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BIZ2121 Production & Operations Management
Process Design
Sung Joo Bae, Associate Professor
Yonsei University School of Business
Disclaimer: Many slides in this presentation file are from the copyrighted material in 2010 by Pearson
Education, Inc. Publishing as Prentice Hall.
A Process View
Departments have their own objectives and resources to achieve them.
Processes may cross different department boundaries, and require resources
from several departments.
External environment
Internal and external customers
Inputs
• Workers
• Managers
• Equipment
• Facilities
• Materials
• Land
• Energy
Processes and operations
1 3
5
2 4
Information on performance
Outputs
• Goods
• Services
Figure 1.2
Process Strategy
Principles of process strategy
1. Make choices that fit the situation and that
make sense together, that have a close strategic
fit
2. Individual processes are the building blocks
that eventually create the firm’s whole supply
chain
3. Management must pay particular attention to
the interfaces between processes (cross-
functional coordination)
Process Strategy Decisions
• There are four basic process decisions:
Customer Involvement
• Low involvement
• High involvement
Process Structure
• Customer-contract position
(services)
• Product-process position
(manufacturing)
• Layout
Resource Flexibility
• Specialized
• Enlarged
Capital Intensity
• Low automation
• High automation
Strategy for Change
• Process reengineering
• Process improvement
Figure 3.1 – Major Decisions for
Effective Processes
Effective Process
Design
Process Structure in Services
Customer contact is the extent to which the
customer is present, actively involved, and
receives personal attention during the service
process
Face-to-face interaction is sometimes called
a moment of truth or a service encounter
Process Structure in Services
TABLE 3.1 | DIMENSIONS OF CUSTOMER CONTACT IN SERVICE | PROCESSES
Dimension High Contact Low Contact
Physical presence Present Absent
What is processed People Possessions or information
Contact intensity Active, visible Passive, out of sight
Personal attention Personal Impersonal
Method of delivery Face-to-face Regular mail or e-mail
Task Characteristics and Its Implications Adapted from Daft and Lengel’s work (1986)
Low
Unanalyzable Unanalyzable, Low Variety
Craft Technology
Task Variety
Unanalyzable, High Variety
Nonroutine Technology
High
Task Analyzability
Analyzable
Structure
- Rich media to resolve unanalyzable issues
- Small amount of information
Examples: Occasional face-to-face and
scheduled meetings, planning, telephone
Analyzable, Low Variety
Routine Technology
Structure
- Media of low richness
- Small amount of information
Examples: Rules, standard procedures,
standard information system reports,
memos, bulletins
Structure
- Rich media to resolve unanalyzable
issues
- Large amount of information to handle
exceptions
Examples: Frequent face-to-face and
group meetings, unscheduled meetings,
special studies and reports
Analyzable, High Variety
Engineering Technology
Structure
- Media of low richness
- Large amount of information to handle
exceptions
Examples: Quantitative databases, plans,
schedules, statistical reports, a few
meetings
Process Structure in Services
The three elements of the customer-contact
matrix are
1. The degree of customer contact
2. Customization
3. Process characteristics
Process characteristics include
1. Process divergence deals with customization and the latitude as to how tasks are performed
2. Flow is how customers, objects, or information are
processed and can be either line or flexible
Less
pro
cess
es
div
erg
en
ce a
nd
mo
re lin
e flo
ws
Service Process Structuring Less customer contact and customization
Process
Characteristics
(1)
Flexible flows with
Individual
processes
(1) (2) (3)
High interaction with Some interaction with Low interaction with customers, highly customers, standard customers, standardized customized service services with some options services
Front office
(2)
Flexible flows with
some dominant
paths, with
some exceptions to
how work
performed
(3)
Line flows, routine
work same with all
customers
Hybrid office
Back office
Figure 3.2 – Customer-Contact Matrix for Service Processes
Product-Process Matrix
For manufacturing organization it brings together 1. Volume
2. Product customization
3. Process characteristics
Process choices include job, batch, line, and continuous flow processes
Production and inventory strategies include make-to-order, assemble-to-order, and make-to-stock
Less
co
mp
lexit
y, less
div
erg
en
ce
, an
d m
ore
lin
e f
low
s Product-Process Matrix
Less customization and higher volume
(1) (2) (3) (4)
Low-volume Multiple products with low Few major High volume, high
Process
Characteristics
(1)
Customized process,
with flexible and
unique sequence of tasks
(2)
Disconnected line
flows, moderately
complex work
(3)
Connected line, highly
repetitive work
(4)
Continuous flows
products, made to moderate volume products, standardization, to customer higher commodity order volume products
Job
process
Small batch
process
Batch processes
Large batch
process
Line
process
Continuous
process
Figure 3.3 – Product-Process Matrix for Processes
Layout
The physical arrangement of human and capital resources
An operation is a group of resources performing all or part of one or more processes
Layout involves three basic steps 1. Gather information
2. Develop a block plan
3. Design a detailed layout
Layout
Gather information on space requirements, available space, and closeness factors
- Example of OBM, 120 emp + 30 new emp
Department Area Needed (ft2)
1. Administration 3,500
2. Social services 2,600
3. Institutions 2,400
4. Accounting 1,600
5. Education 1,500
6. Internal audit 3,400
Total 15,000
3
6
4
1
2
5
150’
Block Plan
100’
Figure 3.4 – Current Block Plan for the Office of Budget Management
15,000 Sq. Ft.
Closeness Matrix
Closeness Factors
Department 1 2 3 4 5 6
1. Administration ― 3 6 5 6 10
2. Social services ― 8 1 1
3. Institutions ― 3 9
4. Accounting ― 2
5. Education ― 1
6. Internal audit ―
Requirements
There are two absolute requirements for the new layout 1. Education should remain where it is
2. Administration should remain where it is
Closeness Factors
Department 1 2 3 4 5 6
1. Administration ― 3 6 5 6 10
2. Social services ― 8 1 1
3. Institutions ― 3 9
4. Accounting ― 2
5. Education ― 1
6. Internal audit ―
Closeness Factors
Department 1 2 3 4 5 6
1. Administration ― 3 6 5 6 10
2. Social services ― 8 1 1
3. Institutions ― 3 9
4. Accounting ― 2
5. Education ― 1
6. Internal audit ―
Developing a Block Plan
EXAMPLE 3.1
Develop an acceptable block plan for the Office of Budget Management
that locates departments with the greatest interaction as close to each
other as possible.
SOLUTION
Using closeness ratings of 8 and above, you might plan to locate
departments as follows:
a. Departments 1 and 6 close together
b. Departments 3 and 5
close together
c. Departments 2 and 3 close together
Departments 1 and 5 should
remain at their current locations
6
2
3
1
4
5
150’
Developing a Block Plan
a. Departments 1 and 6 close together
b. Departments 3 and 5 close together
c. Departments 2 and 3 close together
100’
Figure 3.5 – Proposed Block Plan
2 2
The Weighted-Distance Method
The weighted-distance method can be used to compare alternative block plans when relative locations are important
Euclidian distance is the straight-line distance between two possible points
d AB xA xB yA yB
where
dAB = distance between points A and B
xA = x-coordinate of point A yA = y-coordinate of point A xB = x-coordinate of point B yB = y-coordinate of point B
The Weighted-Distance Method
Rectilinear distance measures the distance
between two possible points with a series of 90-degree turns
d AB xA xB y A yB
The objective is to minimize the weighted- distance score (wd)
A layout’s wd score is calculated by summing the products of the proximity scores and distances between centers
Application 3.1
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB = (20 – 80)2 + (10 – 60)2
=
Rectilinear Distance
dAB = |20 – 80| + |10 – 60| =
Application 3.1
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB = (20 – 80)2 + (10 – 60)2
= 78.1
Rectilinear Distance
dAB = |20 – 80| + |10 – 60| = 110
6
2
3
1
4
5
Calculating the WD Score
EXAMPLE 3.2
How much better is the proposed block than the current block plan?
SOLUTION
The following table lists pairs of departments that have a nonzero closeness factor and the rectilinear distances between departments for both the current plan and the proposed plan
3
6
4
1
2
5
Current Block Plan Proposed Block Plan
Calculating the WD Score
Current Plan Proposed Plan
Department Pair
Closeness Factor (w)
Distance (d)
Weighted-Distance Score (wd)
Distance (d)
Weighted-Distance Score (wd)
1, 2 3
1, 3 6
1, 4 5
1, 5 6
1, 6 10
2, 3 8
2, 4 1
2, 5 1
3, 4 3
3, 5 9
4, 5 2
5, 6 1
Calculating the WD Score
Current Plan Proposed Plan
Department Pair
Closeness Factor (w)
Distance (d)
Weighted-Distance Score (wd)
Distance (d)
Weighted-Distance Score (wd)
1, 2 3
1, 3 6
1, 4 5
1, 5 6
1, 6 10
2, 3 8
2, 4 1
2, 5 1
3, 4 3
3, 5 9
4, 5 2
5, 6 1
1 3
1 6
3 15
2 12
2 20
2 16
2 2
1 1
2 6
3 27
1 2
2 2
Total 112
2 6
3 18
1 5
2 12
1 10
1 8
1 1
2 2
2 6
1 9
1 2
3 3
Total 82
Application 3.2
Matthews and Novak Design Company has been asked to design the layout for a newly constructed office building of one of its clients.The closeness matrix showing the daily trips between its six department offices is given below.
Departments Trips between Departments
1 2 3 4 5 6
1 25 90 165
2 105
3 125 125
4 25
5 105
6
Department Closeness Distance Score
Pair Factor
1, 6 165 1 165
3, 5 125
3, 6 125
2, 5 105 1 105
5, 6 105 1 105
1, 3 90
1, 2 25 3 75
4, 5 25 1 25
Total 1030
Application 3.2
Shown below on the right is a block plan that has been suggested for the building (original plan). Assume rectilinear distance. Students complete highlighted cells.
3 6 1
2 5 4
Based on the above results, propose a better plan and evaluate it in terms of the load-distance score.
Application 3.2
Department
Pair
Closeness
Factor
Distance
Score
1, 6 165
3, 5 125
3, 6 125
2, 5 105
5, 6 105
1, 3 90
1, 2 25
4, 5 25
Total
A Detailed Layout
Once a block plan has been selected, a
detailed representation is created showing
the exact size and shape of each center
Elements such as desks, machines, and
storage areas can be shown
Drawings or models can be utilized
Options can be discussed and problems
resolved
Customer Involvement
Possible disadvantages
Can be disruptive
Managing timing and volume can be challenging
Quality measurement can be difficult
Requires interpersonal skills
Layouts may have to be revised
Multiple locations may be necessary
Customer Involvement
Possible advantages
Increased net value to the customer
Can mean better quality, faster delivery, greater
flexibility, and lower cost
May reduce product, shipping, and inventory
costs
May help coordinate across the supply chain
Processes may be revised to accommodate the
customers’ role
Customer Involvement via Web?
Possible advantages & disadvantages?
Possible advantages
Disadvantages reduced?
Increased net value to the customer
Can mean better quality, faster
delivery, greater flexibility, and lower
cost
May reduce product, shipping, and
inventory costs
May help coordinate across the
supply chain
Processes may be revised to
accommodate the customers’ role
Can be less disruptive
Managing timing and volume
can be less challenging
Quality measurement can be
done efficiently
Requires no interpersonal
skills
Layouts – no need to be
revised
Multiple locations not
necessary
Resource Flexibility
A flexible workforce can often require
higher skills and more training and
education
Worker flexibility can help achieve reliable
customer service and alleviate bottlenecks
Resource flexibility helps absorb changes in
workloads
The type of workforce may be adjusted
using full-time or part-time workers
Resource Flexibility
The volume of business may affect the type of equipment used
Break-even analysis can be used to determine at what volumes, changes in equipment should be made
To
tal co
st (
do
llars
)
Break-Even Analysis
Process 2: Special-purpose equipment
Break-even quantity
Process 1: F2 General-purpose
equipment F1
Units per year (Q)
Figure 3.7 – Relationship Between Process Costs and Product Volume
Application 3.3
BBC is deciding whether to weld bicycle frames manually or to purchase a welding robot. If welded manually, investment costs for equipment are only $10,000. the per-unit cost of manually welding a bicycle frame is $50.00 per frame. On the other hand, a robot capable of performing the same work costs $400,000. robot operating costs including support labor are $20.00 per frame.
welded manually (Make)
welded by robot (Buy)
Fixed costs $10,000 $400,000
Variable costs $50 $20
At what volume would BBC be indifferent to these alternative
methods?
Application 3.3
BBC is deciding whether to weld bicycle frames manually or to purchase a welding robot. If welded manually, investment costs for equipment are only $10,000. the per-unit cost of manually welding a bicycle frame is $50.00 per frame. On the other hand, a robot capable of performing the same work costs $400,000. robot operating costs including support labor are $20.00 per frame.
welded manually (Make)
welded by robot (Buy)
Fixed costs $10,000 $400,000
Variable costs $50 $20
At what volume would BBC be indifferent to these alternative
methods?
Fm – Fb
Q = cb – cm =
$10,000 – $400,000
$20 – $50 = 13,000 frames
Custom Molds, Inc. Case
Strategic Fit
The process chosen should reflect the
desired competitive priorities
The process structure has a major impact
on customer involvement, resource
flexibility, and capital intensity
Different competitive priorities and
related processes
Mold Fabrication ◦ CP: Product flexibility,
quality, design Price and delivery is
OQs, but not OWs
◦ Job process
◦ High customer contact
◦ Highly skilled labor
◦ Divergent processes
Parts Manufacturing
◦ CP:Volume flexibility, cost (price), delivery speed
◦ Line (batch) process
◦ More capital intensive
◦ Less skilled labor
◦ Less divergent processes
Changing focus
Molds Fabricated
◦ 722(2006)
684(2007)
591(2008)
Parts Manufactured
o 47,200(2006)
67,150(2007)
114,850(2008)
13 machinists x 250 days/year 5 days/mold
= appx. 650 molds/year
Decision Patterns for Manufacturing
Competitive Priorities Process Choice
Top-quality, on-time delivery, and flexibility
Job process or small batch process
Low-cost operations, consistent quality, and delivery speed
Large batch, line, or continuous flow process
(a) Links with Process Choice
Competitive Priorities Production and Inventory Strategy
Top-quality, on-time delivery, and
flexibility Make-to-order
Delivery speed and variety Assemble-to-order
Low-cost operation
and delivery speed
Make-to-stock
(b) Links with Production and Inventory Strategy
Figure 3.9 – Links of Competitive Priorities with Manufacturing Strategy
Processes shown in flow chart
Lead time: 9 weeks
Lead time: 3 weeks
1 week
2-4 weeks assigned
3-5 days
1 day
1 day
1 day
1 week
2 days
Gaining Focus
Operations can be focused by process
segments when competitive priorities differ
Plants within plants (PWPs) are different
operations under the same roof
Service can be focused in much the same way
Focused factories can be created by splitting a
large plant into several smaller plants dedicated
to narrower product lines
◦ HP, S.C. J&J, Ricoh, Mitsubishi
Capital Intensity
Automation is one way to address the mix of capital and labor
Automated manufacturing processes substitute capital equipment for labor
Typically require high volumes and costs are high
Automation might not align with a company’s competitive priorities
Fixed automation ◦ produces one type of
part or product in a fixed sequence
◦ Typically requires large investments and is relatively inflexible
Flexible automation
◦ can be changed to handle various products
◦ Industrial robots are classic examples of flexible automation
Majo
r
pro
cess
decis
ion
s
Decision Patterns for
Manufacturing
Low-Volume,
make-to-order process
• More process divergence and more flexible flows
• More customer involvement
• More resource flexibility
• Less capital intensity
Job
process
Small batch
process
Batch processes
Large batch
process
High-Volume, make-to-stock process
• Less process divergence and more line flows
• Less customer involvement
• Less resource flexibility
Line
process
Continuous
process
• More capital intensity
Low High
Volume
Figure 3.10 – Decision Patterns for Manufacturing Processes
Gaining Focus
Operations can be focused by process
segments when competitive priorities differ
Plants within plants (PWPs) are different
operations under the same roof
Service can be focused in much the same way
Focused factories can be created by splitting a
large plant into several smaller plants dedicated
to narrower product lines
◦ HP, S.C. J&J, Ricoh, Mitsubishi
Strategies for Change
Process reengineering is the fundamental
rethinking and radical redesign of a process to
improve performance
Can be successful but it is not simple or easy
The people who are involved with the process
each day are the best source of ideas on how
to improve it
Process improvement is the systematic study of
activities and flows of a process to find ways to
improve it
End of Process Design Session
Trips Between Departments
Department A B C D E F
A ― 8 3 9 5
B ― 3
C ― 8 9
D ― 3
E ― 3
F ―
Solved Problem 1
A defense contractor is evaluating its machine shop’s current layout. Figure
3.11 shows the current layout and the table shows the closeness matrix
for the facility measured as the number of trips per day between
department pairs. Safety and health regulations require departments E and
F to remain at their current locations.
a. Use trial and error to find a better layout
b. How much better is your layout than the current layout in terms of the wd score? Use rectilinear distance.
E
B
F
A
C
D
Figure 3.11 – Current Layout
Solved Problem 1
b. The table reveals that the wd score drops from 92 for the current plan to 67 for the revised plan, a 27 percent reduction.
Current Plan Proposed Plan
Department Pair
Number of Trips (1) Distance (2)
wd Score (1) (2) Distance (3)
wd Score (1) (3)
A, B 8 2 16 1 8
A, C 3 1 3 2 6
A, E 9 1 9 1 9
A, F 5 3 15 3 15
B, D 3 2 6 1 3
C, E 8 2 16 1 8
C, F 9 2 18 1 9
D, F 3 1 3 1 3
E, F 3 2 6 2 6
wd = 92 wd = 67
Recommended