PROCESS MANAGEMENT

Companies begin the process of organizing operations by setting competitive priorities.

That is they must determine which of the following eight priorities are to be emphasized as
competitive advantages:

1. Low-cost operations 2. High performance design
3. Consistent quality 4. Fast delivery time
5. On-time delivery 6. Development speed
7. Product customization 8. Volume flexibility
Although all eight are obviously desirable, it is usually not possible for an operation to
perform significantly better than the competition in more than one or two.

The five key decisions in process management are:

I. Process Choice
II. Vertical Integration
III. Resource Flexibility
IV. Customer Involvement
V. Capital Intensity

These decisions are critical to the success of any organization and must be based on
determining the best was to support the competitive priorities of the enterprise.

PROCESS CHOICE

The first choice typically faced in process management is that of process choice.
Manufacturing and service operations can be characterized as one of the following:

1. Project
2. Job Shop
3. Batch Flow
4. Line Flow
5. Continuous Flow

The nature of these processes are discussed below and summarized in the manufacturing
product-process matrix on page 8.

Project Process. Examples of a project process are building a shopping center, planning a
major event, running a political campaign, putting together a comprehensive training
program, constructing a new hospital, doing management consulting work, or developing a
new technology or product. A project process is characterized by a high degree of job
customization, the large scope of each project, and the release of substantial resources, once a
project is completed. A project process lies at the high-customization, low-volume end of the
process-choice continuum. The sequence of operations and the process involved in each one
are unique to each project, creating one-of-a-kind products or services made specifically to
customer order. Although some projects may look similar, each is unique. Firms with project
processes sell themselves on the basis of their capabilities rather than on specific products or
services. Projects tend to be complex, take a long time, and be large. Many interrelated tasks
must be completed, requiring close coordination. Resources needed for a project are
assembled and then released for further use after the project is finished. Projects typically
make heavy use of certain skills and resources at particular stages and then have little use for
them the rest of the time. A project process is based on a flexible flow strategy, with work
flows redefined with each new project.

Job Shop Process. Next in the continuum of process choices is the job shop process.
Examples are custom metal processing shop, hospital emergency rooms, custom plastic
injection molding shop, or making customized cabinets. A job shop process creates the
flexibility needed to produce a variety of products or services in significant quantities.
Customization is relatively high and volume for any one product or service is low. However,
volumes aren't as low as for a project process, which by definition doesn't produce in
quantity. The work force and equipment are flexible and handle various tasks. As with a
project process, companies choosing a job process often bid for work. Typically, they make
products to order and don't produce them ahead of time. The specific needs of the next
customer are unknown, and the timing of repeat orders from the same customer is
unpredictable. Each new order is handled as a single unit--as a job. A job shop process
primarily involves the use flexible flow strategy, with resources organized around the
process. Most jobs have a different sequence of processing steps.

Batch Flow Process. Examples of a batch flow process are scheduling air travel,
manufacturing garments, furniture manufacturing, making components that feed an assembly
line, processing mortgage loans, and manufacturing heavy equipment. A batch flow process
differs from the job process with respect to volume, variety, and quantity. The primary
difference is that volumes are higher because the same or similar products or services are
provided repeatedly. Another difference is that a narrower range of products or services is
provided. Variety is achieved more through an assemble-to-order strategy than the job shops
make-to-order strategy. Some of the components for the final product or service may be
produced in advance. A third difference is that production lots or customer groups are
handled larger quantities (or batches) than they are with job shop processes. A batch of one
product or customer group is processed, and then production is switched to the next one.
Eventually, the first product or service is produced again Batch flow processes have average
or moderate volumes, but variety is still too great to warrant dedicating substantial resources
to each product or service. The flow pattern is jumbled, with no standard sequence of
operations throughout the facility. However, more dominant paths emerge than at a job shop
and some segments of the process have a linear flow.

Line Flow Process. Products created by a line process include automobiles, appliances,
personal computers, and toys. Services based on a line process are fast-food restaurants and
cafeterias. A line flow process lies between the batch and continuous processes, volumes are
high, and products or services are standardized, which allows resources to be organized
around a product or service. Materials move linearly from one operation to the next according
to a fixed sequence, with little inventory held between operations. Each operation performs
the same process over and over with little variability in the products or services provided.
Production orders aren't directly linked to customer orders, as is the case with project and job
processes. Manufacturers with line flow processes often follow a make-to-stock strategy,
with standard products held in inventory so that they are ready when a customer places an
order. This use of a line flow process is sometimes called mass production. However the
assemble-to-order strategy and mass customization are other possibilities with line flow
processes. Product variety is possible by careful control of the addition of standard options
to the main product or service. The pacing of production may be either machine-paced or
worker-paced.

Continuous Flow Process. Examples are petroleum refineries, chemical plants, and plants
making beer, steel, and processed food items. Firms with such facilities are also referred to as
the process industry. An electric generation plant represents one of the few continuous
processes found in the service sector. A continuous process is the extreme end of high-
volume, standardized production with rigid line flows and tightly linked process segments. Its
name derives from how materials move through the process. Usually one primary material,
such as a liquid, gas, wood fibers, or powder, moves without stopping through the facility.
The process often is capital intensive and operated round the clock to maximize utilization
and to avoid expensive shutdowns are start-ups.