Amity Business School

PROCESS MANAGEMENT ORIENTATION IN OPERATIONS

Amity Business School

MBA Class of 2011, Semester IV
PROCESS ANALYSIS AND THEORY OF

CONSTRAINTS MBA 483

Dr. J P Saxena
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PROCESS & OPERATIONS

Transformation of input resources into output needs process

PROCESS

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Any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides one or more outputs for its customers.

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IMPORTANCE OF EFFECTIVE MANAGEMENT OF PROCESSES TO VARIOUS DEPARTMENTS

ACCOUNTING, which prepares financial and cost accounting information that aids managers in designing and operating processes. FINANCE: It manages the cash flows and capital investments requirements that are created by the firms processes.

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IMPORTANCE OF EFFECTIVE MANAGEMENT OF PROCESSES TO VARIOUS DEPARTMENTS

HUMAN RESOURCES: HR hires and trains employees to match process needs, location decisions, and planned output levels. MANAGEMENT INFORMATION SYSTEMS: MIS develops information systems and decision support systems for the firms processes.

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IMPORTANCE OF EFFECTIVE MANAGEMENT OF PROCESSES TO VARIOUS DEPARTMENTS

MARKETING: Marketing helps create the demand that operations must satisfy, link customer demand with staffing and production plans, and keep the operations function focused on satisfying customers needs. OPERATIONS: Designs & operates processes transforming inputs into services or products to give competitive advantages.

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PROCESS MANAGEMENT
Process management involves:
Planning Administering

Objective:
To achieve high level of performance in key business processes. To identify opportunities for improving:
Quality Operational performance Customer satisfaction

PROCESS VIEW OF AN AD AGENCY

Accounting Process Advertisement Design & Planning Process: Creates the ad to the needs of the client and prepare a plan for media exposure

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Client Interface Process: communicate with client, get needs, and coordinate progress

Inputs

Production Process: Prepare the ad for publication and deliver to media outlets

clients

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ADVANTAGES OF PROCESS MANAGEMENT ACTIVITIES

Prevents defects and errors. Eliminate waste. Leads to better quality Improved company performance through:
Shorter cycle times, Improved flexibility Faster customer satisfaction

PRINCIPLES OF PROCESS MANAGEMENT

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Process quality improvement focuses on the end-to-end process. The mind-set of quality is one of prevention and continuous improvement. Everyone manages a process at some level and is simultaneously a customer and a supplier. Corrective action focuses on removing the root cause of the problem.

PRINCIPLES OF PROCESS MANAGEMENT

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Process simplification reduces opportunities for errors and rework. Process quality improvement results from a disciplined and structured application of the quality management principles.

COMMON BUSINES PROCESSES

Acquiring customer and market knowledge. Strategic planning Research and development Purchasing Developing new products or services Fulfilling customer orders Managing information.

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COMMON BUSINES PROCESSES

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Measuring and analyzing performance. Training employees. Etc.

VALUE CREATION PROCESSES

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Value-creation processes also known as Core Processes are those:

To run the business To maintain or achieve a sustainable competitive advantage.

They drive the creation of products and services They are critical to customer satisfaction. Have major impact on the strategic goals of an organization.

TYPES OF VALUE-CREATION PROCESSES

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1.

Design Processes:
All activities that are performed to incorporate customer requirements. New technology Past learning into the functional specifications of a product (i.e. a manufactured good or service). Defines the fitness of the product/service for use.

TYPES OF VALUE-CREATION PROCESSES

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2.

Production /delivery processes: Create or deliver the actual product. Examples are:
Manufacturing Assembling Dispensing medications Teaching a class, and so on.

Product design greatly influences the efficiency of manufacture as well as the flexibility of service strategies.

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SUPPORT PROCESSES
They provide infrastructure for valuecreation processes but generally do not add value directly to the product or service. Order entry might be thought of as a value creation process for one company (e.g. a direct mail distributer) might be considered as a support process for another (e.g., a custom manufacturer).

LINKAGE BETWEENAmity Business School THE CORE AND SUPPORT PROCESSES IN A FIRM
SUPPORT PROCESSES

Supplier Relationship Process

Order fulfillment process

External customers

New service/ product developmen t process

Customer relationship process

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KEY ACTIVITIES OF PROCESS MANAGEMENT

Design
Control Improvement

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WHAT IS PROCESS DESIGN?

Process design is the selection of the inputs, resources, work flows, and methods that transform inputs into outputs. Inputs depends upon in-house or outside process. Proper mix of human skills and equipment and which part of the processes are to be performed by whom?

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WHAT IS PROCESS DESIGN?

Decisions about the processes must be consistent with competitive priorities and the organizations ability to obtain the resources necessary to support them. Process design also considers:
Quality, Capacity, Layout and Inventory.

WHEN IS PROCESS DESIGN DECISION MADE?

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Existence of a gap between competitive priorities and competitive capabilities. A new or substantially modified service or product is being offered. Need for improving quality. Competitive priorities have changed. Change in the demand of a service or product. Inadequate current performance

WHEN IS PROCESS DESIGN DECISION MADE?

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Change in the cost or availability of inputs. (demand of bauxite for aviation industry). Competitors have a cutting edge by using a new process. (laying of telephone cables, cable jointing process). New technologies are developed. (internet facility for sending mails, CNG gas operated vehicles, metro-rail system). Concern for environment.

FIVE COMMON PROCESS DECISIONS

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1. Process structure: A process decision that determines how processes are designed relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics. 2. Customer involvement: The ways in which customers become part of the process and the extent of their participation.

FIVE COMMON PROCESS DECISIONS

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3. Vertical Integration: The degree to which a firms own production system or service facility handles the entire value chain. 4. Resources Flexibility: The ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions. 5. Capital Intensity: The mix of equipment and human skill in a process.

TERMS IN PROCESS STRUCTURE IN SERVICES

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Customer Contact: The extent to which the customer is present, is actively involved and receives personal attention during the service process. Active Contact: The customer is very much part of the creation of the service and affects the service process itself.

TERMS IN PROCESS STRUCTURE IN SERVICES

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Passive Contact: The customer is not involved in tailoring the process to meet special needs or in how the process is performed. Process Complexity: the number and intricacy of the steps required to perform the process.

TERMS IN PROCESS STRUCTURE IN SERVICES

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Process Divergence: The extent to which the process is highly customized with considerable latitude as to how it is performed. Process Flow: The manner in which work progresses through the sequence of steps in a process, which could range from highly diverse to linear.

TERMS IN PROCESS STRUCTURE IN SERVICES

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Line Flow: The customers, materials, or information move linearly from one operation to the next, according to a fixed sequence. Front Office: A process with high customer contact where the service provider interacts with the internal or external customer.

TERMS IN PROCESS STRUCTURE IN SERVICES

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Hybrid Office: A process with moderate levels of customer contact and standard services with some options available. Back Office: A process with low customer contact and little service contact and little service customization.

MAJOR DECISIONS Business School Amity FOR EFFECTIVE PROCESS DESIGN

Customer involvement: Low involvement High involvement Process Structure: Customer contact position (services). product-process position (manufacturing). Vertical Integration: In-house Outsource Resource Flexibility: Specialized Enlarged Strategy for change: Process Reengineering Process Improvement

Effective Process Design

Capital Intensity: Low Automation High Automation

DIFFERENT Amity Business School DIMENSIONS OF CUSTOMER CONTACT IN SERVICE PROCESSES

HIGH CONTACT
Present People Active, Visible Personal Face-to-face

DIMENSION
Physical presence What is processed Contact intensity Personal attention Method of delivery

LOW CONTACT
Absent Possessions Passive, out of sight Impersonal Regular mail

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PRODUCT-PROCESS Business School Amity MATRIX customization and higher volume FOR PROCESS Less
Less complexity, less divergence, more line flows
Product Design
Process characteristics (1) One-of-a kind products, made to customer order. (2) Low volume, low standardization (3) Multiple products, moderate volume. (4) Few major products, higher volume (5) High Volume, high standardization, commodity products

(1) Complex and highly customized process, unique sequence of tasks. (2)Jumbled flows, complex work with many exceptions (3) Disconnected line flows, moderately complex work.

Project Process

Job Processes

Batch Processes

(4) Connected line, routine work.

(5)Continuous flows, highly repetitive work

Line process
Continuous process

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PROCESS CHOICE AND TYPES

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PROCESS CHOICE A way of structuring the process by organizing resources around the process or organizing them around the products. PROJECT PROCESS A process characterized by a high degree of product customization, the large scope of each product, and the release of substantial resources once it is completed.
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PROCESS CHOICE AND TYPES

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JOB PROCESS A process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable complexities and divergence in the steps performed. BATCH PROCESS A process that differs the job process with respect to volume, variety, and quantity.
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PROCESS CHOICE AND TYPES

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LINE PROCESS A process that lies between the batch and continuous processes on the continuum; volumes are high and products are standardized, which allows resources to be organized around particular products. CONTINUOUS PROCESS The extreme end of high-volume standardized production, with rigid line 37 flows.

PRODUCTION AND INVENTORY STRATEGIES

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MAKE-TO-STOCK STRATEGY A strategy that involves holding items in stock for immediate delivery, thereby minimizing customer delivery time. (keeping enough stock of finished product e.g. florescent fittings, plug tops, electrical wires, locks, cells, pen, notebooks etc.) MASS PRODUCTION A line process that uses make-to-stock 38 strategy

PRODUCTION AND INVENTORY STRATEGIES

MAKE-TO-ORDEER STRATEGY

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A strategy used by manufacturers that make products to customer specifications in low volume (e.g. building a hospital building or building a boat). It is coupled with project (e.g. MIS) or job processes (e.g. making an item for a machine on lathe machine). To satisfy unique needs of customers. (e. g. theme song for Common Wealth Games by A R Rahman). 39

PRODUCTION AND INVENTORY STRATEGIES

ASSEMBLE -TO-ORDEER STRATEGY

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A strategy for producing a wide variety of products from relatively few assemblies and components after the customer orders are received. Involves a line process to assemble and a batch process for fabrication. Uses standardized components and produces standardized products. Creates appropriate inventories for the 40 assembly processes.

FRONT OFFICE SALE OF FINANCIAL SERVICES

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Research customer finances. Work with customer to understand customer needs. Make customized presentation to customer addressing specific customer needs. Involve specialized staff offering variety of services. Continuing relationship with customer, reaction to changing customer needs.

CHANGING POSITION OF PROCESSES

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As a service can be repositioned in the customer-contact matrix, so can a manufacturing process be moved in the product-process matrix. Change can be made either in the degree of customization and volume or in process complexity or divergence. Change in production and inventory strategy

CHANGING POSITION OF PROCESSES

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Linearization of process flow by dedicating human and capital resources to a specific product or a group of similar products.

 Data obtained electronically. Report calculated using standardized process. Report reviewed using standardized diagnostic systems. Manager provides written analysis and recommendations in response to individual employee performance. Manager meets with employee to discuss performance.

HYBRID OFFICE Amity Business School CREATION OF QUATERLY PERFORMANCE REPORTS

BACK OFFICE Amity Business School PRODUCTION OF MONTHLY CLIENT FUND BALANCE REPORTS

Data obtained electronically Report run using standardized process. Results checked for resonableness using well-established policies. Hard copies and electronic files forwarded to analysts. Process repeated monthly with little variation.

COMPETING WITH OPERATIONS

Competing with operations Operations as a competitive weapon Designing and improving processes Operations strategy

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Customers

Operating value chains

Process design strategy

Designing value chain

DESIGNING AND IMPROVING PROCESSES

Process analysis

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Process performance & quality

Process capacity

Process layout

Planning and managing projects

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Designing value chain

Supply chain design

Location

Lean systems

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Operating value chains

Information technology and value chains Forecasting Aggregate planning

Inventory management

Resource planning

Scheduling

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OPERATIONS MANAGEMENT AS AN INTERFUNCTIONAL IMPERATIVE

Inter-organizational relationship, which calls for cross-functional coordination. (suppliers, consultants, banks, security services). A new approach from process view is to replace sequential decision making with more cross-functional coordination and flatter organizational structure.

CROSS FUNCTIONAL COORDINATION

Marketing:
Need for new services and products. Demand for the existing ones. Makes delivery promises to customers keeping in view the current capabilities.

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Operations:
Human & capital resources needed. Facility location & relocation to serve new market. Design the layout of the service organizations. Planning output rates and capacities in view of demand forecasts.

CROSS FUNCTIONAL COORDINATION

Finance & Accounts:
Monitor the production systems vital signs by multiple tracking methods. Provides information upon order fulfillment for billing. Influences the decisions about investment in new technologies, layout redesign, capacity expansion, and even inventory levels.

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Operations:
Feedback on the current performance. To access labor cost Long term benefits of new technologies. Quality improvements.

CROSS FUNCTIONAL COORDINATION

Human resource:
To hire and train workers Aids in changeovers related to new process and job designs. Promotions & transfers into and out of operations easily. Encourages crossfunctional understanding

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Operations:
Feedback on the current performance. To access labor cost Long term benefits of new technologies. Quality improvements.

Technical trade-offs in designing new services and products.

ACHIEVING Amity Business School CROSS-FUNCTIONAL COORDINATION

Develop a unified strategy to fulfill overall organizational strategy. Redesign the organization structure. Establish a goal-setting process and reward system. Improve information process. Develop informal social systems. (joint cafeteria, exercise rooms, social events. Employee selection and promotion.