amp Strategy Based on the Book Managing Business Process Flow Processes Produc ts or services must meet customer expectations physical comfort safety convenience psychological ID: 329528
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Slide1
Process View
&
Strategy
Based on the Book: Managing Business Process Flow.Slide2
Processes
Produc
ts
or services must meet customer expectations;
physical
(
comfort
, safety, convenience),
psychological
(relaxation, peace of mind),
social and spiritual
;
and they must do so within a
budge
t
.
Business processes provide products and services
: new car financing, producing an engine, making a hamburger, delivering a book from Amazon to a customer, teaching a course.
How do organizations
categorize customer expectations?
How
do they
develop
processes
capable
to
fulfill
customer expectations?
What
Metrics
are used to
measure? Slide3
Process
view
Process view: any organization or any part of an organization is
Input Process OutputInputs: tangible or intangible items that flow into the process from the environment: natural or processed resources, parts and components, energy, data, customers, money, etc.Outputs are any tangible or intangible items that flow from the process back into the environment: products, energy, information, served customers, cash, etc..
Raw
material
Manufacturing Process Finished goods
Data Accounting Process Financial Statements
Accounts Receivable Billing Process Cash
Unsatisfied customer demand Transformation Process Satisfied customer demandSlide4
Five Elements of the Process View
Outputs
Goods
Services
Human & Capital
Information
structure
Network of
Activities and Buffers
Inputs
(
natural or processed resources, parts and
component
s
, energy, data, customers, cash, etc.)
Resources
Process
Management
Flow UnitSlide5
Flow Unit: The Item to be analyzed
A flow unit may be a unit of input, such as
a
customer order, or a unit of output such as a finished product, or the value of input or output.
Process
Flow Unit
Input-Output Transformation
From
To
Order fulfillment
Orders
Receipt of an order
Delivery of product
Outbound logistics
Products
End of production
Delivery to customer
Supply cycle
Supplies
Issuing a purchase order
Receipt of the supplies
Customer service
Customers
Unsatisfied customer
Satisfied customer
Product R&D
Projects
Recognition of the need
Launching the project
Cash cycle
Cash
Expenditure (costs)
Collection of revenueSlide6
Systems approach
Sub-optimization
System: A set of parts with interrelationships between parts organized to achieve a goal.
The whole is greater than the sum of the parts. 2 > 1+1.
How systems grow?
Principle:
Performance measure of Sub-systems must be linked to the performance measure of the total system. Performance of a sub-system must be measured in terms of its impact on the performance of the total system
Systems
approach and; Sales, Purchasing, and
Production.
A serial system with two stations. Slide7
Systems-Thinking
We do not have questions on these videos in our quizzes. You may watch them at your own will.
Deming-
Ackoff
on Systems Thinking in EducationThree truth about Systems ThinkingSlide8
Product Attributes & Process Competencies
Product Attribute (External)
Process Competency (Internal)
Price
Cost
Response time
Flow time
Variety
Flexibility
Quality
Quality
Customers
Define
product
a
ttributes
.
Operation Managers
Create
process
c
ompetencies
to meet
and exceed
c
ustomer
e
xpectations.
Slide9
Product Attributes
Product Price (cost for customer):
purchase
price
, service, maintenance, repair, insurance, and disposal costs. Total cost of ownership. Product Delivery-response time: total time before receiving the product. Is the product on shelves, in a distribution center, or somewhere along the production line. Reliability in response time? Low standard deviation. Product Variety: the choices offered to the customer: At a lower level; options offered for a particular model, colors, styles. At a higher level; number of product lines and product families
.
Product Quality:
the degree of excellence, how well the product works. Features (what it can do), Performance (how well it functions), Reliability, Serviceability (how quickly), Aesthetics, Conformance to expectations.
Reliability in quality?
Q
uality over time; consistent quality. Slide10
Customer Value Proposition
:
a set of benefits (in four dimensional space)
that the firm offers to customers.
Order Qualifiers: Characteristics that convince customers to consider the product. Order Winners: Characteristics (in four dimensional space) that convince customers to buy the product. They differ among market segments. Commercial airplane vs. private jets. Customers purchase based on the value they derive from a product. It is the greatest amount a customer is willing to pay (the reservation price). If this value > price, the customer enjoys positive net value (consumer surplus). Customers will buy the products that offers highest consumer surplus.Zara's business is design/manufacture/distribution/retailing. Zara differentiates itself by
timely fashion for the masses.
CVP
timely yet limited variety at modest cost and quality.
Customer Value PropositionSlide11
Process Competencies: Cost
Process cost:
the total cost of producing and delivering outputs.
Remove non-value adding
activities and buffers (Business Process Re-engineering). Allocation of appropriate recourses. Lower than appropriate is cheap, but quality goes down. Higher than appropriate, adds to the costs. High utilization. Division of labor. High standardization. Low variations.
Henry Ford
Shouldice Hospital
in Canada, focus on hernia operations only. Standardized repeatable outpatient surgical procedure, very high quality at a low price. Do not accept patients with any risk factor (blood pressure, allergic, ..)
P
eople of India are vulnerable to cataracts. Millions go blind in their 50s.
Aravind
eye hospital started by treating paying patients and using the profits to offer free care to
the
poor.
To support patients who could not afford transportation and required aSlide12
High Utilization, Standardization, Low Variations
relative
to accompany
them,
Aravind also added its own buses and a group of assistants. To keep costs low, surgical equipment is used all day, doctors focus only on performing surgery, pre- and post-operative care handled by nurses. Aravind served 2.5 million outpatients and performed 3 hundred thousands cataract surgeries in less than one year. Despite providing 2/3 of the outpatient visits and 3/4 of the surgeries as free service to the poor, Aravind generated healthy profits that it used to fund its growth. The key concept in lowering production cost is to allocate appropriate recourses to each operation. Appropriate? Lower than appropriate is cheap, but quality goes down. Higher than appropriate, adds to the costs. Slide13
Process Competencies: Cost Flow Time
The
cataract surgery at Aravind, the hernia surgery at
Shouldice
are example of implementing Ford Production line in healthcare.
Process flexibility:
How Chevrolet got Ford.
the
ability to produce and deliver a variety of products at high and low production volumes.
cross trained workers + general purpose equipment + short set-up time + delayed differentiation, Job-Shop layout or U-shaped layout + small batch size.
Process quality:
How Japanese got US auto industry.
the ability to produce and deliver quality products. Effective design as well as production that conforms to design. Quality at the source. Slide14
Process Competencies: Flexibility, Quality
Process flow time:
the total time to transform a flow unit from input into output. Effective layout and smooth material flow. Remove variability in arrival rate, processing rate, and quality. No starvation or blockage. No defect and re-work.
If I am forced to define Operations Management in one line
Create a Smooth Flow. Smooth flow means (i) low cost production cost because flow units do not have time to collect cost, (ii) high quality because as soon as quality problem is observed, we must stop production, i.e., no smooth flow, and (iii) system is flexible because we do not have too much inventory and can easily respond to technological advances and changes in customer preferences and switch to new products. Slide15
Process Competencies: Flexibility, Quality
Corolla
:
flow shop, decentralized assembly plants close to market, short flow time, low cost.
Ferrari: job shop, only a single plant in Italy, longer flow time, high cost. McMaster-Carr: a materials, repair, and operations (MRO) product distributor, a process with high flexibility, high quality, short response time, but at a high priceWalMart: Operations Strategy: Short flow times, low inventory.Operations Structure: Cross docking, Electronic Data Interchange, Fast transportation system, Focused locations, Communication between retail stores.Inventory turns at retail stores:
Wal-Mart
: 9
times, Target
: 6
Sales per square foot: Wal-Mart:
$
425/
sqf
, Target: $270/sqfSlide16
Operations Management
Operations management
Structure the
process
competencies in the direction of the customer value proposition. Develop measures to evaluate
the effectiveness and efficiency of the processes.
Apply methods and techniques to
improve process performance.
By measurement we find the relationship between controllable process competencies and desired product attributes, and will be able to set appropriate performance standards.
Financial performance measures
External performance measures
Internal performance measuresSlide17
Process Competencies: Flexibility, Quality
If I am forced to provide another short definition for Operations Management
OM is the concepts, ideas, methods, models, and the whole body of knowledge to understand trade-offs.
If
I am forced to provide
still another
short definition for Operations Management
OM is the concepts, ideas, methods, models, and the
whole
body of knowledge to
remove variability.
OM is the concepts, ideas,
methodologies,
models, and the whole body of knowledge to
create a smooth flow, understand trade-off, and remove
variability. Slide18
The
advantages of process view are
a
. It can be adopted at a very broad level, such as the supply chain, or at a very micro level, such as a workstation in both manufacturing and service organizations.
b. By incorporating buffers, accounts for handoffs or interfaces between different activities-typically the areas where most improvements can be made. c. Identifies value added and none-values added points, and enables managers to improve the process and add value at every step. d. Represents any organization as a collection of interconnected processes where its success requires alignment of effort across all its processes. *e. All of the above Process View Systems View