2.

PROCESS STRATEGY

Sep,2017
CDR( R ) AZHAR NISAR
 Process Strategy
Process strategy specifies the
pattern of decisions made in
managing processes so that the
processes will achieve their
competitive priorities.
It guides a variety of process
decisions, and in turn is guided by
operations strategy and the
organization’s ability to obtain the
resources necessary to support
them.
To start with ,there are four basic process
decisions:
• (1) Process structure (including layout),
• (2) Customer involvement,
• (3) Resource flexibility, and
• (4) Capital intensity.
These decisions are for both service and
manufacturing processes.
We need to see and pay particular
attention to ways in which these
decisions fit together, depending on
various factors such as competitive
priorities, customer contact, and volume.
In the end we realize that two basic
change strategies for analyzing and
modifying processes are :

• (1) process reengineering and

• (2) process improvement.
• 1. The key to successful process
decisions is to make choices that
fit the situation and that make
sense together. They should not
work at cross-purposes, with one
process optimized at the expense
of other processes.
• A more effective process is one
that matches key process
characteristics and has a close
strategic fit.
• 2. The individual processes
discussed next are the building
blocks that eventually create the
firm’s whole supply chain. The
cumulative effect on customer
satisfaction and competitive
advantage is huge.
• 3. Whether processes in the
supply chain are performed
internally or by outside suppliers
and customers, management
must pay particular attention to
the interfaces between
processes. Dealing with these
interfaces underscores the need
for cross-functional coordination
Process Strategy Decisions
1. Process structure:
It determines the process type relative to
the kinds of resources needed, how
resources are partitioned between them,
and their key characteristics. A layout,
which is the physical arrangement of
operations created from the various
processes, puts these decisions into
tangible form.

2. Customer involvement:
It reflects the ways in which customers
become part of the process and the
extent of their participation.
3. Resource flexibility:
It is the ease with which employees and
equipment can handle a wide variety of
products, output levels, duties, and
functions.

4. Capital intensity:
It is the mix of equipment and human skills
in a process. The greater the relative cost
of equipment, the greater is the capital
intensity.
 1. Process Structure in Services
Customer Contact:
The extent to which the customer is present,
is actively involved, and receives personal
attention during the service process.
Process divergence:
The extent to which the process is highly
customized with considerable latitude as to
how its tasks are performed.
Flexible flow:
The customers, materials, or information
move in diverse ways, with the path of one
customer or job often crisscrossing the path
that the next one takes.
Service Process Structuring
Front Office :
A process with high customer contact where
the service provider interacts directly with
the internal or external customer.
Hybrid office:
A process with moderate levels of customer
contact and standard services with some
options available
Back office:
A process with low customer contact and
little service customization.
Customer-Contact Matrix For Service Processes
 Process Structure in Manufacturing
• Manufacturing Process Structuring
Process choice: A way of structuring
the process by organizing resources
around the process or organizing them
around the products.
Job process: A process with the
flexibility needed to produce a wide variety
of products in significant quantities, with
considerable divergence in the steps
performed.
Batch process: A process that differs
from the job process with respect to
volume, variety, and quantity
 Line process : A process that lies
between the batch and continuous
processes on the continuum; volumes
are high and products are standardized,
which allows resources to be organized
around particular products.

Continuous flow process: The

extreme end of high-volume standardized
production and rigid line flows, with
production not starting and stopping for
long time intervals.
Product-Process Matrix For Manufacturing
Production and Inventory Strategies
– Make-to-order strategy : A strategy
used by manufacturers that make
products to customer specifications in
low volumes.
– Assemble-to-order strategy : A strategy
for producing a wide variety of products
from relatively few subassemblies and
components after the customer orders
are received.
– Postponement : The strategy of
delaying final activities in the provision
of a product until the orders are
received.
– Mass customization : The strategy
that uses highly divergent processes
to generate a wide variety of
customized products at reasonably
low costs
– Make-to-stock strategy : A strategy
that involves holding items in stock
for immediate delivery, thereby
minimizing customer delivery times.
– Mass production : A term sometimes
used in the popular press for a line
process that uses the make-to-stock
strategy.
• Assignment #1
• Page65---- Problem#
1,2,3,12,14,15,16
• Assignment #2
• Page-131---- Discussion Q# 1,3,5,6
• Page-132--- Problem # 3,4,5
 2.CUSTOMER INVOLVEMENT
• THE WAYS IN WHICH CUSTOMERS
BECOME PART OF THE PROCESS
AND THE EXTENT OF THEIR
PARTICIPATION.

– SELF SERVICE
– PRODUCT SELECTION
– TIME AND LOCATION
• Customer involvement is not always a
good idea.
• In some cases, giving the customer
more active contact in a service process
will just be disruptive, making the
process less efficient.
• Managing the timing and volume of
customer demands becomes more
challenging if the customer is physically
present and expects prompt delivery.
• Exposing the facilities and employees to
the customer can have important quality
implications (favorable or unfavorable).
• Such changes make interpersonal skills
a pre-requisite to the service provider’s
job, but higher skill levels come at a
cost.
• Revising the facility layout might be a
necessary investment, now that
managing customer perceptions
becomes an important part of the
process.
• It also might mean having many smaller
decentralized facilities closer to the
various customer concentration areas if
the customer comes to the service
providers.
 3.RESOURCE FLEXIBILITY
• THE EASE WITH WHICH EMPLOYEES
AND EQUIPMENT CAN HANDLE A WIDE
VARIETY OF PRODUCTS,OUTPUT
LEVELS, DUTIES AND FUNCTIONS.
• WORKFORCE(Flexible)
– CAPABLE OF DOING MANY TASKS
– AT DIFFERENT WORKSTATIONS
– REQUIRING GREATER SKILLS
– HIGHER COSTS,TRG.& EDUC.
– DEPENDS ON NEED FOR VL. FLX.
– NEED FOR FULL/PART TIME-/PMT./TY W.F
– ACHIEVE RELIABLE CUSTOMER SERVICE &
– ALLEVIATE CAPACITY BOTTLENECKS
• EQUIPMENT

– FLEXIBLE GEN.PURPOSE EQPT. FOR

HIGH DEGREE OF CUSTOMISATION,
LOW VOL.,LAB. INTENSIVE,LOW
F.COST,HIGH V.C.

– SPECIAL PURPOSE,HIGH VOL., LOW

CUSTOMISATION, LOW V.COST,HIGH
F.COST,CAPITAL INTENSIVE,
PROCESS Costs and Volume
Total cost (dollars)

Process 1:
General-purpose
F1 equipment

Units per year (Q)

Process Costs and Volume

Process 2:
Special-purpose
Total cost (dollars)

equipment

Process 1:
F2 General-purpose
equipment
F1

Units per year (Q)

 Process Costs and Volume

Process 2:
Special-purpose
Total cost (dollars)

equipment

Break-
even
quantity

Process 1:
F2 General-purpose
equipment
F1

Units per year (Q)

 4.Capital Intensity

Capital intensity is the mix of equipment

and human skills in the process; the greater
the relative cost of equipment, the greater
is the capital intensity.
As the capabilities of technology increase
and its costs decrease, managers face an
ever-widening range of choices, from
operations utilizing very little automation to
those requiring task specific equipment and
little human intervention.
• Automation is a system, process, or
piece of equipment that is self-acting
and self regulating.

• Although automation is often thought

to be necessary to gain competitive
advantage, it has both advantages and
disadvantages.

• Thus, the automation decision requires

careful examination.
Automation : A system, process, or piece of
equipment that is self-acting and self-
regulating.
Fixed automation : A manufacturing process
that produces one type of part or product in a
fixed sequence of simple operations.
Flexible (programmable)Automation : A
manufacturing process that can be changed
easily to handle various products.
Industrial robot : Versatile, computer-
controlled machine programmed to perform
various tasks.
 Economies of scope
• Economies of scope reflect the ability to
produce multiple products more cheaply
in combination than separately.
• In such situations, two conflicting
competitive priorities—customization
and low price—become more
compatible.
• However, taking advantage of
economies of scope requires that a
family of parts or products have enough
collective volume to utilize equipment
fully.
 Strategic fit
• The choices should fit the
situation and each other.
• When the fit is more strategic, the
process will be more effective.
• We examine services and
manufacturing processes, looking
for ways to test for strategic fit.
 Strategies for Change
• Process Reengineering : is the
fundamental rethinking and radical
redesign of processes to improve
performance dramatically in terms
of cost, quality, service, and speed.
• Process reengineering is about
reinvention, rather than incremental
improvement. It is strong medicine
and not always needed or
successful.
• Process Improvement : is the systematic
study of the activities and flows of each
process to improve it.
• Its purpose is to “learn the numbers,”
understand the process, and dig out the
details.
• Once a process is really understood, it can
be improved.
• The relentless pressure to provide better
quality at a lower price means that
companies must continually review all
aspects of their operations.
• Process improvement goes on, whether or
not a process is reengineered. There is
always a better way.
SUPPLY CHAIN PROCESS EXAMPLES
ILLUSTRATIVE BUSINESS PROCESSES
OUTSIDE OF OPERATIONS
 NEXT

3.ANALYZING
PROCESSES
Aug,2017
CDR( R ) AZHAR NISAR