Operations Management

Lecture 2: Process Management

Dr. Gyan Prakash

What is a process?
Definition: A process is a series of independent tasks that
transforms an input into output material of higher value
for the organization.
Examples:
Suzuki transforms steel, rubber, and plastic into cars
McDonald’s transforms meat, potatoes, vegetables, and cheese
into packaged food
Dell transforms customer orders into PC’s
What is a process?...
 A manufacturing process is a configuration of people,
technology, systems, and information, used to transform
inventories of physical inputs into physical outputs.

 A service process is a configuration of technologies and service

delivery personnel (and their associated methods) used to
deliver a service-product.

 An e-service process is a configuration of digital technologies,

supporting physical technologies, and human service personnel
to deliver a product/service.
Process design: scope

Process design
Operations
Supply network design strategy

Layout Operations
and flow management
Design Improvement

Process Job design

technology Planning and
control
Product/service
design

Adapted from Slack, Chambers and

Johnston
Design of products/services and processes

Designing the Designing the

product or service process

Products and Product / service Processes should

services should design has an be designed so
be designed in impact on the they can create
such a way that process design all products and
they can be and vice versa services
created
effectively

Adapted from Slack, Chambers and

Johnston
Design of products/services and processes

Design of Design of Design of Design of

the the process the service the process
product

manufacturing operations service operations

the overlap between product the overlap between service
and process design is and process design is
explicit implicit
 Transformational process
At market level Capital
market
FINANC
E
Input Assets
transformation (manufactur
Activity 1

Supplie Activitying) Customer or

r 3 product
market market
A typical Activity 2
manufactur Other
ing process assets HUMAN RESOURCE

At firm level Labour Decisions about each

market process Operations
Management
Raw
material
supplier
Goods Component
s
inward/ manufacturin
Final Customer
assembly FG
receiving g I

Component
WI WI
suppliers Raw
P P
mater
Symbol for Inventory
ial input
WIP: Work in progress FGI:
transformation Final goods inventory
Transformational process…
Process design
Transformation processes
involves: These affect Process choice
process determines
choice … these …
Process design Process planning
Strategic decisions Operational decisions Forecasting Capacity Facilities and
planning equipment

Layout Product and

Type of Type of Layout
(Process service design
process Flow (Job layout, Capacity
(Conversion, shop, Batch, Product planning Job design Scheduling Process
Fabrication, Assembly line, layout,
Assembly, Continuous Cellular Technological selection
Testing) flow) Work
layout) change design
 Process design: types of processes
Process Design Process Planning
Strategic Decisions Operational Decisions
Type of Type of
Typical processes process
(Conversi on,
Flow (Job
shop,
Layout
(Process
layout,
Fabrication, Batch, Product Capacity
Assembly, Assembly planning Job design Scheduling
layout,
Conversion: Manufacturing from raw Testing) line,
Continuous
Cellular
layout)
flow)
materials

Fabrication: Changing raw materials

into a specific shape

Assembly: Putting together different

components or modules
Logistics and Supply Chain Management

Testing: Evaluating the outputs

against desired quality objectives
 Process design: operational performance objective

Aerospace: Starbuck Binder clips

Engine
 Quality: Error free s Minimum
 Speed:  Cost: Low processing
processing throughput time cost
 Dependability: Reliable output  Flexibility:  Sustainability : Low
and volume Change easily environmental
impact

Water treatment PC Paint

plant Volume and variety have a significant influence on process design
The balancing act
 Cost Vs. Customer service (On shelf availability, Response time, order fulfillment etc.)
 Setup Vs. Planned inventory (What is optimal production batch size, how much to stock
etc.)
 Inventory Vs. Order quantity (What are optimal order quantities etc.)

OM decisions that shape your competitive priorities

 How much inventory?
 What should be production batch size?
 How many machines/ serving counters and how many operators?
 What type of set up for production or servicing?
 What frequency of transport or shipment?
 What strategy to use for logistics, warehousing and distribution?
 What to do with obsolescence ?
 How much to invest on marketing and sales?
 How much Variety?
Operations Management is the act of effectively managing
resources, within a firm, to deliver products and services
through process thinking and
Example- Apple: the operational edge

What makes Apple truly a market leader ?

Answer lies in product and operations

perspective.
 Apple : the operational edge
Apple enjoys 2 or 3 times profit margin
Operational Strategy
High Volume: Leverages high initial sales volume to get large
discounts on parts, manufacturing capacity and
air freight.
Supplier partnerships: Apple’s designers and engineers spend months
at manufacturers/ suppliers locations to
seamlessly translate prototypes into mass production.
Controlled variety: Focus on few product lines, with little
customization. It helps reduce complexity and
cost of the supply chain.
Capacity Procurement: Apple makes advance payments to suppliers
and buys a large portion of the capacity thus
limiting options for competitors.
Demand Sensing: Apple has limited number of channels for selling its
Process strategy

Formulation of process strategy:

 Make choices that fit the situation and that make sense together,
that have a close strategic fit.

 Individual processes are the building blocks that eventually

create the firm’s end-to-end supply chain.

 Process management must pay particular attention to the

interfaces between processes.
Process strategy…

Basic process decisions

 Process structure including layout
 Customer involvement
 Resource flexibility
 Capital intensity
Process strategy decisions
Process structure
• Customer-contact position (services)

• Product-process position
(manufacturing)
• Layout
Typica
Customer involvement Resource flexibility
• Low involvement • Specialized
l
• High involvement • Enlarged
proces
Capital intensity s
• Low automation
decisi
• High automation
on

Strategy for change

• Process improvement
Strate
• Process re-engineering
gy for
chang
e
Effective process
design
Process structure in services

Typical services: High contact and

low contact
Dimensions of customer contact in service processes
Dimensions High contact services Low contact services
Physical structure Present Absent
What is processed People Possessions or information
Contact intensity Active, visible Passive, out of sight
Personal attention Personal Impersonal
Method of delivery Face-to-face Regular mail or e-mail
 Service process structuring
High customer contact and customization Less

High Process High interaction with

Low interaction with
Some interaction with

Characteristics customers, highly customers, standard customers,

standardized
customized service services with some options services
Flexible flows with
Individual processes
Front office

Processe
s Flexible flows with
divergen some dominant
paths, with
ce and some exceptions to Hybrid office
more how work is
performed
line flows

Line flows, routine

work same with all Back office
Less customers

Adapted from Krajewski, Manoj K. Malhotra, Larry P. Ritzm

Service process types
Process Process
tasks flow

High
Diverse/ Professional service
Intermittent
complex

Service shop

Variety

Mass service
Low

Repeated/ Continuous
divided
Low Volume High
Product-process matrix
In the context of products:
Manufacturer needs to decide
 Product volume
 Product customization
 Process characteristics
Process choices include job, batch, line, and continuous
flow processes
Production and inventory strategies include
 Make-to-order,
 Assemble-to-order,
 Make-to-stock
Types of flow
How resources move within the
factory?
Assembly Line
Variety = Low
Volume= High
Flow: Connected
line
Flexibility= Low
Products: A few Automotiv Electronic
Continuous flow e
Variety = Low
Volume= High
Flow= Continuous
Flexibility= Very
low
Products: One Power Aluminum
generation sheet
Types of flow…
How resources move within the
factory? Project
Variety = 1
Volume= 1

NASA:
Job Shop
James web Variety =
telescope
precision High Volume
mirrors = Low

Batch
Process
Variety = Low
Volume=
Flexible
Product-process matrix…
Customization and higher volume
(1) (2) (3)
Complexity, less divergence, and more

(4)
Process Low-volume Multiple products with low Few major
High volume, high
Characteristics products, made to moderate volume products,
standardization,
(1) to customer higher
Customized process, with commodity
Job
flexible and unique order
process volume
sequence of tasks products

Small batch
(2)
process
Disconnected line flows,
moderately complex work Batch processes
Large batch
(3) process
Connected line, highly
repetitive work
line flows

Line
process
(4)
Continuous flows
Continuous
process

Adapted from Krajewski, Manoj K. Malhotra, Larry P. Ritzman

Transformation process typology
0 5 10
Hig 0 0 Hig
h None h
Proje 90%
ct Make-to-
order
Muc Job Zo Muc
h shop fit ne h
of
Bat
ch

Lo Lo
Assem
w w
bly

Continuo 90%
None us Make-to-
Non process stock Non
e On Few Many ∞ 0 50 e 100
e Volume (number of % make-to-order
outputs)
Adapted from Meredith &
Shafer
Deviation in product/service-process matrix
Manufacturing Volume Service operations
operations process types process types
Variety

Project None
Professional
service
More process
Jobbing flexibility than is
needed so high cost

Service
Batch Less process Zone of fit shop
flexibility than
is needed so
high cost
Mass
Mass
service
Continuous None

The zone of fit of process to volume/variety

characteristics
Layouts
How transformed resources are positioned relative to each
other?
How these tasks are allocated to transforming resources?
Manufacturing Basic layout Service
process types types process types
Project processes
Project processes Fixed Professional
position layout services

Jobbing processes
Process layout
Service shops
Batch processes
Cell layout

Mass processes Mass services

Product layout
Continuous processes
Production layout
Process oriented layout (Job shop, batch)
Similar machines, equipment or functions are grouped together.

Parts travel from one area to other according to a sequence of

activities.
Product oriented layout (Line flow)
Machines and work processes are arranged according to progressive

steps
Cellular layout
Dissimilar machines are grouped into work centres (cells) to work on

products having similar shapes or processing requirements.

Performs specific set of processes on a dedicated set of products.

Fixed Layout (Projects)

 Layouts…
Worke Mobile • Transforming resources
equipme
r
nt moves
• Product may be too heavy
or delicate
• Shipbuilding, heart
Fixed surgery etc.
position • Transformed resources
passes through cells
• Similar resources or
Job Shop processes are located
Workstatio together
Batc Function ns
• Hospitals, supermarkets
• Transformed resources
h al etc.
are pre-selected to enter
Cell Work in a operation
Mass units
• Laptop assembly,
Production Produ maternity etc.
ct Work
units
• Transforming resources
(Assembly) Work
flow move for convenience of
transformed resources
• Auto assembly, self-
Layouts…
resources are pre-
Cellular production selected to enter in a
operation

Similar resources
or processes
Forms of Job shop are located
Transformati High variety - low volume
together
on Systems

Transforming
resources move
Internment: flow Shop for transformed

High volume - low variety

Continuous

Highly standardized products

in large volumes
Product vs process layout
Process Product layout
layout Advantages
Advantages High rate of output
Capability to manage high variety and
Low unit cost due to economies of scale
varying volumes
Low material handling costs

High equipment utilisation

Disadvantages
Clear routing and scheduling
Long lead times
Simple inventory control (WIP)
Inefficient material flow
Labour specialisation reduces training
Low machine utilisation
Bottlenecks
costs

Disadvantages
Inflexibility

Highly vulnerable to equipment failures

Highly specialised and expensive

equipments
Automation in manufacturing
 Automation: Machinery with sensing and control devices that enables
it to operate automatically
 Fixed automation
 specialized equipment for standard, high-volume production, rigid, high cost.
 Programmable automation
 general purpose equipment, more flexibility, higher-cost
 Numerically controlled (NC) machines
 Robots
 Flexible automation
 Most flexible, customizable equipment
 Robots, Manufacturing cells
 CAD/CAM
 FMS, CIM
Balancing product layouts
Cycle time = Production time per day /Required
production
Takt time =vol. per day
Time/Number of customer
order
Example: Your customer orders 5 parts in
every 60 sec. Work involves four work stations
Takt time = 60/5= 12
𝑠𝑒𝑐 Different
Your Cycle /Process time = Customer demand workstation times
time between work stations must be consistent 12
18
sec
10 9
8
1. Line balancing: Redistribute the tasks
associated with
A B C D
work station B.
Workstatio
1. Resource : Allocate more resource n
(People, machine or technology) to reduce
time.
Assembly line balancing
Example: A line to manufacture fan has 12 major assembly operations .
Operation times and precedence shown in the table.
Takt time: 60 units per hour or 1 part every 1 minute.
Line Balancing
Description Time Predecesso
(min) r  Approximately equal amount of time
1 Attach frame to work holder
0.2 -
2 Fix plug and grommet to 0.4 -
taken at each work station.
 Sequence of tasks is constrained by
power cord
3 Attach brackets to frame 0.7 1 precedence.
4 Wire power cord to motor 0.1 1,2  Line designed for particular cycle
5 Wire power cord to switch 0.3 2
6 Fix mechanism plate to 0.11 3
time (production rate).
 Efficiency of design measured is by
bracket
7 Fix blade to bracket 0.32 3 ‘balancing loss’.
8 Fix motor to brackets 0.6 3,4  Many possible ways to balance a line
9 Align blade and attached to 0.27 6,7,8
motor
but Largest Candidate Rule (LCR)
10 Fix switchminimum
to motor bracket 0.38 method is the most common heuristic.
5,8 𝑆𝑢𝑚 𝑜𝑓𝑖𝑛𝑑𝑖𝑣𝑖𝑑𝑢𝑎𝑙
Theoretical workstations (N)= 𝑡𝑎𝑠𝑘
11 Attach cover, inspect and test 0.5 9,10
𝑡𝑖𝑚𝑒𝑠(𝑇)/𝐶𝑦𝑐𝑙𝑒
12 Pack completed𝑡𝑖𝑚𝑒(𝐶)
Efficiency = 𝑆𝑢𝑚fan 𝑜𝑓 𝑖𝑛𝑑𝑖𝑣𝑖𝑑𝑢𝑎𝑙0.12 11
𝑡𝑎𝑠𝑘 𝑡𝑖𝑚𝑒𝑠(𝑇)/[a𝑐𝑡𝑢𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑘 𝑠𝑡𝑎𝑡𝑖𝑜𝑛𝑠 x
Total
𝐶𝑦𝑐𝑙𝑒 𝑡𝑖𝑚𝑒]
Assembly line balancing…
Precedence diagram
6 Statio Task Task Time Task
n Time left available
1
3
7
9 2
1 8 3
4 1 1 4
1 2
2 1
5 0

Heuristic used: largest candidate rule

 List all operation numbers in descending order of operation time
(largest at the top)
 Start at the top of the list and assign operation number to the 1st
station
 Select the 1st feasible element for placement at the station
 A feasible element is one that satisfies the precedence but the
total ops time value of the station must not exceed the max
cycle time
Theoretical minimum workstations
(N)=
𝑆𝑢𝑚 𝑜𝑓𝑖𝑛𝑑𝑖𝑣𝑖𝑑𝑢𝑎𝑙 𝑡𝑎𝑠𝑘 𝑡𝑖𝑚𝑒𝑠(𝑇)/𝐶𝑦𝑐𝑙𝑒 6
𝑡𝑖𝑚𝑒(𝐶)

3 7
9
1
11 12
4 8

2 10
5

Station 1 Station 2 Station 3 Station 4 Station 5

2,5,1,4 3,6 8,10 9,7 11,12

CT 1.0 CT 0.8 CT 0.9 CT 0.5 CT 0.6

= = 1 = 8 = 9 = 2
Process mapping
Process mapping symbols derived Process mapping symbols derived
from ‘Scientific Management’ from Systems Analysis

Operation (an activity that Beginning or end of the process

directly adds value)

Inspection (a check of some Activity

sort)
Input or output from the process
Transport (a movement of
something)

Delay (a wait, e.g. for materials) Direction of flow

Storage (deliberate storage, as Decision (exercising discretion)

opposed to a delay)
Process analysis?
We need to analyze the process?
To identify inefficient tasks
To spot possible effectiveness improvement tasks
To understand where value can be added

How can we analyze a process?

 Map it
Develop relevant performance measures?
 As is
To be
Description of activity
Description of activity
1 Report arrives
1 Report arrives
2 Wait for processing
2 Stamp and date report
3 Check expenses report 3 Check expenses report
4 Stamp and date report 4 Attach payment voucher
5 Send cash to receipt desk 5 Wait for batching
6 Wait for processing
6 Collect retorts into batch
7 Check advance payment Batch to audit desk
7
8 Send to accounts receivable
8 Wait for processing
9 Wait for processing 9 Check reports and vouchers
10 Check employee record 10 Reports to batch control
11 Send to account payable 11 Batch control number
12 Attach payment voucher
12 Copy of reports to filing
13 Log report
13 Reports filed
14 Check against rules 14 Payment voucher to keying
15 Wait for batching Confirm payment
15
16 Collect retorts into batch
17 Batch to audit desk Totals 5 5 2 2 1
18 Wait for processing
19 Batch of reports logged
20 Check payment voucher
21 Reports to batch control
22 Batch control number
23 Copy of reports to filing
24 Reports filed
25 Payment voucher to keying
26 Confirm payment
Totals 7 8 5 5 1
Process Analysis: the performance measures
How to analyse efficiency of a process?

 What is its capacity?

 How many units per unit time go through each task in a process as whole?
 What is the bottleneck?
 Which production step limits the process capacity?
 What is the throughput time?
 How long does it take to get through the system?
How do we measure capacity?
Capacity of a task is the physical limitation in terms of “how
much can be processed at this task”

Cycle time: Average time for completion of a unit at a workstation.

It does not include waiting. Measured as time/unit
Throughput rate: Average number of units processed over a
time interval. Measured as units/time
1
Key Throughput rate =
relationship Cycle time
Capacity = throughput rate
The capacity of the process is minimum throughput rate at any of the stages
What is a bottleneck?

Bottleneck is the process stage with the

smallest throughput rate (longest cycle time)

Which task is the bottleneck?

3 units/hr 5 units/hr 2 units/hr

How do we measure throughput time?

Throughput Time: Average time that a unit takes to go through the

entire process (including waiting time). Measured as time
Work in Process(WIP): Average number of units in system over
a time interval. Measured as units

Throughput (TH) = Work in process (WIP) × (Little’s Law)

Cycle time (CT)

Cycle time = 2 minutes

Throughput time = ?
WIP =
10
Throughput time = 10 × 2 minutes = 20
minutes
How do we analyze a complex process…

 Look at the process step-by-step

 Determine throughput rate (i.e. capacity) of each step
 Identify the process bottleneck (smallest processing
rate, or largest cycle time).
 The capacity of the process is equal to the capacity of
the bottleneck
Throughput efficiency?

Throughput efficiency
Throughput efficiency is the work content of whatever is being
processed as a percentage of its throughput time

Work content
Throughput efficiency × 100
= Throughput time
Process variability

Processes suffers from

variability in the demand
variability in the time taken for the process to perform its various

activities.
Reasons for variability
the late (or early) arrival of material, information or customers
a temporary breakdown of process technology within a stage of the

process
the recycling of ‘mis-processed’ activities at an earlier stage in the

process
variation in the requirements of items being processed, etc.

Results
variability in the demand for processing is expressed in terms of

variation in the inter-arrival times.

Process variability
Process throughput time (or inventory) Utilization= (time taken/inter-arrival
time )*100
In
perfectl
Average length of queue:
High
y
High utilization but long predicta
waiting time

throughput times ble

situation
s
process
Average waiting time and
process utilization
X waiting
time and
utilizatio
Low utilization but short
throughput times
X n-
Reduce process rectang
Low X variability ular
Variable inter-arrival
times function
No waiting
X X X time
0 20% 40% 60% 80% 100%
e.g.one every 30 Capacity utilization e.g.one every 10
 Effects of process variability

Average number of
Average number of

units waiting to be
units waiting to be

High utilization but

long waiting time

processed
processed

Reduction in
process variability X
Decreasing Short waiting
time but low
variability utilization

Y Z

0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100
Utilization Utilization

Decreasing variability allows higher utilization without long waiting times. This
is achieved through:
limiting the degree of customization of products or services,
imposingstricter limits on how products or services can be delivered to
customers
Thank you