PROCESS ANALYSIS

PROCESSA logical set of steps Inputs are availableDifferent resources available

for maximum utilizationLimitations or constraints Goods and/or services are the

end result or output

PROCESS Identify the tasks Design of those tasks Implementation of those tasks Coordination of those tasks Identification of risks and risk

minimization strategy What outputs are required

PROCESS New or modifies products/services

are offered Quality of product or services is

improved Competitive position or priority

has changed Current performance is not Cost of inputs has changed

PROCESS Demand for existing products and

services is changing New technology is emerging

PROCESS SELECTION

Projectsone-of-a-kind production of a product to customer order

Batch production

different jobs through the system in groups or batches

6-6

PROCESS SELECTIONMass production

produces large volumes of a standard product for a mass

market

Continuous productionused for very-high volume commodity products

PROJECT BATCH

Types of Processes

Type of product

UniqueMade-to- order(customized)

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York:McGraw-Hill, 2001), p. 210

Type of customer

One-at-a-time

Few individual

customers

MASS

Made-to- stock(standardized )

Mass

market

CONT.

Commodity

Mass

market

Product demand Infrequent Fluctuates Stable Very stable

6-8

PROJECT BATCH

Types of Processes

Demand volume

Very low Low to medium

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York:McGraw-Hill, 2001), p. 210

Number of different products

Infinite variety

Many, varied

MASS

High

Few

CONT.

Very high

Very few

Production system

Long-term project

Discrete, job shops

Repetitive, assembly lines

Continuous, process industries

6-9

PROJECT BATCH

Types of Processes

Equipment Varied General-purpose

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York:McGraw-Hill, 2001), p. 210

Primary type of work

Specialized contracts

Fabrication

MASS

Special-purpose

Assembly

CONT.

Highly automated

Mixing, treating, refining

Worker skills

Experts, crafts-persons

Wide range of skills

Limited range of skills

Equipment monitors

6-10

PROJECT BATCH

Types of Processes

Advantages

Custom work, latest

technologyFlexibility, quality

Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York:McGraw-Hill, 2001), p. 210

Dis-advantages

Non-repetitive, small customer base, expensive

Costly, slow,

difficult to

manage

MASS

Efficiency,

speed,

low cost

Capital

investment;

lack of

responsiveness

CONT.

Highly efficient,

large capacity,

ease of control

Difficult to change,

far-reaching errors,

limited variety

ExamplesConstruction, shipbuilding, spacecraft

Machine shops,

print shops,

bakeries,

education

Automobiles,

televisions,

computers,

fast food

Paint, chemicals, foodstuffs

6-11

PROCESS SELECTIONCost

Fixed costs - constant regardless of the number of units produced

Variable costs - vary with the volume of units produced

Revenue - price at which an item is sold

PROCESS SELECTIONTotal revenue

o price times volume soldProfit

o difference between total revenue and total cost

PROCESS SELECTIONTotal cost = fixed cost + total

variable cost TC = cf + vcv

Total revenue = volume x price TR = vp

Profit = total revenue - total cost

Z = TR – TC = vp - (cf + vcv)

TR = TCvp = cf + vcv

vp - vcv = cf

v(p - cv) = cf

v =Cf

p - cv

Solving for Break-Even Volume

Example:Fixed cost = cf = $2,000

Variable cost= cv = $5 per raftPrice = p = $10 per raft

Break-Even Analysis: Graph

Total cost line

Total revenue line

Break-even point400 Units/volume

$3,000 —

$2,000 —

$1,000 —

Example:Break-even point is

v = = = 400 raftscf

p - cv

2000

10 - 5

PROCESS SELECTION Process A Process B

$2,000 + $5v = $10,000 + $2v

$3v = $8,000

v = 2,667 unit

Below 2,667, choose A

Above 2,667, choose B

| | | |1000 2000 3000 4000 Units

$20,000 —

$15,000 —

$10,000 —

$5,000 —

Total cost of process A

Total cost of process B

Choose process A

Choose process B

Point of indifference = 2,667 Units

6-20

PROCESS ANALYSIS Process Flowcharts

Symbolic representation of processes

Incorporatenonproductive activities

(inspection, transportation, delay, storage)

productive activities (operations)

Ste

p

Ope

ratio

nT

rans

port

Insp

ect

Del

ayS

tora

ge

Dis

tanc

e(f

eet)

Tim

e(m

in)Description

ofprocess

1

2

3

4

5

6

7

8

9

10

11

Unload apples from truck

Move to inspection station

Weigh, inspect, sort

Move to storage

Wait until needed

Move to peeler

Apples peeled and cored

Soak in water until needed

Place in conveyor

Move to mixing area

Weigh, inspect, sort

TotalPage 1 0f 3 480

30

5

20

15

360

30

20

190 ft

20 ft

20 ft

50 ft

100 ft

Process: Apple Sauce

Flowchart of apple