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Business Process

A logically related sets of tasks or activities geared toward some business outcome.

1. Primary (value-added)2. Support3. Developmental

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Versus the “functional” Perspective

Developing new products (Chapter 5)

Evaluating suppliers (Chapter 9)

Developing sales & operations plans (Chapter 11)

Suppliers Purchasing Engineering Operations Finance Marketing Customers

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Relationship Map

Family 1Supplier

Family 2Supplier

Family 3Supplier

Family 10Supplier

Supplier of“Cockpits”

AssemblyPlant

Tier 1

Tier 2

AutomotiveOEM

Physical andInformation

Flows

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A Detailed Process Map

DealerFaxesOrder

PaperOrder

Created

Order SitsIn FaxIn Box

Internal MailDelivers Fax

Order SitsIn Clerk’s

In Box

ClerkProcesses

Order

Is ItemIn Stock?

WorkerPicksOrder

Clerk NotifiesDealer and

Passes OrderOn to Plant

InspectorChecksOrder

Transport FirmDelivers Order

DealerReceives

Order

2 minutes0.5% of orders incorrect1 to 3 hours

2 hours on averageNo history of lost,damaged, or incorrectdeliveries

YES

NO

10 to 45 minutes20 minutes on average

0 to 2 hours1 hour on average0.5 to 1.5 hours

1 hour on average1% of orders lost

0 to 4 hours2 hours on average

4% oforders lost

5 minutes

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Mapping Symbols

Typical, but others may be used as appropriate

Start or finishing point

Step or activity in the process

Decision point (typically requires a “yes” or “no”)

Input or output (typically data or materials

Document created

Delay

Inspection

Move activity

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Improving Business Processes: Guidelines

• Attack each delay– What causes it?– How long is it?– How could we reduce its impact?

• Examine each decision point– Is this a real decision or just a checking activity?– If the latter, can we automate or eliminate it?

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More Guidelines

• Look for loops– Why is this loop here?– Would we need to loop if we didn’t have any failures

in quality, planning, etc?

• Process steps– What is the value of this activity, relative to its cost?– Is this a necessary activity (support or

developmental?), or something else?

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Process Measures

Productivity

Efficiency

Cycle Time

Benchmarking

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Productivity Measures

Productivity = OutputsInputs

Partial, Multifactor, and Total measures of productivity

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Examples

Batteries ProducedMachine + Direct Labor Hours

Total Nightly Sales ($)Total Nightly Costs

Batteries ProducedDirect Labor Hours

Single factorproductivity ratio:

Multifactor:

Total:

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Efficiency

A comparison of a company’s actualperformance to some standard

Usually expressed as a percentage

Standard is an estimate of what should be produced based on studies or historical results

Efficiency = 100%(actual/standard)

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Cycle Time

The total time required to complete a process from start to finish.

The percent of cycle time spent on

value-added activities is a measure of

process effectiveness.

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Cycle Time Drivers

Causes that increase cycle time are:Waiting times

Unneeded steps

Rework

Unnecessary controls or testing

Outmoded technology

Lack of information or training

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Benchmarking

A comparison of a company’s performance to the performance of:

Other firms in its industry (strategic)

Firms identified as “world-class” (process)

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Classic Mfg. Process Types(in order of decreasing volume)

• Continuous Flow

• Production Line (Flow Line)

• Batch (High Volume)

• Batch (Low Volume)

• Job Shop

• Project

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Continuous Flow

• Large production volumes

• High level of automation

• Basic material passed along, converted as it moves

• Usually very high fixed costs, inflexible

Oil refinery, fiber formation, public utilities

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Production Line aka Flow Line and Repetitive Manufacturing

High-volume production of standard products or “design window”

• Processes arranged by product flow• Often “paced”• Highly efficient, but not too flexible

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Batch I

• Somewhere in between job shop and line processes

• Moderate volumes, multiple products

• Production occurs in “batches”

Garment manufacturing, carton makers, etc.

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Batch II

Layout is a cross between that found in a line and that found in a job shop:

Group Technology

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Job Shop

• Low volume, one-of-a-kind products• Job shops sell their capability

• Highly flexible equipment, skilled workers• Equipment arranged by function

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Project

• Used when a product is:– one-of-a-kind– too large to be moved

• Resources moved to where needed

• Equipment, people, etc. are highly flexible

• Finite duration, often with deadlineBuilding projects, equipment installation

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Mixing Together the Process Types ...

Spindles

Arms andLegs

SeatsBATCH forfabricatingparts ...

ASSEMBLYLINE forputting togetherfinal product

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Comparing Process Types...

Job Shop Batch Line

Volume Very Low High

Variety Very High Low

Skills Broad Limited

Advantage Flexibility Price and Delivery

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Product – Process Matrix

One of a Kind Low Volume

Multiple Products Moderate Volumes

Few Major ProductsHigh Volume

Commodity Products

Job Shop

Batch

Line Very Poor Fit

Very Poor Fit

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Life-Cycle Planning Framework

IntroductionStage

GrowthStage

MaturityStage

Decline Stage

TotalMarketSales

Time

• Centralized inventory• Speed

•High product availability

•Flexibility to handle variation

•Availability•Achieve break- even volumes as soon as possible

Less need for flexibility

More selective,targeted efforts

Value-addedservice

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What is “Customization”?

“Customization occurs when a customer’s unique requirements directly affect the timing and nature of operations and supply chain activities”

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Customization Point Model

DESIGNSOURCINGMATERIALS

FABRICATIONASSEMBLY/FINISHING

DISTRIBUTION

ETO MTO MTSATO

Definitions:

ETO – engineer to order

MTO – make to order

ATO – assemble-to-order

MTS – make to stock

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Layout Decision Models

• Product-based layout– Usually best for a line operation– Cycle time a primary measure

• Functional (Process-based) layout– Usually best for a job shop– Distance between steps a measure

• Cellular layout– Usually best for batch processes