Process Strategy and Capacity Planning

Introduction What: Making process and capacity

decisions Where: Produce goods and

services Why: Long term effects on

company

Process Focus Complete jobs on demand Low volume High variety “Job shop” Products move between processes High flexibility

Repetitive Focus Modules Assemble Modules into finished

products More structure Less flexibility Some customizing

Product Focus Produce one product High volume Low variety Continuous process

Mass Customization Focus Individualized goods and services What customer wants when they

want it Volume of product focus with

flexibility of process focus

Comparing Process Choices

Process Repetitive Product Mass Cust

Quantity/Variety

Small / Large

Long runs, some options

Large / Small Large / Large

Equipment General Special Special Flexible

People/Training Skilled Modest Train Less skilled Skilled

Job Instructions Many Some Few Many

Raw Materials Large JIT Small Small

Work in Process High JIT Low Low

Speed Slow Medium Fast Fast

Finished Goods To order To forecast To forecast To order

Scheduling Complex Forecast Simple Complex

Costs Low fixed High fixed High fixed High fixed

Costing Hard Easy Easy Hard

Process Analysis Tools Designed to achieve competitive

advantage? Eliminate steps that do not add

value? Maximize customer value? Win orders?

Flow Diagram

Shipping

Customer

Customer sales representative

take order

Prepress Department(Prepare printing plates

and negatives)

Printing Department

Collating Department

Gluing, binding, stapling, labeling

Polywrap Department

Purchasing(order inks, paper,

other supplies)

Vendors

Receiving

Warehousing(ink, paper, etc.)

Accounting

Information flowMaterial flow

Time-Function Mapping

Customer

Sales

Production control

Plant A

Warehouse

Plant B

Transport

Order Product

Process Order

Print

Extrude

Receive product

Wait

Move

Wait Wait Wait

Move

Ord

er

Ord

er

WIP

WIP

WIP W

IP

Prod

uct

Prod

uct

Prod

uct

12 days 1 day 1 day 1 day 1 day13 days 4 days 10 days 9 days

Process Charts

SUBJECT: Request tool purchase

Dist (ft) Time (min) Symbol Description

D Write order

On desk

75 D To buyer

D Examine

= Operation; = Transport; = Inspect; D = Delay; = Storage

Service Blueprinting

Process Design for Services

Mass Service Professional Service

Service Factory Service Shop

Commercial Banking

General purpose law firms

Fine dining restaurants

Hospitals

Airlines

Full-service stockbroker

Retailing

Personal banking

Boutiques

Law clinics

Fast food restaurants

Warehouse and catalog stores

No frills airlines

Limited service stockbroker

For-profit hospitals

Degree of Interaction and Customization

Deg

ree

of L

abor

Inte

nsityLow High

High Low

Process Design for Services Layout Human Resources Technology

Process Reengineering Design of Process based on initial

assumptions Assumptions change! Rethink and redesign Flexibility

Capacity Planning Design Capacity = maximum

theoretical output of system Effective Capacity = Capacity

expected in current operation Utilization = Actual Output /

Design Capacity Efficiency = Actual Output /

Effective Capacity

Capacity Planning Anticipated Production = Design

Capacity x Effective Capacity x Efficiency

Capacity Expansion

Expected Demand

Time in Years

Dem

and

New Capacity

Capacity leads demand with an incremental expansion

Capacity ExpansionExpected Demand

Time in Years

Dem

and

New Capacity

Capacity leads demand with a one-step expansion

Capacity ExpansionExpected Demand

Time in Years

Dem

and

New Capacity

Capacity lags demand with an incremental expansion

Capacity ExpansionExpected Demand

Time in Years

Dem

and

New Capacity

Attempts to have an average capacity, with an incremental expansion

Approaches to Capacity Expansion May need to manage demand

through: Staffing changes Adjusting equipment and

processes Increasing throughput

Break-even Analysis Fixed Costs Variable Costs Contribution Revenue Function Crossover Chart Net Present Value

Operations Technology

Design Technology Internet Intranet CAD DFMA 3-D Object Modelling STEP CAM Virtual Reality

Production Technology Numerical Control Process Control Vision Systems Robots Automated Storage and Retrieval Systems Automated Guided Vehicle Flexible Manufacturing System Computer Integrated Manufacturing

Information Technology Transaction Processing System Automatic Identification System Management Information System Artificial Intelligence Expert System Fuzzy Logic Neural Network

Information Technology Enterprise Resource Planning (ERP) Automate and integrate processes Share common data SAP, JD Edwards, BAAN, PeopleSoft