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DISCUSSION QUESTIONS
1. Process strategy is the organizationās approach to transform- ing resources into goods and services.
2. Product Likely Process Beer Product Focused/Continuous Wedding invitations Process Focused/Job Shop Automobiles Modular/Repetitive Paper Product Focused/Continuous āBig Macā Modular/Repetitive Custom Homes Job Shop with components made in Product Focused and Modular facilities Motorcycles Modular/Repetitive
3. Service blueprinting is a process analysis technique that fo- cuses on the providerās interaction with the customer. 4. Process reengineering is the rethinking and radical design of business processes to bring about dramatic improvements in performance. 5. Techniques for improving service productivity include: sepa- ration, self-service, postponement, focus, modules, automation, scheduling, and training. 6. The 4 quadrants are: (1) mass service (low interaction/customization; high labor intensity) (2) professional service (high interaction/customization; high labor intensity) (3) service factory (low interaction/customization; low labor intensity) (4) service shop (high interaction/customization; low labor intensity). 7. CIM (computer integrated manufacturing), in its ideal, but seldom realized form, ties together computer-aided design (CAD), computer ā aided manufacturing, flexible manufacturing systems (FMS), the necessary automated storage and retrieval systems (ASRS) and movement of materials (automated transfer machines or automated guided vehicles ā AGVs) to make it all work. 8. In process control systems sensors collect data; analog de- vices read data on a periodic basis; measurements are digitized and transmitted to a computer; data are analyzed; and output is presented in various signals, charts, diagrams, messages, etc. 9. Manufacturing firms in each of the process models: Process focus, your local print shop and Kinkoās Repetitive focus, Harley-Davidson Product focus, International paper Mass customization, Dell Computer 10. Competitive advantage of manufacturing firms in each of the process models: Process focus, differentiation, and expertise in each process area. (Kinkoās) Repetitive focus, rapid response, and efficiency (Harley- Davidson) Product focus, very low variable cost (International Paper) Mass customization, low cost, rapid response to unique customer demands. (Dell Computer) 11. Students may find Figure 7.1 and Figure 7.10 and the related discussions helpful with this question. Service firms in each of the process models: Process: your local general-purpose hospital. Also most construction firms, such as Bechtel Repetitive: fast-food restaurants Product: Shouldice Hospital. Mass customization: cafeterias and e-trade stockbrokers such as Schwab 12. Competitive advantage of service firms in each process model: Process focus for a general-purpose hospital: specialization of expertise in each hospital discipline, x-ray, physical ther- apy, blood lab, etc., by both the technician and supervision. Repetitive focus: high-quality modules as in most fast- food (very limited menu) restaurants, and law clinicsā with the low cost of the uncontested divorce. Product focus: Southwest Airlines and e-trade stockbro- kers may be good examples of low-cost advantage. Mass customization, per the text, McDonaldās is trying this in a limited way. Charles Schwab seems to be effec- tive at this in the financial services areas. They seek com- petitive advantage via low cost and high customization. 13. Numerically controlled machinery means the equipment is computer controlled via programming languages known as APT and Compact II. Machinery with its own programmable computer
C H A P T E R
Process Strategy
is sometimes called computer numerically controlled (CNC), im- plying that there is computer memory at the machine. Machines that are wired to a central machine are sometimes called Direct Numerically Controlled (DNC) machines.
14. In an Automatic Identification System (AIS), bar codes, radio frequency (RF) signals, and optical signals improve both ac- curacy and speed of data entry contributing to productivity. For in- stance, costs are reduced because clerks spend less time keying in prices and quantities and do so with fewer errors. New services are being developed as these systems collect more information about customer behavior. 15. Technological advances include: numeric control, process control, vision systems, robots, automated storage and retrieval systems, automated guided vehicles, flexible manufacturing sys- tems, and Computer Integrated Manufacturing (CIM). 16. A Flexible Manufacturing System (FMS) is basically a sub- system within a larger Computer Integrated Manufacturing (CIM) system. A CIM includes elements of computer-aided design, com- puter-aided engineering, computer-aided drafting, production, in- ventory control, etc., as well as flexible manufacturing systems. 17. CAD data generates design data, but can also generate in- structions for NC machines. If the NC machines are connected (integrated) with other NC machines and material handling equip- ment such as AGVs or conveyors or other transfer machines, the entire system is considered an Flexible Manufacturing System.
CRITICAL THINKING EXERCISE
Nice class discussion exerciseāall you need is an animal rights advocate to really get things going. Most students will agree that this is not a nice way to treat animals. However, to get things in perspective you might point out that much egg production is also handled this way with chickens in small cages, and although we do not put steers in cages, we do confine them to feedlots, and most bulls become steers. The ad- vantage to society is that food (pork in this example) is prepared
very economically, bringing lower-cost food and some protein to those who might not otherwise be able to afford it. (Lack of pro- tein is a major contributor to limited mental development.) The violence reaped upon animals in the food chain is not confined to what homo sapiens do to hogs. Animals reap violence on others in their food chain. Virtually all of those cows grazing peacefully in pastures and chickens looking quaint in farmyards will come to a violent end. That violent end is why the investment is made in them. The alternatives are expensive; we donāt even take real good care of many animals in zoos.
ACTIVE MODEL EXERCISE
Active Model 7.1: Crossover Chart
1. Suppose Kleber Enterprises wants to lower the point of indif- ference between Software A and Software B to 2000 units. What would the FIXED costs need to be for software B. $270, 2. Examine the graph. If the expected volume is 1,500 reports which process should be used? Software A 3. Examine the graph. If the expected volume is 15,000 reports which process should be used? Software C 4. As the fixed costs for developing software B drop, what hap- pens to the graph? The cost line for B drops and the area between the breakeven points for B widens. There is a wider range of vol- ume over which software B is the best choice.
END - OF -CHAPTER PROBLEMS 7.1 (a) A fun topic, as students will add a lot of waiting. Flow is, of course, dependent upon the school, but usually in- cludes the following:
(b) Flow diagram for a car wash:
(c) Flow diagram for a shoe shine (customer perspective, a very different diagram would be prepared for the operator).
Obtain registration materials at registrarās office
Complete desired course schedule
Get housing office approval
Go to registrar to obtain approval of schedule
Revise schedule (again and again)
Go to business office to pay fees
Enter car wash line Wait Describe servicedesired to attendant Wash Pay forservice Tip and leave
Wait for open chair
Provide Instructions
Engage in small talk while shoes are shined
Indicate approval Pay and tip
7.5 GPEās total cost $4,600,000 [($15 300,000) $100,000] FMSās total cost $4,400,000 [($14 300,000) $200,000] DMās total cost $4,400,000 [($13 300,000) $500,000]
The total cost for Dedicated Machinery and Flexible Manu- facturing System the same and lowest.
7.6 15 x 100,000 14 x 200,000. Therefore
x 100, 14 x 200,000 13 x 500,000. Therefore x 300, GPE is best below 100, FMS is best between 100,000 and 300, DM is best over 300,
7.7 Based on the solution to Problem 7.
at 75,000 units use GPE at 275,000 units use FMS at 375,000 units use DM
7.8 The optimum process will change at 100,000 units and 300,000 units as shown in Problem 7.6.
7.
b) at 3,000 boards, costs are: Plan A: 800 (1.10)(3,000) $4,100. Plan B: 1,100 (.70)(3,000) $3,200. Plan C: 1,800 (.40)(3,000) $3,000. So, at 3000 boards plan C is the low cost plan. c) cross-over points: First, 800 1.10 x 1,100 .70 x .40 x 300 x 750 Second, 1,100 .70 x 1,800 .40x .30 x 700 x 2, So, between 1,000 & 2,000 boards, plan B is best. 7.11 Expected rooms rented: 50 365 18,250. Current: Fixed cost $61, Variable cost $12. Outsourcing: Fixed cost $25, Variable cost $18. 61,000 (12.50) x $25,000 (18.50) x 36,000 6 x 6,000 x cross-over point in room rights Since Susan expects to rent 18,250 rooms, she should not outsource the clean-up. 7.12 CAD Software decision. (5)($3,000) $200 x (6)($2,000) $240 x $15,000 $200 x $12,000 $240 x 3,000 40 x 75 x cross-over in no. of drawings Since the projected volume of 80 is above the crossover point, he should rent the HP Software.
0 3 6 9 Qty
At approximately 7,000 gears, either choice would have the same cost (indifference point)
4 x 15,000 1.82 x x 6,881 the exact quantity at the crossover point
7.
At 4000 units (arbitrary Units At 0 Units number)
(A) y 800 1.10 x 800 $5200 refurbish (B) y 1100 0.70 x 1100 $3900 modify (C) y 1800 0.4 x 1800 $3400 new
0 Units
1,000 2,000 3,
A
B
C
2,
750
0
1,
2,
3,
4,
$5,
Values to aid in plotting the graph below Units Stanās Costs Salt Lake Supply Costs 0 15,000 0 10,000 33,200 40,
CASE STUDY
ROCHESTER MANUFACTURING CORPORATION
1. As a production manager for RMC what do you recommend? Why? As production manager, you believe that the inherent advan- tages of an FMS should tilt the scales in favor of FMS. Your management task should be easier and therefore better. Your task will be easier and better because those parts of your workday that are related to scheduling, manpower, maintenance, and housekeeping should require less direction and be easier to control. You would be inclined to ask the ānumbers peopleā to be sure they included all of these rela- tively minor shop floor issues in the decision. 2. Prepare a case by a conservative plant manager for main- taining the status quo until the returns are more obvious. A conservative plant manager may well be the individual in the decision-making process who is asked about the return on investment. ROI may be largely the plant managerās responsibility. If the numbers do not support change, then donāt do it. Additionally, the trauma of change in layout, training, and acceptance by workers contains numerous hid- den costs. Consequently, the plant manager may have a strong case for the status quo. 3. Prepare the case for an optimistic sales manager who sug- gests that you should move ahead with the FMS now. The optimistic sales managerās case is that improved deliv- ery time (i.e., improved throughput) and improved quality may well yield a higher market share, which, if the company is already above breakeven, is great for profitability, and hence ROI will be higher than projected (sales growth is not typically included in ROI computations). Additionally, the management task is easier (i.e., fewer machines to maintain, fewer people to supervise), and additional floor space will be available when needed.
VIDEO CASE STUDY
PROCESS STRATEGY AT WHEELED COACH
The video, filmed specifically for our text, is available from Prentice Hall and is designed to supplement this case. The video also appears in a 2 minute abbreviated version on the student CD in the text.
1. The major auto companies are not in the custom design busi- ness, and ambulance volume is small compared with the vol- ume of the big three U.S. auto manufacturers. 2. The traditional way to build specialized custom products such as autos was for the work to stand still and to bring the mater- ial and parts to the workstation. 3. It is more efficient to prepare work modules and then deliver them to the assembly line than it would be to produce the components on the line because of all of the advantages of work cells. Work cells can be designed around the modules (upholstery, wiring, or cabinetry work) with the necessary supplies, talents, and machinery located in that particular āmodule.ā Then the employees become experienced in those modules and the customized modules can be delivered to the line as needed. 4. Management sets high expectations for quality and provides an extensive in-house training program to ensure the proper talent is available. Because custom products require unique labor standards, they are set for each module and assembly area to insure that the work at each station can be accom- plished in the time allocated. Absentees, tardiness, and special talents can play havoc with such a system.
**INTERNET CASE STUDY ***
MATTHEW YACHTS, INC.
This is an excellent case to address the characteristics of process oriented vs repetitive vs product oriented production.
1. Matthew Yachts is profitable thanks to its custom designed yachts. Its management experience appears to have yielded a competitive advantage in custom designed yachts, hence the higher profit margins. However, since the demand for the āfixedā design is growing, expansion into this area with it repetitive oriented layout and procedures (see Table 7.1 in text) may be warranted. 2. Establishing a separate facility with its own labor force, cost- ing, and procedures may be a good move. Particularly if this can be done at a low production level that will allow mainte- nance of production even in periods of recession (or high federal luxury taxes).
*Solutions to cases that appear on our Internet home page (www.prenhall.com/heizer).
