Chapter 3.docx

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Ryerson University
Information Technology Management
ITM 410
Margaret Plaza

Chapter 3 – Process Strategy  Process strategy specifies the pattern of decisions made in managing processes so that the processes will achieve their competitive priorities o It guides a variety of process decisions o 4 basic process decisions  Process structure (including layout)  Customer involvement  Resource flexibility  Capital intensity Process Strategy across the Organization Supplier Chains Have Processes  Supply chain processes are business processes that have external customers or suppliers  Table 3.1 has some common supply chain processes Processes Are Not Just in Operations  Processes are found in various areas such as in accounting, finance, hr, management information systems & marketing o Table 3.2 lists some business processes that are outside the operations area Process Strategy Decisions  1 recurring question in managing processes is deciding how to provide services or make products o Many choices are available in selecting hr, equipment, outsourced services, materials, work flows & methods that transform inputs into outputs  Another choice is which processes are to be done in-house & which processes are to be outsourced o This decision helps to define the supply chain  Operations managers must consider 4 process decisions o Figure 3.1 shows them o The 4 process decisions are  Process structure determines the process type relative to the kinds of resources needed, how resources are partitioned between them & their key characteristics  Layout is the physical arrangement of operations created from the various processes  Customer involvement reflects the ways in which customers become part of the process & the extent of their participation  Resource flexibility is the ease with which employees & equipment can handle a wide variety of products, output levels, duties & functions  Capital intensity is the mix of equipment & human skills in a process. The greater the relative cost of equipment, the greater is the capital intensity Process Structure in Services Nature of Service Processes: Customer Contact  A good process strategy for a service process depends first & foremost on the type & amount of customer contact o Customer contact is the extent to which the customer is present, is actively involved & receives personal attention during the service process  Table 3.3 shows dimensions of customer contact in service processes Customer-Contact Matrix  Customer-contact matrix in figure 3.2 brings together 3 elements o The degree of customer contact  Positions on the left side of the matrix represent high customer contact & highly customized services (customer will be present & active, process will be visible to the customer who receives more personal attention etc.)  Positions on the right side of the matrix represents low customer contact, passive involvement, less personalized attention & process out of the customers sight o Customization o Process characteristics  Process divergence and flow o Vertical dimension of the customer-contact matrix deals with 2 characteristics of the process itself. Each process can be analyzed on these two elements  Process divergence  It is the extent to which the process is highly customized with considerable latitude as to how its tasks are performed  If the process changes with each customer, that means every performance of the service is unique (ex. on pg 93)  A service with low divergence is repetitive & standardized, work is performed exactly the same with all the customers & less complex  Flow  Flexible flow means that the customers, materials or information move in diverse ways with the path of 1 customer or job often crisscrossing the path that the next one takes  Line flow means that the customers, materials or information move linearly from 1 operation to the next according to a fixed sequence o When diversity is low & the process is standardized, line flows are common Service Process Structuring  Front Office o Front-office process has high customer contact where the service provider interacts directly with the internal or external customer o Because of customization of service & variety of service options, many of the steps in it have high divergence o Work flows are flexible & vary from 1 customer to the next o High-contact service process tends to be unique to each customer  Hybrid Office o Hybrid-office process has moderate levels of customer contact & standard services with some options available from which the customer chooses o The work slow progresses from 1 workstation to the next with some dominant paths apparent  Back Office o Back-office process has low customer contact & little service customization o Work is standardized & routine with line flows from 1 service provider to the next until the service is completed (ex. on pg 94) Process Structure in Manufacturing Product-Process Matrix  Product-process matrix (in figure 3.3) brings together 3 elements o Volume o Product customization o Process characteristics  For manufacturing processes, high product customization means lower volumes  Product-process matrix also deals with the same 2 characteristics as the customer-contact matrix o Process divergence & flow Manufacturing Process Structuring  Process choice is the way of structuring the process by organizing resources around the process or organizing them around the products (ex. on pg 95)  Manager has 4 process choices which form a scale to choose from o Job process  Job process creates the flexibility needed to produce a wide variety of products in significant quantities with considerable difference in the steps performed  Customization is high and volume is low  Companies choosing job processes typically make products to order & does not produce them ahead of time (each new order is handled as a individual job) (ex. on pg 95) (more on pg 95 bottom) o Batch process  Batch process differs from the job process with respect to volume, variety & quantity  Main difference is that volumes are higher because the same products are produced repeatedly  Production lots are handled in larger quantities (or batches) than they are with job processes  A batch of 1 product is processed & then production is switched to the next one  Batch process has average or moderate volumes  Process flow is flexible but more dominant paths emerge than at a job process & some segments of the process have a line flow (ex. on pg 96) o Line process  Line process lies between the batch & continuous process on the scale; volumes are high & products are standardized which allows resources to be organized around particular products  Divergence is minimal in the process or line flows  Each step performs the same process over & over with little variability in the products manufactured (ex. on pg 96)  Standard products are produced in advance of their need & held in inventory so that they are ready when a customer orders o Continuous-flow process  Continuous flow process is the extreme end of high-volume standardized production with rigid line flows  It differs from a line process in one important respect o 1 primary material moves without stopping through the process until the whole batch is finished (ex. on pg 96) Product and Inventory Strategies  Make-to-Order Strategy o Make-to-order strategy is used by manufacturers that make products to customer specifications in low volumes  This strategy is complex & provides a high degree of customization & typically uses job or small batch processes (ex. on pg 96)  Assemble-to-Order Strategy o Assemble-to-order strategy is an approach to producing a wide variety of products from relatively few subassemblies & components after the customer orders are received  Often involves a line process for assembly & a batch process for fabrication (manufacturing)  Once the specific order from the customer is received, the assembly processes create the product from standardized components & subassemblies produced by the fabrication (manufacturing) process o Stocking finished products is not allowed, principle of postponement is applied here  Postponement i
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