Om3 C07

PROCESS SELECTION,
DESIGN, AND ANALYSIS

CHAPTER 7
DAVID A. COLLIER AND JAMES R. EVANS
OM3 Chapter 7 Process Selection, Design, and Analysis

2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 7
PROCESS SELECTION, DESIGN, AND ANALYSIS
LO1 Describe the four types of processes used to

produce goods and services.
LO2 Explain the logic and use of the productprocess matrix.
LO3 Explain the logic and use of the servicepositioning matrix.
LO4 Describe how to apply process and value

stream mapping for process design.
LO5 Explain how to improve process designs and

analyze process maps.
LO6 Describe how to compute resource

utilization and apply Littles Law.
CHAPTER 7
called to make an airline flight reservation just an
hour ago. The telephone rang five times before a

recorded voice answered. Thank you for calling ABC
Travel Services, it said. To ensure the highest level of
customer service, this call may be recorded for future
analysis. Next, I was asked to select from one of the
following three choices: If the trip is related to
company business, press 1. Personal business, press 2.
Group travel, press 3. I pressed 1. I was then asked
to select from the following four choices: If this is a
trip within the United States, press 1. International,
press 2. Scheduled training, press 3. Related to a
CHAPTER 7
Now two minutes into my telephone call, I was

instructed to enter my 19-digit customer service
number. The voice then said: Thank you. An operator
will be with you shortly. Ten minutes passed and
then a real person answered the telephone. Please
give me your 19-digit customer service number I only
handle domestic reservations. Ill transfer you. A few
clicks later a message came on, saying: All of our
international operators are busy. Please hold, as your
business is important to us.

CHAPTER 7
What do you think?

Describe a situation
that you have
encountered in which a
process was
either well designed
and enhanced your
customer experience,
or poorly designed and
resulted in
dissatisfaction.
CHAPTER 7
Process Choice Decisions

Process design is an important
operational decision that affects the cost
of operations, customer service, and
sustainability.

CHAPTER 7
Process Choice Decisions Types of Goods and

Services
Custom, or make-to-order, goods and
services are generally produced and
delivered as one-of-a-kind or in small
quantities, and are designed to meet
specific customers specifications.
Examples include ships, weddings,
certain jewelry, estate plans, buildings,
and surgery.

CHAPTER 7

Services
Option, or assemble-to-order, goods
and services are configurations of
standard parts, subassemblies, or services
that can be selected by customers from a
limited
set. are Dell computers, Subway
Examples
sandwiches, machine tools, and travel
agent services.

CHAPTER 7

Services
Standard, or make-to-stock, goods and
services are made according to a fixed
design, and the customer has no options
from which to choose.
Examples are appliances, shoes,
sporting goods, credit cards, online Webbased courses, and bus service.

CHAPTER 7
Process Choice Decisions Types of Processes

Projects are large-scale, customized
initiatives that consist of many smaller tasks
and activities that must be coordinated and
completed to finish on time and within
budget.
Characteristics: One-of-a-kind, large
scale, complex, resources brought to site;
wide variation in specs and tasks.
Examples: Legal defense preparation,
construction, customer jewelry, consulting,
and software development.
10
CHAPTER 7

Job shop processes are organized around
particular types of general-purpose equipment
that are flexible and capable of customizing
work for individual customers.
Characteristics: Significant setup and/or
changeover time, batching, low to moderate
volume, many routes, many different products,
high work-force skills, and customized to
customers specs.
Examples: Many small manufacturing
companies are set up as job shops, as are
hospitals, legal services, and some restaurants.
11
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Flow shop processes are organized around
a fixed sequence of activities and process
steps, such as an assembly line, to produce a
limited variety of similar goods or services.
Characteristics: Little or no setup time,
dedicated to small range of goods or services
that are similar, similar sequence of process
steps, moderate to high volume.
Examples: Assembly lines that produce
automobiles and appliances, production of
insurance policies and checking account
statements, and hospital laboratory work.
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CHAPTER 7

A continuous flow process creates highly
standardized goods or services, usually
around the clock in very high volumes.
Characteristics: Very high volumes in a
fixed processing sequence, high investment
in system,
24-hour/7-day continuous operation,
automated, dedicated to a small range of
goods or services.
Examples: Chemical, gasoline, paint, toy,
steel factories; electronic funds transfer,
credit card authorizations, and automated
13
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14
CHAPTER 7
Process Choice Decisions

A product life cycle is a characterization of
product growth, maturity, and decline over time.
Four phases:
Introduction
Growth
Maturity
Decline and turnaround
A products life cycle has important implications

in terms of process design and choice. For
example, new products with low sales volume
might be produced in a job shop process;
however, as sales grow and volumes increase, a
flow shop process might be more efficient.

15
CHAPTER 7
The Product-Process Matrix

The product-process matrix is a model
that describes the alignment of process
choice with the characteristics of the
manufactured good.
The most appropriate match between type

of product and type of process occurs along
the diagonal in the product-process matrix.
As one moves down the diagonal, the
emphasis on both product and process
structure shifts from low volume and high
flexibility, to higher volumes and more
standardization.

16
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Exhibit 7.1
Characteristics
of Different
Process Types

17
CHAPTER 7
Exhibit 7.2
Product-Process Matrix

18
CHAPTER 7
The Service-Positioning Matrix

In the product-process matrix, product volume, the
number of products, and the degree of
standardization/customization determine the
manufacturing process that should be used. This
relationship between volume and process is not
found in many service businesses.
The Service-Positioning Matrix is similar to the
product-process matrix in that it suggests that the
nature of the customers desired service encounter
activity sequence should lead to the most
appropriate service system design and that
superior performance results by generally staying
along the diagonal of the matrix.
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CHAPTER 7

A pathway is a unique route through a
service system. Pathways can be
customer- or provider-driven, depending
on the level of control that the service
firm wants to ensure.
The service encounter activity
sequence consists of all the process
steps and associated service encounters
necessary to complete a service
transaction and fulfill customers wants
and needs.

20
CHAPTER 7

Customer-routed services are those
that offer customers broad freedom to
select the pathways that are best suited
for their immediate needs and wants, from
many possible pathways through the
service delivery system.
Examples include searching the
Internet, museums, health clubs, and
amusement parks.

21
CHAPTER 7

Provider-routed services constrain
customers to follow a very small number of
possible and predefined pathways through
theExamples
service system.
are a newspaper dispenser

and logging on to a secure online bank
account.

22
CHAPTER 7
Exhibit 7.3
The Service
Positioning Matrix
Source: Adapted from D. A.

Collier and S. M. Meyer, A
Service Positioning Matrix,
International Journal of
Production and Operations
Management, 18, no. 12, 1998,
pp. 11231244. Also see D. A.
Collier and S. Meyer, An
Empirical Comparison of Service
Matrices, International Journal of
Operations and Production
Management, 2000 (no. 56), pp.
705729.

23
CHAPTER 7
Process Design Four Levels of Work

Taska specific unit of work required to
create an output.
Activitya group of tasks (sometimes
called a workstation) needed to create and
deliver an intermediate or final output.
Processa group of activities.
Value chaina network of processes.
24
CHAPTER 7
We divided the
work; but stood
together.
- Mr. John Ringling, Ringling Bros., Bamum & Bailey Circus,
1907

25
CHAPTER 7
Exhibit 7.4 The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets

26
CHAPTER 7
Process and Value Stream Mapping

A process map (flowchart) describes the
sequence of all process activities and tasks
necessary to create and deliver a desired output or
outcome.
Process maps document how work either is, or
should be, accomplished, and how the
transformation process creates value.
A process boundary is the beginning or end of a
process.
Makes it easier to obtain management
support, assign process ownership, and
identify where performance measures should
be taken.
27
CHAPTER 7

In service applications, flowcharts generally
highlight the points of contact with the
customer and are often called service
blueprints or service maps.
Such flowcharts often show the separation
between the back office and the front office
with a line of customer visibility.

28
CHAPTER 7
Exhibit 7.5
Automobile Repair Flowchart

29
CHAPTER 7

The value stream refers to all value-added
activities involved in designing, producing,
and delivering goods and services to
customers.
A value stream map (VSM) shows the process
flows in a manner similar to an ordinary
process map; however, the difference lies in
that value stream maps highlight value-added
versus non-value-added activities and include
costs associated with work activities for both
value- and non-value-added activities.
30
CHAPTER 7

Examples of non-value-added activities
include:
Transferring materials between two
nonadjacent workstations
Overproducing
Waiting for service or work to do
Not doing work correctly the first time
Requiring multiple approvals for a low cost
electronic transaction

31
CHAPTER 7
Exhibit 7.6 Restaurant Order Posting and Fulfillment Process

32
CHAPTER 7
Exhibit 7.7
Value Stream Map for
Restaurant Order
Posting and Fulfillment
Process

33
CHAPTER 7
Process Design Methodology

1. Define the purpose and objectives of the
process.
2. Create a detailed process or value stream
map that describes how the process is
currently performed.
3. Evaluate alternative process designs.
4. Identify and define appropriate performance
measures for the process.
5. Select the appropriate equipment and
technology.
6. Develop an implementation plan to introduce
the new or revised process design.
34
CHAPTER 7
Process Mapping Improves Pharmacy Service

Metro Health Hospital in Grand Rapids, Michigan,
applied process mapping reducing the lead time for
getting the first dose of a medication to a patient in
its pharmacy services operations. The lead time was
measured from the time an order arrived at the
pharmacy to its delivery on the appropriate hospital
floor. A process improvement team carefully laid out
all the process steps involved and found that it had a
14-stage process with some unnecessary steps,
resulting in a total lead time of 166 minutes.
(continued)
35
CHAPTER 7
Process Mapping Improves Pharmacy Service

During the evaluation process, the pharmacy
calculated that technicians were spending 77.4
percent of their time locating products; when a
pharmacist needed a technician for clinical activities,
the technician was usually off searching for a drug.
Overall, the pharmacy at Metro realized a 33-percent
reduction in time to get medications to patients, and
reduced the number of process steps from 14 to nine
simply by removing non-value-added steps. Patients
have experienced a 40-percent reduction in
pharmacy-related medication errors, and the
severity of those errors has decreased.
36
CHAPTER 7
Process Analysis and Improvement

Strategies:
Increasing revenue by improving process efficiency in

creating goods and services and delivery of the
customer benefit package.
Increasing agility by improving flexibility and response
to changes in demand and customer expectations.
Increasing product and/or service quality by reducing
defects, mistakes, failures, or service upsets.
Decreasing costs through better technology or
elimination of non-value-added activities.
Decreasing process flow time by reducing waiting time
or speeding up movement through the process and
value chain.
Decreasing the carbon footprint of the task, activity,
and/or
OM3 Chapter 7 process
Process Selection, Design,
and Analysis value chain.
37
CHAPTER 7

Questions to ask for process analysis:
Are the steps in the process arranged in logical

sequence?
Do all steps add value? Can some steps be
eliminated and should others be added in order to
improve quality or operational performance? Can
some be combined? Should some be reordered?
Are capacities of each step in balance; that is, do
bottlenecks exist for which customers will incur
excessive waiting time?
What skills, equipment, and tools are required at
each step of the process? Should some steps be
automated?
38
CHAPTER 7

At which points in the system (sometimes called
process fail points) might errors occur that would
result in customer dissatisfaction, and how might
these errors be corrected?
At which point or points in the process should
performance be measured? What are appropriate
measures?
Where interaction with the customer occurs, what
procedures, behaviors, and guidelines should
employees follow that will present a positive
image?
What is the impact of the process on sustainability?
Can we quantify the carbon footprint of the current
39

CHAPTER 7

Reengineering has been defined as the
fundamental rethinking and radical
redesign of business processes to achieve
dramatic improvements in critical,
contemporary measures of performance,
such as cost, quality, service, and speed.

40
CHAPTER 7
Process Design and Resource Utilization

Utilization is the fraction of time a
workstation or individual is busy over the
long run.
Utilization (U) =
Resources Used
[7.1 ]
Resources Available
or
Utilization (U) =
Demand Rate
[7.2]
[Service Rate Number
of Servers]
41
CHAPTER 7
Exhibit 7.6 Restaurant Order Posting and Fulfillment Process

42
CHAPTER 7
Exhibit 7.8 Utilization Analysis of Restaurant Order Posting

and Fulfillment Process

43
CHAPTER 7
Exhibit 7.9 Revised Utilization Analysis of Restaurant Order Posting

and Fulfillment Process (4 chefs)

44
CHAPTER 7
Exhibit 7.10 Revised Utilization Analysis of Restaurant Order Posting

and Fulfillment Process (4 ovens)

45
CHAPTER 7
Solved Problem
An inspection station for assembling printers receives 40
printers/hour and has two inspectors, each of whom can
inspect 30 printers per hour. What is the utilization of the
inspectors? What service rate would be required to have
a target utilization of 85 percent?
Solution
The labor utilization at this inspection station is calculated
to be 40/(2 30) = 67%. If the utilization rate is 85%, we
can calculate the target service rate by solving the
equation:
85% = 40/(2 SR)
1.7 SR = 40
SR = 23.5 printers/hour
46
CHAPTER 7
Process Design and Resource Utilization

The average number of entities completed per unit
time the output ratefrom a process is called
throughput.
Throughput might be measured as parts per
day, transactions per minute, or customers per
hour, depending on the context.
A bottleneck is the work activity that effectively
limits throughput of the entire process.
Identifying and breaking process bottlenecks is
an important part of process design and
improvement, and will increase the speed of
the process, reduce waiting and work-inprocess inventory, and use resources more
efficiently.
47

CHAPTER 7
Exhibit 7.11 Simplified Restaurant Fulfillment Process

48
CHAPTER 7

49
CHAPTER 7
Littles Law
Flow time, or cycle time, is the average time it
takes to complete one cycle of a process.
Littles Law is a simple formula that explains the
relationship among flow time (T ), throughput (R ),
and work-in-process (WIP ).
Work-In-Process = Throughput Flow Time
or
WIP = R T [7.3]
If we know any two of the three variables, we can
compute the third.
50
CHAPTER 7
Solved Problem
Suppose that a voting facility processes an
average of 50 people per hour and that, on
average, it takes 10 minutes. What is the
average number of voters in the process? for
each person to complete the v
Solution
WIP = R T
= 50 voters/hr (10 minutes/60 minutes per
hour)
= 8.33 voters
51
CHAPTER 7
Solved Problem
Suppose that the loan department of a bank
takes an average of 6 days (0.2 months) to
process an application and that an internal audit
found that about 100 applications are in various
stages of processing at any one time. Using
Littles Law, we see that T = 0.2 and WIP = 100.
What is the throughput? the v
Solution
R = WIP/T = 100 applications/0.2 months
= 500 applications per month
52
CHAPTER 7
Solved Problem
Suppose that a restaurant makes 400 pizzas per
week, each of which uses one-half pound of
dough, and that it typically maintains an
inventory of 70 pounds of dough. In this case, R
= 200 pounds per week of dough and WIP = 70
pounds. What is the average flow time?
Solution
T = WIP/R = 70/200
= 0.35 weeks, or about 21/2 days.

53
CHAPTER 7
Hopewell Hospital Pharmacy Case Study

1. Draw the process flowchart, including processing
times and capacities for each work activity, and
total time per prescription.
2. As a baseline measure, what is the labor utilization
if 36 prescriptions arrive between 8 and 9 am on
Monday and four pharmacists are on duty?
3. Clearly identify and evaluate one alternative
process design, and discuss the advantages and
disadvantages of it. Also consider how you will
design and group the work activities for medical
technicians and pharmacists.
4. What are your final recommendations?
54

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PROCESS SELECTION,

DESIGN, AND ANALYSIS

DAVID A. COLLIER AND JAMES R. EVANS

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

LO1 Describe the four types of processes used to

LO2 Explain the logic and use of the productprocess matrix.

LO3 Explain the logic and use of the servicepositioning matrix.

LO4 Describe how to apply process and value

LO5 Explain how to improve process designs and

LO6 Describe how to compute resource

PROCESS SELECTION, DESIGN, AND ANALYSIS

called to make an airline flight reservation just an

hour ago. The telephone rang five times before a

PROCESS SELECTION, DESIGN, AND ANALYSIS

Now two minutes into my telephone call, I was

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

What do you think?

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Goods and

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Goods and

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Goods and

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Processes

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Processes

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Processes

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions Types of Processes

PROCESS SELECTION, DESIGN, AND ANALYSIS

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

Process Choice Decisions

A products life cycle has important implications

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

The Product-Process Matrix

The most appropriate match between type

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

The Service-Positioning Matrix

PROCESS SELECTION, DESIGN, AND ANALYSIS

The Service-Positioning Matrix

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

The Service-Positioning Matrix

OM3 Chapter 7 Process Selection, Design, and Analysis

PROCESS SELECTION, DESIGN, AND ANALYSIS

The Service-Positioning Matrix