©The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin Chapter 4 Processes: Turning Resources into Capabilities

2-2 Learning Objectives Describe the functions and importance of concurrent engineering for product and service design. Describe the service system design matrix and understand the relationships between sales opportunities, customer contact, and process efficiency. Describe the quality function deployment processes. Describe the component matrices in the house of quality. Use the house of quality to structure quality function deployment. Differentiate between lean production, value stream mapping, Six Sigma, business process analysis, reengineering, and poka-yoke. Construct a process flow chart. Construct a service blueprint.

2-3 Process Definition A process is a collection of tasks and activities that together, and only together, transform inputs to outputs. Processes are organizing structures for resources, which provide the bridge between resources and capabilities.

2-4 Process Decisions and Process Choice Process decisions range from strategic to tactical Many require long-term investments All affect the firm’s ability to compete

2-5 General Layout Alternatives Product-oriented layout Process-oriented layout Cellular layout

2-6 General Layout Decisions The product-oriented layout –Provides resources in a fixed sequence –Matches the sequence of steps required to produce a product or service –Common in high-volume manufacturing

2-7 Product Oriented Layout Advantages Efficient production of standardized goods and services High processing speed Low cost per unit Disadvantages Lack of flexibility or customization Employee boredom/ dissatisfaction Quality problems

2-8 Process Oriented Layout Process-oriented Layout –Organized by function –Processing steps can be completed in any sequence –Products or customers can take any “route” necessary.

2-9 Process Oriented Layout Advantages Flexibility and customization Disadvantages Higher cost per unit Higher skilled, high cost employees Transport/wait time between departments Less consistency

2-10 Cellular Layouts Cellular layouts –A compromise of product and process layouts –Create “families” of products with similar process requirements –A “cell” contains all resources needed for family

2-11 Cellular Layouts Advantages Flexibility greater than a product-oriented layout Less costly than a process-oriented layout Less material transport/wait Fewer changeovers Disadvantages Duplication of resources

2-12 Choices for Manufacturers: The Product/Process Matrix Process Types Project – Unique, one-of-a-kind, products or customers. Generally large in size (building a bridge, installing a software system, implementing a major improvement effort) Job Shop – Predominantly manufacturing, high customization and flexibility, but higher volume than project. Batch Production – Groups of identical products or customers processed together through one step and then moved together to the next step. More limited product variety, higher production volume.

2-13 Process Types (continued) Assembly Line – Narrowly defined processes, made up of equipment with limited flexibility. Much higher volume. Still the possibility of some flexibility. Continuous Flow (Repetitive)– Equipment and workstations dedicated to a single thing. Very high volume. Very low flexibility. Best chance for automation. Choices for Manufacturers: The Product/Process Matrix

2-14 Process flow selection and the Product Process Matrix Tend to be product- oriented Can be either Tend to be process- oriented

2-15 Manufacturers match output to demand in different ways Make-to-stock (MTS) –Process activated to meet expected or forecast demand –Customer orders are served from target stocking level –Shorter lead time for stocked items MUCH longer for out of stock items Risk of obsolescence, shrink, etc. Make-to-order (MTO) –Process activated in response to an actual order May be either standard or custom product –WIP and finished goods inventory kept to a minimum –Tends to have longer response time Other Process Choices: Demand Linkage

2-16 Other Process Choices: Demand Linkage Assemble-to-order (ATO) –Partially manufactured and held in unfinished state –Customer order dictates final configuration –Quicker response than MTO; More flexible than MTS

2-17 Exhibit 4.7 Service System Design Matrix Choices for Service Providers: The Service System Design Matrix Customer contact & sales opportunity versus efficiency.

2-18 Linking Customer Needs to Product/Process Attributes - Quality Function Deployment (QFD) Process design is as important as product design Products and/or services must meet customer needs Processes must meet product and/or service needs

2-19 Quality Function Deployment: Phase 1 Example Phase 1: Product Planning –Translating customer wants and needs into technical design parameters that can guide development of products and services.

2-20 The relationships between the WHATs and the HOWs WHAT customers want HOW it can be achieved, in measurable technical terms The relationships among the HOWs Performance Goals for the HOWS The “House of Quality” Supports QFD by providing a structured framework for linking customer to product and process

2-21 Relative importance of the WHAT s Performance on WHAT ’s relative to competitors Performance goals achieved by competitors Relative importance of performance goal to delivery of customer wants The “House of Quality” links to competitors

2-22 WHATS HOWS Relationships between WHATs and HOWS Relationships among HOWS Goals for HOWS Phase 1 House of Quality

2-23 Quick delivery is most important to customers Phase 1 House of Quality (continued) It is also something Mary is very good at. It is measured in minutes The goal is < 20 minutes AND… It can affect how hot a pizza is when it arrives

2-24 The House of Quality The “House” is used repetitively to drive customer requirements closer to the product and process design. –“Hows” from prior phase become “Whats” of current phase Phase 2 Part Deployment Phase 3 Process Planning Phase 4 Production Planning Phase 1 Product Planning

2-25 Phase 2 House of Quality (continued) Phase 2: Part Deployment –Technical design parameters provide information to guide the development of the components of the product or service.

2-26 Phase 3: Process Planning –Based on component characteristics, processes are designed. –Specifying process requirements Specific decisions on resource allocation and configuration Prioritizing process requirements Analyzing competitive offerings Phase 3 House of Quality

2-27 The House of Quality Phase 4: Production Planning –Process requirements are used to design a system that will control the process and make sure it continues to meet expectations. The result is a discernable and measurable link between –The “wants” of the customer and the design of the product or service Phase 2 Part Deployment Phase 3 Process Planning Phase 4 Production Planning Phase 1 Product Planning

2-28 New Product and New Service Development Design for manufacture and assembly (DFMA) –Product and process engineers consult to ensure that the product can be produced easily and at low cost Design for logistics (DFL) –Product design considers costs associated with transportation Design for environment (DFE) –Product design includes environmental concerns such as the manufacturing process, packaging issues, disposal, refurbishing, and recycling Concurrent engineering –The ultimate in integrating process design and new product or service design

2-29 A Closer Look at Concurrent Engineering Performing product and service development engineering functions in tandem to reduce time and improve communication.

2-30 Process Improvement Tools Process Maps –A visual model of a process

2-31 Process Improvement Tools (continued) Value Stream Mapping –A common “lean systems” tool –Examines entire value stream for waste

2-32 Process Improvement Tools (continued) Service Blueprints

2-33 Business Process Analysis –Focus on processes that cross functional boundaries and transitions between departments –Identified nonvalue-adding activities Other Process Improvement Tools

2-34 Reengineering –Clean slate –Focus on behind-the-scenes activities –High use of technology –High rate of use in the service sector Other Process Improvement Tools

2-35 Process selection –Identify potential areas for improvement based on need and likelihood of success Description of current process –Using process flow diagram techniques, describe, precisely, the current process Process improvement –Identify new ways to accomplish the process goals –Technology is often used as a catalyst for improvement “Technology-enabled reengineering” Process verification –Identify problems with the proposed changes and ensure that they can be eliminated Implementing and monitoring –Make the changes and monitor the results for effectiveness Reengineering steps

2-36 Other Process Improvement Tools Poka-Yoke –Mistake-proofing products and services –Preventing errors, reducing costs and improving quality –Design to prevent doing it any but the correct way McDonald’s wrapping of burger Car won’t start unless transmission is in “Park” “Deadman switch” on lawn mower

2-37 Broad Improvement Frameworks Lean Systems –Organization-wide waste elimination –Evolved from JIT –Covered extensively in Chapter 13 Six Sigma –Structured quality improvement process –Training intensive –Elimination of variability is focus –Covered Extensively in Chapter 6