3 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Strategy 3...

3 – 1Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Process StrategyProcess Strategy3

For For Operations Management, 9eOperations Management, 9e by by Krajewski/Ritzman/Malhotra Krajewski/Ritzman/Malhotra © 2010 Pearson Education© 2010 Pearson Education

PowerPoint Slides PowerPoint Slides by Jeff Heylby Jeff Heyl


Process StrategyProcess Strategy

Principles of process strategy1. Make choices that fit the situation and that

make sense together, that have a close strategic fit

2. Individual processes are the building blocks that eventually create the firm’s whole supply chain

3. Management must pay particular attention to the interfaces between processes


Process StrategyProcess Strategy

There are four basic process decisions

1. Process structure including layout

2. Customer involvement

3. Resource flexibility

4. Capital intensity


Process Strategy DecisionsProcess Strategy Decisions

Figure 3.1 – Major Decisions for Effective Processes

Process Structure• Customer-contract position

(services)• Product-process position

(manufacturing)• Layout

Resource Flexibility• Specialized• Enlarged

Customer Involvement• Low involvement• High involvement

Effective Process Design

Strategy for Change• Process reengineering• Process improvement

Capital Intensity• Low automation• High automation


Process Structure in ServicesProcess 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



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



The three elements of the customer-contact matrix are

1. The degree of customer contact

2. Customization

3. Process characteristics

Process characteristics include1. Process divergence deals with customization

and the latitude as to how tasks are performed

2. Flow is how customers, objects, or information are processed, and can be either line flow or flexible flow


Service Process StructuringService Process Structuring

Front office

Hybrid office

Back office

Less customer contact and customization

Les

s p

roce

sses

div

erg

ence

an

d m

ore

lin

e f

low

s

(1) (2) (3)High interaction with Some interaction with Low interaction withcustomers, highly customers, standard customers, standardizedcustomized service services with some options services

ProcessCharacteristics

(1)Flexible flows withIndividual processes

(2)Flexible flows withsome dominantpaths, withsome exceptions to how work performed

(3)Line flows, routinework same with all customers

Figure 3.2 – Customer-Contact Matrix for Service Processes


Product-Process MatrixProduct-Process Matrix

For manufacturing organization it brings together

1. Volume

2. Product customization

3. 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


Product-Process MatrixProduct-Process Matrix

Continuousprocess

Jobprocess

Lineprocess

Large batchprocess

Small batchprocess

(1) (2) (3) (4)Low-volume Multiple products with low Few major High volume, highproducts, made to moderate volume products, standardization,to customer higher commodity order volume products

ProcessCharacteristics

(1)Customized process, with flexible and unique sequence of tasks

(2)Disconnected line flows, moderately complex work

(3)Connected line, highly repetitive work

(4)Continuous flows

Le

ss

co

mp

lex

ity

, le

ss

div

erg

en

ce

, a

nd

mo

re l

ine

flo

ws

Less customization and higher volume

Batch processes

Figure 3.3 – Product-Process Matrix for Processes


LayoutLayout

The physical arrangement of human and capital resources

An operation is a group of resources performing all or part of one or more processes

Layout involves three basic steps1. Gather information

2. Develop a block plan

3. Design a detailed layout


LayoutLayout

Department Area Needed (ft2)

1. Administration 3,500

2. Social services 2,600

3. Institutions 2,400

4. Accounting 1,600

5. Education 1,500

6. Internal audit 3,400

Total 15,000

Gather information on space requirements, available space, and closeness factors


150’

100’

Block PlanBlock Plan

1 2

3 4

5

6

Figure 3.4 – Current Block Plan for the Office of Budget Management


Closeness MatrixCloseness Matrix

Closeness Factors

Department 1 2 3 4 5 6

1. Administration ― 3 6 5 6 10

2. Social services ― 8 1 1

3. Institutions ― 3 9

4. Accounting ― 2

5. Education ― 1

6. Internal audit ―


RequirementsRequirements

There are two absolute requirements for the new layout

1. Education should remain where it is

2. Administration should remain where it is

Closeness Factors





4. Accounting ― 2

5. Education ― 1



Developing a Block PlanDeveloping a Block Plan

EXAMPLE 3.1

Develop an acceptable block plan for the Office of Budget Management that locates departments with the greatest interaction as close to each other as possible.

SOLUTION

Using closeness ratings of 8 and above, you might plan to locate departments as follows:

a. Departments 1 and 6 close together

b. Departments 3 and 5 close together

c. Departments 2 and 3 close together

Departments 1 and 5 should remain at their current locations

Closeness Factors





4. Accounting ― 2

5. Education ― 1



150’

100’

Developing a Block PlanDeveloping a Block Plan

Figure 3.5 – Proposed Block Plan

1 54

6 32

a. Departments 1 and 6 close togetherb. Departments 3 and 5 close togetherc. Departments 2 and 3 close together


The Weighted-Distance MethodThe Weighted-Distance Method

The weighted-distance method can be used to compare alternative block plans when relative locations are important

Euclidian distance is the straight-line distance between two possible points

22BABAAB yyxxd

wheredAB = distance between points A and BxA = x-coordinate of point AyA = y-coordinate of point AxB = x-coordinate of point ByB = y-coordinate of point B


The Weighted-Distance MethodThe Weighted-Distance Method

Rectilinear distance measures the distance between two possible points with a series of 90-degree turns

BABAAB yyxxd

The objective is to minimize the weighted-distance score (wd)

A layout’s wd score is calculated by summing the products of the proximity scores and distances between centers


Application 3.1Application 3.1

Rectilinear Distance

dAB = |20 – 80| + |10 – 60| =

Euclidian Distance

What is the distance between (20,10) and (80,60)?

dAB = (20 – 80)2 + (10 – 60)2

=



Rectilinear Distance

dAB = |20 – 80| + |10 – 60| =

Euclidian Distance

dAB = (20 – 80)2 + (10 – 60)2

What is the distance between (20,10) and (80,60)?

110

= 78.1


Calculating the WD ScoreCalculating the WD Score

EXAMPLE 3.2

How much better is the proposed block than the current block plan?

SOLUTION

The following table lists pairs of departments that have a nonzero closeness factor and the rectilinear distances between departments for both the current plan and the proposed plan

6

1

2

4 5

33

1 2

6

5

4

Current Block Plan Proposed Block Plan



Current Plan Proposed Plan

Department Pair

Closeness Factor (w)

Distance (d)

Weighted-Distance Score (wd)

Distance (d)


1, 2 3

1, 3 6

1, 4 5

1, 5 6

1, 6 10

2, 3 8

2, 4 1

2, 5 1

3, 4 3

3, 5 9

4, 5 2

5, 6 1


3 15

2 12

2 20

2 16

2 2

1 1

2 6

3 27

1 2

2 2

Total 112


2 6

1 6

1 3

3 18

1 5

2 12

1 10

1 8

1 1

2 2

2 6

1 9

1 2

3 3

Total 82


Department Pair

Closeness Factor (w)

Distance (d)


Distance (d)


1, 2 3

1, 3 6

1, 4 5

1, 5 6

1, 6 10

2, 3 8

2, 4 1

2, 5 1

3, 4 3

3, 5 9

4, 5 2

5, 6 1


OM Explorer AnalysisOM Explorer Analysis

Figure 3.6 – Second Proposed Block Plan (Analyzed with Layout Solver)



Matthews and Novak Design Company has been asked to design the layout for a newly constructed office building of one of its clients. The closeness matrix showing the daily trips between its six department offices is given below.

Departments Trips between Departments

1 2 3 4 5 6

1 25 90 165

2 105

3 125 125

4 25

5 105

6


DepartmentPair

ClosenessFactor

Distance Score

3 6 1

1, 6 165 1 165 2 5 4

3, 5 125

3, 6 125

2, 5 105 1 105

5, 6 105 1 105

1, 3 90

1, 2 25 3 75

4, 5 25 1 25

Total 1030


Shown below on the right is a block plan that has been suggested for the building (original plan). Assume rectilinear distance. Students complete highlighted cells.

Based on the above results, propose a better plan and evaluate it in terms of the load-distance score.


DepartmentPair

ClosenessFactor

Distance Score

3 6 1

1, 6 165 1 165 2 5 4

3, 5 125

3, 6 125

2, 5 105 1 105

5, 6 105 1 105

1, 3 90

1, 2 25 3 75

4, 5 25 1 25

Total 1030

2 250

1 125

2 180


Shown below on the right is a block plan that has been suggested for the building (original plan). Assume rectilinear distance. Students complete highlighted cells.

Based on the above results, propose a better plan and evaluate it in terms of the load-distance score.


DepartmentPair

ClosenessFactor Distance Score

4 6 1

1, 6 165 2 5 3

3, 5 125

3, 6 125

2, 5 105

5, 6 105

1, 3 90

1, 2 25

4, 5 25

Total



DepartmentPair

ClosenessFactor Distance Score

4 6 1

1, 6 165 2 5 3

3, 5 125

3, 6 125

2, 5 105

5, 6 105

1, 3 90

1, 2 25

4, 5 25

Total

1 165

1 125

2 250

1 105

1 105

1 90

3 75

2 50

965



A Detailed LayoutA Detailed Layout

Once a block plan has been selected, a detailed representation is created showing the exact size and shape of each center

Elements such as desks, machines, and storage areas can be shown

Drawings or models can be utilized

Options can be discussed and problems resolved


Customer InvolvementCustomer Involvement

Possible disadvantages

Can be disruptive Managing timing and volume can be

challenging Quality measurement can be difficult Requires interpersonal skills Layouts may have to be revised Multiple locations may be necessary


Customer InvolvementCustomer Involvement

Possible advantages

Increased net value to the customer Can mean better quality, faster delivery, greater

flexibility, and lower cost May reduce product, shipping, and inventory

costs May help coordinate across the supply chain Processes may be revised to accommodate the

customers’ role


Resource FlexibilityResource Flexibility

A flexible workforce can often require higher skills and more training and education

Worker flexibility can help achieve reliable customer service and alleviate bottlenecks

Resource flexibility helps absorb changes in workloads

The type of workforce may be adjusted using full-time or part-time workers


Resource FlexibilityResource Flexibility

The volume of business may affect the type of equipment used

Break-even analysis can be used to determine at what volumes changes in equipment should be made


Break-Even AnalysisBreak-Even Analysis

Process 2: Special-purpose equipment

Process 1: General-purpose equipment

Break-even quantity

To

tal c

ost

(d

olla

rs)

Units per year (Q)

F2

F1

Figure 3.7 – Relationship Between Process Costs and Product Volume



Q = Fm – Fb

cb –

cm

BBC is deciding whether to weld bicycle frames manually or to purchase a welding robot. If welded manually, investment costs for equipment are only $10,000. the per-unit cost of manually welding a bicycle frame is $50.00 per frame. On the other hand, a robot capable of performing the same work costs $400,000. robot operating costs including support labor are $20.00 per frame.

At what volume would BBC be indifferent to these alternative methods?

welded manually (Make)

welded by robot (Buy)

Fixed costs $10,000 $400,000

Variable costs $50 $20

=

$10,000 – $400,000

$20 – $50 = 13,000 frames


Capital IntensityCapital Intensity

Automation is one way to address the mix of capital and labor

Automated manufacturing processes substitute capital equipment for labor

Typically require high volumes and costs are high

Automation might not align with a company’s competitive priorities



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



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



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


Strategic FitStrategic 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


Decision Patterns for ServicesDecision Patterns for Services

Front office

Hybrid office

Back office

Low customer-contact process

• Less complexity, less divergence, more line flows

• Less customer involvement• Less resource flexibility• Capital intensity varies with

volume

High customer-contact process

• More complexity, more divergence, more flexible flows

• More customer involvement• More resource flexibility• Capital intensity varies with

volume

Figure 3.8 – Decision Patterns for Service Processes

LowHighCustomer contact and customization

Maj

or

pro

ces

s d

ecis

ion

s


Decision Patterns for ManufacturingDecision Patterns for Manufacturing

Processes can be adjusted for the degree of customization and volume

Process flows can be made more or less linear

Competitive priorities must be considered when choosing processes



Competitive Priorities Process Choice

Competitive Priorities Production and Inventory Strategy

(b) Links with Production and Inventory Strategy

Top-quality, on-time delivery, and flexibility

Job process or small batch process

(a) Links with Process Choice

Low-cost operations, consistent quality, and delivery speed

Large batch, line, or continuous flow process

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

Figure 3.9 – Links of Competitive Priorities with Manufacturing Strategy



Continuousprocess

Jobprocess

Lineprocess

Large batchprocess

Small batchprocess

Batch processes

Figure 3.10 – Decision Patterns for Manufacturing Processes

Ma

jor

pro

ce

ss

d

ec

isio

ns

Low HighVolume

High-Volume, make-to-stock process

• Less process divergence and more line flows

• Less customer involvement• Less resource flexibility• More capital intensity

Low-Volume, make-to-order process

• More process divergence and more flexible flows

• More customer involvement• More resource flexibility• Less capital intensity


Gaining FocusGaining 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


Strategies for ChangeStrategies 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


Process ReengineeringProcess 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


Solved Problem 1Solved Problem 1

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 D E F

A ― 8 3 9 5

B ― 3

C ― 8 9

D ― 3

E ― 3

F ―

E

A

B

C D

F

Figure 3.11 – Current Layout



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 D E F

A ― 8 3 9 5

B ― 3

C ― 8 9

D ― 3

E ― 3

F ―

E F

A B

C

D

Figure 3.12 – Proposed Layout




Department Pair

Number of Trips (1) Distance (2)

wd Score (1) (2) Distance (3)

wd Score (1) (3)

A, B 8 2 16 1 8

A, C 3 1 3 2 6

A, E 9 1 9 1 9

A, F 5 3 15 3 15

B, D 3 2 6 1 3

C, E 8 2 16 1 8

C, F 9 2 18 1 9

D, F 3 1 3 1 3

E, F 3 2 6 2 6

wd = 92 wd = 67

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.

3 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Strategy 3...

Documents

Transcript of 3 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Strategy 3...