1) process management & operations

Amity Business School

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Amity Business SchoolMBA Class of 2011, Semester IV

PROCESS ANALYSIS AND THEORY OF

CONSTRAINTS – MBA 483

Dr. J P Saxena

PROCESS MANAGEMENT ORIENTATION IN OPERATIONS


PROCESS & OPERATIONS

Transformation of input resources into output needs process

Amity Business SchoolPROCESS

Any activity or group of activities that takes

one or more inputs, transforms and adds

value to them, and provides one or more

outputs for its customers.


IMPORTANCE OF EFFECTIVE MANAGEMENT OF PROCESSES TO VARIOUS DEPARTMENTS

• ACCOUNTING, which prepares financial and cost accounting information that

aids managers in designing and operating processes.

• FINANCE: It manages the cash flows and capital investments requirements that are created by the firm’s processes.



• HUMAN RESOURCES:

HR hires and trains employees to match process needs, location decisions, and planned output levels.

• MANAGEMENT INFORMATION SYSTEMS:

MIS develops information systems and decision support systems for the firm’s processes.



• MARKETING: Marketing helps create the demand that operations must satisfy, link customer demand with staffing and production plans, and keep the operations function focused on satisfying customer’s needs.

• OPERATIONS: Designs & operates processes transforming inputs into services or products to give competitive advantages.


PROCESS MANAGEMENT• Process management involves:

– Planning– Administering

• Objective:– To achieve high level of performance in key

business processes.– To identify opportunities for improving:

• Quality• Operational performance• Customer satisfaction

Amity Business SchoolPROCESSVIEW OF AN AD AGENCY

Inpu

ts

clie

nts

Accounting Process

Advertisement Design & Planning Process: Creates the ad to the

needs of the client and prepare a plan for

media exposure

Production Process: Prepare the ad for

publication and deliver to media

outlets

Client Interface Process:

communicate with client, get needs, and coordinate progress


ADVANTAGES OF PROCESS MANAGEMENT ACTIVITIES

• Prevents defects and errors.

• Eliminate waste.

• Leads to better quality

• Improved company performance through:– Shorter cycle times,– Improved flexibility– Faster customer satisfaction

Amity Business SchoolPRINCIPLES OF PROCESS MANAGEMENT

• Process quality improvement focuses on the end-to-end process.

• The mind-set of quality is one of prevention and continuous improvement.

• Everyone manages a process at some level and is simultaneously a customer and a supplier.

• Corrective action focuses on removing the root cause of the problem.

Amity Business SchoolPRINCIPLES OF PROCESS MANAGEMENT

• Process simplification reduces opportunities for errors and rework.

• Process quality improvement results from a disciplined and structured application of the quality management principles.

Amity Business SchoolCOMMON BUSINES PROCESSES

• Acquiring customer and market knowledge.

• Strategic planning

• Research and development

• Purchasing

• Developing new products or services

• Fulfilling customer orders

• Managing information.

Amity Business SchoolCOMMON BUSINES PROCESSES

• Measuring and analyzing performance.

• Training employees.

• Etc.

Amity Business SchoolVALUE CREATION PROCESSES

• Value-creation processes also known as ‘Core Processes’ are those:– To run the business– To maintain or achieve a sustainable competitive

advantage.

• They drive the creation of products and services

• They are critical to customer satisfaction.

• Have major impact on the strategic goals of an organization.

Amity Business SchoolTYPES OF VALUE-CREATION PROCESSES

1. Design Processes:– All activities that are performed to incorporate

customer requirements.– New technology– Past learning into the functional specifications

of a product (i.e. a manufactured good or service).

– Defines the fitness of the product/service for use.

Amity Business SchoolTYPES OF VALUE-CREATION PROCESSES

2. Production /delivery processes: Create or deliver the actual product. Examples are:– Manufacturing– Assembling– Dispensing medications– Teaching a class, and so on.

• Product design greatly influences the efficiency of manufacture as well as the flexibility of service strategies.


SUPPORT PROCESSES• They provide infrastructure for value-

creation processes but generally do not add value directly to the product or service.

• Order entry might be thought of as a value creation process for one company (e.g. a direct mail distributer) might be considered as a support process for another (e.g., a custom manufacturer).

Amity Business SchoolLINKAGE BETWEEN

THE CORE AND SUPPORT PROCESSES IN A FIRM

SUPPORT PROCESSES

Supplier Relationship

Process

Order fulfillment process

New service/ product

development process

Customer relationship

process

Ext

erna

l cus

tom

ers


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Amity Business SchoolKEY ACTIVITIES OF PROCESS MANAGEMENT• Design

• Control

• Improvement


WHAT IS PROCESS DESIGN?• Process design is the selection of the

inputs, resources, work flows, and methods that transform inputs into outputs.

• Inputs depends upon in-house or outside process.

• Proper mix of human skills and equipment and which part of the processes are to be performed by whom?


WHAT IS PROCESS DESIGN?• Decisions about the processes must be

consistent with competitive priorities and the organizations ability to obtain the resources necessary to support them.

• Process design also considers:– Quality,– Capacity, – Layout and – Inventory.

Amity Business SchoolWHEN IS PROCESS DESIGN DECISION MADE?

• Existence of a gap between competitive priorities and competitive capabilities.

• A new or substantially modified service or product is being offered.

• Need for improving quality.

• Competitive priorities have changed.

• Change in the demand of a service or product.

• Inadequate current performance

Amity Business SchoolWHEN IS PROCESS DESIGN DECISION MADE?

• Change in the cost or availability of inputs. (demand of bauxite for aviation industry).

• Competitors have a cutting edge by using a new process. (laying of telephone cables, cable jointing process).

• New technologies are developed. (internet facility for sending mails, CNG gas operated vehicles, metro-rail system).

• Concern for environment.

Amity Business SchoolFIVE COMMONPROCESS DECISIONS

1. Process structure: A process decision that determines how processes are designed relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics.

2. Customer involvement: The ways in which customers become part of the process and the extent of their participation.

Amity Business SchoolFIVE COMMONPROCESS DECISIONS

3. Vertical Integration: The degree to which a firm’s own production system or service facility handles the entire value chain.

4. Resources Flexibility: The ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions.

5. Capital Intensity: The mix of equipment and human skill in a process.

Amity Business SchoolTERMS IN PROCESS STRUCTURE IN SERVICES

• Customer Contact:

The extent to which the customer is present, is actively involved and receives personal attention during the service process.

• Active Contact:

The customer is very much part of the creation of the service and affects the service process itself.


• Passive Contact:

The customer is not involved in tailoring the process to meet special needs or in how the process is performed.

• Process Complexity:

the number and intricacy of the steps required to perform the process.


• Process Divergence:

The extent to which the process is highly customized with considerable latitude as to how it is performed.

• Process Flow:

The manner in which work progresses through the sequence of steps in a process, which could range from highly diverse to linear.


• Line Flow:

The customers, materials, or information move linearly from one operation to the next, according to a fixed sequence.

• Front Office:

A process with high customer contact where the service provider interacts with the internal or external customer.


• Hybrid Office:

A process with moderate levels of customer contact and standard services with some options available.

• Back Office:

A process with low customer contact and little service contact and little service customization.

Amity Business SchoolMAJOR DECISIONSFOR EFFECTIVE PROCESS DESIGN

Process Structure:• Customer contact position (services).• product-process position (manufacturing).

Customer involvement:• Low involvement• High involvement

Resource Flexibility:• Specialized• Enlarged

Strategy for change:• Process Reengineering• Process Improvement

Capital Intensity:• Low Automation• High Automation

Vertical Integration:• In-house• Outsource

Effective Process Design

Amity Business SchoolDIFFERENTDIMENSIONS OF CUSTOMER

CONTACT IN SERVICE PROCESSES

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Absent Present

Possessions People

Passive, out of sight

Active, Visible

Personal Impersonal

Face-to-face Regular mail

HIGH CONTACT DIMENSION LOW CONTACT

Physical presence

What is processed

Contact intensity

Personal attention

Method of delivery

Amity Business SchoolPRODUCT-PROCESSMATRIX FOR PROCESS

Product DesignProcess characteristics

(1) One-of-a kind products, made to customer order.

(2) Low volume, low standardization

(3) Multiple products, moderate volume.

(4) Few major products, higher volume

(5) High Volume, high standardization, commodity products

(1) Complex and highly customized process, unique sequence of tasks.

(2)Jumbled flows, complex work with many exceptions

(3) Disconnected line flows, moderately complex work.

(4) Connected line, routine work.

(5)Continuous flows, highly repetitive work

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Less customization and higher volume

Project Process

Job Processes

Batch Processes

Less

com

plex

ity,

less

div

erge

nce,

mor

e lin

e flo

ws

Lineprocess

Continuousprocess

Amity Business SchoolPROCESSCHOICE AND TYPES

• PROCESS CHOICE

A way of structuring the process by organizing resources around the process or organizing them around the products.

• PROJECT PROCESS

A process characterized by a high degree of product customization, the large scope of each product, and the release of substantial resources once it is completed.

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• JOB PROCESS

A process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable complexities and divergence in the steps performed.

• BATCH PROCESS

A process that differs the job process with respect to volume, variety, and quantity.

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• LINE PROCESS

A process that lies between the batch and continuous processes on the continuum; volumes are high and products are standardized, which allows resources to be organized around particular products.

• CONTINUOUS PROCESS

The extreme end of high-volume standardized production, with rigid line flows.

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Amity Business SchoolPRODUCTIONAND INVENTORY STRATEGIES

• MAKE-TO-STOCK STRATEGY

A strategy that involves holding items in stock for immediate delivery, thereby minimizing customer delivery time. (keeping enough stock of finished product e.g. florescent fittings, plug tops, electrical wires, locks, cells, pen, notebooks etc.)

• MASS PRODUCTION

A line process that uses make-to-stock strategy

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• MAKE-TO-ORDEER STRATEGY– A strategy used by manufacturers that make

products to customer specifications in low volume (e.g. building a hospital building or building a boat).

– It is coupled with project (e.g. MIS) or job processes (e.g. making an item for a machine on lathe machine).

– To satisfy unique needs of customers. (e. g. theme song for Common Wealth Games by A R Rahman).

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• ASSEMBLE -TO-ORDEER STRATEGY– A strategy for producing a wide variety of

products from relatively few assemblies and components after the customer orders are received.

– Involves a line process to assemble and a batch process for fabrication.

– Uses standardized components and produces standardized products.

– Creates appropriate inventories for the assembly processes. 40

Amity Business SchoolFRONT OFFICESALE OF FINANCIAL SERVICES

• Research customer finances.

• Work with customer to understand customer needs.

• Make customized presentation to customer addressing specific customer needs.

• Involve specialized staff offering variety of services.

• Continuing relationship with customer, reaction to changing customer needs.

Amity Business SchoolCHANGING POSITION OF PROCESSES

• As a service can be repositioned in the customer-contact matrix, so can a manufacturing process be moved in the product-process matrix.

• Change can be made either in the degree of customization and volume or in process complexity or divergence.

• Change in production and inventory strategy

Amity Business SchoolCHANGING POSITION OF PROCESSES

• Linearization of process flow by dedicating human and capital resources to a specific product or a group of similar products.

Amity Business SchoolHYBRID OFFICE CREATION OF QUATERLY PERFORMANCE

REPORTS• Data obtained electronically.• Report calculated using standardized process.• Report reviewed using standardized

diagnostic systems.• Manager provides written analysis and

recommendations in response to individual employee performance.

• Manager meets with employee to discuss performance.

Amity Business SchoolBACK OFFICEPRODUCTION OF MONTHLY CLIENT FUND

BALANCE REPORTS

• Data obtained electronically

• Report run using standardized process.

• Results checked for ‘resonableness’ using well-established policies.

• Hard copies and electronic files forwarded to analysts.

• Process repeated monthly with little variation.

Amity Business SchoolCOMPETING WITH OPERATIONS

Competing with operations

Designing and improving processes

Designing value chain

Operating value chains

Customers

Operations as a competitive

weapon

Operations strategy

Process design strategy

Amity Business SchoolDESIGNING AND IMPROVING PROCESSES

Process analysis

Process layout

Process performance & quality

Planning and managing projects

Process capacity


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Designing value chain

Supply chain design

Location Lean systems


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Operating value chains

Aggregate planning

Inventory management

Resource planning

Information technology and value chains

Forecasting

Scheduling


OPERATIONS MANAGEMENT AS AN INTERFUNCTIONAL IMPERATIVE

• Inter-organizational relationship, which calls for cross-functional coordination. (suppliers, consultants, banks, security services).

• A new approach from process view is to replace sequential decision making with more cross-functional coordination and flatter organizational structure.

Amity Business SchoolCROSS FUNCTIONAL COORDINATION

• Marketing:– Need for new services

and products.– Demand for the

existing ones.– Makes delivery

promises to customers keeping in view the current capabilities.

• Operations:– Human & capital

resources needed.– Facility location &

relocation to serve new market.

– Design the layout of the service organizations.

– Planning output rates and capacities in view of demand forecasts.


• Finance & Accounts:– Monitor the production

system’s vital signs by multiple tracking methods.

– Provides information upon order fulfillment for billing.

– Influences the decisions about investment in new technologies, layout redesign, capacity expansion, and even inventory levels.

• Operations:– Feedback on the

current performance.– To access labor cost– Long term benefits of

new technologies.– Quality improvements.


• Human resource:– To hire and train

workers– Aids in changeovers

related to new process and job designs.

– Promotions & transfers into and out of operations easily.

– Encourages cross-functional understanding

• Operations:– Feedback on the

current performance.– To access labor cost– Long term benefits of

new technologies.– Quality improvements.

• Technical trade-offs in designing new services and products.

Amity Business SchoolACHIEVINGCROSS-FUNCTIONAL COORDINATION

• Develop a unified strategy to fulfill overall organizational strategy.

• Redesign the organization structure.

• Establish a goal-setting process and reward system.

• Improve information process.

• Develop informal social systems. (joint cafeteria, exercise rooms, social events.

• Employee selection and promotion.

1) process management & operations

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