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Samenvatting Operations and Process Management:

Principles and Practice for Strategic Impact college 1-10
Services Logistics (Vrije Universiteit Amsterdam)

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Samenvatting Service Logistics

Lecture 1 – Chapter 1

About the course

Scope: managing the resources and processes that produce services
Process: any transformation that converts inputs into outputs (using resources)

Using a process perspective

- A business consists of a set of interrelated processes
- Processes can be management using operations management processes
- Every organization has an operations function and operations managers even if they are not called
as such.

The input-output model

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Operations are not of operational but of strategic importance

The 4-V Typology

- Low variety goes with high volume
- High variety goes with high variation

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An example for banking processes

Product and services

- We cannot talk about pure services because there are always products involved.
- Service: heterogeneity, perishability(service cannot be produced and stored for consumption),
intangibility, simultaneous production & consumption, non-ownership.
- Product: homogeneity, non-perishable(can be stored), tangible, production and consumption
separate and ownership.

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Key aspects of a service

- Inputs: customer-self input, property and physical objects, customer provided information
- Customer: individuals or entities who determine whether service provider shall be compensated for
production.
- Production process: sequence of activities modifying inputs in a way that is valued by customers.

Operations & process management requires analysis at 3 levels

- 1) The supply network: analysis at the level of the supply network.  A supply network is an
arrangement of operations
- 2) The operation: an operation is an arrangement of processes
- 3) The process: is an arrangement of resources

Unified service theory

- With service processes, the customer provides significant inputs into the production process. With
manufacturing processes, a group of customers may contribute ideas to the design of the product
but individuals only participation is to select and/or consume the product.
1) Non service I/O Model

2) Service model I/O Model

Typical issues in services supply chains

- Many professional services agreements executed without clear specifications.
- There is a significant opportunity for service providers to profit unfairly.
- There is a lack of recognition of a problem in services management

Manufacturing ≠ Service

Lecture 2 – Chapter 4

Resources
- Inputs  transformation  Outputs

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- Process design is treated in 2 parts:

- 1)Process positioning: lay out the process, decide the process technology and design jobs
- 2)Process analysis: align the process with performance objectives, understand how the process is
currently designed and configure the process’s tasks and capacity

Establishing a process view

- Identify inputs and outputs; inputs  any tangible or intangible that “flow” into the process from
the environment. Outputs  any tangible or intangible items that “flow” from the process back into
the environment.
- Understanding the flow units: the items that are being analysed, depending on the process, the
flow unit can be a unit of input or of output.

Describing the network of activities and buffers

- Activity: simplest form of transformation, the basic building block of a process
- Buffer: stores flow units that have finished with one activity but are waiting for the next activity to
start (‘inventory)
- Resources: tangible assets (usually divided in labor and capital) and intangible assets (Information
infrastructure) that facilitates the transformation of inputs into outputs.  some activities require
multiple resources, some resources can perform multiple activities.

Natural line of fit

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Process types
1) Project processes: are those which deal with discrete, usually highly customised products. Often
the time scale of making the project is relatively long as is the completions of each product. Example
movie production, computer design.
2) Jobbing processes: also deals with very high variety and low volumes, but where as in project
processes each project has resources devoted more or less exclusively to it, in jobbing processes each
‘product’ has to share the operations resources with many others. The process will work on a series
of products but, although all of products will require the same kind of attention, each will differ in its
exact needs. Example: specialist toolmakers.
3) Batch processes: batch processes can look like jobbing processes, but without the degree of
variety normally associated with jobbing. As the name implies, batch processes usually produce more
than one ‘product’ at a time. So each part of the operation has periods when it is repeating itself, at
least while the batch being processed. The size of the batch could be just 2 or 3, in which case the
batch process would differ little from jobbing especially, if each batch is a totally novel product. If the
batches are large and especially if the products are familiar to the operation, batch processes can be
fairly repetitive. Because of this, the batch type of process can be found over a wider range of
volume and variety levels than other process types.
4) Mass processes: produce in high volume, usually with narrow effective variety. A car
manufacturing plant for example might produce several thousand variants of a car if every option of
size and equipment is taken into account. Yet its effective variety Is low because the different
variants do not affect the basic process of production. Mass processes are essentially repetitive and
largely predictable. E.g. food processes
5) Continuous processes: are one step beyond mass processes in so much as they operate at even
higher volume and often have even lower variety. Sometimes they are literally continuous in that

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their products are inseparable, being produced in an endless flow. Continuous processes are often
associated with relatively inflexible capital intensive technologies with highly predictable flow.

Service process types

1) Professional services: are high-variety, low volume processes, where customers may spend a
considerable time in the service process. Such services usually provide high levels of customisation,
so contact staff are giving considerable discretion. They tend to be people-based rather than
equipment based. E.g. doctors, surgeries.
2) Service shops: are characterized by levels of customer contact, customization, volume of
customers and staff discretion. That positions them between the extremes of professional and mass
services.
3) Mass services: have many customer transactions and little customization. Such services are
predominantly equipment based and ‘product’ oriented with the most value added in the back-
office. Sometimes with comparatively little judgement needed by frontoffice staff who may have a
closely defined job and follow set of procedures. E.g. supermarkets, airports and callcentres.

Key management conclusions

- Diagonal line of product/service process matrix: identifies most appropriate general layout of a
process.
- Moving of the diagonal (line of fit) will incur extra cost.

Lay-out decisions
- Strategic importance of lay-out decisions: the objective of lay-out strategy is to develop an effective
and efficient layout that will meet the firm’s competitive requirements.
- Layout decisions operations:
-> Higher utilization of space, equipment and people
-> Improved flow of information, materials of people
-> Improved employee morale and safer working conditions
-> Improve customer/client interaction
-> Flexibility

Objectives of facility layout

Minimize material-handling costs, utilize space & labor efficiently, eliminate bottlenecks, facilitate
communication and interaction, reduce manufacturing cycle time, eliminate wasted or redundant
movement, increase capacity, facilitate entry/exit and placement of material, products and people,
incorporate safety and security measures, promote product and service equality, provide flexibility to
adapt to changing conditions.

Basic layout-types
1) Fixed-position layouts: are used for projects in which product cannot be moved.
2) Process or functional layouts: group similar activities together according to process or function
they perform.
3) Product layouts: arrange activities in line according to sequence of operations for a particular
product of service.
4) Cellular layout: group dissimilar machines into work centres that process families of parts with
similar shapes or possessing requirements.

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1)Fixed-position layout
- Features: Items remains in one place, workers and equipment come to site.
- Complicated factors: limited space at site, different materials required at different stages of the
project.
- Volume of material needed is dynamic.

Product versus process

- Product: workers; limited skills, inventory; low in process- high finished goods, storage space; small,
material handling; fixed path, scheduling; part of balancing, goal; equalize work at each station.
- Process: workers; varied skills, inventory; high in process-low in finished goods, storage space; large,
material handling; variable path, scheduling; machine location, goal; minimize material handling cost.

4) Advantages and disadvantages of cellular layout

- Advantages: reduced material handling & transit time, reduced setup time, reduced work in process
inventory, better use of human resources, easier to control, easier to automate.
- Disadvantages: inadequate part families, poorly balanced cells, expanded training and scheduling of
workers, increased capital investment.

Methods for layout-design

- Several approaches exist for designing layouts depending on the type of layout.
- 2 well known types for functional or process layouts:
* Block diagramming
* Relationship diagramming

Relationship diagramming
- Schematic diagram that uses weighted lines to denote location preference.
- Murther’s grid: format for displaying preferences for department locations.

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Step 1 : identify departments and construct Muther’s grid

- Use same equipment or facilities
- Share the same personnel
- Sequence of work flow
- Ease of communication
- Unsafe or unpleasant conditions
- Similar work performed

Step 2 : create relationship diagram

- Position facilities on basic grid, e.g. 2 x3
- Plot closeness requirements by means of lines

Step 3: evaluate & generate new designs

- Informal/qualitative assessment
- Check whether zigzagged lines are avoided or reduced.
- Distance of the heavier lines is made as short as possible.

Benefits of an appropriate layout type

- Cost savings
- Clarity and transparency for flow items through process
- Changing process type is disruptive & expensive but can be worthwhile
- Still better to choose right from the start based on the nature of the process itself.

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Process technology should reflect volume & variety

Job design should reflect volume & variety

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Performance measures
- Cost, speed, flexibility, quality, dependability

- Organizational strategic position: establishes what product attributes it aims to provide.

Moving the frontier

Operations strategy
- Is the pattern of decisions and actions that shapes the long-term vision, objectives and capabilities
of the operation and its contribution to overall strategy.
- 3 types of decisions: design of operations & processes, planning and controlling the delivery of
products and services and development of operations performance.

Customer needs are key inputs

- Dissatisfiers: requirements that are expected in a good or service. If these features are not present,
the customer is dissatisfied, sometimes very dissatisfied.
- Satisfiers: requirements that customers say they want.
- Exciters/delighter: new or innovative good or service features that customers do not expect.

Basic customer expectations (dissatisfiers & satisfiers) are generally considered the minimum
performance level required to stay in business and are often called order qualifier.

Order winners: are goods and service features and performance characteristics that differentiate one
customer benefit package from another, and win the customer business.

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Lecture 3 – chapter 5

- Throughput time: is the time of the beginning of the process to the end.
- Defining the average throughput rates as the long-run average number of jobs that flow into and
out of the system.
- In a stable environment the average inflow rate is equal to the average outflow rate (or else you
have to many stock or to less)

Why is there variability in processes

- Late arrival of material, information or customers
- Temporary malfunction of technology
- Products or services may require slightly different treatments
- Variations in human activity

Measure: capacity
- Definition: the number of units, per unit of time, they can be processed.
- It is a rate, units per time
- Capacity says something about the resources.

Utilization or process resources

- Utilization rate is a measure of efficiency, it measures the percentage of products/services that the
process is producing what it is designed to do.

- Can utilization be greater than 1? No it cannot.

Calculating capacity
- The capacity of a process is determined by the slowest (bottleneck) resource.
- To calculate bottleneck resource, calculate the amount of “stuff” the resource can push out per unit
time. The bottleneck resource that pushes out the least amount of stuff per unit time.
- Work- in process inventory: the number of units at a point of time in a system.
 The WIP in a snackbar is the number of customers waiting to be served.
 The WIP in the efteling is the number of customers in the park.
- Throughput time: average time a customer spends in a process.

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- In this example, a product comes out every 10 minutes, this is the cycle time.

- In this example, the top one has a cycle time of 12 minutes and the bottom one of 10 minutes.
- The ‘short-fat arrangement of stages: all activities done by one person.

Balancing Loss
- If you have 4 persons, and each unit is performed by one person, that means that there is no idle
time!

- Every 43 minutes one is finished, so the cycle time is then 43/4= 10.75 minutes.

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- Because 4 are ready every 43 minutes, that means 10.75 minutes per one unit.
- There is no idle time.

- Cycle time is 12 minutes. Idle time = 1+0+2+2= 5 minutes.

- Balancing loss is 5 minutes/ 4 * 12 = 0.104
- balancing loss = 10.4 %

- Cycle time is 22 minutes.

- Balancing loss= 1 / 2* 22 minutes = 0.023
- Balancing loss= 2.3 %

Waiting context (Maister’s law)

- Unoccopied time feels longer than occupied timw
- Pre-proces waits feel longer than in-process waits
- Anxiety makes waits feel longer
- Uncertain waits seem longer than certain waits
- Unexplained waits seem longer than explained waits
- Unfair waits seem longer than equitable waits.
- More valuable the service, the longer people will wait.
- Solo waiting feels longer than group waiting

Lecture 4 -

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