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Operations Management: Processes and
Supply Chains
Twelfth Edition
Chapter 2
Process Strategy and
Analysis
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Learning Objectives (1 of 2)
2.1 Understand the process structure in services and how
to position a service process on the customer-contact
matrix.
2.2 Understand the process structure in manufacturing and
how to position a manufacturing process on the productprocess matrix
2.3 Explain the major process strategy decisions and their
implications for operations.
2.4 Discuss how process decisions should strategically fit
together.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Learning Objectives (2 of 2)
2.5 Compare and contrast two commonly used strategies
for change, and understand a systematic way to analyze
and improve processes.
2.6 Discuss how to define, measure, and analyze
processes.
2.7 Identify the commonly used approaches for effectively
improving and controlling processes.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
What is Process Strategy?
• Process Strategy
– The pattern of decisions made in managing
processes so that they will achieve their competitive
priorities
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Strategy
Figure 2.1 Major Decisions for Effective Processes
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Structure in Services (1 of 2)
• Customer Contact
– The extent to which the customer is present, is actively involved,
and receives personal attention during the service process
• Customization
– Service level ranging from highly customized to standardized
• Process Divergence
– The extent to which the process is highly customized with
considerable latitude as to how its tasks are performed
• Flow
– How the work progresses through the sequence of steps in a
process
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Structure in Services (2 of 2)
Table 2.1 Dimensions of Customer Contact in Service Processes
Dimension
Physical presence
What is processed
Contact intensity
Personal attention
Method of delivery
High Contact
Present
People
Active, visible
Personal
Face-to-face
Low Contact
Absent
Possessions or information
Passive, out of sight
Impersonal
Regular mail or e-mail
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Customer-Contact Matrix
Figure 2.2 Customer-Contact Matrix for Service Processes
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Service Process Structuring
• Front Office
• Hybrid Office
• Back Office
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Structure in Manufacturing (1 of 2)
• Process Choice
– A way of structuring the process by organizing
resources around the process or organizing them
around the products.
• Job Process
• Batch Process
– Small or Large
• Line Process
• Continuous-Flow Process
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Structure in Manufacturing (2 of 2)
Figure 2.3 Product-Process Matrix for Manufacturing Processes
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Production and Inventory Strategies
• Design-to-Order Strategy
• Make-to-Order Strategy
• Assemble-to-Order Strategy
– Postponement
– Mass Customization
• Make-to-Stock Strategy
– Mass Production
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Layout
• Layout
– The physical arrangement of operations (or
departments) created from the various processes and
put in tangible form.
• Operation
– A group of human and capital resources performing
all or part of one or more processes
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Strategy Decisions
• Customer Involvement
• Resource Flexibility
• Capital Intensity
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Customer Involvement (1 of 2)
• Possible Advantages
– Increased net value to the customer
– Better quality, faster delivery, greater flexibility, and
lower cost
– Reduction in product, shipping, and inventory costs
– Coordination across the supply chain
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Customer Involvement (2 of 2)
• Possible Disadvantages
– Can be disruptive
– Managing timing and volume can be challenging
– Could be favorable or unfavorable quality implications
– Requires interpersonal skills
– Multiple locations may be necessary
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Resource Flexibility
• Workforce
– Flexible workforce
Figure 2.4 Relationship between
Process Costs and Product Volume
• Equipment
– General-purpose
– Special-purpose
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Capital Intensity
• Automating Manufacturing Processes
– Fixed Automation
– Flexible (Programmable) Automation
• Automating Service Processes
• Economies of Scope
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Decision Patterns for Manufacturing
Processes
Figure 2.5 Links of Competitive Priorities with Manufacturing
Strategy
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Gaining Focus
• Focus by Process Segments
– Plant Within Plants (PWPs)
? Different operations within a facility with
individualized competitive priorities, processes,
and workforces under the same roof.
– Focused Service Operations
– Focused Factories
? The result of a firm’s splitting large plants that
produced all the company’s products into several
specialized smaller plants.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Reengineering (1 of 2)
• Reengineering
– The fundamental rethinking and radical redesign of
processes to improve performance dramatically in
terms of cost, quality, service, and speed
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Reengineering (2 of 2)
• Key elements
– Critical processes
– Strong leadership
– Cross-functional teams
– Information technology
– Clean-slate philosophy
– Process analysis
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Improvement
• Process Improvement
– The systematic study of the activities and flows of
each process to improve it
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
What is Process Analysis?
• Process Analysis
– The documentation and detailed understanding of
how work is performed and how is can be redesigned
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Six Sigma Process Improvement Model (1 of 2)
Figure 2.6 Six Sigma Process Improvement Model
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Six Sigma Process Improvement Model (2 of 2)
• Define – The scope and boundaries of the process to be
analyzed are first established
• Measure – The metrics to evaluate how to improve the
process are determined
• Analyze – A process analysis is done, using the data on
measures, to determine where improvements are necessary
• Improve – The team uses analytical and critical thinking to
generate a long list of ideas for improvement
• Control – The process is monitored to make sure that high
performance levels are maintained
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Defining, Measuring, and Analyzing the
Process (1 of 3)
• Flowcharts
• Work Measurement Techniques
• Process Charts
• Data Analysis Tools
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Defining, Measuring, and Analyzing the
Process (2 of 3)
Flowchart
• A diagram that traces the flow of information, customers,
equipment, or materials through the various steps of a
process
Service Blueprint
• A special flowchart of a service process that shows which
steps have high customer contact
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Swim Lane Flowchart
Swim Lane Flowchart – A visual representation that groups functional areas
responsible for different subprocesses into lanes.
Figure 2.7 Swim Lane Flowchart of the Order-Filling Process Showing
Handoffs between Departments
Source: D. Kroenke, Using MIS, 4th ed., © 2012. Reprinted and electronically reproduced by
permission of Pearson Education, Inc., Upper Saddle River, New Jersey.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Defining, Measuring and Analyzing the
Process (3 of 3)
• Work Measurement Techniques
– Time Study
– Elemental Standard Data Method
– Predetermined Data Method
– Work Sampling Method
– Learning Curve Analysis
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 1 (1 of 3)
A process at a watch assembly plant has been changed.
The process is divided into three work elements. A time
study has been performed with the following results. The
time standard for the process previously was 14.5 minutes.
Based on the new time study, should the time standard be
revised?
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 1 (2 of 3)
The new time study had an initial sample of four
observations, with the results shown in the following table.
The performance rating factor (RF) is shown for each
element, and the allowance for the whole process is 18
percent of the total normal time.
Blank
Obs 1
Obs 2
Obs 3
Obs 4
Average (min)
RF
Normal Time
Element 1
2.60
2.34
3.12
2.86
2.730
1.0
2.730
Element 2
4.94
4.78
5.10
4.68
4.875
1.1
5.363
Element 3
2.18
1.98
2.13
2.25
2.135
0.9
1.922
ervation
ervation
ervation
ervation
Total Normal Time = 10.015
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 1 (3 of 3)
The normal time for an element in the table is its average
time, multiplied by the RF.
The total normal time for the whole process is the sum of
the normal times for the three elements, or 10.015 minutes.
To get the standard time (ST) for the process, just add in
the allowance, or
ST = 10.015(1 + 0.18) = 11.82 minutes watch
The time to assemble a watch appears to have decreased
considerably. However, based on the precision that
management wants, the analyst decided to increase the
sample size before setting a new standard.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Work Measurement Techniques (1 of 2)
Work Sampling
Figure 2.8 Work Sampling Study of Admission Clerk at Health
Clinic using OM Explorer’s Time Study Solver
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Work Measurement Techniques (2 of 2)
Learning Curves
Figure 2.9 Learning Curve with 80% Learning Rate Using OM
Explorer’s Learning Curves Solver
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Charts (1 of 6)
• Process Charts – An organized way of documenting all
the activities performed by a person or group of people,
at a workstation, with a customer, or working with certain
materials
• Activities are typically organized into five categories:
– Operation
– Transportation
– Inspection
– Delay
– Storage
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Charts (2 of 6)
Figure 2.10 Process Chart for Emergency Room Admission
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Charts (3 of 6)
Figure 2.10 [continued]
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Charts (4 of 6)
Figure 2.10 [continued]
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Charts (5 of 6)
• The annual cost of an entire process can be estimated as:
Annual
? Time to perform ?? Variable costs ?? Number of times process ?
=?
??
??
?
labor cost ? the process in hours ?? per hour ?? performed each year ?
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Process Charts (6 of 6)
• For example:
– Average time to serve a customer is 4 hours
– The variable cost is $25 per hour
– 40 customers are served per year
• The total labor cost is:
4 hrs customer ? $25 hr ? 40 customers yr = $ 4, 000
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Data Analysis Tools
• Checklists
• Histograms and Bar Charts
• Pareto Charts
• Scatter Diagrams
• Cause-and-Effect Diagrams (Fishbone)
• Graphs
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 2 (1 of 3)
The manager of a neighborhood restaurant is concerned about the
smaller numbers of customers patronizing his eatery. Complaints have
been rising, and he would like to find out what issues to address and
present the findings in a way his employees can understand.
The manager surveyed his customers over several weeks and
collected the following data:
Complaint
Discourteous server
Slow service
Cold dinner
Cramped table
Atmosphere
Frequency
12
42
5
20
10
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 2 (2 of 3)
Figure 2.11 Bar Chart
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 2 (3 of 3)
Figure 2.12 Pareto Chart
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 3 (1 of 4)
A process improvement team is working to improve the
production output at the Johnson Manufacturing plant’s
header cell that manufactures a key component, headers,
used in commercial air conditioners.
Currently the header production cell is scheduled
separately from the main work in the plant.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 3 (2 of 4)
• The team conducted extensive on-site observations
across the six processing steps within the cell and they
are as follows:
1.
2.
3.
4.
5.
6.
Cut copper pipes to the appropriate length
Punch vent and sub holes into the copper log
Weld a steel supply valve onto the top of the copper log
Braze end caps and vent plugs to the copper log
Braze stub tubes into each stub hole in the copper log
Add plastic end caps to protect the newly created header
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 3 (3 of 4)
• To analyze all the possible causes of that problem, the
team constructed a cause-and-effect diagram.
• Several suspected causes were identified for each major
category.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 3 (4 of 4)
Figure 2.13 Cause-and-Effect Diagram for Inadequate Header
Production
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 4 (1 of 3)
The Wellington Fiber Board Company produces headliners, the fiberglass
components that form the inner roof of passenger cars. Management wanted to
identify which process failures were most prevalent and to find the cause.
• Step 1: A checklist of different types of process failures is constructed from
last month’s production records.
• Step 2: A Pareto chart prepared from the checklist data indicated that broken
fiber board accounted for 72 percent of the process failures.
•
Step 3: A cause-and-effect diagram for broken fiber board identified several
potential causes for the problem. The one strongly suspected by the
manager was employee training.
• Step 4: The manager reorganizes the production reports into a bar chart
according to shift because the personnel on the three shifts had varied
amounts of experience.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 4 (2 of 3)
Figure 2.14 Application of the Tools for Improving Quality
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Example 4 (3 of 3)
Figure 2.14 [continued]
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Redesigning and Managing Process
Improvements (1 of 4)
• Questioning and Brainstorming
• Benchmarking
• Implementing
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Redesigning and Managing Process
Improvements (2 of 4)
• Questioning and Brainstorming
• Ideas can be uncovered by asking six questions:
1. What is being done?
2. When is it being done?
3. Who is doing it?
4. Where is it being done?
5. How is it being done?
6. How well does it do on the various metrics of importance?
Brainstorming – Letting a group of people, knowledgeable
about the process, propose ideas for change by saying whatever
comes to mind
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Redesigning and Managing Process
Improvements (3 of 4)
• Benchmarking
– A systematic procedure that measures a firm’s
processes, services, and products against those of
industry leaders
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Redesigning and Managing Process
Improvements (4 of 4)
• Implementing
– Avoid the following seven mistakes:
1. Not connecting with strategic issues
2. Not involving the right people in the right way
3. Not giving the Design Teams and Process Analysts a
clear charter, and then holding them accountable
4. Not being satisfied unless fundamental “reengineering”
changes are made
5. Not considering the impact on people
6. Not giving attention to implementation
7. Not creating an infrastructure for continuous process
improvement
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 1 (1 of 3)
Create a flowchart for the following telephone-ordering process at a
retail chain that specializes in selling books and music CDs. It provides
an ordering system via the telephone to its time-sensitive customers
besides its regular store sales.
The automated system greets customers, asks them to choose a tone
or pulse phone, and routes them accordingly.
The system checks to see whether customers have an existing
account. They can wait for the service representative to open a new
account.
Customers choose between order options and are routed accordingly.
Customers can cancel the order. Finally, the system asks whether the
customer has additional requests; if not, the process terminates.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 1 (2 of 3)
Figure 2.16 Flowchart of Telephone Ordering Process
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 1 (3 of 3)
Figure 2.16 [continued]
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 2 (1 of 4)
An automobile service is having difficulty providing oil
changes in the 29 minutes or less mentioned in its
advertising. You are to analyze the process of changing
automobile engine oil. The subject of the study is the
service mechanic. The process begins when the mechanic
directs the customer’s arrival and ends when the customer
pays for the services.
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 2 (2 of 4)
Figure 2.17 Process Chart for Changing Engine Oil
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 2 (3 of 4)
Figure 2.17 [continued]
Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved
Solved Problem 2 (4 of 4)
The times add up to 28 minutes, which does not allow
much room for error if the 29-minute guarantee is to be met
and the mechanic travels a total of 420 feet.
Copyright © 2019, 2016, …
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