OPERATIONS &

PRODUCTION
MANAGEMENT
Lecture 1( Final Term)
 Operations performance and
Operations Strategy
Introduction
The quality objective
The speed objective
The dependability objective
The flexibility objective
The cost objective
The ‘top-down’ and ‘bottom-up’ perspectives
The market requirements and operations
resources perspectives
The process of operations strategy
 EXAMPLE
Operations management can have a very significant impact on a business’s financial
performance. Even when compared with the contribution of other parts of the business, the
contribution of operations can be dramatic. Consider the following example. Kandy Kitchens
currently produce 5,000 units a year. The company is considering three options for boosting
its earnings. Option 1 involves organizing a sales campaign that would involve spending an
extra a100,000 in purchasing extra market information. It is estimated that sales would rise by
30 per cent. Option 2 involves reducing operating expenses by 20 per cent through forming
improvement teams that will eliminate waste in the firm’s operations. Option 3 involves
investing a70,000 in more flexible machinery that will allow the company to respond faster to
customer orders and therefore charge 10 per cent extra for this ‘speedy service’. Table 2.2
illustrates the effect of these three options.
 ANALYSIS OF EXAMPLE
• Option 1:Increasing sales volume by 30 per cent certainly improves the
company’s sales revenue, but operating expenses also increase.
Nevertheless, earnings before investment and tax (EBIT) rise to
a1,000,000.
• Option 2 :But reducing operating expenses by 20 per cent is even more
effective, increasing EBIT to a1,200,000. Furthermore, it requires no
investment to achieve this.
• Option 3 :The third option involves improving customer service by
responding more rapidly to customer orders. The extra price this will
command improves EBIT to a1,000,000 but requires an investment of
a70,000.
• Note how options 2 and 3 involve operations management in changing
the way the company operates.
• Note also how, potentially, reducing operating costs and improving
customer service can equal and even exceed the benefits that come from
improving sales volume.
The ‘stakeholder’ perspective on
operations performance
Operations can contribute to competitiveness
 Top management’s performance objectives for
operations
• Of all stakeholder groups, it is the organization’s top management who
can have the most immediate impact on its performance.
• They represent the interests of the owners (or trustees, or electorate, etc.)
and therefore are the direct custodians of the organization’s basic purpose.
• They also have responsibility for translating the broad objectives of the
organization into a more tangible form. So what should they expect from
their operations function.
• Broadly they should expect all their operations managers to contribute to
the success of the organization by using its resources effectively.
• To do this it must be
• creative, innovative and energetic in improving its processes, products
and services. In more detail, effective operations management can give
five types of advantage to the business:
 OM five types of advantage to the
business
• It can reduce the costs of producing products and services, and being
efficient.
• It can achieve customer satisfaction through good quality and service.
• It can reduce the risk of operational failure, because well designed and
well run operations should be less likely to fail, and if they do they
should be able to recover faster and with less disruption (this is called
resilience).
• It can reduce the amount of investment (sometimes called capital
employed) that is necessary to produce the required type and quantity
of products and services by increasing the effective capacity of the
operation and by being innovative in how it uses its physical resources.
• It can provide the basis for future innovation by learning from its
experience of operating its processes, so building a solid base of
operations skills, knowledge and capability within the business.
 The Five Operations Performance Objectives
1. Quality: You would want to do things right; that is, you would not want to make
mistakes, and would want to satisfy your customers by providing error-free goods
and services which are ‘fit for their purpose’. This is giving a quality advantage.
2. Speed : You would want to do things fast, minimizing the time between a
customer asking for goods or services and the customer receiving them in full,
thus increasing the availability of your goods and services and giving a speed
advantage.
3. Dependability: You would want to do things on time, so as to keep the delivery
promises you have made. If the operation can do this, it is giving a dependability
advantage.
4. Flexibility: You would want to be able to change what you do; that is, being able
to vary or adapt the operation’s activities to cope with unexpected circumstances
or to give customers individual treatment. Being able to change far enough and
fast enough to meet customer requirements gives a flexibility advantage.
5. Cost: You would want to do things cheaply; that is, produce goods and services at
a cost which enables them to be priced appropriately for the market while still
allowing for a return to the organization; or, in a not-for-profit organization, give
good value to the taxpayers or whoever is funding the operation. When the
organization is managing to do this, it is giving a cost advantage.
 The Quality Objective
• Quality is consistent conformance to customers’
expectations
• Quality is the most visible part of what an
operation does
• It is something that A customer finds relatively
easy to judge about the operation
• It is clearly A major influence on customer
satisfaction or dissatisfaction
• A customer perception of high-quality products
and services means customer satisfaction
• And therefore the likelihood that the customer
will return.
 Quality Inside The Operation
• Quality reduces costs. The fewer mistakes made
by each process in the operation, the less time
will be needed to correct the mistakes and the less
confusion and irritation will be spread.
• Quality increases dependability. Increased costs
are not the only consequence of poor quality. At
the supermarket it could also mean that goods run
out on the supermarket shelves with a resulting
loss of revenue to the operation and irritation to
the external customers.
The Speed Objective
 The Speed Objective
• Inside the operation, speed is also important.
• Fast response to external customers is greatly
helped in:
• decision-making and
• speedy movement of materials and
• information inside the operation.
 Speed inside the operation
• Speed reduces inventories.
• Speed reduces risks.
– Forecasting tomorrow’s events is far less of a risk
than forecasting next year’s.
– The further ahead companies forecast, the more
likely they are to get it wrong.
– The faster the throughput time of a process the
later forecasting can be left.
The dependability objective
 Dependability inside the operation
• Dependability saves time
• Dependability saves money.
• Dependability gives stability
The flexibility objective
 The flexibility objective
• Product/service flexibility –
– the operation’s ability to introduce new or modified
products and services;
• Mix flexibility –
– the operation’s ability to produce a wide range or mix of
products and services;
• Volume flexibility –
– the operation’s ability to change its level of output or
activity to
• Produce different quantities or volumes of products and
services over time;
• Delivery flexibility –
– the operation’s ability to change the timing of the delivery
of its services or products.
 Flexibility inside the operation
• Flexibility speeds up response.
• Flexibility saves time.
• Flexibility maintains dependability.
 Low cost is a universally
attractive objective
• Productivity
• Single-factor productivity
• Multi-factor productivity
 Single-factor productivity
• Often partial measures of input or output are
used so that comparisons can be made. in the
automobile industry productivity is sometimes
measured in terms of the number of cars
produced per year per employee. This is called
a single-factor measure of productivity.
• Single-factor productivity=Output from the operation
One input to the operation
 The cost objective
• Productivity is the ratio of what is produced
by an operation to what is required to
produce it. The measure that is most frequently
used to indicate how successful an operation is
at doing this is productivity.
• Output from operations
Input to operations
 Multi-factor productivity
• Total factor productivity is the measure that
includes all input factors.

Multi-factor productivity = Output from the operation

All inputs to the operation
 Improving productivity
• to reduce the cost of its inputs while
maintaining the level of its outputs
• reducing the costs of some or all of its
transformed and transforming resource inputs.
• cutting out waste
 Cost reduction through internal
effectiveness
• High-quality operations do not waste time or effort having to re-do
things, nor are their internal customers inconvenienced by flawed
service.
• Fast operations reduce the level of in-process inventory between
and within processes, as well as reducing administrative overheads.
• Dependable operations do not spring any unwelcome surprises on
their internal customers. They can be relied on to deliver exactly as
planned. This eliminates wasteful disruption and allows the other
micro-operations to operate efficiently.
• Flexible operations adapt to changing circumstances quickly and
without disrupting the rest of the operation. Flexible micro-
operations can also change over between tasks quickly and without
wasting time and capacity.
External effect of five performance
objectives
 Worked example
• Slap.com is an Internet retailer of speciality cosmetics. It orders products
from a number of suppliers, stores them, packs them to customers’ orders,
and then dispatches them using a distribution company. Although broadly
successful, the business is very keen to reduce its operating costs. A
number of suggestions have been made to do this. There are as follows:
• ● Make each packer responsible for his or her own quality. This could
potentially reduce the percentage of mis-packed items from 0.25 per cent to
near zero. Repacking an item that has been mis-packed costs 2 per item.
• ● Negotiate with suppliers to ensure that they respond to delivery requests
faster. It is estimated that this would cut the value of inventories held by
slap.com by 1,000,000.
• ● Institute a simple control system that would give early warning if the
total number of orders that should be dispatched by the end of the day
actually is dispatched in time. Currently one per cent of orders is not
packed by the end of the day and therefore has to be sent by express courier
the following day. This costs an extra 2 per item.
Because demand varies through the year, sometimes staff have
to work overtime.
Currently the overtime wage bill for the year is 150,000.

The company’s employees have indicated that they would be

willing to adopt a flexible working scheme where extra hours
could be worked when necessary in exchange for having the
hours off at a less busy time and receiving some kind of extra
payment.
This extra payment is likely to total 50,000 per year.
If the company dispatches 5 million items every year and if
the cost of holding
inventory is 10 per cent of its value, how much cost will each
of these suggestions save the company?
 Analysis
• Eliminating mis-packing would result in an improvement in quality. 0.25 per
cent of 5 million items are mis-packed currently. This amounts to 12,500 items
per year. At @2 repacking charge per item, this is a cost of 25,000 that would
be saved.
• Getting faster delivery from suppliers helps reduce the amount of inventory in
stock by 1,000,000. If the company is paying 10 per cent of the value of stock
for keeping it in storage the saving will be a1,000,000 × 0.1 = 100,000.
• Ensuring that all orders are dispatched by the end of the day increases the
dependability of the company’s operations. Currently, 1 per cent are late, in
other words, 50,000 items per year. This is costing 2 × 50,000 = 100,000 per
year which would be saved by increasing dependability.
• Changing to a flexible working hours system increases the flexibility of the
operation and would cost 50,000 per year, but it saves 150,000 per year.
Therefore, increasing flexibility could save a100,000 per year.
• So, in total, by improving the operation’s quality, speed, dependability and
flexibility, a total of 325,000 can be saved.
Operations
Strategy
 Operations strategy
• No organization can plan in detail every aspect
• Some strategic direction still needed
• E.g. where they are heading
• and how they could get there
• formulate a set of general principles which
will guide its decision-making
 Operations strategy
• pattern of strategic decisions and actions which
set the role, objectives and activities of the
operation.
• ‘Operational’ is the opposite of strategic,
meaning day-to-day and detailed.
• The content of operations strategy is the specific
decisions and actions which set the operations
role, objectives and activities.
• The process of operations strategy is the method
that is used to make the specific ‘content’
decisions.
 What is strategy and what is
operations strategy?
• Setting broad objectives that direct an enterprise
towards its overall goal.
• Planning the path (in general rather than specific
terms) that will achieve these goals.
• Stressing long-term rather than short-term
objectives.
• Dealing with the total picture rather than
stressing individual activities.
• Being detached from, and above, the confusion
and distractions of day-to-day activities
 Implementing v/s Supporting v/s
Driving Strategy
• Implementing business strategy. The most basic role of
operations is to implement strategy. Most companies will
have some kind of strategy but it is the operation that puts it
into practice. You cannot, after all, touch a strategy; you
cannot even see it; all you can see is how the operation
behaves in practice. (insurance co)
• Support strategy goes beyond simply implementing
strategy. It means developing the capabilities which allow
the organization to improve and refine its strategic goals.
(Mobile co)
• Driving business strategy. The third, and most difficult,
role of operations is to drive strategy by giving it a unique
and long-term advantage.( customer and supplier)
 Hayes and Wheelwright’s four stages of operations
contribution
• Stage 1: Internal neutrality. This is the very poorest level of contribution by the operations
function. It is holding the company back from competing effectively. It is inward-looking and, at
best, reactive with very little positive to contribute towards competitive success. back in any
way. It attempts to improve by ‘avoiding making mistakes’.
• Stage 2: External neutrality. The first step of breaking out of stage 1 is for the operations
function to begin comparing itself with similar companies or organizations in the outside market
(being ‘externally neutral’). This may not immediately take it to the ‘first division’ of companies
in the market, but at least it is measuring itself against its competitors’ performance and trying to
implement ‘best practice’.
• Stage 3: Internally supportive. Stage 3 operations are amongst the best in their market. Yet,
stage 3 operations still aspire to be clearly and unambiguously the very best in the market. They
achieve this by gaining a clear view of the company’s competitive or strategic goals and
supporting it by developing appropriate operations resources. The operation is trying to be
‘internally supportive’ by providing a credible operations strategy.
• Stage 4: Externally supportive. Yet Hayes and Wheelwright suggest a further stage – stage 4,
where the company views the operations function as providing the foundation for its competitive
success. Operations looks to the long term. It forecasts likely changes in markets and supply, and
it develops the operations-based capabilities which will be required to compete in future market
conditions. Stage 4 operations are innovative, creative and proactive and are driving the
company’s strategy by being ‘one step ahead’ of competitors – what Hayes and Wheelwright call
‘being externally supportive’.
 Perspectives on operations strategy
• Different authors have slightly different views and
definitions of operations strategy. Between them, four
‘perspectives’ emerge:
• Operation strategy is a top-down reflection of what the
whole group or business wants to do.
• Operations strategy is a bottom-up activity where
operations improvements cumulatively build strategy.
• Operations strategy involves translating market
requirements into operations decisions.
• Operations strategy involves exploiting the capabilities
of operations resources in chosen markets.
The ‘top-down’ perspectives
 Top-down strategies
• A large corporation will need a strategy to
position itself in its global, economic, political
and social environment
• This will consist of decisions about what types
of business the group wants to be in, what
parts of the world it wants to operate in, how
to allocate its cash between its various
businesses, and so on. Decisions such as these
form the corporate strategy of the
corporation.
Bottom-up’ strategies
Emergent strategies
 Emergent strategies
• Strategy is gradually shaped over time and based
on real-life experience rather than theoretical
positioning.
• Indeed, strategies are often formed in a relatively
unstructured and fragmented manner to reflect the
fact that the future is at least partially unknown
and unpredictable (see Figure ).
• This view of operations strategy is perhaps more
descriptive of how things really happen, but at
first glance it seems less useful in providing a
guide for specific decision-making.
 Bottom-up’ strategies
• When any group is reviewing its corporate
strategy, it will also take into account the
circumstances, experiences and capabilities of the
various businesses that form the group.
• Similarly, businesses, when reviewing their
strategies, will consult the individual functions
within the business about their constraints and
capabilities.
• They may also incorporate the ideas which come
from each function’s day-to-day experience.
• Therefore an alternative view to the top-down
perspective is that many strategic ideas emerge
over time from operational experience.
 The market requirements and
operations resources perspectives
• Market-requirements-based strategies
• To satisfy the requirements of its markets.
• To survive in the long term.
• Understanding markets is usually thought of as the
domain of the marketing function, it is also of
Importance to operations management.
• It is impossible to ensure that operations is
achieving the right priority between its
performance objectives (quality, speed,
dependability, flexibility and cost).
 The market influence on
performance objectives
• Operations seek to satisfy customers through
developing their five performance objectives.
• Low Priced
• High Quality
• Fast Delivery
• Reliable delivery
• Innovative Products and Services
 The market influence on
performance objectives
• Competitive factors
– Order-winning factors
– Qualifying factors
– Less important factors
 Order-winning factors
• Importance of competitive factors is to distinguish
between ‘order-winning’ and qualifying’ factors.
• Order-winning factors are those things which
directly and significantly contribute to winning
business.
• They are regarded by customers as key reasons
for purchasing the product or service.
• Raising performance in an order-winning factor
will either result in more business or improve the
chances of gaining more business.
 Qualifying factors
• Qualifying factors may not be the major competitive
determinants of success, but are important in another
way.
• They are those aspects of competitiveness where the
operation’s performance has to be above a particular
level just to be considered by the customer.
• Performance below this ‘qualifying’ level of
performance will possibly disqualify the company from
being considered by many customers.
• But any further improvement above the qualifying
level is unlikely to gain the company much competitive
benefit.
 Less important factors
• less important factors which are neither
order-winning nor qualifying.
• They do not influence customers in any
significant way.
• They are worth mentioning here only because
they may be of importance in other parts of the
operation’s activities.
Figure 3.7 shows the difference between
order-winning, qualifying and less The Market Influence On
important factors in terms of their utility
Performance Objectives
or worth to the competitiveness of the
organization.
The curves illustrate the relative amount
of competitiveness (or attractiveness to
customers) as the operation’s
performance at the factor varies.
 Order-winning factors show a steady
and significant increase in their
contribution to competitiveness as the
operation gets better at providing them.
 Qualifying factors are ‘givens’; they
are expected by customers and can
severely disadvantage the competitive
position of the operation if it cannot raise
its performance above the qualifying
level.
 Less important objectives have little
impact on customers no matter how well
the operation performs in them.
Different banking services require different performance objectives
It is about four years now since we specialized in the small-to-medium firms market. Before that we
also used to provide legal services for anyone who walked in the door. So now we have built up our
legal skills in many areas of corporate and business law. However, within the firm, I think we could
focus our activities even more. There seem to be two types of assignment that we are given. About
forty per cent of our work is relatively routine. Typically these assignments are to do with things
like property purchase and debt collection. Both these activities involve a relatively standard set of
steps which can be automated or carried out by staff without full legal qualifications. Of course, a
fully qualified lawyer is needed to make some decisions; however, most work is fairly routine.
Customers expect us to be relatively inexpensive and fast in delivering the service. Nor do they
expect us to make simple errors in our documentation, in fact if we did this too often we would lose
business. Fortunately our customers know that they are buying a standard service and don’t expect
it to be customized in any way. The problem here is that specialist agencies have been emerging
over the last few years and they are starting to undercut us on price. Yet I still feel that we can
operate profitably in this market and anyway, we still need these capabilities to serve our other
clients. The other sixty per cent of our work is for clients who require far more specialist services,
such as assignments involving company merger deals or major company restructuring. These
assignments are complex, large, take longer, and require significant legal skill and judgment. It is
vital that clients respect and trust the advice we give them across a wide range of legal
specialism's. Of course they assume that we will not be slow or unreliable in preparing advice, but
mainly it’s trust in our legal judgment which is important to the client. This is popular work with
our lawyers. It is both interesting and very profitable. But should I create two separate parts to our
business, one to deal with routine services and the other to deal with specialist services? And, what
aspects of operations performance
should each part be aiming to excel at?’ (Managing Partner, Branton Legal Services)
Analysis Table 3.2 has used the information supplied above to
identify the order winners, qualifiers and less important competitive
factors for the two categories of service. Two types of service are
very different. Routine services must be relatively inexpensive and
fast, whereas the clients for specialist services must trust the quality
of advice and range of legal skills available in the firm. The
customers for routine services do not expect errors and those for
specialist services assume a basic level of dependability and speed.
These are the qualifiers for the two categories of service. Note that
qualifiers are not ‘unimportant’. On the contrary, failure to be ‘up to
standard’ at them can lose the firm business. However, it is the order
winner that attracts new business. Most significantly, the
performance objectives which each operations partner should stress
are very different. Therefore there does seem to be a case for
separating the sets of resources (e.g. lawyers and other staff ) and
processes (information systems and procedures) that produce each
type of service.
The process of operations strategy
• A process which formally links the total organization strategic
objectives (usually a business strategy) to resource-level
objectives.
• The use of competitive factors (called various things such as
order winners, critical success factors, etc.) as the translation
device between business strategy and operations strategy.
• A step which involves judging the relative importance of the
various competitive factors in terms of customers’ preferences.
• A step which includes assessing current achieved performance,
usually as compared against competitor performance levels.
The process of operations strategy
• An emphasis on operations strategy formulation as an iterative
process.
• The concept of an ‘ideal’ or ‘greenfield’ operation against
which to compare current operations. Very often the question
asked is: ‘If you were starting from scratch on a green field
site, how, ideally, would you design your operation to meet the
needs of the market?’ This can then be used to identify the
differences between current operations and this ideal state.
• A ‘gap-based’ approach. This is a well-tried approach in all
strategy formulation which involves comparing what is
required of the operation by the marketplace against the levels
of performance the operation is currently achieving.
What should the formulation process
be trying to achieve?
• Comprehensive
• critical first step in seeking to achieve an effective
• operations strategy. Business history is littered
with world-class companies that simply failed
• to notice the potential impact of, for instance, new
process technology or emerging changes
• in their supply network. Also, many strategies
have failed because operations have paid undue
• attention to only one key decision area.
OPERATIONS &
PRODUCTION
MANAGEMENT
Lecture 2
 Process Design and Design of Products
and Services

Introduction
Process Types _Volume and Variety
Why good Design?
Benefits of Interactive Design
 What is process design?
• To ‘design’ is to conceive the looks, arrangement, and
workings of something before it is created. In that
sense it is a conceptual exercise.
• Yet it is one which must deliver a solution that will
work in practice.
• Process Design is an activity that can be approached at
different levels of detail. One may predict the general
shape and intention of something before getting down
to defining its details.
• The most common way of doing this is by positioning it
according to its volume and variety characteristics.
• Eventually the details of the process must be analysed
to ensure that it fulfils its objectives effectively.
What objectives should process
design have?
 Introduction
• Process selection
– Deciding on the way production of goods or
services will be organized
• Major implications
– Capacity planning
– Layout of facilities
– Equipment
– Design of work systems
 Process Design
• Design is a activity which shapes the physical
form and purpose of both products and
services and processes that produce them.
• This design activity is more likely to be
successful if the complementary activities of
product or service design and process design
are coordinated.
 Process Selection and System Design
Figure 6.1

Facilities and
Forecasting Capacity Equipment
Planning

Product and Layout

Service Design

Process
Technological Selection Work
Change Design
 Process Strategy
• Key aspects of process strategy
– Capital intensive – equipment/labor
– Process flexibility
– Adjust to changes
– Design
– Volume
– technology
 Process Selection
 Variety
◦ How much Batch
 Flexibility
◦ What degree
 Volume
◦ Expected output Job Shop Repetitive

Continuous
 Process Types
• Job shop
– Small scale
• Batch
– Moderate volume
• Repetitive/assembly line
– High volumes of standardized goods or services
• Continuous
– Very high volumes of non-discrete goods
 Product – Process Matrix
Figure 6.2

Process Type
Job Shop Appliance repair Not
Emergency feasible
room
Batch Commercial
bakery
Classroom
Lecture
Repetitive Automotive
assembly
Automatic
carwash
Continuous Not Oil refinery
feasible Water purification
(flow)
 Product – Process Matrix
Figure 6.2
(cont’d)
Dimension Job Shop Batch Repetitive Continuous
(flow)

Job variety Very High Moderate Low Very low

Process Very High Moderate Low Very low
flexibility

Unit cost Very High Moderate Low Very low

Volume of Very Low Low High Very High
output
 Process Design

Design of Design of Design of Design of

the Product the Process the Service the Process

In manufacturing operations In most service operations

overlapping the activities of the overlap between service
product and process design and process design is
is beneficial implicit in the nature of
service
 Process Design

Process design
Processes that Processes that
Design Products Produce Products
and Services and Services
Supply Network Design
Concept Generation

Screening
Layout
and Flow
Preliminary Design

Evaluation and
Improvement
Process Job
Technology Design
Prototyping and final
design
 The Product/Process Matrix
INCREASING VARIETY
INCREASING VOLUME

PRODUCT CHARACTERISTICS
Low volume Low volume Higher volume High volume
Low Multiple Few major High
standardisation products products standardisation

Random
flow
(project) Custom
PROCESS CHARACTERISTICS

furniture
Jumbled
flow
(jobbing)
maker Machine
tool
Disconnected maker
line flow
(batch)
Automobile
Connected factory
line flow
(mass) Petro-
Smooth
chemical
flow refinery
(Continuous)
 The Product/Process Matrix
INCREASING VARIETY
INCREASING VOLUME

PRODUCT CHARACTERISTICS
Low volume Low volume Higher volume High volume
Low Multiple Few major High
standardisation products products standardisation

Random
flow
(project) Investment
PROCESS CHARACTERISTICS

Jumbled banking
flow
(jobbing)
Customer
service
Disconnected
line flow
branch
(batch)
Bank call
Connected
line flow
centre
(mass)
Credit card
Smooth processing
flow
(Continuous)
 Objectives of Design Process
Finished designs
which are:
TRANSFORMED High quality: Error-free
RESOURCES designs which fulfil their
Technical information purpose in an effective and
Market information creative way
Time information
Speedily produced: Designs
which have moved from
THE DESIGN concept to detailed
INPUTS OUTPUT specification in a short time
ACTIVITY
Dependably delivered: Designs
which are delivered when
Test and design promised
equipment
Design and technical Produced flexibly: Designs
staff which include the latest ideas
to emerge during the process
TRANSFORMING
RESOURCES Low cost: Designs produced
without consuming excessive
resources
 Process Analysis

Operation (an activity Beginning or end of process

that directly adds value)

Inspection (a check of Activity

some sort)

Transport (a movement Input or Output from the

of some thing) process

Delay (a wait, e.g. for materials)

Direction of flow

Storage (deliberate storage,

as opposed to a delay) Decision (exercising discretion)

Process mapping symbols derived Process mapping symbols derived

from “Scientific Management” from Systems Analysis
How do you draw process flowcharts?
What is the first thing that happens?
Are there any decisions to be made at this
stage?
What happens next?
What decisions need to be made? By whom?
(customer or employee or computer or
equipment?)
What happens if the decision is yes? / no?
What happens then?
Where does the customer go next?
 Flow map arrows

Single straight arrow – used between tasks

performed by same person or area, but no
physical movement has occurred.

Box arrow – indicates physical movement of

information / product from one person /
function to another.

Jagged arrow – indicates electronic movement

of information from one person / function to
another.
 Process Analysis
Raw Stored Move to Stored Take
Assembly Sell
Materials Sandwiches Outlets Sandwiches Payment

Standard sandwich process

Customer
Request
Raw Assembly Take
Materials Payment

Customer
Request

Customized sandwich old process

 Process Analysis
Customised sandwich new
process
Assemble whole
sandwich

Assembly of Use standard Take

“sandwich No Payment
“base”?
bases”

Fillings

Bread and Yes

Base filling
Customer Request
Stored “Bases” Assemble from
standard “base”
The operation of making
and selling customised
sandwiches Assemble as Take
Prepare required payment
Sandwich Customers
materials and “assembled” to
customers sandwiches

Bread and
Base filling The outline process of making
and selling customised
Assemble whole
sandwiches
sandwich
Use standard
“base”?
No

Yes Fillings
Customer The detailed process of
Request assembling customised
sandwiches
Assemble from
standard “base”
Stored
“Bases”
Using process maps to improve processes
 Throughput, Cycle time and Work-in-process
• Work content (the total amount of work required to
produce a unit of output)
• Throughput time (the time for a unit to move through the
process)
• Cycle time of the process, the average time between units
of output emerging from the process.
• Work-in-process (or work-in-progress) sometimes
written as WIP is when customers join the queue in the
process
• Little’s Law:
• Throughput time = Work-in-process × Cycle time
• Percentage throughput efficiency:
= Work content × 100
Throughput time
 What is process design?
What is process design?
Design is the activity which shapes the physical form and purpose of
both products and services and the processes that produce them.
This design activity is more likely to be successful if the
complementary activities of product or service design and process
design are coordinated.
What objectives should process design have?
The overall purpose of process design is to meet the needs of customers
through achieving appropriate levels of quality, speed,
dependability, flexibility and cost.
The design activity must also take account of environmental issues.
These include examination of the source and suitability of materials,
the sources and quantities of energy consumed, the
amount and type of waste material, the life of the product itself, and the
end-of-life state of the product.
 What is process design?
How do volume and variety affect process design?
The overall nature of any process is strongly influenced by the volume and variety of what it
has to process. The concept of process types summarizes how volume and variety affect
overall process design. In manufacturing, these process types are (in order of increasing
volume and decreasing variety) project, jobbing, batch, mass and continuous processes.
In service operations, although there is less consensus on the terminology, the terms often
used (again in order of increasing volume and decreasing variety) are professional
services, service shops and mass services.
How are processes designed in detail?
Processes are designed initially by breaking them down into their individual activities. Often
common symbols are used to represent types of activity. The sequence of activities in a
process is then indicated by the sequence of symbols representing activities. This is called
‘process mapping’. Alternative process designs can be compared using process maps and
improved processes considered in terms of their operations performance objectives.
Process performance in terms of throughput time, work-in-progress, and cycle time are
related by a formula known as Little’s law: throughput time equals work-in-progress
multiplied by cycle time. Variability has a significant effect on the performance of
processes, particularly the relationship between waiting time and utilization.
Mike was totally confident in his judgment, ‘You’ll never get them back in
time’, he said. ‘They aren’t just wasting time, the process won’t allow them to
all have their coffee and get back for 11 o’clock.’ Looking outside the lecture
theatre, Mike and his colleague Dick were watching the 20 business people
who were attending the seminar queuing to be served coffee and biscuits. The
time was 10.45 and Dick knew that unless they were all back in the lecture
theatre at 11 o’clock there was no hope of finishing his presentation before
lunch. ‘I’m not sure why you’re so pessimistic’, said Dick. ‘They seem to be
interested in what I have to say and I think they will want to get back to hear
how operations management will change their lives.’ Mike shook his head.
‘I’m not questioning their motivation’, he said, ‘I’m questioning the ability of
the process out there to get through them all in time. I have been timing how
long it takes to serve the coffee and biscuits. Each coffee is being made fresh
and the time between the server asking each customer what they want and them
walking away with their coffee and biscuits is taking 48 seconds. Remember
that, according to Little’s law, throughput equals work-in-process multiplied by
cycle time. If the work-in-process is the 20 managers in the queue and cycle
time is 48 seconds, the total throughput time is going to be 20 multiplied by 0.8
minute which equals 16 minutes. Add to that sufficient time for the last person
to drink their coffee and you must expect a total throughput time of a bit over
20 minutes. You just haven’t allowed long enough for the process.’ Dick was
impressed. ‘Err . . . what did you say that law was called again?’ ‘Little’s law’,
said Mike.
 Worked example
• Every year it was the same. All the workstations in the
building had to be renovated (tested, new software installed,
etc.) and there was only one week in which to do it. The one
week fell in the middle of the August vacation period when
the renovation process would cause minimum disruption to
normal working. Last year the company’s 500 workstations
had all been renovated within one working week (40 hours).
Each renovation last year took on average 2 hours and 25
technicians had completed the process within the week.
This year there would be 530 workstations to renovate but
the company’s IT support unit had devised a faster testing
and renovation routine that would only take on average 11/2
hours instead of 2 hours. How many technicians will be
needed this year to complete the renovation processes
within the week?
Last year :
Work-in-progress (WIP) = 500 workstations
Time available (Tt ) = 40 hours
Average time to renovate = 2 hours
Therefore throughput rate (Tr) = 1/2 hour per technician = 0.5N
where N = Number of technicians
Little’s law: WIP = Tt × Tr
500 = 40 × 0.5N
N= 500 = 25 technicians
40x0.5
This year:
Work-in-progress (WIP) = 530 workstations
Time available = 40 hours
Average time to renovate = 1.5 hours = 0.67 N N = Number of Technicians
Throughput rate (Tr) = 1/1.5 per technician = 0.67N where N = Number of
technicians
Little’s law: WIP = Tt × Tr
530 = 40 × 0.67N
N = 530
40 × 0.67
= 19.88 technicians
A vehicle licensing centre receives application documents, keys in details,
checks the information provided on the application, classifies the
application according to the type of licence required, confirms payment and
then issues and mails the licence. It is currently processing an average of
5,000 licences every 8-hour day. A recent spot check found 15,000
applications that were ‘in progress’ or waiting to be processed. The sum of
all activities that are required to process an application is 25 minutes. What
is the throughput efficiency of the process?
Work-in-progress = 15,000 applications
Cycle time = Time producing
Time producing = 8 hours = 480 min = 0.96 min
Number produced 5000 5000

From Little’s Law,

Throughput time = WIP × Cycle time
Throughput time = 15,000 × 0.096
= 1,440 minutes = 24 hours = 3 days of working
Throughput efficiency = Work content= 25 = 1.74 per cent
Throughput time 1440
 Assignment
• Visit a drive-through quick-service restaurant and
observe the operation for half an hour. You will
probably need a stop watch to collect the relevant
timing information. Consider the following questions.
• (a) Where are the bottlenecks in the service (in other
words, what seems to take the longest time)?
• (b) How would you measure the efficiency of the
process?
• (c) What appear to be the key design principles that
govern the effectiveness of this process?
• (d) Using Little’s law, how long would the queue
have to be before you think it would be not worth
joining the queue?