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Chapter 3

ITM 410 Chapter Notes - Chapter 3: Small Batch Whiskey, Back Office, Activity-Based Costing

Information Technology Management
Course Code
ITM 410
Margaret Plaza

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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
o Need to see interfaces between processes, underscores need for cross functional
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

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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
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
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

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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
Competitive priority: how much customization is needed?
Process divergence and Flow
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
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