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Competitive Priorities
Cost 1. Low-cost operations
Quality 2. Top quality
3. Consistent quality
Time 4. Delivery speed
5. On-time delivery
6. Development speed
Flexibility 7. Customization
8. Variety
9. Volume flexibility
A Systematic Approach to Process Analysis
Identify Opportunity
1
DefineScope
2
DocumentProcess
3
Evaluate Performance
4
RedesignProcess
5
ImplementChanges
6
Figure 3.3Figure 3.3
Customer-Contact Model for Processes
Front office
Hybrid office
Back office
(1)(1) (2)(2) (3)(3)High interaction withHigh interaction with Some interaction withSome interaction with Low interaction withLow interaction withcustomers, highlycustomers, highly customers, standardcustomers, standard customers, standardizedcustomers, standardizedcustomized servicecustomized service services with some optionsservices with some options servicesservices
ProcessProcessCharacteristicsCharacteristics
(1)(1)Jumbled flows,Jumbled flows,complex work withcomplex work withmany exceptionsmany exceptions
(2)(2)Flexible flows withFlexible flows withsome dominantsome dominantpaths, moderate jobpaths, moderate jobcomplexity withcomplexity withsome exceptionssome exceptions
(3)(3)Line flows, routineLine flows, routinework easilywork easilyunderstood byunderstood byemployeesemployees
Le
ss
Co
mp
lex
ity
, L
es
s D
ive
rge
nc
e,
Mo
re L
ine
Flo
ws
Le
ss
Co
mp
lex
ity
, L
es
s D
ive
rge
nc
e,
Mo
re L
ine
Flo
ws
Less Customer Contact and CustomizationLess Customer Contact and Customization
Service PackageService Package
Figure 3.6Figure 3.6
Product-Process Matrix for Processes
(1)(1) (2)(2) (3)(3) (4)(4) (5)(5)One of a kindOne of a kind Low volume,Low volume, MultipleMultiple Few majorFew major High volumeHigh volumeproducts, madeproducts, made lowlow productsproducts products,products, highhighto customer to customer standardizationstandardization moderate moderate higherhigher standardization,standardization,orderorder volumevolume volumevolume commoditycommodity
productsproducts
ProcessProcessCharacteristicsCharacteristics
(1)(1)Complex and Complex and highly customized highly customized process, unique process, unique sequence of taskssequence of tasks
(2)(2)Jumbled flows, Jumbled flows, complex work with complex work with many exceptionsmany exceptions
(3)(3)Disconnected line Disconnected line flows, moderately flows, moderately complex workcomplex work
(4)(4)Connected line, Connected line, routine workroutine work
(5)(5)Continuous Continuous flows, highly flows, highly repetitive workrepetitive workL
es
s C
om
ple
xit
y,
Le
ss
Div
erg
en
ce
, M
ore
Lin
e F
low
sL
es
s C
om
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ss
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ore
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low
s
Less Customization and Higher VolumeLess Customization and Higher Volume
Product DesignProduct Design
Continuousprocess
Projectprocess
Lineprocess
Batchprocess
Jobprocess
Waiting Line ModelsWaiting Line ModelsCustomer population
Service system
Served customers
Waiting line
Priority rule
Service facilities
Figure C.1
Operating CharacteristicsOperating Characteristics
Line lengthLine length
Number of customers in systemNumber of customers in system
Waiting time in lineWaiting time in line
Total time in systemTotal time in system
Service facility utilizationService facility utilization
Decision AreasDecision Areas
Arrival rates Number of service
facilities Number of phases Number of servers
per facility Server efficiency Priority rule Service facility
arrangement
Applying the TheoryApplying the Theory of Constraints of Constraints
1. Identify the bottlenecks.
2. Optimize the schedule of the bottleneck.
3. Schedule all other resources to support the
bottleneck.
4. If the bottleneck is still restrictive, increase its capacity.
5. Once the bottleneck has been relieved, check for other bottlenecks.
How Can I Tell Which Markets Will How Can I Tell Which Markets Will Be Most Profitable?Be Most Profitable?
Contribution per hour
c = contribution to profits and overhead per unit
s = changeover time (hrs.)
p = productivity rate (units per hour)
T = total resource hours required for customer order
= contribution per hourHC
cp( s)H
TC
T
E
X
T
E
R
N
A
L
S
U
P
P
L
I
E
R
S
E
X
T
E
R
N
A
L
C
U
S
T
O
M
E
R
S
Support Processes Support Processes
Business- to- Business (B2B)
Customer Relationship
Process
Supplier Relationship
Process
Order -Fulfillment
Process
Supplier Relationship
Process
Order -Fulfillment
Process
Business-to-Customer
(B2C)
Customer Relationship
Process
First-Tier Supplier Service/Product Provider
New Service/Product
Development Process
New Service/Product
Development Process
External Value-Chain LinkagesExternal Value-Chain Linkages
0
2,000
4,000
6,000
8,000
10,000
SU
/Week
Consumer
CustomerK-C
Package Supplier
VariabilityVariability
Facial TissueFacial Tissue Facial TissueFacial Tissue
Inventory Inventory MeasuresMeasures
Average inventory = $2 millionAverage inventory = $2 millionCost of goods sold = $10 millionCost of goods sold = $10 million52 business weeks per year52 business weeks per year
Weeks of supply = = 10.4 weeksWeeks of supply = = 10.4 weeks$2 million$2 million
($10 million)/(52 weeks)($10 million)/(52 weeks)
Inventory turns = = 5 turns/yearInventory turns = = 5 turns/year$10 million$10 million
$2 million$2 million
Example 9.1Example 9.1
Environments & Design Features
Design Factors Efficient Supply Chains Responsive Supply Chains
Environment Factors Efficient Supply Chains Responsive Supply Chains
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