Process Design, analysis and selection

1. Course: MBA
Subject: Production & Operation
Management
Unit: 1.4
Process design, analysis and selection

2. • Process Analysis
• Process Flowcharting
• Types of Processes
• Process Performance Metrics
• Manufacturing Processes
• Service Processes
OBJECTIVES

3. Process Management
• Processes relate to work that is ongoing and
repetitive
• Process management concepts and methods
can be applied to improve manufacturing,
service, and business processes
• Effort is placed trying to reduce cost, increase
throughput, and improve quality

4. Process Analysis Terms
• Process: Is any part of an organization that
takes inputs and transforms them into
outputs
• Cycle Time: Is the average successive time
between completions of successive units
• Utilization: Is the ratio of the time that a
resource is actually activated relative to the
time that it is available for use

5. Process Flowcharting
Defined
• Process flowcharting is the use of a diagram to
present the major elements of a process
• The basic elements can include tasks or
operations, flows of materials or customers,
decision points, and storage areas or queues
• It is an ideal methodology by which to begin
analyzing a process

6. Tasks or operations
Examples: Giving an
admission ticket to a
customer, installing a
engine in a car, etc.
Examples: Giving an
admission ticket to a
customer, installing a
engine in a car, etc.
Decision Points
Examples: How much
change should be
given to a customer,
which wrench should
be used, etc.
Examples: How much
change should be
given to a customer,
which wrench should
be used, etc.
Purpose and Examples
Flowchart Symbols

7. Examples: Sheds,
lines of people waiting
for a service, etc.
Examples: Sheds,
lines of people waiting
for a service, etc.
Examples: Customers
moving to a seat,
mechanic getting a
tool, etc.
Examples: Customers
moving to a seat,
mechanic getting a
tool, etc.
Storage areas or
queues
Flows of
materials or
customers
Purpose and Examples
Flowchart Symbols

8. Types of Processes
Single-stage Process
Stage 1
Stage 1 Stage 2 Stage 3
Multi-stage Process

9. Types of Processes (Continued)
A buffer refers to a storage area between
stages where the output of a stage is
placed prior to being used in a
downstream stage
Stage 1 Stage 2
Buffer
Multi-stage Process with Buffer

10. Other Process Terminology
• Blocking
– Occurs when the activities in a stage must stop because
there is no place to deposit the item just completed
– If there is no room for an employee to place a unit of work
down, the employee will hold on to it not able to continue
working on the next unit
• Starving
– Occurs when the activities in a stage must stop because
there is no work
– If an employee is waiting at a work station and no work is
coming to the employee to process, the employee will
remain idle until the next unit of work comes

11. Other Process Terminology (Continued)
• Bottleneck
– Occurs when the limited capacity of a process
causes work to pile up or become unevenly
distributed in the flow of a process
– If an employee works too slow in a multi-stage
process, work will begin to pile up in front of that
employee. In this is case the employee represents
the limited capacity causing the bottleneck.
• Pacing
– Refers to the fixed timing of the movement of
items through the process

12. Other Types of Processes
• Make-to-order
– Only activated in response to an actual order
– Both work-in-process and finished goods inventory
kept to a minimum
• Make-to-stock
– Process activated to meet expected or forecast
demand
– Customer orders are served from target stocking
level

14. Process Performance Metrics
Capacity: maximum output of a
process or resource measured in
units/time: a rate
Operation time = Setup time + Run
time
Setup time: the length of time
required to changeover from one
product to another (assumes
products are produced in batches)
Throughput time = Average time for
a unit to move through the system

15. Process Performance Metrics (Continued)
• Cycle time = Average time between
completion of units
• Throughput rate = 1___
Cycle time
• Utilization of an operation =
Demand/Capacity

16. Cycle Time Example
Suppose you had to produce 600 units in 80 hours to
meet the demand requirements of a product. What is
the cycle time to meet this demand requirement?
Suppose you had to produce 600 units in 80 hours to
meet the demand requirements of a product. What is
the cycle time to meet this demand requirement?
Answer: There are 4,800 minutes (60
minutes/hour x 80 hours) in 80 hours. So the
average time between completions would have
to be: Cycle time = 4,800/600 units = 8 minutes.
Answer: There are 4,800 minutes (60
minutes/hour x 80 hours) in 80 hours. So the
average time between completions would have
to be: Cycle time = 4,800/600 units = 8 minutes.

18. Bread-Making Questions
• What is the bottleneck when one
bread-making line is used? What is the
capacity of the process? What is the
utilization of packaging? What is the
throughput time?
• What happens to capacity and
utilization when two bread-making
lines are used? What is the bottleneck?

19. Process Throughput Time Reduction
• Perform activities in parallel
• Change the sequence of activities
• Reduce interruptions

20. Basic work flow structures
Project layout – fixed position; construction,
movie lots
Workcenter (job shop) – similar equipment
grouped together; machine shop
Manufacturing cell – similar set of processes for a
limited range of products
Assembly Line – discrete parts move through
workstations; toys, appliances, cars
Continuous process – flow vs discrete, flows a set
sequence of steps; oil, rubber, chemicals

21. Process types
• Continuous
• Assembly Line
• Job Shop
• Cell
• Project

22. Continuous Process
• Highly standardized products in large volumes
• Often these products have become commodities
• Typically these processes operate 24 hours/day
seven days/week
• Objective is to spread fixed cost over as large a
volume as possible

23. Continuous Process continued
• Starting and stopping a continuous process
can be prohibitively expensive
• Highly automated and specialized
equipment used
• Layout follows the processing stages
• Output rate controlled through equipment
capacity and flow mixture rates

24. Continuous Process continued
• Low labor
requirements
• Often one primary
input
• Initial setup of
equipment and
procedures very
complex
24

25. Assembly Line
• Similar to continuous process except
discrete product is produced
• Heavily automated special purpose
equipment
• High volume - low variety
• Both services and products can use flow
shop form of processing

26. A Generalized Assembly Line
Operation

27. Advantages of the Assembly Line
• Low unit cost
– specialized high volume equipment
– bulk purchasing
– lower labor rates
– low in-process inventories
– simplified managerial control

28. Disadvantages of Assembly Line
• Variety of output difficult to obtain
• Difficult to change rate of output
• Minor design changes may require
substantial changes to the equipment
• Worker boredom and absenteeism
• Work not very challenging
• Vulnerable to equipment breakdowns

29. Disadvantages of Assembly Line
continued
• Line balanced to slowest element
• Large support staff required
• Planning, design, and installation very
complex task
• Difficult to dispose of or modify special
purpose equipment

30. Assembly Line Layout
• Objective is to assign tasks to groups
• The work assigned to each group should
take about the same amount of time to
complete
• Final assembly operations with more labor
input often subdivided easier
• Paced versus unpaced lines

31. Job Shop
• High variety - low volume
• Equipment and staff grouped based on
function
• Each output processed differently

32. A Generalized Job Shop Operation
32

33. Advantages of the Job Shop
• Flexibility to respond to individual demands
• Less expensive general purpose equipment
used
• Maintenance and installation of general
purpose equipment easier
• General purpose equipment easier to
modify and therefore less susceptible to
becoming obsolete

34. Advantages of the Job Shop continued
• Dangerous activities can be segregated
from other operations
• Higher skilled work leading to pride of
workmanship
• Experience and expertise concentrated
• Pace of work not dictated by moving line
• Less vulnerable to equipment breakdowns

35. Disadvantages of the Job Shop
• General purpose equipment is slower
• Higher direct labor cost
• High WIP inventories
• High material handling costs
• Management control very difficult

36. The Cell Form
• Combines flexibility of job shop with low
costs and short response times of flow
shop
• Based on group technology
• First identify part families
• Then form machine cells to produce part
families

37. Conversion of a Job Shop Layout to a
Cellular Layout
37

38. Organization of Miscellaneous Parts
into Families
38

39. Advantages of Cellular Production
• Reduced machine setup times
– increased capacity
– economical to produce in smaller batch sizes
– smaller batch sizes result in less WIP
– less WIP leads to shorter lead times
– shorter lead times increase forecast accuracy
and provide a competitive advantage
• Parts produced in one cell

40. Advantages of Cellular Production
continued
• Capitalize on benefits of using worker
teams
• Minimal cost to move from job shop to
cellular production (e.g. EHC)
• Can move from cellular production to
“mini-plants”

41. Disadvantages of Cellular Production
• Volumes too low to justify highly efficient
high volume equipment
• Vulnerable to equipment breakdowns
• Balancing work across cells
• Does not offer the same high degree of
customization as the job shop

42. Cellular Layout
• Teams of workers and equipment to
produce families of outputs
• Workers cross-trained
• Nominal cells versus physical cells.
• Remainder cell
• Cell formation methods
– production flow analysis

43. Project Operations
• Large scale
• Finite duration
• Nonrepetitive
• Multiple
interdependent
activities
• Offers extremely
short reaction times

44. Product-Process Matrix

45. Selection of Transformation System by
Stage of Life Cycle

46. Break-Even Analysis
• A standard approach to choosing among
alternative processes or equipment
• Model seeks to determine the point in units
produced (and sold) where we will start
making profit on the process or equipment
• Model seeks to determine the point in units
produced (and sold) where total revenue and
total cost are equal

47. Break-Even Analysis (Continued)
This formula can be used to find any of its
components algebraically if the other
parameters are known
Break-even Demand=Break-even Demand=
Purchase cost of process or equipment
Price per unit - Cost per unit
or
Total fixed costs of process or equipment
Unit price to customer - Variable costs per unit
Purchase cost of process or equipment
Price per unit - Cost per unit
or
Total fixed costs of process or equipment
Unit price to customer - Variable costs per unit

48. Break-Even Analysis (Continued)
Example: Suppose you want to purchase a new
computer that will cost $5,000. It will be used to
process written orders from customers who will
pay $25 each for the service. The cost of labor,
electricity and the form used to place the order is
$5 per customer. How many customers will we
need to serve to permit the total revenue to
break-even with our costs?
Break-even Demand:
= Total fixed costs of process or equip.
Unit price to customer – Variable costs
=5,000/(25-5)
=250 customers
Example: Suppose you want to purchase a new
computer that will cost $5,000. It will be used to
process written orders from customers who will
pay $25 each for the service. The cost of labor,
electricity and the form used to place the order is
$5 per customer. How many customers will we
need to serve to permit the total revenue to
break-even with our costs?
Break-even Demand:
= Total fixed costs of process or equip.
Unit price to customer – Variable costs
=5,000/(25-5)
=250 customers

49. Manufacturing Process Flow Design
• A process flow design can be defined as a
mapping of the specific processes that raw
materials, parts, and subassemblies follow as
they move through a plant
• The most common tools to conduct a process
flow design include assembly drawings,
assembly charts, and operation and route
sheets

50. Example: Assembly Chart (Gozinto) – Plug Assembly
A-2SA-2
4
5
6
7
Lockring
Spacer, detent spring
Rivets (2)
Spring-detent
A-5
Component/Assy Operation
Inspection
From Exhibit 7.4From Exhibit 7.4

51. Service Businesses
• Facilities-based services: Where the
customer must go to the service facility
• Field-based services: Where the
production and consumption of the
service takes place in the customer’s
A service business is the management of
organizations whose primary business
requires interaction with the customer to
produce the service

52. The Customer Centered View
The
Customer
The Service
Strategy
The
People
The
Systems
A philosophical view that
suggests the organization
exists to serve the
customer, and the
systems and the
employees exist to
facilitate the process of
service.
A philosophical view that
suggests the organization
exists to serve the
customer, and the
systems and the
employees exist to
facilitate the process of
service.

53. Service-System Design Matrix
Mail contact
Face-to-face
loose specs
Face-to-face
tight specs
Phone
Contact
Face-to-face
total
customization
Buffered
core (none)
Permeable
system (some)
Reactive
system (much)
High
LowHigh
Low
Degree of customer/server contact
Internet &
on-site
technology
Sales
Opportunity
Production
Efficiency

54. Characteristics of Workers, Operations, and Innovations Relative to the
Degree of Customer/Service Contact

55. Example of Service Blueprinting
Brush
shoes
Apply
polish
Fail
point
Buff
Collect
payment
Clean
shoes Materials
(e.g., polish, cloth)
Select and
purchase
supplies
Standard
execution time
2 minutes
Total acceptable
execution time
5 minutes
30
secs
30
secs
45
secs
15
secs
Wrong
color wax
Seen by
customer 45
secs
Line of
visibility
Not seen by
customer but
necessary to
performance

56. Service Fail-safing
Poka-Yokes (A Proactive Approach)
• Keeping a
mistake from
becoming a
service defect
• How can we fail-
safe the three
Ts?
Task
TangiblesTreatment

57. Three Contrasting Service Designs
The production line approach (ex.
McDonald’s)
The self-service approach (ex. automatic
teller machines)
The personal attention approach (ex. Ritz-
Carlton Hotel Company)

58. Managing Customer Introduced Variation
•Arrival variability
•Request variability
•Capability variability
•Effort variability
•Subjective preference variability

59. Accommodation Strategies
• Classic accommodation – extra employees
or additional employee skills
• Low cost accommodation – use low cost
labor, outsource, self-service
• Classic reduction – more self-service,
reservations, adjust expectations
• Uncompromised reduction – develop
procedures for good service, minimizing
variation impact

60. Characteristics of a Well-Designed Service System
1. Each element of the service system is
consistent with the operating focus
of the firm
2. It is user-friendly
3. It is robust
4. It is structured so that consistent
performance by its people and
systems is easily maintained

61. Characteristics of a Well-Designed Service System (Continued)
5. It provides effective links between the back
office and the front office so that nothing
falls between the cracks
6. It manages the evidence of service quality in
such a way that customers see the value of
the service provided
7. It is cost-effective

62. Service Guarantees as Design Drivers
• Recent research suggests:
– Any guarantee is better than no guarantee
– Involve the customer as well as employees in the
design
– Avoid complexity or legalistic language
– Do not quibble or wriggle when a customer
invokes a guarantee
– Make it clear that you are happy for customers to
invoke the guarantee

63. Business Process Design
(Reengineering)

64. Division of Labor Concept
• Work broken down into its simplest most
basic tasks
– Performing same task facilitates attaining
greater skill
– No time lost switching to another task
– Workers well positioned to improve tools
and techniques

65. Division of Labor Concept continued
• Division of labor concept not challenged
until recently despite dramatic changes
in technology
• Quality, innovation, service, and value
more important than cost, growth, and
control

66. Process
• Set of activities that taken together
produce a result of value to the customer
• Organizing on basis of processes
– Eliminate delays and errors when work is
handed off
– Capture information once and at source
– When people closest to process perform
work, there is little need for management
overhead

67. Business Process Design (BPD)
The fundamental rethinking and radical
redesign of business processes to bring
about dramatic improvements in
performance
Hammer, M. and Stanton, S. The Reengineering Revolution, Harper
Business, 1995.

68. Radical
• Profoundly change the way work
performed
• Not concerned with making superficial
changes
• Get to root
• Get rid of old
• Reinventing, not improving

69. Redesign
• BPD is about designing how work is done
• Smart, capable, well trained, highly
motivated employees mean little if the
way work is performed is poorly designed

70. Process
• All organizations perform processes
• Customers not interested in individual
activities but rather overall results
• Few of them are organized on the basis of
processes
• Thus, processes tend to go unmanaged
• Team approach one way this addressed

71. Dramatic
• Quantum leaps in performance, not
marginal or incremental improvements
• Breakthroughs in performance

72. IBM Credit Example
72

73. IBM Credit Example continued
• Order logged by 1 of 14 people in
conference room
• Carted upstairs to credit department
• Information entered into computer to
check borrower’s creditworthiness
• Results written on piece of paper

74. IBM Credit Example continued
• Business practices department modified
standard loan covenant in response to
customer requests
• Used its own computer system
• Pricer keyed data into PC to determine
appropriate interest rate
• Administrator converted to quote letter
and Fedexed to field sales rep.

75. IBM Credit Example continued
• Average time to process a request was 6
days
• Could take as long as 2 weeks
• Actual processing time 90 minutes
• Deal Structurer
– Turnaround time 4 hours
– Number of deals processed increased 100 times
with small reduction in head count

76. Reference
• www.csun.edu
• www.crfproject-eu.org
• erp.acuvisions.com/ERP01.