BIZ2121-04 Production & Operations Managementsjbae.pbworks.com/w/file/fetch/86530318/process...

BIZ2121 Production & Operations Management

Process Design

Sung Joo Bae, Associate Professor

Yonsei University School of Business

Disclaimer: Many slides in this presentation file are from the copyrighted material in 2010 by Pearson

Education, Inc. Publishing as Prentice Hall.

A Process View

Departments have their own objectives and resources to achieve them.

Processes may cross different department boundaries, and require resources

from several departments.

External environment

Internal and external customers

Inputs

• Workers

• Managers

• Equipment

• Facilities

• Materials

• Land

• Energy

Processes and operations

1 3

5

2 4

Information on performance

Outputs

• Goods

• Services

Figure 1.2

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 (cross-

functional coordination)

Process Strategy Decisions

• There are four basic process decisions:

Customer Involvement

• Low involvement

• High involvement

Process Structure

• Customer-contract position

(services)

• Product-process position

(manufacturing)

• Layout

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

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

Task Characteristics and Its Implications Adapted from Daft and Lengel’s work (1986)

Low

Unanalyzable Unanalyzable, Low Variety

Craft Technology

Task Variety

Unanalyzable, High Variety

Nonroutine Technology

High

Task Analyzability

Analyzable

Structure

- Rich media to resolve unanalyzable issues

- Small amount of information

Examples: Occasional face-to-face and

scheduled meetings, planning, telephone

Analyzable, Low Variety

Routine Technology

Structure

- Media of low richness

- Small amount of information

Examples: Rules, standard procedures,

standard information system reports,

memos, bulletins

Structure

- Rich media to resolve unanalyzable

issues

- Large amount of information to handle

exceptions

Examples: Frequent face-to-face and

group meetings, unscheduled meetings,

special studies and reports

Analyzable, High Variety

Engineering Technology

Structure

- Media of low richness

- Large amount of information to handle

exceptions

Examples: Quantitative databases, plans,

schedules, statistical reports, a few

meetings


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

processed and can be either line or flexible

Less

pro

cess

es

div

erg

en

ce a

nd

mo

re lin

e flo

ws

Service Process Structuring Less customer contact and customization

Process

Characteristics

(1)

Flexible flows with

Individual

processes

(1) (2) (3)

High interaction with Some interaction with Low interaction with customers, highly customers, standard customers, standardized customized service services with some options services

Front office

(2)

Flexible flows with

some dominant

paths, with

some exceptions to

how work

performed

(3)

Line flows, routine

work same with all

customers

Hybrid office

Back office

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

Less

co

mp

lexit

y, less

div

erg

en

ce

, an

d m

ore

lin

e f

low

s Product-Process Matrix

Less customization and higher volume

(1) (2) (3) (4)

Low-volume Multiple products with low Few major High volume, high

Process

Characteristics

(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

products, made to moderate volume products, standardization, to customer higher commodity order volume products

Job

process

Small batch

process

Batch processes

Large batch

process

Line

process

Continuous

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

- Example of OBM, 120 emp + 30 new emp

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

3

6

4

1

2

5

150’

Block Plan

100’

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

15,000 Sq. Ft.

Closeness 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 ―

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





4. Accounting ― 2

5. Education ― 1


Closeness Factors





4. Accounting ― 2

5. Education ― 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:

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

6

2

3

1

4

5

150’

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

100’

Figure 3.5 – Proposed Block Plan

2 2

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 xA xB yA yB

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 xA 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

6

2

3

1

4

5

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

1

2

5

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



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

1 3

1 6

3 15

2 12

2 20

2 16

2 2

1 1

2 6

3 27

1 2

2 2

Total 112

2 6

3 18

1 5

2 12

1 10

1 8

1 1

2 2

2 6

1 9

1 2

3 3

Total 82

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

Department Closeness Distance Score

Pair Factor

1, 6 165 1 165

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

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.

3 6 1

2 5 4

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

Application 3.2

Department

Pair

Closeness

Factor

Distance

Score

1, 6 165

3, 5 125

3, 6 125

2, 5 105

5, 6 105

1, 3 90

1, 2 25

4, 5 25

Total

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


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


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

Customer Involvement via Web?

Possible advantages & disadvantages?

Possible advantages

Disadvantages reduced?

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

Can be less disruptive

Managing timing and volume

can be less challenging

Quality measurement can be

done efficiently

Requires no interpersonal

skills

Layouts – no need to be

revised

Multiple locations not

necessary


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


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

To

tal co

st (

do

llars

)

Break-Even Analysis

Process 2: Special-purpose 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 (Make)

welded by robot (Buy)

Fixed costs $10,000 $400,000

Variable costs $50 $20

At what volume would BBC be indifferent to these alternative

methods?

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 (Make)

welded by robot (Buy)

Fixed costs $10,000 $400,000

Variable costs $50 $20

At what volume would BBC be indifferent to these alternative

methods?

Fm – Fb

Q = cb – cm =

$10,000 – $400,000

$20 – $50 = 13,000 frames

Custom Molds, Inc. Case

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

Different competitive priorities and

related processes

Mold Fabrication ◦ CP: Product flexibility,

quality, design Price and delivery is

OQs, but not OWs

◦ Job process

◦ High customer contact

◦ Highly skilled labor

◦ Divergent processes

Parts Manufacturing

◦ CP:Volume flexibility, cost (price), delivery speed

◦ Line (batch) process

◦ More capital intensive

◦ Less skilled labor

◦ Less divergent processes

Changing focus

Molds Fabricated

◦ 722(2006)

684(2007)

591(2008)

Parts Manufactured

o 47,200(2006)

67,150(2007)

114,850(2008)

13 machinists x 250 days/year 5 days/mold

= appx. 650 molds/year

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

Processes shown in flow chart

Lead time: 9 weeks

Lead time: 3 weeks

1 week

2-4 weeks assigned

3-5 days

1 day

1 day

1 day

1 week

2 days

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

◦ HP, S.C. J&J, Ricoh, Mitsubishi

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

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

Majo

r

pro

cess

decis

ion

s

Decision Patterns for

Manufacturing

Low-Volume,

make-to-order process

• More process divergence and more flexible flows

• More customer involvement

• More resource flexibility

• Less capital intensity

Job

process

Small batch

process

Batch processes

Large batch

process

High-Volume, make-to-stock process

• Less process divergence and more line flows

• Less customer involvement

• Less resource flexibility

Line

process

Continuous

process

• 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

◦ HP, S.C. J&J, Ricoh, Mitsubishi

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

End of Process Design Session

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 ―

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.

E

B

F

A

C

D

Figure 3.11 – Current Layout

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 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

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