CHAPTER 3 PROCESS MANAGEMENT WHAT IS PROCESS MANAGEMENT

CHAPTER 3 PROCESS MANAGEMENT

WHAT IS PROCESS MANAGEMENT ? The selection of the inputs, operations, work flows and methods that transform inputs into outputs l input selection : in-house or outsource l process decision : proper mix of human skills and equipment that is consistent with competitive priorities l five basic process decisions : process choice, vertical integration, resource flexibility, customer involvement and capital intensity l

PROCESS CHOICE Designing a well-functioning process l Choosing a process type that best achieve the relative importance placed on quality, time, flexibility and cost - strategic issue l Four major process types : project, job, batch, line and continuous l The best choice for a process depends on the volume and degree of customization required l

Project process l high customization, low volume, large scope, unique l complex and long time l requiring close coordination l heavy use of certain skills and resources at particular stages and then have little use for them afterwards

Job process l needs flexibility to produce a variety of products or services in significant quantities l relatively high customization, low volume l jumbled flow and a little line flow l some customers may repeat orders from time to time

Batch process l higher volume than job process - similar products or services are provided repeatedly l narrower range provided than job process l production lots or customer groups are handled in larger quantities than job process l mostly use line flow

Line process l lies between batch and continuous process l volume is high, standardized products or services l little inventory held l make-to-stock, mass production

Continuous process l extremely high volume, rigid line flow l primary materials are moving without stopping

VERTICAL INTEGRATION Make-or-buy decision l coordinating and integrating the various processes and suppliers involved l backward integration : moving upstream toward the source of raw materials l forward integration : acquiring more distribution channels l

RESOURCE FLEXIBILITY - WORKFORCE Flexible workforce : greater skills, costly, large benefit l The best way to achieve reliable customer service and alleviate capacity bottlenecks l The combination of temporary and full-time employees l

RESOURCE FLEXIBILITY - EQUIPMENT General-purpose equipment : low fix cost, high variable cost, high customization, low volume l Special-purpose equipment : high fix cost, low variable cost, high volume, low customization l

CUSTOMER INVOLVEMENT The extent to which customers interact with the process l Self-service : price is competitively priority l Product selection : when business competes on customization, involved in designing and inspecting the product l Time and location : services or products provided in the presence of customers l

CAPITAL INTENSITY l l l The greater the relative cost of equipment, the greater is the capital intensity Mix of equipment and human skill Automation : as capabilities of technology and productivity increase, its costs decrease, improve quality, high demand Fixed automation : demand volume is high, product design is stable, life cycle is long, low variable cost Flexible automation : handling various products

ECONOMIES OF SCOPE Capital intensity and resource flexibility vary inversely l Programmable automation breaks this inverse relationship which makes possible high capital intensity and high resource flexibility, creating economies of scope l Economies of scope reflects the ability to produce multiple products more cheaply in combination than separately, so that 2 conflicting competitive priorities (quality & low cost) become more compatible l

GAINING FOCUS Focused factories : splitting large plants into several specialized small plants to concentrate on fewer tasks and lead a workforce toward a single goal l Focus by process segment (PWPs) : different operations within a facility with individual competitive priorities, processes and workforces under the same roof l The use of cell : a group of two or more dissimilar workstations located close to each other that process a limited number of parts/models that have similar process requirements l

DESIGNING PROCESS To determine how each process will be performed l A systematic approach is to analyze a process, spotting areas for improvement, developing ways to improve them and implementing the desire changes l Using three supporting techniques - flow diagram, process chart and simulation - can give insights into current process and proposed changes l Concluding with two complementary philosophies : process reengineering and process improvement l

A systematic approach : l describe the more strategic dimensions of the process l identify the inputs, outputs and customers of the process l identify the important performance measure of the process l document the process l redesign or refine the process to achieve better performance l evaluate the changes and implement those that appear to give the best payoffs; back to step 1 as needed

PROCESS REENGINEERING Fundamental rethinking and radical redesign of processes to improve performance dramatically in terms of cost, quality, flexibility of service and speed l reinvention and not incremental improvement l massive changes, large investment l critical processes, strong leadership, cross-functional teams, information technology, clean-slate philosophy, process anlysis l

PROCESS IMPROVEMENT Systematic study of the activities and flows of each process to improve it, understand the processes in details l continuous improvement by examining each aspect of the process, looking for a ‘better way’ all the time : streamline tasks, eliminate whole process, cut expensive materials or services, improve the environment, make the jobs safer l trim costs and delays, improve customer satisfaction l