MGT 301
Overview
• Process strategies
• Service process design
• Process Analysis And Design
Process Strategy
– Flow charts
– Service system mapping
– Time-Function Mapping
– Value Stream Mapping
– Process Charts
– Service Blueprinting
Announcements
Process, Volume, and Variety
Volume
• We will not cover all of chapter
7.
• We will concentrate on pp.
254-270 8th edition
Low
Volume
High Variety
Process Focus
job shops
(machine, print,
carpentry)
Standard Register
Job-shop Batch
Asembly
Continuous
Low Variety
Poor Strategy
(Both fixed and
variable costs
are high)

A continuum

Within a given facility, several or blend of
strategies may be used
Flexibility
Capital investment
Variable cost
Labor content
Product Focus
(commercial
baked goods,
steel, glass)
Nucor Steel
Process Strategies
Flow
Variety
Mass
Customization
Dell
Repetitive
(autos,
motorcycles)
Harley Davidson
Comparison of process strategies
Project
High
Volume

These strategies are often classified as:
Process-Focused
RepetitiveFocused
Product-Focused
Labor skill
Volume
Continuum
Chapter 07 Process strategies
1
MGT 301
Process-Focused Strategy
Process-Focused Strategy Examples
 Job
shop
 Facilities are organized by process
 Similar processes are together

Example: All drill presses are together
 Low
© 1995 Corel Corp.
Machine
Shop
volume, high variety products
 ‘Jumbled’ flow
Product A
Operation
1
2
3
Product B
Process Focused Strategy -Characteristics
Repetitive-Focused Strategy - Examples
• Positives
Fast
Food
Clothes
Dryer
– Greater product flexibility
– More general purpose equipment
– Lower initial capital investment
McDonald’s
over 95 billion served
Truck
• Negatives
© 1995 Corel Corp.
– More highly trained personnel
– More difficult production planning & control
– Low equipment utilization (5% to 25%)
© 1984-1994 T/Maker Co.
© 1995 Corel Corp.
Repetitive Focused Strategy
• Assembly line / Production line
• Facilities often organized by assembly
lines
• Characterized by modules
– Parts & assemblies made previously
• Modules combined for many output
options
Chapter 07 Process strategies
Repetitive Focused Strategy - Characteristics
• More structured than process-focused, less
structured than product focused
• Enables quasi-customization
• Using modules, it enjoys economic
advantage of continuous process, and
custom advantage of low-volume, highvariety model
2
MGT 301
Product-Focused Examples
Assembly process
Frame tube
bending
Frame-building
work cells
Frame
machining
THE ASSEMBLY LINE
TESTING
28 tests
Soft Drinks
(Continuous,
then Discrete)
Hot-paint
frame painting
Engines and
transmissions
Incoming parts
Air cleaners
Oil tank work cell
Fluids and mufflers
Shocks and forks
Fuel tank work cell
Handlebars
Wheel work cell
Fender work cell
From Milwaukee
on a JIT arrival
schedule
© 1995 Corel
Corp.
Light Bulbs
(Discrete)
Roller testing
Crating
© 1995 Corel Corp.
© 1984-1994 T/Maker Co.
Paper (Continuous)
Figure 7.3
Nucor Steel Plant – continuous process
D
Continuous caster
Scrap
steel
A
Nucor Steel Plant
B
C
Product-Focused Strategy
Ladle of molten steel
 Continuous
production
 Facilities are organized by product
 High volume, low variety products
 Where found
Electric
furnace
Continuous cast steel
sheared into 24-ton slabs
Hot tunnel furnace - 300 ft
E

F

Discrete unit manufacturing
Continuous process manufacturing
Hot mill for finishing, cooling, and coiling
H
Products A & B
G
I
1
2
Operation
Product-Focused Strategy - Characteristics
Process Design
• Positive
Lower variable cost per unit
Lower but more specialized labor skills
Easier production planning and control
Higher equipment utilization (70% to 90%)
• Negative
– Lower product flexibility
– More specialized equipment
– Usually higher capital investment
High
Variety of Products
–
–
–
–
3
Customization at high
Volume
Process -focused
Job Shops
(Print shop, emergency
room , machine shop,
fine dining
Mass Customization
(Dell Computer’s PC)
Repetitive (modular)
focus
Assembly line
Moderate
(Cars, appliances, TVs,
fast -food restaurants)
Product -focused
Continuous
(steel, beer, paper, bread)
Low
Low
Moderate
High
Volume
Chapter 07 Process strategies
3
MGT 301
Mass Customization
• Using technology and imagination to
rapidly mass-produce products that
cater to sundry unique customer
desires.
Comparison of process strategies
Project
Job-shop Batch
Assembly Continuous
Flow
None
Continuous
Flexibility
High
Low
Variety
High
Low
Capital investment
Low
High
Variable cost
High
Low
Labor content
High
Low
Labor skill
High
Low
Volume
Low
High
• Under mass customization the three
process models become so flexible
that distinctions between them blur,
making variety and volume issues less
significant.
Mass Customization - More Choices
Than even
Vehicle models
Vehicle styles
Bicycle types
Software titles
Web sites
Movie releases
New book titles
Houston TV channels
Breakfast cereals
Items in supermartkets
Early
1970s
Late
1990s
140
18
8
0
0
267
40,530
5
160
14,000
260
1,212
19
380,000
9,865,982
458
77,446
851
340
20,000
Degree of Customization
High
Low
Mass Service
Professional Service
Private
banking
Commercial
banking
High
Degree of Labor
Item
Service Process Matrix
Full-service
stockbroker
Generalpurpose law firms
Boutiques
Retailing
Service Factory
Law clinics
Service
Specialized
Limited-service
hospitals
stockbroker
Low
Warehouse and
catalog stores
Fast food
restaurants
Fine-dining
restaurants
Shop
Hospitals
Airlines
No frills
airlines
Service Process Matrix
Low
Mass Service
Retailing
Degree of Labor
High
Doctors
Lawyers
Schools
Accountants
Service Factory
Low
High
Professional Service
Wholesaling
Commercial banking
Architects
Service Shop
Airlines
Hospitals
Trucking
Auto repair
Hotels
Other repair services
Chapter 07 Process strategies
To summarize:
• Products
Degree of Customization
– Job-shop process
– Batch/assembly process
– Continuous/line process
– Mass customization
• Services
– Service Factory
– Service Shop
– Mass service
– Professional service
4
MGT 301
What is a Business Process?
What is a Business Process?
Traditional Process definition in OM literature
Resources
A process specifies the transformation of inputs to outputs
Process
Inputs
Process
Outputs
The transformation model of a process
Suppliers
Inputs
Outputs
Customers
Different types of transformations
• Physical (Ex. raw material  finished product)
• Locational (Ex. flying from Denver to L.A.)
• Transactional (Ex. depositing money in a bank)
• Informational (Ex. accounting data  financial statement)
Illustration: Process Types and Hierarchies
CEO
Marketing
Operations
Understanding the Existing Process
• Questions to answer
Accounting
 What is the existing process doing?
 How well does it perform?
Buying a TV
commercial
 What are the critical issues that impact the
process performance?
Order Request
Individual process
Production planning
Vertical process
Order Fulfilled
Horizontal process
Understanding the Existing Process
1. Describe the process architecture
 Inputs/outputs
 Flow units
 Resources
 Network activities and buffers
 Information system
2. Identify the process owner/stakeholders
3. Understand the customer
Chapter 07 Process strategies
Describe the process architecture
Inputs and Outputs
• Identify the process boundaries  easy
to identify the Input consumed from the
environment in order to produce the
desired Output
• Process inputs and outputs can be
– Tangible (Ex. raw material, cash,
products, customers)
– Intangible (Ex. Information, time,
energy, services)
5
MGT 301
Describe the process architecture
Describe the process architecture
Flow units
Transformational activities
• A flow unit is a transient entity or a job
that proceeds through the network of
activities and buffers and exits the
process as a finished output
• Typically, the identity of a flow unit
changes across the process
• Examples of common flow units:
materials, orders, files, documents,
customers, products, cash, transactions…
• The work performed on a job moving
through a process can be divided into an
ordered sequence of activities
• The buffers represent storage or waiting
points where the job waits before moving
to the next activity (queues, waiting rooms,
etc.)
• Different types of jobs  different paths
through the network
Describe the process architecture
Describe the process architecture
Resources
• Tangible assets utilized to perform
activities in a process
• Can be divided into:
• Capital assets – real estate, machinery,
equipment, IT systems…
• Labor – people and their knowledge
and skills
• Resources are utilized while inputs are
consumed
Information structure
The 5w2h framework – use to describe a process
• Specifies the information required for
making decisions and performing
activities in a process
• Limited information availability is a
common cause for process
inefficiencies
– Information enables coordination!
Process Analysis Tools
Classification
5w2h
questions
Description
People
Who?
Who is performing the activity?
Why is this person doing it?
Could/Should someone else perform the activity?
Subject
matter
What?
What is being done in this activity?
Can the activity in question be eliminated?
Sequence
When?
When is the best time to perform this activity?
Does it have to be done at a certain time?
Location
Where?
Where is this activity carried out?
Does it have to be done at this location?
 Value stream analysis extends to
customers and suppliers
Purpose
Why?
Why is this activity needed?
Clarify its purpose.
 Process charts show detail
Method
How?
How is the activity carried out?
Cost
How much? How much does it currently cost?
 Service blueprint focuses on customer
interaction
Chapter 07 Process strategies
 Flowcharts provide a view of the big
picture
 Time-function mapping adds rigor and a
time element
6
MGT 301
Flow Charts
Illustration of a Sample Flow Chart
• One of the fundamental graphical tools for process
analysis and design
– Typically depicts activities sequentially from left to right
– Can help to identify, loops, multiple alternative paths,
decision points etc.
Order waits
for sales rep.
Operator
takes phone
order.
Orders wait
to be picked
up.
Orders
wait for
supervisor.
No
Is order
complete?
• Symbols to use in flow charting
Operation
Inspection
Storage
Transportation of a
physical item
Delay
Transportation of
information
Orders are
moved to
supervisor’s
in-box.
2.
3.
4.
5.
Client notifies a local agent that she wishes to file a claim. She is given a
claims form and is told to obtain a cost estimate from a local glass vendor.
When the claims form is completed the local agent verifies the information
and forwards the claim to a regional processing center.
The processing center logs the date and time of the claim’s arrival. The data
is entered into a computer-based system (for record keeping only) by a clerk.
The claim is then placed in a hard copy file and passed on to a claims
representative.
a) If the claims representative is satisfied with the claim it is passed along to
several others in the processing chain and eventually a check is issued and
sent to the client.
b) If there are problems with the claim the representative mails it back to the
client for necessary corrections.
When the client receives the check she can go to the local glass vendor and
replace the glass.
Service System Mapping (I)
• An extension of traditional flowcharting
– Documents the role played by the customer in the
service delivery process
– A combination of service blue printing and
traditional flowcharting
– Build consistent perceptions of customer’s
experience with core processes
– Identify all points of contact between the process
and its customers
Yes
Order is
fulfilled.
Existing claims process for auto glass
1.
Supervisor
inspects
orders.
Flow Chart of Auto glass insurance claims process
10. Attach
Form
4. Is Claim
Form
correct?
11. Mail to
customer
11
9. Problems
with Claim?
10
9
4
1
3
2
1. Client notifies
local agent and
is given Claim
Form
3. Agent verifies
accuracy of
Claim Form
2. Client obtains
estimate and
completes
Claim Form
5
6
7
6. Processing enters
date, time and
contents into
computer and creates
hardcopy
5. Form forwarded
to Regional
Processing Center
8
8. Routed to a
Claims Rep.
7. Routed to a
Claims Rep.
12
13
14
13. Issue check
to customer
12. Route to
Accounts Payable
15
15. Have
glass repaired
at local
vendor
14. Mail check
to customer
Service System Mapping
• SSM Horizontal Bands
– The purpose is to organize activities according to
the people or “players in the process. – Who
does what?
• An SSM typically consists of 5 bands
1. Customer band – end user
2. Frontline or distribution channel band
3. Back-room activity band
4. Centralized support or information systems band
5. Vendor or supplier band
– Identify opportunities within the process
Chapter 07 Process strategies
7
MGT 301
SSM Journal Paper Submissions
1.
2.
3.
4.
5.
6.
7.
Authors send manuscripts to
the Journal Editorial Office
(JEO).
JEO sends a letter of
acknowledgement and sends
manuscript to editor-in-chief
(EIC)
EIC selects associate editor (AE)
to handle manuscript and
notifies JEO
JEO sends manuscript to AI
AE reads manuscript and
selects 2 referees. AE notifies
JEO.
JEO sends copies to referees
Referees review and send
reports to JEO.
8.
9.
10.
11.
12.
13.
14.
15.
SSM Journal Paper Submissions
JEO forwards reports to AE
AE reads reports and decides
reject, accept, revise. Decision
sent to JEO.
If rejected, JEO sends letter to
authors.
If accepted, JEO forward
manuscript to production. JEO
notifies authors and EIC.
If revise, JEO forwards reports
to authors.
Authors revise and resubmit to
JEO.
JEO sends resubmit to AE
AE decides accept or 2nd review
Author
Order
product
Sales
Process
order
Production
control
JEO
2
Revision
4
6
8
10
14
Accepted
EIC
Further
reviewing
3
AE
5
9
15
Accepted
Referees
7
Production
Time-Function Mapping or Process Mapping
Receive
product
Wait
Plant A
13
Acknowledge
Time-Function Mapping or Process Mapping
Customer
1
Customer
Order
product
Sales
Process
order
Production
control
Receive
product
Wait
Print
Plant
Warehouse
Wait
Wait
Print
Extrude
Wait
Warehouse
Wait
Extrude
Plant B
Transport
Move
Transport
Figure 7.7
12 days
13 days
1 day
4 days
1 day 10 days
Move
1 day
0 day
1 day
Move
1 day
2 days
1 day
6 days
1 day
1 day
Figure 7.7
52 days
Process chart symbols
Chapter 07 Process strategies
Process chart: Requisition for petty cash
8
MGT 301
IBM Credit Process Flow
1.
2.
3.
4.
IBM Credit Process Activity Chart
Field sales personnel called in requests for financing to a group of 14 people.
The person taking the call logged information on a piece of paper.
The paper was taken upstairs to the credit department
A specialist:
a)
b)
Entered the information into a computer system
Did a credit check
Written on a piece of paper
Sent to the business practices department
V
2
Agent logs info on paper
5
6
Sent to a ‘pricer’
‘Pricer’ determined interest rate
7
8
9
8. The interest rate was
a)
b)
Value code
[V/N/C]
120
4
6. Standard loan contracts were modified to meet customer requirements
7. The request was
a)
b)
Time
Field sales personnel call in
requests
3
5. The results of the credit check were:
a)
b)
Description
1
No.
Written on a piece of paper
Sent to a clerical group
10
11
9. A quote was developed
10. The quote was sent to filed sales via FedEx
Paper taken to Credit
Department
Specialist enters info in
computer
Specialist does a credit
check
Results written on piece of
paper
Paper sent to Business
Practices Department
Loan contracts modified to
meet requirements
Request sent to Pricer
Pricer determines interest
rate
Pricer writes interest rate
on piece of paper
3
N
10
N
1,440
N
10
C
60
N
10
N
Symbol
Symbols
Operation
Inspection
Storage
Delay
20
V
10
N
320
C
2
N
12
Paper sent to clerical group
10
N
13
Quote is developed by clerks
15
V
14
Quote sent to Field Sales
10
N
Transportation
Service Blueprint
Service Blueprint
 Focuses on the customer and
provider interaction
 Defines three levels of
interaction
 Defines three levels of
interaction
 Activities under the control
of the customer
 Interaction between the
customer and service
provider
 Each level has different
management issues
 Activities performed
invisibly to the customer
 Identifies potential failure
points
Service Blueprint
Personal Greeting
Level
#1
Service Diagnosis
Perform Service
Customer arrives
for service
Warm greeting
and obtain
service request
Customer departs
Determine
specifics
No
Standard
request
Level
#2
Friendly Close
Direct customer
to waiting room
Can
service be
done and does
customer
approve?
Yes
Yes
Level
#3
Potential failure point
Chapter 07 Process strategies
Notify
customer
and recommend
an alternative
provider
Customer pays bill
No
Notify
customer the
car is ready
Perform
required work
Prepare invoice
9