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Process Strategy
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PROCESS DESIGN:
Process design is the selection of the inputs,
resources, workflows and methods that
transforms inputs into outputs.
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Process Strategy
Principles of process strategy
1. Make choices that fit the situation and that
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Process Strategy
There are four basic process decisions
1. Process structure including layout
2. Customer involvement
3. Resource flexibility
4. Capital intensity
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Resource Flexibility
Specialized
Enlarged
Capital Intensity
Low automation
High automation
Effective Process
Design
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Dimension
High Contact
Low Contact
Physical presence
Present
Absent
What is processed
People
Possessions or information
Contact intensity
Active, visible
Personal attention
Personal
Impersonal
Method of delivery
Face-to-face
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Process
Characteristics
(1)
Flexible flows with
Individual
processes
(1)
High interaction with
customers, highly
customized service
(2)
Some interaction with
customers, standard
services with some options
(3)
Low interaction with
customers, standardized
services
Front office
(2)
Flexible flows with
some dominant
paths, with
some exceptions
to how work
performed
(3)
Line flows, routine
work same with all
customers
Hybrid office
Back office
Product-Process Matrix
For manufacturing organization it brings
together
1. Volume
2. Product customization
3. Process characteristics
Product-Process Matrix
Less customization and higher volume
Process
Characteristics
(1)
Customized process,
with flexible and
unique sequence of
tasks
(2)
Disconnected line
flows, moderately
complex work
(1)
(2)
Low-volume
Multiple products with low
products, made to moderate volume
to customer
order
(3)
Few major
products,
higher
volume
(4)
High volume, high
standardization,
commodity
products
Job
process
Small batch
process
(3)
Connected line, highly
repetitive work
(4)
Continuous flows
Batch processes
Large batch
process
Line
process
Continuous
process
Customer Involvement
Possible disadvantages
Can
be disruptive
Managing
Quality
Requires
interpersonal skills
Layouts
Multiple
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Customer Involvement
Possible advantages
Increased
Can
May
May
Processes
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Resource Flexibility
A flexible workforce can often require
higher skills and more training and
education
Worker flexibility can help achieve reliable
customer service and alleviate bottlenecks
Resource flexibility helps absorb changes
in workloads
The type of workforce may be adjusted
using full-time or part-time workers
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Resource Flexibility
The volume of business may affect the type
of equipment used
Break-even analysis can be used to
determine at what volumes changes in
equipment should be made
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Break-Even Analysis
Process 2:
Special-purpose
equipment
Break-even
quantity
F2
F1
Process 1:
General-purpose
equipment
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Application 3.3
BBC is deciding whether to weld bicycle frames manually or to
purchase a welding robot. If welded manually, investment costs
for equipment are only $10,000. the per-unit cost of manually
welding a bicycle frame is $50.00 per frame. On the other hand,
a robot capable of performing the same work costs $400,000.
robot operating costs including support labor are $20.00 per
frame.
Fixed costs
Variable costs
welded manually
(Make)
welded by robot
(Buy)
$10,000
$400,000
$50
$20
F m Fb
$10,000 $400,000
=
= 13,000 frames
$20 $50
cb
cm
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Capital Intensity
Automation is one way to address the mix
of capital and labor
Automated manufacturing processes
substitute capital equipment for labor
Typically require high volumes and costs
are high
Automation might not align with a
companys competitive priorities
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Capital Intensity
Fixed automation produces one type of
part or product in a fixed sequence
Typically requires large investments and is
relatively inflexible
Flexible automation can be changed to
handle various products
Industrial robots are classic examples of
flexible automation
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Capital Intensity
Capital equipment may be used to
automate service processes
Investment can be justified by cost
reduction and increased task divergence
through expanded customer choice
May impact customer contact
May be used in both front and back-office
operations
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Capital Intensity
Economies of scope reflect the ability to
produce multiple products more
inexpensively in combination than
separately
Applies to manufacturing and services
Requires sufficient collective volume
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Strategic Fit
The process chosen should reflect the
desired competitive priorities
The process structure has a major impact
on customer involvement, resource
flexibility, and capital intensity
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High customer-contact
process
More complexity, more
divergence, more flexible
flows
More customer involvement
More resource flexibility
Capital intensity varies with
volume
Low customer-contact
process
Less complexity, less
divergence, more line flows
Less customer involvement
Less resource flexibility
Capital intensity varies with
volume
Front office
Hybrid office
Back office
High
Low
Customer contact and customization
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Process Choice
Job process or
small batch process
Make-to-order
Assemble-to-order
Low-cost operation
and delivery speed
Make-to-stock
Job
process
Small batch
process
Batch processes
Major
process
decisions
Low-Volume,
make-to-order process
More process divergence
and more flexible flows
More customer involvement
More resource flexibility
Less capital intensity
High-Volume,
make-to-stock process
Less process divergence
and more line flows
Less customer involvement
Less resource flexibility
More capital intensity
Large batch
process
Line
process
Continuous
process
Low
High
Volume
Gaining Focus
Operations can be focused by process
segments when competitive priorities differ
Plants within plants (PWPs) are different
operations under the same roof
Service can be focused in much the same
way
Focused factories can be created by
splitting a large plant into several smaller
plants dedicated to narrower product lines
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Process Reengineering
TABLE 3.2
Element
Description
Critical processes
Strong leadership
Cross-functional teams
Information technology
Clean-slate philosophy
Start with the way the customer wants to deal with the company
and includes internal and external customers
Process analysis
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