and memory, is referred to as having
computer numerical controls (CNC). Electronic controls increase throughput by cutting changeover
time, reducing waste (because of fewer mistakes), and enhancing flexibility.

Advanced versions of such technology are used on Pratt & Whitney's turbine blade plant in
Connecticut. The machinery has improved the loading and alignment task so much that Pratt has cut
the total time for the grinding process of a turbine blade from 10 days to 2 hours. The new
machinery has also contributed to process improvements that mean the blades now travel just 1,800
feet in the plant, down from 8,100 feet, cutting throughput time from 22 days to 7 days.

New advances in machinery suggest that rather than removing material as has tradition­ally been
done, adding material may in many cases be more efficient. Additive manufacturing or, as it is often
called, 3D printing, is frequently used for design testing, prototypes, and custom products. The
technology continues to advance and now supports innovative product design (variety and
complexity), minimal custom tooling (little tooling is needed), minimal assembly (integrated
assemblies can be "printed"), low inventory (make-to-order systems), and reduced time to market.
As a result, additive manufacturing is being increasingly used to enhance pro­duction efficiency for
high-volume products. The convergence of software advances, computer technology, worldwide
conm1unication, and additive manufacturing has put us on the cusp of true mass customization. we
can expect personalized mass markets via additive manufacturing to bring enormous changes to
operations.

Automatic Identification Systems (AISs) and RFID

New equipment, from numerically controlled manufacturing machinery to ATMs, is controlled by

digital electronic signals. Electrons are a great vehicle for transmitting informa­tion, but they have a
major limitation-most OM data does not start out in bits and bytes. Therefore, operations managers
must get the data into an electronic form. Making data digi­tal is done via computer keyboards, bar
codes, radio frequencies, optical characters, and so forth. These automatic identification systems
(AISs) help us move data into electronic form, where it is easily manipulated.

Because of its decreasing cost and increasing pervasiveness, radio frequency identification (RFID)
warrants special note. RFID is integrated circuitry with its own tiny antennas that use radio waves to
send signals a limited range-usually a matter of yards. These RFID tags provide unique identification
that enables the tracking and monitoring of parts, pallets, people, and pets--virtually everything that
moves. RFID requires no line of sight between tag and reader.

Process Control

Process control is the use of information technology to monitor and control a physical process. For
instance, process control is used to measure the moisture content and thickness of paper as it travels
over a paper machine at thousands of feet per minute. Note the process technology at work in the
Donawitz rolling mill described in the OM in Action box, "500,000 Tons of Steel; 14 Jobs." Process
control is also used to determine and control temperatures, pressures, and quanti­ties in petroleum
refineries, petrochemical processes, cement plants, nuclear reactors, and other product-focused
facilities.

Process control systems operate in a number of ways, but the following are typical:

• Sensors collect data, which is read on some periodic basis, perhaps once a minute or second.

• Measurements are translated into digital signals, which are transmitted to a computer.

• Computer programs read the file and analyze the data.

• The resulting output may take numerous forms. These include messages on computer consoles or
printers, signals to motors to change valve settings, warning lights or horns, or statistical process
con­trol charts.

Vision Systems

Vision systems combine video cameras and computer technology and are often used in inspection
roles. Visual inspection is an important task in most food-processing and manufacturing
organi­zations. Moreover, in many applications, visual inspection performed by humans is tedious,
mind­numbing, and error prone. Thus, vision systems are widely used when the items being
inspected are very similar. For instance, vision systems are used to inspect Frito-Lay's potato chips so
that imperfections can be identified as the chips proceed down the production line. The systems are
also used to ensure that sealant is present and in the proper amount on Whirlpool's washing
machine transmissions. Vision systems are consistently accurate, do not become bored, and are of
modest cost. These systems are vastly superior to individuals trying to perfom1 these tasks.

Robots

When a machine is flexible and has the ability to hold, move, and perhaps "grab" items, we tend to
use the word robot. Robots are mechanical devices that use electronic impulses to acti­vate motors
and Switches. Robots may be used effectively to perfom1 tasks that are especially monotonous or
dangerous or those that can be improved by the substitution of mechanical for human effort. Such is
the case when consistency, accuracy, speed, strength, or power can be enhanced by the substitution
of machines for people. The automobile industry, for example, uses robots to do virtually all the
welding and painting on automobiles. And a new, more sophisticated, generation of robots is fitted
with sensors and cameras that provide enough dex­terity to assemble, test, and pack (or in the case
of Apple's iPhone, disassemble) small parts.

Automated Storage and Retrieval Systems (ASRSs)

Because of the tremendous labor involved in error-prone warehousing, computer-controlled

warehouses have been developed. These systems, known as automated storage and retrieval
systems (ASRSs), provide for the automatic placement and withdrawal of parts and products into and
from designated places in a warehouse. Such systems are commonly used in distribution facilities of
retailers such as Walmart, Tupperware, and Benetton. These systems are also found in inventory and
test areas of manufacturing firms.

Automated Guided Vehicles (AGVs)

Automated material handling can take the form of monorails, conveyors, robots, or auto­mated
guided vehicles. Automated guided vehicles (AGVs) are electronically guided and con­trolled carts
used in manufacturing and warehousing to move parts and equipment. They are also used in
agriculture to distribute feed, in offices to move mail, and in hospitals and jails to deliver supplies and
meals.

Flexible Manufacturing Systems (FMSs)

When a central computer provides instructions to each workstation and to the material-handling
equipment such as robots, ASRSs, and AG Vs (as just noted), the system is known as an automated
work cell or, more commonly, a flexible manufacturing system (FMS). An FMS is flexible because
both the material-handling devices and the machines themselves are controlled by easily changed
electronic signals (computer programs). Operators simply load new programs, as necessary, to
produce dif­ferent products. Tue result is a system that can economically produce low volume but
high variety. For example, the Lockheed Martin facility, near Dallas, efficiently builds one-of-a-kind
spare parts for military aircraft. Tue costs associated with changeover and low utilization have been
reduced substantially. FMSs bridge the gap between product-focused and process-focused facilities.

Computer-Integrated Manufacturing (CIM)

Flexible manufacturing systems can be extended backward electronically into the engineering and
inventory control departments and forward to the warehousing and shipping departments. In this
way, computer-aided design (CAD) generates the necessary electronic instructions to run a
numerically controlled machine. In a computer-integrated manufacturing environment, a design
change initiated at a CAD terminal can result in that change being made in the part produced on the
shop floor in a matter of minutes. When this capability is integrated with inventory control,
warehousing, and shipping as a part of a flexible manufacturing system, the entire system is called
computer-integrated manufacturing (CIM).

Flexible manufacturing systems and computer-integrated manufacturing are reducing the distinction
between low-volume/high-variety and high-volume/low-variety production. Infor­mation technology
is allowing FMS and CIM to handle increasing variety while expanding to include a growing range of
volumes.

Technology in Services

Just as we have seen rapid advances in technology in the manufacturing sector, so w e also find
dramatic changes in the service sector. These range from electronic diagnostic equip­ment at auto
repair shops, to blood- and urine-testing equipment in hospitals, to retinal security scanners at
airports. The hospitality industry provides other examples, as dis­cussed in the OM in Action box
"Technology Changes the Hotel Industry." The fast-food industry has introduced kiosks and cashless
payments. The labor savings when ordering and speedier checkout service provide valuable
productivity increases for both the restaurant and the customer.

In retail stores, self-service and point-of-sale (POS) technology inm1ediately reflect changing costs or
market conditions and track sales in l 5-minute segments to aid personnel scheduling. Drug
companies, such as Purdue Pharma LP, track critical medications with radio frequency identification
(RFID) tags to reduce counterfeiting and theft.

Table 7.4 provides a glimpse of the impact of technology on services. Operations managers in
services, as in manufacturing, must be able to evaluate the impact of technology on their firm. This
ability requires particular skill when evaluating reliability, investment analysis, human-resource
requirements, and maintenance/service.