Process Strategy

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Presented by:

Brijesh kakdiya

Disha kothari

Manan dave

Meeta thawrani

Surjit goswami

CH :3 PROCESS STRATEGY

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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 organization’s resources to provide something of value.

• Objective

• Meet or exceed customer requirement

• Meet cost and managerial goals

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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

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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.

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Process Strategy Decisions(con’t)

• 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.

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Major Decisions for Effective Process Design

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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.

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Dimensions of customer contact in service sector

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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.

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Customer-Contact Matrix for Service Processes

Less Customer Contact and CustomizationLess Customer Contact and Customization

ServiceService Package Package

Front office

Hybrid office

Back office

(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,complex work withmany exceptions

(2)Flexible flows withsome dominantpaths, moderate job complexity withsome exceptions

(3)Line flows, routinework easilyunderstood byemployeesL

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Process Structuring 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.

Process Structuring in Manufacturing


Product-Process Matrix for Processes

(1)(1) (2)(2) (3)(3) (4)(4)Low-volumeLow-volume Multiple products with low Multiple products with low Few majorFew major High volume, highHigh volume, highproducts, madeproducts, made to moderate volume to moderate volume productsproducts standardization,standardization,to customer to customer higherhigher Continuous Flow Continuous Flow orderorder volumevolume

ProcessProcessCharacteristicsCharacteristics

(1)(1)Complex and highly Complex and highly customized process, customized process, unique sequence of unique sequence of taskstasks

(2)(2)Disconnected line Disconnected line flows, moderately flows, moderately complex workcomplex work

(3)(3)Connected line, , Connected line, , highly repetitive workhighly repetitive work

(4)(4)Continuous flowsContinuous flows

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Less Customization and Higher VolumeLess Customization and Higher Volume

Product DesignProduct Design

Continuousprocess

Jobprocess

Lineprocess

Large batchprocess

Small batchprocess

Batch Processes

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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.

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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

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

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Required information

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Block Plan

1 2

3 4

5

6

150’

100’

1 2

3 4

5

6

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

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Closeness Matrix

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

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Requirements

• There are two absolute requirements for the new layout

1. Education should remain where it is

2. Administration should remain where it is

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

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 ―

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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

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 ―

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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

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

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

22BABAAB yyxxd

BABAAB yyxxd

www.company.comCopyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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

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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

• 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

• 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

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• 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

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Break-Even Analysis

Process 2: Special-purpose equipment

Process 1: General-purpose equipment

Break-even quantity

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Units per year (Q)

F2

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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 self-acting 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 company’s competitive priorities

•Fixed automation is a manufacturing process that produces one type of part or product in a fixed sequence of simple operations.

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•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

Front office

Hybrid office

Back office

Low High

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.

Major process decisions


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

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Decision Patterns for Manufacturing

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

Job process or small batch process

(a) Links with Process Choice

Low-cost operations, consistent quality, and delivery speed

Low-cost operations, consistent quality, and delivery speed

Large batch, line, or continuous flow process

Large batch, line, or continuous flow process


Top-quality, on-time delivery, and flexibility Make-to-orderMake-to-order

Delivery speed and varietyDelivery speed and variety Assemble-to-orderAssemble-to-order

Low-cost operation and delivery speedLow-cost operation and delivery speed Make-to-stockMake-to-stock


Decision Patterns for Manufacturing Processes

Major process decisions

Continuousprocess

Jobprocess

Lineprocess

Large batchprocess

Small batchprocess

Batch Processes

High-Volume, make-to-stock process

• Less complexity, less divergence, more line flows

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

Low-Volume, make-to-order process

• More complexity, more divergence, more flexible flows

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

Low 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 | 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

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Thank you…

Process Strategy

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