Operations Management Chapter 7

OM2
CHAPTER 7
PROCESS SELECTION,
DESIGN, AND ANALYSIS
DAVID A. COLLIER
AND
JAMES R. EVANS
OM2, Ch. 7 Process Selection, Design, and Analysis
2010 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 Learning Outcomes
learning outcomes
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.

22
Chapter 7 Process Selection, Design, and Analysis
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
What
do you think?
the United States, press 1. International, press 2. Scheduled
Describe a situation that you have encountered in which a
training, press 3. Related to a conference, press 4. Because
process was either well designed and enhanced your
I was going to Canada, I pressed 2.
customer experience, or poorly designed and resulted in
dissatisfaction.
33
Three Types of Goods and Services

1. 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.

44

2. 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.
Examples are Dell computers, Subway
sandwiches, machine tools, and travel
agent services.

55

3. 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: appliances, shoes, sporting
goods, credit cards, online Web-based
courses, and bus service.

66
Four Types of Processes

1. 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 of projects: legal defense
preparation, construction, customer jewelry,
consulting, and software development.
77

2. 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.
2010 Cengage Learning.
All Rights Reserved. May not be scanned, copied or duplicated, or
88

3. 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.
99

3. Flowshops continued
An assembly line is a common
example of a flow shop process. Many
option-oriented and standard goods and
services are produced in flow-shop
settings.
Examples: automobiles, appliances,
insurance policies, checking account
statements, and hospital laboratory
work.

1010

4. A continuous flow process creates highly
standardized goods or services, usually around the
clock in very high volumes.
Characteristics: not made from discrete
parts, very high volumes in a fixed processing
sequence, high investment in system, 24hour/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 car wash.
1111
Exhibit 7.1
Characteristics of
Different Process
Types

1212
Exhibit 7.2
Product-Process
Matrix

1313
Process Choice in Services

The product-process matrix does not
transfer well to service businesses and
processes.
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.
1414
Process Choice in Services (continued)

For example, to meet increased volume,
service businesses such as retail outlets,
banks, and hotels have historically added
capacity in the form of new stores, branch
banks, and hotels (i.e., bricks and mortar)
to meet demand, but do not change their
processes.
So, new ways to think about services and
their processes are needed, such as the
Service Positioning Matrix.
1515
Process Choice in Services

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.

1616
Service Positioning Matrix

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.

1717
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.

1818

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.
The customer decides what path to take
through the service delivery system with only
minimal guidance from management.
Examples include searching the Internet,
museums, health clubs, and amusement parks.
1919

Provider-routed services constrain
customers to follow a very small number of
possible and predefined pathways through
the service system.
A newspaper dispenser is an extreme
example of a service system design with
only one pathway, thus allowing a single
service encounter activity sequence.
Logging on to your secure online bank
account is provider-routed.
2020
Exhibit 7.3

1998, pp. 11231244. Also see D. A.
(no. 56), pp. 705729.

2121

The position along the horizontal axis of the
Service-Positioning Matrix is described by the
sequence of service encounters. It depends on
two things:
1. The degree of customer discretion,
freedom, and decision-making power in
selecting their service encounter activity
sequence.
Customers may want the opportunity to
design their own unique service encounter
activity sequence, in any order they choose.

2222
Chapter 7 Process Choice in Services

2. The degree of repeatability of the
service encounter activity sequence.
Service encounter repeatability refers to the
frequency that a specific service encounter
activity sequence is used by customers.

2323

The position along the vertical axis of the Service
Positioning Matrix reflects the number of pathways
built into the service system design by
management. It depends on two things:
1. The number of unique pathways (routes)
that customers can take as they move
through the service system during
delivery of the service.
2. Managements degree of control
designed into the service delivery system.
2424
Exhibit 7.3

1998, pp. 11231244. Also see D. A.
(no. 56), pp. 705729.

2525
The hierarchy of work is defined as:

(1)
(2)
(3)
(4)
Task
Activity
Process
Value Chain
A task is a specific unit of work required to create

an output. An example is drilling a hole in a steel
part or completing an invoice.
An activity is a group of tasks (sometimes called
a workstation) needed to create and deliver an
intermediate or final output. Workstations might
be a position on an assembly line, a manufacturing
cell, or an office cubicle.
Value chain and process have been previously
defined.
2626
Exhibit 7.4
The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets

2727
A process map (flowchart) describes the sequence

of all process activities and tasks necessary to create
and deliver a desired output or outcome.
A process map can include the flow of goods, people,
information, or other entities, as well as decisions that
must be made and tasks that are performed.
Process maps document how work either is, or should
be, accomplished, and how the transformation
process creates value.
Process maps delineate the boundaries of a process.
A process boundary is the beginning or end of a
process.
2828
A process flowchart is the basis for value

stream mapping, service blueprinting, and
service maps.
Service blueprints add a line of visibility
that separates the back and front office
(rooms) as shown in Exhibit 7.5.
Many names are used for the analysis and
development of process flowcharts, so dont
let corporate fads and buzzwords confuse
youthe basics of process analysis dont
change, just the buzzwords and consultants
sales pitch!

2929
Exhibit 7.5
Automobile Repair
Flowchart

3030
Value Stream Mapping

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 a traditional
process flowchart or service blueprint.
Traditional flowcharting, service blueprinting,
and value stream mapping all try to analyze
wait and process times, bottleneck work
stations, process throughput, and so on.
3131
Exhibit 7.6
Restaurant Order Posting and Fulfillment Process

3232
Value Stream Mapping

However, the difference between VSM and
these other flowcharting and analysis
approaches lies in that value stream maps
highlight value-added versus non-valueadded activities, and include costs
associated with work activities for both valueand non-value added activities.
That is, VSM tries to include the economics of
the process on the flowcharts.
There are many formats for VSM, such as
Exhibit 7.7.

3333
Exhibit 7.7
Value Stream Map for
Restaurant Order
Posting and Fulfillment
Process

3434
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
Eliminating non-value-added activities in a

process design is one of the most important
responsibilities of operations managers (see
Chapter 17 on Lean Operating Systems).
3535
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. Identify
and define appropriate performance
measures for the process.
4. Select the appropriate equipment and
technology.
5. Develop an implementation plan to introduce

3636
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. 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.
3737
Process Analysis and Improvement

Few processes are designed from scratch. Many
process design activities involve redesigning an
existing process to improve performance.
Management strategies to improve process
designs usually focus on one or more of the
following:
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.

3838
Process Analysis and Improvement

Management strategies to improve process
designs usually focus on one or more of the
following (continued from previous slide):
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.

3939
Reengineering and Creative Destruction

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.

4040
Process Design and Resource Utilization

Utilization is the fraction of time a
workstation or individual is busy over the
long run.
Understanding resource utilization is an
important aspect of process design and
improvement.
Utilization (U) = Resources Demanded
Resource Availability
[7.1]
4141
Process Design and Resource Utilization

U = Demand Rate/[Service RateNumber of
Servers]
U = DR/[(SR)(NS)]
[7.2]
If you know any three of the four variables in

Equation 7.2, you can solve for the 4th!

4242
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
4343
Exhibit 7.6
Restaurant Order Posting and Fulfillment Process

4444
Exhibit 7.8
Utilization Analysis of Restaurant Order Posting

and Fulfillment Process

4545
Throughput and Bottlenecks

The average number of entities completed per
unit timethe 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.
Wheres the bottleneck work activity in Exhibits
7.6 and 7.8?
4646
Exhibit 7.9
Revised Utilization Analysis of Restaurant Order

Posting and Fulfillment Process (4 chefs)

4747
Exhibit 7.10
Revised Utilization Analysis of Restaurant Order

Posting and Fulfillment Process (4 ovens)

4848
Exhibit 7.11
Simplified Restaurant Fulfillment Process

4949
Littles Law
Littles Law is a simple formula that explains the
relationship among flow time (T), throughput (R) and workin-process (WIP).
WORK-IN-PROCESS = THROUGHPUT FLOW

TIME
or
WIP = R T [7.3]
Flow time, or cycle time, is the average time it
takes to complete one cycle of a process.
Littles Law provides a simple way of evaluating
average process performance.
If we know any two of the three variables, we can
compute the third using Little's Law.
5050
Gifford Hospital Pharmacy Case Study

1. Draw the process flowchart, including processing
times and capacities for each work activity.
2. As a baseline measure, what is the labor
utilization if 32 prescriptions arrive between 8 and
9 am on Monday and 5 pharmacists are on duty?
3. Clearly identify an alternative process design, and
discuss in one short paragraph the advantages
and disadvantages of each option.
4. What are your final recommendations?

5151

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What are the three types of goods and services described in the chapter?

What are the three types of goods and services described in the chapter?

What is the relationship between throughput, flow time, and work-in-process according to Little's Law?

What is the relationship between throughput, flow time, and work-in-process according to Little's Law?

OM2

Chapter 7 Learning Outcomes

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

Describe how to compute resource utilization

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

called to make an airline flight reservation just an hour

Chapter 7 Process Selection, Design, and Analysis

Three Types of Goods and Services

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Three Types of Goods and Services

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Three Types of Goods and Services

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Four Types of Processes

Chapter 7 Process Selection, Design, and Analysis

Four Types of Processes

Chapter 7 Process Selection, Design, and Analysis

Four Types of Processes

Chapter 7 Process Selection, Design, and Analysis

Four Types of Processes

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Four Types of Processes

OM2, Ch. 7 Process Selection, Design, and Analysis

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Process Choice in Services

Chapter 7 Process Selection, Design, and Analysis

Process Choice in Services (continued)

Chapter 7 Process Selection, Design, and Analysis

Process Choice in Services

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Service Positioning Matrix

OM2, Ch. 7 Process Selection, Design, and Analysis

The Service Positioning Matrix

Source: Adapted from D. A. Collier

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Service Positioning Matrix

Chapter 7 Process Selection, Design, and Analysis

Service Positioning Matrix

The Service Positioning Matrix

Source: Adapted from D. A. Collier

OM2, Ch. 7 Process Selection, Design, and Analysis

Chapter 7 Process Selection, Design, and Analysis

Service Positioning Matrix

OM2, Ch. 7 Process Selection, Design, and Analysis