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Business Process
A logically related sets of tasks or activities geared toward some business outcome.
1. Primary (value-added)2. Support3. Developmental
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Versus the “functional” Perspective
Developing new products (Chapter 5)
Evaluating suppliers (Chapter 9)
Developing sales & operations plans (Chapter 11)
Suppliers Purchasing Engineering Operations Finance Marketing Customers
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Relationship Map
Family 1Supplier
Family 2Supplier
Family 3Supplier
Family 10Supplier
Supplier of“Cockpits”
AssemblyPlant
Tier 1
Tier 2
AutomotiveOEM
Physical andInformation
Flows
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A Detailed Process Map
DealerFaxesOrder
PaperOrder
Created
Order SitsIn FaxIn Box
Internal MailDelivers Fax
Order SitsIn Clerk’s
In Box
ClerkProcesses
Order
Is ItemIn Stock?
WorkerPicksOrder
Clerk NotifiesDealer and
Passes OrderOn to Plant
InspectorChecksOrder
Transport FirmDelivers Order
DealerReceives
Order
2 minutes0.5% of orders incorrect1 to 3 hours
2 hours on averageNo history of lost,damaged, or incorrectdeliveries
YES
NO
10 to 45 minutes20 minutes on average
0 to 2 hours1 hour on average0.5 to 1.5 hours
1 hour on average1% of orders lost
0 to 4 hours2 hours on average
4% oforders lost
5 minutes
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Mapping Symbols
Typical, but others may be used as appropriate
Start or finishing point
Step or activity in the process
Decision point (typically requires a “yes” or “no”)
Input or output (typically data or materials
Document created
Delay
Inspection
Move activity
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Improving Business Processes: Guidelines
• Attack each delay– What causes it?– How long is it?– How could we reduce its impact?
• Examine each decision point– Is this a real decision or just a checking activity?– If the latter, can we automate or eliminate it?
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More Guidelines
• Look for loops– Why is this loop here?– Would we need to loop if we didn’t have any failures
in quality, planning, etc?
• Process steps– What is the value of this activity, relative to its cost?– Is this a necessary activity (support or
developmental?), or something else?
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Process Measures
Productivity
Efficiency
Cycle Time
Benchmarking
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Productivity Measures
Productivity = OutputsInputs
Partial, Multifactor, and Total measures of productivity
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Examples
Batteries ProducedMachine + Direct Labor Hours
Total Nightly Sales ($)Total Nightly Costs
Batteries ProducedDirect Labor Hours
Single factorproductivity ratio:
Multifactor:
Total:
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Efficiency
A comparison of a company’s actualperformance to some standard
Usually expressed as a percentage
Standard is an estimate of what should be produced based on studies or historical results
Efficiency = 100%(actual/standard)
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Cycle Time
The total time required to complete a process from start to finish.
The percent of cycle time spent on
value-added activities is a measure of
process effectiveness.
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Cycle Time Drivers
Causes that increase cycle time are:Waiting times
Unneeded steps
Rework
Unnecessary controls or testing
Outmoded technology
Lack of information or training
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Benchmarking
A comparison of a company’s performance to the performance of:
Other firms in its industry (strategic)
Firms identified as “world-class” (process)
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Classic Mfg. Process Types(in order of decreasing volume)
• Continuous Flow
• Production Line (Flow Line)
• Batch (High Volume)
• Batch (Low Volume)
• Job Shop
• Project
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Continuous Flow
• Large production volumes
• High level of automation
• Basic material passed along, converted as it moves
• Usually very high fixed costs, inflexible
Oil refinery, fiber formation, public utilities
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Production Line aka Flow Line and Repetitive Manufacturing
High-volume production of standard products or “design window”
• Processes arranged by product flow• Often “paced”• Highly efficient, but not too flexible
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Batch I
• Somewhere in between job shop and line processes
• Moderate volumes, multiple products
• Production occurs in “batches”
Garment manufacturing, carton makers, etc.
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Batch II
Layout is a cross between that found in a line and that found in a job shop:
Group Technology
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Job Shop
• Low volume, one-of-a-kind products• Job shops sell their capability
• Highly flexible equipment, skilled workers• Equipment arranged by function
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Project
• Used when a product is:– one-of-a-kind– too large to be moved
• Resources moved to where needed
• Equipment, people, etc. are highly flexible
• Finite duration, often with deadlineBuilding projects, equipment installation
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Mixing Together the Process Types ...
Spindles
Arms andLegs
SeatsBATCH forfabricatingparts ...
ASSEMBLYLINE forputting togetherfinal product
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Comparing Process Types...
Job Shop Batch Line
Volume Very Low High
Variety Very High Low
Skills Broad Limited
Advantage Flexibility Price and Delivery
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Product – Process Matrix
One of a Kind Low Volume
Multiple Products Moderate Volumes
Few Major ProductsHigh Volume
Commodity Products
Job Shop
Batch
Line Very Poor Fit
Very Poor Fit
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Life-Cycle Planning Framework
IntroductionStage
GrowthStage
MaturityStage
Decline Stage
TotalMarketSales
Time
• Centralized inventory• Speed
•High product availability
•Flexibility to handle variation
•Availability•Achieve break- even volumes as soon as possible
Less need for flexibility
More selective,targeted efforts
Value-addedservice
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What is “Customization”?
“Customization occurs when a customer’s unique requirements directly affect the timing and nature of operations and supply chain activities”
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Customization Point Model
DESIGNSOURCINGMATERIALS
FABRICATIONASSEMBLY/FINISHING
DISTRIBUTION
ETO MTO MTSATO
Definitions:
ETO – engineer to order
MTO – make to order
ATO – assemble-to-order
MTS – make to stock
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Layout Decision Models
• Product-based layout– Usually best for a line operation– Cycle time a primary measure
• Functional (Process-based) layout– Usually best for a job shop– Distance between steps a measure
• Cellular layout– Usually best for batch processes
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