3 Process Strategy PowerPoint Slides by Jeff Heyl Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal For Operations Management, 9e by Krajewski/Ritzman/Malhotra © 2010 Pearson Education 3–1 Process Strategy Principles of process strategy Make choices that fit the situation and that make sense together, that have a close strategic fit Individual processes are the building blocks that eventually create the firm’s whole supply chain Management must pay particular attention to the interfaces between processes Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–2 Process Strategy There are four basic process decisions Process structure including layout Customer involvement Resource flexibility Capital intensity Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–3 Process Strategy Decisions Process Structure • Customer-contract position (services) • Product-process position (manufacturing) • Layout Customer Involvement • Low involvement • High involvement Resource Flexibility • Specialized • Enlarged Capital Intensity • Low automation • High automation Strategy for Change • Process reengineering • Process improvement Figure 3.1 – Major Decisions for Effective Processes Effective Process Design Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–4 Process Structure in Services Customer contact is the extent to which the customer is present, actively involved, and receives personal attention during the service process Face-to-face interaction is sometimes called a moment of truth or a service encounter Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–5 Process Structure in Services TABLE 3.1 | | DIMENSIONS OF CUSTOMER CONTACT IN SERVICE PROCESSES Dimension High Contact Low Contact Physical presence Present Absent What is processed People Possessions or information Contact intensity Active, visible Passive, out of sight Personal attention Personal Impersonal Method of delivery Face-to-face Regular mail or e-mail Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–6 Process Structure in Services The three elements of the customercontact matrix are The degree of customer contact Customization Process characteristics Process characteristics include Process divergence deals with customization and the latitude as to how tasks are performed Flow is how customers, objects, or information are process and can be either line of flexible Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–7 Service Process Structuring Less processes divergence and more line flows Less customer contact and customization Process Characteristics (1) Flexible flows with Individual processes (2) Flexible flows with some dominant paths, with some exceptions to how work performed (1) High interaction with customers, highly customized service (2) Some interaction with customers, standard services with some options (3) Low interaction with customers, standardized services Front office Hybrid office (3) Line flows, routine work same with all customers Figure 3.2 – Customer-Contact Matrix for Service Processes Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal Back office 3–8 Product-Process Matrix For manufacturing organization it brings together Volume Product customization Process characteristics Process choices include job, batch, line, and continuous flow processes Production and inventory strategies include make-to-order, assemble-to-order, and make-to-stock Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal 3–9 Product-Process Matrix Less customization and higher volume Less complexity, less divergence, and more line flows Process Characteristics (1) Customized process, with flexible and unique sequence of tasks (2) Disconnected line flows, moderately complex work (1) (2) Low-volume Multiple products with low products, made to moderate volume to customer order (3) Few major products, higher volume (4) High volume, high standardization, commodity products Job process Small batch process Batch processes (3) Connected line, highly repetitive work (4) Continuous flows Figure 3.3 – Product-Process Matrix for Processes Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal Large batch process Line process Continuous process – 10 Capital Intensity Fixed automation produces one type of part or product in a fixed sequence Typically requires large investments and is relatively inflexible Flexible automation can be changed to handle various products Industrial robots are classic examples of flexible automation Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 39 Capital Intensity Capital equipment may be used to automate service processes Investment can be justified by cost reduction and increased task divergence through expanded customer choice May impact customer contact May be used in both front and back-office operations Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 40 Capital Intensity Economies of scope reflect the ability to produce multiple products more inexpensively in combination than separately Applies to manufacturing and services Requires sufficient collective volume Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 41 Strategic Fit The process chosen should reflect the desired competitive priorities The process structure has a major impact on customer involvement, resource flexibility, and capital intensity Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 42 Decision Patterns for Services Major process decisions • • • • • • • • High customer-contact process More complexity, more divergence, more flexible flows More customer involvement More resource flexibility Capital intensity varies with volume Low customer-contact process Less complexity, less divergence, more line flows Less customer involvement Less resource flexibility Capital intensity varies with volume Front office Hybrid office Back office High Low Customer contact and customization Figure 3.8 – Decision Patterns for Service Processes Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 43 Decision Patterns for Manufacturing Processes can be adjusted for the degree of customization and volume Process flows can be made more of less linear Competitive priorities must be considered when choosing processes Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 44 Decision Patterns for Manufacturing Competitive Priorities Process Choice Top-quality, on-time delivery, and flexibility Job process or small batch process Low-cost operations, consistent quality, and delivery speed Large batch, line, or continuous flow process (a) Links with Process Choice Competitive Priorities Production and Inventory Strategy Top-quality, on-time delivery, and flexibility Make-to-order Delivery speed and variety Assemble-to-order Low-cost operation and delivery speed Make-to-stock (b) Links with Production and Inventory Strategy Figure 3.9 – Links of Competitive Priorities with Manufacturing Strategy Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 45 Decision Patterns for Manufacturing • Job process Small batch process Batch processes Major process decisions • • • Low-Volume, make-to-order process More process divergence and more flexible flows More customer involvement More resource flexibility Less capital intensity • • • • High-Volume, make-to-stock process Less process divergence and more line flows Less customer involvement Less resource flexibility More capital intensity Large batch process Line process Continuous process Low High Volume Figure 3.10 – Decision Patterns for Manufacturing Processes Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 46 Gaining Focus Operations can be focused by process segments when competitive priorities differ Plants within plants (PWPs) are different operations under the same roof Service can be focused in much the same way Focused factories can be created by splitting a large plant into several smaller plants dedicated to narrower product lines Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 47 Strategies for Change Process reengineering is the fundamental rethinking and radical redesign of a process to improve performance Can be successful but it is not simple or easy The people who are involved with the process each day are the best source of ideas on how to improve it Process improvement is the systematic study of activities and flows of a process to find ways to improve it Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 48 Process Reengineering TABLE 3.2 | KEY ELEMENTS OF REENGINEERING Element Description Critical processes Emphasis on core business processes, normal process improvement activities can continue with other processes Strong leadership Strong leadership from senior executives to overcome resistance Cross-functional teams A team with members from each functional area charged with carrying out the project Information technology Primary enabler of the project as most reengineering projects involve information flows Clean-slate philosophy Start with the way the customer wants to deal with the company and includes internal and external customers Process analysis Must understand the current processes throughout the organization Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 49 Solved Problem A defense contractor is evaluating its machine shop’s current layout Figure 3.11 shows the current layout and the table shows the closeness matrix for the facility measured as the number of trips per day between department pairs Safety and health regulations require departments E and F to remain at their current locations a Use trial and error to find a better layout b How much better is your layout than the current layout in terms of the wd score? Use rectilinear distance Trips Between Departments Department A B C A ― B C D E F ― D E F 9 ― ― E B F A C D ― Figure 3.11 – Current Layout ― Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 50 Solved Problem SOLUTION a In addition to keeping departments E and F at their current locations, a good plan would locate the following department pairs close to each other: A and E, C and F, A and B, and C and E Figure 3.12 was worked out by trial and error and satisfies all these requirements Start by placing E and F at their current locations Then, because C must be as close as possible to both E and F, put C between them Place A below E, and B next to A All of the heavy traffic concerns have now been accommodated Trips Between Departments Department A B C A ― B C D E F ― D E F 9 ― ― E C F A B D ― Figure 3.12 – Proposed Layout ― Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 51 Solved Problem b The table reveals that the wd score drops from 92 for the current plan to 67 for the revised plan, a 27 percent reduction Current Plan Department Pair Number of Trips (1) Distance (2) Proposed Plan wd Score (1) × (2) Distance (3) wd Score (1) × (3) A, B 16 A, C 3 A, E 9 A, F 15 15 B, D C, E 16 C, F 18 D, F 3 E, F 6 wd = 92 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal wd = 67 – 52 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal – 53 ... The objective is to minimize the weighteddistance score (wd) A layout’s wd score is calculated by summing the products of the proximity scores and distances between centers Copyright © 2010 Pearson... Closeness Factor Distance 1, 165 165 3, 125 3, 125 2, 105 105 5, 105 105 1, 90 1, 25 75 4, 25 25 Total 1030 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal Score Based on the above... Distance 1, 165 165 250 3, 125 125 3, 125 2, 105 105 5, 105 105 180 1, 90 1, 25 75 4, 25 25 Total 1030 Copyright © 2010 Pearson Education, Inc Publishing as Prentice Hal Score Based on the above