Operations management sustainability and supply chain management 12th edition heizer solutions manua

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7

C H A P T E R

Process Strategy

DISCUSSION QUESTIONS

AACSB: Application of knowledge

7. CIM (computer-integrated manufacturing) in its ideal but seldom realized form, ties together computer-aided design (CAD), computer-aided manufacturing (CAM), flexible manufacturing systems (FMS), the necessary automated storage and retrieval systems (ASRS), and movement of materials (automated transfer machines or automated guided vehicles [AGVs]) to make it all work.

2.

LO 7.5: Identify recent advances in production technology

1. Process strategy is the organization’s approach to transforming resources into goods and services.

LO 7.1: Describe four process strategies

Product

Likely Process

(a) Beer (b) Wedding invitations (c) Automobiles (d) Paper (e) “Big Mac” (f) Custom Homes

Product Focused/Continuous Process Focused/Job Shop Modular/Repetitive Product Focused/Continuous Modular/Repetitive Job Shop with components made in Product Focused and Modular facilities Modular/Repetitive

(g) Motorcycles

LO 7.1: Describe four process strategies AACSB: Application of knowledge 3. Service blueprinting is a process analysis technique that focuses on the provider’s interaction with the customer.

LO 7.3: Use the tools of process analysis AACSB: Application of knowledge 4. Process redesign, or reengineering is the rethinking and radical design of business processes to bring about dramatic improvements in performance.

LO 7.3: Use the tools of process analysis AACSB: Application of knowledge 5. Techniques for improving service productivity include separation, self-service, postponement, focus, modules, automation, scheduling, and training.

LO 7.4: Describe customer interaction in service processes AACSB: Reflective thinking 6. The four 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) LO 7.4: Describe customer interaction in service processes AACSB: Application of knowledge

AACSB: Reflective thinking 8. In process-control systems sensors collect data; analog devices 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.

LO 7.5: Identify recent advances in production technology AACSB: Reflective thinking 9. Manufacturing firms in each of the process models:  Process focus, your local print shop, or the printing operation at FedEx Office, or a machine shop such as Illinois Tool Works, Inc.  Repetitive focus, Harley-Davidson  Product focus, Frito-Lay  Mass customization, Dell Computer LO 7.1: Describe four process strategies AACSB: Application of knowledge 10. Competitive advantage of manufacturing firms in each of the process models:  Process focus, differentiation, and expertise in each process area (such as the print operation at FedEx Office, your local print shop, or the machining competence at Illinois Tool Works, Inc.)  Repetitive focus, rapid response, and efficiency (HarleyDavidson)  Product focus, very low variable cost (Frito-Lay)  Mass customization, low cost, rapid response to unique customer demands (Dell Computer) LO 7.1: Describe four process strategies AACSB: Application of knowledge 11. Students may find Figures 7.1, 7.2, and 7.8 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

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Product: Shouldice Hospital Mass customization: Cafeterias and online stockbrokers, such as Schwab LO 7.1: Describe four process strategies AACSB: Application of knowledge  

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 therapy, 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 clinics—with the low cost of the uncontested divorce.  Product focus: Shouldice Hospital, Southwest Airlines, and online stockbrokers may be good examples of low-cost advantage.  Mass customization: Per the text, McDonald’s is trying this in a limited way. Charles Schwab seems to be effective at this in the financial services areas. They seek competitive advantage via low cost and high customization.

LO 7.1: Describe four process strategies AACSB: Application of knowledge 13. Numerically controlled machinery means the equipment is computer controlled via programming languages. As an added note, machinery with its own programmable computer is sometimes called computer numerically controlled (CNC), implying that there is computer memory at the machine. Machines that are wired to a central machine are called direct numerically controlled (DNC) machines.

LO 7.5: Identify recent advances in production technology AACSB: Application of knowledge 14. In an automatic identification system (AIS), bar codes, radio frequency (RF) signals, and optical signals improve both accuracy and speed of data entry contributing to productivity. For instance, 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.

LO 7.5: Identify recent advances in production technology AACSB: Application of knowledge 15. Technological advances include numeric control, process control, vision systems, robots, automated storage and retrieval systems, automated guided vehicles, flexible manufacturing systems, and computer-integrated manufacturing (CIM).

LO 7.5: Identify recent advances in production technology AACSB: Application of knowledge 16. FMS is a system that uses electronic signals from a centralized computer to automate production and material flow. A flexible manufacturing system (FMS) usually refers to the manufacturing element (a subsystem) within a larger computer-integrated manufacturing (CIM) system. A CIM includes elements of computer-aided design, computer-aided engineering, computer-aided drafting, production, inventory control, etc., as well as flexible manufacturing systems.

LO 7.5: Identify recent advances in production technology AACSB: Application of knowledge

17. CAD data generates design data, but can also generate instructions for NC machines. If the NC machines are connected (integrated) with other NC machines and material handling equipment such as AGVs or conveyors or other transfer machines, the entire system is considered a flexible manufacturing system.

LO 7.5: Identify recent advances in production technology AACSB: Application of knowledge

18. Additive manufacturing adds material (rather than removing it) to produce products. This is typically done by building parts layer by layer with semi-liquid materials. Additive manufacturing is being used for design testing, to build prototypes, for custom products, and increasingly for high volume production.

LO 7.5: Identify recent advances in production technology 19. The advantages of 3D printing (additive manufacturing) include the ability to produce complex products that traditionally might consist of several parts. This often results in lower cost and a minimum of tooling and assembly. This fast, low-cost production may allow fast response to customer orders and lower inventory in the supply chain.

Disadvantages include all of the start-up problems one would expect from a radically new technology, including frequent design changes and reliability problems. Additionally, the raw material as well as final products made in this manner have little or no history as to strength, durability, and design functionality; therefore, engineering guidelines must be established.

LO 7.5: Identify recent advances in production technology AACSB: Reflective thinking

ETHICAL DILEMMA For a nice class discussion exercise, all 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 advantage 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 protein is a 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 often why the investment is made in them.

The alternatives are expensive; we don’t even take very 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 indifference between Software A and Software B to 2,000 units. What would the Fixed costs need to be for Software B? $270,000

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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 happens 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 volume over which Software B is the best choice.

7.6

Units

Stan’s Costs

Salt Lake Supply Costs

0 10,000

15,000 18,200 + 15,000

0 40,000

30,000 6,881

(a) At 4,000 Units (arbitrary number) At 0 Units

Units (A) (B) (C)

Y = 800 + 1.10x Y = 1,100 + 0.70x Y = 1,800 + 0.4x

800 1,100 1,800

$5,200 $3,900 $3,400

Refurbish Modify New

A $5,000 B

4,000

C 3,000

GPE’s total cost = $3,100,000 = [($15  200,000) + $100,000] FMS’s total cost = $3,000,000 = [($14  200,000) + $200,000] DM’s total cost = $3,100,000 = [($13  200,000) + $500,000]

The total cost for the flexible manufacturing system is lowest.

7.2 15x + 100,000 = 14x + 200,000. Therefore, x = 100,000 14x + 200,000 = 13x + 500,000. Therefore, x = 300,000 GPE is best below 100,000.

FMS is best between 100,000 and 300,000.

DM is best over 300,000.

7.3 Based on the solution to Problem 7.2, at 75,000 units, use GPE at 275,000 units, use FMS at 375,000 units, use DM 7.4 The optimum process will change at 100,000 units and 300,000 units, as shown in Problem 7.2. If total units are 600,000 (3 years  200,000), then DM has the lowest cost.

7.5 (a) Values to aid in plotting the graph below:

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2.18x = 15,000 x = 6,881 = the exact quantity at the crossover point

END-OF-CHAPTER PROBLEMS (problems with # symbols are not in MyOMLab) 7.1

PROCESS STRATEGY

2,333 units

2,000 750 units

1,000 0

0

1,000

2,000 Units

3,000

(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 3,000 boards, plan C is the low-cost plan. (c) Crossover points: First, 800 + 1.10x = 1,100 + .70x .40x = 300 x = 750 Second, 1,100 + .70x = 1,800 + .40x .30x = 700 x = 2,333 So, between 1,000 and 2,000 boards, plan B is best.

7.7

Expected rooms rented: 50  365 = 18,250.

Current: Fixed cost = $61,000 Variable cost = $12.50 Outsourcing: Fixed cost = $25,000 Variable cost = $18.50 61,000 + (12.50)x = $25,000 + (18.50)x 36,000 = 6x 6,000 = x = crossover point in room nights

Since Tim expects to rent 18,250 rooms, he should not outsource the cleanup.

15,000

0

3

6 Qty (1,000s)

9

(b) At 6,881 gears, either choice would have the same cost (indifference point) 4x = 15,000 + 1.82x 4x – 1.82x = 15,000

7.8 CAD software decision.

(5)($3,000) + $200x = (6)($2,000) + $240x $15,000 + $200x = $12,000 + $240x 3,000 = 40x 75 = x = crossover in no. of drawings Since the projected volume of 80 is above the crossover point, he should rent the HP software.

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7.10

7.9 (a) Find break-even points, X. Mass customization: 1,260,000 + 60X = 120X  X = 21,000 Intermittent:

1,000,000 + 70X = 120X  X = 20,000

Repetitive:

1,625,000 + 55X = 120X  X = 25,000

Continuous:

1,960,000 + 50X = 120X  X = 28,000

x = 82,000 units (b) 60,000  $2.50 – [($1.25  60,000) + $85,000] Loss of $10,000 (c) 60,000  $2.50 – [($1.75  60,000) + $44,000] Profit of $1,000.

Find least-cost process at X = 24,000 units.

Fixed cost

VC

(a) $85,000 + $1.25x = $44,000 + $1.75x

Units

7.11

(a) $ 75,000 + $16x = $60,000 + $20x x = 3,750 units

Mass customization: 1,260,000 + 60(24,000) = 2,700,000 Intermittent:

1,000,000 + 70(24,000) = 2,680,000

(b) Machine A is preferable above 3,750 units

Repetitive:

1,625,000 + 55(24,000) = 2,945,000

(c) Machine B is preferable below 3,750 units

Continuous:

1,960,000 + 50(24,000) = 3,160,000

24, 000   > Anticipated production volume

20, 000?    

7.12

(a) $65,000 + $10x = $34,000 + $14x x = 7,750 (b) Proposal A is preferable. (Above a volume of 7,750, proposal A should be chosen.)

Least-cost process: Intermittent process Yes.

Intermittent process break-even point

(b) Annual profit using intermittent process: $[120(24,000) – 2,680,000] = $200,000

7.13# (a) A fun topic, as students will add a lot of waiting. Flow is, of course, dependent upon the school but usually includes the following:

The intermittent process will maximize profit.

Annual profit: $200,000

(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):

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7.14

7.15

Time function map of a shoe shine:

7.16# A service blueprint for a shoe shine. (For a discussion of this particular application, see G.L. Shostack “Designing Services that Deliver,” Harvard Business Review 62, no. 1, (Jan.–Feb. 1984): 133–139.)

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7.17# Using the value stream map, Figure 7.6, as a starting point, analyze the opportunity for improvement and develop an improved process.

Remove inventory, improve throughput by reducing setup, reduce lot sizes, use pull techniques, and focus on only activities the customer is willing to pay for. Possible improvements include (1) driving the lot size down to 500 and trying to lower it even more if the supplier and shipping can do so efficiently; (2) getting more frequent shipments from supplier, perhaps twice a week or even each day; (3) shipping smaller lots; and (4) implementing a work cell that performs the machine, component mount, assemble, test, and pack function on a one-piece-flow basis.

VIDEO CASE STUDIES 1

A 7-minute video filmed specifically for this text and case is available in MyOMLab. 1.

The major auto companies are not in the custom design business, and ambulance volume is small compared with the volume of the big three U.S. auto manufacturers.

LO 7.2: Compute crossover points for different processes AACSB: Analytical thinking 2.

CASE STUDY

PROCESS STRATEGY AT WHEELED COACH

The traditional way to build specialized custom products such as autos was for the work to stand still and to bring the material and parts to the workstation.

ROCHESTER MANUFACTURING’S PROCESS DECISION

LO 7.1: Describe four process strategies

1.

AACSB: Application of knowledge

As a production manager for RMC, what do you recommend?

Why? As production manager, you believe that the inherent advantages of an FMS should tilt the scales in favor of FMS. Your management task should be easier and therefore 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 “numbers people” to be sure they included all of these relatively minor shop floor issues in the decision.

LO 7.5: Identify recent advances in production technology AACSB: Analytical thinking 2.

Prepare a case by a conservative plant manager for maintaining 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 manager’s responsibility. If the numbers do not support change, then don’t do it. Additionally, the trauma of change in layout, training, and acceptance by workers contains numerous hidden costs. Consequently, the plant manager may have a strong case for the status quo.

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 “module.” Then the employees become experienced in those modules and the customized modules can be delivered to the line as needed.

LO 7.1: Describe four process strategies AACSB: Application of knowledge 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 ensure that the work at each station can be accomplished in the time allocated. Absentees, tardiness, and special talents can play havoc with such a system.

LO 7.1: Describe four process strategies AACSB: Analytical thinking

LO 7.5: Identify recent advances in production technology AACSB: Analytical thinking 3.

Prepare the case for an optimistic sales manager who suggests that you should move ahead with the FMS now.

The optimistic sales manager’s case is that improved delivery time (i.e., improved throughput) and improved quality may well yield a higher market share, which, if the company is already above break-even, 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.

LO 7.5: Identify recent advances in production technology AACSB: Analytical thinking

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2

PROCESS STRATEGY

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ALASKA AIRLINES 20-MINUTE BAGGAGE PROCESS—GUARANTEED!

An 8-minute video filmed specifically for this text and case is available in MyOMLab. 1.

To respective cart and appropriate plane LO 7.3: Use the tools of process analysis AACSB: Application of knowledge 2. There are virtually no processes that should not be examined.

This is true not just for the operations area where processes in the 10 decision areas can be examined, but other functional areas as well. This includes areas such as marketing, sales, finance, and capital expenditures. Establishing, examining, and improving processes can solve a multitude of problems and be a major contributor to both effectiveness and efficiency. Specific OM areas at Alaska Airlines for process analysis would include passenger boarding, cleaning planes between flights, loading food and drinks, moving bags between connecting flights (“hot bags”), etc.

LO 7.3: Use the tools of process analysis AACSB: Application of knowledge 3. The kiosk process moves the ticketing and tagging processes to the customer. This, of course, adds customer competence and interaction issues to the check-in process, but also has the potential to reduce personnel costs for the airline.

PROCESS ANALYSIS AT ARNOLD PALMER HOSPITAL

3

A 7-minute video filmed specifically for this text and case is available in MyOMLab. 1. As Diane’s new assistant, you need to flowchart this process.

Explain how the process might be improved once you have completed the chart.

Managers (and students) have a variety of options at their disposal for preparing flowcharts. These include: 

Traditional flowcharts, which show a process with annotated boxes and interconnected lines. (See the Harley-Davidson flowchart in the Global Company Profile that opens Chapter 7 in the text.)



Value stream mapping, similar to traditional flowcharting but adds customers and suppliers (Figure 7.6 in text).



Time-function mapping, a flow diagram with time added on the horizontal axis (Figure 7.4 in text).



Process charts, which use symbols to map the flow of people or materials (Figure 7.5 in text).



Service blueprinting, which focuses on the customer and interaction with the customer (Figure 7.7 in text).

LO 7.3: Use the tools of process analysis AACSB: Application of knowledge 4. Alaska Airlines uses speed, the 20-minute guarantee, as one critical measure, as well as the number of lost bags, number of damaged bags, and number of bags that are rejected by TSA. LO 7.3: Use the tools of process analysis ACSB: Application of knowledge 5. The scanners use the bar code tag on each bag to route and track the bag. Only via bar code do bags wend their way through the automated system to the correct pier and cart.

LO 7.3: Use the tools of process analysis

The chart on the next page is a version of a traditional flow chart for the flow of maternity patients.

LO 7.3: Use the tools of process analysis AACSB: Analytical thinking

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CHAPTER 7 P R O C E S S S T R A T E G Y

Flowchart for Arnold Palmer case study.

2. If the mother is scheduled for a Caesarean-section birth (i.e., the baby is removed from the womb surgically), how would this flowchart change?

See Step 7 of the flowchart for Question 1, on next page.

LO 7.3: Use the tools of process analysis AACSB: Application of knowledge 3.

If all mothers were electronically (or manually) preregistered, how would the flowchart change? Redraw the chart to show your changes.

Dispense with Step 2b.

4.

Describe in detail a process that the hospital could analyze besides the one mentioned in this case.

Many options are available to the student, including the hundreds of processes charted by hospital staff such as: forms needed under various situations, vacated room turnaround, admissions, inventory, delivery of foodservice, and information requirements (for the patient and information from the patient). See the “Maternal and Newborn Required Information...” figure below for an example of how to document information requirements.

LO 7.3: Use the tools of process analysis AACSB: Analytical thinking

LO 7.3: Use the tools of process analysis AACSB: Analytical thinking

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ADDITIONAL CASE STUDY (available in MyOMLab) MATTHEW YACHTS, INC. This is an excellent case to address the characteristics of processoriented 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 “fixed” design is growing, expansion into this area, with its repetitive-oriented layout and procedures (see Table 7.2 and Figures 7.1 and 7.2 in text), may be warranted.

LO 7.1: Describe four process strategies AACSB: Analytical thinking 2.

Establishing a separate facility with its own labor force, costing, and procedures may be a good move. Particularly if this can be done at a low production level that will allow maintenance of production even in periods of recession (or high federal luxury taxes).

LO 7.1: Describe four process strategies AACSB: Analytical thinking Copyright ©2017 Pearson Education, Inc.

PROCESS STRATEGY

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