Chapter 7: Process Strategy
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.
