Process Strategy

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Process Strategy

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What is Process Strategy?

Process Strategy The pattern of

decisions made in

decisions made in managing processes, so that the processes will achieve their

competitive

priorities.

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Supply Chain Processes

Process Description Process Description

Outsourcing Customer

Service

Warehousing Logistics

Sourcing Cross-Docking

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Business Function Processes

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Four basic process decisions

1. Process Structure- determines the process type relative to the kinds of resources

needed.

2. Customer involvement- how much extent of 2. Customer involvement- how much extent of

participation?

3. Resource flexibility- handle wide variety of products, functions etc.

4. Capital Intensity- mix of equipment and human skills in a process.

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Process Strategy Decisions

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Process Structure in Services

Designing a well functioning process that achieves the competitive priorities.

Strategy in a fast food restaurant and five star Strategy in a fast food restaurant and five star

dining is same or different?

Customer contact is an extent to which a

customer is present and actively involved in a process.

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Customer Contact in Services

DIMENSIONS OF CUSTOMER CONTACT IN SERVICE PROCESSES

Dimension High Contact Low Contact

Physical presence Present Absent

What is processed People Possessions or information Contact intensity Active, visible Passive, out of sight

Personal attention Personal Impersonal

Method of delivery Face-to-face Regular mail or e-mail

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Process Structure in Services

Customer Contact Customization

Process Divergence

Flexible Flow

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Service Customer-Contact Matrix

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Process Structure in Manufacturing

• Job Process

• Batch

– Small or Large – Small or Large

• Line

• Continuous Flow

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Process Structure in Manufacturing

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Production and Inventory Strategies

• Make-to-Order

• Assemble-to-Order

– Postponement – Postponement

– Mass Customization

• Make-to-Stock

– Mass Production

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Customer Involvement

• Possible Disadvantages

• Can be disruptive

• Managing timing and volume can be challenging

• Quality measurement can be difficult

• Requires interpersonal skills

• Layouts may have to be revised

• Multiple locations may be necessary

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Customer Involvement

• Possible Advantages

• Increased net value to the customer

• Can mean better quality, faster delivery, greater flexibility, and lower cost

flexibility, and lower cost

• May reduce product, shipping, and inventory costs

• May help coordinate across the supply chain

• Processes may be revised to accommodate the customers’ role

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Resource Flexibility

• Workforce

– Flexible workforce

• Equipment

– General-purpose – Special-purpose

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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.

Welded manually Welded by robot

Q = F

_m

– F

_b

c

_b

– c

_m

At what volume would BBC be indifferent to these alternative methods?

Welded manually

(Make) Welded by robot (Buy)

Fixed costs $10,000 $400,000

Variable costs $50 $20

= $10,000 – $400,000

$20 – $50 = 13,000 frames

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Capital Intensity

• Automation in Manufacturing

– Flexible Automation – Fixed

• Automation in Services

– Fixed

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Decision Patterns for Service Processes

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Link of Competitive Priorities to Manufacturing Strategies

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Decision Patterns for Manufacturing Processes

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Process Reengineering

• Critical processes

• Strong leadership

• Cross-functional teams

• Information technology

• Clean-slate philosophy

• Process analysis

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Solved Problem 1

A defense contractor is evaluating its machine shop’s current layout.

The figure below shows the current layout and the table shows the closeness matrix for the facility measured as the number of trips per day between department pairs. Safety and health regulations require departments E and F to remain at their current locations.

a. Use trial and error to find a better layout

b. How much better is your layout than the current layout in terms of the wd score? Use rectilinear distance.

Trips Between Departments Department A B C D E F

A ― 8 3 9 5

B ― 3

C ― 8 9

D ― 3

E ― 3

F ―

E

A

B

C D

F

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Solved Problem 1

a. In addition to keeping departments E and F at their current locations, a good plan would locate the following department pairs close to each other:

A and E, C and F, A and B, and C and E.

The below figure was worked out by trial and error and satisfies all these requirements.

• Start by placing E and F at their current locations.

• Then, because C must be as close as possible to both E and F, put C

• Then, because C must be as close as possible to both E and F, put C between them. Place A below E, and B next to A.

• All of the heavy traffic concerns have now been accommodated.

Trips Between Departments

Department A B C D E F

A ― 8 3 9 5

B ― 3

C ― 8 9

D ― 3

E ― 3

F ―

E F

A B

C

D

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Solved Problem 1

Current Plan Proposed Plan Department

Pair Number of

Trips (1) Distance (2) wd Score

(1)  (2) Distance (3) wd Score (1)  (3)

A, B 8 2 16 1 8

b. The table reveals that the wd score drops from 92 for the

current plan to 67 for the revised plan, a 27 percent reduction.

A, B 8 2 16 1 8

A, C 3 1 3 2 6

A, E 9 1 9 1 9

A, F 5 3 15 3 15

B, D 3 2 6 1 3

C, E 8 2 16 1 8

C, F 9 2 18 1 9

D, F 3 1 3 1 3

E, F 3 2 6 2 6

wd = 92 wd = 67

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