1. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Chapter 3
Process Strategy
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

2. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Process Strategy
There are four basic process decisions
Process structure including layout
Customer involvement
Resource flexibility
Capital intensity
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

3. Process Strategy Decisions
Process Structure
Customer-contract position (services)
Product-process position (manufacturing)
Layout
Customer Involvement
Low involvement
High involvement
Resource Flexibility
Specialized
Enlarged
Capital Intensity
Low automation
High automation
Strategy for Change
Process reengineering
Process improvement
Effective Process Design
Figure 3.1 – Major Decisions for Effective Processes
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

4. Process Structure in Services
Customer contact is the extent to which the customer is present, actively involved, and receives personal attention during the service process
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

5. Process Structure in Services
TABLE 3.1 | DIMENSIONS OF CUSTOMER CONTACT IN SERVICE
| PROCESSES
Dimension
High Contact
Low Contact
Physical presence
Present
Absent
What is processed
People
Possessions or information
Contact intensity
Active, visible
Passive, out of sight
Personal attention
Personal
Impersonal
Method of delivery
Face-to-face
Regular mail or
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

6. Process Structure in Services
The three elements of the customer-contact matrix are
The degree of customer contact
Customization
Process characteristics
Process characteristics include
Process divergence deals with customization and the latitude as to how tasks are performed
Flow is how customers, objects, or information are processed and can be either line of flexible
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

7. Service Process Structuring
Less customer contact and customization
Less processes divergence and more line flows
(1) (2) (3)
High interaction with Some interaction with Low interaction with
customers, highly customers, standard customers, standardized
customized service services with some options services
Process
Characteristics
(1)
Flexible flows with
Individual processes
(2)
some dominant
paths, with
some exceptions to how work performed
(3)
Line flows, routine
work same with all customers
Front office
Hybrid office
Back office
Figure 3.2 – Customer-Contact Matrix for Service Processes
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

8. Product-Process Matrix
For manufacturing organization it brings together
Volume
Product customization
Process characteristics
Process choices include job, batch, line, and continuous flow processes
Production and inventory strategies include make-to-order, assemble-to-order, and make-to-stock
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

9. Product-Process Matrix
(1) (2) (3) (4)
Low-volume Multiple products with low Few major High volume, high
products, made to moderate volume products, standardization, to customer higher commodity
order volume products
Process
Characteristics
(1)
Customized process, with flexible and unique sequence of tasks
(2)
Disconnected line flows, moderately complex work
(3)
Connected line, highly repetitive work
(4)
Continuous flows
Less complexity, less divergence, and more line flows
Less customization and higher volume
Job
process
Batch processes
Small batch process
Large batch
process
Line
process
Continuous
process
Figure 3.3 – Product-Process Matrix for Processes
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

10. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Layout
The physical arrangement of human and capital resources
An operation is a group of resources performing all or part of one or more processes
Layout involves three basic steps
Gather information
Develop a block plan
Design a detailed layout
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

11. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Layout
Gather information on space requirements, available space, and closeness factors
Department
Area Needed (ft2)
1. Administration
3,500
2. Social services
2,600
3. Institutions
2,400
4. Accounting
1,600
5. Education
1,500
6. Internal audit
3,400
Total 15,000
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

12. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Block Plan
150’
100’ 1 2 3 4 5 6
Figure 3.4 – Current Block Plan for the Office of Budget Management
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

13. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Closeness Matrix
Closeness Factors
Department 1 2 3 4 5 6
1. Administration ― 10
2. Social services 8
3. Institutions 9
4. Accounting
5. Education
6. Internal audit
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

14. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Requirements
There are two absolute requirements for the new layout
Education should remain where it is
Administration should remain where it is
Closeness Factors
Department 1 2 3 4 5 6
1. Administration ― 10
2. Social services 8
3. Institutions 9
4. Accounting
5. Education
6. Internal audit
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

15. Developing a Block Plan
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.
SOLUTION
Using closeness ratings of 8 and above, you might plan to locate departments as follows:
Closeness Factors
Department 1 2 3 4 5 6
1. Administration ― 10
2. Social services 8
3. Institutions 9
4. Accounting
5. Education
6. Internal audit
Departments 1 and 6 close together
Departments 3 and 5 close together
Departments 2 and 3 close together
Departments 1 and 5 should remain at their current locations
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

16. Developing a Block Plan
Departments 1 and 6 close together
Departments 3 and 5 close together
Departments 2 and 3 close together 1 5
150’
100’ 6 2 3 4
Figure 3.5 – Proposed Block Plan
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

17. Calculating the WD Score
EXAMPLE 3.2
How much better is the proposed block than the current block plan?
SOLUTION
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 3 1 2 6 5 4 6 1 2 4 5 3
Current Block Plan
Proposed Block Plan
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

18. Calculating the WD Score
Current Plan
Proposed Plan
Department Pair
Closeness Factor (w)
Distance (d)
Weighted-Distance Score (wd)
Distance (d)
1, 2 3
1, 3 6
1, 4 5
1, 5
1, 6 10
2, 3 8
2, 4 1
2, 5
3, 4
3, 5 9
4, 5 2
5, 6
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

19. Calculating the WD Score
Current Plan
Proposed Plan
Department Pair
Closeness Factor (w)
Distance (d)
Weighted-Distance Score (wd)
Distance (d)
1, 2 3
1, 3 6
1, 4 5
1, 5
1, 6 10
2, 3 8
2, 4 1
2, 5
3, 4
3, 5 9
4, 5 2
5, 6 1 3 2 6 1 6 3 18 3 15 2 12 20 16 1 6 27
Total 112 1 5 2 12 10 8 6 9 3
Total 82
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

20. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
A Detailed Layout
Once a block plan has been selected, a detailed representation is created showing the exact size and shape of each center
Elements such as desks, machines, and storage areas can be shown
Drawings or models can be utilized
Options can be discussed and problems resolved
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

21. The Weighted-Distance Method
The weighted-distance method can be used to compare alternative block plans when relative locations are important
Euclidian distance is the straight-line distance between two possible points
where
dAB = distance between points A and B
xA = x-coordinate of point A
yA = y-coordinate of point A
xB = x-coordinate of point B
yB = y-coordinate of point B
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

22. The Weighted-Distance Method
Rectilinear distance measures the distance between two possible points with a series of 90-degree turns
The objective is to minimize the weighted-distance score (wd)
A layout’s wd score is calculated by summing the products of the proximity scores and distances between centers
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

23. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Application 3.1
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB = (20 – 80)2 + (10 – 60)2 =
Rectilinear Distance
dAB = |20 – 80| + |10 – 60| =
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

24. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Application 3.1
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB = (20 – 80)2 + (10 – 60)2
= 78.1
Rectilinear Distance
dAB = |20 – 80| + |10 – 60| =
110
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

25. Trips between Departments
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.
Departments
Trips between Departments 1 2 3 4 5 6  25 90
165
105
125
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

26. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Application 3.2
Shown below on the right is a block plan that has been suggested for the building (original plan). Assume rectilinear distance. Students complete highlighted cells.
Department
Pair
Closeness
Factor
Distance
Score 3 6 1
1, 6
165 2 5 4
3, 5
125
3, 6
2, 5
105
5, 6
1, 3 90
1, 2 25 75
4, 5
Total
1030
Based on the above results, propose a better plan and evaluate it in terms of the load-distance score.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

27. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Application 3.2
Shown below on the right is a block plan that has been suggested for the building (original plan). Assume rectilinear distance. Students complete highlighted cells.
Department
Pair
Closeness
Factor
Distance
Score 3 6 1
1, 6
165 2 5 4
3, 5
125
3, 6
2, 5
105
5, 6
1, 3 90
1, 2 25 75
4, 5
Total
1030 2
250 1
125
180
Based on the above results, propose a better plan and evaluate it in terms of the load-distance score.
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

28. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Application 3.2
Department
Pair
Closeness
Factor
Distance
Score 4 6 1
1, 6
165 2 5 3
3, 5
125
3, 6
2, 5
105
5, 6
1, 3 90
1, 2 25
4, 5
Total
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

29. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Application 3.2
Department
Pair
Closeness
Factor
Distance
Score 4 6 1
1, 6
165 2 5 3
3, 5
125
3, 6
2, 5
105
5, 6
1, 3 90
1, 2 25
4, 5
Total 1
165
125 2
250
105 90 3 75 50
965
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

30. Copyright © 2010 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 © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

31. Copyright © 2010 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 © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

32. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Resource Flexibility
A flexible workforce can often require higher skills and more training and education
Worker flexibility can help achieve reliable customer service and alleviate bottlenecks
Resource flexibility helps absorb changes in workloads
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

33. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Resource Flexibility
The volume of business may affect the type of equipment used
Break-even analysis can be used to determine at what volumes changes in equipment should be made
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

34. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Break-Even Analysis
Total cost (dollars)
Units per year (Q)
Process 1: General-purpose equipment
Process 2: Special-purpose equipment
Break-even quantity F2 F1
Figure 3.7 – Relationship Between Process Costs and Product Volume
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

35. welded manually (Make)
Application 3.3
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.
welded manually (Make)
welded by robot (Buy)
Fixed costs
$10,000
$400,000
Variable costs
$50
$20
At what volume would BBC be indifferent to these alternative methods?
Q =
Fm – Fb cb – cm =
$10,000 – $400, $20 – $50
= 13,000 frames
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

36. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Capital Intensity
Automation is one way to address the mix of capital and labor
Automated manufacturing processes substitute capital equipment for labor
Typically require high volumes and costs are high
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

37. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Capital Intensity
Fixed automation produces one type of part or product in a fixed sequence
Typically requires large investments and is relatively inflexible
Flexible automation can be changed to handle various products
Industrial robots are classic examples of flexible automation
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

38. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Capital Intensity
Economies of scope reflect the ability to produce multiple products more inexpensively in combination than separately
Applies to manufacturing and services
Requires sufficient collective volume
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

39. Decision Patterns for Manufacturing
Competitive Priorities
Process Choice
Top-quality, on-time delivery, and flexibility
Job process or small batch process
Low-cost operations, consistent quality, and delivery speed
Large batch, line, or continuous flow process
(a) Links with Process Choice
Competitive Priorities
Production and Inventory Strategy
Top-quality, on-time delivery, and flexibility
Make-to-order
Delivery speed and variety
Assemble-to-order
Low-cost operation and delivery speed
Make-to-stock
(b) Links with Production and Inventory Strategy
Figure 3.9 – Links of Competitive Priorities with Manufacturing Strategy
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

40. Trips Between Departments
Solved Problem 1
A defense contractor is evaluating its machine shop’s current layout. Figure 3.11 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.
Use trial and error to find a better layout
How much better is your layout than the current layout in terms of the wd score? Use rectilinear distance.
Trips Between Departments
Department A B C D E F ― 8 3 9 5 E A B C D F
Figure 3.11 – Current Layout
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

41. Trips Between Departments
Solved Problem 1
SOLUTION
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. Figure 3.12 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
Department A B C D E F ― 8 3 9 5 E F C A B D
Figure 3.12 – Proposed Layout
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

42. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Solved Problem 1
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.
Current Plan
Proposed Plan
Department Pair
Number of Trips (1)
Distance (2)
wd Score (1)  (2)
Distance (3)
wd Score (1)  (3)
A, B 8 2 16 1
A, C 3 6
A, E 9
A, F 5 15
B, D
C, E
C, F 18
D, F
E, F
wd = 92
wd = 67
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.