2.

PROCESS STRATEGY

Dr. Muhammad Mutasim Billah

 Processes
• Processes involve the use of an
organization’s resources to provide
something of value and are
perhaps the least understood and
managed aspect of a business.
No service can be provided and
no product can be made
without a process, and no
process can exist without
at least one service or product.
Even with talented and
motivated people, a firm cannot
gain competitive advantage with
faulty processes.
 Process Strategy
A process strategy is an organization approach to
transforming resources into goods and services. The
objective is to create a process that can produce offerings
that meet customer requirements within cost and other
managerial constraints .
Process strategy guides a variety of
process decisions, and in turn is guided by
operations strategy and the organization’s
ability to obtain the resources necessary
to support them.
Operations Process Process
Strategy Strategy Decisions
Process Strategy Decisions
1. Process structure:
It determines the process type relative to
the kinds of resources needed, how
resources are partitioned between them,
and their key characteristics. A layout,
which is the physical arrangement of
operations created from the various
processes, puts these decisions into
tangible form.

2. Customer involvement:
It reflects the ways in which customers
become part of the process and the
extent of their participation.
3. Resource flexibility:
It is the ease with which employees and
equipment can handle a wide variety of
products, output levels, duties, and
functions.

4. Capital intensity:
It is the mix of equipment and human skills
in a process. The greater the relative cost
of equipment, the greater is the capital
intensity.
 1. Process Structure in Services
Customer Contact: (example of five star and fast-food restaurant strategies in service)

The extent to which the customer is present, is actively involved, and

receives personal attention during the service process.
Process divergence:
The extent to which the process is highly customized with considerable
latitude as to how its tasks are performed. (process at hospital) /Consulting , law and architect
A service with low divergence, on the other hand, is repetitive and standardized.
Flexible flow:
The customers, materials, or information move in diverse ways, with the path of one
customer or job often crisscrossing the path that the next one takes . Rides at amusement park
Line Flow
• A line flow means that the customers, materials, or information
move linearly from one operation to the next, according to a fixed
sequence. (Process at nadra.)
Customer-Contact Matrix For Service Processes
 Service Process Structuring
Front Office :
A process with high customer contact where
the service provider interacts directly with
the internal or external customer.
Hybrid office:
A process with moderate levels of customer
contact and standard services with some
options available
Back office:
A process with low customer contact and
little service customization.
• (Eg of bank and hospital)
 Process Structure in Manufacturing
• Manufacturing Process Structuring
Process choice: A way of structuring
the process by organizing resources
around the process or organizing them
around the products.
Job process: A process with the
flexibility needed to produce a wide variety
of products in significant quantities, with
considerable divergence in the steps
performed. law offices, medical practices, automobile repair
Batch process: A process that differs
from the job process with respect to
volume, variety, and quantity classes within universities
 Line process : A process that lies
between the batch and continuous
processes on the continuum; volumes
are high and products are standardized,
which allows resources to be organized
around particular products.

Continuous flow process: The

extreme end of high-volume standardized
production and rigid line flows, with
production not starting and stopping for
long time intervals.
Product-Process Matrix For Manufacturing

https://www.youtube.com/watch?v=U_hGhCYqbg4
 Production and Inventory
Strategies
• 1. Design-to-order strategy
• A strategy that involves designing new products
that do not currently exist, and then
manufacturing them to meet unique customer
specifications. (bridal dresses)

• 2. Make-to-order strategy
• A strategy used by manufacturers that make
products to customer specifications in low
volumes. (biryani)
 Cont.

• 3. Assemble-to-Order Strategy
• A strategy for producing a wide variety of
products from relatively few subassemblies
and components after the customer orders
are received .(dell,HP)

• Postponement
• The strategy of delaying final activities in the provision of a
product until the orders are received.

• Mass customization
• The assemble-to-order strategy is also linked to mass
customization, where highly divergent processes generate a
wide variety of customized products at reasonably low costs.
• China Customized products
• 4. Make-to-Stock Strategy
• Manufacturing firms that hold items in stock for
immediate delivery, thereby minimizing customer
delivery times, use a make-to-stock strategy.
(electronic components, soft drinks, and chemicals).

• Mass production
• A term sometimes used in the popular press for a
line process that uses the make-to-stock strategy.
(News Paper Press)
• Assignment #1
• Page65---- Problem#
1,2,3,12,14,15,16

• Assignment #2
• DIY
 2.CUSTOMER INVOLVEMENT
• THE WAYS IN WHICH CUSTOMERS
BECOME PART OF THE PROCESS
AND THE EXTENT OF THEIR
PARTICIPATION.

– ebay
• Possible Advantages
• The advantages of a more customer-focused process
might increase the net value to the customer.
• More customer involvement can mean better quality,
faster delivery, greater flexibility, and even lower
cost.
• Self-service is the choice of many retailers, such as
gasoline stations, supermarkets, and bank services.
Manufacturers of products (such as toys, bicycles,
and furniture) may also prefer to let the customer
perform the final assembly because product,
shipping, and inventory costs frequently are lower.
 Possible Disadvantages

• Customer involvement is not always a

good idea.
• In some cases, giving the customer more
active contact in a service process will
just be disruptive, making the process
less efficient. (green garden Restaurant Malaysia)
• Managing the timing and volume of
customer demands becomes more
challenging if the customer is physically
present and expects prompt delivery.
• Exposing the facilities and employees to
the customer can have important quality
implications (favorable or unfavorable). Eg
(Dominos Pizza)
 3.RESOURCE FLEXIBILITY
• THE EASE WITH WHICH EMPLOYEES AND EQUIPMENT CAN
HANDLE A WIDE VARIETY OF PRODUCTS,OUTPUT LEVELS,
DUTIES AND FUNCTIONS.
• WORKFORCE(Flexible)
• A workforce whose
members are capable
of doing many tasks,
either at their own
workstations or as they
move from one
workstation to another.
Ex: Iftekhar food installation
• EQUIPMENT

– FLEXIBLE GEN.PURPOSE EQPT. FOR

HIGH DEGREE OF CUSTOMISATION,
LOW VOLume.,LOW F.COST,HIGH V.C.

– SPECIAL PURPOSE,HIGH VOL., LOW

CUSTOMISATION, LOW V.COST,HIGH
F.COST,

–.
PROCESS Costs and Volume
Total cost (dollars)

Process 1:
General-purpose
F1 equipment

Units per year (Q)

Process Costs and Volume

Process 2:
Special-purpose
Total cost (dollars)

equipment

Process 1:
F2 General-purpose
equipment
F1

Units per year (Q)

 Process Costs and Volume

Process 2:
Special-purpose
Total cost (dollars)

equipment

Break-
even
quantity

Process 1:
F2 General-purpose
equipment
F1

Units per year (Q)

 4.Capital Intensity

Capital intensity is the mix of equipment

and human skills in the process; the greater
the relative cost of equipment, the greater
is the capital intensity. (100% automation is not always desirable)
As the capabilities of technology increase
and its costs decrease, managers face an
ever-widening range of choices, from
operations utilizing very little automation to
those requiring task specific equipment and
little human intervention.
Automation : A system, process, or piece
of equipment that is self-acting and self-
regulating.
Fixed automation : A manufacturing
process that produces one type of part or
product in a fixed sequence of simple
operations. (Manufacturing of car steering)
Flexible (programmable)Automation :
A manufacturing process that can be
changed easily to handle various products.
(iftekhat food industry plant)

Industrial robot : Versatile, computer-

controlled machine programmed to perform
various tasks. (PLC Programmer UIM)
 Economies of scope
• Economies of scope reflect the ability to
produce multiple products more cheaply
in combination than separately.(producing multiple
product portfolio at same facility) hilal food plant multiple product production)

• In such situations, two conflicting

competitive priorities—customization
and low price—become more
compatible. (normally customization and low prices are inversely
proportional)

• However, taking advantage of

economies of scope requires that a
family of parts or products have enough
collective volume to utilize equipment
fully.
 Strategic fit
• The manager should understand how the four
major process decisions tie together, so as to
spot ways of improving poorly designed
processes.
• The choices should fit the situation and each
other.
• When the fit is more strategic, the process will
be more effective. We examine services and
manufacturing processes, looking for ways to
test for strategic fit.
 Decision Patterns
for Manufacturing Processes

Figure 2.5
 Strategies for Change
• Process Reengineering : is the
fundamental rethinking and radical
redesign of processes to improve
performance dramatically in terms
of cost, quality, service, and speed.
• Process reengineering is about
reinvention, rather than incremental
improvement. It is strong medicine
and not always needed or
successful.
• Process Improvement : is the
systematic study of the activities and
flows of each process to improve it.
• Its purpose is to “learn the numbers,”
understand the process, and dig out
the details.
• Once a process is really understood, it
can be improved.
• The relentless pressure to provide
better quality at a lower price means
that companies must continually
review all aspects of their operations.
Eg Starbucks case study.
Cost Reduction of a Bracket
via Value Engineering

Figure 5.5
3.ANALYZING
PROCESSES
Dr.Muhammad Mutasim Billah
Six Sigma (DMAIC Approach)
1. Defines the project’s purpose, scope, and
outputs, identifies the required process
information keeping in mind the customer’s
definition of quality
2. Measures the process and collects data
3. Analyzes the data ensuring
repeatability and reproducibility (same result)
DMAIC Approach
4. Improves by modifying or
redesigning existing
processes and procedures
5. Controls the new process
to make sure performance
levels are maintained
https://www.youtube.com/watch?v=dwwiOZoc32E
Process Design and Improvement
 Documenting and Evaluating the Process
• Flowcharts
• Process Charts
• Data Analysis Tools
• Checklists
• Histograms and Bar Charts
• Pareto Charts
• Scatter Diagrams
• Cause-and-Effect Diagrams
DATA ANALYSIS TOOLS
• Checklists
• Histograms and Bar Charts
• Pareto Charts
• Scatter Diagrams
• Cause-and-Effect Diagrams
DATASHEET

• DEFINITION
• Data entries in a table of rows and
columns or on single cards.
• PURPOSE
• To organize, manage, and track data.
• To calculate relationships between data.
Check List
 HISTOGRAM

• DEFINITION
• Frequency distribution,
drawn as proportionally
sized bars.
• PURPOSE
• To compare distributions.
• To determine means and
modes.
• To identify population
control limits, mixtures,
abnormality, or errors.
BAR CHART
• DEFINITION
• Data points drawn as proportionally sized,
side-by-side or stacked bars….
• PURPOSE
• To compare distinct (non continuous) items.
(Countable)
 PARETO CHART
• DEFINITION
• Data points drawn as proportionally sized bars and
ranked by relative size, with or without a line indicating
cumulative total with the addition of each item.
• PURPOSE
• To break down broad causes into smaller categories
• To identify the vital few and the trivial many for
efficient problem-solving.
 Pareto Chart
 Bk. down broad causes into smaller category.
 Helps you to identify the vital few and the trivial many
for efficient problem-solving
RUN CHART

• DEFINITION
• Data points in time sequence, connected by
a line, with or without a filled area below the
line.
• PURPOSE
• To determine trends over time.
 Run Chart
 Determines trends over time
SCATTER CHART

• DEFINITION
• Multiple pairs of data plotted as points with
or without a regression line (straight line
that is the line of best fit for the data).
• PURPOSE
• To analyze the correlation, if any, between
two variables.
• To predict future relationships based upon
past correlations.
 Scatter Chart
 Analyzes the correlations, if any, between variables
 Predicts future relationships based upon past correlations
SPIDER CHART

• DEFINITION
• The current state plotted on a circle that
represents the desired or optional state.
• PURPOSE
• To visualize and compare the current state against
desired or optimal state.
 Spider Chart
 Visualizes and compares the current state
against the desired or optimal state
PIE CHART

• DEFINITION
• Percentages of a whole, depicted as proportionally
sized slices of a round pie.
• PURPOSE
• To visualize the proportions and relative
importance of contributing items.
 Pie Chart
 Visualizes the proportions and relative
importance of contributing items
EXAMPLE 2.2 Pareto Chart for a
Restaurant
• The manager of a neighborhood restaurant is concerned about the
lower numbers of customers patronizing his eatery. Complaints have
been rising, and he would like to find out what issues to address and
present the findings in a way his employees can understand.
• SOLUTION
• The manager surveyed his customers over several weeks and
collected the following data:
Bar Charts
Pareto Chart
Solved Problem 4

Vera Johnson and Merris Williams manufacture vanishing

cream. Their packaging process has four steps: (1) mix, (2)
fill, (3) cap, and (4) label. They have had the reported defects
analyzed, which shows the following:

Defect Frequency

Lumps of unmixed product

7
Over- or underfilled jars
18
Jar lids did not seal
6
Labels rumpled or missing
29
Total
60
Draw a Pareto chart to identify the vital defects.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 4 – 58

Solved Problem 4

SOLUTION
Defective labels account for 48.33 percent of the total number
of defects:
29  100% = 48.33%
60
Improperly filled jars account for 30 percent of the total
number of defects:
18  100% = 30.00%
60

The cumulative percent for the two most frequent defects is

48.33% + 30.00% = 78.33%

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 4 – 59

Solved Problem 4

7
Lumps represent  100% = 11.67% of defects;
60
the cumulative percentage is

78.33% + 11.67% = 90.00%

6
Defective seals represent  100% = 10.00% of defects; the
60
cumulative percentage is

10% + 90% = 100.00%

The Pareto chart is shown in Figure 4.16

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 4 – 60

Solved Problem 4

40 – – 100
90% 100%
36 – – 90
78%

Cumulative Percentage of Defects

32 – – 80
Frequency of Defects

28 – – 70

24 – – 60
48%
20 – – 50

16 – – 40

12 – – 30

8– – 20

4– – 10

0– –0
Label Fill Mix Seal

Figure 4.16 – Pareto

Chart

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 4 – 61

The Wellington Fiber Board Company produces headliners, the
fiberglass components that form the inner roof
of passenger cars. Management wanted to identify which process
failures were most prevalent and to find the
cause.
SOLUTION
Figure 2.14 shows the sequential application of several tools for
improving quality.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 4 – 62

CAUSE & EFFECT DIAGRAM

 DEFINITION
 The relationships between a quality characteristic
(effect) and the factors that contribute to it
(causes).
 PURPOSE
 Tofind potential factors (causes) for a critical
effect.

4 – 63
Cause & Effect
Diagram Money is not part of this
diagram

Method Machine
Bi
g Medium Bone
Bo
ne
Backbone Poor
barbecue
Quality

Small Bone
Fine Bone
Man Material

4 – 64
 Cause-and-effect diagram for poor barbecue quality
Condiment Meat
Not well thawed
Consistency
Amount Type Poor marbling
Salt
Content
Spices
Fat Frozen too long
Marinade Not tender
Age
Time Type of cut Grade of meat
Amount Poor
Ingredient
barbecue
In a hurry On edge quality
Clean
Mood Wind Oiled
Rain
Attention Rack Starter
Temperature
Watch Position Charcoal
Talk to
game neighbor Skill
on TV
Position Type
Operator Weather Grill Amount

4 – 65
 Cause-and-effect diagram for “why tables are not cleared quickly”

Policy Procedures

Waitress not available

Can’t start clearing
soon enough Waitress spend too much time sorting
dishes in kitchen – less time to clear
Not allowed to clear until entire
Waitress must bring party has left
Bottlenecks in kitchen
check to desk Takes too long to pay check
No standard training
Credit card machine jams
Empty tables
are not cleared
Can’t Clear promptly quickly
Not enough staff at busy
times
Customers drink coffee endlessly
Takes long time to get to kitchen
High turnover
Waitresses don’t care
Kitchen is far from tables
Poor morale

Poor pay

People Physical Environment

4 – 66
Class Practice

 Consider the everyday task of getting to work on time or

arriving at your first class on time in the morning. Draw a
fish-bone chart showing reasons why you might arrive late
in the morning. Use 4M approach.(Man, Material, method,
machinery)

4 – 67
4 – 68
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 4 – 69
Cause & Effect /Fishbone/ ISHIKAWA
diagram
Example 2.3
Analysis of Inadequate Production of Headers
• A process improvement team is working to improve the production
output at the Johnson Manufacturing plant’s Header Cell that
manufactures a key component, headers, used in commercial air
conditioners. A header is part of the circulatory system of a
commercial air conditioner that moves coolant between various
components such as the evaporator coil and the condenser coil.
Currently, the header production cell is scheduled separately from
the main work in the plant. Often, individual headers are not
sequenced to match the product they go into on the final assembly
line in a timely fashion, and so the product can sit in queue waiting
for a header.
• SOLUTION
• As a first step, the team conducted extensive on-site observations across the six
processing steps within the cell, followed by the transport of the finished header to
the air conditioner assembly area for installation into an air conditioner unit. The
six processing steps included:
• 1. Cut copper pipes to the appropriate length.
• 2. Punch vent and stub holes into the copper log.
• 3. Weld a steel supply valve onto the top of the copper log.
• 4. Braze end caps and vent plugs to the copper log.
• 5. Braze stub tubes into each stub hole in the copper log.
• 6. Add plastic end caps to protect the newly created header.

• To analyze all the possible causes of the problem, the team constructed a cause-
and-effect diagram, shown in Figure 2.13. The main problem, inadequate header
production, is the head of the diagram. The team brainstormed all possible causes,
and together they identified several major categories: management, manpower,
method, measurement, machine, and materials, or the 6 M’s. Several suspected
causes were identified for each major category.
 Class Practice
• Plastomer, Inc., specializes in the manufacture of high-grade plastic film
used to wrap food products. Film is rejected and scrapped for a variety of
reasons (e.g., opacity, high carbon content, incorrect thickness or gauge,
scratches, etc.). During the past month, management collected data on
the types of rejects and the amount of scrap generated by each type.
The following table presents the results:
• Draw a Pareto chart to identify which type of failure management should
attempt to eliminate first.