Krajewski Om9 PPT 03

3 Developing a Process Strategy
For Operations Management, 9e by

PowerPoint Slides
Krajewski/Ritzman/Malhotra
by Jeff Heyl © 2010 Pearson Education
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–1
Process Strategy across the
Organization
 Processes are everywhere and are the
basic unit of work.
 Consider the following two major points:
(1) supply chains have processes and
(2) processes are found throughout the
whole organization, and not just in
operations.

Supply Chains Have Processes
 Supply chain processes are the “business processes that
have external customers or suppliers.”

Processes Are Not Just in
Operations
 Processes are found in accounting, finance, human resources,
management information systems, and marketing.
Organizational structure throughout the many diverse industries
varies, but for the most part, all organizations perform similar
business processes.

Process Strategy
 Principles of process strategy

1. 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 Strategy Decisions
 There are four basic process decisions

1. Process structure including layout
2. Customer involvement
3. Resource flexibility
4. Capital intensity

Process Strategy Decisions
Process Structure
• Customer-contract position
(services)
• Product-process position
(manufacturing)
• Layout
Customer Involvement Resource Flexibility
• Low involvement • Specialized
• High involvement • Enlarged
Capital Intensity
• Low automation
• High automation
Strategy for Change

• Process reengineering
• Process improvement
Effective Process
Design
Major Decisions for Effective
Processes
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

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 include
1. Process divergence deals with customization
and the latitude as to how tasks are performed
2. Flow is how customers, objects, or information
are process and can be either line of flexible
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 10

Service Process Structuring
Less customer contact and customization
(1) (2) (3)

Less processes divergence and more line flows
High interaction with Some interaction with Low interaction with

Process customers, highly customers, standard customers, standardized
Characteristics customized service services with some options services
(1)
Flexible flows with
Individual
Front office
processes
(2)
Flexible flows with
some dominant
paths, with Hybrid office
some exceptions
to how work
performed
(3)
Line flows, routine Back office
work same with all
customers
Figure 3.2 – Customer-Contact Matrix for Service Processes

Product-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 Matrix
Less customization and higher volume
(1) (2) (3) (4)
Low-volume Multiple products with low Few major High volume, high
Process products, made to moderate volume products, standardization,
to customer higher commodity
Characteristics
order volume products
Less complexity, less divergence, and more line flows
(1)
Customized process, Job
with flexible and process
unique sequence of
tasks
Small batch
process
(2)
Disconnected line Batch processes
flows, moderately
complex work Large batch
process
(3)
Connected line, highly Line
repetitive work process
(4) Continuous
Continuous flows process
Figure 3.3 – Product-Process Matrix for Processes

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

Layout
 Gather information on space requirements,

available space, and closeness factors
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

Block Plan
A plan that allocates space and indicates placement of each
operation.
3 6 4
100’
1 2 5
150’
Figure 3.4 – Current Block Plan for the Office of Budget Management
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 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 ―

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 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 ―

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 Department 1 2 3 4 5 6
close together 1. Administration ― 3 6 5 6 10
b. Departments 3 and 5 2. Social services ― 8 1 1
close together 3. Institutions ― 3 9
4. Accounting ― 2
c. Departments 2 and 3
5. Education ― 1
close together 6. Internal audit ―
Departments 1 and 5 should
remain at their current locations
Developing a Block Plan
a. Departments 1 and 6 close together
b. Departments 3 and 5 close together
c. Departments 2 and 3 close together
6 2 3
100’
1 4 5
150’
Figure 3.5 – Proposed Block Plan

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 2
where
dAB = distance between points A and B
xA = x-coordinate of point A
yA = y-coordinate of point A
xB = x-coordinate of point B
yB = y-coordinate of point B
The Weighted-Distance Method
 Rectilinear distance measures the distance

between two possible points with a series
of 90-degree turns
d AB  x A  xB  y A  yB
 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 3.1
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB = (20 – 80)2 + (10 – 60)2
Rectilinear Distance
dAB = |20 – 80| + |10 – 60| =

Application 3.1
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB = (20 – 80)2 + (10 – 60)2
= 78.1
Rectilinear Distance
dAB = |20 – 80| + |10 – 60| = 110

Calculating 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
3 6 4 6 2 3
1 2 5 1 4 5
Current Block Plan Proposed Block Plan

Current Plan Proposed Plan

Department Closeness Distance Weighted-Distance Distance Weighted-Distance
Pair Factor (w) (d) Score (wd) (d) Score (wd)
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


Department Closeness Distance Weighted-Distance Distance Weighted-Distance
Pair Factor (w) (d) Score (wd) (d) Score (wd)
1, 2 3 1 3 2 6
1, 3 6 1 6 3 18
1, 4 5 3 15 1 5
1, 5 6 2 12 2 12
1, 6 10 2 20 1 10
2, 3 8 2 16 1 8
2, 4 1 2 2 1 1
2, 5 1 1 1 2 2
3, 4 3 2 6 2 6
3, 5 9 3 27 1 9
4, 5 2 1 2 1 2
5, 6 1 2 2 3 3
Total 112 Total 82

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

Application 3.2
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 

Application 3.2
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.
Department Closeness Distance Score

Pair Factor 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 Based on the above
1, 3 90 results, propose a
better plan and
1, 2 25 3 75
evaluate it in terms
4, 5 25 1 25 of the load-distance
Total 1030 score.

Application 3.2
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.
Department Closeness Distance Score

Pair Factor 3 6 1
1, 6 165 1 165 2 5 4
3, 5 125 2 250
3, 6 125 1 125
2, 5 105 1 105
5, 6 105 1 105 Based on the above
1, 3 90 2 180 results, propose a
better plan and
1, 2 25 3 75
evaluate it in terms
4, 5 25 1 25 of the load-distance
Total 1030 score.

Application 3.2
Department Closeness
Pair Factor 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

Application 3.2
Department Closeness
Pair Factor Distance Score 4 6 1
1, 6 165 1 165 2 5 3
3, 5 125 1 125
3, 6 125 2 250
2, 5 105 1 105
5, 6 105 1 105
1, 3 90 1 90
1, 2 25 3 75
4, 5 25 2 50
Total 965

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

Customer 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 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 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 Analysis
Process 2:
Special-purpose
Total cost (dollars)
equipment
Break-even
quantity
Process 1:
F2 General-purpose
equipment
F1
Units per year (Q)
Figure 3.7 – Relationship Between Process Costs and Product Volume

Application 3.3
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.
welded manually welded by robot
(Make) (Buy)
Fixed costs $10,000 $400,000
Variable costs $50 $20
At what volume would BBC be indifferent to these alternative

methods?
Fm – Fb $10,000 – $400,000
Q = c –c = = 13,000 frames
b m $20 – $50

Capital 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

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

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

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

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 Services
High customer-contact
process
• More complexity, more
divergence, more flexible Front office
flows
• More customer involvement
Major process decisions
• More resource flexibility

• Capital intensity varies with
volume
Hybrid office
Low customer-contact
process
• Less complexity, less
divergence, more line flows
• Less customer involvement Back office
• Less resource flexibility
• Capital intensity varies with
volume High Low
Customer contact and customization
Figure 3.8 – Decision Patterns for Service Processes

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

Competitive Priorities Process Choice
Top-quality, on-time delivery, and Job process or

flexibility small batch process
Low-cost operations, consistent Large batch, line, or

quality, and delivery speed continuous flow process
(a) Links with Process Choice
Competitive Priorities Production and Inventory Strategy
Top-quality, on-time delivery, and

Make-to-order
flexibility
Delivery speed and variety Assemble-to-order
Low-cost operation
Make-to-stock
and delivery speed
(b) Links with Production and Inventory Strategy
Figure 3.9 – Links of Competitive Priorities with Manufacturing Strategy

Low-Volume,
make-to-order process Job
process
• More process divergence
and more flexible flows
• More customer involvement
• More resource flexibility Small batch
• Less capital intensity process
Batch processes
decisions
process
Major
Large batch
process
Line
process
High-Volume,
make-to-stock process
• Less process divergence
and more line flows Continuous
• Less customer involvement process
• Less resource flexibility
• More capital intensity Low High
Volume
Figure 3.10 – Decision Patterns for Manufacturing Processes

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 | 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 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 E B F
A ― 8 3 9 5
B ― 3
C ― 8 9 A C D
D ― 3
E ― 3 Figure 3.11 – Current Layout
F ―

Solved Problem 1
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 E C F
A ― 8 3 9 5
B ― 3
C ― 8 9
A B D
D ― 3
E ― 3 Figure 3.12 – Proposed Layout
F ―

Solved Problem 1
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.

Department Number of wd Score wd Score
Pair Trips (1) Distance (2) (1)  (2) Distance (3) (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


Krajewski Om9 PPT 03

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Krajewski Om9 PPT 03

Caricato da

Copyright:

Formati disponibili

3 Developing a Process Strategy

For Operations Management, 9e by

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–2

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

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–4

 Principles of process strategy

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–5

 There are four basic process decisions

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–6

Strategy for Change

 Customer contact is the extent to which

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–8

TABLE 3.1 | DIMENSIONS OF CUSTOMER CONTACT IN SERVICE

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3–9

 The three elements of the customer-

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 10

(1) (2) (3)

High interaction with Some interaction with Low interaction with

Figure 3.2 – Customer-Contact Matrix for Service Processes

 For manufacturing organization it brings

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 12

Figure 3.3 – Product-Process Matrix for Processes

 The physical arrangement of human and

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 14

 Gather information on space requirements,

Department Area Needed (ft2)

2. Social services 2,600

6. Internal audit 3,400

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 15

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 17

 There are two absolute requirements for

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 18

Figure 3.5 – Proposed Block Plan

 The weighted-distance method can be used

 Rectilinear distance measures the distance

 The objective is to minimize the weighted-

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 22

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

dAB = (20 – 80)2 + (10 – 60)2

dAB = |20 – 80| + |10 – 60| =

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 23

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

dAB = (20 – 80)2 + (10 – 60)2

dAB = |20 – 80| + |10 – 60| = 110

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 24

Current Block Plan Proposed Block Plan

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 25

Current Plan Proposed Plan

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 26

Current Plan Proposed Plan

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 27

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 28

Departments Trips between Departments

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 29

Department Closeness Distance Score

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 30

Department Closeness Distance Score

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 31

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 32

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 33

 Once a block plan has been selected, a

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 34

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 3 – 35