Process Strategy

To do if time:  Look through old project  For announcements – look thru good example of italicize and defined OM term  Look for good example of inputs, outputs, flow entities  Show specific example about jumbled flow  Be able to give better examples about job- shop;  Give better examples of Mass Customization

Overview  Manufacturing process strategies  Service process strategies  Process Analysis And Design  Flow charts  Service system mapping  Time-Function Mapping  Value Stream Mapping  Process Charts  Service Blueprinting

Announcements  We will not cover all of chapter 7.  We will concentrate on pp th edition pp th edition

Manufacturing Process Strategies Process Focus job shops (machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley Davidson Product Focus (commercial baked goods, steel, glass) Nucor Steel High Variety Low Variety Mass Customization Dell Poor Strategy (Both fixed and variable costs are high) Low Volume High VolumeVolume

Comparison of process strategies ProjectJob-shopBatchAsemblyContinuous Flow Flexibility Variety Capital investment Variable cost Labor content Labor skill Volume

Process Strategies Continuum  A continuum  Within a given facility, several or blend of strategies may be used  These strategies are often classified as: Repetitive- Focused Product-Focused Process-Focused Job Shop BatchAssemblyContinuous

Product-Focused Examples © 1995 Corel Corp. Light Bulbs (Discrete) Paper (Continuous) © T/Maker Co. © 1995 Corel Corp. Soft Drinks (Continuous, then Discrete)

Nucor Steel Plant – continuous process Nucor Steel Plant Continuous caster Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace ft Hot mill for finishing, cooling, and coiling DE F G H I Scrap steel Ladle of molten steel Electric furnace A B C

Product-Focused Strategy  Continuous production  Facilities are organized by product  High volume, low variety products  Where found  Discrete unit manufacturing  Continuous process manufacturing Operation Products A & B

Product-Focused Strategy - Characteristics  Positive  Lower variable cost per unit  Lower but more specialized labor skills  Easier production planning and control  Higher equipment utilization (70% to 90%)  Negative  Lower product flexibility  More specialized equipment  Usually higher capital investment

Repetitive-Focused Strategy - Examples Truck © 1995 Corel Corp. Clothes Dryer © 1995 Corel Corp.

Repetitive Focused Strategy  Assembly line / Production line  Facilities often organized by assembly lines  Characterized by modules  Parts & assemblies made previously  Modules combined for many output options

Repetitive Focused Strategy - Characteristics  More structured than process-focused, less structured than product focused  Enables quasi-customization  Using modules, it enjoys economic advantage of continuous process, and custom advantage of low-volume, high- variety model

Assembly process THE ASSEMBLY LINE TESTING 28 tests Oil tank work cell Shocks and forks Handlebars Fender work cell Air cleaners Fluids and mufflers Fuel tank work cell Wheel work cell Roller testing Incoming parts From Milwaukee on a JIT arrival schedule Engines and transmissionsFrame tube bending Frame-building work cells Frame machining Hot-paint frame painting Crating Figure 7.3

Process-Focused Strategy Examples Machine Shop © 1995 Corel Corp.

Process-Focused Strategy  Job shop  Facilities are organized by process  Similar processes are together  Example: All drill presses are together  Low volume, high variety products  ‘Jumbled’ flow Operation Product A Product B

Process Focused Strategy -Characteristics  Positives  Greater product flexibility  More general purpose equipment  Lower initial capital investment  Negatives  More highly trained personnel  More difficult production planning & control  Low equipment utilization (5% to 25%)

Manufacturing Process Design Low ModerateHigh Volume High Moderate Low Variety of Products Process-focused Job Shops (Print shop, emergency room, machine shop, fine dining Repetitive (modular) focus Assembly line (Cars, appliances, TVs, fast-food restaurants) Product-focused Continuous (steel, beer, paper, bread) Mass Customization Customization at high Volume (Dell Computer’s PC)

Comparison of process strategies ProjectJob-shopBatchAssemblyContinuous FlowNone Continuous FlexibilityHigh Low VarietyHigh Low Capital investmentLow High Variable costHigh Low Labor contentHigh Low Labor skillHigh Low VolumeLow High

Comparison of process strategies ProjectJob-shopBatchAssemblyContinuous FlowNone Continuous FlexibilityHigh Low VarietyHigh Low Capital investmentLow High Variable costHigh Low Labor contentHigh Low Labor skillHigh Low VolumeLow High

Mass Customization  Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires.  Goal:  Variety of a job shop  Volume and variable cost of continuous production

Top 10 Mass Customization Companies in 2007  # Mymuesli: Mass Customized MüsliMymuesli:  # Blends For Friends: Mass Customized TeasBlends For Friends  # Vuru – Custom nutrition  # My Twinn - custom dolls  # Miss-Information: Custom travel books  # flattenme: Personalized children books  # TasteBook: Mass Customized recipesTasteBook:  # Paragon Lake: mass customized jewelryParagon Lake  # Cosmocards - Personal Greeting Cards  # Zyrra – mass customized bras

Mass Customization - More Choices Than even

How do we determine which process strategy is best? Process Crossover Point is one dimension that is considered. Considers Volume/Cost trade-off

Process Crossover Point At Voodoo Holds The new machine would automate this process, reducing the labor involved. The machine would cost $15,000. However, labor cost would decrease from $20 per mold to $5 per mold.

Service Factory Service Shop Degree of Customization Low High Degree of Labor Low High Mass Service Professional Service Service Process Matrix Commercial banking Private banking General- purpose law firms Law clinics Specialized hospitals Hospitals Full-service stockbroker Limited-service stockbroker Retailing Boutiques Warehouse and catalog stores Fast food restaurants Fine-dining restaurants Airlines No frills airlines

Service Factory Service Shop Degree of Customization Low High Degree of Labor Low High Mass Service Professional Service Service Process Matrix Airlines Trucking Hotels Hospitals Auto repair Other repair services Doctors Lawyers Accountants Architects Retailing Wholesaling Schools Commercial banking

Service Factory Service Shop Degree of Customization Low High Degree of Labor Low High Mass Service Professional Service Service Process Matrix Airlines Trucking Hotels Hospitals Auto repair Other repair services Doctors Lawyers Accountants Architects Retailing Wholesaling Schools Commercial banking Where does Zipcar Fit?

ServiceFactoryServiceShop Degree of Customization Low High Degree of Labor Low High MassService ProfessionalService Service Process Matrix Challengers for Managers in High labor intensity services: Hiring, training Methods development Employee welfare Scheduling workforces Control of far-flung locations Managing growth

ServiceFactoryServiceShop Degree of Customization Low High Degree of Labor Low High MassService ProfessionalService Service Process Matrix Challengers for Managers in Highly customized services: Fighting cost increase Maintaining quality Reacting to consumer intervention in process Managing flat hierarchy with loose subordinates/superior relationships Gaining employee loyalty

ServiceFactoryServiceShop Degree of Customization Low High Degree of Labor Low High MassService ProfessionalService Service Process Matrix Challengers for Managers in low labor services: Capital decisions Technological advances Managing demand to avoid Scheduling service delivery

ServiceFactoryServiceShop Degree of Customization Low High Degree of Labor Low High MassService ProfessionalService Service Process Matrix Challengers for Managers in Low customization services: Marketing Making service ‘warm’ Attention to physical surroundings Managing fairly rigid hierarchy with need for standard operating procedures

To summarize:  Products  Project  Job-shop process  Batch/assembly process  Continuous/line process  Mass customization  Services  Service Factory  Service Shop  Mass service  Professional service

What is a Business Process? Traditional Process definition in OM literature A process specifies the transformation of inputs to outputs Different types of transformations Physical (Ex. raw material  finished product) Locational (Ex. flying from Denver to L.A.) Transactional (Ex. depositing money in a bank) Informational (Ex. accounting data  financial statement) The transformation model of a process Inputs Outputs Process

What is a Business Process? A more comprehensive process definition A business process is a network of connected activities and buffers with well defined boundaries and precedence relationships, which utilize resources to transform inputs into outputs with the purpose of satisfying customer requirements Process Customers Suppliers Resources Inputs Outputs

Marketing OperationsAccounting CEO Order Request Order Fulfilled Production planning Vertical process Horizontal process Individual process Buying a TV commercial Illustration: Process Types and Hierarchies

Questions to answer What is the existing process doing? How well does it perform? What are the critical issues that impact the process performance? Important to understand the process but do not overanalyze it in order to avoid “analysis paralysis” –Becoming so familiar with the process it is impossible to think of new ways of doing it Understanding the Existing Process

1.Describe the process architecture Inputs/outputs Flow units Resources Network activities and buffers Information system 2.Identify the process owner/stakeholders 3.Understand the customer Understanding the Existing Process

Describe the process architecture Inputs and Outputs Identify the process boundaries  easy to identify the Input consumed from the environment in order to produce the desired Output Process inputs and outputs can be –Tangible (Ex. raw material, cash, products, customers) –Intangible (Ex. Information, time, energy, services)

Describe the process architecture Flow units A flow unit is a transient entity or a job that proceeds through the network of activities and buffers and exits the process as a finished output Typically, the identity of a flow unit changes across the process Examples of common flow units: materials, orders, files, documents, customers, products, cash, transactions…

Transformational activities The work performed on a job moving through a process can be divided into an ordered sequence of activities The buffers represent storage or waiting points where the job waits before moving to the next activity (queues, waiting rooms, etc.) Different types of jobs  different paths through the network Describe the process architecture

Resources Tangible assets utilized to perform activities in a process Can be divided into: Capital assets – real estate, machinery, equipment, IT systems… Labor – people and their knowledge and skills Resources are utilized while inputs are consumed N o t e d i f f e r e n c e ! ! Describe the process architecture

Information structure Specifies the information required for making decisions and performing activities in a process Limited information availability is a common cause for process inefficiencies –Information enables coordination! Airport Buzz Group Describe the process architecture

The 5w2h framework – use to describe a process Classification5w2h questions Description PeopleWho?Who is performing the activity? Why is this person doing it? Could/Should someone else perform the activity? Subject matter What?What is being done in this activity? Can the activity in question be eliminated? SequenceWhen?When is the best time to perform this activity? Does it have to be done at a certain time? LocationWhere?Where is this activity carried out? Does it have to be done at this location? PurposeWhy?Why is this activity needed? Clarify its purpose. MethodHow?How is the activity carried out? CostHow much?How much does it currently cost?

Process Analysis Tools  Flowcharts provide a view of the big picture  Time-function mapping adds rigor and a time element  Value stream analysis extends to customers and suppliers  Process charts show detail  Service blueprint focuses on customer interaction

 One of the fundamental graphical tools for process analysis and design  Typically depicts activities sequentially from left to right  Can help to identify, loops, multiple alternative paths, decision points etc.  Symbols to use in flow charting Flow Charts Transportation of a physical item Transportation of information Operation Inspection Storage Delay

Illustration of a Sample Flow Chart Operator takes phone order. Orders wait to be picked up. Supervisor inspects orders. Order is fulfilled. Order waits for sales rep. Is order complete? Yes No Orders are moved to supervisor’s in-box. Orders wait for supervisor.

Existing claims process for auto glass 1.Client notifies a local agent that she wishes to file a claim. She is given a claims form and is told to obtain a cost estimate from a local glass vendor. 2.When the claims form is completed the local agent verifies the information and forwards the claim to a regional processing center. 3.The processing center logs the date and time of the claim’s arrival. The data is entered into a computer-based system (for record keeping only) by a clerk. The claim is then placed in a hard copy file and passed on to a claims representative. 4.a) If the claims representative is satisfied with the claim it is passed along to several others in the processing chain and eventually a check is issued and sent to the client. b) If there are problems with the claim the representative mails it back to the client for necessary corrections. 5.When the client receives the check she can go to the local glass vendor and replace the glass.

Flow Chart of Auto glass insurance claims process 1. Client notifies local agent and is given Claim Form 2. Client obtains estimate and completes Claim Form 3. Agent verifies accuracy of Claim Form 4. Is Claim Form correct? 5. Form forwarded to Regional Processing Center 6. Processing enters date, time and contents into computer and creates hardcopy 7. Routed to a Claims Rep. 8. Routed to a Claims Rep. 9. Problems with Claim? 10. Attach Form 11. Mail to customer 12. Route to Accounts Payable 13. Issue check to customer 14. Mail check to customer 15. Have glass repaired at local vendor

 An extension of traditional flowcharting  Documents the role played by the customer in the service delivery process  A combination of service blue printing and traditional flowcharting  Build consistent perceptions of customer’s experience with core processes  Identify all points of contact between the process and its customers  Identify opportunities within the process Service System Mapping (I)

 SSM Horizontal Bands  The purpose is to organize activities according to the people or “players in the process. – Who does what ?  An SSM typically consists of 5 bands 1. Customer band – end user 2. Frontline or distribution channel band 3. Back-room activity band 4. Centralized support or information systems band 5. Vendor or supplier band Service System Mapping

SSM Journal Paper Submissions 1. Authors send manuscripts to the Journal Editorial Office (JEO). 2. JEO sends a letter of acknowledgement and sends manuscript to editor-in-chief (EIC) 3. EIC selects associate editor (AE) to handle manuscript and notifies JEO 4. JEO sends manuscript to AI 5. AE reads manuscript and selects 2 referees. AE notifies JEO. 6. JEO sends copies to referees 7. Referees review and send reports to JEO. 8. JEO forwards reports to AE 9. AE reads reports and decides reject, accept, revise. Decision sent to JEO. 10. If rejected, JEO sends letter to authors. 11. If accepted, JEO forward manuscript to production. JEO notifies authors and EIC. 12. If revise, JEO forwards reports to authors. 13. Authors revise and resubmit to JEO. 14. JEO sends resubmit to AE 15. AE decides accept or 2 nd review

SSM Journal Paper Submissions Author JEO EIC AE Referees Production Revision AcceptedFurther reviewing Accepted Acknowledge

Time-Function Mapping or Process Mapping Customer Sales Production control Plant A Warehouse Plant B Transport Move Receive product Extrude Wait Move Wait Print Wait Order product Process order Wait 12 days 13 days 1 day 4 days 1 day 10 days 1 day 0 day 1 day 52 days Figure 7.7

Time-Function Mapping or Process Mapping Customer Sales Production control Plant Warehouse Transport Move Receive product Extrude Wait Print Order product Process order Wait 1 day 2 days 1 day 6 days Figure 7.7

Process chart symbols

Process chart: Requisition for petty cash

1. Field sales personnel called in requests for financing to a group of 14 people. 2. The person taking the call logged information on a piece of paper. 3. The paper was taken upstairs to the credit department 4. A specialist: a) Entered the information into a computer system b) Did a credit check 5. The results of the credit check were: a) Written on a piece of paper b) Sent to the business practices department 6. Standard loan contracts were modified to meet customer requirements 7. The request was a) Sent to a ‘pricer’ b) ‘Pricer’ determined interest rate 8. The interest rate was a) Written on a piece of paper b) Sent to a clerical group 9. A quote was developed 10. The quote was sent to filed sales via FedEx IBM Credit Process Flow

IBM Credit Process Activity Chart Transportation Operation Inspection Storage Delay Symbols N10 Quote sent to Field Sales 14 V15 Quote is developed by clerks 13 N10 Paper sent to clerical group 12 N2 Pricer writes interest rate on piece of paper 11 C320 Pricer determines interest rate 10 N Request sent to Pricer 9 V20 Loan contracts modified to meet requirements 8 N10 Paper sent to Business Practices Department 7 N60 Results written on piece of paper 6 C10 Specialist does a credit check 5 N1,440 Specialist enters info in computer 4 N10 Paper taken to Credit Department 3 N3 Agent logs info on paper 2 V120 Field sales personnel call in requests 1 SymbolValue code [V/N/C] TimeDescription No.

Service Blueprint  Focuses on the customer and provider interaction  Defines three levels of interaction  Each level has different management issues  Identifies potential failure points

Service Blueprint  Defines three levels of interaction  Activities under the control of the customer  Interaction between the customer and service provider  Activities performed invisibly to the customer

Service Blueprint Personal GreetingService DiagnosisPerform ServiceFriendly Close Customer arrives for service Warm greeting and obtain service request Direct customer to waiting room Notify customer the car is ready Customer departs Customer pays bill Perform required work Prepare invoiceYesYesLevel#3Level#1 Level#2 Potential failure point No Notify customer and recommend an alternative provider Standard request Determine specificsNo Can service be done and does customer approve?