Process Design

Strategies
Chapter 4

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Major Decisions for
Effective Process Design
Customer Involvement Resource Flexibility
• Low involvement • Specialized
• High involvement • Enlarged

Process Structure Strategy for Change

• Customer-contact • Process Effective
position (services) Reengineering Process
• Product-process • Process Design
position (manufacturing) Improvement

Vertical Integration Capital Intensity

• In-house • Low automation
• Outsource • High automation
Figure 3.1
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Different Dimensions of Customer
Contact in Service Processes
High Contact Dimension Low Contact

Present Physical presence Absent

People What is processed Possessions

Active, visible Contact intensity Passive, out of sight

Personal Personal attention Impersonal

Face to face Method of delivery Regular mail

Figure 3.2
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Customer-Contact Model for
Processes
Less Customer Contact and Customization

Service Package
(1) (2) (3)
Process High interaction with Some interaction with Low interaction with
Characteristics customers, highly customers, standard customers, standardized
Less Complexity, Less Divergence, More Line Flows

customized service services with some options services

(1)
Jumbled flows,
Front office
complex work with
many exceptions

(2)
Flexible flows with
some dominant
Hybrid office
paths, moderate job
complexity with
some exceptions

(3)
Line flows, routine Back office
work easily
understood by
employees

Figure 3.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Service Process Structures in
the Financial Services Industry
Front Office Hybrid Office Back Office
Sale of financial Creation of quarterly Production of
services performance report monthly client fund
balanced report
• Research customer • Data obtained
finances electronically • Data obtained
• Work with customer to • Report calculated using electronically
understand customer standardized process • Report run using
needs • Report reviewed using standardized process
• Make customized standardized diagnostic • Results checked for
presentation to systems “reasonableness” using
customer addressing • Manager provides well-established
specific customer needs written analysis and policies
• Involve specialized staff recommendations in • Hard copies and
offering variety of response to individual electronic files
services employee performance forwarded to analysts
• Continuing relationship • Manager meets with • Process repeated
with customer, reaction employee to discuss monthly with little
to changing customer performance variation
needs

Figure 3.4
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Process Repositioning at a Restaurant
Higher Complexity/Divergence Current Process Lower Complexity/Divergence

Specific table selection Take reservations No reservations

Recite menu, describe entrees Seat guests, Self-seating, menu on

and specials give menus blackboard

Assortment of hot breads and hors Serve water

Eliminate
d’oeuvres and bread

Take orders Customer fills out form

Individually prepared at table  Salad (4 choices) Already prepared, no choice
Expand to 20 choices; add flaming  Entrée (15 choices) Limit to 4 choices
dishes, bone fish at table, prepare
sauces at table

Expand to 12 choices  Dessert (6 choices) Sundae bar, self-service

Add exotic coffees, liqueurs  Beverage (6 choices) Coffee, tea, milk only

Separate course services, Serve salad and entrée

sherbet between courses; Serve orders together, bill and beverage
hand grind pepper together

Choice of payment, including

Collect payment Cash only, pay when leaving
house accounts; serve mints

Figure 3.5
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Product-Process Matrix for Processes
Less Customization and Higher Volume

Product Design
(1) (2) (3) (4) (5)
One of a kind Low volume, Multiple Few major High volume
products, made low products products, high
Process to customer standardization moderate higher standardization,
order volume volume commodity
Characteristics products
Less Complexity, Less Divergence, More Line Flows

(1)
Complex and
highly customized Project
process, unique process
sequence of tasks

(2)
Jumbled flows, Job
complex work with process
many exceptions

(3)
Batch
Disconnected line
flows, moderately process
complex work

(4) Line
Connected line, process
routine work

(5) Continuous
Continuous
flows, highly process
repetitive work

Figure 3.6
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Production and Inventory Strategies
• Make to order : A strategy used by manufacturers that
make products to customer specifications in low vol
Ex: Dell computers
• Assemble to order: A strategy for producing a wide
variety of products from relatively few assemblies and
components after the customer orders are received.
Ex: making of sofa and paint (any color can be produced at the paint
store by mixing standard pigments)

• Make to stock: involves holding items in stock for

immediate delivery, therrby minimizing customer delivery
time
Ex: Electronic components, soft drinks and chemicals

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 The Big Picture
King Soopers Bakery

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 The Big Picture
Figure 3.8
King7000Soopers Bakery
loaves/hr

1000
pastries/hr
50
cakes/hr

Bread Pastry Cake

line line line

High Low

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Decision Patterns for Service
Processes
High Contact Customer Contact Low Contact

Front office Back office

High complexity, Low complexity,
1. Process Structure
high divergence, low divergence,
and jumbled flows and line flows

High 2. Customer involvement Low

Varies 3. Vertical integration Varies

High 4. Resource flexibility Low

Varies 5. Capital intensity Varies

Figure 3.11
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
 Decision Patterns for
Manufacturing Processes
High Volume Customer Contact Low Volume

Line or continuous Project or job

process process
Low complexity, low 1. Process Structure High complexity,
divergence, and line high divergence,
flows and diverse flows

Low 2. Customer involvement High

High 3. Vertical integration Low

Low 4. Resource flexibility High

High 5. Capital intensity Low

Figure 3.11
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.