©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 1 8004OMGT Operations Management Topic 3 Topic 3: Process design and analysis In this subject, processes form the basic unit of importance. The operations manager rarely has the opportunity to design a brand new process because this is usually done by engineers and other experts. But the operations manager is usually heavily involved in specifying the configuration of the process and its operating performance requirements. In addition, on joining a company, operations managers often ‘inherit’ old processes and they then have an opportunity to analyse and redesign the process. So a deeper understanding of processes is vital for the successful management of operations. In studying this topic, we look firstly at what type of process is most appropriate for the required processing work. This means studying how processes are positioned against each other in terms of their relative performance characteristics for particular tasks. Secondly, once this is understood, the process can then be mapped and analysed in detail to obtain the optimum productivity and performance profile particularly in terms of cost, output, and resources. Knowledge of these two issues then allows us to better understand how organisational processes are designed. This topic contains the following parts:  Process design – positioning  Process design – analysis  Process configuration Learning resources Chapters 4 and 5 of the textbook: Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2015, Operations and process management, 4th edn, Pearson Education Limited, Harlow. Chapters 4 and 5 of the 3rd edition are also suitable. (For users of the 3rd edition, note that the section on customer experience mapping is new in the current textbook and is reproduced in the approved reading, Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2015, Operations and process management, 4th edn, Pearson Education Limited, Harlow, pp. 154–156.) Key terms and concepts - Volume/variety influence - Types of processes - Process layout - Process technology - Job design - Process performance objectives - Flow process diagram - Process mapping - Throughput rate - Throughput time - Cycle time - Parallel process configuration - Process capacity and balance - Business process reengineering - Process flow objectives - Little’s law - Process variability ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 3 8004OMGT Operations Management Topic 3 Part 1: Process design – positioning As mentioned in the introduction, one of the first considerations in process design is what process is right for the particular tasks. An operations manager must be able to step back and see the operations objectives in the light of the organisation’s guiding business strategy as discussed in Topic 1. In most organisations, it is too easy to accept the existing (often old) processes and try to make them work while ignoring the changed needs of the market including the new customer Internet technologies. We might be tempted to just put all our effort into analysing the existing process when what is required is a new process that has a far greater fit with the operation’s strategy needed to drive the business forward. In order to better understand these issues, we look more closely at volume/variety issues, process objectives, process layout, process technology, business process reengineering and job design. Volume-variety The textbook rightly points out that the position of a process on the volume/variety scale establishes what type of process it will be, including its technology and job design (Slack et al. 2015). Note that the volume/variety question is ultimately decided by the market place, so we need to have done our marketing homework before beginning process design. Projects are almost infinitely variable in variety but are mostly one-off in volume. (Some housing projects try to standardise variety and deliver batches of the same design of home, but volume is still low.) Jobbing processes are repetitive but high in variety, for example, the way your car is repaired after an accident. Students are processed in classroom batches. Mass production is used for cars, canned food and any product where output volume is high and variety is low. Continuous processes are typically used to process commodities. Services also tend to follow these process definitions. For example, professional services are customised to your particular unique needs and cannot be used for anyone else. Mass services are the same for everyone. For example, McDonald’s service is virtually identical worldwide. The volume/variety decision is a response to the needs of the market. This greatly influences the type of process required to deliver those needs. Note that the five process performance objectives of quality, speed, reliability, flexibility and cost are linked to the volume/variety decision, and, in turn, they determine the process flow objectives, namely: the flow rate, throughput time, WIP inventory, and resource utilisation. The process objectives are the starting point for the design. The designer can then begin to think about the layout, the technology and the human interfaces. Process layout Layout analysis is a very big area of operations management and we can do little justice to it here other than to indicate its importance and the factors that are used in layout evaluation. Layout analysis is really a form of location analysis – the location of facilities within a ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 4 8004OMGT Operations Management Topic 3 process. Supermarkets pinpoint the location of every product in the layout of the store. A good layout maximises operational effectiveness and efficiency. The volume/variety effect on layout is clear. For example, the hairdresser operates a high variety/low volume process that is fixed in layout. You should study the four basic layout types (fixed position, functional, cell and product) and look for them in your own organisation. The basic objectives of layout design are to minimise unnecessary movement or transport and to optimise workflow productivity through close physical cooperation between like units. In studying this issue, pay particular attention to the textbook’s identification of the role of transforming resources as distinct from transformed resources. This helps to identify the layout types. Process technology The process technology decision is a cost/benefit trade-off exercise among competing technologies. For example, to heat a swimming pool, there are two liquid fuel technologies (a) the first one costs around $5000 for equipment, but the burner can burn cheap waste oil or any cheap combustible oil; and (b) the second one costs around $500 for the equipment but can only burn a very high grade and expensive oil. Both do an equivalent job. Which one should we choose? A comparative analysis of fixed and variable costs for the volume of heating required will tell us how they compare cost-wise. Similar trade-offs occur with the degree of automation and the scale or flexibility of the technology. Business process reengineering Business process reengineering or BPR is a blend of ideas aimed at completely regenerating existing processes based on fast throughput, waste elimination through process flow charting, customer focused operations, and so on. Business process reengineering is sometimes seen as a more radical approach to improving a process, but in the fast pace of today’s business markets, this is often necessary. An operations manager will only rarely have the opportunity to introduce a new process into a new organisation – an ideal situation. This means that existing processes must be constantly reviewed to determine if they are still the most appropriate means of production. Job design Finally, the job environment can be critical to the design and productivity of the process. For example, a high variety/low volume process will probably demand more from people than a low variety/high volume process, so the design of the jobs needs to suit the process. The textbook covers the basics of job design so there is little need to go further here. It should be noted that technology automation is not always the key to productivity improvement. Where job design allows for a conducive working environment (full commitment, a degree of self-determination, decision making and autonomy within the work group), people resources are often responsible for extraordinary increases in process productivity. The design-positioning of processes is a very important concept. You should know and be able to apply each of the factors described in this part because they go together in designing the right type of process to use. ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 5 8004OMGT Operations Management Topic 3 Textbook Read pages 115–137 in the textbook (pages 109–130 of the 3rd edition). Note particularly the volume-variety section and associated diagrams, and the four basic layout types described in Figure 4.6 on page 127 of the textbook (page 121 of the 3rd edition). Activity 3.1 A call centre issue: As an unemployed customer of a social security centre, you have just had a very good interview with a social worker assessing your unemployment benefits. You have to provide some additional information which you agree with the social worker to phone through as soon as you get home. At home you call the social security centre only to be greeted by automated call options. After waiting twenty minutes, you are put through to a call centre and have to explain, according to a standard format, who you are and what your current business is with the centre, and how you can be helped. The call centre is in another part of the country and the operator only knows the standard rules which state that you must go to the local centre in person to report any information. Examine this situation in terms of process improvement. Are there other possible communication processes that an organisation might use to handle such calls rather than assuming that all customers have only standard information requirements? Why do you think call centres have arisen as a popular customer communication method? According to volume/variety and related standards of performance, do call centres work effectively? For example, is there a mismatch between this customer’s needs and the design of the process delivering the customer service? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ Activity 3.2 Complete Exercise 4 page 141 of the textbook (page 134 of the 3rd edition). ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 6 8004OMGT Operations Management Topic 3 Part 2: Process design – analysis The textbook examines the detailed structure of the process and the design of the process sequence, and the individual tasks within that sequence. This analysis is based on the assumption that the right type of process is in place according to the concepts mentioned in Part 1 above. Note the two process examples and consider how you would view the detailed operations processes of your own organisation. Process performance objectives As mentioned in Topic 1, the five performance objectives are discussed throughout the topics. In this section, note the role of the process performance objectives in the design of the process and the individual tasks within the process. The process design and analysis will depend on quantifying the performance of each of the relevant objectives and then attempting to improve on that performance. For example, how do you manage your tasks in the morning in order to get to work on time? You know that speed is important but unless you measure how long tasks actually take (breakfast, for example), it is not possible to analyse and improve the speed. Finally in this section, note Table 5.2 on page 151 of the textbook (page 144 of the 3rd edition) which lists some common process design terms. Understanding the current process design One of the best ways to understand what any process does is to draw a diagram (process mapping) showing the sequence of activities in the process. All processes are sequential in some way and the various activities can be represented in a flow process diagram. This diagram is drawn using standard symbols to represent an operation or task, storage or inventory (such as work in process), movement or flow, delays, inspection tasks, and so on. The textbook shows two types of symbols–those derived from scientific management and those derived from systems analysis. It is helpful to use the systems analysis symbols for ‘decision’ type processes which are often the basis of service processes. The scientific management symbols are very useful for mapping a straightforward physical work process. Here is an example. You will understand that in a McDonald’s restaurant, there are two familiar core processes–producing the burgers and serving the customer. Serving the customer is both a physical process and a decision process. For example, does the customer want fries, or an upgrade, or desserts? The decision type process works well in mapping this sequence of tasks and decisions. In contrast, the preparation of the burger follows a standard sequence of physical tasks that can be mapped without need for a decision. Flow diagrams follow the basic input/process/output model for every task in the system, and drawing the diagram simply means studying each small input/output process and fitting them all together in their ordered sequence. At a practical level, start with a large sheet of paper and then gradually refine the drawing into a nice tight arrangement of the tasks in the system. Try modelling simple systems before tackling more complex ones. Most of the systems in McDonald’s are visible to customers and you could try mapping the different processes there. ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 7 8004OMGT Operations Management Topic 3 Note also the diagrams in the textbook showing examples of process mapping. You should be familiar with process diagrams and how they can be used to analyse and improve a process. It is a good idea to study practical examples of processes in your local region. Note that the section on customer experience mapping is new in the current textbook and is reproduced in Appendix 1 for the benefit of students using the 3rd edition and due to the growing importance of operations management in service industries. Textbook Read pages 143–156 of the textbook (pages 137–148 of the 3rd edition). Users of the 3rd edition should also read the prescribed reading (Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2015, Operations and process management, 4th edn, Pearson Education Limited, Harlow, pp. 154–156.) Activity 3.3 Complete Exercise 1 on page 175 of the textbook (page 167 of the 3rd edition). ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ Part 3: Process configuration Now that we can draw the process and understand what it does, we can try to determine how well it does what it was designed to do and whether or not it can be improved. The main reason for drawing and analysing a process is to see if the production rate can be improved, costs reduced or bottlenecks reduced. This means measuring the flow rate of the process and the individual tasks (the cycle time), checking the balance of cycle times through the system, and noting how much, by way of manpower, energy and other resources are consumed in the process. Note that the textbook mentions the term ‘capacity’ in this section. This is because the capacity of any process is based on how much it can produce in a given period of time. Consequently, one question the operations manager always has is, ‘How can we increase the capacity of the process in a cost effective way?’ There is a variety of ways to do this as mentioned in the textbook – task precedence, series and parallel configuration, cycle time and process flow, process balancing, and the relationship between throughput, cycle time and work in process (Slack et al. 2015). Note the ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 8 8004OMGT Operations Management Topic 3 computer repair service as a good example of the different process configurations (see page 157 of the textbook; page 149 of the 3rd edition). Parallel processing does tasks at the same time rather than in sequence, such as, opening another checkout in the supermarket to increase the overall service rate. Balancing the flow through the system can also reduce delays and increase output. The following diagram shows a simple but unbalanced flow process, i.e. task output rates are not equal or in balance. Source: developed for topic. The longest task in a sequential system sets the output rate. The output rate of this simple process here is the rate of Task B at 5 per hour, and it does not matter that we have faster tasks in the system. Task B is a bottleneck. What can we do? Adding a parallel Task B will double the output rate and balance the flow. Other solutions such as upgrading the technology for Task B could also be considered. What about the cost? If cycle time is acceptable and cost is important, another possibility is to have only two workers, with the Task A operator swapping to Task C. Throughput time would be almost the same (in theory) and labour cost would drop by one third. Cycle time is the production time between completed units of output. Note that in the simple process shown above it takes 6 minutes for Task A, 12 minutes for Task B and 6 minutes for Task C = 24 minutes total time to make one unit. However, because the tasks are sequential, the time between each unit of output is only 12 minutes (5/hour) because there is more than one unit being processed at any given time. This is the cycle time. Every 12 minutes, a new unit is output from the process. Process capacity is the maximum output of the system. The output capacity of this system is 5 units per hour. Note that the capacity of the passport office example on pages 161–162 of the textbook (page 154 of the 3rd edition) is incorrectly stated. The staffing of a process is a resource input to the process, not a good means of measuring capacity. To be more correct, it should read ‘the capacity of this process is 1600 passports per week based on a staff of 20 people’. Finally, Little’s Law is a useful calculation of the impact of work-in-process on throughput and cycle time, i.e. throughput time = work-in-process x cycle time. If 1000 units arrive to be processed through Tasks A, B and C in the diagram above, throughput time = 1000 x 12min = 200 hours. In summary, we have barely touched the kind of analysis that can be done once a process flow diagram has been completed. There are simulation programs available that can animate Task A Task B Task C Output 10/hour Output 5/hour Output 10/hour Build-up in work-inprocess inventory Delays & waiting time for Task C Input Output ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 9 8004OMGT Operations Management Topic 3 the process as an operating system, highlighting bottle necks, delays and unnecessary work in process inventories, as well as accumulating statistics on the performance of the process.1 Finally, note briefly the section in the text on process variability. You should have a basic appreciation of the significance of process variation and the sources of variability. This section of the textbook is very important and you should expect an exam question to ask how you would apply the theory to a practical process that you know about in your own company or have observed in your local region. For example, you may be given a process diagram in the exam and be asked to explain how to analyse the process and suggest improvements using the configuration options mentioned in the text. There may not be a direct exam question on process variability, but advanced students might discuss the issue as part of their answer to a more general question on process design. Textbook Read pages 156–170 of the textbook (pages 149–163 of the 3rd edition). In particular, note the computer repair service example on pages 156–161 (pages 149–153 of the 3rd edition), and the example of Little’s law at a seminar on pages 163–165 (pages 156–157 of the 3rd edition). Note the sources of process variability on page 166 (page 159 of the 3rd edition). Advanced students may want to peruse the remaining issues in process variability and the associated queuing theory in the supplement to Chapter 5 at the end of the chapter. Conclusion In summary, this topic is concerned with some of the most important issues that an operations manager should know – how to understand, manage and improve processes in the organisation. Three important process concepts were covered: processes design – positioning, process design – analysis, and process configuration. The issues and concepts in this topic underpin the discussion of the management of processes and operations throughout the remainder of this subject. References Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2015, Operations and process management, 4th edn, Pearson Education Limited, Harlow. Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2012, Operations and process management, 3rd edn, Pearson Education Limited, Harlow. 1 SimSoft (http://www.simsoftks.com/) is one such simulation modelling package. ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 10 8004OMGT Operations Management Topic 3 Feedback about activities Activity 3.1 A call centre issue: As an unemployed customer of a social security centre, you have just had a very good interview with a social worker assessing your unemployment benefits. You have to provide some additional information which you agree with the social worker to phone through as soon as you get home. At home you call the social security centre only to be greeted by automated call options. After waiting twenty minutes, you are put through to a call centre and have to explain, according to a standard format, who you are and what your current business is with the centre, and how you can be helped. The call centre is in another part of the country and the operator only knows the standard rules which state that you must go to the local centre in person to report any information. Examine this situation in terms of process improvement. Are there other possible communication processes that an organisation might use to handle such calls rather than assuming that all customers have only standard information requirements? Why do you think call centres have arisen as a popular customer communication method? According to volume/variety and related standards of performance, do call centres work effectively? For example, is there a mismatch between this customer’s needs and the design of the process delivering the customer service? This is a common occurrence these days. Some organisations have outsourced their call centres to overseas call centre operators whose language(s) and accent(s) are often very difficult to understand. Automated phone answering software and call centres appear to have been taken up by companies wanting to cut the cost of processing an increasing volume of customer enquiries. Organisations have analysed query patterns and have found many queries are common to the majority of callers. Unfortunately, customers do not know that their query is a common one until they are channelled into the automated response system. This creates a dissonance or negativity in the mind of the customer. Most callers believe their query is uniquely important to them alone, whereas it may be a very common issue. The mismatch between customer and process is that the customer is looking for a unique experience, e.g. a professional service response (high variety/low volume process), whereas the actual process delivers more of a mass service response. Is there a better way? It is hard to believe that companies could not improve their routine communication with customers. The process is right for the standard common query, but is often seriously wrong for the caller who has a genuine unique query. This suggests that a different process is needed. ©Australian Institute of Business. 1A_05MAY17_SB-JJB:2015:4ed 11 8004OMGT Operations Management Topic 3 Activity 3.2 Complete Exercise 4 page 141 of the textbook (page 134 of the 3rd edition). First, think about the effect of volume and variety on the services that universities provide. How might positioning some of these services at different points on the volume-variety spectrum affect the cost of their delivery? Layout is probably not a critical issue for traditional university education processes, but it can have some effect on costs. Of more interest are the other two volume-variety related decisions of technology and job design. In particular, the use of internet-based technology, either to support existing business processes or to create entirely new business opportunities, has significant potential. The most obvious impact of e-business (or e-education) has been that it increased both reach (the number of customers who could be reached and the number of items they could be presented with) and richness (the amount of detail which could be provided concerning both the items on sale and customers’ behaviour in buying them). Traditionally, selling involved a trade-off between reach and richness. The Internet effectively overcame this trade-off. However, the Internet has had equally powerful implications for the ongoing provision of services. Similarly, the nature of the individuals engaged in teaching (and what they do, and why they do it) will have an effect on the cost of providing services. Consider the broad range of activities that the staff of universities are expected to engage in. How many of these support the provision of low cost services? How many of them (no matter how worthwhile) act against providing low cost services? For example, most university teachers are engaged in research which often does not directly benefit the student and which prevents lecturers from excelling in the industry application issues so important to students. This adds to the university cost base, but does not improve teaching productivity. Activity 3.3 Complete Exercise 1 on page 175 of the textbook (page 167 of the 3rd edition). You may find this a difficult activity because you may not have even considered these processes as processes before. Mapping the process from a customer’s point of view could be relatively straightforward. However, mapping the ‘back-office’ processes is more difficult unless you can gain access. If you cannot, think about how you would design the ‘backoffice’ process if you were asked to be its operations manager. The most difficult part of the exercise is the last question. In essence, it asks you to consider the conflicts between improving the process from the customer’s perspective and improving it from the processes perspective. When doing this activity think of the differences between what these two perspectives imply. For example, if you were in charge of the process, what would you want to do versus if you were a customer, what would you want the process to do. Maybe there is conflict, but usually there is an ‘efficiency versus level of service’ issue to be resolved.