Process Strategy

Overview Process strategies Service process design 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. 254-270

Process, Volume, and Variety Process strategies MGT 301 Process, Volume, and Variety Volume Low Volume High Volume Process Focus job shops (machine, print, carpentry) Standard Register Mass Customization Dell High Variety Repetitive (autos, motorcycles) Harley Davidson Poor Strategy (Both fixed and variable costs are high) Product Focus (commercial baked goods, steel, glass) Nucor Steel Low Variety Ch 7

Comparison of process strategies Project Job-shop Batch Asembly Continuous Flow Flexibility Variety Capital investment Variable cost Labor content Labor skill Volume

King Sooper's Video and Buzz Group Process strategies MGT 301 Process Strategies A continuum Within a given facility, several or blend of strategies may be used These strategies are often classified as: King Sooper's Video and Buzz Group Process-Focused Repetitive-Focused Product-Focused Continuum This slide can be used to begin discussion of two points: - one seldom employs a pure process strategy (process, repetitive, or product) - but rather a strategy which has elements of each of the pure strategies - i.e., practical strategies lie along a continuum. - one seldom employs only a single strategy. Batch Assembly Continuous Job Shop Ch 7

Process-Focused Strategy Examples Process strategies MGT 301 Process-Focused Strategy Examples Machine Shop © 1995 Corel Corp. Ch 7

Process-Focused Strategy Process strategies MGT 301 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 You can use this slide to introduce a discussion of process-focused strategy. Examples are suggested in the following slide or may be requested of students. Operation Product A Product B 1 2 3 Ch 7

Process Focused Strategy -Characteristics Process strategies MGT 301 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%) Select one of the examples you have presented of process-focused strategy, and ask students to identify the sources of advantage and disadvantage. Ch 7

Repetitive-Focused Strategy - Examples Process strategies MGT 301 Repetitive-Focused Strategy - Examples Fast Food McDonald’s over 95 billion served © 1984-1994 T/Maker Co. Clothes Dryer © 1995 Corel Corp. Truck © 1995 Corel Corp. At this point, you might compare in more detail, McDonalds (which uses a batch system) with Wendy’s (which, at least at high volumes, perhaps more closely resembles a simple assembly line). Ch 7

Repetitive Focused Strategy Process strategies MGT 301 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 You can use this slide to begin your discussion of repetitive strategies; the next suggests additional characteristics; the slide following that, some examples. Ch 7

Repetitive Focused Strategy - Characteristics Process strategies MGT 301 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 Ch 7

Frame-building work cells Engines and transmissions Process strategies MGT 301 Assembly process Frame tube bending Frame-building work cells Frame machining Hot-paint frame painting 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 transmissions Crating Figure 7.3 Ch 7

Product-Focused Examples Process strategies MGT 301 Product-Focused Examples © 1995 Corel Corp. Soft Drinks (Continuous, then Discrete) Paper (Continuous) © 1984-1994 T/Maker Co. © 1995 Corel Corp. Light Bulbs (Discrete) Some examples of products produced using a product-focused strategy. Ch 7

Nucor Steel Plant – continuous process Process strategies MGT 301 Nucor Steel Plant – continuous process Scrap steel Ladle of molten steel Electric furnace A B C Continuous caster Continuous cast steel sheared into 24-ton slabs Hot tunnel furnace - 300 ft Hot mill for finishing, cooling, and coiling D E F G H I Nucor Steel Plant Ch 7

Product-Focused Strategy Process strategies MGT 301 Product-Focused Strategy Continuous production Facilities are organized by product High volume, low variety products Where found Discrete unit manufacturing Continuous process manufacturing You can use this slide to begin a discussion of product-focused strategy. The following slide outlines some advantages/disadvantages of this approach. Operation Products A & B 1 2 3 Ch 7

Product-Focused Strategy - Characteristics Process strategies Product-Focused Strategy - Characteristics MGT 301 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 Ch 7

Process Design Process Design Variety of Products Volume Job Shops Process strategies MGT 301 Process Design Process Design Low Moderate High Volume 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 Continuous (steel, beer, paper, bread) Mass Customization Customization at high (Dell Computer’s PC) Add to chapter 7 lecture notes Ch 7

Comparison of process strategies Project Job-shop Batch Assembly Continuous Flow None Continuous Flexibility High Low Variety Capital investment Low High Variable cost Labor content Labor skill Volume

Process strategies MGT 301 Mass Customization Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires. Under mass customization the three process models become so flexible that distinctions between them blur, making variety and volume issues less significant. Once students understand what mass customization is, they should be asked to consider whether such an approach will move from an “option” at present, to a “necessity” in the future. Ch 7

Mass Customization - More Choices Than even

Service Process Matrix Process strategies MGT 301 Service Process Matrix Service Factory Service Shop Degree of Customization Low High Degree of Labor Mass Service Professional Service Commercial banking Private banking General- purpose law firms Law clinics Full-service stockbroker Limited-service stockbroker Retailing Boutiques Warehouse and catalog stores Specialized hospitals Hospitals Fast food restaurants Fine-dining restaurants Airlines No frills airlines Ch 7

Service Process Matrix Process strategies MGT 301 Service Process Matrix Service Factory Service Shop Degree of Customization Low High Degree of Labor Mass Service Professional Service Retailing Wholesaling Schools Commercial banking Doctors Lawyers Accountants Architects Airlines Trucking Hotels Hospitals Auto repair Other repair services Ch 7

Service Process Matrix Process strategies MGT 301 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 Service Factory Shop Degree of Customization Low High Degree of Labor Mass Professional Ch 7

Service Process Matrix Process strategies MGT 301 Service Process Matrix Challengers for Managers in Highly customized services: Fighting cost increase Maintaining quality Reacting to consumer intervention in process Managing flat hierarch with loose subordinates/superior relationships Gaining employee loyalty Service Factory Shop Degree of Customization Low High Degree of Labor Mass Professional Ch 7

Service Process Matrix Process strategies MGT 301 Service Process Matrix Challengers for Managers in low labor services: Capital decisions Technological advances Managing demand to avoid Scheduling service delivery Service Factory Shop Degree of Customization Low High Degree of Labor Mass Professional Ch 7

Service Process Matrix Process strategies MGT 301 Service Process Matrix Challengers for Managers in Low customization services: Marketing Making service ‘warm’ Attention to physical surroundings Managing fairly rigid hierarchy wit need for standard operating procedures Service Factory Shop Degree of Customization Low High Degree of Labor Mass Professional Ch 7

To summarize: Products Services 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 The transformation model of a process Inputs Outputs Process 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)

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

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

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

Inputs and Outputs Describe the process architecture 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 Describe the process architecture 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 Note difference!!

Information structure 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

The 5w2h framework – use to describe a process Classification 5w2h questions Description People Who? 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? Sequence When? When is the best time to perform this activity? Does it have to be done at a certain time? Location Where? Where is this activity carried out? Does it have to be done at this location? Purpose Why? Why is this activity needed? Clarify its purpose. Method How? How is the activity carried out? Cost How 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

Flow Charts 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 Operation Transportation of a physical item Storage Inspection Transportation of information 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 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. When the claims form is completed the local agent verifies the information and forwards the claim to a regional processing center. 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. 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 10. Attach Form 4. Is Claim Form correct? 11. Mail to customer 9. Problems with Claim? 10 11 9 4 3 1 2 5 6 7 8 12 13 14 15 1. Client notifies local agent and is given Claim Form 3. Agent verifies accuracy of Claim Form 6. Processing enters date, time and contents into computer and creates hardcopy 8. Routed to a Claims Rep. 13. Issue check to customer 15. Have glass repaired at local vendor 2. Client obtains estimate and completes Claim Form 5. Form forwarded to Regional Processing Center 7. Routed to a Claims Rep. 12. Route to Accounts Payable 14. Mail check to customer

Service System Mapping (I) 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 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 Customer band – end user Frontline or distribution channel band Back-room activity band Centralized support or information systems band Vendor or supplier band

SSM Journal Paper Submissions Process strategies MGT 301 SSM Journal Paper Submissions Authors send manuscripts to the Journal Editorial Office (JEO). JEO sends a letter of acknowledgement and sends manuscript to editor-in-chief (EIC) EIC selects associate editor (AE) to handle manuscript and notifies JEO JEO sends manuscript to AI AE reads manuscript and selects 2 referees. AE notifies JEO. JEO sends copies to referees Referees review and send reports to JEO. JEO forwards reports to AE AE reads reports and decides reject, accept, revise. Decision sent to JEO. If rejected, JEO sends letter to authors. If accepted, JEO forward manuscript to production. JEO notifies authors and EIC. If revise, JEO forwards reports to authors. Authors revise and resubmit to JEO. JEO sends resubmit to AE AE decides accept or 2nd review Ch 7

SSM Journal Paper Submissions 1 2 3 Author JEO EIC AE Referees 4 5 6 7 8 9 10 13 14 15 Production Revision Accepted Further reviewing Acknowledge

Time-Function Mapping or Process Mapping Process strategies MGT 301 Time-Function Mapping or Process Mapping Customer Sales Production control Plant A Warehouse Plant B Transport Order product Process order Wait Move Receive product Print Wait Move Wait Extrude Wait 12 days 13 days 1 day 4 days 10 days 0 day 52 days Figure 7.7 Ch 7

Time-Function Mapping or Process Mapping Process strategies MGT 301 Time-Function Mapping or Process Mapping Customer Sales Production control Plant Warehouse Transport Order product Process order Wait Move Receive product Extrude Wait Print 1 day 2 days 6 days Figure 7.7 Ch 7

Process chart symbols

Process chart: Requisition for petty cash

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

IBM Credit Process Activity Chart Process strategies MGT 301 IBM Credit Process Activity Chart No. Description Time Value code [V/N/C] Symbol 1 Field sales personnel call in requests 120 V 2 Agent logs info on paper 3 N 3 Paper taken to Credit Department 10 N 4 Specialist enters info in computer 1,440 N Transportation Operation Inspection Storage Delay Symbols 5 Specialist does a credit check 10 C 6 Results written on piece of paper 60 N 7 Paper sent to Business Practices Department 10 N 8 Loan contracts modified to meet requirements 20 V 9 Request sent to Pricer 10 N 10 Pricer determines interest rate 320 C 11 Pricer writes interest rate on piece of paper 2 N 12 Paper sent to clerical group 10 N 13 Quote is developed by clerks 15 V 14 Quote sent to Field Sales 10 N Ch 7

Service Blueprint Focuses on the customer and provider interaction Process strategies MGT 301 Service Blueprint Focuses on the customer and provider interaction Defines three levels of interaction Each level has different management issues Identifies potential failure points Ch 7

Service Blueprint Defines three levels of interaction Process strategies MGT 301 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 Ch 7

Service Blueprint Personal Greeting Service Diagnosis Perform Service Process strategies MGT 301 Service Blueprint Personal Greeting Service Diagnosis Perform Service Friendly Close Level #1 Customer arrives for service Warm greeting and obtain service request Notify customer the car is ready Customer departs Customer pays bill No Notify customer and recommend an alternative provider Standard request Determine specifics No Can service be done and does customer approve? Level #2 Direct customer to waiting room Perform required work Prepare invoice Yes Level #3 Potential failure point Ch 7