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Process Management
Class 3: 2/2/11
Process Analysis
Process Flowcharting
Types of Processes
Process Performance Metrics
Manufacturing Processes
Service Processes
Business Process Reengineering
OBJECTIVES
6-2
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
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
6-4
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
6-5
Tasks or operationsExamples: 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 PointsExamples: 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
6-6
Flowchart Symbols
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
6-7
Flowchart Symbols
TYPES OF PROCESSES
Single-stage Process
Stage 1
Stage 1 Stage 2 Stage 3
Multi-stage Process
6-8
TYPES OF PROCESSES (CONTINUED)
Stage 1 Stage 2
Buffer
Multi-stage Process with Buffer
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
6-9
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
6-10
OTHER PROCESS TERMINOLOGY (CONTINUED)
BottleneckOccurs 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.
PacingRefers to the fixed timing of the
movement of items through the process
6-11
OTHER TYPES OF PROCESSES
Make-to-orderOnly activated in response to an
actual orderBoth work-in-process and finished
goods inventory kept to a minimumMake-to-stock
Process activated to meet expected or forecast demand
Customer orders are served from target stocking level
6-12
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
6-14
PROCESS PERFORMANCE METRICS (CONTINUED)
Cycle time = Average time betweencompletion of units
Throughput rate = 1___
Cycle time
Utilization of an operation =
Demand/Capacity
6-15
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.
6-16
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?
PROCESS THROUGHPUT TIME REDUCTION
Perform activities in parallel
Change the sequence of activities
Reduce interruptions
6-19
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
7-20
PROCESS TYPES
Continuous Assembly Line Job Shop Cell Project
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
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
2424
CONTINUOUS PROCESS CONTINUED Low labor
requirements Often one primary
input Initial setup of
equipment and procedures very complex
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
A GENERALIZED ASSEMBLY LINE OPERATION
ADVANTAGES OF THE ASSEMBLY LINE
Low unit cost specialized high volume equipment bulk purchasing lower labor rates low in-process inventories simplified managerial control
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
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
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
JOB SHOP
High variety - low volume Equipment and staff grouped based on
function Each output processed differently
32
32
A GENERALIZED JOB SHOP OPERATION
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
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
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
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
37
CONVERSION OF A JOB SHOP LAYOUT TO A CELLULAR LAYOUT
38
38
ORGANIZATION OF MISCELLANEOUS PARTS INTO FAMILIES
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
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”
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
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
4343
PROJECT OPERATIONS Large scale Finite duration Nonrepetitive Multiple
interdependent activities
Offers extremely short reaction times
PRODUCT-PROCESS MATRIX
7-44
45
45
SELECTION OF TRANSFORMATION SYSTEM BY STAGE OF LIFE CYCLE
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
7-46
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
7-47
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
7-48
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
7-49
EXAMPLE: ASSEMBLY CHART (GOZINTO) – PLUG ASSEMBLY
A-2SA-2
4
5
6
7
Lockring
Spacer, detent spring
Rivets (2)
Spring-detent
A-5Component/Assy Operation
Inspection
From Exhibit 7.4From Exhibit 7.4
7-50
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 environment
A service business is the management of organizations whose primary business requires interaction with the customer to produce the service
8-51
THE CUSTOMER CENTERED VIEW
TheCustomer
The ServiceStrategy
ThePeople
TheSystems
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.
8-52
SERVICE-SYSTEM DESIGN MATRIX
Mail contact
Face-to-faceloose specs
Face-to-facetight specs
PhoneContact
Face-to-facetotal
customization
Buffered core (none)
Permeable system (some)
Reactivesystem (much)
High
LowHigh
Low
Degree of customer/server contact
Internet & on-site
technology
SalesOpportunity
ProductionEfficiency
8-53
CHARACTERISTICS OF WORKERS, OPERATIONS, AND INNOVATIONS RELATIVE TO THE DEGREE OF CUSTOMER/SERVICE CONTACT
8-54
EXAMPLE OF SERVICE BLUEPRINTING
Brushshoes
Applypolish
Failpoint
BuffCollect
payment
Cleanshoes Materials
(e.g., polish, cloth)
Select andpurchasesupplies
Standardexecution time
2 minutes
Total acceptableexecution time
5 minutes
30secs
30secs
45secs
15secs
Wrongcolor wax
Seen bycustomer 45
secs
Line ofvisibility
Not seen bycustomer butnecessary toperformance
8-55
SERVICE FAIL-SAFINGPOKA-YOKES (A PROACTIVE APPROACH)
Keeping a mistake from becoming a service defect
How can we fail-safe the three Ts?
Task
TangiblesTreatment
8-56
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)
8-57
MANAGING CUSTOMER INTRODUCED VARIATION
•Arrival variability
•Request variability
•Capability variability
•Effort variability
•Subjective preference variability
8-58
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
8-59
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
8-60
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
8-61
SERVICE GUARANTEES AS DESIGN DRIVERS
Recent research suggests:Any guarantee is better than no
guaranteeInvolve the customer as well as
employees in the designAvoid complexity or legalistic
languageDo not quibble or wriggle when a
customer invokes a guaranteeMake it clear that you are happy for
customers to invoke the guarantee
8-62
BUSINESS PROCESS DESIGN (REENGINEERING)
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
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
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
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.
RADICAL
Profoundly change the way work performed Not concerned with making superficial
changes Get to root Get rid of old Reinventing, not improving
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
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
DRAMATIC
Quantum leaps in performance, not marginal or incremental improvements
Breakthroughs in performance
72
72
IBM CREDIT EXAMPLE
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
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.
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