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Unit 2: Process Strategy and Analysis

Pattern of decisions made in managing processes so that they will achieve their
competitive priorities.
 Cost
 Time
 Flexibility
 Quality

Process Structure in Services

(Criteria to take into account)

Customer Contact The customer is present, actively involved

and receives personal attention during the
service process.

Customization Service level ranging from highly

customized to standardized.

Process Divergence 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.

Customer- Contact Matrix - Service Process Structuring

 Front Office: Customer-facing aspect of a business, dealing directly with clients

through functions like sales, marketing, and customer service. It shapes the
customer experience and serves as the public face of the company.

 Hybrid Office: Flexible work environment combining on-site and remote work.
Embracing technology, this model allows employees to work both in physical
offices and remotely. Recognizing the implications of the hybrid office is crucial
for understanding evolving work trends in a global business context. (Some
interaction with customers, standard service with some options)

 Back Office: Handles internal operations vital for overall business function,
including administration, HR, accounting, and IT support. While not customer-
facing, it ensures organizational efficiency and supports front office functions.
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Process Structure in Manufacturing

 Job Process: Tailored to produce unique, custom-made products. Each product is

typically made to order, and the production process is flexible and can be
customized to meet specific customer requirements.
Example: A craftsman creating custom furniture pieces.
 Batch Processes: Involves producing a set quantity of products at one time.
Products are typically standardized within each batch and the production process
is adjusted between batches to accommodate different products or
specifications.
Example: Pharmaceutical manufacturing producing batch of medication.
o Small Batch Process: Produce goods in limited quantities.
(The production volume is lowest than in mass production allowing more
flexibility and customization)

o Large Batch Process: Producing a significant quantity of standardized

products. (Repetitive work)

 Line Process: Products move along a production line and each station on the line is
responsible for a specific task. (Set up to produce a standard product
repeatedly at a high volume)
Example: Automobile assembly line producing standardized cars

Process Choice: Way of structuring the process by organizing resources around the
process or organizing them around the products.
 Job Process
 Bath Process (Small or Large)
 Line Process
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 Continuous-Flow Process

Production and Inventory Strategies

 Design to Order Strategy: Products are customized and designed based on

specific customer requirements. (Production processes are initiated only
after receiving a customer’s order)
 Make to Order Strategy: Products are manufactured only after receiving
customer orders. This strategy helps reduce inventory costs and can lead to
quicker response times compared to Design-to-Order.
 Assemble to Order Strategy: Producing standard components or sub-
assemblies in advance and assembling them into final products only after
receiving customer orders.
o Postponement: A company delays product differentiation until closer to
the point of sale. For example, a company might produce a generic
product and then add specific features or labels based on customer
requirements after receiving orders. This helps reduce the risk of
producing excess inventory.
o Mass Customization: The ability to customize products on a large scale
to meet individual customer needs. It involves designing flexible
production processes that can accommodate a wide range of product
variations.

 Make-to-Stock Strategy: Mass production. This strategy involves producing

goods based on demand forecasts and stocking them in anticipation of
customer orders. It is suitable for products with stable demand patterns and
allows for quicker order fulfillment. Mass production is often associated with
this strategy, as it involves producing large quantities of standardized
products to achieve economies of scale.

Layout: Arrangement of people, equipment, material, and methods to create products in

order of process in a continuous flow. (Focusing on short lead times, low inventory, and
flexibility to respond to changes in mix and volumes minimizes the total cost of
product)

Operation: A group of human and capital resources performing all or part of one or
more processes.

Customer Involvement

Possible Advantages:
o Increased net value to the customer
o Better quality, faster delivery, greater flexibility, and lower cost
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o Reduction in product, shipping, and inventory costs

o Coordination across the supply chain

Possible Disadvantages:
o Can be disruptive.
o Managing timing and volume can be challenging.
o Could be favorable or unfavorable quality implications.
o Requires interpersonal skills.
o Multiple locations may be necessary.

Resource Flexibility

Workforce:
 Flexible Workforce

Equipment:
 General - Purpose
 Special – Purpose

Decision Patterns for Manufacturing Processes

Capital Intensity:
 Automating Manufacturing Processes
o Fixed Automation
o Flexible (Programmable) Automation
 Automating Service Processes
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 Economies of Scope

Process Reengineering
The fundamental rethinking and radical redesign of processes to improve performance
dramatically in terms of cost, quality, service, and speed.

Key Elements:
 Critical processes
 Strong leadership
 Cross - Functional Teams
 Information Technology
 Clean – slate philosophy
 Process Analysis

Process Improvement: Systematic study of the activities and flows of each process to
improve it.

Process Analysis: The documentation and detailed understanding of how work is

performed and how can be redesigned.

Six Sigma Process Improvement Model

Flowchart: A diagram
that traces the flow of information, customers, equipment, or materials through the
various steps of a process. (Visual representation that groups functional areas
responsible for different subprocesses into lanes)

Service Blueprint: Special flowchart of a service process that shows which steps have
high customer contact.

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.
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Activities are typically organized into five categories:

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:
4hrs/customer x $25/hr x 40 customers/yr= $4,000

Brainstorming: Letting a group of people, knowledgeable about the process, propose ideas
for change by saying whatever comes to mind.
Benchmarking: Systematic procedure that measures a firm’s processes, services and
products against those of industry leaders.

Human Resources Management plays a key role in helping companies deal with a fast –
changing environment and the greater demand for quality employees.

Dimensions of Customer Contact in Service Processes

Dimension High Contact Low Contact
Physical Presence Present Absent
What is proceed People Possesions of info
Contact Intensity Active, visible Passive out of sight
Personal Attention Personal Impersonal
Method of Delivery Face to Face Regular mail
Work/Job Design: Process of deciding the tasks and responsibilities that should form
part of a particular job.

Labor Standards: Amount of time required to perform a job or part of a job.

 Effective workforce planning is dependent on a knowledge of the labor required.
 Accurate labor standards help determine labor requirements, costs and fair work.
 Stated early in the 20th century.
It help determine:
 Staffing needs
 Cost and time estimates
 Expected Production
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 Efficiency of Employees
May be set in four ways:
1. Historical Experience: How the task was perfomed last time, easy and
inexpensive..
2. Time Studies: Involves timing a sample of a worker’s performance and using it to
set a standard. Required trained and experienced observers.

3. Predetermined Time Standards: Can be set before the work is actually perfomed.
4. Work Sampling: Estimates percentage of time a worker spends on various
tasks. /Less expensive than time study.

Digital Monitoring Techniques

 Computer oriented jobs are now tracked by software.

 Similarly, for many physical tasks, labor standards are now built into software
that tracks, monitors and rates individual performance.
 Hospitals installing sensors to detect everything from the location of nurses to
handwashing practices.
 Restaurant software continues to be refined to track multiple metrics.

Ethics:
 Fairness, equity and ethics are important constraints of job design.
 Important issues may relate to equal opportunity, equal pay for equal work and
safe working conditions.
 Helpful to work with government agencies, unions, trade associations, insurers, and
employees.