Chapter 3.docx

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Ryerson University
Information Technology Management
ITM 410
Margaret Plaza

Chapter 3: Process Strategy  Process strategy: the pattern of decisions made in managing processes so that they will achieve their competitive priorities  Process decisions should further a company’s long-term competitive goals  Four basic profess decisions o Process structure (including layout) o Customer involvement o Resource flexibility o Capital intensity  Two basic change strategies for analyzing and modifying processes o Process reengineering o Process involvement  Three principles concerning process strategy o Make choices that fit the situation and make sense together, match key process characteristics and has a close strategic fit o Individual processes are building blocks that eventually create the firm’s whole supply chain o Need to see interfaces between processes, underscores need for cross functional coordination Process Strategy across the Organization  Supply chains have processes  Processes are found throughout the whole organization and not just in operations Supply Chains Have Processes  Supply chain processes: business processes that have external customers or suppliers  Common supply chain processes Processes Are Not Just in Operations  Processes found in accounting finance, human resources, management information systems, marketing, etc  Eg of some business processes outside of operations o Payroll o Sales o Help desks o Activity based costing o Credit management o Etc  Need to make sure adding as much customer value as possible Process Strategy Decisions  Process involves use of an organization’s resources to provide something of value  No service can be provided and no product can be made without a processes  No process can exist without at least one service or product  Done in house or outsourced?  Process decisions o Process structure: process type relative to the kinds of resources needed, how resources are partitioned between them and their key characteristics  Layout: physical arrangement of operations created from the various processes o Customer involvement: how much customer become part of the process, extent of participation o Resource flexibility: ease with which employees and equipment can handle a wide variety of products, output levels, duties and functions o Capital intensity: mix of equipment and human skills in a process  Need to look at every process individually and see which one would be best to handle the products being produced Process Structure in Services  Manager needs to choose a process type that best achieves the competitive priorities for that process Nature of Service Processes: Customer Contact  Must start at process level and recognize key contextual variables associated with the process  Customer contact: extent to which the customer is present, is actively involved and receives personal attention during the service process  Face to face interaction (also called moment of truth or service encounter)  Customer attitudes about the quality of the service provided are shaped Customer- contact Matrix  Brings together o Degree of customer contact o Customization o Process characteristics Customer Contact and Customization  Horizontal, service provided to the customer in terms of customer contact and competitive priorities  Competitive priority: how much customization is needed? Process divergence and Flow  Vertical o Process divergence o Flow  Process divergence: extent to which the process is highly customized with considerable latitude as to how its tasks are performed o Eg of high divergence many steps in them change with each customer (law, architecture) o Eg of low divergence, repetitive and standardized, trying to assure uniformity (hotel services and telephone services)  Flexible flow: the customers, materials, or information move in diverse ways with the path of one customer or job often criss-crossing the path that the next one takes o High process divergence  Line flow: the customers, materials, or information move linearly from one operation to the next, according to a fixed sequence  Diversity is low, process standardized, line flows natural consequence Service Process Structuring  Three process structures which form a continuum o Front office o Back office o Hybrid office  If a process occupies one of the extreme positions (blue area), unlikely that it would be a top performer o Represent too much disconnect between the service provided and process characteristics Front Office  Front-office: high customer contact where the service provider interacts directly with the internal or external customer  Customization of service, considerable divergence  Work flows flexible, vary from one customer to the next  High contact service adapted or tailored to each customer Hybrid Office  Middle of the five dimensions, or high on some contact measure and low on others  Hybrid office: moderate levels of customer contact and standard services with some options available from which the customer chooses Back Office  Back-office: low customer contact and little service customization, work is standardized and routine  Line flows from one service provider to the next until service is completed  Eg, preparing monthly client fund balance reports in the financial services industry  Low customer contact, low divergence, line flow Process Structure in Manufacturing  Some processes at manufacturing firm are services to internal or external customers Product- Process Matrix  Three elements o Volume o Product Customization o Process characteristics  (Manufacturing)High product customization means lower volumes for many of the steps in the process Manufacturing Process Structuring  Process choice: a way of structuring the process by organizing resources around the process or organizing them around the products  Organizing around process means for ex all milling machines are grouped together and process all products or parts needing that kind of transformation  Organizing around product means bring together all the different human resources and equipment needed for a specific product and dedicating them to producing just that product  Manager has 4 process choices o Job process o Batch process o Line process o Continuous flow process  Best choice depends on the volume and degree of customization required of the process  Process choice might apply to entire manufacturing process or just one subprocess nested within it Job Process  Job process: a process with the flexibility needed to produce a wide variety of products in significant quantities with considerable divergence in the steps performed  Customization high, volume for any one product is low  Make products to order and do not produce them ahead of time  Eg, machining a metal casting for a customized order or producing customized cabinets  Creates flexible flows through the operations rather than the line flow Batch Process  Most common process  Small batch or large batch  Batch process: a process that differs from the job process with respect to volume, variety and quantity  Volumes are higher b/c the same or similar products or parts going into them are produced repeatedly  Batch of one product or component is processed, then production is switched to the next one o Eventually first product is produced again  Batch has average or moderate volumes, process divergence too great to warrant dedicating a separate process for each product  Process flow flexible  Eg, apple pastries, then a different kind of pastry will be made next Line Process  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  Little inventory held between the processing steps o Each step performs the same process over and over  Eg, the assembly of computers, automobiles, etc  Standard product held in inventory so ready when a customer orders  Product variety possible, careful control of the addition of standard options to the main product Continuous Flow Process  Continuous flow process: extreme end of high volume standardized production and rigid line flows with production not starting and stopping for long time intervals  Process divergence is negligible  One primary material (such as a liquid, a gas, or powder) moves without stopping through the process  Differs from line process in that materials flow through the process without stopping until the whole batch is finished  Eg, chemical processes, soft drinks, etc Production and Inventory Strategies  Manufacturing processes Make-To-Order Strategy  Make to order strategy: a strategy used by manufactures that make products to customer specifications in low volumes  Complex  High degree of customization  Job or small batch processes  High divergence Assemble to Order Strategy  Assemble to order strategy: strategy of del
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