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Chapter4ProcessDesignandAnalysis.ppt

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Process Design
and Analysis

Chapter 4

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Learning Objectives

Describe the service-process matrix for service organizations.

Describe the product-process matrix for manufacturing organizations.

Explain the three physical types of layouts and describe the advantages and disadvantages or each type.

Characterize how strategic goals should be matched with appropriate process choices.

Understand process analysis techniques, including break-even analysis, reengineering, flowcharting, from-to charts, and process simulation.

Describe the nature of the process swamp and the need to improve processes that matter to customers.

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Pop-Tart Production
at Kellogg’s: Millions per Day

Kellogg’s produces more than 10 million Pop-Tarts per day by using a highly automated line process.
Each step has specially designed equipment that costs a quarter million dollars or more.
Kellogg’s cannot change any part of this system without changing all the remaining parts to ensure that they are adequately matched and paced.

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Kellogg’s Production Line

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Process Choice

Process choice is a procedure involving numerous decisions regarding the relationships among workers, technology, raw materials, and job assignments.

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Service-Process Matrix

Service-oriented businesses have some fundamental similarities with manufacturing, but:

Services cannot use inventory to buffer fluctuations in demand.

Customers tend to be much more involved in the service delivery process.

One of the key challenges for service processes is to retain the ability to customize and encourage customer involvement.

Source: © Image Source/Corbis

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Service-Process Matrix

Customer involvement: the degree to which customers are involved in shaping the end service/products that they receive
Labor intensity: the amount of labor needed to provide a service relative to the total amount of physical resources needed

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Service Factories

Service factories: services with both low customer contact/customization and a low degree of labor intensity

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Discussion Starter

How do we get customers involved with developing new products or services?

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Service Shops

Service shops: services with low labor intensity but high customer contact or customization
Hospitals, auto and other repair services are excellent examples of service shops because while labor is a critical component, the capital investment in equipment and capacity is higher than the cost of labor.

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Mass Services

Mass services: services with low customer contact or customization in combination with high labor intensity
Retail companies, wholesalers, and schools are examples of mass services.

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Professional Services

Professional services: services with both high customer contact or customization and a high degree of labor intensity
Services provided by doctors, lawyers, accountants, and architects all have very high labor costs because of the large amount of education associated with these professions.

Source: © Image Source/Corbis

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Process Management
at American Express

American Express uses a variety of processes in conducting its business.
The approval process for a new credit card or financial product is a professional service involving both a high degree of customer contact and a high degree of labor intensity.

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Figure 4.2: Credit Card
Approval Process at American Express

Source: This flowchart represents an overview of the process followed by American Express as reported by a former employee and excluding company confidential information.

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Product-Process Matrix

Product-process matrix: matches product character with the appropriate choice of production process
There is a tradeoff between high-volume standardized products that get produced for a low per-unit cost and low-volume customized products that have a high per-unit cost.

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Projects

Project process: a type of process that has a high degree of customization, a large scope, a high degree of customer involvement, and the use of primarily generalized tools and equipment
A critical characteristic of projects is the requirement for close coordination among the various people and organizations involved with the project.

The 2008 Summer Olympics held in Beijing involved over 10,000 athletes, 37 competition venues, and over 70,000 volunteers.

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Job Shop Processes

Job shop: a type of process that provides high flexibility to produce a variety of products in limited volumes

Examples: a bakery with a large variety of breads and desserts, a plumber, airplane manufacturers, custom furniture manufactures, or a machine shop

Companies that use a job shop process must often bid against competitors for work.
Products are typically produced in response to a specific order rather than being produced ahead of time for inventory or demand forecast.

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Job Shop Flow – Machine Shop

“Spaghetti” or Jumbled Flow

Drills

Grinders

Sanders

Punch

Part C

Part A

Part B

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Batch Processes

Batch process: a higher-volume job shop, in which the same or similar products are produced repetitively

Examples: commercial printers that produce brochures or advertisements, car loan processing, the production of parts or components to feed an assembly line, or the production of swimsuits

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Line Processes

Line processes: processes that have high volumes, standardized products, and dedicated resources

Examples: computer assembly, food production (such as Kellogg’s Corn Flakes), book printing, or umbrella production

Every step in the process is performed repetitively, over and over, with little variation.
Advantage: both equipment and workers can be very specialized

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Continuous Processes

Continuous processes: processes that have high volume and low flexibility, and that work with nondiscrete items that are not divided into their final packages until the very end of production

Examples: soda production, chemical production, brewing beer, and sugar and paint production

Extremely capital intensive, very standardized, and very inflexible

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Using Technology to
Move Off the Diagonal

There is a tradeoff between high flexibility and high volume/low cost per unit.
Project or job shop processes provide a high degree of flexibility and a variety of products but with limited volume and at a high cost per unit.
Line and continuous processes are limited in flexibility but produce a high volume of product at a low cost per unit.
Computers can facilitate increased flexibility without increasing costs because they can be programmed to make changes without new equipment.

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Layout Types

Where should specific pieces of equipment,

people, and work centers be located?

Three basic layout types:

Process

Product

Fixed-position

Hybrid layouts combine features of these basic layouts.

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Process Layout

Process layout: a layout that groups together machines, equipment or people with similar functions or goals
Many products share usage of the same equipment.
The order and length of processing at various steps will differ.

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Product Layout

Product layout: a layout that dedicates equipment and workers to specific products on a linear route

Can be dedicated to a single product or can be mixed-model lines

When volumes for a particular product are high, resources can be specialized and designed for a specific product.

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Figure 4.4: Comparing
Process and Product Layouts

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Assembly Line Balancing

Assembly line balancing: the technique of assigning work to individual stations so that the variability across all stations in an assembly line is minimized
Challenge: ensuring that there is an even flow of work

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Table 4.1: Advantages/Disadvantages of Process vs. Product Layouts

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Fixed-Position Layout

Fixed-position layout: a layout that requires the product (because of its extreme weight or size) to remain at one location

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Hybrid Layouts

Hybrid layouts: layouts that attempt to combine the advantages of process and product layouts by grouping disparate machines into work centers or cells to work on products that have similar shapes and processing equipment
Group technology: an approach in which the product parts having similarities (shape, usage, and/or manufacturing process) are grouped together to achieve a higher level of integration between the product design and manufacturing

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Discussion Starter

Does group technology reduce costs?

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The Impact of Strategy
and Technology on Process Choice

To assess process choice impacts, there are two factors to consider:
Process Strategy
Technology Impacts

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Process Strategy

It is important to consider the organization’s operations strategy and how it fits with process choice.
Companies that focus on a large range of product or service choices will focus on processes such as project, job, or batch.
Companies that focus on achieving the lowest possible cost per unit are more likely to standardize their operations and use either a line or a continuous flow process.

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Technology Impacts

Technology has been a major driver of changes in process design throughout the twentieth century and will continue to be one.
Examples of the numerous technologies affecting the business environment are:

Cell phones

Personal digital assistants

Computers

Genetic advances in identifying genes

Materials advances that provide improved raw materials

The Internet has provided one of the largest process design shifts that business has experienced.

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Designing Processes

Three common processes:

Break-Even Analysis

Reengineering

Bottleneck Analysis

Additional Process Analysis Techniques facilitate

detailed decisions:

Flowcharting, simulation, and from-to charts

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Break-even Analysis

Break-even analysis: a mathematical technique that allows a comparison of total costs for different processes
This technique takes the fixed costs of buying or developing a process or technology, adds the variable costs for producing each unit, and finds the break-even point at which the cost of two or more processes is equal.

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Figure 4.5: Break-even
Analysis: Cookie Dough Formation

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Discussion Starter

What problems do companies face when reengineering?

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Reengineering

A general methodology for reengineering

involves six steps:

Identify the core processes with the greatest potential for improving competitiveness must be indentified.

Become familiar with the current problems and processes.

Gather information from customers in order to indentify changes to improve these processes.

Indentify enablers of change.

Review the proposed changes by the process reengineering team, customers and personnel.

Receive support from top management and appropriate financial resources to implement the new processes.

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Bottleneck Analysis

Bottleneck analysis: the step with the slowest cycle time in a given process; this is the step that limits the overall productivity for the process
The objective of process design is to maximize the amount of output relative to the amount of input.

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Bottleneck Analysis: Cycle Time/Output

Cycle time: the time it takes to complete a particular step or action once
Output: the number of units that can be produced per unit of time
The output is the inverse of the cycle time.

Output =

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A Paced Assembly Process

In order to provide a more accurate and complete analysis, we need to incorporate stochastic times, where each step has a mean or average time and a variance or standard deviation associated with it.
Step C is the bottleneck, as it requires 30 seconds per cycle or has an output of 2 units per minute.
Steps A and B must wait for Step C to finish its work. The output of the system is 2 units per minute.

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Figure 4.7: A Paced Assembly Process

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Utilization

Utilization: the percentage of available time that equipment, space, or labor is used and adding value
The utilization of the bottleneck step is always 100 percent.

* 100%

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Process Analysis: Typical Constraints

There are three typical constraints:

Labor resources

Machine or equipment resources

Demand

Changes affect output or productivity.

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Changing Labor Resources

The output or productivity can be changed in 2 simple ways:

Assign only 2 workers to the entire process

one for Step C and one for Step A and B.

Add a fourth worker to Step C.

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Figure 4.8: Process
with Steps Combined

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Figure 4.9 (first part): Process with Worker Added to Step C

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Gantt Chart

Gantt chart: a visual representation of schedules for the resources used in a particular process or project

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Figure 4.9: Process with Worker Added to Step C (top portion) and Gantt Chart (bottom portion)

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Machine and Equipment Resources

While people can be bottlenecks in a process, a capacity limitation on a machine or piece of equipment can form a bottleneck.
Throughput time: the time that an individual unit must spend in a given process or step

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Figure 4.10: Pizza Baking
with an Equipment Bottleneck

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Simultaneous Labor,
Machine, and Demand Constraints

All processes have a combination of labor, machine/equipment, and demand constraints.

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Figure 4.11: Steps in the
Process at Mike’s Sub Shack

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Parallel Processing

Two operations on a product occur simultaneously, with the results merged at a later point.

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Figure 4.12: An
Example of Parallel Processing

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Process Analysis Techniques

Three analysis techniques

Flowcharting

Simulation

From-to charts

These are generally used to draw more micro, detail-oriented maps of very specific steps and to make detailed decisions

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Flowcharting

Flowcharting: a technique that involves graphically portraying the key elements, steps, participants, and materials of a process
Helps illustrate areas where improvements can be made and steps eliminated.
The goal is to:

See the sequence of steps.

Draw boundaries around the processes.

Identify key players and functional groups.

Identify handoffs between sub-processes.

Identify supplier/customer interfaces.

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Figure 4.13: Flowchart for Filling a Prescription at a Walk-In Pharmacy

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Figure 4.14: Common
Flowcharting Symbols

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Service Blueprint

Service blueprint: a technique for describing and analyzing a service that incorporates the actions of both the customer and the server

Recognizes that customers are an integral part of the process, and seeks to identify interactions between customers and servers.

It shows the line of visibility

Line of visibility: the point at which customers lose physical sight of the steps of a particular process; separates front-office operations that directly interact with customers from back-office operations that are more independent

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Simulation

Process simulation: a technique that employs computer software to develop a visual model of a process that incorporates multiple work centers, inputs, and processing techniques as variables
Simulation can provide a more accurate model of an actual operation.
There are numerous software programs that can be employed for simulation analysis.

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From-to Charts

From-to Charts: diagrams that show the number of trips or the amount of materials flowing between different departments or work centers
Load-distance score: a weighted calculation of the load times the distance covered
This technique, or one of several variations, can be applied to many facility layout decisions.

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Process
Selection—The Process Swamp

The key to maximizing process value using process analysis and redesign techniques such as reengineering, flowcharting, simulation, and from-to charts is choosing processes to improve that will have the greatest impact.
The difference between success and failure is choosing the right process to improve.
It is critical that the customer be considered in every decision, since the end result must be an improvement in perceived value.

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Self-Sourcing

Self-sourcing: a technique that includes customers in the process in a way that reduces the resource demands on the organization providing the product or service, while also providing the customer with improved service
Customers like this service because it is generally quicker and cheaper.
Companies must be aware that self-sourcing can lead to unforeseen changes in other components of the business.

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Outsourcing

Outsourcing: selecting suppliers with expertise in a particular area of business to produce and deliver a component part of service to another company.
The use of outsourcing has increased for several reasons:

The total quality management movement in the 1980s helped increase companies’ awareness that it is difficult to be “world class” in multiple activities.

Settling for second-best products produced “in-house” is not the best approach.

The rapid increase in the capabilities of information technologies and other communication devices has made managing multitier supply chains much easier.

CycleTime

TimePeriod

unit

Seconds

Minute

Seconds

System

Step

CycleTime