Material for session Three of the Operations Management Course at the MBA IV at HIBA in Damascus

1. Operations Management Session 3 – Process and Layout Strategies

10. Process, Volume, and Variety Process Focus projects, job shops (machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley-Davidson Product Focus (commercial baked goods, steel, glass) Nucor Steel High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only Mass Customization (difficult to achieve, but huge rewards) Dell Computer Poor Strategy (Both fixed and variable costs are high) Figure 7.1 Low Volume Repetitive Process High Volume Volume

14. Process Focus Job Shop Many inputs Many variety of outputs Many departments and many routings

15. Process Flow Diagram Figure 7.2 Accounting Information flow Material flow COLLATING DEPT GLUING, BINDING, STAPLING, LABELING POLYWRAP DEPT SHIPPING Customer PRINTING DEPT PREPRESS DEPT Vendors Receiving Warehouse Purchasing Customer Customer sales representative

17. Repetitive Focus Automobile Assembly Line Raw materials and module inputs Modules combined for many output options Few modules

18. Process Flow Diagram Figure 7.3 THE ASSEMBLY LINE TESTING 28 tests Oil tank work cell Shocks and forks Handlebars Fender work cell Air cleaners Fluids and mufflers Fuel tank work cell Wheel work cell Roller testing Incoming parts From Milwaukee on a JIT arrival schedule Engines and transmissions Frame tube bending Frame-building work cells Frame machining Hot-paint frame painting Crating

20. Product Focus Continuous Work Flow Few inputs Output variations in size, shape, and packaging

21. Product Focus Nucor Steel Plant Continuous caster Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft Hot mill for finishing, cooling, and coiling D E F G H I Scrap steel Ladle of molten steel Electric furnace A B C

23. Mass Customization Table 7.1 Vehicle models 140 286 Vehicle types 18 1,212 Bicycle types 8 19 Software titles 0 400,000 Web sites 0 98,116,993 Movie releases 267 458 New book titles 40,530 77,446 Houston TV channels 5 185 Breakfast cereals 160 340 Items (SKUs) in 14,000 150,000 supermarkets LCD TVs 0 102 Number of Choices Item 1970s 21 st Century

24. Mass Customization Effective scheduling techniques Rapid throughput techniques Figure 7.5 Mass Customization Repetitive Focus Flexible people and equipment Process-Focused High variety, low volume Low utilization (5% to 25%) General-purpose equipment Product-Focused Low variety, high volume High utilization (70% to 90%) Specialized equipment Modular techniques Supportive supply chains

25. Comparison of Processes Table 7.2 Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Small quantity, large variety of products Long runs, standardized product made from modules Large quantity, small variety of products Large quantity, large variety of products General purpose equipment Special equipment aids in use of assembly line Special purpose equipment Rapid changeover on flexible equipment

26. Comparison of Processes Table 7.2 Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Operators are broadly skilled Employees are modestly trained Operators are less broadly skilled Flexible operators are trained for the necessary customization Many job instructions as each job changes Repetition reduces training and changes in job instructions Few work orders and job instructions because jobs standardized Custom orders require many job instructions

27. Comparison of Processes Table 7.2 Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Raw material inventories high JIT procurement techniques used Raw material inventories are low Raw material inventories are low Work-in-process is high JIT inventory techniques used Work-in-process inventory is low Work-in-process inventory driven down by JIT, lean production

28. Comparison of Processes Table 7.2 Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Units move slowly through the plant Movement is measured in hours and days Swift movement of unit through the facility is typical Goods move swiftly through the facility Finished goods made to order Finished goods made to frequent forecast Finished goods made to forecast and stored Finished goods often build-to-order (BTO)

29. Comparison of Processes Table 7.2 Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Scheduling is complex, trade-offs between inventory, availability, customer service Scheduling based on building various models from a variety of modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Sophisticated scheduling required to accommodate custom orders

30. Comparison of Processes Table 7.2 Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Fixed costs low, variable costs high Fixed costs dependent on flexibility of the facility Fixed costs high, variable costs low Fixed costs high, variable costs must be low Costing estimated before job, known only after the job Costs usually known due to extensive experience High fixed costs mean costs dependent on utilization of capacity High fixed costs and dynamic variable costs make costing a challenge

32. Improving Service Productivity Table 7.3 Strategy Technique Example Separation Structure service so customers must go where service is offered Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits Self-service Self-service so customers examine, compare, and evaluate at their own pace Supermarkets and department stores, Internet ordering

33. Improving Service Productivity Table 7.3 Strategy Technique Example Postponement Customizing at delivery Customizing vans at delivery rather than at production Focus Restricting the offerings Limited-menu restaurant Modules Modular selection of service, modular production Investment and insurance selection, prepackaged food modules in restaurants

34. Improving Service Productivity Table 7.3 Strategy Technique Example Automation Separating services that may lend themselves to automation Automatic teller machines Scheduling Precise personnel scheduling Scheduling ticket counter personnel at 15-minute intervals at airlines Training Clarifying the service options, explaining how to avoid problems Investment counselor, funeral directors, after-sale maintenance personnel

37. Technology in Services Table 7.4 Service Industry Example Financial Services Debit cards, electronic funds transfer, ATMs, Internet stock trading Education Electronic bulletin boards, on-line journals, WebCT and Blackboard Utilities and government Automated one-man garbage trucks, optical mail and bomb scanners, flood warning systems Restaurants and foods Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs Communications Electronic publishing, interactive TV

38. Technology in Services Table 7.4 Service Industry Example Hotels Electronic check-in/check-out, electronic key/lock system Wholesale/retail trade ATM-like kiosks, point-of-sale (POS) terminals, e-commerce, electronic communication between store and supplier, bar coded data Transportation Automatic toll booths, satellite-directed navigation systems Health care Online patient-monitoring, online medical information systems, robotic surgery Airlines Ticketless travel, scheduling, Internet purchases

41. Operations Management Layout Strategies

50. Strategic Importance of Layout Decisions The objective of layout strategy is to develop a cost-effective layout that will meet a firm’s competitive needs

57. Layout Strategies Table 9.1 Office Retail Warehouse (storage) Examples Allstate Insurance Microsoft Corp. Kroger’s Supermarket Walgreen’s Bloomingdale’s Federal-Mogul’s warehouse The Gap’s distribution center Problems/Issues Locate workers requiring frequent contact close to one another Expose customer to high-margin items Balance low-cost storage with low-cost material handling

58. Layout Strategies Table 9.1 Project (fixed position) Job Shop (process oriented) Examples Ingall Ship Building Corp. Trump Plaza Pittsburgh Airport Arnold Palmer Hospital Hard Rock Café Olive Garden Problems/Issues Move material to the limited storage areas around the site Manage varied material flow for each product

59. Layout Strategies Table 9.1 Work Cells (product families) Repetitive/ Continuous (product oriented) Examples Hallmark Cards Wheeled Coach Standard Aero Sony’s TV assembly line Toyota Scion Problems/Issues Identify a product family, build teams, cross train team members Equalize the task time at each workstation