OM
CHAPTER 7

PROCESS SELECTION, DESIGN, AND ANALYSIS
DAVID A. COLLIER AND JAMES R. EVANS

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Chapter 7 Learning Outcomes

learning outcomes
LO1 Describe the four types of processes used to produce goods and services.

LO2 Explain the logic and use of the product-process matrix. LO3 Explain the logic and use of the service-positioning matrix. LO4 Describe how to apply process and value stream mapping for process design. process maps.

LO5 Explain how to improve process designs and analyze LO6 Describe how to compute resource utilization and apply Little’s Law.

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Chapter 7 Process Selection, Design, and Analysis

called to make an airline flight reservation just an hour ago. The telephone rang five times before a recorded voice answered. “Thank you for calling ABC Travel Services,” it said. “To ensure the highest level of customer service, this call may be recorded for future analysis.” Next, I was asked to select from one of the following three choices: “If the trip is related to company business, press 1. Personal business, press 2. Group travel, press 3.” I pressed 1. I was then asked to select from the following four choices: “If this is a trip within the United States, press 1. International, press 2. Scheduled training, press 3. Related to a conference, press 4.” Because I was going to Canada, I pressed 2.

What do you think?

Describe a situation that you have encountered in which a process was either well designed and enhanced your customer experience, or poorly designed and resulted in dissatisfaction.
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Chapter 7 Process Choice Decisions

Three Types of Goods and Services
1. Custom , or m ake-to-order, goods and services are generally produced and delivered as one-of-a-kind or in small quantities, and are designed to meet specific customers’ specifications.
 Examples include ships, weddings, certain jewelry, estate plans, buildings, and surgery.

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Chapter 7 Process Choice

Three Types of Goods and Services
2. Option, or assem ble-to-order, goods and services are configurations of standard parts, subassemblies, or services that can be selected by customers from a limited set.
 Examples are Dell computers, Subway sandwiches, machine tools, and travel agent services.

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Chapter 7 Process Choice

Three Types of Goods and Services
3. Standard, or m ake-to-stock, goods and services are made according to a fixed design, and the customer has no options from which to choose.
 Examples: appliances, shoes, sporting goods, credit cards, online Web-based courses, and bus service.

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Chapter 7 Process Types

Four Types of Processes
1. P rojects are large-scale, customized initiatives that consist of many smaller tasks and activities that must be coordinated and completed to finish on time and within budget.
 Characteristics: one-of-a-kind, large scale, complex, resources brought to site; wide variation in specs and tasks.  Examples of projects: legal defense preparation, construction, customer jewelry, consulting, and software development.
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Chapter 7 Process Types

Four Types of Processes
2. Job shop processes are organized around particular types of general-purpose equipment that are flexible and capable of customizing work for individual customers.
 Characteristics: Significant setup and/or changeover time, batching, low to moderate volume, many routes, many different products, high workforce skills, and customized to customer’s specs.  Examples: Many small manufacturing companies are set up as job shops, as are hospitals, legal services, and some restaurants.
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Chapter 7 Process Types

Four Types of Processes
3. Flow shop processes are organized around a fixed sequence of activities and process steps, such as an assembly line, to produce a limited variety of similar goods or services.
 Characteristics: Little or no setup time, dedicated to small range of goods or services that are similar, similar sequence of process steps, moderate to high volume.
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Chapter 7 Process Types

Four Types of Processes
3. Flowshops continued  An assembly line is a common example of a flow shop process. Many option-oriented and standard goods and services are produced in flow-shop settings.  Examples: automobiles, appliances, insurance policies, checking account statements, and hospital laboratory work.
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Chapter 7 Process Types

Four Types of Processes
4. A continuous flow process creates highly standardized goods or services, usually around the clock in very high volumes.
 Characteristics: not made from discrete parts, very high volumes in a fixed processing sequence, high investment in system, 24-hour/7-day continuous operation, automated, dedicated to a small range of goods or services.  Examples: chemical, gasoline, paint, toy, steel factories; electronic funds transfer, credit card authorizations, and automated car wash.
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Exhibit 7.1
Characteristics of Different Process Types

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Exhibit 7.2
Product-Process Matrix

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Chapter 7 Process Choice in Services

Process Choice in Services
• The product-process matrix does not transfer well to service businesses and processes. • In the product-process matrix, product volume, the number of products, and the degree of standardization/customization determine the manufacturing process that should be used. This relationship between volume and process is not found in many service businesses.

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Chapter 7 Process Choice in Services

Process Choice in Services (continued)
• For example, to meet increased volume, service businesses such as retail outlets, banks, and hotels have historically added capacity in the form of new stores, branch banks, and hotels (i.e., bricks and mortar) to meet demand, but do

not change their processes.

• So, new ways to think about services and their processes are needed, such as the Service

P ositioning M atrix .

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Chapter 7 Process Choice in Services

Process Choice in Services
• A pathw ay is a unique route through a service system. Pathways can be customer- or provider-driven, depending on the level of control that the service firm wants to ensure.

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Chapter 7 Process Choice in Services

Service Positioning Matrix
• The service encounter activity sequence

consists of all the process steps and associated service encounters necessary to complete a service transaction and fulfill customer’s wants and needs.

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Exhibit 7.3

The Service Positioning Matrix

Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 2000 (no. 5–6), pp. 705–729.

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Chapter 7 Process Choice in Services

Service Positioning Matrix
• Custom er-routed services are those that offer

customers broad freedom to select the pathways that are best suited for their immediate needs and wants, from many possible pathways through the service delivery system.

• The customer decides what path to take through the service delivery system with only minimal guidance from management. • Examples include searching the Internet, museums, health clubs, and amusement parks.
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Chapter 7 Process Choice in Services

Service Positioning Matrix
• P rovider-routed services constrain customers

to follow a very small number of possible and predefined pathways through the service system.

• A newspaper dispenser is an extreme example of a service system design with only one pathway, thus allowing a single service encounter activity sequence. • Logging on to your secure online bank account is provider-routed.
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Exhibit 7.3

The Service Positioning Matrix

Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 2000 (no. 5–6), pp. 705–729.

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Chapter 7 Process Choice in Services

Service Positioning Matrix
The position along the horizontal axis of the ServicePositioning Matrix is described by the sequence of service encounters. It depends on two things:

1. The degree of custom er discretion, freedom , and decision-m aking pow er in selecting their service encounter activity sequence.
Customers may want the opportunity to design their own unique service encounter activity sequence, in any order they choose.
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Chapter 7 Process Choice in Services

Service Positioning Matrix
The position along the horizontal axis of the Service Positioning Matrix is described by the sequence of service encounters. It depends on two things:

2. The degree of repeatability of the service encounter activity sequence.
Service encounter repeatability refers to the frequency that a specific service encounter activity sequence is used by customers.

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Chapter 7 Process Choice in Services

Service Positioning Matrix
The position along the vertical axis of the Service Positioning Matrix reflects the number of pathways built into the service system design by management. It depends on two things:

1. The num ber of unique pathw ays (routes) that custom ers can take as they m ove through the service system during delivery of the service. 2. M anagem ent’s degree of control designed into the service delivery system .
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Exhibit 7.3

The Service Positioning Matrix

Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 2000 (no. 5–6), pp. 705–729.

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Chapter 7 Process Design -- Hierarchy of Work

The hierarchy of w ork is defined as:
(1) Task (2) Activity (3) Process (4) Value Chain

• A task is a specific unit of work required to create an output. An example is drilling a hole in a steel part or completing an invoice. • An activity is a group of tasks (sometimes called a

assembly line, a manufacturing cell, or an office cubicle. • Value chain and process have been previously defined.
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workstation) needed to create and deliver an intermediate or final output. Workstations might be a position on an

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Exhibit 7.4

The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets

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Chapter 7 Process Design and Flowcharting

• A process m ap (flow chart) describes the sequence of all

process activities and tasks necessary to create and deliver a desired output or outcome.

• A process map can include the flow of goods, people, information, or other entities, as well as decisions that must be made and tasks that are performed. • Process maps document how work either is, or should be, accomplished, and how the transformation process creates value. • Process maps delineate the boundaries of a process. A

process boundary is the beginning or end of a process.

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Chapter 7 Process Design and Flowcharting

• A process flowchart is the basis for value stream mapping, service blueprinting, and service maps. • Service blueprints add a “line of visibility” that separates the back and front office (rooms) as shown in Exhibit 7.5. • Many names are used for the analysis and development of process flowcharts, so don’t let corporate fads and buzzwords confuse you—the basics of process analysis don’t change, just the buzzwords and consultant’s sales pitch!
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Exhibit 7.5
Automobile Repair Flowchart

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Chapter 7 Value Stream Mapping & Flowcharting

Value Stream Mapping
• The value stream refers to all value-added activities

involved in designing, producing, and delivering goods and services to customers.

• A value stream map (VSM) shows the process flows in a manner similar to a traditional process flowchart or service blueprint. • Traditional flowcharting, service blueprinting, and value stream mapping all try to analyze wait and process times, bottleneck work stations, process throughput, and so on.
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Exhibit 7.6

Restaurant Order Posting and Fulfillment Process

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Chapter 7 Value Stream Mapping & Flowcharting

Value Stream Mapping
• However, the difference between VSM and these other flowcharting and analysis approaches lies in that value stream maps highlight value-added versus non-value-added activities, and include costs associated with work activities for both valueand non-value added activities. • That is, VSM tries to include the economics of the process on the flowcharts. • There are many formats for VSM, such as Exhibit 7.7.
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Exhibit 7.7
Value Stream Map for Restaurant Order Posting and Fulfillment Process

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Chapter 7 Value Stream Mapping

Examples of non-value-added activities include:
• • • • • transferring materials between two nonadjacent workstations overproducing waiting for service or work to do not doing work correctly the first time requiring multiple approvals for a low cost electronic transaction

Eliminating non-value-added activities in a process design is one of the most important responsibilities of operations managers (see Chapter 17 on Lean Operating Systems).
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Chapter 7 Steps to Analyze a Process

1. Define the purpose and objectives of the process. 2. Create a detailed process or value stream map that describes how the process is currently performed. 3. Evaluate alternative process designs. Identify and define appropriate performance measures for the process. 4. Select the appropriate equipment and technology. 5. Develop an implementation plan to introduce the new or revised process design.

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Chapter 7 Process Improvement Objectives

Process Analysis and Improvement
Few processes are designed from scratch. Many process design activities involve redesigning an existing process to improve performance. Management strategies to improve process designs usually focus on one or more of the following: • Increasing revenue by improving process efficiency in creating goods and services and delivery of the customer benefit package. • Increasing agility by improving flexibility and response to changes in demand and customer expectations.
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Chapter 7 Process Improvement Objectives

Process Analysis and Improvement
Management strategies to improve process designs usually focus on one or more of the following (continued from previous slide):
• • • Increasing product and/or service quality by reducing defects, mistakes, failures, or service upsets. Decreasing costs through better technology or elimination of non-value-added activities. Decreasing process flow time by reducing waiting time or speeding up movement through the process and value chain.
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Chapter 7 Process Improvement Objectives

Reengineering and Creative Destruction
• Reengineering has been defined as “the

fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.”

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Chapter 7 Process Analysis & Resource Utilization

Process Design and Resource Utilization
• Utilization is the fraction of time a workstation

or individual is busy over the long run.

• Understanding resource utilization is an important aspect of process design and improvement. Utilization (U) = Resources Demanded Resource Availability [7.1]

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Chapter 7 Process Analysis & Resource Utilization

Process Design and Resource Utilization
U = Demand Rate/[Service Rate×Number of Servers] U = DR/[(SR)(NS)]
[7.2]

• If you know any three of the four variables in Equation 7.2, you can solve for the 4th!

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Chapter 7 Solved Problem

An inspection station for assembling printers receives 40 printers/hour and has two inspectors, each of whom can inspect 30 printers per hour. What is the utilization of the inspectors? What service rate would be required to have a target utilization of 85 percent? Solution: The labor utilization at this inspection station is calculated to be 40/(2 × 30) = 67%. If the utilization rate is 85%, we can calculate the target service rate by solving the equation: 85% = 40/(2 × SR) 1.7 × SR = 40 SR = 23.5 printers/hour
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Exhibit 7.6

Restaurant Order Posting and Fulfillment Process

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Exhibit 7.8

Utilization Analysis of Restaurant Order Posting and Fulfillment Process

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Chapter 7 Process Analysis & Resource Utilization

• The average number of entities completed per unit

time—the output rate—from a process is called throughput.

• Throughput might be measured as parts per day, transactions per minute, or customers per hour, depending on the context. • A bottleneck is the work activity that effectively

limits throughput of the entire process.

• Where’s the bottleneck work activity in Exhibits 7.6 and 7.8?
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Exhibit 7.9

Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 chefs)

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Exhibit 7.10

Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 ovens)

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Exhibit 7.11

Simplified Restaurant Fulfillment Process

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Chapter 7 Little’s Law

Little’s Law is a simple formula that explains the relationship among flow time (T), throughput (R) and work-in-process (WIP).

WORK-IN-PROCESS = THROUGHPUT × FLOW TIME or WIP = R × T
• • •

[7.3]

Flow tim e, or cycle tim e, is the average time it takes to complete one cycle of a process.
Little’s Law provides a simple way of evaluating average process performance. If we know any two of the three variables, we can compute the third using Little's Law.

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