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Chapter 5

GMS 401 Chapter Notes - Chapter 5: Material-Handling Equipment, Flexible Manufacturing System, Hot Dog Bun


Department
Global Management Studies
Course Code
GMS 401
Professor
Wally Whistance- Smith
Chapter
5

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Chapter 5: Process Strategy and Sustainability
Four Process Strategies
When offering goods and services, we must consider the need for their selection,
definition, and design.
Our purpose may be to create environmentally friendly designs 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 not to waste our planet's resources.
A process (or transformation) strategy is an organization's approach to transforming
resources into goods and services.
The objective of a process strategy is to build a production process that meets customer
requirements and product specifications within costs and other managerial constraints.
The 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. Therefore, the
limitation of a firm's operations strategy is determined at the time of the process
decision. Virtually every good or service is made by using some variation of one of the
four process strategies:
1. Process focus.
2. Repetitive focus.
3. Product focus.
4. Mass customization.
Process Focus
The vast majority of global production is devoted to making low-volume, high-
variety products in places called job shops. Facilities are organized around specific
activities or processes. Such facilities have a process focus in terms of equipment,
layout, and supervision. They provide a high degree of product flexibility as products
move between processes. Each process is designed to perform a wide variety of
activities and handle frequent changes. Consequently, they are also called intermittent
processes.
o In a factory, this process might be departments devoted to welding, grinding,
and painting.
o In an office, the processes might be accounts payable, sales, and payroll.
o In a restaurant that might be bar, grill, and bakery.
Process-focused facilities have high variable costs with extremely low utilization of
facilities, as low as 5%. This is the case for many restaurants, hospitals, and machine
shops. However, some facilities that lend themselves to electronic controls do
somewhat better. With computer-controlled machines, it is possible to program
machine tools, piece movement, tool changing, placement of the parts on the machine,
and even the movement of materials between machines.
Repetitive Focus
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A repetitive process falls between the product and process focuses. Modules or parts or
components previously prepared, often in a continuous process. The repetitive
process is the classic assembly line.
o 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.
o Fast food firms are another example of 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.
o In this manner, the firm obtained both the economic advantages of the
continuous model where many of the modules are prepared and the custom
advantage of the low-volume, high-variety model.
Product Focus
High-volume, low-variety processes have a product focus. 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, and sheets, light bulbs,
beer, and potato chips are made in via a continuous process. It is only with
standardization and effective quality control that firms have established product-
focused facilities.
o An organization producing the same light bulb or hot dog bun day after day can
organize around a product.
o 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.
o A product focus facility produces high volume and low variety. The specialized
nature of the facility requires high fixed costs, but low variable costs reward high
facility utilization.
Mass Customization Focus
Our increasingly wealthy and sophisticated world demands individualized goods and
services.
The explosion of variety has taken place in automobiles, movies, breakfast cereals, and
thousands of other areas. In spite of 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. Mass customization is about making
precisely what the customer wants when the customer wants it economically.
Mass customization brings us the variety of products traditionally provided by low-
volume manufacturer (a process focus) at the cost of high-volume (product-focus)
production. However, achieving mass customization is a challenge that requires
sophisticated operational capabilities. Building agile processes that rapidly and
inexpensively produce custom products requires imaginative and aggressive use of
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organizational resources. And the link between sales, design, production, supply chain,
and logistics must be tight.
o The service industry is also moving towards mass customization. For instance,
not very many years ago, most people had the same telephone service. Now, not
only is the phone service full of options, from caller ID to voicemail, but
contemporary phones are hardly phones. They may also be part camera,
computer, game player, GPS, and web browser.
o Insurance companies are adding and tailoring new products with shortened
development times to meet the unique needs of their customers.
o Firms like iTunes and eMusic maintain a music inventory on the Internet that
allows customers to select a dozen songs of their choosing and have them made
into a custom CD.
o Similarly, the number of new books and movies increases each year.
Mass customization places new demands on operations managers who must build the
processes that provide the expanding variety of goods and services. One of the essential
ingredients in mass customization is reliance on modular design. However, very
effective scheduling, personnel and facility flexibility, supportive supply chains, and
rapid throughput are also required. These items influence all ten of the OM decisions
and therefore require excellent operations management.
Making Mass Customization Work
Mass customization suggests a high-volume system in which products are build-to-
order. Build-to-order (BTO) means producing to customer orders, not forecast. Build-to-
order can be a successful order-winning strategy when executed successfully. But high-
volume build-to-order is difficult. Some major challenges are:
o Product design must be imaginative and fast. Successful build-to-order designs
often use modules. Ping Inc., the premier golf club manufacturer, uses different
combinations of club heads, grips, shafts, and angles to make 20,000 variations
of its golf clubs.
o Process design must be flexible and able to accommodate changes in both
design and technology. For instance, postponement allows for customization
late in the production process. Toyota installs unique interior modules very late
in production for its popular Scion, a process also typical with customized vans.
o Inventory management requires tight control. To be successful with build-to-
order, a firm must avoid being stuck with unpopular or obsolete components.
With virtually no raw material, Dell puts custom computers together in less than
a day.
o Tight schedules that track orders and material from design through delivery are
another requirement of mass customization. Align Technology, a well-known
name in orthodontics, figured out how to achieve competitive advantage by
delivering custom-made clear plastic aligners within three weeks of your first
isit to the detist’s offie.
o Responsive partners in the supply chain can yield effective collaboration.
Forecasting, inventory management, and ordering for many Loblaw products are
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