Lecture Fundamentals of operations management (4/e): Chapter 6 - Davis, Aquilano, Chase

Chapter 5 Process measurement and analysis, after studying this chapter you will be able to: Illustrate how all activities within an organization are actually processes that need to be managed; present the various measures of performance that can be used to evaluate a process; show how process analysis can provide managers with an in-depth understanding of how a process is performing, while at the same time identifying areas for improvement;...

Process Measurement  and Analysis

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chapter 5

DAVIS AQUILANO CHASE

PowerPoint Presentation by Charlie Cook

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• Present the various measures of performance that can

be used to evaluate a process

• Show how process analysis can provide managers

with an in-depth understanding of how a process is

performing, while at the same time identifying areas for improvement

• Present the concept of service blueprinting and

illustrate how it is used to evaluate processes within a service environment

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Chapter Objectives (cont’d)

Chapter Objectives (cont’d)

• Introduce the concept of business processes and

show how they are providing managers with a broader perspective for managing their organizations

• Present the concepts of benchmarking and

reengineering and show their roles in creating class operations

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• Acknowledging that processes are linked to other

processes in other functional areas

• Choosing strategically critical performance measures

by which to monitor processes so that corrective

actions are taken when needed

• Using benchmarking to identify ways in which to

create or improve world-class design, production and delivery operations for products

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Defining a Process

Defining a Process

• Selecting a Process

–Identifying the strengths and weaknesses of

each process’s capability to support the

strategic focus of the firm on particular market segments.

• Standardization

• Flexibility

• Customization

• Speed of delivery

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Process Flowcharts for Making Hamburgers

Process Flowcharts for Making Hamburgers

Exhibit 5.1a

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Process Flowcharts for Making Hamburgers

Process Flowcharts for Making Hamburgers

Exhibit 5.1b

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Relative Comparison of  Hamburger Preparation Processes

Relative Comparison of  Hamburger Preparation Processes

Exhibit 5.2

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Process Measurement

Process Measurement

• Importance of Measuring Processes

–Is the basis for good management—“If you can’t

measure it, you can’t manage it.”

–Allows a firm to determine if its strategically

important goals and standards are being met.

–Allows for performance comparisons with other

competing firms.

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Types of Performance Measures

Types of Performance Measures

• Productivity

–The operational efficiency with which inputs are

transformed (converted) into outputs.

• A relative measure that becomes meaningful when

compared to itself over time, similar operations internally, or externally within its industry.

–Partial measures of productivity can be taken

using the various inputs (e.g., labor, energy, and materials) that are combined to create a product.

Inputs

Outputs ty

Productivi

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Partial Measures of Productivity Partial Measures of Productivity

Exhibit 5.3

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Types of Performance Measures (cont’d)

Types of Performance Measures (cont’d)

• Capacity

–Output of a process in a given period of time—

units of output per unit of time.

–Design capacity

• The ideal output rate at which the firm would like

to produce under normal circumstances and for which the system was designed.

–Maximum capacity

• The maximum potential output rate that could be

achieved when productive resources are used to their maximum.

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Types of Performance Measures (cont’d)

Types of Performance Measures (cont’d)

• Capacity Utilization

–Percentage of available capacity actually used.

• Design capacity versus maximum capacity

capacity Design

output

Actual

Capacity Utilization

available hours

machine Total

used hours

machine Actual

Capacity Utilization Homogeneous output

Variable output

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Measures of Capacity

Measures of Capacity

Exhibit 5.4

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–Product’s lead time—amount of time from when

product is ordered to when it is shipped.

• Inventoried versus customized products

–Variability/Uncertainty in delivery time

• Less uncertainty in delivery times is better.

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Types of Performance Measures (cont’d)

Types of Performance Measures (cont’d)

• Flexibility

–The measure of how readily a firm’s

transformation process can adjust to changes in customer demand (i.e., agile manufacturing).

• Flexibility Measures

–How quickly a process can convert from

producing one product to another product.

–How quickly a process can adjust to changes in

volume (demand).

–How capable is the process in producing more

than one type of product.

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Types of Performance Measures (cont’d)

Types of Performance Measures (cont’d)

• Process Velocity (Manufacturing Velocity)

–Ratio of total throughput time for a product to

the value-added time.

• Throughput time—the time the product spends in

Total velocity

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–A multistage process that consists of more than

one type of process.

• Make-to-Stock

–Process for making highly standardized

products for finished goods inventory.

• Make-to-Order

–Process for making customized products to

meet individual customer requirements.

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Manufacturing: Make­to­Stock

Manufacturing: Make­to­Stock

Exhibit 5.5a

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Manufacturing: Make­to­Order

Manufacturing: Make­to­Order

Exhibit 5.5b

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Process Analysis in Manufacturing

Process Analysis in Manufacturing

• Modularization

–Use of standard components and

subassemblies to produce customized

products.

• Tightness and Dependence

–The degree to which various process stages are

related Tight process are highly related,

creating strongly dependence between the

stages.

–Buffer inventories can make a process “looser.”

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Manufacturing: Modularization  Manufacturing: Modularization 

Exhibit 5.5c

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Process Analysis in Manufacturing

Process Analysis in Manufacturing

• Bottleneck

–A stage with the lowest output capacity that

limits the total output of the process.

• Capacity versus Demand

–Capacity is the firm’s output capability; demand

is the level of output that the market requires to meet customer needs.

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Process Analysis in Manufacturing

Process Analysis in Manufacturing

• Process Flowcharts

–A schematic diagram for describing a process.

• What the official or documented method is.

• How the work is actually being performed.

• What the proper procedures should be.

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Elements in a Process Flowchart Elements in a Process Flowchart

Exhibit 5.6

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Process Analysis in Services

Process Analysis in Services

• Service Blueprinting

–The process of flowcharting for services that

includes the customer:

• Identifying (mapping) processes

• Isolating fail points

• Establishing a time frame

• Analyzing profitability

• Line of visibility

– Above the line: stages in process, in direct contact with  customer, that focus on providing good service.

– Below the line: stages in the process, not in contact with the  customer, that focus on process efficiency.

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Source: Adapted from G Lynn Shostack, “Designing Services That Deliver,”

Harvard Business Review 62, no 1 (January–February 1984), p 138.

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Blueprint for a Corner Shoeshine

Blueprint for a Corner Shoeshine

Exhibit 5.8

Source: Reprinted by permission of Harvard Business Review Exhibit from Adapted from

“Designing Services That Deliver” by G Lynn Shostack, January–February 1984, p 134

Copyright © 1984 by the President and Fellows of Harvard College; all rights reserved.

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Shoeshine Profitability Analysis Shoeshine Profitability Analysis

Exhibit 5.9

Source: Reprinted by permission of Harvard Business Review Exhibit from Adapted from

“Designing Services That Deliver” by G Lynn Shostack, January–February 1984, p 135

Copyright © 1984 by the President and Fellows of Harvard College; all rights reserved.

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Process Analysis in Services (cont’d)

Process Analysis in Services (cont’d)

• Failsafing

–Creating a control condition where the

customer, server, or process can take only the correct (or desired) action while engaged in a service process.

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Business Processes

Business Processes

• Business Process

–A logical set of tasks or activities that crosses

functional boundaries and recognizes its

interdependence with other processes or

businesses.

• Examples of Business Processes

Exhibit 5.10

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Business Process Analysis

Business Process Analysis

• Define the Process Boundaries

–Identify where the process begins and where it

ends (its boundaries).

–Determine its inputs and outputs.

–Recognize other processes that impact on the

process under evaluation.

• Link the Process to the Corporate Strategy

–Understand how the process contributes to the

firm’s competitive advantage.

–Identify key measures to be used evaluate the

process.

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Measures of Performance for Specific Business Processes

Measures of Performance for Specific Business Processes

Exhibit 5.11

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Business Process Analysis (cont’d)

Business Process Analysis (cont’d)

• Map the Process

–Develop a process flow chart to provide a visual

context for analyzing the process:

• Specific ordering of the process steps

• Length of time each step takes

• Resources required by each step

• Cross-functional relationships

• Granularity

–Describes the level of detail that is used in

analyzing a process.

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Process Mapping with Functional Areas

Process Mapping with Functional Areas

Exhibit 5.12

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Benchmarking

Benchmarking

• Benchmarking

–Comparison of a company’s measures of

performance with those of firms that are

considered to be world class.

–“The search of the best practices that leads to

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–Comparison with the “best of breed” in a

specific function, regardless of industry

• Generic Benchmarking

–Adopting the innovative processes of industry

leaders in commonly-held practices

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Benchmarking Process Steps

Benchmarking Process Steps

Exhibit 5.12

Source: Robert C Camp, Benchmarking: The Search for Industry Best Practices

That Lead to Superior Performance, (Milwaukee, WI: ASQC Quality Press, 1989).

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• Characteristics of a Reengineered Process

–Several jobs are combined into one.

–Workers make decisions.

–The steps in the process are performed in a

natural order.

–Processes have multiple versions (flexibility) –Work is performed where it makes the most

sense.

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Business Process Reengineering

Business Process Reengineering

• Issues with Reengineering

–Inability of management to link reengineering

efforts to overall corporate strategy.

–Reengineering is regarded as a tactical program

rather than as a strategy issue for the entire

organization.

–Lack of commitment and participation by top

management.

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Comparison between Strategic and Tactical Deployment Techniques for Reengineering

Comparison between Strategic and Tactical Deployment Techniques for Reengineering

Exhibit 5.13

Source: Gateway Management Consulting