chapter 3-process-design-strategy

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

Part 1Part 1

Chapter 1:Chapter 1: Operations As a Operations As a Competitive WeaponCompetitive Weapon

Chapter 2:Chapter 2: Operations StrategyOperations Strategy

Chapter 3:Chapter 3: Process Design StrategyProcess Design Strategy


Process Design Process Design StrategyStrategy

Chapter 3Chapter 3


We’ll Discuss...We’ll Discuss...

What Is Process Design?What Is Process Design?

Major Process Design DecisionsMajor Process Design Decisions

Process StructureProcess Structure Customer InvolvementCustomer Involvement Vertical IntegrationVertical Integration Resource FlexibilityResource Flexibility Capital IntensityCapital Intensity


What Is Process Design?What Is Process Design?

The selection of the inputs, resources, work flows, and The selection of the inputs, resources, work flows, and methods that transform inputs into outputsmethods that transform inputs into outputs

Includes:Includes:

Which process are to be done in-house or Which process are to be done in-house or outside?outside?

Proper mix of human skills and equipmentProper mix of human skills and equipment Quality, Capacity, InventoryQuality, Capacity, Inventory Impact on environmentImpact on environment

Decisions must be consistent with Competitive PrioritiesDecisions must be consistent with Competitive Priorities


Process Decisions must be made when:Process Decisions must be made when:

Gap exists between competitive priorities and capabilitiesGap exists between competitive priorities and capabilitiesA new or substantially modified service or product is being A new or substantially modified service or product is being offeredofferedQuality must be improvedQuality must be improvedCompetitive priorities have changedCompetitive priorities have changedDemand for a service or product is changingDemand for a service or product is changingThe cost or availability of inputs have changedThe cost or availability of inputs have changedCompetitors are gaining by using a new processCompetitors are gaining by using a new processNew technologies are availableNew technologies are available


Effective Process Design

Major Decisions for Major Decisions for Effective Process DesignEffective Process Design

Vertical Integration• In-house• Outsource

Capital Intensity• Low automation• High automation

Customer Involvement• Low involvement• High involvement

Resource Flexibility• Specialized• Enlarged

Process Structure• Customer-contact

Matrix (services)• Product-process

Matrix (manufacturing)

Strategy for Change• Process

Reengineering• Process

Improvement

Figure 3.1Figure 3.1


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.

Vertical Integration refers to the degree to which the firm’s own production system or service facility handles the entire value chain.

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.


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 Structures in Services Process Structures in Services


People What is processed Possessions

Active, visible Contact intensity Passive, out of sight

Personal Personal attention Impersonal

Face-to-face Method of delivery Regular mail

Present Physical presence Absent

High ContactHigh Contact DimensionDimension Low ContactLow Contact

Process Structures in Services Process Structures in Services

Customer-Contact Matrix for Customer-Contact Matrix for Service ProcessesService 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)Jumbled flows,complex work withmany exceptions

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

(3)Line flows, routinework easilyunderstood byemployeesLe

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Process Structure in ManufacturingProcess Structure in Manufacturing

Manufacturing processes convert materials into goods that have a physical form.

Process choicesProcess choices

Project Process: Project Process: A process characterized by a high degree of customization, the A process characterized by a high degree of customization, the large scope of each product, and the release of substantial resources once it is large scope of each product, and the release of substantial resources once it is completed.completed.

Job ProcessJob Process: A process with the flexibility needed to produce a wide variety of : A process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable complexity and divergence products in significant quantities, with considerable complexity and divergence in the steps performed.in the steps performed.

Batch ProcessBatch Process: A process that differs from the job process with respect to : A process that differs from the job process with respect to volume, variety and quantity.volume, variety and quantity.

Line ProcessLine Process: A process that lies between the batch and continuous processes : A process that lies between the batch and continuous processes on the continuum; volumes are high and products are standardized, which allows on the continuum; volumes are high and products are standardized, which allows resources to be organized around particular products.resources to be organized around particular products.

ContinuousContinuous FlowFlow: The extreme end of high-volume, standardized production and : The extreme end of high-volume, standardized production and rigid line flows, with production not starting and stopping for long time intervals.rigid line flows, with production not starting and stopping for long time intervals.

Product-Process Matrix for ProcessesProduct-Process Matrix for Processes

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

Less

Com

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Div

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Mor

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low

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Less Customization and Higher VolumeLess Customization and Higher Volume

Product DesignProduct Design

Continuousprocess

Projectprocess

Lineprocess

Batchprocess

Jobprocess

One-of-a-kind One-of-a-kind products, made products, made to customer to customer orderorder

Low volume, Low volume, low low standardizationstandardization

Multiple Multiple products, products, moderate moderate volumevolume

Few major Few major products, products, higher volumehigher volume

High volume, High volume, high high standardizationstandardization

Production and Inventory StrategiesProduction and Inventory Strategies Make-to-order strategyMake-to-order strategy: A strategy used by manufactures that : A strategy used by manufactures that

make products to customer specifications in low volume.make products to customer specifications in low volume.

Assemble-to-orderAssemble-to-order strategystrategy: A strategy for producing a wide : A strategy for producing a wide variety of products from relatively few assemblies and variety of products from relatively few assemblies and components after the customer orders are received.components after the customer orders are received.

Make-to-stockMake-to-stock strategystrategy: A strategy that involves holding items : A strategy that involves holding items in stock for immediate delivery, thereby minimizing customer in stock for immediate delivery, thereby minimizing customer delivery times.delivery times.

Mass productionMass production: A term sometimes used in the popular press : A term sometimes used in the popular press for a line process that uses the make-to-stock strategy.for a line process that uses the make-to-stock strategy.

Customer InvolvementCustomer InvolvementGood or Bad?Good or Bad?

Improved Competitive CapabilitiesImproved Competitive Capabilities: More customer : More customer involvement can mean better quality, faster delivery, involvement can mean better quality, faster delivery, greater flexibility, and even lower cost.greater flexibility, and even lower cost.

– Customers can come face-to-face with the service providers, Customers can come face-to-face with the service providers, where they can ask questions, make special requests on the where they can ask questions, make special requests on the spot and provide additional information. spot and provide additional information.

– Self-service is the choice of many retailers.Self-service is the choice of many retailers.

Customer InvolvementCustomer InvolvementGood or Bad?Good or Bad?

• However customer involvement can be disruptive and make However customer involvement can be disruptive and make the process less efficient.the process less efficient.

– Greater interpersonal skills are required.Greater interpersonal skills are required.– Quality measurement becomes more difficult.Quality measurement becomes more difficult.


Vertical IntegrationVertical Integration

KingSoopers

In-houseIn-houseprocessesprocesses

BackwardBackwardintegrationintegration

Raw materials(eggs, flour, sugar)

ForwardForwardintegrationintegration

Customers(grocery stores)

Figure 3.9Figure 3.9

Resource FlexibilityResource Flexibility Flexible workforceFlexible workforce: A workforce whose members are : A workforce whose members are

capable of doing many tasks, either at their own capable of doing many tasks, either at their own workstations or as they move from one workstation to workstations or as they move from one workstation to another.another.

– Job EnlargementJob Enlargement– Job RotationJob Rotation– Job EnrichmentJob Enrichment

Resource FlexibilityResource Flexibility

• Flexible equipmentFlexible equipment: Low volumes mean that process : Low volumes mean that process designers should select flexible, general-purpose designers should select flexible, general-purpose equipment.equipment.

Capital IntensityCapital Intensity

Capital IntensityCapital Intensity is the mix of equipment and human skills in the is the mix of equipment and human skills in the process; the greater the relative cost of equipment, the greater is process; the greater the relative cost of equipment, the greater is the capital intensity.the capital intensity.

AutomationAutomation is a system, process, or piece of equipment that is is a system, process, or piece of equipment that is self-acting and self-regulating.self-acting and self-regulating.

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

Flexible automationFlexible automation is a manufacturing process that can be is a manufacturing process that can be changed easily to handle various products.changed easily to handle various products.

Economies of ScopeEconomies of Scope

Economies of scope Economies of scope are economies that reflect the ability to are economies that reflect the ability to produce multiple products more cheaply in combination than produce multiple products more cheaply in combination than separately.separately.

With economies of scope, the often conflicting competitive With economies of scope, the often conflicting competitive priorities of customization and low price become more priorities of customization and low price become more compatible.compatible.

Strategies for ChangeStrategies for Change

Process ReengineeringProcess Reengineering is a fundamental rethinking and drastic is a fundamental rethinking and drastic redesign of processes to improve performance dramatically in redesign of processes to improve performance dramatically in terms of cost, quality, and speed.terms of cost, quality, and speed.

Process improvementProcess improvement is the systematic study of the activities is the systematic study of the activities and flows of each process to improve it.and flows of each process to improve it.

chapter 3-process-design-strategy

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