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3 1Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Process Strategy
3
For Operations M anagement, 9e byKrajewski/Ritzman/Malhotra 2010 Pearson Education
Homework Ch. 3: 2, 3, 5
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3 2Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Proc ess St rateg y
Principles of process strategy1. Make choices that fit the situation and that
make sense together, that have a closes t ra tegic f i t
2. Individual processes are the building blocksthat eventually create the firms whole supplychain
3. Management must pay particular attention tothe interfaces between processes
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3 3Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
A Process View
External environment
Information onperformance
Internal and externalcustomers
Processes andoperations
1
2
3
4
5
Inputs Workers Managers Equipment Facilities Materials Land Energy
Outputs Goods Services
Figure 1.2
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The Su pp ly Chain View
Support Processes
E x
t e r n a
l s u p p
l i e r s E
x t er n
al
c u s t om
er s
Supplierrelationshipprocess
New
service/productdevelopment
Orderfulfillmentprocess
Customerrelationshipmanagement
Figure 1.4
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Proc ess St rateg y Decis ion s
Figure 3.1 Major Decisions for
Effective Processes
Process Structure Customer-contract position
(services) Product-process position
(manufacturing) Layout
Resource Flexibility Specialized Enlarged
Customer Involvement Low involvement High involvement
Effective ProcessDesign
Strategy for Change
Process reengineering Process improvement
Capital Intensity Low automation High automation
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1.a. Serv ice Pro cess Struc tu r in g
Front off ice
Hybr id off ice
Back off ice
Less customer contact and customization
L e s s p r o c e s s e s
d i v e r g e n c e a n
d m o r e
l i n e
f l o w s (1) (2) (3)High interaction with Some interaction with Low interaction with
customers, highly customers, standard customers, standardizedcustomized service services with some options services
ProcessCharacteristics
(1)Flexible flows with
Individualprocesses
(2)Flexible flows withsome dominantpaths, withsome exceptions
to how workperformed
(3)Line flows, routinework same with allcustomers
Figure 3.2 Customer-Contact Matrix for Service Processes
High-End HomeDesign
IBM/Dell
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Serv ice Proc ess St ruc tur ing
Front, Hybrid, or Back?Bank TellerFinancial PlanningTax Service
ExpediaBarber/SalonEmployee PayrollMonthly bank statementsCar wash
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1.b . Manu factu r ing Process St ruc tur in g
Continuousprocess
Jobprocess
Lineprocess
Large batchprocess
Small batchprocess
(1) (2) (3) (4)Low-volume Multiple products with low Few major High volume, highproducts, made to moderate volumeto customerorder
ProcessCharacteristics
(1)Customized process,with flexible andunique sequence of
tasks
(2)Disconnected lineflows, moderatelycomplex work
(3)Connected line, highlyrepetitive work
(4)Continuous flows
L e s s c o m p
l e x
i t y ,
l e s s
d i v e r g e n c e ,
a n
d m o r e
l i n e
f l o w s
Less customization and higher volume
Batch processes
Figure 3.3 Product-Process Matrix for Processes
standardization,commodity products
products,higher vol
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Manu fac tur in g Proc ess S truc tur ing
Job, Batch, Line or Continuous?Uniform productionElectrical productionBen & Jerrys Ice Cream Automobile manufacturingOil refineryAlconAuto repair shop/body shop
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Layout (page 140 or 100)
The physical arrangement of human andcapital resourcesAn operation is a group of resourcesperforming all or part of one or moreprocesses
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Clo seness Matr ix
There are two absolute requirements forthe new layout1. Education should remain where it is2. Administration should remain where it is
Closeness FactorsDepartment 1 2 3 4 5 61. Administration 3 6 5 6 102. Social services 8 1 13. Institutions 3 94. Accounting 25. Education 16. Internal audit
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Develop ing a Bloc k P lan
EXAMPLE 3.1Develop an acceptable block plan for the Office of BudgetManagement that locates departments with the greatestinteraction as close to each other as possible.
150
100
63 4
2 51
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150
100
Develop ing a Bloc k P lan
Figure 3.5 Proposed Block Plan
1 5
a. Departments 1 and 6 close togetherb. Departments 3 and 5 close togetherc. Departments 2 and 3 close together
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3 15
2 122 20
2 16
2 2
1 12 6
3 27
1 2
2 2
Total 112
Calcu lat ing the WD Sco re
2 61 61 3
3 18
1 5
2 121 10
1 8
1 1
2 22 6
1 9
1 2
3 3
Total 82
Current Plan Proposed PlanDepartment
PairClosenessFactor ( w )
Distance(d )
Weighted-DistanceScore ( w d )
Distance(d )
Weighted-DistanceScore ( w d )
1, 2 3
1, 3 6
1, 4 5
1, 5 61, 6 102, 3 8
2, 4 1
2, 5 1
3, 4 3
3, 5 9
4, 5 25, 6 1
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2. Cus tom er Inv o lvem ent
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3. Reso u rc e Flexib i l i ty
A flexible workforce can often requirehigher skills and more training andeducation
Worker flexibility can help achieve reliablecustomer service and alleviate bottlenecksResource flexibility helps absorb changesin workloadsThe type of workforce may be adjustedusing full-time or part-time workers
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Reso u rc e Flexib i li ty
The volume of business may affect the typeof equipment usedBreak-even analysis can be used to
determine at what volumes changes inequipment should be made
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B reak-Even A n alys is
Process 2:Special-purposeequipment
Process 1:General-purpose
equipment
Break-evenquantity
T o
t a l c o s
t ( d o
l l a r s
)
Units per year ( Q )
F2
F1
Figure 3.7 Relationship Between Process Costs and Product Volume
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A p p l icat ion 3.3
Q =F m F b c b c m
BBC is deciding whether to weld bicycle frames manually or topurchase a welding robot. If welded manually, investment costsfor equipment are only $10,000. the per-unit cost of manuallywelding 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 perframe.
At what volume would BBC be indifferent to these alternativemethods?
welded manually(Make)
welded by robot(Buy)
Fixed costs $10,000 $400,000Variable costs $50 $20
=$10,000 $400,000
$20 $50 = 13,000 frames
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4. Cap ital In tens i ty
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Strateg ies fo r Chang e
Process reengineering is the fundamentalrethinking and radical redesign of aprocess to improve performanceCan be successful but it is not simple oreasyThe people who are involved with theprocess each day are the best source ofideas on how to improve itProcess improvement is the systematicstudy of activities and flows of a process tofind ways to improve it
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Proc ess Reen g ineer ing
TABLE 3.2 | KEY ELEMENTS OF REENGINEERING
Element Description
Critical processes Emphasis on core business processes, normal processimprovement activities can continue with other processes
Strong leadership Strong leadership from senior executives to overcomeresistance
Cross-functional teams A team with members from each functional area charged withcarrying out the project
Information technology Primary enabler of the project as most reengineering projectsinvolve information flows
Clean-slate philosophy Start with the way the customer wants to deal with the companyand includes internal and external customers
Process analysis Must understand the current processes throughout theorganization
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Solved Problem 1
A defense contractor is evaluating its machine shops currentlayout. Figure 3.11 shows the current layout and the tableshows the closeness matrix for the facility measured as thenumber of trips per day between department pairs. Safety andhealth regulations require departments E and F to remain attheir current locations.
a. Use trial and error to find a better layoutb. How much better is your layout than the current layout in
terms of the w d score? Use rectilinear distance.
Trips Between Departments
Department A B C D E FA 8 3 9 5
B 3
C 8 9
D 3
E 3
F
E
A
B
C D
F
Figure 3.11 Current Layout
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Solved Problem 1
SOLUTIONa. In addition to keeping departments E and F at their current
locations, a good plan would locate the following departmentpairs close to each other: A and E, C and F, A and B, and Cand E. Figure 3.12 was worked out by trial and error andsatisfies all these requirements. Start by placing E and F attheir current locations. Then, because C must be as close aspossible to both E and F, put C between them. Place A belowE, and B next to A. All of the heavy traffic concerns havenow been accommodated.
Trips Between Departments
Department A B C D E FA 8 3 9 5
B 3
C 8 9
D 3
E 3
F
E F
A B
C
D
Figure 3.12 Proposed Layout
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Solved Problem 1
Current Plan Proposed Plan
DepartmentPair
Number ofTrips (1) Distance (2)
w d Score(1) (2) Distance (3)
w d Score(1) (3)
A, B 8 2 16 1 8
A, C 3 1 3 2 6A, 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 8C, F 9 2 18 1 9
D, F 3 1 3 1 3
E, F 3 2 6 2 6w d = 92 w d = 67
b. The table reveals that the w d score drops from 92 for thecurrent plan to 67 for the revised plan, a 27 percentreduction.
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