PROCESS MANAGEMENT

Companies begin the process of organizing operations by setting competitive priorities. That is they m st !etermine "hich of the fo##o"ing eight priorities are to be emphasize! as competitive a!vantages$ %. &o"'cost operations (. )igh performance !esign *. Consistent + a#ity ,. -ast !e#ivery time .. On'time !e#ivery /. 0eve#opment spee! 1. Pro! ct c stomization 2. 3o# me f#e4ibi#ity A#tho gh a## eight are obvio s#y !esirab#e5 it is s a##y not possib#e for an operation to perform significant#y better than the competition in more than one or t"o. The five 6ey !ecisions in process management are$ 7. 77. 777. 73. 3. Process Choice 3ertica# 7ntegration Reso rce -#e4ibi#ity C stomer 7nvo#vement Capita# 7ntensity

These !ecisions are critica# to the s ccess of any organization an! m st be base! on !etermining the best "as to s pport the competitive priorities of the enterprise. PROCESS C)O7CE The first choice typica##y face! in process management is that of process choice. Man fact ring an! service operations can be characterize! as one of the fo##o"ing$ %. (. *. ,. .. Pro8ect 9ob Shop :atch -#o" &ine -#o" Contin o s -#o"

The nat re of these processes are !isc sse! be#o" an! s mmarize! in the man fact ring pro! ct'process matri4 on page 2. Pro8ect Process. E4amp#es of a pro8ect process are b i#!ing a shopping center5 p#anning a ma8or event5 r nning a po#itica# campaign5 p tting together a comprehensive training program5 constr cting a ne" hospita#5 !oing management cons #ting "or65 or !eve#oping a ne" techno#ogy or pro! ct. A pro8ect process is characterize! by a high !egree of 8ob c stomization5 the #arge scope of each pro8ect5 an! the re#ease of s bstantia# reso rces5 once a pro8ect is comp#ete!. A pro8ect process #ies at the high'c stomization5 #o"'vo# me en! of the process' choice contin m. The se+ ence of operations an! the process invo#ve! in each one are ni+ e to each pro8ect5 creating one'of'a'6in! pro! cts or services ma!e specifica##y to c stomer or!er.

A#tho gh some pro8ects may #oo6 simi#ar5 each is ni+ e. -irms "ith pro8ect processes se## themse#ves on the basis of their capabi#ities rather than on specific pro! cts or services. Pro8ects ten! to be comp#e45 ta6e a #ong time5 an! be #arge. Many interre#ate! tas6s m st be comp#ete!5 re+ iring c#ose coor!ination. Reso rces nee!e! for a pro8ect are assemb#e! an! then re#ease! for f rther se after the pro8ect is finishe!. Pro8ects typica##y ma6e heavy se of certain s6i##s an! reso rces at partic #ar stages an! then have #itt#e se for them the rest of the time. A pro8ect process is base! on a f#e4ib#e f#o" strategy5 "ith "or6 f#o"s re!efine! "ith each ne" pro8ect. 9ob Shop Process. Ne4t in the contin m of process choices is the 8ob shop process. E4amp#es are c stom meta# processing shop5 hospita# emergency rooms5 c stom p#astic in8ection mo#!ing shop5 or ma6ing c stomize! cabinets. A 8ob shop process creates the f#e4ibi#ity nee!e! to pro! ce a variety of pro! cts or services in significant + antities. C stomization is re#ative#y high an! vo# me for any one pro! ct or service is #o". )o"ever5 vo# mes aren;t as #o" as for a pro8ect process5 "hich by !efinition !oesn;t pro! ce in + antity. The "or6 force an! e+ ipment are f#e4ib#e an! han!#e vario s tas6s. As "ith a pro8ect process5 companies choosing a 8ob process often bi! for "or6. Typica##y5 they ma6e pro! cts to or!er an! !on;t pro! ce them ahea! of time. The specific nee!s of the ne4t c stomer are n6no"n5 an! the timing of repeat or!ers from the same c stomer is npre!ictab#e. Each ne" or!er is han!#e! as a sing#e nit''as a 8ob. A 8ob shop process primari#y invo#ves the se f#e4ib#e f#o" strategy5 "ith reso rces organize! aro n! the process. Most 8obs have a !ifferent se+ ence of processing steps. :atch -#o" Process. E4amp#es of a batch f#o" process are sche! #ing air trave#5 man fact ring garments5 f rnit re man fact ring5 ma6ing components that fee! an assemb#y #ine5 processing mortgage #oans5 an! man fact ring heavy e+ ipment. A batch f#o" process !iffers from the 8ob process "ith respect to vo# me5 variety5 an! + antity. The primary !ifference is that vo# mes are higher beca se the same or simi#ar pro! cts or services are provi!e! repeate!#y. Another !ifference is that a narro"er range of pro! cts or services is provi!e!. 3ariety is achieve! more thro gh an assemb#e'to'or!er strategy than the 8ob shop<s ma6e'to'or!er strategy. Some of the components for the fina# pro! ct or service may be pro! ce! in a!vance. A thir! !ifference is that pro! ction #ots or c stomer gro ps are han!#e! #arger + antities =or batches> than they are "ith 8ob shop processes. A batch of one pro! ct or c stomer gro p is processe!5 an! then pro! ction is s"itche! to the ne4t one. Event a##y5 the first pro! ct or service is pro! ce! again :atch f#o" processes have average or mo!erate vo# mes5 b t variety is sti## too great to "arrant !e!icating s bstantia# reso rces to each pro! ct or service. The f#o" pattern is 8 mb#e!5 "ith no stan!ar! se+ ence of operations thro gho t the faci#ity. )o"ever5 more !ominant paths emerge than at a 8ob shop an! some segments of the process have a #inear f#o". &ine -#o" Process. Pro! cts create! by a #ine process inc# !e a tomobi#es5 app#iances5 persona# comp ters5 an! toys. Services base! on a #ine process are fast'foo! resta rants an! cafeterias. A #ine f#o" process #ies bet"een the batch an! contin o s processes5 vo# mes are high5 an! pro! cts or services are stan!ar!ize!5 "hich a##o"s reso rces to be organize! aro n! a pro! ct or service. Materia#s move #inear#y from one operation to the ne4t accor!ing to a fi4e! se+ ence5 "ith #itt#e inventory he#! bet"een operations. Each operation performs the same process over an! over "ith #itt#e variabi#ity in the pro! cts or services provi!e!. Pro! ction or!ers aren;t !irect#y #in6e! to c stomer or!ers5 as is the case "ith pro8ect an! 8ob processes. Man fact rers "ith #ine f#o" processes often fo##o" a ma6e'to'stoc6 strategy5 "ith stan!ar! pro! cts he#! in

inventory so that they are rea!y "hen a c stomer p#aces an or!er. This se of a #ine f#o" process is sometimes ca##e! mass pro! ction. )o"ever the assemb#e'to'or!er strategy an! mass c stomization are other possibi#ities "ith #ine f#o" processes. Pro! ct variety is possib#e by caref # contro# of the a!!ition of stan!ar! options to the main pro! ct or service. The pacing of pro! ction may be either machine'pace! or "or6er'pace!. Contin o s -#o" Process. E4amp#es are petro#e m refineries5 chemica# p#ants5 an! p#ants ma6ing beer5 stee#5 an! processe! foo! items. -irms "ith s ch faci#ities are a#so referre! to as the process in! stry. An e#ectric generation p#ant represents one of the fe" contin o s processes fo n! in the service sector. A contin o s process is the e4treme en! of high'vo# me5 stan!ar!ize! pro! ction "ith rigi! #ine f#o"s an! tight#y #in6e! process segments. 7ts name !erives from ho" materia#s move thro gh the process. ?s a##y one primary materia#5 s ch as a #i+ i!5 gas5 "oo! fibers5 or po"!er5 moves "itho t stopping thro gh the faci#ity. The process often is capita# intensive an! operate! ro n! the c#oc6 to ma4imize ti#ization an! to avoi! e4pensive sh t!o"ns are start' ps. 3ERT7CA& 7NTEGRAT7ON A## b sinesses b y at #east some inp ts to their processes5 s ch as professiona# services5 ra" materia#s5 or man fact re! parts5 from other pro! cers. Management !eci!es the #eve# of vertica# integration by #oo6ing at a## the activities performe! bet"een ac+ isition of ra" materia#s or o tsi!e services an! !e#ivery of finishe! pro! cts or services. The more processes in the s pp#y chain that the organization performs itse#f5 the more vertica##y integrate! it is. 7f it !oesn;t perform some processes itse#f5 it m st re#y on o tso rcing5 or paying s pp#iers an! !istrib tors to perform those processes an! provi!e nee!e! services an! materia#s. @hen managers opt for more vertica# integration5 there is by !efinition #ess o tso rcing. These !ecisions are sometimes ca##e! ma6e'or'b y !ecisions5 "ith a ma6e !ecision meaning more integration an! a b y !ecision meaning more o tso rcing. After !eci!ing "hat to o tso rce an! "hat to !o in'ho se5 management m st fin! "ays to coor!inate an! integrate the vario s processes an! s pp#iers. 3ertica# integration can be in t"o !irections. :ac6"ar! integration represents movement pstream to"ar! the so rces of ra" materia#s an! parts5 s ch as a ma8or grocery chain having its o"n p#ants to pro! ce ho se bran!s of ice cream5 frozen pizza !o gh5 an! pean t b tter. -or"ar! integration means that the firm ac+ ires more channe#s of !istrib tion5 s ch as its o"n !istrib tion centers ="areho ses> an! retai# stores. 7t can a#so mean that the firm goes even f rther5 ac+ iring its in! stria# c stomers. The a!vantages of more vertica# integration are !isa!vantages of more o tso rcing. Simi#ar#y5 the a!vantages of more o tso rcing are !isa!vantages of more vertica# integration. Managers m st st !y the options caref ##y before ma6ing choices A!vantages of 3ertica# 7ntegration. More vertica# integration can sometimes improve mar6et share an! a##o" a firm to enter foreign mar6ets more easi#y than it co #! other"ise. A firm can a#so achieve savings if it has the s6i##s5 vo# me5 an! reso rces to perform the processes at #o"er cost an! pro! ce higher + a#ity goo!s an! services than o tsi!ers can. 0oing the "or6 in'ho se

may mean better + a#ity an! more time#y !e#ivery''an! ta6ing better a!vantage of the firm;s h man reso rces5 e+ ipment5 an! space. E4tensive vertica# integration is genera##y attractive "hen inp t vo# mes are high beca se high vo# mes a##o" tas6 specia#ization an! greater efficiency. Stabi#ity of process techno#ogy a#so favors vertica# integration. 7t is a#so attractive if the firm has the re#evant s6i##s an! vie"s the processes into "hich it is integrating as partic #ar#y important to its f t re s ccess. Management m st i!entify5 c #tivate5 an! e4p#oit its core competencies to prevai# in g#oba# competition. Core competencies are the co##ective #earning of the firm5 especia##y ho" to coor!inate !iverse pro! ction processes an! integrate m #tip#e techno#ogies. They !efine the firm an! provi!e its reason for e4istence. Management m st #oo6 pstream to"ar! its s pp#iers an! !o"nstream to"ar! its c stomers5 an! bring in'ho se those processes that give it the right core competencies''those that a##o" the firm to organize "or6 an! !e#iver va# e better than its competitors can. Management sho #! a#so rea#ize that if the firm o tso rces a process that;s cr cia# to its mission5 it may #ose contro# over that area of its b siness an! may even #ose the abi#ity to bring the "or6 inho se #ater. A!vantages of O tso rcing. O tso rcing offers severa# a!vantages to firms. 7t is partic #ar#y attractive to those that have #o" vo# mes. -or e4amp#e5 most sma## resta rants nee! on#y sma## vo# mes of har!'boi#e! eggs for their sa#a! bars. 7nstea! of preparing their o"n5 most t rn to s pp#iers s ch as At#antic -oo!s "here si4 emp#oyees can pee# %A5AAA eggs in one shift. Obvio s#y5 a sma## resta rant can;t match the efficiency of At#antic -oo!s in boi#ing an! pee#ing eggs. Rapi!#y changing process techno#ogy an! an emphasis on pro! ct c stomization a#so favors o tso rcing. O tso rcing can a#so provi!e better + a#ity an! cost savings. RESO?RCE -&EB7:7&7TC The choices that management ma6es concerning competitive priorities !etermine the !egree of f#e4ibi#ity re+ ire! of a company;s reso rces''its emp#oyees5 faci#ities5 an! e+ ipment. -or e4amp#e5 "hen ne" pro! cts an! services ca## for short #ife cyc#es or high c stomization5 emp#oyees nee! to perform a broa! range of ! ties an! e+ ipment m st be genera# p rpose. This type of f#e4ibi#ity is pro! ct c stomization. A secon! type of f#e4ibi#ity is vo# me f#e4ibi#ity an! refers to the abi#ity to operate a faci#ity profitab#y over a "i!e range of !eman! vo# mes. A goo! e4amp#e5 is a fast foo! resta rant that is open (, ho rs a !ay. @or6 -orce. Operations managers m st !eci!e "hether to have a f#e4ib#e "or6 force. Members of a f#e4ib#e "or6 force are capab#e of !oing many tas6s5 either at their o"n "or6stations or as they move from one "or6station to another. )o"ever5 s ch f#e4ibi#ity often comes at a cost5 re+ iring greater s6i##s an! th s more training an! e! cation. Neverthe#ess5 benefits can be #arge$ @or6er f#e4ibi#ity can be one of the best "ays to achieve re#iab#e c stomer service an! a##eviate capacity bott#enec6s. Reso rce f#e4ibi#ity is partic #ar#y cr cia# "ith a f#e4ib#e f#o" strategy5 he#ping to absorb the feast'or'famine "or6#oa!s in in!ivi! a# operations that are ca se! by #o"' vo# me pro! ction5 8 mb#e! ro tings5 an! f# i! sche! #ing. The type of "or6 force re+ ire! a#so !epen!s on the nee! for vo# me f#e4ibi#ity. @hen con!itions a##o" for a smooth5 stea!y rate of o tp t5 the #i6e#y choice is a permanent "or6 force that e4pects reg #ar f ##'time emp#oyment. 7f the process is s b8ect to ho r#y5 !ai#y5 or seasona# pea6s an! va##eys in !eman!5 the se of part'time or temporary emp#oyees to s pp#ement a

sma##er core of f ##'time emp#oyees may be the best so# tion. )o"ever5 this approach may not be practica# if 6no"#e!ge an! s6i## re+ irements are too high for a temporary "or6er to grasp + ic6#y. E+ ipment. @hen a firm;s pro! ct or service has a short #ife cyc#e an! a high !egree of c stomization5 #o" pro! ction vo# mes mean that a firm sho #! se#ect f#e4ib#e5 ine4pensive5 genera#'p rpose e+ ipment. @hen vo# mes are #o"5 the #o" fi4e! cost more than offsets the higher variab#e nit cost associate! "ith this type of e+ ipment. Converse#y5 specia#ize!5 higher' cost e+ ipment is the best choice "hen vo# mes are high an! c stomization is #o". 7ts a!vantage is #o" variab#e nit cost. This efficiency is possib#e "hen c stomization is #o" beca se the e+ ipment can be !esigne! for a narro" range of pro! cts or tas6s. 7ts !isa!vantage is high e+ ipment investment an! th s high fi4e! costs. @hen ann a# vo# me pro! ce! is high eno gh5 sprea!ing these fi4e! costs over more nits pro! ce!5 the a!vantage of #o" variab#e costs more than compensates for the high fi4e! costs. C?STOMER 7N3O&3EMENT The fo rth significant process !ecision is the e4tent to "hich c stomers interact "ith the process. The amo nt of c stomer invo#vement may range from se#f'service to c stomization of pro! ct to !eci!ing the time an! p#ace that the service is to be provi!e!. Se#f'Service. Se#f'service is the process !ecision of many retai#ers5 partic #ar#y "hen price is a competitive priority. To save money5 some c stomers prefer to !o part of the process former#y performe! by the man fact rer or !ea#er. Man fact rers of goo!s s ch as toys5 bicyc#es5 an! f rnit re may a#so prefer to #et the c stomer perform the fina# assemb#y beca se pro! ction5 shipping5 an! inventory costs fre+ ent#y are #o"er5 as are #osses from !amage. The firms pass the savings on to c stomers as #o"er prices. Pro! ct Se#ection. A b siness that competes on c stomization fre+ ent#y a##o"s c stomers to come p "ith their o"n pro! ct specifications or even become invo#ve! in !esigning the pro! ct. A goo! e4amp#e of c stomer invo#vement is in c stom'!esigne! an! 'b i#t homes$ The c stomer is heavi#y invo#ve! in the !esign process an! inspects the "or6 in process at vario s times. Time an! &ocation. @hen services can;t be provi!e! in the c stomer;s absence5 c stomers may !etermine the time an! #ocation that the service is to be provi!e!. 7f the service is !e#ivere! to the c stomer5 c#ient5 or patient by appointment5 !ecisions invo#ving the #ocation becomes part of process !esign. @i## the c stomer be serve! on#y on the s pp#ier;s premises5 "i## the s pp#ier;s emp#oyees go to the c stomer;s premises5 or "i## the service be provi!e! at a thir! #ocationD A#tho gh certifie! p b#ic acco ntants fre+ ent#y "or6 on their c#ients; premises5 both the time an! the p#ace are #i6e#y to be 6no"n "e## in a!vance. CAP7TA& 7NTENS7TC -or either the !esign of a ne" process or the re!esign of an e4isting one5 an operations manager m st !etermine the amo nt of capita# intensity re+ ire!. Capita# intensity is the mi4 of

e+ ipment an! h man s6i##s in the processE the greater the re#ative cost of e+ ipment5 the greater is the capita# intensity. As the capabi#ities of techno#ogy increase an! its costs !ecrease5 managers face an ever'"i!ening range of choices5 from operations ti#izing very #itt#e a tomation to those re+ iring tas6'specific e+ ipment an! very #itt#e h man intervention. A tomation is a system5 process5 or piece of e+ ipment that is se#f'acting an! se#f'reg #ating. A#tho gh a tomation is often tho ght to be necessary to gain competitive a!vantage5 it has both a!vantages an! !isa!vantages. Th s the a tomation !ecision re+ ires caref # e4amination. One a!vantage of a tomation is that a!!ing capita# intensity can significant#y increase pro! ctivity an! improve + a#ity. )o"ever5 the !isa!vantage of capita# intensity can be the prohibitive investment cost for #o"'vo# me operations. Genera##y5 capita#'intensive operations m st have high ti#ization to be 8 stifiab#e. A#so5 a tomation !oesn;t a#"ays a#ign "ith a company;s competitive priorities. 7f a firm offers a ni+ e pro! ct or high'+ a#ity service5 competitive priorities may in!icate the nee! for s6i##e! servers5 han! #abor5 an! in!ivi! a# attention rather than ne" techno#ogy. -i4e! A tomation. Man fact rers se t"o types of a tomation$ fi4e! an! f#e4ib#e =or programmab#e>. Partic #ar#y appropriate for #ine f#o" an! contin o s f#o" process choices5 fi4e! a tomation pro! ces one type of part or pro! ct in a fi4e! se+ ence of simp#e operations. ?nti# the mi! %F2As most ?.S. a tomobi#e p#ants "ere !ominate! by fi4e! a tomation''an! some sti## are. Chemica# processing p#ants an! oi# refineries a#so ti#ize this type of a tomation. Operations managers favor fi4e! a tomation "hen !eman! vo# mes are high5 pro! ct !esigns are stab#e5 an! pro! ct #ife cyc#es are #ong. These con!itions compensate for the process;s t"o primary !ra"bac6s$ #arge initia# investment cost an! re#ative inf#e4ibi#ity. The investment cost is partic #ar#y high "hen a sing#e5 comp#e4 machine =ca##e! a transfer machine> m st be capab#e of han!#ing many operations. :eca se fi4e! a tomation is !esigne! aro n! a partic #ar pro! ct5 changing e+ ipment to accommo!ate ne" pro! cts is !iffic #t an! cost#y. )o"ever5 fi4e! a tomation ma4imizes efficiency an! yie#!s the #o"est variab#e cost per nit. -#e4ib#e A tomation. -#e4ib#e =or programmab#e> a tomation can be change! easi#y to han!#e vario s pro! cts. The abi#ity to reprogram machines is sef # "ith both f#e4ib#e f#o" an! #ine f#o" strategies. A machine that ma6es a variety of pro! cts in sma## batches5 in the case of a f#e4ib#e f#o"5 can be programme! to a#ternate bet"een the pro! cts. @hen a machine has been !e!icate! to a partic #ar pro! ct or fami#y of pro! cts5 as in the case of a #ine f#o"5 an! the pro! ct is at the en! of its #ife cyc#e5 the machine can simp#y be reprogramme! "ith a ne" se+ ence of operations for a ne" pro! ct. SER37CE OPERAT7ON RE&AT7ONS)7PS The five process types !escribe! ear#ier provi!e meaningf # insights into both man fact ring an! service operations. A!!itiona# insights regar!ing service operations5 ho"ever5 may be gaine! by foc sing on t"o !imensions$ %. amo nt of c stomer invo#vement re+ iring c stomize! service5 an!

(. the !egree of capita# intensity The service'process matri4 on page F sho"s the re#ationships of these t"o !imensions to fo r service processes$ professiona# service5 service shop5 mass service5 an! service factory. Professiona# Service. The professiona# service process !eman!s high c stomization. E4amp#es of s ch services inc# !e management cons #tants5 #a"yers5 physicians5 an! corporate ban6ers. Professiona#s interact fre+ ent#y "ith c stomers5 often one'to'one5 to n!erstan! an! !iagnose each c stomer;s in!ivi! a# nee!s. They m st be ab#e to re#ate "e## "ith the p b#ic5 not 8 st have technica# s6i##s. E4ercising 8 !gment as they provi!e ne" or ni+ e services an! so# tions is commonp#ace. :eca se of the infinite variabi#ity of prob#ems confronte!5 the menta# an! physica# re+ irements of these services are !iffic #t to a tomate. Capita# intensity is #o"5 "hich means high #abor intensityE the high s6i## #eve#s re+ ire! are very e4pensive. The professiona#s have a great !ea# of operating !iscretion an! re#ative#y #oose s perior's bor!inate re#ationships. Service Shop. The "or6 force an! c stomer a#so interact fre+ ent#y in the service shop. Consi!erab#e attention is given to a c stomer;s ni+ e re+ irements an! preferences. )ospita#s5 repair shops5 an! go rmet resta rants are e4amp#es of s ch services. 7n contrast to professiona# service5 capita# intensity in the service shop ten!s to be high an! th s #abor intensity #o". E+ ipment often is cr cia# for han!#ing !iverse an! specia#ize! service re+ irements. :eca se c stomization of services contin es to be high "ith this process5 "or6'force s6i## #eve#s a#so m st be high5 compare! to a mass service or service factory process. @or6ers m st be ab#e to han!#e ne" or ni+ e services on !eman!. @hen they are in c#ose contact "ith the c stomer5 they a#so m st have the training an! peop#e s6i##s to !ea# effective#y "ith c stomers. Mass Service. Mass service processes are + ite !ifferent from the first t"o processes beca se c stomize! c stomer invo#vement is #o". E4amp#es of s ch services inc# !e "ho#esa#ers5 f ##' service retai#ers5 spectator sports5 an! #arge c#asses at schoo#s. Service specifications are tight#y contro##e!. Stan!ar!izing services increases vo# mes an! process repeatabi#ity. &ine f#o"s are preferre!5 a#tho gh the c stomer often moves thro gh the faci#ity. Capita# intensity is #o" beca se a tomation is !iffic #t to achieve5 so #abor intensity is high. S6i## #eve#s may vary b t often are #o" to mo!erate beca se the nee! for c stomize! service is #ess. Service -actory. The service factory invo#ves the #east c stomize! c stomer invo#vement. E4amp#es of s ch services inc# !e p b#ic transportationE movie theatersE the bac6'room operations in ban6ing5 ins rance5 an! posta# service faci#itiesE !ry c#eanersE airport baggage han!#ingE an! cata#og e stores. The #itt#e contact that occ rs bet"een "or6ers an! c stomers is for stan!ar!ize! services. 7f the c stomer is invo#ve! in the process5 it is in !oing se#f'service

The Man fact ring Pro! ct'Process Matri4

PRODUCT MIX PROCESS PATTERN 3ery 8 mb#e! f#o"5 process segments #oose#y #in6e! One of a 6in! &o" vo# me c stom pro! cts )igh vo# me stan!ar! 3ery high vo# me pro! cts commo!ity pro! cts MANAGEMENT CHALLENGES

PRO9ECT

Sche! #ing5 materia# han!#ing5 shifting bott#enec6s

9 mb#e! f#o" "ith !ominant #ine

9O: S)OP

:ATC) -&O@ Process b i#t aro n! a pacing #ine &7NE -&O@

CONT7N?O?S -&O@

@or6er motivation5 maintaining capacity ba#ance an! f#e4ibi#ity

)igh#y a tomate!5 contin o s process f#o" "ith tight#y #in6e! segments

Capita# e4penses for big ch n6 capacity5 techno#ogica# change5 vertica# integration

MANAGEMENT C)A&&ENGES

:i!!ing5 !e#ivery5 pro! ct c stomization

Pro! ct !ifferentiation5 vo# me f#e4ibi#ity

Price

The Service'Process Matri4

CUSTOMIZATION AND CUSTOMER INVOLVEMENT CAPITAL INTENSITY &O@ )7G) MANAGEMENT CHALLENGES

)7G) PRO-ESS7ONA& SER37CE SER37CE S)OP

-ighting cost increases5 maintaining + a#ity5 reacting to c stomer interventions in process5 managing emp#oyee a!vancement5 managing f#at hierarchy "ith #oose s bor!inate's perior re#ationships5 bin!ing emp#oyees to firm

&O@

MASS SER37CE

SER37CE -ACTORC

Mar6eting5 ma6ing service G"armH5 attention to physica# s rro n!ings5 managing rigi! hierarchy "ith nee! for stan!ar! operating proce! res

MANAGEMENT C)A&&ENGES

)iring5 training5 metho!s !eve#opment an! contro#5 emp#oyee "e#fare5 sche! #ing "or6forces5 start' p of ne" nits F

Capita# !ecisions5 techno#ogica# a!vances5 sche! #ing !e#ivery of service5 #eve#ing !eman!

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