Chapter 7.docx

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University of Guelph
Food Agricultural and Resource Economics
FARE 3310
Jamie Gruman

Chapter 7 – Process Strategy and Sustainability What is a process Process- group of related tasks with specific inputs and outputs -involves use of organizations resources to provide something of value Process design-defines what tasks need to be done and how they are to be coordinated among functions, people, and organization Process (or transformationstrategy- organization’s approach to transforming resources into goods and services -process chosen will have long-term effect on efficiency and flexibility of production, cost, and quality of goods/services Four Process Strategies -every good/service is made by using some variation of one of four process strategies: 1. process focus- production facility organized around processes to facilitate low-volume, high-variety production 2. repetitive focus- product-oriented production process that uses modules (ie. Fast food, cars, appliances) 3. product focus- facility organized around products, product oriented high-volume, low variety process Modules-parts or components of a product previously prepared, often in continuous process 4. mass customization- rapid, low-cost production that caters to constantly changing unique customer desires -within these basic process strategies there are many ways they may be implemented Build to order- produce to customer other rather than to a forecast Postponement- delay of modifications (customization) to product as long as possible in production process Comparison of the Characteristics of the Four Process Strategies Process Focus Repetitive Focus Product Focus Mass customization -low volume (small quantity), -modular (standardized product -high volume, low variety -high volume, high variety high variety (large variety of with options, are produced from (large quantity and small variet(large quantity and large variety modules) of products are produced) of products are produced) products produced) -equipment used is general -special equipment aids in -equipment used is special -rapid changeover on flexible purpose use of an assembly line purpose equipment -operators are broadly skilled -special equipment aids in -operators are less broadly -flexible operators are use of an assembly line skilled trained for necessary customization -there are many job -repetitive operations reduce -work orders and job -custom orders require many instructions because each job training and changes in job instructions are few because job instructions changes instructions they are standardized -raw-material inventories are -just-in-time procurement -raw material inventories are -raw material inventories are high relative to the value of techniques are used low relative to the value of low relative to the value of the product the product the product -work-in-progress is high -just-in-time inventory -work-in-progress inventory -work-in-progress inventory compared to output techniques are used is low compared to output is driven down by JOT. Kanban, and lean production -units move slowly through -assembly is measured in -swift movement of units -goods move slowly through the facility hours and days through the facility is typical the facility -finished goods are usually -finished goods are made to -finished goods are usually -finished goods are often made to order and not stored frequent forecasts made to a forecast and build-to-order (BTO) stored -scheduling is complex and -scheduling is based on -scheduling is relatively -sophisticated scheduling is concerned with trade-off building various models from simple and concerned with required to accommodate between inventory available, a variety of modules to establishing a rate of output custom orders capacity, and customer forecast sufficient to meet sales service forecasts -fixed costs tend to be low -fixed co
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