Operations Management / Supply Chain Management

Module 06.01 Key Concepts: Process Design Tools and Methods

In the previous section we looked at Manufacturing Process choices based on Volume and Variety.  Crossover Charts provide a useful tool for making decisions regarding different Manufacturing or Service options.  In this case, there is a difference in cost / benefit based on the volume of product or service produced.   We will look at s similar concept (Break Even Point) in a following section.  To calculate the Crossover point for any comparison you must have data related to the fixed and variable costs involved.  The approach is illustrated by our Text Authors with evaluation of three different accounting software products.

The Crossover point for any two options is the point where total of fixed and variable costs for each option is equal the other.  Fixed Cost is given in the table and total Variable Cost is equal the Variable Cost per unit times the number of units produced.  Since we do not know that from the data, it must be calculated by an algebraic expression.

If we are calculating the Crossover Point for Software A and Software B, this would utilize the following equation:

Fixed Cost “A” + Variable Cost “A” = Fixed Cost “B” + Variable Cost “B”

From a design perspective, Focused Processes bring efficiency because it is possible to focus on the depth of product line rather than breadth.  Many organizations thus create so called Focused Factories or Plants within a Plant.  This is where different overall process layouts can be used for different product / service families.  The selected focus can be organized by customer, products, service or technology.

Design decisions can be complex as alternate methods may be available.  The following important factors may be considered in any decision:
  • Cost
  • Cash Flow
  • Market Stability
  • Quality
  • Capacity
  • Flexibility
Equipment and technology should be chosen to provide possible competitive advantage.  For example, flexibility may be a competitive advantage but also may be difficult and expensive and may require starting over.
Within process design the following questions are quite relevant:
  • Is the process designed to achieve a competitive advantage?
  • Does the process eliminate steps that do not add value?
  • Does the process maximize customer value?
  • Will the process win orders?
Many tools are available to help with the analysis and decision making to select / optimize product and service production processes.  We will briefly review some of them here.
Flowcharts are very useful in any Business Process Design or Continuous Improvement project.    Flowcharts show relationships between steps / activities and are useful in optimizing overall process efficiency.  Redundant steps, complicated movements / relationships and such can be identified and revisions in the process can be derived through collaboration between individuals / functions.
Time-Function Mapping extends the flow charting approach to Shows flows and time frames.  This is quite valuable for comparing alternate processes.
Value-Stream Mapping is a technique used to show where value is added in the entire production process, including the supply chain.  This extends from the customer back to the suppliers.
In the Value Stream Mapping approach, specific symbols are used to indicate the role of  customer, supplier, and production to show the big picture.  Customer order requirements are presented and the daily production requirements are calculated. Outbound shipping requirements and delivery frequency are indicated as well as the inbound shipping method and delivery frequency.  The various steps and interrelationships are shown on the diagram by completing the following tasks:
  • Add the process steps (i.e., machine, assemble) in sequence, left to right
  • Add communication methods, add their frequency, and show the direction with arrows
  • Add inventory quantities between every step of the entire flow
  • Determine total working time (value-added time) and delay (non-value-added time)
A Process Chart is another tool that is useful.
Service Blueprinting focuses on the customer and provider interactions.   This process identifies potential failure points to highlight opportunities for “mistake proofing”.
There are many things that are unique to service process design. Some interaction with customer is necessary, but this often affects performance adversely.  The better these interactions are accommodated in the process design, the more efficient and effective the process.  It is therefore essential to find the right combination of cost and customer interaction.  This can be a little tricky at times.
In an earlier section we looked at the Product Volume Variety matrix for products.  A similar approach can be used for services by considering the degree of system customization (variety) vs. the Labor required.
With Mass Services and Professional Services, labor involvement is high.  This requires an emphasis on human resources.  Personnel selection and training are highly important. Personalized services are especially challenging.
With a Service factory of Service shop  there may be automation of standardized services.  This means restricted offerings.  Low labor intensity responds well to process technology and scheduling.   Tight control is required to maintain standards and ensure quality of service delivery.
Production Technology can be used to improve productivity and quality.  The following examples are quite relevant to most businesses.  Of course they are selected and deployed differently by different companies.
  • Machine technology
  • Automatic identification systems (AISs) and RFID
  • Process control
  • Vision systems
  • Robots
  • Automated storage and retrieval systems (ASRSs)
  • Automated guided vehicles (AGVs)
  • Flexible manufacturing systems (FMSs)Computer-integrated manufacturing (CIM)
Machine Technology Brings:
  • Increased precision
  • Increased productivity
  • Increased flexibility
  • Improved environmental impact
  • Reduced changeover time
  • Decreased size
  • Reduced power requirements
Automatic Identification Systems provide:
  • Improved data acquisition
  • Reduced data entry errors
  • Increased speed
  • Increased scope of process automation

 

Process Control provides:

  • Real-time monitoring and control of processes
  • Sensors collect data
  • Devices read data on periodic basis
  • Measurements translated into digital signals then sent to a computer
  • Computer programs analyze the data
  • Resulting output may take numerous forms

 

Vision Systems offer:

  • Particular aid to inspection
  • Consistently accurate
  • Never bored
  • Modest cost
  • Superior to individuals performing the same tasks

 

Robots:

  • Perform monotonous or dangerous tasks
  • Perform tasks requiring significant strength or endurance
  • Generally enhance consistency and accuracy

 

Automated Storage and Retrieval Systems provide:

  • Automated placement and withdrawal of parts and products
  • Reduced errors and labor
  • Particularly useful in inventory and test areas of manufacturing firms

 

Automated Guided Vehicles:

  • Electronically guided and controlled carts
  • Used for movement of products and/or individuals

 

Flexible Manufacturing Systems provide:

  • Computer controls both the workstation and the material handling equipment
  • Enhance flexibility and reduced waste
  • Can economically produce low volume at high quality
  • Reduced changeover time and increased utilization
  • Stringent communication requirement between components

 

Computer Integrated Manufacturing provides:

  • Extend flexible manufacturing Backwards to engineering and inventory control Forward into warehousing and shipping
  • Can also include financial and customer service areas Reducing the distinction between low-volume/high-variety, and high-volume/low-variety production
Of course technology is also required to optimize Service process productivity and quality.
Process redesign is a never ending journey for companies that want to ensure long-term growth, profitability and sustainability. Process redesign is described as the fundamental rethinking of business processes to bring about dramatic improvements in performance.  It relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions.  Process redesign thus requires reexamination of the basic process and its objectives.  The approach focuses on activities that cross functional lines.  In this day and age, any process is a candidate for redesign.
In reality this fits in with one of our Quality Concepts presented earlier – the Plan > Do > Check > Act process.  Each business process is created and implemented in the most effective way.  Then key performance metrics are tracked and results can be used to highlight business processes that need redesign.  In addition, company leaders must always be aware of the resources required for each process to be capable of performing as expected.  This brings us to the topic of the next section related to capacity planning and management.