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1OM3 Chapter 7 Process Selection, Design, and Analysis© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

PROCESS SELECTION, DESIGN, AND ANALYSISCHAPTER 7

DAVID A. COLLIER AND JAMES R. EVANS


CHAPTER 7 PROCESS SELECTION, DESIGN, AND ANALYSIS

LO1 Describe the four types of processes used to produce goods and services.

LO2 Explain the logic and use of the product-process matrix.

LO3 Explain the logic and use of the service-positioning matrix.

LO4 Describe how to apply process and value stream mapping for process design.

LO5 Explain how to improve process designs and analyze process maps.

LO6 Describe how to compute resource utilization and apply Little’s Law.



i called to make an airline flight reservation just an

hour ago. The telephone rang five times before a recorded voice answered. “Thank you for calling ABC Travel Services,” it said. “To ensure the highest level of customer service, this call may be recorded for future analysis.” Next, I was asked to select from one of the following three choices: “If the trip is related to company business, press 1. Personal business, press 2. Group travel, press 3.” I pressed 1. I was then asked to select from the following four choices: “If this is a trip within the United States, press 1. International, press 2. Scheduled training, press 3. Related to a conference, press 4.” Because I was going to Canada, I pressed 2.



Now two minutes into my telephone call, I was instructed to enter my 19-digit customer service number. The voice then said: “Thank you. An operator will be with you shortly.” …Ten minutes passed and then a real person answered the telephone. “Please give me your 19-digit customer service number… I only handle domestic reservations. I’ll transfer you.” A few clicks later a message came on, saying: “All of our international operators are busy. Please hold, as your business is important to us.”



Describe a situation that you have encountered in which a process was either well designed and enhanced your customer experience, or poorly designed and resulted in dissatisfaction.

What do you think?



Process Choice Decisions

Process design is an important operational decision that affects the cost of operations, customer service, and sustainability.



Process Choice Decisions – Types of Goods and Services

- Examples include ships, weddings, certain jewelry, estate plans, buildings, and surgery.

• Custom, or make-to-order, goods and services are generally produced and delivered as one-of-a-kind or in small quantities, and are designed to meet specific customers’ specifications.




- Examples are Dell computers, Subway sandwiches, machine tools, and travel agent services.

• Option, or assemble-to-order, goods and services are configurations of standard parts, subassemblies, or services that can be selected by customers from a limited set.




- Examples are appliances, shoes, sporting goods, credit cards, online Web-based courses, and bus service.

• Standard, or make-to-stock, goods and services are made according to a fixed design, and the customer has no options from which to choose.



Process Choice Decisions – Types of Processes

• Projects are large-scale, customized initiatives that consist of many smaller tasks and activities that must be coordinated and completed to finish on time and within budget. - Characteristics: One-of-a-kind, large

scale, complex, resources brought to site; wide variation in specs and tasks.

- Examples: Legal defense preparation, construction, customer jewelry, consulting, and software development.




• Job shop processes are organized around particular types of general-purpose equipment that are flexible and capable of customizing work for individual customers.- Characteristics: Significant setup and/or

changeover time, batching, low to moderate volume, many routes, many different products, high work-force skills, and customized to customer’s specs.

- Examples: Many small manufacturing companies are set up as job shops, as are hospitals, legal services, and some restaurants.




• Flow shop processes are organized around a fixed sequence of activities and process steps, such as an assembly line, to produce a limited variety of similar goods or services.- Characteristics: Little or no setup time,

dedicated to small range of goods or services that are similar, similar sequence of process steps, moderate to high volume.

- Examples: Assembly lines that produce automobiles and appliances, production of insurance policies and checking account statements, and hospital laboratory work.




• A continuous flow process creates highly standardized goods or services, usually around the clock in very high volumes.

- Characteristics: Very high volumes in a fixed processing sequence, high investment in system, 24-hour/7-day continuous operation, automated, dedicated to a small range of goods or services.

- Examples: Chemical, gasoline, paint, toy, steel factories; electronic funds transfer, credit card authorizations, and automated car wash.



Process Choice Decisions

• A product life cycle is a 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. For example, 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.



The Product-Process Matrix

• The product-process matrix is a model that describes the alignment of process choice with the characteristics of the manufactured good.- The most appropriate match between type

of product and type of process occurs along the diagonal in the product-process matrix.

- As one moves down the diagonal, the emphasis on both product and process structure shifts from low volume and high flexibility, to higher volumes and more standardization.



Exhibit 7.1

Characteristics of Different Process Types



Exhibit 7.2

Product-Process Matrix



The Service-Positioning Matrix

• In the product-process matrix, product volume, the number of products, and the degree of standardization/customization determine the manufacturing process that should be used. This relationship between volume and process is not found in many service businesses.

• The Service-Positioning Matrix is similar to the product-process matrix in that it suggests that the nature of the customer’s desired service encounter activity sequence should lead to the most appropriate service system design and that superior performance results by generally staying along the diagonal of the matrix.




• A pathway is a unique route through a service system. Pathways can be customer- or provider-driven, depending on the level of control that the service firm wants to ensure.

• The service encounter activity sequence consists of all the process steps and associated service encounters necessary to complete a service transaction and fulfill customer’s wants and needs.




• Customer-routed services are those that offer customers broad freedom to select the pathways that are best suited for their immediate needs and wants, from many possible pathways through the service delivery system. - Examples include searching the

Internet, museums, health clubs, and amusement parks.




• Provider-routed services constrain customers to follow a very small number of possible and predefined pathways through the service system. - Examples are a newspaper dispenser

and logging on to a secure online bank account.



Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 2000 (no. 5–6), pp. 705–729.

Exhibit 7.3

The Service Positioning Matrix



Process Design – Four Levels of Work

• Task—a specific unit of work required to create an output.

• Activity—a group of tasks (sometimes called a workstation) needed to create and deliver an intermediate or final output.

• Process—a group of activities.

• Value chain—a network of processes.



“We divided the work; but stood

together.”- Mr. John Ringling, Ringling Bros., Bamum & Bailey Circus,

1907



Exhibit 7.4 The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets



Process and Value Stream Mapping

• A process map (flowchart) describes the sequence of all process activities and tasks necessary to create and deliver a desired output or outcome. - Process maps document how work either is, or

should be, accomplished, and how the transformation process creates value.

• A process boundary is the beginning or end of a process. - Makes it easier to obtain management

support, assign process ownership, and identify where performance measures should be taken.




• In service applications, flowcharts generally highlight the points of contact with the customer and are often called service blueprints or service maps.

• Such flowcharts often show the separation between the back office and the front office with a “line of customer visibility.”



Exhibit 7.5

Automobile Repair Flowchart




• The value stream refers to all value-added activities involved in designing, producing, and delivering goods and services to customers.

• A value stream map (VSM) shows the process flows in a manner similar to an ordinary process map; however, the difference lies in that value stream maps highlight value-added versus non-value-added activities and include costs associated with work activities for both value- and non-value-added activities.




Examples of non-value-added activities include:

• Transferring materials between two nonadjacent workstations

• Overproducing• Waiting for service or work to do • Not doing work correctly the first time• Requiring multiple approvals for a low cost

electronic transaction



Exhibit 7.6 Restaurant Order Posting and Fulfillment Process



Exhibit 7.7

Value Stream Map for Restaurant Order Posting and Fulfillment Process



Process Design Methodology

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.



Process Mapping Improves Pharmacy Service

Metro Health Hospital in Grand Rapids, Michigan, applied process mapping reducing the lead time for getting the first dose of a medication to a patient in its pharmacy services operations. The lead time was measured from the time an order arrived at the pharmacy to its delivery on the appropriate hospital floor. A process improvement team carefully laid out all the process steps involved and found that it had a 14-stage process with some unnecessary steps, resulting in a total lead time of 166 minutes.

(continued)



Process Mapping Improves Pharmacy Service

During the evaluation process, the pharmacy calculated that technicians were spending 77.4 percent of their time locating products; when a pharmacist needed a technician for clinical activities, the technician was usually off searching for a drug. Overall, the pharmacy at Metro realized a 33-percent reduction in time to get medications to patients, and reduced the number of process steps from 14 to nine simply by removing non-value-added steps. Patients have experienced a 40-percent reduction in pharmacy-related medication errors, and the severity of those errors has decreased.



Process Analysis and Improvement

Strategies: • Increasing revenue by improving process efficiency in

creating goods and services and delivery of the customer benefit package.

• Increasing agility by improving flexibility and response to changes in demand and customer expectations.

• Increasing product and/or service quality by reducing defects, mistakes, failures, or service upsets.

• Decreasing costs through better technology or elimination of non-value-added activities.

• Decreasing process flow time by reducing waiting time or speeding up movement through the process and value chain.

• Decreasing the carbon footprint of the task, activity, process and/or value chain.




Questions to ask for process analysis: • Are the steps in the process arranged in logical

sequence?• Do all steps add value? Can some steps be

eliminated and should others be added in order to improve quality or operational performance? Can some be combined? Should some be reordered?

• Are capacities of each step in balance; that is, do bottlenecks exist for which customers will incur excessive waiting time?

• What skills, equipment, and tools are required at each step of the process? Should some steps be automated?




• At which points in the system (sometimes called process fail points) might errors occur that would result in customer dissatisfaction, and how might these errors be corrected?

• At which point or points in the process should performance be measured? What are appropriate measures?

• Where interaction with the customer occurs, what procedures, behaviors, and guidelines should employees follow that will present a positive image?

• What is the impact of the process on sustainability? Can we quantify the carbon footprint of the current process?




• Reengineering has been defined as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.”



Process Design and Resource Utilization

• Utilization is the fraction of time a workstation or individual is busy over the long run. Utilization (U) = Resources Used [7.1]

Resources Available

or

Utilization (U) = Demand Rate [7.2] [Service Rate × Number of Servers]



Exhibit 7.6 Restaurant Order Posting and Fulfillment Process



Exhibit 7.8 Utilization Analysis of Restaurant Order Posting and Fulfillment Process



Exhibit 7.9 Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 chefs)



Exhibit 7.10 Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 ovens)



Solved Problem

An inspection station for assembling printers receives 40 printers/hour and has two inspectors, each of whom can inspect 30 printers per hour. What is the utilization of the inspectors? What service rate would be required to have a target utilization of 85 percent?

SolutionThe labor utilization at this inspection station is calculated to be 40/(2 × 30) = 67%. If the utilization rate is 85%, we can calculate the target service rate by solving the equation:

85% = 40/(2 × SR) 1.7 × SR = 40 SR = 23.5 printers/hour



Process Design and Resource Utilization

• The average number of entities completed per unit time— the output rate—from a process is called throughput. – Throughput might be measured as parts per

day, transactions per minute, or customers per hour, depending on the context.

• A bottleneck is the work activity that effectively limits throughput of the entire process. – Identifying and breaking process bottlenecks is

an important part of process design and improvement, and will increase the speed of the process, reduce waiting and work-in-process inventory, and use resources more efficiently.



Exhibit 7.11 Simplified Restaurant Fulfillment Process



Little’s Law

• Flow time, or cycle time, is the average time it takes to complete one cycle of a process.

• Little’s Law is a simple formula that explains the relationship among flow time (T ), throughput (R ), and work-in-process (WIP ).

Work-In-Process = Throughput × Flow Timeor

WIP = R × T [7.3]

• If we know any two of the three variables, we can compute the third.



Solved Problem

Suppose that a voting facility processes an average of 50 people per hour and that, on average, it takes 10 minutes. What is the average number of voters in the process? for each person to complete the v

SolutionWIP = R T = 50 voters/hr (10 minutes/60 minutes per hour) = 8.33 voters



Solved Problem

Suppose that the loan department of a bank takes an average of 6 days (0.2 months) to process an application and that an internal audit found that about 100 applications are in various stages of processing at any one time. Using Little’s Law, we see that T = 0.2 and WIP = 100. What is the throughput? the v

SolutionR = WIP/T = 100 applications/0.2 months

= 500 applications per month



Solved Problem

Suppose that a restaurant makes 400 pizzas per week, each of which uses one-half pound of dough, and that it typically maintains an inventory of 70 pounds of dough. In this case, R = 200 pounds per week of dough and WIP = 70 pounds. What is the average flow time?

SolutionT = WIP/R = 70/200 = 0.35 weeks, or about 21/2 days.



Hopewell Hospital Pharmacy Case Study

1. Draw the process flowchart, including processing times and capacities for each work activity, and total time per prescription.

2. As a baseline measure, what is the labor utilization if 36 prescriptions arrive between 8 and 9 am on Monday and four pharmacists are on duty?

3. Clearly identify and evaluate one alternative process design, and discuss the advantages and disadvantages of it. Also consider how you will design and group the work activities for medical technicians and pharmacists.

4. What are your final recommendations?

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