Chapter 7: Process Strategy

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What are some techniques for improving service productivity?

- Separation - Self-Service - Postponement - Focus - Modules - Automation - Scheduling - Training

What are the five tools of process analysis?

1) Flowcharts. 2) Time-Function Mapping 3) Process Charts 4) Value-Stream Mapping 5) Service Blueprinting.

What are the four process strategies?

1) Process Focus 2) Product Focus 3) Mass Customization 4) Repetitive Focus

What are the four quadrants that services can be classified into?

1) Service Factory 2) Service Shop 3) Mass Service 4) Professional Service

California​ Gardens, Inc.,​ prewashes, shreds, and distributes a variety of salad mixes in​ 2-pound bags. Doug​ Voss, Operations​ VP, is considering a new​ Hi-Speed shredder to replace the old​ machine, referred to in the shop as​ "Clunker." Hi-Speed will have a fixed cost of ​$79,000 per month and a variable cost of ​$1.55 per bag. Clunker has a fixed cost of only ​$38,000 per​ month, but a variable cost of ​$1.95. Selling price is ​$3.10 per bag. ​A) What is the crossover point in units​ (point of​ indifference) for the​ processes? The crossover point is ___ units. ​(Round your response to the nearest whole​ number.) ​B) What is the monthly profit or loss if the company changes to the​ Hi-Speed shredder and sells 80,000 bags per​ month? The monthly profit or loss if the company changes to the​ Hi-Speed shredder and sells 80,000 bags per month is ​___. ​(Round your response to the nearest dollar and include a minus sign if​ necessary.) ​C) What is the monthly profit or loss if the company stays with Clunker and sells 80,000 bags per​ month? The monthly profit or loss if the company stays with Clunker and sells 80,000 bags per month is ___. ​(Round your response to the nearest dollar and include a minus sign if​ necessary.)

102500; $45000; $54000

Tim​ Urban, owner/manager of​ Urban's Motor Court in Key​ West, is considering outsourcing the daily room cleanup for his motel to​ Duffy's Maid Service. Tim rents an average of 50 rooms for each of 365 nights​ (365 × 50 equals the total rooms rented for the​ year). Tim's cost to clean a room is $13.00. The​ Duffy's Maid Service quote is $19.00 per room plus a fixed cost of $26,000 for sundry items such as uniforms with the​ motel's name.​ Tim's annual fixed cost for​ space, equipment, and supplies is $65,000. Based on the given information related to costs for each of the​ options, the crossover point for Tim​ = ___ room nights ​(round your response to the nearest whole ​number). If the number of room nights is less than the crossover​ point, then ___ is the best option available to Tim. Based on the given room nights that Tim expects to rent ​(18,250​), the best option is ___.

6500; outsourcing; not outsourcing.

Borges Machine​ Shop, Inc., has a​ 1-year contract for the production of 200,000 gear housings for a new​ off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are​ general-purpose equipment​ (GPE), flexible manufacturing system​ (FMS), and​ expensive, but​ efficient, dedicated machine​ (DM). The cost data​ follow: GPE FMS DM Annual contracted units 200,000 200,000 200,000 Annual fixed cost $100,000 $250,000 $525,000 Per unit variable cost $16.00 $14.00 $13.00 The option GPE is best when the contracted volume is below ___ units ​(enter your response as a whole​ number). The option FMS is best when the contracted volume is between ___ and ___ units ​(enter your responses as whole​ numbers). The option DM is best when the contracted volume is over ___ units ​(enter your response as a whole​ number).

75000; 75000 and 275000; 275000

Crossover Chart

A chart of costs at the possible volumes for more than one process.

Flowchart

A drawing used to analyze movement of people or material.

Process Focus

A facility organized around processes to facilitate low-volume, high variety production. This also refers to job shops or intermittent process facilities. These facilities have high variable costs with extremally low utilization of facilities.

Product Focus

A facility organized around products; a product-oriented, high-volume, low-variety process. These are also called continuous processes because they have very long, continuous production runs. This requires high fixed costs; however, low variable costs reward high facility utilization.

Robot

A flexible machine with the ability to hold, move, or grab items. It functions through electronic impulses that activate motors and switches.

Time-Function Mapping (Process Mapping)

A flowchart with time added on the horizontal axis.

Computer-Integrated Manufacturing (CIM)

A manufacturing system in which CAD, FMS, inventory control, warehousing, and shipping are integrated.

Service Blueprinting

A process analysis technique that lends itself to a focus on the customer and the provider's interaction with the customer.

Repetitive Process

A product-oriented production process that uses modules. This is the classic assembly line. It combines the economic advantages of the product-focused model with the customization advantages of the process-focus model.

A process focus is: A) A production facility organized around specific activities. B) Based on the classical assembly line. C) Organized around products. D) A​ rapid, low-cost production system that caters to constantly changing unique customer desires.

A production facility organized around specific activities.

Automatic Identification System (AIS)

A system for transforming data into electronic form, for example, bar codes.

Value-Stream Mapping (VSM)

A tool that helps managers understand how to add value in the flow of material and information through the entire production process.

Radio Frequency Identification (RFID)

A wireless system in which integrated circuits with antennas send radio waves.

What is an electronically guided and controlled cart used to move​ materials? A) AIS BB RFID C) AGV D) CNC

AGV

Which of the following statements is NOT​ true? A) Adding flexibility to the production process can be a major competitive advantage. Building flexibility into a production process is usually​ inexpensive, but difficult. B) Selecting the best equipment requires understanding the specific industry and available processes and technology. C) Selection of a particular process strategy requires decisions about equipment and technology. D) The selection of equipment requires considering​ cost, cash​ flow, market​ stability, quality,​ capacity, and flexibility.

Adding flexibility to the production process can be a major competitive advantage. Building flexibility into a production process is usually​ inexpensive, but difficult.

Which of the following is true regarding the concept of​ flexibility? A) It is the ability to respond with little penalty in​ time, cost, or customer value. B) It may be accomplished with digitally controlled equipment. C) It may involve modular or movable equipment. D) All of the above are true. E) None of the above is true.

All of the above are true.

Process​ redesign: A) Tries to bring about dramatic improvements in performance. B) Is sometimes called process reengineering. C) Is the fundamental rethinking of business processes. D) Often focuses on activities that cross functional lines. E) All of the above.

All of the above.

Stacked Restaurants lets customers choose ingredients for their sandwiches using: A) An iPad menu. B) A Telephone at the table. C) A moving conveyor belt. D) Playing cards.

An iPad menu.

Process Strategy

An organization's approach to transforming resources into goods and services.

Flexible Manufacturing Systems (FMS)

Automated work cell controlled by electronic signals from a common centralized computer facility.

Which service strategy describes separating services that may lend themselves to some type of​ automation? A) Focus B) Modules C) Separation D) Automation

Automation

Process Charts

Charts that use symbols to analyze the movement of people or material. This allows managers to focus on value-added activities and to compute the percentage of value-added time.

Training

Clarifying the service options; explaining how to avoid problems.

Self-Service

Customers examining, comparing, and evaluating at their own pace.

Automated Guided Vehicle (AGV)

Electronically guided and controlled cart used to move materials.

Borges Machine​ Shop, Inc., has a​ 1-year contract for the production of 200,000 gear housings for a new​ off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are​ general-purpose equipment​ (GPE), flexible manufacturing system​ (FMS), and​ expensive, but​ efficient, dedicated machine​ (DM). The cost data​ follow: GPE FMS DM Annual contracted units 200,000 200,000 200,000 Annual fixed cost $150,000 $250,000 $500,000 Per unit variable cost $18.00 $14.50 $13.50 Based on the​ cost, the process that is best suited for the current contracted volume is ___.

FMS

Borges Machine​ Shop, Inc., has a​ 1-year contract for the production of 75,000 gear housings for a new​ off-road vehicle. Owner Luis Borges hopes the contract will be extended and the volume increased next year. Borges has developed costs for three alternatives. They are​ general-purpose equipment​ (GPE), flexible manufacturing system​ (FMS), and​ expensive, but​ efficient, dedicated machine​ (DM). The cost data​ follow: GPE FMS DM Annual contracted units 75,000 75,000 75,000 Annual fixed cost $125,000 $225,000 $525,000 Per unit variable cost $18.00 $14.75 $13.75 Based on the total​ cost, the process that is best suited for the current contracted volume is ___. Suppose the contracted volume changes to 275,000 gear housings. Based on the total​ cost, the process that is best suited for the new volume is ___. Suppose the contracted volume changes to 375,000 gear housings. Based on the total​ cost, the process that is best suited for the new volume is ___.

FMS; FMS; DM

Production technology has had a major impact on​ services, but as yet there has been little reduction in service labor requirements. A) True B) False

False

Successful process redesign focuses on departmental areas where​ small, continuous improvements can be made. A) True B) False

False

What is the ability to respond with little penalty in​ time, cost, or customer​ value? A) Flexibility B) Mass customization C) Repetitive process D) Postponement

Flexibility

Which of the following statements is NOT true regarding production​ technologies? A) Flexible manufacturing systems and​ computer-integrated manufacturing are increasing the distinction between​ low-volume/high-variety and​ high-volume/low-variety production. B) CNC is machinery with its own computer and memory. C) Robots are mechanical devices that use electronic impulses to activate motors and switches. D) Vision systems combine video cameras and computer technology and are often used in inspection roles.

Flexible manufacturing systems and​ computer-integrated manufacturing are increasing the distinction between​ low-volume/high-variety and​ high-volume/low-variety production.

What is a drawing of the movement of​ material, product or​ people? A) Flowchart B) Process chart C) RFID D) AIS

Flowchart

Advances in​ technology: A) Have failed to change the level of customer interaction with an organization. B) Have dramatically changed health​ care, but have not changed retailing. C) Have had only a limited impact on services. D) Have had a dramatic impact on customer interaction with services and with products. E) Have impacted the manufacturing sector only.

Have had a dramatic impact on customer interaction with services and with products.

What are the major challenges of a BTO system?

Includes product design, process design, inventory management, tight schedules, and responsive partners.

A fast food restaurant is an example of A) High customization and high degree of labor. B) Low customization and high degree of labor. C) High customization and low degree of labor. D) Low customization and low degree of labor.

Low customization and low degree of labor.

Computer Numerical Control (CNC)

Machinery with its own computer and memory.

A large quantity and large variety of products are produced in: A) Mass customization. B) Process focus. C) Product focus. D) Repetitive focus.

Mass customization.

What is the equation for value added time?

Operation Time/Total Time

Which of the following is NOT a tool for process analysis and​ design? A) Flowchart B) Pareto chart C) Process mapping D) Process chart

Pareto chart

Modules

Parts or components of a product previously prepared, often in a continuous process.

Scheduling

Precise personnel scheduling.

Low-volume, high-variety production is best suited for which of the following process​ strategies? A) Product focus B) Repetitive focus C) Mass customization D) Process focus

Process focus

What is a flowchart with time added on the horizontal​ axis? A) CNC B) Service blueprinting C) Process mapping D) Process chart

Process mapping

What is the fundamental rethinking of business processes to bring about dramatic improvements in​ performance? A) Process design B) Process redesign C) Process strategy D) Process analysis

Process redesign

Which of the following statements is NOT true regarding process​ redesign? A) Process redesign also focuses on those activities that cross functional lines. B) Process redesign is also called process reengineering. C) Process redesign is also called process reinvention. D) Effective process redesign works only if the basic process and its objectives are reexamined.

Process redesign is also called process reinvention.

Build-to-Order (BTO)

Produce to customer order rather than to a forecast.

High-volume, low-variety production is best suited for which of the following process​ strategies? A) Repetitive focus B) Mass customization C) Product focus D) Process focus

Product focus

Which of the quadrants in the service process matrix has high labor intensity and high​ customization? A) Service shop B) Service factory C) Mass service D) Professional service

Professional service

Which of the following is NOT an example of​ technology's impact on the financial services​ industry? A) Debit cards B) Internet stock trading C) Electronic funds transfer D) RFID

RFID

Mass Customization

Rapid, low-cost production that caters to constantly changing unique customer desires.

Focus

Restricting the offerings.

Automation

Separating services that may lend themselves to a type of automation.

Which of the following is NOT a production technology that enhances production and​ productivity? A) Service blueprinting B) Vision systems C) Automatic identification systems D) Process control

Service blueprinting

Which of the quadrants in the service process matrix has low labor intensity and low​ customization? A) Service shop B) Professional service C) Service factory D) Mass service

Service factory

Separation

Structuring service so customers must go where the service is offered.

Vision Systems

Systems that use video cameras and computer technology in inspection roles.

Flexibility

The ability to respond with little penalty in time, cost, or customer value.

Postponement

The delay of any modifications or customization to a product as long as possible in the production process.

Process Redesign

The fundamental rethinking of business processes to bring about dramatic improvements in performance. It often focuses on activities that cross functional lines.

What is the objective of a process strategy?

The objective is to build a production process that meets customer requirements and product specifications within cost and other managerial constrains.

Additive Manufacturing

The production of physical items by adding layer upon layer, much in the same way an ink jet printer lays down ink; often referred to as 3D printing.

Process Control

The use of information technology to control a physical process.

Optical checkout scanners and ATMs are examples of​ technology's impact on services. A) True B) False

True

When selecting new equipment and​ technology, decision makers look for flexibility—the ability to respond with little penalty in​ time, cost, or customer value. A) True B) False

True

In many​ applications, human quality inspectors can be replaced effectively by: A) FMS. B) RFID tags. C) Automated storage and retrieval systems. D) Vision systems.

Vision systems.

Which of the following is an example of​ technology's impact on​ wholesale/retail trade​ industry? A) Bar-coded data B) Automatic teller machines C) Automatic toll booths D) Interactive TV

​Bar-coded data

Which of the following statements is NOT true regarding the process analysis​ tools? A) Service blueprinting is designed to help focus on the customer interaction part of the process. B) A process chart is different than a flowchart. C) Process mapping is another name for​ time-function mapping. D) ​Time-function mapping extends​ value-stream mapping to include suppliers.

​Time-function mapping extends​ value-stream mapping to include suppliers.


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