Process Strategy Chapter Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

What is Process Strategy? Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Process Strategy The pattern of decisions made in managing processes, so that the processes will achieve their competitive priorities.

Supply Chain Processes Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall ProcessDescriptionProcessDescription OutsourcingCustomer Service WarehousingLogistics SourcingCross-Docking

Business Function Processes Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Process Strategy Decisions Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Customer Contact in Services Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall DIMENSIONS OF CUSTOMER CONTACT IN SERVICE PROCESSES DimensionHigh ContactLow Contact Physical presencePresentAbsent What is processedPeoplePossessions or information Contact intensityActive, visiblePassive, out of sight Personal attentionPersonalImpersonal Method of deliveryFace-to-faceRegular mail or

Process Structure in Services Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Customer Contact Customization Process Divergence Flexible Flow

Service Customer-Contact Matrix Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Process Structure in Manufacturing Job Process Batch – Small or Large Line Continuous Flow Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Process Structure in Manufacturing Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Production and Inventory Strategies Make-to-Order Assemble-to-Order – Postponement – Mass Customization Make-to-Stock – Mass Production Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Layout Layout - The physical arrangement of human and capital resources Operation - A group of resources performing all or part of one or more processes Layout involves three basic steps 1.Gather information 2.Develop a block plan 3.Design a detailed layout

Layout Gather information on: – Space requirements – Available space – Closeness Factors Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Layout Develop a Block Plan Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Layout Use a Closeness Matrix Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Layout Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Euclidian distance is the straight-line distance between two possible points where d AB = distance between points A and B x A = x-coordinate of point A y A = y-coordinate of point A x B = x-coordinate of point B y B = y-coordinate of point B

Layout Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Rectilinear distance measures the distance between two possible points with a series of 90-degree turns

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Application 3.1 Rectilinear Distance d AB = |20 – 80| + |10 – 60| = Euclidian Distance d AB = (20 – 80) 2 + (10 – 60) 2 What is the distance between (20,10) and (80,60)? 110 =

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Example 3.1 Develop an acceptable block plan for the Office of Budget Management that locates departments with the greatest interaction as close to each other as possible

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Example 3.1 How much better is the proposed block than the current block plan? The following table lists pairs of departments that have a nonzero closeness factor and the rectilinear distances between departments for both the current plan and the proposed plan Current Block PlanProposed Block Plan

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Example 3.1 Current PlanProposed Plan Department Pair Closeness Factor (w) Distance (d) Weighted-Distance Score (wd) Distance (d) Weighted-Distance Score (wd) 1, 23 1, 36 1, 45 1, 56 1, 610 2, 38 2, 41 2, 51 3, 43 3, 59 4, 52 5,

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Total 112 Example Total 82 Current PlanProposed Plan Department Pair Closeness Factor (w) Distance (d) Weighted-Distance Score (wd) Distance (d) Weighted-Distance Score (wd) 1, 23 1, 36 1, 45 1, 56 1, 610 2, 38 2, 41 2, 51 3, 43 3, 59 4, 52 5,

Example Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Excel Solver evaluation of solution

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Application 3.2 Matthews and Novak Design Company has been asked to design the layout for a newly constructed office building of one of its clients. The closeness matrix showing the daily trips between its six department offices is given below. DepartmentsTrips between Departments     25 5  

Department Pair Closeness Factor DistanceScore 361 1, , , , , , 390 1, , 5251 Total Application 3.2 Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Shown on the right is a block plan that has been suggested for the building (original plan). Assume rectilinear distance and complete the highlighted cells.

Department Pair Closeness Factor DistanceScore 361 1, , , , , , 390 1, , 5251 Total Application 3.2 Based on the above results, propose a better plan and evaluate it in terms of the load-distance score. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Department Pair Closeness FactorDistanceScore 461 1, , , , , , 390 1, 225 4, 525 Total Application 3.2 Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Department Pair Closeness FactorDistanceScore 461 1, , , , , , 390 1, 225 4, 525 Total Application 3.2 Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Customer Involvement Possible Disadvantages Can be disruptive Managing timing and volume can be challenging Quality measurement can be difficult Requires interpersonal skills Layouts may have to be revised Multiple locations may be necessary Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Customer Involvement Possible Advantages Increased net value to the customer Can mean better quality, faster delivery, greater flexibility, and lower cost May reduce product, shipping, and inventory costs May help coordinate across the supply chain Processes may be revised to accommodate the customers’ role Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Resource Flexibility Workforce – Flexible workforce Equipment – General-purpose – Special-purpose Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Application 3.3 Q = F m – F b c b – c m BBC is deciding whether to weld bicycle frames manually or to purchase a welding robot. If welded manually, investment costs for equipment are only $10,000. The per-unit cost of manually welding a bicycle frame is $50.00 per frame. On the other hand, a robot capable of performing the same work costs $400,000. Robot operating costs including support labor are $20.00 per frame. At what volume would BBC be indifferent to these alternative methods? Welded manually (Make) Welded by robot (Buy) Fixed costs$10,000$400,000 Variable costs$50$20 = $10,000 – $400,000 $20 – $50 = 13,000 frames

Capital Intensity Automation in Manufacturing – Flexible Automation – Fixed Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Automation in Services

Decision Patterns for Service Processes Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Link of Competitive Priorities to Manufacturing Strategies Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Decision Patterns for Manufacturing Processes Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Process Reengineering Critical processes Strong leadership Cross-functional teams Information technology Clean-slate philosophy Process analysis Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Solved Problem 1 A defense contractor is evaluating its machine shop’s current layout. The figure below shows the current layout and the table shows the closeness matrix for the facility measured as the number of trips per day between department pairs. Safety and health regulations require departments E and F to remain at their current locations. a.Use trial and error to find a better layout b.How much better is your layout than the current layout in terms of the wd score? Use rectilinear distance. Trips Between Departments DepartmentABCDEF A―8395 B―3 C―89 D―3 E―3 F― E A B CD F

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Solved Problem 1 a. In addition to keeping departments E and F at their current locations, a good plan would locate the following department pairs close to each other: A and E, C and F, A and B, and C and E. The below figure was worked out by trial and error and satisfies all these requirements. Start by placing E and F at their current locations. Then, because C must be as close as possible to both E and F, put C between them. Place A below E, and B next to A. All of the heavy traffic concerns have now been accommodated. Trips Between Departments DepartmentABCDEF A―8395 B―3 C―89 D―3 E―3 F― EF A B C D

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Solved Problem 1 Current PlanProposed Plan Department Pair Number of Trips (1)Distance (2) wd Score (1)  (2) Distance (3) wd Score (1)  (3) A, B A, C31326 A, E91919 A, F53153 B, D32613 C, E C, F D, F31313 E, F32626 wd = 92wd = 67 b. The table reveals that the wd score drops from 92 for the current plan to 67 for the revised plan, a 27 percent reduction

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