CH :3 PROCESS STRATEGY

Presented by: Brijesh kakdiya Disha kothari Manan dave Meeta thawrani Surjit goswami

Process strategy
Process strategy is the pattern of decisions made in managing processes so that they will achieve their competitive priorities. A process involves the use of an organizations resources to provide something of value.

Objective Meet or exceed customer requirement Meet cost and managerial goals

How Process Strategy fits the Operations Management Philosophy

Operations As a Competitive Operations Strategy Project Management Process Strategy Process design Process Analysis Process Performance and Quality Constraint Management Capacity planning Process Layout Lean Systems

Supply chain design Supply Chain integration Location Inventory Management Forecasting Sales and Operations Planning Resource Planning Scheduling

Process Strategy decision

Process strategy decision directly affect the process itself and indirectly the services and the products. Major process decisions include: Process Structure Customer Involvement Resource Flexibility Capital Intensity Process Structure determines how processes are designed relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics. Customer Involvement refers to the ways in which customers become part of the process and the extent of their participation.

Process Strategy Decisions(cont)

Resource flexibility is the ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions. Capital intensity is the mix of equipment and human skills in a process.

Major Decisions for Effective Process Design

Process Structure
Process structure : A process decision that determines the process type relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics. A good process strategy for a service process depends first and foremost on the type and amount of customer contact. Customer contact is the extent to which the customer is present, is actively involved, and receives personal attention during the process. Process Divergence: The extent to which the process is highly customized with considerable latitude as to how it is performed.

Dimensions of customer contact in service sector

TABLE 3.1 | | DIMENSIONS OF CUSTOMER CONTACT IN SERVICE PROCESSES

Dimension
Physical presence What is processed Contact intensity Personal attention Method of delivery

High Contact
Present People Active, visible Personal Face-to-face

Low Contact
Absent Possessions or information Passive, out of sight Impersonal Regular mail or e-mail

 Process Flow : Flexible flow: The customers, materials, or information move in diverse ways, with the path of one customer or job often crisscrossing the path that the next one will take. Line Flow: The customers, materials or information move linearly from one operation to the next, according to a fixed sequence. Service process Structuring Front office: A process with high customer contact where the service provider interacts directly with the internal or external customer. Hybrid office: A process with moderate levels of customer contact and standard services with some options available. Back office: A process with low customer contact and little service customization.

Customer-Contact Matrix for Service Processes

Less Customer Contact and Customization
Less Complexity, Less Divergence, More Line Flows

Service Package
(1) Process Characteristics
High interaction with customers, highly customized service

(2)
Some interaction with customers, standard services with some options

(3)
Low interaction with customers, standardized services

(1)
Flexible flows, complex work with many exceptions

Front office

(2)
Flexible flows with some dominant paths, moderate job complexity with some exceptions

Hybrid office

(3)
Line flows, routine work easily understood by employees

Back office

2007 Pearson Education

Process Structuring Process Structuring in Manufacturing in Manufacturing Process choice: A way of structuring the process by organizing
resources around the process or organizing them around the products. Job Process: A process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable complexity and divergence in the steps performed. Batch process: A process that differs from the job process with respect to volume, variety and quantity. Line process: A process that lies between the batch and continuous processes on the continuum; volumes are high and products are standardized, which allows resources to be organized around particular products. Continuous flow: The extreme end of high-volume, standardized production and rigid line flows, with production not starting and stopping for long time intervals.

Product-Process Matrix for Processes

Less Customization and Higher Volume Product Design
(1) (2) Low-volume Multiple products with low products, made to moderate volume to customer order (3) (4) Few major High volume, high products standardization, higher Continuous Flow volume

Less Complexity, Less Divergence, More Line Flows

Process Characteristics (1) Complex and highly customized process, unique sequence of tasks

Job process Small batch process Large batch process Line process Continuous process

(2) Disconnected line flows, moderately complex work

(3) Connected line, , highly repetitive work (4) Continuous flows

2007 Pearson Education

Production and Inventory Strategies

Make-to-order strategy: A strategy used by manufactures that make products to customer specifications in low volume. Assemble-to-order strategy: A strategy for producing a wide variety of products from relatively few assemblies and components after the customer orders are received. Postponement: the strategy of delaying final activities in the provision of a product until the orders are received. Mass customization: the strategy that uses highly divergent processes to generate a wide variety of customized products at reasonably low costs. Make-to-stock strategy: A strategy that involves holding items in stock for immediate delivery, thereby minimizing customer delivery times. Mass production: A term sometimes used in the popular press for a line process that uses the make-to-stock strategy.

Layout
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 steps 1. Gather information 2. Develop a block plan 3. Design a detailed layout Gather information: three types of information are needed
Space requirements by center Available space and Closeness factor

Required information

Block Plan
Block plan: A plan that allocates space and indicates placement of each operations

3 3 1

6 6 2
150

4 4
100

Closeness Matrix
A table that gives a measure of the relative importance of each pair of operations being located close together.

Closeness Factors Department 1. Administration 1 2 3 3 6 4 5 5 6 6 10

2. Social services
3. Institutions 4. Accounting 5. Education 6. Internal audit

1
3

1
9 2 1

Requirements
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 Department 1. Administration 1 2 3 3 6 4 5 5 6 6 10

2. Social services
3. Institutions 4. Accounting 5. Education 6. Internal audit

1
3

1
9 2 1

Developing 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: Closeness Factors a. Departments 1 and 6 close Department 1 2 3 4 5 together 1. Administration 3 6 5 6 2. Social services 8 1 1 b. Departments 3 and 5 close 3. Institutions 3 9 together 4. Accounting 2 c. Departments 2 and 3 close 5. Education 6. Internal audit together Departments 1 and 5 should remain at their current locations

6 10

The 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

d AB

x A xB y A y B
2

where dAB xA yA xB yB

= distance between points A and B = x-coordinate of point A = y-coordinate of point A = x-coordinate of point B = y-coordinate of point B

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

d AB x A xB y A y B

A 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 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 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

Possible advantages

Resource Flexibility
Flexible workforce: A workforce whose members are capable of doing many tasks, either at their own workstations or as they move from one workstation to another. Worker flexibility can be one of the best ways to achieve reliable customer service and alleviate capacity bottlenecks. This comes at a cost, requiring greater skills and thus more training and education. Flexible equipment: Low volumes mean that process designers should select flexible, general-purpose equipment. 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 parttime workers 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 Analysis

Total cost (dollars)

Process 2: Special-purpose equipment Break-even quantity

F2 F1

Process 1: General-purpose equipment

Units per year (Q)

Capital Intensity
Capital Intensity is the mix of equipment and human skills in the process; the greater the relative cost of equipment, the greater is the capital intensity. Automation is a system, process, or piece of equipment that is selfacting and self-regulating. 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 companys competitive priorities Fixed automation is a manufacturing process that produces one type of part or product in a fixed sequence of simple operations.

Flexible (or programmable) automation is a manufacturing process that can be changed easily to handle various products. 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

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

Decision Patterns for Service Processes

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.

Front office

Hybrid office
Low customer-contact process
Less complexity, less divergence, more line flows Less customer involvement Less resource flexibility Capital intensity varies with volume.. 2007 Pearson Education

Back office

Low

High

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

Decision Patterns for Manufacturing

Competitive Priorities
Top-quality, on-time delivery, and flexibility Low-cost operations, consistent quality, and delivery speed (a) Links with Process Choice Competitive Priorities Top-quality, on-time delivery, and flexibility Delivery speed and variety Low-cost operation and delivery speed (b) Links with Production and Inventory Strategy Production and Inventory Strategy Make-to-order

Process Choice
Job process or small batch process Large batch, line, or continuous flow process

Assemble-to-order

Make-to-stock

Decision Patterns for Manufacturing Processes

Major process decisions
Low-Volume, make-to-order process
More complexity, more divergence, more flexible flows More customer involvement More resource flexibility Less capital intensity Job process Small batch process Large batch process

High-Volume, make-to-stock process

Less complexity, less divergence, more line flows Less customer involvement Less resource flexibility More capital intensity Low 2007 Pearson Education

Line process

Continuous process
High

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

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

Process Reengineering
TABLE 3.2 Element Critical processes | KEY ELEMENTS OF REENGINEERING Description Emphasis on core business processes, normal process improvement activities can continue with other processes Strong leadership from senior executives to overcome resistance A team with members from each functional area charged with carrying out the project Primary enabler of the project as most reengineering projects involve information flows Start with the way the customer wants to deal with the company and includes internal and external customers Must understand the current processes throughout the organization

Strong leadership

Cross-functional teams

Information technology

Clean-slate philosophy

Process analysis

Thank you