Special Topics in Operations Management
Inputs to the process
Chapter 1
Operations management- is managing the resources
that create and deliver services and products. The
operations function is the part of the organization that
is responsible for this activity. Every organization has an
operations function because every organization
produces some type of service and/or product.
Operations managers- are the people who have the
responsibility for managing some, or all, of the resources
which comprise the operations function.
Operations in the Organization
 The operations function is central to the
organization because it creates the services and
products which are its reason for existing, but it is not
the only function. It is, however, one of the three
core functions of any organization. These are:
1. Marketing function – which is responsible for
communicating the organization’s services and
products (or more generically, offerings) to its
markets to generate customer requests for
assistance;
2. Service/Product Development function –
which is responsible for developing new and
modified offerings to generate future customer
requests for service;
3. Operations function – which is responsible for
fulfilling customer requests for service through
the creation and delivery of services and
products.
 In addition, there are the support functions that
enable the core functions to operate effectively.
These include, for example:
 Accounting and Finance function – which
provides the information to help economic
decision-making and manages the financial
resources of the organization;
 Human Resources function – which recruits
and develops the organization’s staff and looks
after their welfare.
Figure 1.1 The relationship between the operations
function and other core and support functions of the
organization
THE INPUT-TRANSFORMATION-OUTPUT PROCESS
All operations create services and products by changing
inputs into outputs using an ‘input-transformation-output’
process. Put simply; operations are processes that take
in a set of input resources that are used to transform
something, or are transformed themselves, into outputs
of services and products
 
One set of inputs to any operation’s processes are
transformed resources. These are the resources that
are treated, transformed or converted in the process.
They are usually a mixture of the following:
 Customers. Operations which process customers
might change their physical properties, transform the
location, transform their physiological state and
psychological state.
 Materials. Operations which process materials could
do so to transform their physical properties, change
their location, while some operations store materials.
 Information. Operations which process information
could do so to transform their informational
properties, change the possession of the information,
while some store the information.
The other set of inputs to any operations process are
transforming resources. These are the resources that
act upon the transformed resources. There are two
types that form the ‘building blocks of all operations:
 Facilities – the buildings, equipment, plant and
process technology of the operation.
 Staff – the people who operate, maintain, plan and
manage the operation.
Outputs from the process
 Some operations create and deliver just services,
and others just products, but most operations
produce a mixture of the two.
The figure shows several operations positioned in a
spectrum from ‘pure’ product operations to ‘pure’ service
operations.
THE PROCESS HIERARCHY
 Process is ‘an arrangement of resources that
produce some mixture of products and services”.
They are the ‘building blocks’ of all operations, and
they form an ‘internal network’ within an operation.
 Each process is, at the same time, an internal
supplier and an internal customer for other
processes. This ‘internal customer’ concept
provides a model to analyse the internal activities of
an operation. It is also a useful reminder that, by
treating internal customers with the same degree of
care as external customers, the effectiveness of the
whole operation can be improved.
 Within each of these processes is another network
of individual units of resource such as individual
people and individual items of process technology
(machines, computers, storage facilities, etc.). Again,
transformed resources flow between each unit of
transforming resource. So any business, or
operation, is made up of a network of processes and
any process is made up of a network of resources. In
addition, any business or operation can itself be
viewed as part of a greater network of businesses or
operations. It will have operations that supply it with
the products and services it needs and unless it deals
directly with the end-consumer, it will supply
customers who themselves may go on to supply their
own customers. Moreover, any operation could have
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 several suppliers and several customers and may be
in competition with other operations producing similar
services to those it produces itself. This network of
operations is called the supply network. In this way
the input–transformation–output model can be used
at a number of different ‘levels of analysis’. This idea
is called the hierarchy of operations.
Operations Management in All Parts of the Business
Operations management is relevant for all
functions, and all managers should have something to
learn from the principles, concepts, approaches and
techniques of operations management. It also means
that we must distinguish between two meanings of
‘operations’:
 ‘Operations’ as a function, meaning the part of the
organization which creates and delivers the services
and products for the organization’s external
customers;
 ‘Operations’ as an activity, meaning the
management of the processes within any of the
organization’s functions.
CHARACTERISTICS OF OPERATIONS PROCESSES
Although all operations processes are similar in that they
all transform inputs, they do differ in a number of ways,
four of which, known as the four Vs, are particularly
important:
 The volume of their output;
 The variety of their output;
 The variation in the demand for their output;
 The degree of visibility which customers have
of the production of their output
SUMMARY
Operations management – Is the activity of managing
the resources which are devoted to the creation and
delivery of services and products. It is one of the core
functions of any business, although it may not be called
operations management in some industries.
- Operations management is concerned with
managing processes. All processes have internal
customers and suppliers. As all management
functions also have processes, operations
management has relevance for all managers.
Why is operations management important in all types
of organization?
 Operations management uses the organization’s
resources to create outputs that fulfil defined market
requirements. This is the fundamental activity of any
type of enterprise.
 Operations management is increasingly important
because today’s business environment requires new
thinking from operations managers.
Process hierarchy
 All operations are part of a larger supply network
which, through the individual contributions of each
operation, satisfies end-customer requirements.
 All operations are made up of processes that form a
network of internal customer–supplier relationships
within the operation.
 End-to-end business processes that satisfy customer
needs often cut across functionally based processes.
Chapter 2
Social, Environmental and Economic Performance
OPERATIONS PERFORMANCE IS VITAL FOR ANY
ORGANIZATION
It is no exaggeration to view operations
management as being able to either ‘make or break’
any business. This is not just because the operations
function is large and, in most businesses, represents the
bulk of its assets and the majority of its people, but
because the operations function gives the ability to
compete by providing customer responsiveness and by
developing the capabilities that will keep it ahead of its
competitors in the future.
THE TRIPLE BOTTOM LINE
One common term that tries to capture the idea
of a broader approach to assessing an organization’s
performance is the ‘triple bottom line’ (TBL, or 3BL),
also known as ‘people, planet and profit’. Essentially,
it is a straightforward idea, simply that organizations
should measure themselves not just on the traditional
economic profit that they generate for their owners, but
also on the impact their operations have on society
(broadly, in the sense of communities, and individually,
for example in terms of their employees) and the
ecological impact on the environment. The influential
initiative that has come out of this triple bottom line
approach is that of ‘sustainability’. A sustainable
business is one that creates an acceptable profit for its
owners, but minimizes the damage to the environment
and enhances the existence of the people with whom it
has contact. In other words, it balances economic,
environmental and societal interests. This gives the
organization its ‘license to operate’ in society.
THE SOCIAL BOTTOM LINE
Businesses should accept that they bear some
responsibility for the impact they have on society and
balance the external ‘societal’ consequences of their
actions with the more direct internal consequences,
such as profit. Society is made up of organizations,
groups and individuals. Each is more than a simple unit
of economic exchange. Organizations have
responsibility for the general well-being of society
beyond short-term economic self-interest. At the level
of the individual, this means devising jobs and work
patterns which allow individuals to contribute their
talents without undue stress. At a group level, it
means recognizing and dealing honestly with employee
representatives. This principle also extends beyond the
boundaries of the organization. Any business has a
responsibility to ensure that it does not knowingly
disadvantage individuals in its suppliers or trading
partners. Businesses are also a part of the larger
community, often integrated into the economic and
social fabric of an area. Increasingly, organizations are
recognizing their responsibility to local communities by
helping to promote their economic and social well-
being.
Globalization
The International Monetary Fund defines
globalization as ‘the growing economic
interdependence of countries worldwide through
increasing volume and variety of cross-border
transactions in goods and services, free international
capital flows, and more rapid and widespread diffusion
of technology’. It reflects the idea that the world is a
smaller place to do business in.
Corporate Social Responsibility (CSR)
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 Strongly related to the social ‘bottom line’ is that of
corporate social responsibility (generally known as
CSR). Definition:
 ‘CSR is essentially about how business takes
account of its economic, social and environmental
impacts in the way it operates – maximizing the
benefits and minimizing the downsides. . . .
Specifically, we see CSR as the voluntary actions
that business can take, over and above
compliance with minimum legal requirements, to
address both its own competitive interests and the
interests of wider society.’
 ‘Corporate Social Responsibility . . . is listening
and responding to the needs of a company’s
stakeholders. This includes the requirements of
sustainable development. We believe that building
good relationships with employees, suppliers and
wider society is the best guarantee of long-term
success. This is the backbone of our approach to
CSR.’
THE ENVIRONMENTAL BOTTOM LINE
Environmental sustainability means:
 ‘Ensuring that the overall productivity of
accumulated human and physical capital resulting
from development actions more than compensates
for the direct or indirect loss or degradation of the
environment’
 ‘Meeting the needs of the present without
compromising the ability of future generations to
meet their own needs’.
From the perspective of individual organizations,
the challenging issues of dealing with sustainability
are connected with the scale of the problem and the
general perception of ‘green’ issues.
 Firstly, the scale issue is that cause and effect in
the environmental sustainability area are judged at
different levels. The effects of, and arguments for,
environmentally sustainable activities are felt at a
global level, while those activities themselves are
essentially local. It has been argued that it is
difficult to use the concept at a corporate or even
at the regional level.
 Secondly, there is a paradox with sustainability-
based decisions. It is that the more the public
becomes sensitized to the benefits of firms acting
in an environmentally sensitive way, the more
those firms are tempted to exaggerate their
environmental credentials, the so-called
‘greenwashing’ effect.
It is important to understand that broad issues such as
environmental responsibility are intimately
connected with the day-to-day decisions of operations
managers. Many of these are concerned with waste.
Operations management decisions in product and
service design significantly affect the utilization of
materials both in the short term and in long-term
recyclability. Process design influences the proportion
of energy and labour that is wasted as well as materials
wastage. Planning and control may affect material
wastage, but also affects energy and labour wastage.
Improvement, of course, is dedicated largely to
reducing wastage. Here environmental responsibility
and the conventional concerns of operations
management coincide.
THE ECONOMIC BOTTOM LINE
An organization’s top management represent the
interests of the owners (or trustees, or electorate, etc.)
and therefore are the direct custodians of the
organization’s basic purpose. They also have
responsibility for translating the broad objectives of the
organization into a more tangible form. Broadly they
should expect all their operations managers to
contribute to the economic success of the organization
by using its resources effectively. To do this it must be
creative, innovative and energetic in improving its
processes, products and services.
Effective operations management can give five types
of advantage to the business
1. It can reduce the costs
2. It can achieve customer satisfaction through
good quality and service and therefore revenue
in a for-profit organization
3. It can reduce the risk of operational failure.
4. It can reduce the amount of investment.
5. It can provide the basis for future innovation.
The Five Operations Performance Objectives
Broad stakeholder objectives form the backdrop to
operations decision-making, and top management’s
objectives provide a strategic framework, but running
operations at an operational day-to-day level requires a
more tightly defined set of objectives. These are the
five basic ‘performance objectives’ and they apply to
all types of operation.
1. You would want to do things right; that is, you
would not want to make mistakes, and would want
to satisfy your customers by providing error-free
services and products which are ‘fit for their
purpose’. This is giving a quality advantage.
2. You would want to do things fast, minimizing the
time between a customer asking for services or
products and the customer receiving them in full,
thus increasing the availability of your services and
products and giving a speed advantage.
3. You would want to do things on time, so as to
keep the delivery promises you have made. If the
operation can do this, it is giving a dependability
advantage.
4. You would want to be able to change what you
do; that is, being able to vary or adapt the
operation’s activities to cope with unexpected
circumstances or to give customers individual
treatment. Being able to change far enough and
fast enough to meet customer requirements gives
a flexibility advantage.
5. You would want to do things cheaply; that is,
create and deliver services and products at a cost
which enables them to be priced appropriately for
the market while still allowing for a return to the
organization; or, in a not-for-profit organization,
give good value to the taxpayers or whoever is
funding the operation. When the organization is
managing to do this, it is giving a cost advantage.
THE QUALITY OBJECTIVE
Quality is consistent conformance to
customers’ expectations, in other words, ‘doing things
right’, but the things which the operation needs to do
right will vary according to the kind of operation. There
is something fundamental about quality. Because of
this, it is clearly a major influence on customer
satisfaction or dissatisfaction
Quality Inside the Operation
When quality means consistently creating and
delivering services and products to specification, it not
only leads to external customer satisfaction, but makes
life easier inside the operation as well.
Quality reduces costs.
Quality increases dependability.
THE SPEED OBJECTIVE
Speed means the elapsed time between
customers requesting services or products and
receiving
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them. The main benefit to the operation’s (external)
customers of speedy delivery of services or products is
that the faster they can have the service or product, the
more likely they are to buy it, or the more they will pay
for it, or the greater the benefit they receive.
Speed Inside the Operation
Inside the operation, speed is also important. Fast
response to external customers is greatly helped by
speedy decision-making and speedy movement of
materials and information inside the operation. Speed
brings other benefits too.
Speed reduces inventories
Speed reduces risks
THE DEPENDABILITY OBJECTIVE
Dependability means doing things in time for
customers to receive their services or products exactly
when they are needed, or at least when they were
promised.
Dependability inside the operation
Inside the operation, internal customers will judge
each other’s performance partly by how reliable the
other processes are in delivering material or
information on time. Operations where internal
dependability is high are more effective than those
which are not, for a number of reasons.
Dependability saves time.
Dependability saves money
Dependability gives stability
THE FLEXIBILITY OBJECTIVE
Flexibility means being able to change the
operation in some way. This may mean changing
what the operation does, how it is doing it, or when it is
doing it. Specifically, customers will need the operation
to change so that it can provide four types of
requirement:
 Service/product flexibility – the operation’s
ability to introduce new or modified services and
products;
 Mix flexibility – the operation’s ability to create a
wide range or mix of services and products;
 Volume flexibility – the operation’s ability to
change its level of output or activity to produce
different quantities or volumes of services and
products over time;
 Delivery flexibility – the operation’s ability to
change the timing of the delivery of its services or
products.
Mass customization – One of the beneficial external
effects of flexibility is the increased ability of operations
to do different things for different customers. So, high
flexibility gives the ability to create a high variety of
services or products.
Agility – Judging operations in terms of their agility has
become popular. Agility is really a combination of all the
five performance objectives, but particularly flexibility
and speed. In addition, agility implies that an operation
and the supply chain of which it is a part can respond to
uncertainty in the market. Agility means responding to
market requirements by creating new and existing
services and products fast and flexibly
Flexibility inside the operation – Developing a
flexible operation can also have advantages to the
internal customers within the operation.
 Flexibility speeds up response.
 Flexibility saves time
 Flexibility maintains dependability
THE COST OBJECTIVE – To the companies which
compete directly on price, cost will clearly be their major
operations objective. The lower the cost of creating and
delivering their services and products, the lower can be
the price to their customers.
Cost Reduction through Internal Effectiveness
Our previous discussion distinguished between the
benefits of each performance objective to externally
and internally. Each of the various performance
objectives has several internal effects, but all of them
affect cost. So, one important way to improve cost
performance is to improve the performance of the other
operations objectives.
 High-quality operations do not waste time or
effort having to re-do things, nor are their internal
customers inconvenienced by flawed service.
 Fast operations reduce the level of in-process
inventory between and within processes, as well
as reducing administrative overheads.
 Dependable operations do not spring any
unwelcome surprises on their internal customers.
They can be relied on to deliver exactly as
planned. This eliminates wasteful disruption and
allows the other micro-operations to operate
efficiently.
 Flexible operations adapt to changing
circumstances quickly and without disrupting the
rest of the operation. Flexible micro-operations can
also change over between tasks quickly and
without wasting time and capacity.
Summary
1. Why is operations performance important in any
organization? - Operations management can either
‘make or break’ any business. It is large and, in most
businesses, represents the bulk of its assets, but also
because the operations function gives the ability to
compete by providing the ability to respond to
customers and by developing the capabilities that will
keep it ahead of its competitors in the future.
2. How should the operations function judge itself? –
Operations performance can be judged using the ‘triple
bottom line’ approach. This includes social,
environmental and economic performance.
3. What does top management expect from the
operations function? – Operations can contribute to
the organization as a whole by: achieving customer
satisfaction. reducing the costs, reducing the risk of
operational failure, reducing the amount of investment,
providing the basis for future innovation.
4. How do operations performance objectives trade off
against each other? – Trade-offs are the extent to
which improvements in one performance objective can
be achieved by sacrificing performance in others. The
‘efficient frontier’ concept is a useful approach to
articulating trade-offs and distinguishes between
repositioning performance on the efficient frontier and
improving performance by overcoming trade-offs
CHAPTER 3
THE DESIGN OF SERVICES & PRODUCTS
Services and products are often the first
thing that customers see of a company, so they
should have an impact. Whilst operations managers
may not have direct responsibility for service and
product design, they always have an indirect
responsibility to provide the information and advice upon
which successful development depends. However,
operations managers are increasingly expected to take a
more active part in design. Unless a service, however
well-conceived, can be implemented and unless a
product, however well designed, can be produced to a
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high standard, the design can never bring its full
benefits.
Why is good design so important?
Good design satisfies customers, communicates the
purpose of the service or product to its market, and
brings financial rewards to the business. The objective of
good design, whether of services or products, is to
satisfy customers by meeting their actual or anticipated
needs and expectations. This, in turn, enhances the
competitiveness of the organization.
What is designed in a service or product?
All services and products can be considered as having
three aspects:
 A concept, which is the understanding of the
nature, use and value of the service or product. The
concept is a clear articulation of the outline
specification including the nature, use and value of
the product or service against which the stages of
the design (see later) and the resultant product
and/or service can be assessed.
 A package of ‘component’ services and products
that provide those benefits defined in the concept.
The collection of services and products that is
usually referred to as the ‘package’ that customers
buy. Some of the services or products in the
package are core, that is they are fundamental to
the purchase and could not be removed without
destroying the nature of the package. Other parts
will serve to enhance the core. These are
supporting services and products. Warranties
and after sales service are example of it.
 The process defines the way in which the
component services and products will be created
and delivered. Producing designs for services and
products is itself a process which conforms to the
input–transformation–output model. It therefore has
to be designed and managed like any other
process. 
The Stages of Design
Fully specified designs rarely spring, fully formed, from a
designer’s imagination. To get to a final design of a
service or product, the design activity must pass through
several key stages. These form an approximate
sequence, although in practice designers will often
recycle or backtrack through the stages. We will
describe them in the order in which they usually occur.
Firstly, comes the concept generation stage that
develops the overall concept for the service or product.
The concepts are then screened to try to ensure that, in
broad terms, they will be a sensible addition to its
portfolio and meet the concept as defined. The agreed
concept has then to be turned into a preliminary design
that then goes through a stage of evaluation and
improvement to see if the concept can be served better,
more cheaply or more easily. An agreed design may
then be subjected to prototyping and final design.
Concept Generation
The ideas for new concepts can come from sources
outside the organization, such as customers or
competitors, and from sources within the organization,
such as staff (for example, from sales staff and front-of-
house staff) or from the R&D department.
 Ideas from customers. Marketing, the function
generally responsible for identifying new service or
product opportunities, may use many market
research tools for gathering data from customers in
a formal and structured way, including
questionnaires and interviews.
 Ideas from competitor activity. All market-aware
organizations follow the activities of their
competitors. A new idea may give a competitor an
edge in the marketplace, even if it is only a
temporary one, then competing organizations will
have to decide whether to imitate, or alternatively to
come up with a better or different idea.
 Ideas from staff. The contact staff in a service
organization or the salesperson in a product-
oriented organization could meet customers every
day. These staff may have good ideas about what
customers like and do not like. They may have
gathered suggestions from customers or have ideas
of their own as to how offerings could be developed
to meet the needs of their customers more
effectively.
 Ideas from research and development. One
formal function found in some organizations is
research and development (R&D). As its name
implies, its role is twofold. Research usually means
attempting to develop new knowledge and ideas in
order to solve a particular problem or to grasp an
opportunity. Development is the attempt to try to
utilize and operationalize the ideas that come from
research.
Concept Screening
Not all concepts which are generated will necessarily be
capable of further development into services and
products. Designers need to be selective as to which
concepts, they progress to the next design stage. The
purpose of the concept-screening stage is to take the
flow of concepts and evaluate them. Evaluation in design
means assessing the worth or value of each design
option, so that a choice can be made between them.
This involves assessing each concept or option against
a number of design criteria:
 The feasibility of the design option – can we do it?
 Do we have the skills (quality of resources)?
 Do we have the organizational capacity (quantity
of resources)?
 Do we have the financial resources to cope with
this option?
 The acceptability of the design option – do we want
to do it?
 Does the option satisfy the performance criteria
which the design is trying to achieve?
 (These will differ for different designs.)
 Will our customers want it?
 Does the option give a satisfactory financial
return?
 The vulnerability of each design option – do we
want to take the risk? That is,
 Do we understand the full consequences of
adopting the option?
 Being pessimistic, what could go wrong if we
adopt the option? What would be the
consequences of everything going wrong?
The Design ‘Funnel’
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Applying these evaluation criteria progressively reduces
the number of options which will be available further
along in the design activity. Design funnel is the
progressive reduction of design options from many to
one.
Preliminary Design
• Having generated an acceptable, feasible and
viable concept the next stage is to create a
preliminary design. The objective of this stage is to
have a first attempt at both specifying the
component products and services in the package
and defining the processes to create the package.
This will require the collection of information about
such things as the constituent component parts
which make up the package and the component
structure, the order in which the components of the
package have to be put together. Designers adopt a
number of approaches to reducing the inherent
complexity in the design of their range. Here we
describe three common approaches to complexity
reduction – standardization, commonality and
modularization.
Standardization
• Operations sometimes attempt to
overcome the cost penalties of high
variety by standardizing their services,
products, or processes. This allows
them to restrict variety to that which has
real value for the end-customer. Often it
is the operation’s outputs which are
uniform.
Commonality
• Using common service or product
elements can also simplify design
complexity. The more that different
services and products can be based on
common components, the less complex
it is to produce them.
Modularization
• The use of modular design principles
involves designing standardized ‘sub-
components’ of a service or product
which can be put together in different
ways.
Design Evaluation and Improvement
The purpose of this stage in the design activity is to take
the preliminary design and see if it can be improved
before the offering is tested in the market. There are a
number of techniques that can be employed at this stage
to evaluate and improve the preliminary design. Here we
discuss two which have proved particularly useful:
 Quality function deployment (QFD)
The key purpose of quality function
deployment (QFD) is to try to ensure that the
eventual service or product actually meets the
needs of its customers. Customers may not
have been considered explicitly since the
concept generation stage, and therefore it is
appropriate to check that what is being proposed
for the design of the product or service will meet
their needs. It is also known as the ‘house of
quality’ (because of its shape) and the ‘voice of
the customer’ (because of its purpose). The
technique tries to capture what the customer
needs and how it might be achieved.
 Value engineering
The purpose of value engineering is to
try to reduce costs, and prevent any
unnecessary costs, before creating the
service or product. Simply put, it tries to
eliminate any costs that do not
contribute to the value and performance
of the service or product. (‘Value
analysis’ is the name given to the same
process when it is concerned with cost
reduction after the product or service
has been introduced.) Value
engineering requires innovative and
critical thinking, but it is also carried out
using a formal procedure. The
procedure examines the purpose of the
service or product, its basic functions
and its secondary functions. Taking the
example of the remote mouse used
previously:
The purpose of the remote mouse is to
communicate with the computer.
The basic function is to control presentation
slide shows.
The secondary function is to be plug-and-play-
compatible with any system.
Prototyping and Final Design
At around this stage in the design activity it is
necessary to turn the improved design into a
prototype so that it can be tested. It may be too
risky to go into full production before testing it
out, so it is usually more appropriate to create a
prototype. Service prototypes may also include
computer simulations but also the actual
implementation of the service on a pilot basis.
Product prototypes include everything from clay
models to computer simulations.
 Computer-aided design (CAD)
CAD systems provide the computer-aided ability
to create and modify designs. These systems
allow conventionally used shapes such as
points, lines, arcs, circles and text, to be added
to a computer-based representation of the
design.
Skunkworks
This is usually taken to mean a small team who
are taken out of their normal work environment
and granted freedom from their normal
management activities and constraints.
 
Chapter 4
PROCESS DESIGN
To ‘design’ is to conceive the looks,
arrangement, and workings of something before it is
created. In that sense it is a conceptual exercise. Yet it
is one which must deliver a solution that will work in
practice.
Design is also an activity that can be
approached at different levels of detail. One may
envisage the general shape and intention of something
before getting down to defining its details. This is
certainly true for process design. At the start of the
process design activity it is important to understand the
design objectives, especially at first, when the overall
shape and nature of the process is being decided.
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WHAT OBJECTIVES SHOULD PROCESS DESIGN
HAVE?
The whole point of process design is to make
sure that the performance of the process is appropriate
for whatever it is trying to achieve. For example, if an
operation competed primarily on its ability to respond
quickly to customer requests, its processes would need
to be designed to give fast throughput times. This
would minimize the time between customers requesting
a service or product and their receiving it. Similarly, if
an operation competed on low price, cost-related
objectives would dominate its process design. Some
kind of logic should link what the operation as a whole
is attempting to achieve and the performance
objectives of its individual processes.
• Every firm that produces a good or a service will
do so by the use of a process.   This process will
use the firm’s resources in order to transform the
primary inputs into some type of output.  In
designing the actual process, particularly the
number and sequence of steps, several
important factors need to be considered.
1. Product variety – Is the product highly
standardized, or is the product highly
customized?
2. Volume of output – Is the business created to
produce large volumes or a small amount of
output?
3. Is the technology to be used general purpose or
specialized? Is it capital intensive?
4. The skill level of employees, it is very high or
low?
5. What is the expected duration?
Make-to-order and Make-to-stock
•  It is useful to categorize processes as either make-
to-order or make-to-stock.
• In a make-to-order business, the customer’s order
is not manufactured until the order is received. This
allows customization to the exact specifications that
the customer requires. It may also be referred to as
build-to-order. This type of production is considered
a pull type system. The work is “pulled” through the
process when customer demand is present.
• The disadvantage of this type of system is that it
takes time for the firm to acquire any materials and
needed components, and then to schedule and
produce the customer’s order. Goods are made in
small amounts and may be more expensive.
• The advantage of this type of process is that
inventory is lower than in a typical make-to-stock
system. There is not any uncertainty about what the
customer desires and there is no obsolete stock to
be disposed of. Dell Computer has utilized this type
of system to produce personal computers very
successfully.
• In a make-to-stock process, goods are produced
in anticipation of customer demand, usually from a
sales forecast. These products are generally made
in larger amounts and put into storage to wait for
customer orders. Although the unit cost may be
lower due to large production volumes, there may
be losses due to forecast error, excess inventory,
obsolescence and theft. Lead times however are
short because goods are available when the
customer places the order. These goods are not
customized but standardized.
Process Types
Project – A one-time event, such as construction of
an apartment building, implementation of a new
ERP system, or writing a book, would all be
considered a project type of process. Each of these
projects have a high degree of customization,
substantial use of resources, and a complex set of
related activities. There is only a single output at the
end of the project.
Job Shop – Many businesses have a job shop type
of process. This is most commonly used when the
product being produced is unique for each
customer. It is a make-to-order type of business
where production is intermittent (i.e. rather than one
entire product being completed at a time, work will
continue on multiple products as time permits).
Often the product has unique characteristics for
each customer. The workers in this type of business
are very highly skilled in their craft or trade. Often
they are referred to as craftsmen or makers. The
volume of output is low in a job shop. The
equipment used is quite general purpose. Examples
include a small bakery that produces beautiful
custom wedding cakes, or a business that makes
custom guitars or bicycles based on the customers
measurements and preferences of materials and
Batch – Some businesses are in the situation
where they make groups of identical products on a
regular basis.  These groups are referred to as a
batch. The batch will progress through a set of
steps to be completed from the start to the end. An
organization may have multiple batches at different
stages coming through the process.  This type of
processing is also intermittent. (start, stop, start)
There is less variety in this type of business
(compared to a job shop) and the equipment used
will be relatively general purpose and suited to the
industry that they are in. Employees need to be
skilled and experienced at operating that equipment
and producing these products. Examples of
products made using batch production are baked
goods, aircraft parts, clothing, and vaccines. An
important decision by these firms is how big the
batch should be.
Repetitive – This type of business produces
products that are more standardized in nature.
Usually the output is high. Since the goods are quite
standardized, the equipment used tends to be quite
specialized and often highly customized for that
process. The skill level of the employees is usually
low because the steps are highly standardized.
Although these types of jobs may not require a
trade or extensive experience, they often do require
skills such as multi-tasking, concentration, problem
solving, and teamwork. Often, these processes use
flexible automation that allows for customization
such as the addition of upgraded features.
Examples of a repetitive process include assembly
lines such as assembling automobiles or
electronics, a carwash, or a cafeteria line.
Continuous – A continuous process is when a very
high volume of standardized product is produced.  
The type of product being made is described as
non-discrete. This means that these businesses do
not produce individual products, rather a product
that is often a liquid or a product such as sugar,
gasoline, or steel. An example of this type of
process is an oil refinery. There are not separate
individual workstations, rather the product flows
from one step to the next within the system. The
equipment in this type of process is highly complex
and designed solely for that product at that facility.
There are very few workers except for those that
are responsible for process monitoring,
maintenance, and cleaning.
Hybrids – There are many firms using mixtures of
process types.  One such common exception is
the Mass Customization model of production. In
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 mass customization, a company combines low-cost
high volume of output, but each and every customer
order is customized to the customers specifications.
Usually the use of computer-aided manufacturing
systems is what permits this customization.   These are used in businesses that use assembly
Examples include furniture makers who wait to
produce the exact model of sofa based on the
customers dimensions and fabric choice, or the
vehicle manufacturer that has dozens of
customization packages and paint options such that
each vehicle is custom for the purchaser. A key
requirement for successful mass customization is a
modular design to allow fast seamless change from
each product to the next.
Facility Layout
Layout refers to the way in which organizations position
their equipment, departments, or workcentres.   Having
an effective layout can streamline production activities,
eliminate wasted or redundant movement and improve
safety. The general types of layouts are: a fixed position
layout, a process layout (functional), a product (line)
layout, and a cellular layout, which is considered a
hybrid. Other common layouts include office layouts,
retail layouts, and warehouse layout.
Fixed Position Layout – When producing a
product that is not easily able to be moved, it may
require that the worker, their tools and equipment
are brought to the site where the production is
taking place. This is a common layout in
manufacturing a building, a ship or performing
repairs to major equipment.
Process Layout – A process layout is a layout in
which departments, equipment, or workcentres are
arranged according to their function. In a
manufacturing environment, all of the milling
machines may be in one area or “department,” the
lathes may be in another area, and the drilling
machines all in another area.  This layout is also
common in services. In a department store, similar
goods are arranged together such as footwear,
jewelry, and housewares.  At a hospital, cardiology
is in one area, maternity in another location, and
pediatrics elsewhere. The specific dedicated
equipment and skilled practitioners work in each of
these areas.
Advantage and Disadvantages of Process Layout
• An advantage to a process layout is that
equipment tends to be quite general-purpose. If one
particular piece of equipment breaks down, it will
not halt the entire process. This type of process
gives flexibility to handle a variety of products or
customers. It is ideal for job shops or small batch
manufacturing.
• A disadvantage of a process layout is that a
particular product will likely have to travel from
department to department to get the set of
processes completed. This often leads to lots of
material handling and movement of goods
throughout the facility. A flexible material-handling
system is needed such as forklifts.  Inventory will sit
in each area waiting for its turn to be processed.
This waiting inventory is referred to
as queue. When examining the total throughput
time of jobs through the system, it is often
discovered that each order spends much more time
waiting in queue than it does actually being
processed. For that reason, this type of layout is
generally very inefficient.  A major consideration in
a process layout is to ensure that departments with
a large amount of interaction are located nearby
one another.
Product (Line) Layout
lines or production lines. If the product has high
volume an assembly line might be the best
option. 
 The equipment in these types of layouts is often
very capital intensive and are laid out according to
the progressive steps of the process. Each work
station is located along the line and may consist of
a worker with equipment, or robots. Often each
work station is adding components (assembly line)
or modifying a product (production line).  It is
important to note that it is not necessarily a
straight line, often assembly lines zig zag or are in
a shape to use the maximum amount of space
available. Some services may use a line layout,
such as preparing hospital meals, or a cafeteria
line. Due to the considerable cost involved with
setting up an assembly line, a large volume of
product needs to be produced. Demand that is
steady and consistent is ideal.
 In contrast to a process layout a product layout
is very efficient. There are a number of reasons
for this.
1. Because of the division of labour and the
repetition, there is less variability in the work
performed
2. There is no build up of inventory, and no waiting.
When completed at one work station, the job
automatically moves to the next workstation.
Only the inventory that is in process is in the
system. Goods tend to be shipped when they
are completed.
3. Due to the material handling system, goods
move quickly and not very far.
4. Changeovers are not necessary so very little
time is lost in changing between products.
Challenges in a product (line) layout include:
1. The fact that the line may be susceptible to
shutdowns if there are equipment malfunctions
so preventative maintenance is critical.
Preventative maintenance involves the
inspection and replacement of any parts that
have a high probability of failures, as well as
holding ample spare parts in stock and having a
detailed maintenance schedule for each piece of
equipment.
2. Training and job rotation are critical activities to
make sure employees are capable of completing
the work tasks and that there are multiple people
that can work at each individual job
3. With repetitive standardized jobs, it is critical that
good ergonomic job design is performed.
Organizations that ensure the health, safety and
comfort of their employees reap rewards in
terms of the quality of work they receive from
employees.
Cellular Layout
• Cellular layouts are considered a “hybrid” type of
layout because it includes characteristics of both
a Process layout and a product (line) layout. It is
very common that a business may have multiple
product lines, with far too much variety in order
to take advantage of one assembly line. Often
these businesses may have been using a
process layout, with all of the associated product
movement and waiting times.  An alternative that
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 became popular beginning in the late 1980s is
the Cellular layout type.  This type of production
layout is still heavily utilized today.
Other Layouts Include
Office Layout: In 2020 office spaces are a great
deal different than in generations past. Floor space
per employee has dropped significantly. There is far
less worry about the flow of paperwork than in the
past. Often employees are grouped according to the
tasks they perform and the work teams they
participate in.  Workspaces now tend to be more
flexible with less paper and less furniture to hold
files and documents. Many organizations put more
emphasis on having comfortable spaces for
collaboration.  Layouts are much more open
concept with lower partitions to improve visibility of
the workspace.
Retail Layout: The overall goal when laying out a
retail location is to try and maximize the amount of
sales per square foot in the facility. This is done by
careful study of traffic patterns in the store in order
to try and maximize the amount of product to which
each customer is exposed. That is why you will
often find the milk at the far end of the store causing
customers the need to walk past all other
departments to reach it.
Warehouse Layout: Effective warehouse layout
aims to make effective use of the total volume of
space contained in the building. The relationship
between the receipt of incoming goods, the storage
space and the picking, packing and shipping of
outbound goods is carefully analyzed. An important
consideration is the placement of inventory items in
order to minimize distance goods and employees
are need to travel. Many warehouses have special
holding requirements such as freezers, cold storage
and high security areas.
Some important “Times” to be familiar with:
• Throughput time is the time between the
beginning – the very first operation in the process
until the product is actually completed at the end of
the process. Remember that this includes not only
the process time, but also any waiting time,
inspection time, time spent on rework and
movement.
• Lead time is the amount of time between when the
customers order is received and when the product
is completed and ready to ship.
• Cycle time is the rate at which the operation is
actually producing each unit. If you stood at the end
of the process and measured the time between
completion of each unit, that is the true cycle time.
• Takt time is a calculated value which determines
the rate at which a firm needs to process their
product in order to meet customer demand. It can
be calculated by: available production time
demand
Example: A firm operates 8 hours per day (480
minutes). Their daily demand is 120 units. They can
calculate their takt time required to meet this demand: (8
hours x 60 min) / 120  = 4 min.
• The firm must product one product every 4
minutes. This is also known as the drum beat of
the operation. They must produce one product at
least every 4 minutes to meet customer demand.  If
demand increases it may be required to use
continuous improvement tools to change the takt
time or possibly add additional equipment.
• The above calculation shows that an assembly line
must have a takt time of 4 minutes in order to
produce 120 units per day. 
HUMAN IMPLICATIONS FOR PROCESS DESIGN
• Task allocation – the division of labour
The idea of the division of labour – dividing the
total task down into smaller parts, was first
formalized as a concept by the economist Adam
Smith in his Wealth of Nations in 1746.
There are some real advantages in division of
labour:
• It promotes faster learning. It is obviously easier
to learn how to do a relatively short and simple task
than a long and complex one.
• Reduced non-productive work. This is probably
the most important benefit of division of labour. In
large, complex tasks the proportion of time spent
picking up tools and materials, putting them down
again and generally finding, positioning and
searching can be very high indeed (called non-
productive elements of work). But in shorter,
divided, tasks non-productive work can be
considerably reduced, which would be very
significant to the costs of the operation.
There are also serious drawbacks to highly divided
jobs:
• Monotony. The shorter the task, the more often
operators will need to repeat it. Repeating the same
task, for example every 30 seconds, eight hours a
day and five days a week, can hardly be called a
fulfilling job.
• Physical injury. The continued repetition of a very
narrow range of movements can, in extreme cases,
lead to physical injury. The over-use of some parts
of the body (especially the arms, hands and wrists)
can result in pain and a reduction in physical
capability.
• Low flexibility. Dividing a task up into many small
parts often gives the job design a rigidity which is
difficult to change under changing circumstances.
• Poor robustness. Highly divided jobs imply
customers, materials or information passing
between several stages. If one of these stages is
not working correctly, for example because some
equipment is faulty, the whole operation is affected.
• Designing the human interface – ergonomic
workplace design
• Ergonomics is concerned primarily with the
physiological aspects of job design. Physiology is
about the way the body functions. It involves two
aspects: firstly, how a person interfaces with his or
her immediate working area; secondly, how people
react to environmental conditions. Ergonomics is
sometimes referred to as human factors
engineering or just ‘human factors’.
Process Flowcharting
• Any process improvement initiative will always
begin with mapping out a visual representation of
the current process.  This is necessary so that all
members of the team have a clear understanding of
how current process is working. All of the steps and
flows need to be identified and laid out in the proper
sequence. It is important that the correct
stakeholders are involved in this activity!
• There are many different types of flowcharts, and
many different softwares that can assist with this
activity. Most practitioners tend to prefer using a
large roll of paper on the wall where the group can
collaborate rather than using a computer projected
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onto a screen.  It is important to go out into the
workplace and walk the process before beginning
this task.  This is a very standard activity that takes
place in organizations around the globe.  As an
Operations Manager, there is a high likelihood that
you will become involved in this at some point in
your career.  To map a process, a standard set of
symbols are used. There are many different
symbols, it is best not to get too caught up in all of
them. 

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