Chapter 7 Process Strategy and Sustainability
March 6, 2015:02 PM
Global Company Profile: Harley-Davidson (the leading motorcycle company)
Groups together production of parts that require similar processes (work cells).
Raw materials move to the work cells and the modules proceed to the assembly
line. Materials go to assembly line on a just-in time system (Ex. Material As Needed
(MAN) system). Tightly scheduled repetitive production line. Highly automated.
Technology in Services (4 process strategies)
Process, Volume, and Variety (1-2 Qs in exam): Virtually every good or service is
made by using some variation of one of the four process strategies. The
relationship of these four strategies to VOLUME and VARIATION is important to
study. Some companies may use more than one processes.
4 Process Strategies: Meets or exceeds customer requirements and meets cost
and managerial goals and constraints. Has long-term effects on efficiency &
production flexibility, costs & quality. The limitation of a firm's operation strategy
are determined at the time of the process decision. Within these 4 basic strategies
there are many ways they may be implemented.
1.Process Focus (High variety & low volume) - Ex. Arnold Palmer
○ 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 (as low as 5%)
○ Product flows may vary considerably making planning and scheduling a
○ In an office, the processes might be payable, sales, and payroll.
○ In a manufacturing facility, processes could be welding, grinding, and
○ In a restaurant, processes could be bar, grill, and bakery.
○ Think about a hospital. A diverse group of patients entering the hospital.
Patients need to be directed to specialized departments , treated in a
2.Repetitive Focus (High variety & repetitive process) - Ex. Harley Davidson汽
○ Facilities often organized as assembly lines. Sometimes we call this type
of process classic assembly line.
○ Characterized by modules with parts and assemblies made previously.
Modules may be combined for many output options.
○ Less flexible than process-focused facilities but more efficient.
○ It is widely used in all automobiles and household appliances. Fast food
companies are using this type of processes.
○ With repetitive process, firms obtain both the economic advantages of
the continuous model and the custom advantage of the low-volume, high
3.Product Focus (high volume & low variety) - Ex. Frito Lay
○ Features: Highly productive. Look at forecast information.
○ Facilities are organized by product. High volume but low variety.
○ Long, continuous production runs enable efficient processes.
○ Typically high fixed cost but low variety cost. Generally less skilled labor.
○ Product such as glass, paper, tin sheets, light bulb, beer, and potato chips
are made with this type.
○ An organization producing the same light bulb or hotdog bun day after
day can organize around a product. This type of organization has an
inherent ability to set standards and maintain a given quality.
4.Mass Customization Focus (High variety & high volume) - Ex. Dell Computer
○ Features: The most expensive.
○ The rapid, low-cost production of goods and service to satisfy
increasingly unique customer desires. Combine the flexibility of a process
focus with the efficiency of a product focus.
○ Combines the flexibility of a process focus with the efficiency of a
○ Imaginative and fast product design. Rapid process design. Tightly
controlled inventory management. Tight schedules. Responsive supply
Comparison of Process Choices Comparison of Process Choices Selection of Equipment and Technology
Crossover Charts: Looking at the point where the total cost of the processes
changes. Crossover chart is one of tools that can be used in selection of processes.
Different processes can be expected to have different costs. However, at any given
volume, only one will have the lowest cost.
Focused Processes: In an ongoing quest for efficiency, industrialized societies
continue to move toward specialization. The focus that comes with specialization