Chapter 4 - Process Design and Improvement

 Sets of activities that are taken together to produce a result of value to the customer  Organizing activities (on the basis of processes) result in: –Eliminate delays and errors when work is handed off –Capture information once and at source –When people close to process perform work, there is little need for management overhead Process

A GROUP OF ACTIVITIES (USUALLY REPETITIVE) THAT USES AN ORGANIZATION’S RESOURCES TO PROVIDE SOMETHING OF A GREATER VALUE They underlie all activities throughout the organization They are nested within other processes along an organization’s supply chain OUTPUTS A B C N INPUTS: RESOURCES AVAILABLE TO THE ORGANIZATION ENVIRONMENT ACTIVITIES Process

The activity that CONVERTS inputs into outputs. It constitutes the organization’s competitive edge.  It affects entire organization and its ability to achieve its goals (process accounts for 80% of the problems while people make up the 20%).  It reflects the way the organization chooses to be in the marketplace. INPUTS TRANSFORMATION PROCESS OUTPUTS

The Importance of Process Design Process design affects Cost and profitability Flexibility Quality

2 Dimensions of Processes 1.The Value Creations Processes: key design and production/delivery processes for goods and services- generally stem from external customer needs. 2.Support Processes: those that support an organization’s value creation processes - stem from internal customer needs.

Process Thinking A structured approach that views a firm and its various activities and functions as a system of interrelated processes that managers must design, control and continuously improve. Understand interactions among individuals and groups Discover barriers that inhibit cooperation and high performance Help to analyze and improve processes

Understanding Processes Identify the product or service Identify the customer Identify the supplier Identify the process Mistake-proof the process Develop measurements, controls, and improvement goals

Process Mapping Helps to determine if tasks occur in the proper sequence, if flows are routed properly, and if storage is necessary.

Example: Pizza Production

Process Technology Consists of the methods and equipment used to manufacture a product or deliver a service. The ability of operations managers to use process technology effectively greatly influences a firm’s ability to create (internal efficiencies) and deliver customer value. Technology Choices defined as: Primary factors: Technology cost Secondary factors: Technology requirements Tertiary factors: Non-economic issues such as installation time, training, flexibility

Example: Purchasing a Lawnmower

Work System Issues 1.Work design – how employees are organized into formal and informal units; e.g., teams 2.Job design – responsibilities and tasks assigned to individuals. 3.Ergonomics and safety – consideration of human interfaces and the work environment

Approaches to Work Design Job enlargement – expand the scope of work Job rotation – change the type of work on a frequent basis Job enrichment – give workers more autonomy, authority, and responsibility

High-Performance Work Systems Characteristics FlexibilityFlexibility InnovationInnovation Knowledge and skill sharingKnowledge and skill sharing Alignment with organizational directionsAlignment with organizational directions Customer focusCustomer focus Rapid response to changing needsRapid response to changing needs

Measuring Process Time Performance 1.Flow Time (Throughput Time): Time taken to complete a job after release to production. 2.Cycle Time: Average time between completions of successive units. 3.Throughput Time: 1 / Cycle Time 4.WIP = (Average Throughput) x (Cycle Time)

Bottleneck Ops mins. Ops mins. Ops mins.

Bottlenecks Bottleneck – an operation that limits the capacity of a process and essentially defines the cycle time and throughput Removing bottlenecks and balancing work flow reduces cycle times and improves efficiency, productivity, and cost.

Service Analogy to Flow Time Contact time –Active contact time – time a customer is involved in value-adding activities –Passive contact time – time a customer is waiting for service to be performed Service quality is proportional to active contact time

Process Variability Increased variability decreases the effective capacity of a system. Process design decisions should not be based on average processing rates. Increasing capacity toward the end of a process usually results in better performance than increasing capacity at the beginning.

Theory of Constraints (TOC) Set of problem solving tools: the TOC Thinking Processes Set of daily management tools to improve key management skills Innovative solutions to production, distribution, marketing and sales, and project management

Constraint Constraint – any resource lack that prevents a system from achieving continuously higher levels of performance.

Synchronizing a Manufacturing Process Identify the constraints Place buffers at key points to protect throughput Determine the production schedule for the constraint resource Release materials to feed the constraint resources Forward schedule workstations that follow a constraint resource

Linking with other Decisions

Process Planning and Layout Analysis  Process design considers alternative transformation forms and selects best one given characteristics of desired outputs.  Layout analysis seeks to maximize the efficiency or effectiveness of operations.  Skinner’s The Focus Factory.

Volume/Variety Considerations – Operations Strategy  High volume indicate automated mass production  High variety implies use of skilled labor and general purpose equipment  Make-to-stock versus make-to-order  Assemble-to-order

Volume and Process Decisions for Manufacturing HighLow Volume  Less vertical integration  More resource flexibility  More customer involvement  Less capital intensity/ automation  More vertical integration  Less resource flexibility  Less customer involvement  More capital intensity/ automation Low volume, make- to-order process High volume, make- to-stock process Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Job process Machining precision metal tubes Internal consulting team at manufacturing firm Batch process Forging process to make fittings for pressure vessels access Producing a batch of textbooks at R. R. Donnelley’s plant Line process Auto assembly King Soopers bread line Continuous process Oil refining process Borden’s pasta making process Process design choices

Volume and Process Decisions for Services Process design choices  Less vertical integration  More resource flexibility  More customer involvement  Less capital intensity/ automation  More vertical integration  Less resource flexibility  Less customer involvement  More capital intensity/ automation Low volume, customized-service process High volume, standardized-service process HighLow Volume Project process Real estate process for leasing and constructing facilities for large insurance company Student team’s field project Job process Customer service process at financial services firm General medical practice Batch process Order fulfillment process of importer/distributor Placing purchase orders at public relations agency Line process Cafeteria line Teller line at bank Continuous process Power generation plant Providing telephone line access

Process Planning & Strategy  Process planning is determined by an organization’s process strategy.  Process strategy: Overall approach to producing goods and services  Process planning defines:  Capital intensity  Process flexibility  Vertical integration  Customer involvement

Types of Processes

1. PROJECT OPERATIONS  Large scale  Finite duration  Non-repetitive  Multiple interdependent activities  Offers extremely short reaction times

HighLow Volume Customization High Low Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Processes at manufacturing organizations

2. JOB SHOP - BATCH PRODUCTION  Processes items in small group or batches - intermittent.  (e.g. Furniture making, machine shops, …)  Nature of Work:  Works are not continuous - Intermittent  Moderate volume of goods or services with high variety  Flexibility in machines and manpower is needed  Most involved fabrication (machining)  Equipment and staff grouped based on function  Each output processed differently

HighLow Volume Customization High Low Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Job process Machining precision metal tubes Internal consulting team at manufacturing firm Processes at manufacturing organizations

HighLow Volume Customization High Low Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Job process Machining precision metal tubes Internal consulting team at manufacturing firm Batch production Forging process to make fittings for pressure vessels access Producing a batch of textbooks at R. R. Donnelley’s plant Processes at manufacturing organizations

3. LINE PROCESS – MASS PRODUCTION  Similar to continuous process except discrete product is produced  Heavily automated special purpose equipment  High volume - low variety  Both services and products can use flow shop form of processing

HighLow Volume Customization High Low Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Job process Machining precision metal tubes Internal consulting team at manufacturing firm Batch process Forging process to make fit- tings for pressure vessels access Producing a batch of textbooks at R. R. Donnelley’s plant Mass production Auto assembly King Soopers bread line Processes at manufacturing organizations

4. CONTINUOUS PROCESS  Highly standardized products in large volumes  Often these products have become commodities  Typically these processes operate 24 hours/day seven days/week  Objective is to spread fixed cost over as large a volume as possible

HighLow Volume Customization High Low Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Job process Machining precision metal tubes Internal consulting team at manufacturing firm Batch process Forging process to make fit- tings for pressure vessels access Producing a batch of textbooks at R. R. Donnelley’s plant Mass production Auto assembly King Soopers bread line Continuous process Oil refining process Borden’s pasta making process Processes at manufacturing organizations

HighLow Volume Customization High Low Project process Selecting location for new plant in Europe Installing ERP for a manufacturing firm’s business processes Batch production: Forging process to make fittings for pressure vessels access Producing a batch of textbooks at R. R. Donnelley’s plant Mass production Auto assembly King Soopers bread line Continuous process Oil refining process Borden’s pasta making process

Process Selection Tools

All of the processes are in a continuum between two extreme focuses- Product focus and Process Focus Process focus Equipment and workforce are grouped by the function they perform Equipment is general purpose Workers have multiple skills Volume is low Routings vary from one order to the next Flow pattern is jumbled The facility can produce a wide range of products FLOW STRATEGY Product Focus The equipment and workforce are group by the product or service to be produced Equipment is special purpose Workers have few skills Volume is high Single routing, material may be moved by conveyor The facility can produce a high volume of just few products

Comparison of Layout Patterns

PROJECT BATCH MASS PRODUCTION CONTINUOUS PROCESS STANDARDIZATION LOW HIGH CUSTOMIZATION HIGH LOW CUSTOMIZATION VS. STANDARDIZATION

Process Improvement

A never ending effort to discover and eliminate main causes of problems or wastes in the operations. It is very objective, not fire fighting It seeks ways to learn how things happen and works ways to improve them It involves everybody in the organization

Process Improvement A systematic approach to: Reduce variation Remove activities that have no value (waste) Improve customer satisfaction

Process Improvement Model: ADDIE Analyze Design Development Implementation Evaluate

Process Improvement Model: ADDIE A: Identify areas of opportunity and target specific problems D: Generate solutions through brainstorming D: Formulate a detailed procedure for implementing the approved solutions I: Execute the solutions E: Build measurement tools, monitor implementation and evaluate measurement to the baseline

Benchmarking Benchmarking – the search for industry best practices – approaches that produce exceptional results, are innovative in their use of technology or human resources, and are recognized by customers or industry experts.

Reengineering Reengineering – the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance

Process Tools

Flow Diagrams - Sequence of activities * = Points critical to the success of the service † = Points at which failure is most often experienced Customer drops off car Mechanic makes diagnosis* Discuss needed work with customer* Customer departs with car Collect payment Notify customer Check parts availability † Order parts Repair complete Repair not authorized Parts available Service visible to customer Repair authorized Service not visible to customer Perform work † Inspect/ test and repair Perform corrected work Corrective work necessary Parts not available