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Process Strategy and Analysis

Chapter 2

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What is Process Strategy?

Process Strategy

The pattern of decisions made in managing processes, so that the processes will achieve their competitive priorities.

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Process Strategy

Figure 2.1

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Process Structure in Services

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 e-mail

Table 2.1

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Process Structure in Services

Customer Contact

The extent to which the customer is present, is actively involved, and receives personal attention during the service process

Customization

Service level ranging from highly customized to standardized

Process Divergence

The extent to which the process is highly customized with considerable latitude as to how its tasks are performed

Flow

How the work progresses through the sequence of steps in a process

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Customer-Contact Matrix

Figure 2.2

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Service Process Structuring

Front Office

Hybrid Office

Back Office

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Process Structure in Manufacturing

Job Process

Batch Process

Small or Large

Line Process

Continuous-Flow

Process Choice

A way of structuring the process by organizing resources around the process or organizing them around the products.

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Process Structure in Manufacturing

Figure 2.3

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Production and Inventory Strategies

Design-to-Order

Make-to-Order

Assemble-to-Order

Postponement

Mass Customization

Make-to-Stock

Mass Production

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Layout

Layout - The physical arrangement of operations (or departments) relative to each other

Operation - A group of human and capital resources performing all or part of one or more processes

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Process Strategy Decisions

Customer Involvement

Resource Flexibility

Capital Intensity

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Customer Involvement

Possible Advantages

Increased net value to the customer

Better quality, faster delivery, greater flexibility, and lower cost

Reduction in product, shipping, and inventory costs

Coordination across the supply chain

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Customer Involvement

Possible Disadvantages

Can be disruptive

Managing timing and volume can be challenging

Quality measurement can be difficult

Requires interpersonal skills

Multiple locations may be necessary

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Resource Flexibility

Workforce

Flexible workforce

Equipment

General-purpose

Special-purpose

Figure 2.4

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Application 2.1

Q =

Fm – Fb cb – cm

BBC is deciding whether to weld bicycle frames manually or to purchase a welding robot. If welded manually, investment costs for equipment are only $10,000. The per-unit cost of manually welding a bicycle frame is $50.00 per frame. On the other hand, a robot capable of performing the same work costs $400,000. Robot operating costs including support labor are $20.00 per frame.

At what volume would BBC be indifferent to these alternative methods?

	Welded manually (Make)	Welded by robot (Buy)
Fixed costs	$10,000	$400,000
Variable costs	$50	$20

$10,000 – $400,000 $20 – $50

= 13,000 frames

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Capital Intensity

Automating Manufacturing Processes

Fixed Automation

Flexible (Programmable) Automation

Automating Service Processes

Economies of Scope

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Decision Patterns for Manufacturing Processes

Figure 2.5

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Gaining Focus

Focus by Process Segments

Plant within plants (PWPs)

Different operations within a facility with individualized competitive priorities, processes, and workforces under the same roof.

Focused Service Operations

Focused Factories

The result of a firm’s splitting large plants that produced all the company’s products into several specialized smaller plants.

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Process Reengineering

Reengineering

The fundamental rethinking and radical redesign of processes to improve performance dramatically in terms of cost, quality, service, and speed

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Process Reengineering

Key elements

Critical processes

Strong leadership

Cross-functional teams

Information technology

Clean-slate philosophy

Process analysis

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Process Improvement

The systematic study of the activities and flows of each process to improve it

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What is Process Analysis?

Process Analysis

The documentation and detailed understanding of how work is performed and how is can be redesigned

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Six Sigma Process Improvement Model

Figure 2.6

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Documenting and Evaluating the Process

Flowcharts

Work Measurement Techniques

Process Charts

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Documenting and Evaluating the Process

Flowchart – A diagram that traces the flow of information, customers, equipment, or materials through the various steps of a process

Service Blueprint – A special flowchart of a service process that shows which steps have high customer contact

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Swim Lane Flowchart

Figure 2.7

Swim Lane Flowchart – A visual representation that groups functional areas responsible for different sub-processes into lanes.

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Documenting and Evaluating the Process

Work Measurement Techniques

Time Study

Elemental Standard Data approach

Predetermined Data Approach

Work Sampling Method

Learning Curve Analysis

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Example 2.1

A process at a watch assembly plant has been changed. The process is divided into three work elements. A time study has been performed with the following results. The time standard for process previously was 14.5 minutes. Based on the new time study, should the time standard be revised?

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Example 2.1

The new time study had an initial sample of four observations, with the results shown in the following table. The performance rating factor (RF) is shown for each element, and the allowance for the whole process is 18 percent of the total normal time.

	Obs 1	Obs 2	Obs 3	Obs 4	Average (min)	RF	Normal Time
Element 1	2.60	2.34	3.12	2.86	2.730	1.0	2.730
Element 2	4.94	4.78	5.10	4.68	4.875	1.1	5.363
Element 3	2.18	1.98	2.13	2.25	2.135	0.9	1.922
Total Normal Time = 10.015

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Example 2.1

The normal time for an element in the table is its average time, multiplied by the RF.

The total normal time for the whole process is the sum of the normal times for the three elements, or 10.01 minutes. To get the standard time (ST) for the process, just add in the allowance, or

ST = 10.015(1 + 0.18) = 11.82 minutes/watch

Yes, change the time standard from 14.5 minutes to 11.82 minutes.

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Work Measurement Techniques

Work Sampling

Figure 2.8

Documenting and Evaluating the Process

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Work Measurement Techniques

Learning Curves

Figure 2.9

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Process Charts

Process Charts - An organized way of documenting all the activities performed by a person or group, at a workstation, with a customer, or working with certain materials

Activities are typically organized into five categories

Operation, 

Transportation, 

Inspection, 

Delay, 

Storage, 

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Step No.	Time (min)	Distance (ft)						Step Description
1				X
2			X
3				X
4					X
5				X
6						X
7				X
8						X
9					X
10				X
11			X
12				X
13						X
14			X
15				X
16			X
17				X
18			X
19				X

0.50	15.0
10.00
0.75	40.0
3.00
0.75	40.0
1.00
1.00	60.0
4.00
5.00
2.00	200.0
3.00
2.00	200.0
3.00
2.00
1.00	60.0
4.00
2.00	180.0
4.00
1.00	20.0

Sit down and fill out patient history

Enter emergency room, approach patient window

Nurse escorts patient to ER triage room

Nurse inspects injury

Return to waiting room

Wait for available bed

Go to ER bed

Wait for doctor

Doctor inspects injury and questions patient

Nurse takes patient to radiology

Technician x-rays patient

Return to bed in ER

Wait for doctor to return

Doctor provides diagnosis and advice

Return to emergency entrance area

Check out

Walk to pharmacy

Pick up prescription

Leave the building

Process Charts

Figure 2.10

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Step No.	Time (min)	Distance (ft)						Step Description
1				X
2			X
3				X
4					X
5				X
6						X
7				X
8						X
9					X
10				X
11			X
12				X
13						X
14			X
15				X
16			X
17				X
18			X
19				X

0.50	15.0
10.00
0.75	40.0
3.00
0.75	40.0
1.00
1.00	60.0
4.00
5.00
2.00	200.0
3.00
2.00	200.0
3.00
2.00
1.00	60.0
4.00
2.00	180.0
4.00
1.00	20.0

Sit down and fill out patient history

Enter emergency room, approach patient window

Nurse escorts patient to ER triage room

Nurse inspects injury

Return to waiting room

Wait for available bed

Go to ER bed

Wait for doctor

Doctor inspects injury and questions patient

Nurse takes patient to radiology

Technician x-rays patient

Return to bed in ER

Wait for doctor to return

Doctor provides diagnosis and advice

Return to emergency entrance area

Check out

Walk to pharmacy

Pick up prescription

Leave the building

Summary
Activity		Number of Steps	Time (min)	Distance (ft)
Operation		5	23.00
Transport		9	11.00	815
Inspect		2	8.00
Delay		3	8.00
Store		―	―

Process Charts

Figure 2.10

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Process Charts

The annual cost of an entire process can be estimated

It is the product of

Time in hours to perform the process each time

Variable costs per hour

Number of times the process is performed each year

Annual labor cost

Time to perform the process in hours

Variable costs per hour

Number of times process performed each year

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Process Charts

If the average time to serve a customer is 4 hours

The variable cost is $25 per hour

And 40 customers are served per year

The total labor cost is

4 hrs/customer  $25/hr  40 customers/yr = $4,000

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Data Analysis Tools

Checklists

Histograms and Bar Charts

Pareto Charts

Scatter Diagrams

Cause-and-Effect Diagrams (Fishbone)

Graphs

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Example 2.2

The manager of a neighborhood restaurant is concerned about the smaller numbers of customers patronizing his eatery. Complaints have been rising, and he would like to find out what issues to address and present the findings in a way his employees can understand.

The manager surveyed his customers over several weeks and collected the following data:

Complaint	Frequency
Discourteous server	12
Slow service	42
Cold dinner	5
Cramped table	20
Atmosphere	10

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Example 2.2

50 –

45 –

40 –

35 –

30 –

25 –

20 –

10 –

5 –

0 –

Failures

Discourteous server

Slow service

Cold dinner

Cramped tables

Atmosphere

Failure Name

Bar Chart

Figure 2.11

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Example 2.2

 100% = 69.7%

(42 + 20)

– 100.0%

– 80.0%

– 60.0%

– 40.0%

– 20.0%

– 0.0%

45 –

40 –

35 –

30 –

25 –

20 –

10 –

5 –

0 –

Failures

Discourteous server

Slow service

Cold dinner

Cramped tables

Atmosphere

Failure Name

Percent of Total

Pareto Chart

Figure 2.12

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Example 2.3

A process improvement team is working to improve the production output at the Johnson Manufacturing plant’s Header Cell that manufactures a key component, headers, used in commercial air conditioners.

Currently the header production cell is scheduled separately from the main work in the plant.

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Example 2.3

The team conducted extensive on-site observations across the six processing steps within the cell and they are as follows:

Cut copper pipes to the appropriate length

Punch vent and sub holes into the copper log

Weld a steel supply valve onto the top of the copper log

Braze end caps and vent plugs to the copper log

Braze sub tubes into each stub hole in the copper log

Add plastic end caps to protect the newly created header

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Example 2.3

To analyze all the possible causes of that problem, the team constructed a cause-and-effect diagram.

Several suspected causes were identified for each major category.

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Fishbone Diagram

Figure 2.13

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Example 2.4

The Wellington Fiber Board Company produces headliners, the fiberglass components that form the inner roof of passenger cars. Management wanted to identify which process failures were most prevalent and to find the cause.

Step 1: A checklist of different types of process failures is constructed from last month’s production records.

Step 2: A Pareto chart is prepared from the checklist data.

Step 3: A cause-and-effect diagram identified several potential causes for the problem.

Step 4: The manager reorganizes the production reports into a bar chart according to shift because the personnel on the three shifts had varied amounts of experience.

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Example 2.4

Checklists

Pareto Chart

Figure 2.14

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Example 2.4

Cause-and-Effect Diagram

Bar Chart

Figure 2.14

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Redesigning and Managing Process Improvements

Questioning and Brainstorming

Benchmarking

Implementing

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Redesigning and Managing Process Improvements

Questioning and Brainstorming

Ideas can be uncovered by asking six questions

What is being done?

When is it being done?

Who is doing it?

Where is it being done?

How is it being done?

How well does it do on the various metrics of importance?

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Redesigning and Managing Process Improvements

Benchmarking

A systematic procedure that measures a firm’s processes, services, and products against those of industry leaders

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Redesigning and Managing Process Improvements

Implementing

Avoid the following seven mistakes

Not connecting with strategic issues

Not involving the right people in the right way

Not giving the design teams and process analysts a clear charter, and then holding them accountable

Not being satisfied unless fundamental “reengineering” changes are made

Not considering the impact on people

Not giving attention to implementation

Not creating an infrastructure for continuous process improvement

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Solved Problem 1

Create a flowchart for the following telephone-ordering process at a retail chain that specializes in selling books and music CDs. It provides an ordering system via the telephone to its time-sensitive customers besides its regular store sales.

The automated system greets customers, asks them to choose a tone or pulse phone, and routes them accordingly.

The system checks to see whether customers have an existing account. They can wait for the service representative to open a new account.

Customers choose between order options and are routed accordingly.

Customers can cancel the order. Finally, the system asks whether the customer has additional requests; if not, the process terminates.

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Solved Problem 1

Continued on

Next Slide

Figure 2.16

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Solved Problem 1

Figure 2.16

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Solved Problem 2

An automobile service is having difficulty providing oil changes in the 29 minutes or less mentioned in its advertising. You are to analyze the process of changing automobile engine oil. The subject of the study is the service mechanic. The process begins when the mechanic directs the customer’s arrival and ends when the customer pays for the services.

The times add up to 28 minutes, which does not allow much room for error if the 29-minute guarantee is to be met and the mechanic travels a total of 420 feet.

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Step No.	Time (min)	Distance (ft)						Step Description
1	0.80	50.0		X				Direct customer into service bay
2	1.80		X					Record name and desired service
3	2.30				X			Open hood, verify engine type, inspect hoses, check fluids
4	0.80	0.30		X				Walk to customer in waiting area
5	0.60		X					Recommend additional services
6	0.70					X		Wait for customer decision
7	0.90	70.0		X				Walk to storeroom
8	1.90		X					Look up filter number(s)
9	0.40				X			Check filter number(s)
10	0.60	50.0		X				Carry filter(s) to service pit
11	4.20		X					Perform under-car services
12	0.70	40.0		X				Climb from pit, walk to automobile
13	2.70		X					Fill engine with oil, start engine
14	1.30				X			Inspect for leaks
15	0.50	40.0		X				Walk to pit
16	1.00				X			Inspect for leaks
17	3.00		X					Clean and organize work area
18	0.70	80.0		X				Return to auto, drive from bay
19	0.30						X	Park the car
20	0.50	60.0		X				Walk to customer waiting area
21	2.30		X					Total charges, receive payment

Summary
Activity		Number of Steps	Time (min)	Distance (ft)
Operation	
Transport	
Inspect	
Delay	
Store	

16.50

5.50

420

5.00

0.70

0.30

Figure 2.17

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Solved Problem 3

What improvement can you make in the process shown in Solved Problem 2?

a. Move Step 17 to Step 21. Customers should not have to wait while the mechanic cleans the work area.

b. Store small inventories of frequently used filters in the pit. Steps 7 and 10 involve travel to and from the storeroom.

c. Use two mechanics. Steps 10, 12, 15, and 17 involve running up and down the steps to the pit. Much of this travel could be eliminated.

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Solved Problem 4

Defect	Frequency
Lumps of unmixed product	7
Over- or underfilled jars	18
Jar lids did not seal	6
Labels rumpled or missing	29
Total	60

Vera Johnson and Merris Williams manufacture vanishing cream. Their packaging process has four steps: (1) mix, (2) fill, (3) cap, and (4) label. They have had the reported process failures analyzed, which shows the following:

Draw a Pareto chart to identify the vital defects.

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Solved Problem 4

Defective labels account for 48.33 percent of the total number of defects:

 100% = 48.33%

Improperly filled jars account for 30 percent of the total number of defects:

The cumulative percent for the two most frequent defects is

 100% = 30.00%

48.33% + 30.00% = 78.33%

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Solved Problem 4

10% + 90% = 100.00%

Defective seals represent of defects; the cumulative percentage is

 100% = 10%

78.33% + 11.67% = 90.00%

 100% = 11.67%

Lumps represent of defects;

the cumulative percentage is

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Solved Problem 4

40 –

36 –

32 –

28 –

24 –

20 –

16 –

12 –

8 –

4 –

0 –

– 100

– 90

– 80

– 70

– 60

– 50

– 40

– 30

– 20

– 10

– 0

Frequency of Defects

Label

Fill

Mix

Seal

Cumulative Percentage of Defects

100%

90%

78%

48%

Figure 2.18

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Process Strategy and Analysis

Chapter 2

Part 2

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What is Total Quality Management

Encompasses entire organization, from supplier to customer

Stresses a commitment by management to have a continuing, company-wide, drive toward excellence in all aspects of products and services that are important to the customer.

TQM is a part of out overall quality strategy. It connects to the work we are already doing in Strategy Development and Deployment System (SDDS).

TQM is based on customer needs.

It defines what an organization must do to run smoothly to meet customer needs.

It enables everyone in the organization to know what to do, measure and control to keep the organization running smoothly.

TQM includes a step by step process for making improvements to processes to better satisfy the business and customer needs.

Involves shared problem solving, statistical quality control and training and education for all employees.

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Components of TQM

Strategy Deployment

Customer Satisfaction

Process Maintenance

Process Improvement

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Concepts of TQM

Continuous improvement

Employee empowerment

Benchmarking

Just-in-time (JIT)

Knowledge of TQM tools

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This slide simply introduces concepts of TQM. These concepts are expanded upon in subsequent slides.

Continuous Improvement

Represents continual improvement of process & customer satisfaction

Involves all operations & work units

Other names

Kaizen (Japanese)

Zero-defects

Six sigma

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Students may have a number of questions with respect to the notion of continuous improvement.

- Why do we need continuous improvement? Why can’t we do it right the first time?

- Doesn’t implementation of continuous improvement introduce a certain instability?

- Are we never “done”?

- Etc.

Vision For TQM

In a mature TQM system:

Process outputs are stable

Root causes are well understood

Process owners are clearly identified

The process owner tracks the critical in-process measures, promptly deals with special causes, and prevents upsets in the output measures.

The work processes are standardized, documented and followed.

As a result, efforts previously used to fight fires are put toward improvement efforts.

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Shewhart’s PDCA Model

4.Act

1.Plan

3.Check

2.Do

Identify the improvement and make a plan

Test the plan

Is the plan working

Implement the plan

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Employee Empowerment

Getting employees involved in product & process improvements

85% of quality problems are due to process & material

Techniques

Support workers

Let workers make decisions

Build teams & quality circles

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If you have not done so already, you might at this point discuss:

- why employee empowerment works

- the role of information technology in enabling employee empowerment

- the role of information technology in making employee empowerment a requirement

Benchmarking

Selecting best practices to use as a standard for performance

Determine what to benchmark

Form a benchmark team

Identify benchmarking partners

Collect and analyze benchmarking information

Take action to match or exceed the benchmark

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Ask student to identify firms which they believe could serve as benchmarks. If students are unable to identify any firms - ask them to identify a college or university whose registration system or housing selection system could serve as a benchmark. Most students have enough knowledge of, or friends at,other colleges and universities so as to be able to respond to this question.

TQM System

Select Process

Assess Situation

Monitor Process

Improve Process

Document & Install CBA

Results

OK?

Yes

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Benefits of TQM

All employees have a method of process improvement and maintenance to enhance quality

Processes that have been improved are standardized, to maintain the gains that are made, thereby reducing rework.

Improvement efforts on day-to-day work are focuses on business needs.

This results in:

Reduced waste within our DM process.

Reduced ongoing fire fighting through standardization o processes.

Long-term cures instead of short-term fixes.

Day-to-day work made easier than traditional management.

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TQM System

Select Process

Assess Situation

Monitor Process

Improve Process

Document & Install CBA

Results

OK?

Yes

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Customer Priority Grid

		Lead-time
Inventory $
		Method of delivery
	Accuracy of billing

High

Low

S A T I S F A C T I O N

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TQM System

Select Process

Assess Situation

Monitor Process

Improve Process

Document & Install CBA

Results

OK?

Yes

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Assess Situation

Draw macro level flow chart

Identify output measures

Select improvement or maintenance

2-‹#›

TQM System

Select Process

Assess Situation

Monitor Process

Improve Process

Document & Install CBA

Results

OK?

Yes

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Improvement Processes

QIP – a problem solving process used to identify the real root causes and develop action plans to deal with them.

QIP Fast Track – Used when the root cause and solution are obvious from existing data.

CBA – When the Current Best Approach exists but is not being followed, you need to find out why.

Search & Reapply – Used when someone in the organization is getting good results from a process that will satisfy your needs. Rather than invent your own solution, copy the one that works.

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TQM System

Select Process

Assess Situation

Monitor Process

Improve Process

Document & Install CBA

Results

OK?

Yes

2-‹#›

TQM System

Select Process

Assess Situation

Monitor Process

Improve Process

Document & Install CBA

Results

OK?

Yes

2-‹#›

Strategic Implications Of TQM

Quality is key to effective strategy

Clear strategic goal, vision, mission

High quality goals

Operational plans & policies

Feedback mechanism

Strong leadership

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Employees & Quality Improvement

Quality circles

Employee suggestions

Process improvement teams

Self-managed work teams

High Performing Work Systems (HPWS)

Horizontal Process Teams (HPT’s)

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This Week’s Discussions

McDonald’s – what do you know about McDonald’s operations? How have they streamlined their operations?

How can the a Total Quality Management Process help a company and you in your personal life?

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