Business Process
A logically related sets of tasks or
activities geared toward some business
outcome.
1. Primary (value-added)
2. Support
3. Developmental
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Versus the “functional” Perspective
Suppliers Purchasing Engineering Operations
Finance
Marketing Customers
Developing new products (Chapter 5)
Evaluating suppliers (Chapter 9)
Developing sales & operations plans (Chapter 11)
2
Relationship Map
Tier 2
Family 1
Supplier
Family 2
Supplier
Family 3
Supplier
Family 10
Supplier
Tier 1
Supplier of
“Cockpits”
Automotive
OEM
Assembly
Plant
Physical and
Information
Flows
3
A Detailed Process Map
Dealer
Faxes
Order
Paper
Order
Created
4% of
orders lost
Order Sits
In Fax
In Box
0 to 4 hours
2 hours on average
Order Sits
In Clerk’s
In Box
Internal Mail
Delivers Fax
0.5 to 1.5 hours
1 hour on average
1% of orders lost
0 to 2 hours
1 hour on average
Clerk
Processes
Order
5 minutes
10 to 45 minutes
20 minutes on average
Dealer
Receives
Order
Transport Firm
Delivers Order
1 to 3 hours
2 hours on average
No history of lost,
damaged, or incorrect
deliveries
Inspector
Checks
Order
Worker
Picks
Order
2 minutes
0.5% of orders incorrect
YES
Is Item
In Stock?
NO
Clerk Notifies
Dealer and
Passes Order
On to Plant
4
Mapping Symbols
Start or finishing point
Step or activity in the process
Decision point (typically requires a “yes” or “no”)
Input or output (typically data or materials
Document created
Delay
Inspection
Move activity
Typical, but others may be used as appropriate
5
Improving Business Processes:
Guidelines
• Attack each delay
– What causes it?
– How long is it?
– How could we reduce its impact?
• Examine each decision point
– Is this a real decision or just a checking activity?
– If the latter, can we automate or eliminate it?
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More Guidelines
• Look for loops
– Why is this loop here?
– Would we need to loop if we didn’t have any failures
in quality, planning, etc?
• Process steps
– What is the value of this activity, relative to its cost?
– Is this a necessary activity (support or
developmental?), or something else?
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Process Measures
Productivity
Efficiency
Cycle Time
Benchmarking
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Productivity Measures
Productivity =
Outputs
Inputs
Partial, Multifactor, and Total measures of productivity
9
Examples
Single factor
productivity ratio:
Multifactor:
Total:
Batteries Produced
Direct Labor Hours
Batteries Produced
Machine + Direct Labor Hours
Total Nightly Sales ($)
Total Nightly Costs
10
Efficiency
A comparison of a company’s actual
performance to some standard
Usually expressed as a percentage
Standard is an estimate of what should be
produced based on studies or historical
results
Efficiency = 100%(actual/standard)
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Cycle Time
The total time required to complete a
process from start to finish.
The percent of cycle time spent on
value-added activities is a measure of
process effectiveness.
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Cycle Time Drivers
Causes that increase cycle time are:
Waiting times
Unneeded steps
Rework
Unnecessary controls or testing
Outmoded technology
Lack of information or training
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Benchmarking
A comparison of a company’s
performance to the performance of:
Other firms in its industry (strategic)
Firms identified as “world-class”
(process)
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Classic Mfg. Process Types
(in order of decreasing volume)
• Continuous Flow
• Production Line (Flow Line)
• Batch (High Volume)
• Batch (Low Volume)
• Job Shop
• Project
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Continuous Flow
• Large production volumes
• High level of automation
• Basic material passed along, converted as it
moves
• Usually very high fixed costs, inflexible
Oil refinery, fiber formation, public utilities
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Production Line aka Flow Line and
Repetitive Manufacturing
High-volume production of standard
products or “design window”
• Processes arranged by product flow
• Often “paced”
• Highly efficient, but not too flexible
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Batch I
• Somewhere in between job shop
and line processes
• Moderate volumes, multiple
products
• Production occurs in “batches”
Garment manufacturing, carton
makers, etc.
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Batch II
Layout is a cross between that found in a
line and that found in a job shop:
Group Technology
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Job Shop
• Low volume, one-of-a-kind products
• Job shops sell their capability
• Highly flexible equipment, skilled workers
• Equipment arranged by function
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Project
• Used when a product is:
– one-of-a-kind
– too large to be moved
• Resources moved to where needed
• Equipment, people, etc. are highly
flexible
• Finite duration, often with deadline
Building projects, equipment installation
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Mixing Together the Process Types ...
Spindles
Arms and
Legs
BATCH for
fabricating
parts ...
ASSEMBLY
LINE for
putting together
final product
Seats
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Comparing Process Types...
Job Shop
Batch
Line
Volume
Very Low
High
Variety
Very High
Low
Skills
Broad
Limited
Advantage
Flexibility
Price and
Delivery
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Product – Process Matrix
One of a Kind
Low Volume
Job Shop
Multiple
Products
Moderate
Volumes
Few Major
Products
High Volume
Commodity
Products
Very Poor Fit
Batch
Line
Very Poor Fit
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Life-Cycle Planning Framework
Introduction
Stage
•High
product
availability
•Flexibility
to handle
variation
Growth
Stage
Maturity
Stage
•Availability
•Achieve breakeven volumes
as soon as
possible
Less need
for flexibility
More selective,
targeted efforts
Decline Stage
• Centralized
inventory
• Speed
Total
Market
Sales
Value-added
service
Time
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What is “Customization”?
“Customization occurs when a customer’s
unique requirements directly affect the
timing and nature of operations and supply
chain activities”
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Customization Point Model
ETO
MTO
DESIGN
SOURCING
MATERIALS
ATO
FABRICATION
MTS
ASSEMBLY/
FINISHING
DISTRIBUTION
Definitions:
ETO – engineer to order
MTO – make to order
ATO – assemble-to-order
MTS – make to stock
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Layout Decision Models
• Product-based layout
– Usually best for a line operation
– Cycle time a primary measure
• Functional (Process-based) layout
– Usually best for a job shop
– Distance between steps a measure
• Cellular layout
– Usually best for batch processes
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