To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Design Strategies Chapter 3

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Effective Process Design Major Decisions for Effective 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 position (services) Product-process position (manufacturing) Strategy for Change Process Reengineering Process Improvement Figure 3.1

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Different Dimensions of Customer Contact in Service Processes Figure 3.2 PresentPhysical presenceAbsent PeopleWhat is processed Possessions Active, visibleContact intensityPassive, out of sight Personal Personal attentionImpersonal Face to faceMethod of deliveryRegular mail High Contact Dimension Low Contact

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Figure 3.3 Customer-Contact Model for Processes Front office Hybrid office Back office (1)(2)(3) High interaction withSome interaction withLow interaction with customers, highlycustomers, standardcustomers, standardized customized serviceservices with some optionsservices ProcessCharacteristics (1) Jumbled flows, complex work with many exceptions (2) Flexible flows with some dominant paths, moderate job complexity with some exceptions (3) Line flows, routine work easily understood by employees Less Complexity, Less Divergence, More Line Flows Less Customer Contact and Customization Service Package

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Service Process Structures in the Financial Services Industry Hybrid Office Creation of quarterly performance report Data obtained electronically Report calculated using standardized process Report reviewed using standardized diagnostic systems Manager provides written analysis and recommendations in response to individual employee performance Manager meets with employee to discuss performance Back Office Production of monthly client fund balanced report Data obtained electronically Report run using standardized process Results checked for “reasonableness” using well-established policies Hard copies and electronic files forwarded to analysts Process repeated monthly with little variation Figure 3.4 Front Office Sale of financial services Research customer finances Work with customer to understand customer needs Make customized presentation to customer addressing specific customer needs Involve specialized staff offering variety of services Continuing relationship with customer, reaction to changing customer needs

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Process Repositioning at a Restaurant Higher Complexity/DivergenceCurrent ProcessLower Complexity/Divergence Figure 3.5 Specific table selection Take reservationsNo reservations Recite menu, describe entrees and specials Seat guests, give menus Self-seating, menu on blackboard Assortment of hot breads and hors d’oeuvres Serve water and bread Eliminate Maitre d’ takes personally at table Individually prepared at table Expand to 20 choices; add flaming dishes, bone fish at table, prepare sauces at table Expand to 12 choices Add exotic coffees, liqueurs Take orders   Salad (4 choices)   Entrée (15 choices)   Dessert (6 choices)   Beverage (6 choices) Customer fills out form Already prepared, no choice Limit to 4 choices Sundae bar, self-service Coffee, tea, milk only Separate course services, sherbet between courses; hand grind pepper Serve orders Serve salad and entrée together, bill and beverage together Choice of payment, including house accounts; serve mints Collect payment Cash only, pay when leaving

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Figure 3.6 Product-Process Matrix for Processes (1)(2)(3)(4)(5) One of a kindLow volume,MultipleFew majorHigh volume products, madelowproductsproducts,high to customer standardizationmoderate higherstandardization, ordervolumevolumecommodity products ProcessCharacteristics (1) Complex and highly customized process, unique sequence of tasks (2) Jumbled flows, complex work with many exceptions (3) Disconnected line flows, moderately complex work (4) Connected line, routine work (5) Continuous flows, highly repetitive work Less Complexity, Less Divergence, More Line Flows Less Customization and Higher Volume Product Design Continuous process Project process Line process Batch process Job process

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Automobile Assembly Process A:Front-end body-to- chassis assembly H:Hood attachment F:Fluid filling S:Start-up testing ASHF Midsized 6 cylinder Midsized 6 cylinder Compact 4 cylinder Compact 4 cylinder Figure 3.7

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. The Big Picture King Soopers Bakery

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. The Big Picture King Soopers Bakery 7000 loaves/hr 1000 pastries/hr 50 cakes/hr Bread line Pastry line Cake line HighLow Figure 3.8

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Vertical Integration King SoopersIn-houseprocesses Backwardintegration Raw materials (eggs, flour, sugar) Forwardintegration Customers (grocery stores) Figure 3.9

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Costs and Volume F2F2F2F2 F1F1F1F1 Figure 3.10 Process 1: General-purposeequipment Process 2: Special-purposeequipment Break-even quantity Units per year (Q) Total cost (dollars)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Decision Patterns for Service Processes High ContactCustomer ContactLow Contact Figure Process Structure Back office Low complexity, low divergence, and line flows Front office High complexity, high divergence, and jumbled flows Varies 5. Capital intensity HighLow4. Resource flexibility Varies 3. Vertical integration HighLow2. Customer involvement

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Decision Patterns for Manufacturing Processes High VolumeCustomer ContactLow Volume Figure Process Structure Project or job process High complexity, high divergence, and diverse flows Line or continuous process Low complexity, low divergence, and line flows HighLow5. Capital intensity LowHigh4. Resource flexibility HighLow3. Vertical integration LowHigh 2. Customer involvement

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. Custom Molds Plant Layout Dock Lunch room Cut and trim Receiving raw materials inventory Dry mix Assembly Wet mix Offices Packing and shipping finished goods inventory Testing and inspection Injection machines Mold fabrication Figure 3.13