Operations Strategy (Process flow analysis)

MGMT 707 OPERATIONS MANAGEMENT

LESSON Notes for Process Flow Analysis & Service Blueprinting.

Part I Process Flow Analysis

The transformation process that defines Operations Management can be viewed a series of process flows connecting inputs to outputs. In Process Flow Analysis we will be analyzing how the product or service is made. When the sequence of steps connecting inputs to outputs is analyzed, better methods or procedures can usually be found.

We begin this process with the concept of Process Thinking. So let’s look at this idea. A process is a system. It has boundaries, inputs, outputs, suppliers and customers. A business should be viewed as an interrelated collection of parts. For a business these parts are marketing, operations, finance, accounting, engineering, human resources and information systems. None of these parts can operate independently of each other.

An idea is how to set the boundary of the Process Flow Analysis. This is always difficult but must be done. The easiest way to look at this is to determine which departments are not affected by the change. Let’s take the example of a bank. A new computer system will be installed with some new operational software. The front office operations (tellers, loan officers, and others who deal directly with the customers) are not affected. Their operating software and the computer equipment they use will not be changed. They are outside of the boundaries. However, the new software that handles the management reporting will be changed. So they are inside the boundaries. Since this is obviously an IT project, they too will be heavily involved.

So now a cross functional team should be formed consisting of those functions responsible for computer conversion. So the task is to look at the current process to determine things like throughput time, flow rate, capacity and bottlenecks.

A banking example from the Harvard Business Review titled, “How to make Reengineering Really Work”

An Italian bank operated in a very traditional manner with many bureaucratic structures and departments. The bank felt the competitive pressures from American and other European banks. So they instituted a complete review of their internal processes. The first one studied was what happened when a check was deposited by a customer into their account. The process flow required 64 activities, nine forms and 14 accounts. After producing the process flow chart, the team determined that many steps could be eliminated or combined. The new process resulted in only 25 activities, 2 forms and 2 accounts. As a result of that success, 9 other families of retail banking processes were also reviewed. As a result of all this process flow analysis the bank was able to support growth and made impressive gains in profitability...

One of the basic analysis tools is a flow processing chart like the one on the next page:

Hamburgers by some of your favorite fastfoodplaces:

A

A

Customer

orders

AssembleCook

Assemble

Assemble

Customer

orders

Cook

Customer

orders

AssembleCook

CookAssemble

Customer

orders

Standard

Or

Custom

A

A

A=raw material

inventory

W-I-P

Finished Goods Inv.

Finished

Goods Inv

W-I-P

Standard

Custom

Local

McDonald

Burger King

Wendy’s

I selected this chart because I worked in this field for years. So if you have any questions about this flow chart, just ask away. Basically it shows the departments and activities in the proper sequence for a warehouse to fill an order for delivery to a super market. A quick analysis will show you that the delays in the process total 335 minutes of the 526 minutes for an order to flow from pick ticket printing to being place in the warehouse ready for truck loading. That is over 63% of the time. How would you like your milk to sit for 110 minutes after being picked before it is ready for shipment?

The Hamburger Process:

Perhaps a good way to look at process flow analysis is to look at something you are familiar with, what happens when you order a hamburger. Flow Chart on next page.

Local; you walk into your local luncheon place and order a hamburger. The cook takes one out of the raw material inventory (freezer or frig.). Next step is the cooking process, after that comes the assembly (bun, lettuce, tomato, condiments, etc with chips) and lastly, it is served to you.

McDonald’s; McDonald’s cooks its hamburgers on grills in batches of 12. The rolls are toasted also in batches of 12. After cooking, the hamburgers are assembled to a standard format, wrapped and stored in finished goods inventory in a holding bin ready to be given to customer upon order. Fastest way around.

Burger King uses a different process. They cook their hamburgers on a conveyor system that cooks from both the top and the bottom. This takes 90 seconds from start to finish. The hamburgers are partially assembled with the buns and stored in a steam bin. This is their W-I-P (work in process) inventory. Here the W-I-P is used to replenish the burgers in finished goods inventory as needed. The top loop called Standard. The Custom loop is used for customers who “want it their own way”. By having the cooked and partially assembled hamburgers in W-I-P, Burger King can custom assemble in a much shorter time that the local luncheon place. The fixed conveyor time of 90 seconds requires that the hamburgers all be of the same thickness. So when Burger King introduced the Whopper they had to keep it the same thickness so they made it bigger.

Wendy’s adopted a more custom process. Wendy’s keeps their W-I-P on the grill in a almost cooked state. When the customer order comes in, the cook moves it to a hotter center and quickly finishes the cooking process. It moves to the assembly process and then given to the customer. Wendy’s customers perceive this assemble-to-order as higher quality then its competitors because everything is done within sight of the customer. One draw back is that since the hamburger starts in a semi-cooked state, it takes longer then Burger King’s custom assembly process.

It should be noted that all three firms are very successful because there is a very strong alignment between marketing and operations. They all recognize their strengths and focus advertising and other promotional efforts on attracting the proper market segment.

FLOW PROCESS CHART

21

Total Time52620

=19

Wait to be moved to WH.5018

Loaded on carts by route1017

Inspected416

To inspection1515 45

Meat picker fills order514

On conveyer wait for picker6013

To meat aisle3012 30

Dairy picker fills order1011

On conveyer wait for picker2510

To dairy aisle159 20

Produce picker fills order208

Picker separates by order47

Wait for order picker806

Take to start points105 30

Separated for work areas34

On distribution desk1203

To the warehouse602 90

Computer prints sheets

5

1

DescriptionTaskTime

in min.

Dist.

In ft.

21

Total Time52620

=19

Wait to be moved to WH.5018

Loaded on carts by route1017

Inspected416

To inspection1515 45

Meat picker fills order514

On conveyer wait for picker6013

To meat aisle3012 30

Dairy picker fills order1011

On conveyer wait for picker2510

To dairy aisle159 20

Produce picker fills order208

Picker separates by order47

Wait for order picker806

Take to start points105 30

Separated for work areas34

On distribution desk1203

To the warehouse602 90

Computer prints sheets

5

1

DescriptionTaskTime

in min.

Dist.

In ft.

Picking product in warehouse for shipping

operation

transport

inspection

delay

store

Part II Service Blueprinting:

Leave it to the Service industry to call it something different. Another popular name is process re-engineering, big with consulting companies and academics.

The key different is that it is a process flow chart for services that includes the customer. Remember one of the key characteristics of service is the customer as a co-producer. Just thing of ATM’s, self-serve gas, self-check out at the super market, the ever present Salad Bar.

Lynn Shostack is credited with the term, service blueprinting, by introducing two important differences from a normal flow chart. They are a) the line of visibility (what the customer can see and what the customer can’t see, the “back room”) and b) the potential fail points (where can something go wrong).

Doing the blueprinting requires 4 steps:

· Identify processes including the all important customer contacts

· Isolate fail points, normally where information is exchanged and/or an operation is performed

· Establish a time frame, calculate the time for one customer to be serviced.

· Analyze profitability of the current process and what are the costs at each fail point.

1. a. Service blueprint

Customers arrives

by car

Attendant greets

customer and

takes car

Hostess takes

name

Drink Orders

taken

Meal orders taken

Customers

receives drinks

Customers

receive soup and

salad

Table is prepared Drink orders filled

Soups and salads

prepared

Line of visibility

Customers enter

restaurant

Car is parked

Name called

Customers seated

Customers

receive meals

Waitor takes

dessert orders

Customers

recieve desserts

Bill prepared

Customer pays bill

Change given to

customer

Customer leaves

and requests car

Attendant request

information on car

Car arrives,

customers depart

Attendant retrives

car

Meals prepared

Waitor checks on

customers

Customers eat

meals

Dessert prepared

Parking Seating Meal Parking

Soups and salads

delivered

Meal delivered

Waitor takes

dessert orders

Bill given to

customer

a.The advantage of this system is a great deal of personal attenti on can be given to the customer.

The drawback is that there are many fail points in the s ystem.