Mgt 235

Process Selection,

Design, and Analysis

@ oescribe the four types of processes used to produce goods and services'

Explain the logic and use of the product-Process matrix'

Explain the logic and use of the service-positioning matrix'

Describe how to aPply process and value stream mapping br process design'

Explain how to improve process designs and analyze Proc€ss maPs'

Describe how to compute resource utilization and apply Li -de's Law'

@ @ (D (E @

LEARNING ()BJECTIVES

After studying this chapter, you should be able to:

Japanese automakers such as Toyota and Honda

hive used fiexible manufacturing for decades' Some production lines can build six different modeli. Until recently, American factories were

designed to produce only one. This is changing, as Ford retooled an inflexibie sport utility vehicle (SUV) factory in Wayne, Michigan, to become an environmentaliy friendly workplace with fiexible manufacturing capability The factory rvill be the first facility in the world capable of building a wide range of vehicles-gas-powered' electric, hybrid, and plug-in hybrid-ali on the same production iine. This allows rapid change

to different models as consumer wants and needs change.

To accomplish this, Ford's manufacturing team had to redesign and program most of the 696

robots to weld a variety of parts and get them to move in additional directions' recognize panels for

different vehicles, grasp each at the right points,

and know exactly how to weid them. Vehicies on

the line ride on "skillets" that automatically raise

and lower to the ideal height at each station for the

task and model. The factory's integrated stamping

facility allows the stamping and welding of all large iheet metal parts on-site. It also employs an efficient, synchronous material flow in which parts and other components move in kits to each

bp.t"to., providing employees with the tools they need in the sequence they will need them'

The factorY is not onlY flexible but environmentally friendly-it runs on a blend of renewable and conventional electricity For example, it has 10 electric vehicle charging statlons

that recharge electric switcher trucks, which transport parts between adjacent faciiities, and the factoiy recycles everything from packing materials to water bottles.l

132 PARTTWO: Designing Operations and Supply Chains

This Ford plant in Wayne, Michigan, is the first to

make gas, electric, hybrid and plug-in hybrid vehicles

on the same production line.

Choosing appropriate processes and designing them to work effectively wi& each other is vital for an effective an< [ efficient value chain and cannot be taken lightly. As the in troductory example suggests, process design is an impor ttrnt operational decision that affects the cost of operations, customer service, and sustainability. Companies are just be ginning to consider: the environmental iurpact of their pro cesses zrnd those of their customers. See the box feature orr Global Logistics arrd Sustainability and Solved Problem 7.l

PROCESS CHOICE DECISIONS

Firms generally produce either in response to custome '

orders and demand or in anticipation of them. Thir, leads to three major tlpes of goods and services: custom option-oriented, and standard,2 Custom, or make-to' order, goods and services are generally produced on/ delivered as one of o kind or in smoll quantities, ond ore designec'

to meet specific customers' specifications. Examples includr ships, Internet sites, weddings, taxi service, estate plans buildings, and surgery Because custom goods and ser- vices are produced on demand, the customer must wait for them, often for a long tirre because the good or service must be designed, created, and delivered.

l- I Process design is an I i*portant operationalT-

decision that affects the cost of operations, customer service, and I

sustainability. _t

Option, or assemble-to-order, goods and services are configurotions of stondard ports, subassem- blies, or services thot con be selected by customers from o limited

sef. Cornmon examples are Dell computers, Subway sandwjches, ma-

chine tools, and travel agent services. Although the custorner chooses how the goods and ser- vices are configured, any unique technical specifi- cations or requirements cannot generally be accornmodated.

CHAPTER 7: Process 5election, Design, and Analysis 1 33

Global Logistics and Sr-lstainability One example of a company that is focusing on sustainable processes is Alfa Laval, a Swedish company that provides goods and services to the energy, food, refrigeration and cooling, water, and pharmaceutical industries in over

I00 countries. Carbon dioxide emissions from transporting Alfa Laval's products accounted for approximately 2 percent of its total emissions, Its Global Transport Department analyzed over 1 00,000 transactions to identify opportunities to reduce emissions by shifting from airfreight to surface (mainly ocean) transportation. The advantage of airfreight had been that the inventory l€vels could be minimized and a fast response to changing customer needs could be assured. However, a thorough cost-benefit analysis confirmed that increased inventory costs using surface shipping were more than outweighed by the carbon dioxide reduction and freight cost savings. The move from air to surface shipping meant redesigning and switching the ordering process for 32,000 order

SOLVED PROBLEM 7.1

lines per year. Switching to sea freight also required an inventory buildup at distribution centers to ensure that delivery performance to end customers would not suffer, along with major changes to Alfa Laval's processes. The process changes resulted in a reduction of approximately 12 percent in inventory,

carbon dioxide emissions, and similar freight shipping savings.3

Solution:

a. By dividing number of miles saved by miles per gallon, we get the number of gallons of gasoline saved annually:

(1,260,000 - 1,030,000 miles/year)/(20 miles per gallon) : 1 1,500 gallons saved/year.

b. By multiplying the number of gallons saved/year by 8.91 and dividing by 1,000, we get metric tons of CO, released into the atmosphere:

(11,500 gallons saved/yearX8.91 kg of CO, per

gallon)/'l ,000 kg CO, per metric ton : '102.5 metric tons of CO, not released into the atmosphere due to better vehicle routing and scheduling.

I

Clear Water Pool Service (CWPS) provides the

maintenance for over 7,000 pools in southwest

Florida. In 2010, CWPS purchased vehicle routing and scheduling software and a GPS truck locator system. Before the use of the "smart system," CWPS's vans and trucks drove 1.26 million miles to service these pools

on monthly and weekly appointment schedules. After 1 year of using the "smart systemi'CWPS reduced

total miles driven to i.03 million miles by using better vehicle routes from site to site, and using fewer vehicles. CWPS's vehicles average 20 miles per gallon. Unleaded

gasoline has 8.91 kilograms (19.643 lb) of carbon

dioxide (COr) per gallon, and 1 metric ton equals 1,000 kilograms (kg), according to government sources.

a. Find the number of gallons of gasoline saved annually.

b. How many metric tons of CO, did not go into the earth's atmosphere because of CWPS using smart vehicle scheduling and locator technology?

5 t- s. \:YfaYlry\ "f'

134 PARTTWO: Designing operations and Supply Chains

i- f,-t:!"++-:j+:??:-rc

Standard, or make-to-stock, goods and services ore mode according to o fixed design, ond the customer hos n) options from which to choose. Appliances, shoes, sportinl goods, credit cards, online Web-based courses, and bus service are some examples. Standard goods are rnade i r anticipation of customer demand and stocked in inven- tory and there{bre are usu- ally available, although in some cases the proper color or size miglit be out of stock.

We note that manu- {'acturing systems often use tlre terms make-to-order, assernhl,e-to-order and make-

to-stock to describe tlie types of systems used to manufac- ture goods. The terminology is not as standardized irr ser- vice industries, althougli the

l- I Ir the future, processI I managers will not only

need to quantify the trade-offs among cost,

quality, time, and other priorities, but also

tthe carbon footprint I of their processes I

common exarnples are automobiles, appliances, insur- ance policies, checking account statements, and hospital laboratory work. FIow shops tend to use highly produc- tive, specialized equiprnent and computer software.

Continuous flow processes create highly standord- ized goods or seruices, usually oround the clock in very high volumes.

Examples of continuous flow processes are autorlated car washes, paper and steel mills, paint factories, and many electronic, information- intensive services such as credit card authorizations and security systems. The sequence ofwork tasks is very rigid and the processes use highly specialized, automated equiprnent that is o{ien con- trolled by computers with mjnimal human oversight.

Exhibit 7.I summarizes these di{ferent process tlpes and their characteristics.

I product life cycle is o charocterization of prod- uct growth, moturity, ond decline ovet time. It is important to understand product life cycles because when goods and services change and mature, so must the processes and value chains that create and deliver them.

The traditional prod- uct life cycle (PLC) gen- erally consists of four phases-inf roduction, gro@th, maturity, and decline and turnaround. A product's life cycle has important implica- tions in terms of process design and choice. For example, new products with low sales volume might be produced in a job shop process; however, as sales grow and volumes increase, a flow shop process might be more eflicient. As another example, a firm might introduce a

concepts are similar. Four principal types ofprocesses are used to produc,;

goods and serwices:

L Projects. 2. Job shop processes.

3. Flow shop processes. 4. Continuous flow processes.

Projects ore lorge-scale, customized initiatives that consist of mony smaller tasks and activities that must be coordinoted on,l completed to finish on time ond within budget. Some exarnples of projects are legal defense preparation, construction, and software development. Projects are often used for custom goods and services, and occasionally for stan- dardized products such as "market homes" that are built from a standard design.

Job shop processes ore organized around particu- lor types of general-purpose equipment that are flexible ond ca- pable of customizing work for individual customers. Job shop ; produce a wide variety of goods and services, often irr small quantities. Thus, they are often used for custonr or option type products. In job shops, customer order:; are generally processed in batches, and different order; may require a different sequence o{'processing steps an<l movement to different work areas.

Ffow shop processes are organized around o fixed se- quence of octivities and process steps, such os an ossembly line, to produce o limited variety of similar goods or services. An assem - bly line is a common'example of a {low shop process. Many large-volume, option-oriented and standard good; and services are produced in flow shop settings. Somc

CHAPTER 7: Process Selection, Design, and Analysis i 35

Rethinking Airplane l\,4anutfacturing Processes Airplane manufacturing is typically performed on a

project basis where volumes are lower and airlines

demand more customization. However, as demand is

rising rapidly, Boeing is rethinking this paradigm. Eoeing

plans to use newer, more standardized manufacturing

techniques for its new 777Xietliner, paving the way

for significant savings as it gradually feeds the changes

back into existing assembly lines.The approach will

draw increasingly on lessons learned from outside the

aerospace industry. Boeing hired an executive from

Toyota who observed, "lf we can develop a system

where we have direct deliveries to our lines and in

an orientation which our operators will use to simply

secure instead of handling parts, we have tremendous

opportunitiesl' lmproving the sequencing of parts

PROJECT

reduces inventory, eases cash flow, and requires less

space, thus lowering overhead. One Boeing executive

noted:"We've gone to a single moving line, and even

though it goes one inch per half-hour, it's a moving line

and it is the same concept as Toyota. We (put everything

that is needed in kits).We make it very visible. We deliver

things right to the side, and before we had mechanics

running all over the factory getting parts." 4

@

JOB SHOP

FLOW SHOP

CONTINUOUS FLOW

One ofra kind ' ' :: - '' Large scale, complex

Resources brouqht to the site

Wide variation in specifications or tasks

Significant setup and/or changeover time

Low to moderate volume

Batching (small to large jobs)

Many process routes with some repetitive s teps

Customized design to customer's specificat ons

Many different products

High workforce skills

Little or no s6tup or cfrangeover time

Dedicated to a small range of goods or serv ces that are highly slmiler

Slmllar sequenco ot procoss steps

Moderate to high volumes

Very high volumes in a fixed processing seouence

Not made from discrete parts

High investment in equipment and facility

Dedicated to a small range of goods or serv ces

Automated movement of goods or informat on between process steps

24-hour l7-dav continuous operation

Space shuttle, cruise ships,.small business tax service, consulting

Dams, bridges, skyscrapers

Skyscrapers. weddings, consulting :

Custom jewelry, surgery, Web pages'

Automobile engines, auto body repait major legal cases

Machine tools, beauty salons

Orders from small customers, mortgages, tourist tour groups

Shoes, hospital care, commercial loans

Commercial and Web-based printing

Heavy equipment, financial services

Legal services, consulting

Insurance policies

Cafeterias, airline frequent flyei progrsms

Relrigerators, stock trados : : Toys, f urniture, lawnmowers

Gasoline, paint, memory chips, check posting

Grain, chemicals

Steel, paper, power-generating facilities

Automated car wash

Credit card authorizations, electric utilities

Steel, electronic f unds transfer, broadcasting

Custom or Make-to-Order

Option or' Assemble. f to"Order ,ttt+ Standardized or Make-to-Stock

I

I

I

I

1 36 PARTTWO: Designing Operations and Supply Chains

l- I ft is important toI I understand product life T

cycles because when goods and services change and mature, so must the

processes and value chains that create and

deliver them

standard product that is produced with a {low s}rop process, but as the market matures, the product might become more customized. In this case, a job shop process might be rnore advantageous. What often happens in many firrns is that prod- uct strategies change, but managers do not make the necessary changes in the process to reflect the new product characteristics.

Two approaches to help un- derstand the relationships between product chartrcteristics for goods and services and process choice decisions are the product-process matrix and service-positioning matrix, which we introduce in the {bllowinq sections.

For example, consider a firm that manufactures only a few products with high volumes and low custom- ization using a flow shop process structure. This pro- cess choice best matches the product characteristics. However, suppose that as time goes on and customer needs evolve, marketing and engineering functions de- velop more product options and add new products to the mix. This results in a larger number and variety of products to make, Iower volumes, and increased cus- tomization. The firm finds itself "off the diagonal" and in the lower left-hand corner of the matrix (denoted by Position A in Exhibit 7.2). There is a rnisrnatch between product characteristics and process choice. If the Iirm

continues to use the flow shop pro- cess, it may find itself struggling to meet delivery promises and incur unnecessary costs because of low efficiencies.

On the other hand, by selec- tively and consciously positioning a business off the diagonal o{'the product-process matrix (often called a "positioning stratery"), a company can differentiate itself from its com- petitors. However, it must be care- ful not to get too far offthe diagonal, or it must have a market where high prices absorb any operational inefli- ciencies. For example, Rolls-Royce produces a small line of automo- biles, using a process sirnilar to a job shop rather than the traditional flow shop of other automobile manu- facturers. Each car requires about 900 hours of labor. For Rolls-Royce this strategy has worked, but its

target rnarket is willing to pay premiurn prices for pre- mium quality and features.

The theory of the product-process matrjx has been challenged by some who suggest that advanced manufac- turing technologies may allow lirms to be success{ul even when theyposition themselves offthe diagonal. These new technologies provide manufacturers with the capability to be highly llexible and produce lower volumes oiproducts in greater varieties at lower costs. Therefore, off-diagonal positioning strategies are becoming rnore and more viable for many organiza- tions and allow for "mass-

customization" strategies and capabilities.6

-

@Iil[ii,'Jilffi,,. The product-process matrix was first proposed l,y Hayes and Wheelwriglit and is shown in Exhibit 7.2.s Trrc product-process matrix is o model thot describes tlte olignment of process choice with the charocteristics of the man- ufactured good. The most appropriate match betwee n type of product and type of process occurs along tle diagonal in the product-process matrix. As one mov(:s down the diagonal, the emphasis on both product:rnd process structure shifts frorn low volume and high {lexibility to higher volumes and more standardizr - tion. If product and process characteristics or€ [(rt well matched, the firm will be unable to achieve ir s competitive priorities effectively.

CHAPTER 7: Process Selection, Design, and Analysis 137

OPERATIONS

Process Choice Decision with Example Process

Charactelistics

. One of a kind

. Large scale

. Complex o Wide variation of tasks . Resources to site

. High setup ttme

. Batching

. Many process routes

. Customized

. Many different products

. General high level skills

. Lowno Setup tme

. Highly similar products

. Dominant line flow(s)

. Specialized skills

. High investment in equipment and facility

. Not made from discrete parts

. Automated

. 2417 continuous operatton

o Demand (Volume)

. Degree of Customization

. Number/Range of Products

. Type of Goods

Moderate High

Moderate LowHigh Low

Custom Make-to-Ord:r

Many/Multiple

Options Assemble-to-Order

Several

Standardized Make-to-Stock

The product-process matrix does not transfer well to ser-

vice businesses and processes.T'8 The relationship between volume and process is not

found in many service businesses. For example, to meet increased volume.

service businesses such as retail outlets, banks, and hotels have histori- cally added capacity in the form of new stores, branch banks. and hotels

MARKETING Product Characteristic/Decisione

to meet demand but they do not change tl-reir processes.

These limitations are resolved by introducingthe sensice-

positioningmafrir. To better understand it, we first discuss

the concept of a pathway in a service-delivery system.

A pathway is a unique route through o service system. Pathways can be customer driven or provider driven, depending on the level o{ control that the service firm wants to ensure. Pathways can be physical in nature, as in walking around Disney World or a golf course; proce-

dural, as in initiating a transaction via the telephone with

a brokerage firrn; or purely mental and virtual, as in do- ing an Internet search. Customer-routed services dre those thot offer customers broad freedom to select the pothwoys

thot are best suited for their immediate needs ond wants from

mony possible pothways through the service-delivery system.

The customer decides what path to take through the

Gt THE sERVtcE-PostTtoNtNG - MATRIX

LOW

1 38 PARTTWo: Designing operations and Supply Chains

Becton Dickinson (BD) is the leading producer of needl,: devices for the medical industry. Spring-loaded lV catheters have 12 parts, assembled in an automated process with 48 steps carried out at incredibly fast speeds. Instead of using one long assembly line, BD's Utah plant uses a producti()n system that makes it relatively easy to modify a product by altering or adding subassembly stations. BD's manufact lring process choice is somewhat of offthe diagonal of the product-process matrix, producing multiple products in high volumes in more-or-less a continuous flow pattern. A simple product design and a high degree of automatiorr helped BD work off the product-process diagonal. This strategy helps the company to continue to hold and grow its market share in a highly competitive industry.

service-delivery system with only minimal guidanc e from management. Searching the Internet to pu:- chase an item or visiting a park are exarnples.

Provider-routed services constroin cusrcmers,o follow a very small number of possible ond predefined pothwo.rs

through the service system. An automatic teller machine (ATM) is an example. A limited number of pathwavs exjst-for example, getting cash, mahng a deposit, checl:- ing an account balance, and rnoving money from one account to another. Mailing and processing a package using the U.S. Postal Service, Federal Express, or UPS s another example of a provider-routed service.

Designs for customer-routed services require a soliC understanding of the features that can deliglit custorl - ers, as well as methods to educate customers about the variety of pathways that may exist and how to select an I navigate through them.

The service-positioning rnatrix (SPM), as show,r in Exhibit 7.3, is roughly analogous to the produo - process rnatrix for: manufacturing. The SPM focuse s on the serwice-encounter level and lielps marragefirer r design a service system that best meets the techn - cal and behavioral needs of custorners. The positio,r along the horizontal axis is described by the sequenc: of service encounters. Ihe service-encounter activit'y sequence consists of all the process steps and associoted service encounters necessory to complete a service transoction and fulfill t customer's wants ond needs. It depends on two things:

\. The degree of customer discretion, freedom, and. decision-mrtking pouer in selecting the sensice- encounter octlt:ity sequerrce. Customers may want the opportunity to design their own unique service- encounter activity sequence, in any order they choose.

2. The degree of repeatability ofthe sensice- encounter actiuity sequence. Service-encounter repeatability refers to the frequency that a specifi<' service-encounter activity sequence is used

by customers. Service-encounter repeatability provides a measure analogous to product volume for goods-producing firms.

The rrore unique the sewice encounter, the less repeatable it is. A high degree of repeatability encour- ages standardized process and equipment design and dedicated service channels, and results in lower costs and improved efficiency. A low degree of repeatability encourages more customization and more flexible equip- ment and process designs, and typically results in higher relative cost per transaction and lower efficiency.

The position along the vertical axis of the SpM reflects the number of pathways built into the service system design by management. That is, the designers or management predefine exactly how many pathways will be possible for the custorner to select, ranging from one to an infinite number of pathways.

The SPM is similar to the product-process matrix in that it suggests that the nature of the customers desiretl service-encounter activity sequence should lead to the most appropriate service system design and that superior perfonnance results by generally staying along dre diagonal of the matrix. Like the product-process matrix, organiza- tions that venture too far off the diagonal create a mismatch between service system characteristics and desired activity sequence characteristics. As we move down the diagonal of the SPM, the service-encounter activity sequence becomes less unique and more repeat- able with fewer pathways. Like &e product-process rnatrix, the midrange por- tion of the rnatrix contains a broad range of interme- diate design choices.

CHAPTER 7: Process Selection, Desiqn, and Analvsis 139

Customer wants e high degree of freedonr and decision-making p )wer to select a servrce. encounter actrvrty sequence

Unrque, never-to-i e- ranaato.i corrrina- encounter activity sequence

F :E

I

E5E ooE ?B 3oio!t.9 F6 E= E?g r; a" t.s o

I

+

i Sources: Adapted from D. A. Collier and S. M. Meyer, ? Service Positioning no. 1 2, (1 998) pp. 'l 1 23-1 244. Also see D. A. Collier and S. Meyet ?n Empir Ptoduction Monagement, 20, no.5-6 (2000), pp.705-729.

,rlavix: lntemotionol.lournol of Operotions ond Production Monogement, 18,

:al Comparison of Service Matrices,"/nremotionol Journolof Operations and

Unique

Not Repeatable Customer's Service-

Encountef Activitg Sequence Highlg

Repestable

Fulfillment of Customer Wants and Needs

Customer wants a moderate degree of {reedom and decision- making power to select a service-encounter actrvrty sequence

Low to moderately repeatable service- encounter actrvrty sequence

Customer wants a low degree of freedom and decision-making power to select a servrce- encounter activity sequence

Highly repeatable service-encounte r actrvrty sequence

Management- F)ocinnod

Service System Characteristics

. Many customer pathways

. Management designs a low degree of control into the service system

. Moderate number of customer pathways

. Management designs a moderate degree of control into the service syslem

o Limited number of customer pathways

. Management designs a high degree of control into the service system

When Apple introduced a redesigned line of MacBooks tlrat featured precision

unibody enclosures milled from an extruded block of alu "ninum that improved rigidity and durability, and also resulted in a thinner desi,Jn, it needed to develop an entirely new process. The process started with an extr Jded block of aluminum that was carved out using computer numerical control (C NC) machines, similar to processes used in the aerospace industry.The aluminum sheets were cut into blocks that underwent 13 separate milling operations. Apple used CNC to precision- cut keyboard holes from the face of the slab, mill out the "thumbscoop" that provides enough of a recession to open the display lid, machine out complex patterns from the inside, and perforate the speaker grill holes using lasers. Once the inside was precision cut, the edges were rounded and polished. The material machined from the aluminum block was collected and recycled.e

E

I

E

.! E

I

e E

140 PARTTWo: Designing Operations and Supply Chains

ffi@*ffi -

PROCTSS DESIGN

The goal of process design is to create dre right combin,r- tion of equipment, labor, software, work rnethods, and err- vironrnent to produce and deliver goods and services th rt satisfy both internal and external customer requirernenls. Process design can have a signi{icant impact on cost (and her-rce profitability), flexibjlity (the ability to produce tl e riglit types and arnounts of products as customer demand or preferences change), and the quaiity ofthe output.

We can think about work at four hierarchical levelr;:

1. Task.

2. Activity.

3. Process.

4. Value chain.

A task is a specific unit of work required to creote on outpt"t. Examples are inserting a circuit board into an iPad suba,;- sembly or tJping the address on an invoice. An activity is a group oftasks needed to create and deliver an intermediate or final oufput. Examples include all the tasks necessary to build an

Cascading to the I next level of detail

iPad; for example, connecting the battery and assembling the cover pieces, or inputting all the information correctly on an invoice, such as the items ordered, prices, discounts, and so on. An example of a process would be manufactur- ing an iPad or ful{illing a customer order. The value chain for an iPad would include acquiring the materials and com- ponents, rnanufacturing and assembly, distribution, retail sales, and face-to-face and web-based customer support.

Exhibit 7.4 shows an example for the production of antacid tablets. The value chain shows an aggregate view focused on the goods-producing processes (supporting services such as engineering, shipping, accounts payable, advertising, and retailing are not shown). The next level in the hierarchy of work is at the production process level where tablets are made. The third level focuses on the mixing toorkstation (o, u;ork actirsities) where the ingredients are unloaded into mixers. The mixer must be set up for each batch and cleaned for the next batch because

CHAPTER 7: Process Selection, Design, and Analysis 141

Airlines have been working to redefine their customer benefit packages. Since 2010'

Alaska Airlines has offered a 20-minute baggage guarantee:

lf your bags are not at baggage claim within 20 minutes ()f your plane's arrival at

the gate, we'll offer you a 525 Discount Code for use on a future Alaska Airlines

flight, or 2,500 Alaska Airlines Mileage Plan'" Bonus Mile:. In the rare instance

that we don't meet our 20-minute guarantee, just get ahold of us within 2 hours

of your flight's arrival for your discount code or Miles. Yotr can reach out to us on

Twitter @alaskaair, call our customer service center, or sirnply come and speak with

one of our Custonier Service Agents at the airport'

Could your preferred airline do this without improving their operations and baggage-

handling processes?10

E

=

E

FT

many different {lavors, such as peppermint, strawberry-

banana, cherry and mandarin orange, are produced using

the same mixers. The fourth and final level in the work

hierarchy is theflaooringtarks, which are defined as three

tasks, each with specific procedures, standard times per

task, and labor requirements. These three tasks could be

broken down into even more detail if required.

7-4a Process and Value Stream Mapping

5.

6.

that describe how the process can best achieve

customer and organizational objectives.

Identify and define appropriate performance measures for the process.

Select the appropriate equipment and technology.

Develop an implementation plan to introduce

the new or revised process design. This includes

developing process performance criteria and

standards to monitor and control the process.

Understanding process design objectives focuses on

answering the question: What is the process intended

to accomplish? An example process objective might be "to create and deliver the output to the customer in

48 hours." Another key question to consider is: What are

the critical customer and organizational requirements that must be achieved?

Designing a goods-producing or service-providing process requires six major activities:

1. Define the puqpose and objectives ofthe process.

2. Create a detailed process or value stream map that describes how the process is currently performed (sometimes called a current state or baseline map).

Of course, if you are designing an entirely new process, this step is skipped.

3. Evaluate alternative process designs. That is, create process or value stream maps (sometimes called future state maps)

A process map (flowchart) describes the sequence of all process octivities ond tosks necessory to create and deliver o

desired output or outcome.It documents how work either is

or should be accomplished, and how the transformation

process creates value. We usually first develop a "base-

Iine" map of how the current Process operates in order

to understand it and identify improvements for redesign.

Process maps delineate the boundaries of a process.

A process boundary is the beginning or end of a process.

142 PARTTWo: Designing operations and Supply Chains

A ,i'.,,.r

Tl-re advantages of a clearly defined process boundary are that it makes it easier to obtain senior rnanage- ment support, assign process own- ership to individuals or teams, identify key interfaces with internal or external customers, and identify where performance measurements should be taken. Thus, each ofthe levels in Exhibit 7.4 represents a process map defining different process boundaries.

Typical symbols used for pro- cess rnaps are the following:

I A rectangle denotes a task or work activity. A triangle indicates waiting. An oval denotes the "start" or "end" of the process and de- fines the process boundaries. An arrow denotes movement, transfer, or flow to the next task or activity,

-> A double-headed arrow de- notes an input or arrival into a Drocess.

f i di^*o,',d denotes a decision that rnight result in taking al- ternative paths.

Exhibit 7.5 shows a flowchart for an automobile repair process. Pro- cess maps clearly delineate the process boundaries.

In serwice applications, flow- charts generally highlight the points of contact with the customer and are often called sensice blue- prints or service nraps. Such flow- charts often show the separation between the back oflice and the front office with a "line of custorner the one shown in Exhibit 7.5.

Line of IIIII

customer vis bility

I Mrchantcownershlp I

5ource: David A. Colliq The Service/Quality Solution, copublished by lrwin professional publishing, Burr Ridge, lllinois, and American S :ciety of euality, ASe euality press, Milwaukee, Wisconsin, I 994, p. I20.

visibiliry" such as

Non-value-added activities such as transferring materials between two nonadjacent workstations, wait- ing for service, or requiring multiple approvals for a low-cost electronic transaction simply lengtherr process- ing time, increase costs, and often increase customer frustration. Elirninating non-value-added activities in a process design is one of the most important responsibili- ties of operations managers. This is often accomplished

Elirninating non -value - added activities in a process design is one of the most important responsibilities of I operations managers.

CHAPTER 7: Process Selection, O.r'nr, uffi, O,

using value stream mapping, a variant of more generic process mapping.

Ihe value stream refers to oll value-added activi- ties involved in designing, producing, and delivering goods and services to customers. A value stream map (VSM) shows the process flows in a manner similar to an or- dinary process map; the difference lies in that value stream maps highlight value-added versus non-value- added activities and include costs associated with work activities for both value- and non-value-added activities.

To illustrate this, consider a process rnap for the order fulfillrnent process in a restaurant, as shown in Exhibit 7.6. From the times on the process map, the "serwice stan- dard" order posting and fulfillment time is an average of30rninutes perorder(5 + f + 4 + 12+ 3 + 5). The restaurant's service guarantee requires that if this order posting and fulfillment time is more than 40 minutes, the customer's order is {ree of charge.

The chei's time is valued at $30 per hour, oven op- eration at $I0 per hour, precooking order waiting time at $5 per hour, and postcooking order waiting time at $60 per hour. The $60 estimate reflects the cost of poor quality {br a dinner waiting too long that might be deliv- ered to the customer late (and cold).

Exhibit 7.7 illus- trates a value stream map for the order posting and fulfillment process in Exhibit 7.6. Exhibit 7.7 is one of many formats

for value stream mapping. Here, non-value-added time is 33.3 percent (10/30 minutes) of the total order posting and

ful{illment time, and non-value-added cost is 31.7 percent ($5.417l$17.087) of total cost. Suppose that a process im- provernent incorporates wireless technology to transmit food orders to the htchen and notify the waiter when the order is ready so that the vvaiting time can be reduced from 10 minutes to 4 minutes on the front and back ends of the process. Hence, the total processing time is reduced from

30 to 24 rninutes (a 20 percent improvement). Costs are reduced by $3.25 with a 3-rninute wait time reduction on the front and back ends ofdre process. Therefore, cost per order goes from $17.087 to $13.837 (a 19 percent irnprove-

ment). Increasing the speed of this part of the restaurant delivery process may also allow for a higher seat tur:nover during peak demand periods, thus helping to increase total

revenue and contribute to profit and overhead.

144 PARTTWO: Designing Operations and Supply Chains

@il,81ffi#lnhlil,l

Few processes are designed liom scratch. Many procr ss design activities involve redesigning an existing proc( ss to improve perfbrrnance. Managerrent strategies to irn- prove process designs usually focus on one or more of the following:

Value-Added Activities (VA) Non-Value-Added Activities ( NVAf

Total Time = 20 minutes VA time) + 10 minutes (NVA tim )) = 30 minutes Total Cost : $11.67 {VA cost) + $5.417 (NVA cost) = $'t 7.087

increasi.ng reoenue by improving process efficiency in creating goods and services and delivery ofthe customer benefit package;

increosing ugtlity by irnproving flexibility and response to changes in demand and customer expectations;

incre as in g p ro duct and/ o r s ensic e quality by reducing defects, mistakes, failures, or serice upsets;

d.e.creasing cosfs through better technology or elimination o{'non- value-added activities;

l decreasingprocess flow timeby reducing waiting time or speeding up movement through the process and value chain; and

the task, actioity, process, and/or oalue chain.

Process and value stream maps are the foundation {br improvement activities. Typical questions that need to be evalu- ated during process analysis include:

in logical sequence?

l Do all steps add value? Can some steps be eliminated, and should others be added in order to improve quality or operational perforrnance? Can some be combined? Should sorne be reordered?

Are capacities of'each step in balance; that is, do bottlenecks exist lbr which customers will incur excessive waiting tirne?

What skills, equipment, and tools are required at each step of the process? Should some steps be automated?

At which points in the system (sometimes called process fail points) might errors occur that would result in customer dissatisfaction, and how rniqht these errors be corrected? -

At whicli point or points in the process should performance be measured? What are appropriate measures?

CHAPTER 7: Process Selection, Desiqn, and Analvsis 145

Where interaction with the customer occurs, what procedures, behaviors, and guidelines should employees follow that will present a positive image? What is the impact of the process on sustainability? Ctrn we quantify the carbon footprint of the current nrocess?

Sometirnes, processes grow so complex that it is easier to st:rrt fiorn a "clean sheet" rather than try to im- prove incrementally. Reengineering has been defined as "the fundomental rethinking and rodical redesign of business processes to ochieve dromatic improvements in criticol, contem- porory measures of performonce, such os cost, quolity, service, ond speed.".lt

Reengineering was spawned by the revolution in inforrnation technology and involves asking basic ques- tions about business processes: Why do we do it? Why is it done this way? Such questioning often uncovers ob- solete, erroneous, or inappropriate assumptions. Radical redesign involves tossing out existing procedures and re- inventing the process, not just incrernentally improving it. The goal is to achieve quantum leaps in perfbrmance. All processes and functional areas participate in reengi- neering efforts, each requiring knowledge and shlls in operations management.

@fil3ff;iil,:iiiitfii8^,

Idle rnachines, tmcks, people, computers, warehouse space, and other resources used in a process simply drain away potential pro{it. Utilization is the froction of time a workstation or individual is busy over the long run. It is difficult to achieve I00 percent utilization. For example, utiliza- tion in most job shops ranges from 65 to 90 percent. In flow shops, it might be between 80 to 95 percent, and for: rnost continuous {low processes, above 95 percent. Job shops require {requent machine changeovers and delays, whereas {low shops and continuous flow processes keep

equipment more fully utilized. Service facilities have a greater range of're- source utilization. Movie theaters, for example, average 5 to 20 percent utilization when seat uti- lization is computed over the entire week. Similar ranges apply to hotels, air- lines, and other services

Two ways of computing resource utilization are

Resources Used Utilization (U) :

Utilization (U) :

Resources Available

Demand Rate

[7.1]

ln 01Lt,.l [Service Rate X Number

of Servers]

In Equation 7.1, the measurement base (time, units, etc.) must be the same in the numerator and denomina- tor. For a process design to be feasible, the calculated utilization ooer the long nm cannot exceed 100 percent. However, over short periods o{'time, it is quite possible thert demand {br a resource will exceed its availability. If a manager hrows any three of the lbur variables in Equa- tion7.2, then the fourth can easily be found.

Equations 7.1 and 7.2 can provide useful insight for evaluating alternative process designs. Exhibit 7.8 pro- vides an analysis ofthe utilization ofthe restaurant order

l\,4etro Health Hospital: Process N,4apping lrnproves Pharrn acy Servace Metro Health Hospital in Grand Rapids, Michigan, applied process mapping, reducing the lead time for getting the first dose of a medication to a patient in its pharmacy services operations. The lead time was measured from the time an order arrived at the pharmacy to its delivery on the appropriate hospital floor. A process-improvement team carefully laid out all the process steps involved and found that the pharmacy had a 1 4-stage process with some unnecessary steps, resulting in a total lead time of 166 minutes. During the evaluation process, the pharmacy calculated that technicians were spending 77.4 percent of their time locating products; when a pharmacist needed a technician for clinical activities, the technician was usually off searching for a drug. The team outlined several non-value-added steps in the process, only one of which was out of the pharmacy's control (i.e., the time it took to transport the ordered medication, once filled, to the appropriate floor). Overall, the pharmacy at Metro realized a 33 percent reduction in time to get medications to patients, and reduced the number of process steps from 14 to 9 simply by removing non-value-added steps. Patients have experienced a 40 percent reduction in pharmacy-related medication errors, and the severity of those errors has decreased.r2

146 PARTTWO: Designing Operations and Supply Chains

SOLVED PROBLEM 7.2

An inspection station for assembling printers receives 40 printers/hour and has two inspectors, each of whom can inspect 30 printers per hour. What is the utilization of the inspectors? What service rate would be required to have a target utilization of 85 percent?

Solution: The utilization at this inspection station is calculated to be

Utilization : 40/(30/2) x 0.67, or 67 percent. lf the utilization rate is 85 percent, we can calculate the target service rate (5R) by solving Equation 7.2:

0.85:40/(SRx2\ 1.7 x SR:40

5R: 23.5 printers/hour

ryr'?,q:::.qlvirg::T!=1??::trrPi5;;1if.:1'1i13:iT:fry?1?l13sr"l?4.'#,.4'{:'!1iq' *:,.'

posting and {ul{illment process in Exhibit 7.6. Usirrg Equation 7 .2, the resource utilization for work activity * 3, assurning only one chef and two ovens, is cornputed as

(20 orders/hour)/l (5 orders/hour)

(1 clief) : 4.0, or 400 percent

As we noted earlier, whenever the utilization is cal- culated to be greater than 100 percent, the work will endlessly pile up befbre the workstation. This is clearly a poor process design, and more resources are needed.

A logical question to consider is how many chefs are needed to bring the utilization down below 100 per:cent at work activity #3? Because the chef is the most skilled and highest paid employee, it would make sense to de- sign the process so that the chef would have the higli- est labor utilization rate (although 100 percent would probably not be practical). This can be found by solving Equation 7.2 as follows:

(20 orders/hour)/[(5 orders/hour) (X chefs)] : 1.00 (5 orders/hour) X 1.00 x X : 20 orders/hour,

orX: 4.00 chefs With four chefs, the resource utilizations are recomputed in Exhibit 7.9. We see that the oven is still a problem, with a calculated 167 percent utilization. To determine how many ovens to have for a J.00 percent utilization, we solve the equation:

(20 orders/hour)/[(6 ordersdrour) (Y ovens)] : 1.00 (6 orders/hour) x 1.00 x Y : 2}orders/hour,

orY:3.33che{s

Rounding this up to 4, actual oven utilization would now be 83 percent (see Exhibit 7.10 for the final results).

20 orders/hrOrder arrival Iate (given) r : Time per order

Number of 16sources:

20 orders/hr

1 manute

1. chef .

20 orders/hr

4 minutes

1 chef

12 minutes

1 chef

10 minutes

2 ovons ,,"

12 orders/hr

3 minutes

, - t .t't"t - .',..- t - , . '

20 orders/hrOutput per time penoo

Resource utilization with 1 chef and 2 ovens ',,, ' ..:

Resouics'utilization with 4 chefs and,' 2 ovens :. '-

60 orders/hr

3.3%' ,

1 5 orders/hr

1337o

t,,^ , ,,r.:.'.

5 orders/hr

400Y0 :'' toz*o;i 10ovo

,' :

167tt/6!):',1:'.:8.33,o/.i

CHAPTER 7: Process Selection, Desiqn, and Analvsis 147

Time per order

Output per time period

1 minute

240 ordersihr

4 minutes 10 minutes

4 oveng ' .:

i

xffitlt'ru3*t: " ; :.'''i';"0'ni:l',,r;, . 3 minutes

j,, i '+

gr'.rj1.i ,';,,i),,,,,,

;"..,_,.;,:::.:Ii..:ni;_,.!!::r;;!:;L.;".j:a:\.;..:.;:.:...,|.:,;:.:).:.

24 orders/hr B0 orders/hr

Exhibit 7.11 shows a simplified flowchart of thr order fulfillment process along with the output rates, from Exhibit 7.10 that can be achieved {br each wor:} activity. The overage number of entities completed per uni' time-the output rcte-from a process is called throughput. Throughput might be measured as parts per day, trans actions per rninute, or customers per hour, dependinll on the context.

A logical question to consider is what tliroughpu: can be achieved for the entire process. A bottlenecli is the work octivity that effectively limits the throughput of th,z

entire process. A bottle- neck is like the weak- est link of a chain; th,r process in Exliibit 7.11 can never produc: more than 20 orders/ hour-the output rat 3 of work activity #3 (as- suming all five activities must be completed . Identifying and breal- ing process bottlenecl.s

is an important part of process design and improve- ment, and will increase the speed of the process, re- duce waiting and work-in-process inventory and use resources more efficiently.

z-oa Little's Law

At any moment, people, orders, jobs, documents, money, and other entities that flow through processes are in vari- ous stages of completion and may be waiting in queues. Ff ow time, or cycle time, is the overoge time it tokes to com- plete one cycle of a process.It makes sense that the flow time will depend not only on the actual time to per{brm the tasks required but also on how many other entities are in the work-in-process stage.

Littlet Law is a simple formula that explains the relationship among flow time (?), throughput (R), and work-in-process (WIP): Ir

Wor:k-in-process : Throughput X Flow tirne or

148 PART TWO: Designing Operations and Supply Chains

WIP: R x 7' [7.3]

SOLVED PROBLEM 7,3

These solved problems illustrate the application of Little's Law and formula.

1 . Suppose that a voting facility processes an average c f 50 people per hour (throughput)and that, on aver- age, it takes I0 minutes for each person to complete the voting process (flow time). Using Equation 7.3, we can compute the average number of voters in proce:;s (work in process):

Work-in-process (WIP) : R x f : 50voters/hr X ( l 0 minute;/

60 minutes per hour) : 8.33 voters

Therefore, on average, we would expect to find about B or 9 voters inside the facility.

Exhibit 7.12 shows the use of the Excel template Little's Law for solving this problem.

The template may be used for the other solved problems here by entering the input data in the appropriate cells.

2. Suppose that the loan department ofa bank takes an average of 6 days (0.2 months) to process an application (flowtime) and that an internal audit found that about 100 applications

are in various stages of processing at any one

time (work-in-process). Using Little's Law, we see

that f : 0.2 and WIP : lOO.fherefore, we can calculate the throughput of the department as

Little's Law provides a simple way of evaluating av- erage process perfbrmance, If we krow any two of the three variables, we can compute the third using Littl,;'s Law. Littles Law can be applied to many di{Ierent types of'manufacturing and service operations. (See t re accompanying Solved Problems. )

R : WIP|T : 100 applications/0.2 months : 500 applications per month

3. Suppose that a restaurant makes 400 pizzas per week, each ofwhich uses 1/2 pound ofdough, and that it typically maintains an inventory of 70 pounds of dough. In this case, R : 200 pounds per week ofdough andWlP:70 pounds. Using Little's Law, we can compute the average flow time as

T: W|P|T -- 70/200 : 0.35 weeks, or about 2lzdays

This information can be used to verify the freshness of the dough.

Wl?:trj;trq'nr

It is important to understand that Little s Law is based on simple aDerages {br all variables. Such an analy- sis serves as a good baseline for understanding process performance on an aggregate basis, but it does not take into account any randomness in arrivals or service times, or dif{'erent probability distributions.

i Enter any two of the three values only in the yellow cells and the spreadsheet will calculate the third.

Work-in-process lWlP)

DISCUSSION OUESTIONS

I . What type of process-project, job sliop, flow shop, and continuous flow-would most likely be used to produce the following? Explain your reasoning.

a. Apple iPads b. Weddings c. Paper d. Tax preparation

L. Provide some examples of customer- and provider- routed services that you have encountered that are different from those described in this chapter. Can you identify any improvements that could be merde to these processes?

List some comrllon processes that you perform as a stu- dent. How can you use the lnowledge from this chapter:, such as identifying bottlenecks, to improve tlem?

CHAPTER 7: Process Selection, Design, and Analysis 149