1.0 INTRODUCTION
This note discusses process management, which is very essential in
the design of a production system.
Deciding on process involves many different choices in selecting human resources,
equipment, as well
as materials. Processes are involved in
how the marketing department prepares a market analysis; how a retail store provides services on the sales
floor; and how a manufacturing plant
performs its assembly operations
2.0 OBJECTIVES
By the end of this note, you should be able to: Describe each of
the main process decisions and how they
must relate to volume.
(i) Discuss how process choice implements flow strategy and how
the five choices differ.
(ii) Explain when less vertical integration and more outsourcing
are appropriate and how resource
flexibility supports competitive priorities.
(iii) Describe the different ways that customer contact can affect
a process.
3.0 MAIN CONTENT
3.1 The Meaning of Process Management
Let us start by first defining what a process is: A process
involves the use of an organisation’s
resources to provide something of value. You should understand that no product can be made and no service
can be provided without a process. On
the other hand too, no process can exist without a product or service. Two implications of this definition come out
very clearly:
(i) Processes underline all work activity and are found in all
organisations, as well as all functions
of an organisation.
(ii) Processes are nested within other processes along an
organisation’s supply chain. A firm’s
supply chain (also called the value chain) is an interconnected set of linkages among suppliers
of materials and services that spans the
transformation process that convert ideas and raw materials into finished goods and services
for a firm’s customers.
We can now go ahead to define process management as the selection
of the inputs, operations, work flows,
and methods that transforms input into outputs.
Usually input selection begins by deciding which processes are to be
done inhouse, and which processes are to
be done outside, as well as purchased
materials and services. Process decisions also deal with the proper mix
of human skills and equipment and which
parts of the processes are to be
performed by each. You should also note that decisions about processes must be consistent with the organisation’s flow
strategy, and the organisation’s ability
to obtain the resources necessary to support that strategy. When should process decisions be made? It is
always better to take the necessary
decisions whenever:
(i) A new or substantially modified product or service is being
offered.
(ii) Quality must be improved;
(iii) Competitive priorities have changed;
(iv) Demand for a product or service is changing;
(v) Current performance is inadequate;
(vi) Competitors are gaining by using a new process or technology,
or
(vii) The cost or availability of inputs has changed.
However, not all these situations will result to changes in
current processes. Very often, process
decisions must recognize costs, and sometimes the cost of change outweighs its benefits. In addition, process decisions must take
other choices into account, especially
those concerning quality, capacity, layout, and inventory. Furthermore,
process decisions depend on competitive
priorities and on flow strategy. Ethics and the
environment are similarly considered.
3.2 Major Types of Process Decisions
Operations managers usually consider five common process
decisions. These are discussed in the
sections that follow:
3.2.1 Process Choice
Choosing a process that best supports an organisation’s flow strategy
is one of the first decisions a manager
makes in order to design a well-functioning
operation. There are five process types, which form a continuum, and
from which the manager can choose:
(a) Project,
(b) Job,
(c) Batch,
(d) Line, and
(e) Continuous process.
A close look at Figure 4.1 should reveal to you that the best
choice depends on the volume and degree
of customisation. It is important to note that a process choice might apply to an entire facility or
just one segment of its overall process.
For example, a process segment might best be characterised as a job process and another segment as a line
process.
Figure 4.1:
3.2.1.1 Project
Process
A project process is characterised by a high degree of job
customisation, the large scope of each
project, and the release of substantial resources once a project is completed. A project process lies
at the high – customisation, lowvolume
end of the process choice continuum. The sequence of operations and the process involved in each one are unique
to each project, thereby creating
one-of-a-kind products or services made specifically to customer
order.
Very often, firms with project processes sell themselves on the
basis of their capabilities rather than
on specific products or services. One attribute of project is that they tend to be complex, take a long
time, and be large. Also, many
interrelated tasks must be completed, and these usually require
close coordination. Projects usually
make heavy use of certain skills and resources at particular stages, and then have little use
for them till the end of the time. A
project process is based on a flexible flow strategy, with work flows
re-defined with each new project.
Examples of a project process: Building a shopping centre, forming
a project team to do a task,
running a political campaign, doing management consultancy work, or developing a new technology or
product.
3.2.1.2 Job Process
A job process creates the flexibility needed to produce a variety
of products or services in significant
quantities. Very often, customisation is relatively high and volume for any one product or service is
low. However, the volume here is larger
than in the case of project process. Note that by definition, a project process does not produce in quantity. The
work force and equipment are flexible
and can handle various tasks.
Organisations choosing the job process usually bid for work.
Since the specific needs of
the next customer is unknown, and the timing of repeat orders from the same customer is unpredictable, products
are made to order and never ahead of
time. Thus, each new job is handled as a
single note, i.e. as a job. A job process
primarily involves the use of a flexible flow strategy, with resource
organised around the process.
Examples of a job process: Providing emergency room care, courier
services, making customised
cabinets etc.
3.2.1.3 Batch Process
A batch process differs from the job process with respect to
volume, variety and quantity. For instance,
volumes are higher in the case of batch process
since the same or similar products or services are provided
repeatedly. However, a narrower range of
products and services is provided with respect to quantity, production lots, or customer groups
are handled in larger quantities (or
batches) then they are with job processes. A batch of one product or customer grouping is processed, and
production is later switched to the next
one. Invariably, the first product or service is produced again.
Examples of a batch process: Scheduling air travel for a group
(pilgrims, students, holiday
makers), making components that feed an assembly line, and manufacturing capital equipment.
3.2.1.4 Line Process A line process lies
between the batch and continuous process on the continuum, volumes are high, and products or services
are standardised, thus allowing
resources to be organised around a product or service. In this process,
materials move linearly from one
operation to the next according to a fixed order, and little inventory being held between
operations.
Unlike project and job processes, production orders are not
directly linked to customer orders.
Manufacturers with line processes usually follow a make-tostock strategy, with
standard products held in inventory so that they are ready when a customer places an order. Note that
the use of a line process is also
referred to as mass production. It is possible to have product variety
by carefully controlling the addition of
standard options to the main product or
service. Very often, a line process fits primarily with the line flow
strategy, although it can overlap into
the intermediate flow strategy when mass
customisation or assemble-to-order strategies are pursued. Examples of a line process: Vehicle
assembly plants, Electrical and electronic
manufacturing companies, garment factories etc.
3.2.1.5 Continuous Process
A continuous process is the extreme and of high-volume,
standardised production with rigid line
flows. Usually, one primary material, such as a
liquid, gas, or powder, moves without stopping through the facility.
Typically this process is capital
intensive and operated round the ch to maximize
utilization and to wid expensive shutdowns and start-ups. They are used
almost exclusively in manufacturing and
fit perfectly a line flow strategy.
3.2.2 Degree of Vertical Integration
Another important issue to resolve when developing production
process designs is the determination of
how much of the production of products or
services a company should bring under its own roof. Vertical integration
is the amount of the production and
distribution chain, from suppliers of components to the delivery of products and services to
customers that is brought under the
ownership of a company.
Usually, management decides the level of vertical integration by
looking at all the activities performed
between acquisition of raw materials or outside
services and delivery of finished products or services. The more
processes in the supply chain that the
organisation performs itself, the more vertically integrated it is. If the organisation does
not perform some processes itself, then
it must rely on outsourcing.
Decisions such as these are often called make-orbuy decisions. A make decision translates to more
integration, while a buy decision
essentially means more outsourcing. The
make-or-buy decisions are not always simple.
But the starting point is to
determine whether the cost of making components is less than that of buying them from suppliers. Unless there are clear
cost advantages to making components
in-house, such issues as the following are not likely to be as important. Is enough investment capital
available to expand production capacity
to make the components?. Does the company have the technological capability to make the components? Are there
high-quality suppliers available? Is
there a risk that suppliers will become competitors?
Whatever decision is taken, management must find ways to
coordinate and integrate the various
processes and suppliers involved.
Because of shortages of both capital and production capacity, small
firms and start-up ventures ordinarily
choose to have a very low degree of vertical
integration.
3.2.3 Resource Flexibility
Usually, the choices that management makes with respect to
competitive priorities determine the
degree of flexibility required of a company’s resources (i.e. its employees, facilities, and
equipment). With respect to human
resources, operations managers must decide whether to have a flexible work force or an inflexible
one.
Members of a flexible
workforce are capable of doing many tasks. However this flexibility has
its costs. For example, it requires
greater skills and thus more training and
education. On the other hand, worker flexibility provides an opportunity
to achieve reliable customer service and
alleviate capacity bottlenecks. When a
firm’s product or service has a short life cycle and a high degree of customisation, low production volumes suggest
that the firm should select flexible,
general-purchase equipment.
3.2.4 Customer Involvement
The extent to which customers interact with the process is another
important process decision to consider.
The amount of customer involvement ranges from
self-service to customisation of product, to deciding the time and place
that the service is to be provided.
3.2.5 Degree of
Automation
A key issue in designing production processes is determining how
much automation to integrate into the production
system. Usually, automation projects are
not under-taken lightly since the equipment is very expensive and managing the integration of automation into
existing or new operation is
difficult. Automation can reduce
labour and related costs. In many applications however, the huge capital investment required by
automation projects cannot be justified
on labour savings alone.
It is the goals of improving product quality and product flexibility that motivate companies
to make the huge investments in
automation projects. Apart from anything else, the degree of
automation appropriate for producing a
product or service must be driven by the operations strategy of the firm. For instance, if those
strategies call for high product
quality and product flexibility, automation can be an important element
of operations strategy.
3.3 Designing Processes
Having broadly examined the five main process decisions, the
manager should determine exactly how
each process will be performed. T here are two different, but complementary approaches for designing
process: process re-engineering and
process improvement.
3.3.1 Process Re-engineering
Re-engineering is the fundamental rethinking and radical redesign
of processes to improve performance dramatically
in terms of cost, quality, service, and
speed. It is all about reinvention, rather than an incremental
improvement. Though reengineering can
make a company more competitive, its side effects, especially on employees are often very harsh.
For example, it usually leads to massive
lay-offs. The company also coughs out large cash outflows for investment in information technology. The
following points are useful guidelines
for reengineering:
3.3.1.1 Critical Processes
Normally, a process selected for reengineering should be a core
process, rather than functional
departments (such as purchasing or marketing). By focusing on processes, managers may discover opportunities
to eliminate unnecessary work and
supervisory activities. Hence, reengineering should be reserved for essential processes, such as new-product
development or customer services,
because of the time and energy involved.
3.3.1.2 Strong Leadership
It has also been
suggested that senior executives must provide strong leadership for reengineering to be successful. If this
is not effectively and efficiently done,
cynicism, resistance and boundaries between functional areas can block
such a radical change. Resistance can be
over-come by providing the clout necessary
to ensure that the project proceeds within a strategic choice.
3.3.1.3 Cross-Functional Teams
Usually, a team, made up of members from each functional area
affected by the process change should be
charged with carrying out a reengineering project.
3.3.1.4 Information Technology
Information technology is absolutely necessary for a successful
reengineering. This is because most
reengineering projects design processes around
information flows such as customer order fulfillment.
3.3.1.5 Clean Slate Philosophy
A “clean slate” philosophy means starting with the way the
customer wants to deal with the company.
A customer-driven orientation necessitates that the cross-functional teams start with internal
and external customer objectives for the
process. What the teams usually do is to first establish a price target for
the product or service, subtract the
desired profit, and then find an appropriate
process that will provide what the customer wishes to pay. It is thus a
common practice for Reengineers to start
from the future and work backward, usually
unconstrained by current approaches.
3.3.1.6 Process Analysis
In spite of the clean slate philosophy discussed above, a
reengineering team must understand
things about the current process. For instance, what it does, how well it performs, and what factors affect
it. A critical analysis of such details
can highlight areas in which new thinking will provide the biggest payoff. It is therefore necessary for the
team to examine every procedure involved
in the process throughout the organisation, recording each step, questioning why it is done, and then
eliminating it, if it is not necessary.
3.3.2 Process
Improvement
This is the systematic study of the activities and flows of each
process to improve it. The major
objective of process improvement is to “learn the number”, understand the process, and dig out
the details. The idea here is that once
a process is really understood, it can be improved. Please note that process improvement goes on, whether or not a
process is reengineered. In actual fact,
the relentless pressure to provide better quality at a lower price means firms must always review all aspects of
their operations. There are two basic
techniques for analyzing processes: flow diagrams and process charts. These are already treated. As
discussed in that note, these techniques
involve the systematic observation and recording of process details to allow better understanding of it.
Thereafter, the analysis can highlight tasks
to be simplified, or where productivity can otherwise be improved.
4.0 CONCLUSION
You have learned in this note that process decisions affect what
the firm achieves with the competitive
priorities of quality, flexibility, time, and cost. For example, firms can improve their ability
to compete on the basis of time by
examining each step of their processes and then finding ways to respond
more quickly to their customers.
5.0 SUMMARY
This note has demonstrated that process decisions are strategic
and can affect an organisation’s ability
to compete over the long-run. We started by defining five basic process decisions: process choice,
degree of vertical integration, resource
flexibility, customer involvement, and degree of automation. We also discussed how each process will be performed.
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