COLLIER/EVANS
OM
5
7
Process
Selection, Design,
and Analysis
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accessible website, in whole or in part.
Housekeeping Items
1) Syllabus Update
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Wednesday Nov 2
Chapter 7 / In Class Activity 4 & 6
No Class – Work on group projects
Chapter 18
In Class Activity
Assignment #2 Due
Second Major Test: Chapters 4, 6, 7, 18
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Chapter 15
2) Assignment #2 – posted on Moodle
• MUST be submitted through Moodle
• No later than 5pm on October 24th (Section 1 and 2)
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3) Group Assignment – instructions on Moodle
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LEARNING OUTCOMES
1 Describe the four types of processes used to
produce goods and services
2 Explain the logic and use of the product-process
matrix
3 Explain the logic and use of the service-positioning
matrix
4 Describe how to apply process and value stream
mapping for process design
5 Explain how to improve process designs and
analyze process maps
6 Describe how to compute resource utilization and
apply Little’s Law
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Process Choice Decision: Three Types of
Goods and Services
Custom or make-to-order
• Produced and delivered as one-of-a-kind or in small quantities (ships, weddings,
buildings, internet sites)
• Designed to meet specific customers’ specifications
• Produced on demand – customer must wait for the good or service (designed,
created, delivered)
Option or assemble-to-order
• Configurations of standard parts, subassemblies, or services that can be selected
by customers from a limited set (Dell Computers, Subway sandwiches, travel
agent services)
• Although the customer chooses how the good or service is configured – unique
requirements cannot be accommodated
Standard or make-to-stock
• Made according to a fixed design, and the customer has no options from which
to choose (appliances, online web-based courses, shoes)
• Made in anticipation of customer demand and stocked in inventory
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Process – what is it again?
• Any part of an organization that takes inputs and
transforms them into outputs that are of greater
value to the organization than the original inputs.
• Example: McDonald’s uses inputs such as hamburger
meat, lettuce, tomatoes, and potatoes. To these inputs,
trained labour is added in the form of cooks and order
takers, and capital equipment is used to transform the
inputs into hamburgers, french fries, and other foods.
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4 Major Types of Processes Used To Produce
Goods and Services
Projects
• Large-scale, customized initiatives that consist of smaller tasks
and activities that must be coordinated and completed to finish
on time and within budget
• Example: large construction projects; low volume, high flexibility
Job shop processes (custom or make-to-order)
• Organized around particular types of general-purpose equipment
that are flexible and capable of customizing work for individual
customers
• Produce a wide variety of goods & services, often in small
quantities
• Example: Dell Computers; moderate volume, moderate flexibility
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Types of Processes
Flow shop (Option or Assemble-to-order)
• Organized around a fixed sequence of activities and process
steps, such as an assembly line (moderate / high volume & low
flexibility)
• Assembly line - Produce a limited variety of similar goods or
services (ie. Automobiles or appliances, insurance policies)
Continuous flow (Standardized or Make-to-order)
• Creates highly standardized goods or services, around the clock in
very high volumes
• Sequence of work tasks is vey rigid – use of automated
equipment
• (e.g. credit card authorizations, paper and steel mills; high
volumes and lowest flexibility)
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Product Life Cycle (PLC)
• Characterization of product growth, maturity, and decline
over time
• Four Phases
-
Introduction
Growth
Maturity
Decline and turnaround
• A product’s life cycle has important implications in terms of
process design and choice
• Ie. New products with low sales volume might be produced in a job
shop process, however, as sales grow and volumes increase, a flow shop
process might be more efficient
It is important to understand product life cycles because when goods and
services change and mature, so must the processes and value chains that
create and deliver them.
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The Product-Process Matrix
• Model that describes the alignment of process
choice (project – job shops – flow shops –
continuous flow)with the characteristics of the
manufactured good
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Exhibit 7.2
Product-Process Matrix
The most appropriate match between type of product and type of process occurs along the
diagonal in the product-process matrix
•
As you move down the
diagonal, the emphasis on
both product and process
structure shifts from low
volume and high flexibility
to higher volume and more
standardization.
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The Product-Process Matrix
Must align
process
choice with
the
characteristics
of the
manufactured
good
Continuous Flow
Job shops
(moderate
volume,
moderate
flexibility)
Projects
(low volume,
high flexibility
–
customization
can exist)
(high volumes and
lowest flexibility –
standardization now
exists)
Flow shops
(moderate/high
volume & low
flexibility)
Shifts from low volume and high flexibility to higher volume and more standardization.
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Product-Process Matrix
Job Shop
Flow Shop
Continuous
Flow
Demand (Volume)
Low
Moderate
High
Degree of
Customization
High
Moderate
Low
Number/Range of
Products
Low
Many/Multiple
Several
Custom
Make-to-Order
Options
Assemble-toOrder
Standardized
Make-to-Stock
Type of Good
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The Service-Positioning Matrix
• Similar to the product-process matrix but the product-process
matrix does not transfer well to services.
• Why? Relationship between volume and process is not found in
many service businesses.
• For example, if a branch of a bank is at service capacity, they will try
to physically increase the size of the branch but the processes used
for servicing customers remain the same.
• Therefore, the nature of the customer’s desired service encounter
activity sequence should lead to:
• Appropriate service system design that best meets the technical and
behavioral needs of customers and that results in superior
performance.
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The Service-Positioning Matrix: Service
Encounter Activity Sequence
• Process steps and associated service encounters
necessary to:
• Complete a service transaction
• Fulfill customer’s wants and needs
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The Service-Positioning Matrix: Pathways
• The unique route through a service system
• Pathways can be customer driven or provider driven,
depending on the level of control that the service firm
wants to ensure
• Customer-routed services:
- Offer customers extensive freedom to select the pathways that are best
suited for themselves
- The degree of customer discretion, freedom, and decision-making power in
selecting the service-encounter activity sequence (visiting a theme park,
searching the Internet)
- Customer decides what path to take with minimal guidance
• Provider-routed services:
- Constrain customers to follow a very small number of possible and
predefined pathways through the service system (highly repeatable service
encounter activity such as visiting an ATM or going to the post office)
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Exhibit 7.3
The Service Positioning Matrix
Service positioning matrix focuses on the service encounter level and helps
management design a service system that best meets the technical and
behavioural needs of customers.
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Process Design
• Goal - Create the right combination of
equipment, labor, software, work methods and
environment
• To produce and deliver goods and services that
satisfy internal and external customer requirements
• Process design can have a significant impact on
• Cost (and hence profitability)
• Flexibility (the ability to produce the right types and amount of
products a customer demand or preferences change)
• Quality of output
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Levels of Process Design
Task
• Specific unit of work required to create an output (e.g. inserting a
circuit board into an iPad subassembly)
Activity
• Group of tasks needed to create and deliver an immediate or
final output (e.g. all the tasks necessary to build an iPad)
Process
• Group of activities (e.g. moving the parts and materials for an
iPad to the assembly stations, building the iPad, and packing the
iPad and peripherals)
Value chain
• Network of processes (e.g. developing the website and video
clips for advertising an iPad, purchasing materials for an iPad)
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Process and Value Stream Mapping
Designing a goods-producing or service-providing process
requires 6 activities:
1. Define the purpose and objectives of the process
2. Create a detailed process or value stream map that
describes how the process is currently performed
3. Evaluate alternative process designs
4. Identify and define appropriate performance measures for
the process
5. Select the appropriate equipment and technology
6. Develop an implementation plan to introduce the new or
revised process design
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Questions to consider when Designing a
Process:
Each step of your process must add value. Ask some
basic questions such as:
1.
2.
3.
4.
5.
6.
7.
Is the process designed to achieve competitive advantage
in terms of differentiation, response, or low cost?
Does the process eliminate steps that do not add value?
Does the process maximize customer value as perceived
by the customer?
Will the process win orders?
How much variety in products or services will the system
need to handle?
What degree of equipment flexibility will be needed?
What is the expected volume of output?
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Process Map (Flowchart) – exhibit 7.4
• Describes the sequence of all process activities and
tasks necessary to create and deliver a desired output
or outcome
• Documents how work either is, or should be,
accomplished and how the transformation process
creates value
• Process maps clearly show the boundaries of a process
• Process boundary: Beginning or end of a process
- Easier to obtain management support
- Assign process ownership
- Identify where performance measures should be taken
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Value Stream
• Refers to all value-added activities involved in designing,
producing, and delivering goods and services to
customers.
• A Value stream map (VSM) – similar to process map but
also highlights value-added versus non-value-added
activities.
- A non-value added activity for example would be transferring
materials between two nonadjacent workstations or waiting
for approvals for a low-cost electronic transaction, etc.
- Eliminating non-value added activities in a process design is
one of the most important responsibilities of operations
managers.
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Process Analysis and Improvement
• Process design activities involve redesigning an
existing process to improve performance
• Management strategies to improve process designs
usually focus on increasing:
• Revenue (by improving process efficiency in creating goods and
services and delivery of the CBP)
• Agility (by improving flexibility and response to changes in demand
and customer expectations)
• Product and/or service quality (by reducing defects, mistakes,
failures or service upsets)
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Process Analysis and Improvement
• Strategies to improve process designs usually focus
on decreasing:
• Costs (through better technology or elimination of non
value-added activities)
• Process flow time (by reducing waiting time or speeding
up movement through the process and value chain)
• Carbon footprint of the task, activity
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Utilization
Fraction of time a workstation or individual is busy over the long run
• It is difficult to achieve 100% utilization.
• Two ways of computing resource utilization (provide useful insight
for evaluating alternative process designs)
• Utilization (U) =
Resources used
resources available
• Utilization (U) =
Demand rate
[service rate × number of servers]
• Note: for equation 1, the measurement base (e.g. time, units, etc) must be the
same for the numerator and denominator).
• For a process design to be feasible, the calculated utilization over the long run
cannot exceed 100%
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Resource Utilization Example
A 30,000-seat college football stadium is used 18 times for games,
concerts, and graduation ceremonies. Each event averages four hours
and assumes the stadium is full for each event. The stadium is available
365 days a year from 6 am to midnight. What is stadium (seat)
utilization?
• Utilization (U)
= Resources Used/Resources Available
= (30,000 seats/visit)(4 hours/visit)(18 visits/year)
(30,000 seats/visit)(365 days/year)(18 hours/day)
= 2,160,000 seat hours/year
197,100,000 seat hours/year
• = 0.0109 or 1.09% Stadium seat utilization
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Resource Utilization Example
An inspection station for assembly printers
receives 40 printers/hour and has 2 inspectors,
each of whom can inspect 30 printers/hr.
• What is the utilization of the inspectors?
• What service rate would be required to have a
target utilization of 85%?
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Example
Utilization (U)
= Resources used /resources available
= 40/ (30)(2)
= 40/60
=66.67 or 67%
Utilization (U)
0.85
(0.85)(2) x SR
1.7 X SR
SR
SR
= Demand rate/[service rate × number of servers]
= 40 / (SR)(2)
= 40
= 40
= 40 / 1.7
= 23.5 printers/hour
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Little’s Law
At any moment in time, people, orders, jobs, documents, and so on
that flow through processes are in various stages of completion
and may be waiting in queues
• Flow time, or cycle time: Average time it takes to complete one
cycle of a process
• The flow time depends not only on the actual time to perform
tasks required but also on how many other entities are in the
“work-in-process” stage
• Little’s Law was developed by John Little of Case Western
Reserve University in Cleveland in the 1960s. It explains the
relationship among flow time (T), throughput ( R ) and work-inprocess (WIP):
Work-in-process = Throughput x Flow Time; OR
WIP = R x T
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Little’s Law
• Little’s Law is based on simple averages for all
variables and while it serves as a good
baseline for understanding process
performance on an aggregate basis
• It does not take into account any randomness
in arrivals or service times or different
probability distributions.
• If we know any 2 of the 3 variables, we can
compute the 3rd.
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Solved Problem Using Little’s Law
Suppose that a voting facility processes an average of
50 people per hour and that, on average, it takes 10
minutes for each person to complete the voting
process.
Using Little’s Law, compute the average number of
voters in process:
WIP: How many of “X” is in process
WIP = R x T
WIP = 50 voters per hour x (10
minutes/60 minutes per hour)
WIP = 8.33 voters
Therefore, you should expect, on
average, to find about 8 or 9 voters
inside the facility.
or inventory
Throughput (R): Output rate. The
average number of entities
completed per unit (how many are
coming at a time)
Flow Time: Average time it takes to
complete one cycle of a process
(how long does it take)
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Solved Problem Using Little’s Law
A manufacturer’s average work-in-process inventory for Part
#1234 is 500 parts. The workstation produces parts at the rate of
225 parts per day. What is the average time a part spends in this
workstation?
WIP = R x T
500 = 225(T)
500/225 = T
T = 2.22 days
WIP: How many of “X” is in process
or inventory
Throughput (R): The average
number of entities – output rate completed per unit (how many are
coming at a time)
Flow Time: Average time it takes to
complete one cycle of a process
(how long does it take)
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SUMMARY
• Goods and services can be custom - based,
assemble-to-order or standard - based
• Product life cycle has important
implications in terms of process design and
choice
• Product process matrix is similar to servicepositioning matrix
• Process design activities involve redesigning
an existing process to improve performance
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KEY TERMS
•
•
•
•
•
•
•
•
•
Activity
Bottleneck
Continuous flow processes
Custom, or make-to-order, goods and services
Customer-routed services
Flow shop processes
Flow time, or cycle time
Job shop processes
Option, or assemble-to-order, goods and
services
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KEY TERMS
•
•
•
•
•
•
•
•
•
Pathway
Process
Process boundary
Process map (Flowchart)
Product life cycle
Product-process matrix
Projects
Provider-routed services
Reengineering
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KEY TERMS
• Service encounter activity sequence
• Standard, or make-to-stock, goods and
services
• Task
• Throughput
• Value chain
• Value stream
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Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acce ssible website, in whole or in part.
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