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1OM, Ch. 7 Process Selection, Design, and Analysis

2009 South-Western, a part of Cengage Learning

PROCESS SELECTION,

DESIGN, AND ANALYSIS

CHAPTER 7

DAVID A. COLLIER

AND

JAMES R. EVANS

OM

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Three Types of Goods and Services

1. Custom, ormake-to-order, goods andservicesare generally produced and deliveredas one-of-a-kind or in small quantities, and are

designed to meet specific customersspecifications.

Examples include ships, weddings, certain

jewelry, estate plans, buildings, andsurgery.

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2. Option,or assemble-to-order, goods andservicesare configurations of standard parts,subassemblies, or services that can be selected

by customers from a limited set.

Examples are Dell computers, Subwaysandwiches, machine tools, and travel agent

services.

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3. Standard, ormake-to-stock, goods andservicesare made according to a fixed design,and the customer has no options from which to

choose.

Examples: appliances, shoes, sportinggoods, credit cards, online Web-based

courses, and bus service.

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Four Types of Processes

1. Projectsare large-scale, customized initiativesthat consist of many smaller tasks and activitiesthat must be coordinated and completed to

finish on time and within budget.

Characteristics: one-of-a-kind, large scale,complex, resources brought to site; wide variationin specs and tasks.

Examples of projects: legal defense preparation,construction, customer jewelry, consulting, andsoftware development.

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2. Job shop processesare organized aroundparticular types of general-purpose equipment thatare flexible and capable of customizing work for

individual customers. Characteristics: Significant setup and/or

changeover time, batching, low to moderate volume,many routes, many different products, high work-

force skills, and customized to customers specs. Examples: Many small manufacturing companies

are set up as job shops, as are hospitals, legalservices, and some restaurants.


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3. Flow shop processesare organized arounda fixed sequence of activities and processsteps, such as an assembly line, to produce a

limited variety of similar goods or services.

Characteristics: Little or no setup time,dedicated to small range of goods or

services that are similar, similar sequenceof process steps, moderate to highvolume.


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Four Types of Processes3. Flowshops continued

An assembly line is a common example of

a flow shop process. Many option-orientedand standard goods and services areproduced in flow-shop settings.

Examples: automobiles, appliances,insurance policies, checking accountstatements, and hospital laboratory work.


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4. Acontinuous flow processcreates highly standardizedgoods or services, usually around the clock in very highvolumes.

Characteristics: not made from discrete parts, veryhigh volumes in a fixed processing sequence, highinvestment in system, 24-hour/7-day continuousoperation, automated, dedicated to a small range of

goods or services. Examples: chemical, gasoline, paint, toy, steel

factories; electronic funds transfer, credit cardauthorizations, and automated car wash.


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Product-Process

Matrix

Exhibit 7.2

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Process Choice in Services

Apathwayis a unique route through a servicesystem. Pathways can be customer- orprovider-driven, depending on the level of

control that the service firm wants to ensure.

Theservice encounter activity sequenceconsists of all the process steps and associated

service encounters necessary to complete aservice transaction and fulfill customers wantsand needs.

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Service Positioning Matrix

Customer-routed servicesare those that offercustomers broad freedom to select the pathways thatare best suited for their immediate needs and wants,

from many possible pathways through the servicedelivery system.

The customer decides what path to take through theservice delivery system with only minimal guidancefrom management.

Examples include searching the Internet, museums,health clubs, and amusement parks.


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Service Positioning Matrix

Provider-routed servicesconstrain customersto follow a very small number of possible andpredefined pathways through the service system.

A newspaper dispenser is an extreme example ofa service system design with only one pathway,thus allowing a single service encounter activity

sequence.

Logging on to your secure online bank account isprovider-routed.


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Exhibit 7.3

Source: Adapted from D. A. Collier

and S. M. Meyer, A ServicePositioning Matrix,International

Journal of Production and

Operations Management, 18, no. 12,

1998, pp. 11231244.Also see D. A.

Collier and S. Meyer, An Empirical

Comparison of Service Matrices,

International Journal of Operations

and Production Management, 2000

(no. 56), pp. 705729.

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The hierarchy of workis defined as:

(1) Task(2) Activity(3) Process

(4) Value Chain

Ataskis a specific unit of work required to create anoutput. An example is drilling a hole in a steel part orcompleting an invoice.

Anactivityis a group of tasks (sometimes called a

workstation) needed to create and deliver an intermediateor final output. Workstations might be a position on anassembly line, a manufacturing cell, or an office cubicle.

Value chainandprocesshave been previously defined.

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Aprocess map (flowchart)describes the sequence of all

process activities and tasks necessary to create and deliver adesired output or outcome.

A process map can include the flow of goods, people,information, or other entities, as well as decisions that must

be made and tasks that are performed.

Process maps document how work either is, or should be,accomplished, and how the transformation process createsvalue.

Process maps delineate the boundaries of a process. Aprocess boundaryis the beginning or end of a process.

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Aprocess flowchart is the basis for value stream

mapping, service blueprinting, and service maps.

Service blueprintsadd a line of visibility thatseparates the back and front office (rooms) as

shown in Exhibit 7.5.

Many names are used for the analysis anddevelopment of process flowcharts, so dont let

corporate fads and buzzwords confuse youthebasics of process analysis dont change, just thebuzzwords and consultants sales pitch!

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Automobile Repair

Flowchart

Exhibit 7.5

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Value Stream Mapping

Thevalue streamrefers to all value-added activitiesinvolved in designing, producing, and deliveringgoods and services to customers.

A value stream map (VSM) shows the process flowsin a manner similar to a traditional process flowchartor service blueprint.

Traditional flowcharting, service blueprinting, andvalue stream mapping all try to analyze wait andprocess times, bottleneck work stations, process

throughput, and so on.

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Value Stream Mapping

However, the difference between VSM and theseother flowcharting and analysis approaches lies inthat value stream maps highlight value-added

versus non-value-added activities, and includecosts associated with work activities for both value-and non-value added activities.

That is, VSM tries to include the economics of the

process on the flowcharts.

There are many formats for VSM.

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Examples ofnon-value-added activities include:

transferring materials between two nonadjacentworkstations

overproducing

waiting for service or work to do not doing work correctly the first time

requiring multiple approvals for a low cost electronictransaction

Eliminating non-value-added activities in a processdesign is one of the most important responsibilities ofoperations managers.

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1. Define the purpose and objectives of the process.

2. Create a detailed process or value stream map thatdescribes how the process is currently performed.

3. Evaluate alternative process designs. Identify anddefine appropriate performance measures for theprocess.

4. Select the appropriate equipment and technology.

5. Develop an implementation plan to introduce thenew or revised process design.

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Process Analysis and Improvement

Few processes are designed from scratch. Manyprocess design activities involve redesigning an existingprocess to improve performance. Managementstrategies to improve process designs usually focus onone or more of the following:

Increasing revenue by improving process efficiencyin creating goods and services and delivery of the

customer benefit package. Increasing agility by improving flexibility and

response to changes in demand and customerexpectations.

Chapter 7 Process Improvement Objectives

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Process Analysis and Improvement (continued)

Increasing product and/or service quality by reducingdefects, mistakes, failures, or service upsets.

Decreasing costs through better technology or

elimination of non-value-added activities.

Decreasing process flow time by reducing waiting timeor speeding up movement through the process andvalue chain.


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Reengineering and Creative Destruction

Reengineeringhas been defined as thefundamental rethinking and radical redesignof business processes to achieve dramatic

improvements in critical, contemporarymeasures of performance, such as cost,quality, service, and speed.


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Process Design and Resource Utilization

Utilizationis the fraction of time a workstationor individual is busy over the long run.

Understanding resource utilization is animportant aspect of process design andimprovement.

Utilization (U) = Resources Demanded [7.1]Resource Availability

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The average number of entities completed per unit

timethe output ratefrom a process is calledthroughput.

Throughput might be measured as parts per day,transactions per minute, or customers per hour,depending on the context.

Abottleneckis the work activity that effectivelylimits throughput of the entire process.

Wheres the bottleneck work activity in Exhibit 7.11?

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Exhibit 7.11 Simplified Restaurant Fulfillment Process

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Littles Law is a simple formula that explains the relationship

among flow time (T), throughput (R) and work-in-process (WIP).

WORK-IN-PROCESS = THROUGHPUT FLOW TIME

or

WIP = R T [7.3]

Flow time, orcycle time, is the average time it takes tocomplete one cycle of a process.

Littles Law provides a simple way of evaluating average

process performance. If we know any two of the three variables, we can compute

the third using Little's Law.

Chapter 7 Littles Law

om chapter 07

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