BAOPNMAX CM Week8 ACT102

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Subject Code: BAOPNMAX
Subject Title: Operations Management and Total Quality Management
Subject Description: This course tackles the nature, scope, functions and importance of
production and operations management in business. It includes
discussions on productivity, competitiveness and strategy,
forecasting, production system design, process selection and
capacity planning, facilities layout, design of work systems, quality,
scheduling and just-in-time manufacturing systems. Cases will also
be used to illustrate and apply the basic production and operations
concepts and tools commonly used in business firms. Total Quality
Management will familiarize students with the basic principles and
methods associated with Total Quality and Performance Excellence,
how these principles and methods have been put into effect in a
variety of organizations, and to illustrate the relationship between
principles and theories in the study of business courses especially
programs that discusses managing of people and industry.
No. of Units: 3
Class Schedule: ACT102: Face-to-Face: Saturday 1:00 – 5:00pm
Course Learning Outcomes:

At the end of the course, the student will be able to:
1. Analyze the importance of quality management towards cost reduction. Report on project
management and its importance.
2. Demonstrate how to design goods and services and how managing quality may provide
competitive advantage.
3. Evaluate the relevance of leadership, human management and supply-chain management
to sustainability.
4. Assess the strategic importance of inventory management, maintenance, and decisions
related to processes, location and layout/facility.
About the Instructor:

PROF. MARK ANTHONY R. LAZARO, LPT, MBA
● Professional Lecturer 4 – National University Baliwag , December 2022 to Present
● Administrative Payroll Specialist – Philippine Airlines, 2016 to Present
● Licensed Professional Teacher – October 2022
● Master in Business Administration – Baliuag University, 2022
● Continuing Professional Teacher Education (CPTE) – Baliwag Polytechnic College, 2019
● Bachelor of Science in Accountancy – Baliuag University, 2015
● Bachelor of Science in Business Administration, Baliuag University, 2013
SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph
Topic 5
PROCESS SELECTION, DESIGN AND ANALYSIS
Objectives:
▪ Describe the four types of processes used to produce goods and services.
▪ Explain the logic and use of the product-process matrix.
▪ Explain the logic and use of the service-positioning matrix.
▪ Describe how to apply process and value stream mapping for process design.
▪ Explain how to improve process designs and analyze process maps.
▪ Describe how to compute resource utilization and apply Little’s Law.
5-1 Process Choice Decisions

Process design is an important operational decision that affects the cost of operations, customer
service, and sustainability.
Process Choice Decisions – Types of Goods and Services
• Custom, or make-to-order, goods and services are generally produced and delivered as
one-of-a-kind or in small quantities, and are designed to meet specific customers’
specifications.
Examples include ships, weddings, certain jewelry, estate plans, buildings, and surgery.
• Option, or assemble-to-order, goods and services are configurations of standard parts,
subassemblies, or services that can be selected by customers from a limited set.
Examples are Dell computers, Subway sandwiches, machine tools, and travel agent
services.
• Standard, or make-to-stock, goods and services are made according to a fixed design, and
the customer has no options from which to choose.
Examples are appliances, shoes, sporting goods, credit cards, online Web-based courses,
and bus service.
Process Choice Decisions – Types of Processes
• Projects are large-scale, customized initiatives that consist of many smaller tasks and
activities that must be coordinated and completed to finish on time and within budget.
Characteristics: One-of-a-kind, large scale, complex, resources brought to site; wide
variation in specs and tasks.
Examples: Legal defense preparation, construction, customer jewelry, consulting, and
software development.
• Job shop processes are organized around particular types of general-purpose equipment
that are flexible and capable of customizing work for individual customers.
Characteristics: Significant setup and/or changeover time, batching, low to moderate
volume, many routes, many different products, high work-force skills, and customized to
customer’s specs.
Examples: Many small manufacturing companies are set up as job shops, as are hospitals,
legal services, and some restaurants.
• Flow shop processes are organized around a fixed sequence of activities and process steps,
such as an assembly line, to produce a limited variety of similar goods or services.
Characteristics: Little or no setup time, dedicated to small range of goods or services that
are similar, similar sequence of process steps, moderate to high volume.
Examples: Assembly lines that produce automobiles and appliances, production of
insurance policies and checking account statements, and hospital laboratory work.
• A continuous flow process creates highly standardized goods or services, usually around
the clock in very high volumes.
Characteristics: Very high volumes in a fixed processing sequence, high investment in
system,
24-hour/7-day continuous operation, automated, dedicated to a small range of goods or
services.
Examples: Chemical, gasoline, paint, toy, steel factories; electronic funds transfer, credit
card authorizations, and automated car wash.
Process Choice Decisions

• A product life cycle is a characterization of product growth, maturity, and decline over
time.
Four phases:
− Introduction
− Growth
− Maturity
− Decline and turnaround
• A product’s life cycle has important implications in terms of process design and choice.
For example, new products with low sales volume might be produced in a job shop process;
however, as sales grow and volumes increase, a flow shop process might be more efficient.
5-2 The Product-Process Matrix

• The product-process matrix is a model that describes the alignment of process choice with
the characteristics of the manufactured good.
− The most appropriate match between type of product and type of process occurs along the
diagonal in the product-process matrix.
− As one moves down the diagonal, the emphasis on both product and process structure shifts
from low volume and high flexibility to higher volumes and more standardization.
Characteristics of Different Process Types
Product-Process Matrix
The Service-Positioning Matrix
• In the product-process matrix, product volume, the number of products, and the degree of
standardization/customization determine the manufacturing process that should be used.
This relationship between volume and process is not found in many service businesses.
• The Service-Positioning Matrix is similar to the product-process matrix in that it suggests
that the nature of the customer’s desired service encounter activity sequence should lead
to the most appropriate service system design and that superior performance results by
generally staying along the diagonal of the matrix.
• A pathway is a unique route through a service system. Pathways can be customer- or
provider-driven, depending on the level of control that the service firm wants to ensure.
• The service encounter activity sequence consists of all the process steps and associated
service encounters necessary to complete a service transaction and fulfill customer’s wants
and needs.
• Customer-routed services are those that offer customers broad freedom to select the
pathways that are best suited for their immediate needs and wants from many possible
pathways through the service delivery system.
− Examples include searching the Internet, museums, health clubs, and amusement parks.
• Provider-routed services constrain customers to follow a very small number of possible
and predefined pathways through the service system.
− Examples are a newspaper dispenser and logging on to a secure online bank account.
5-3 The Service Positioning Matrix
5-4 Process Design – Four Levels of Work
• Task—a specific unit of work required to create an output.
• Activity—a group of tasks (sometimes called a workstation) needed to create and
deliver an intermediate or final output.
• Process—a group of activities.
• Value chain—a network of processes.
The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets
Process and Value Stream Mapping

• A process map (flowchart) describes the sequence of all process activities and tasks
necessary to create and deliver a desired output or outcome.
− Process maps document how work either is, or should be, accomplished, and how the
transformation process creates value.
• A process boundary is the beginning or end of a process.
− Makes it easier to obtain management support, assign process ownership, and identify
where performance measures should be taken.
• In service applications, flowcharts generally highlight the points of contact with the
customer and are often called service blueprints or service maps.
• Such flowcharts often show the separation between the back office and the front office with
a “line of customer visibility.”
Automobile Repair Flowchart
Process and Value Stream Mapping

• The value stream refers to all value-added activities involved in designing, producing, and
delivering goods and services to customers.
• A value stream map (VSM) shows the process flows in a manner similar to an ordinary
process map; however, the difference lies in that value stream maps highlight value-added
versus non-value-added activities and include costs associated with work activities for both
value- and non-value-added activities.
Examples of non-value-added activities include:
• Transferring materials between two nonadjacent workstations
• Overproducing
• Waiting for service or work to do

• Not doing work correctly the first time
• Requiring multiple approvals for a low cost electronic transaction
Restaurant Order Posting and Fulfillment Process
Value Stream Map for Restaurant Order Posting and Fulfillment Process
Process Design Methodology
1. Define the purpose and objectives of the process.
2. Create a detailed process or value stream map that describes how the process is currently
performed.
3. Evaluate alternative process designs.
4. Identify and define appropriate performance measures for the process.
5. Select the appropriate equipment and technology.
6. Develop an implementation plan to introduce the new or revised process design.
Process Mapping Improves Pharmacy Service

Metro Health Hospital in Grand Rapids, Michigan, applied process mapping, reducing the lead
time for getting the first dose of a medication to a patient in its pharmacy services operations. The
lead time was measured from the time an order arrived at the pharmacy to its delivery on the
appropriate hospital floor. A process improvement team carefully laid out all the process steps
involved and found that it had a 14-stage process with some unnecessary steps, resulting in a total
lead time of 166 minutes.
During the evaluation process, the pharmacy calculated that technicians were spending 77.4
percent of their time locating products; when a pharmacist needed a technician for clinical
activities, the technician was usually off searching for a drug. Overall, the pharmacy at Metro
realized a 33-percent reduction in time to get medications to patients, and reduced the number of
process steps from 14 to nine simply by removing non-value-added steps. Patients have
experienced a 40-percent reduction in pharmacy-related medication errors, and the severity of
those errors has decreased.
5-5 Process Analysis and Improvement

Strategies:
• Increasing revenue by improving process efficiency in creating goods and services and
delivery of the customer benefit package.
• Increasing agility by improving flexibility and response to changes in demand and
customer expectations.
• Increasing product and/or service quality by reducing defects, mistakes, failures, or service
upsets.
• Decreasing costs through better technology or elimination of non-value-added activities.
• Decreasing process flow time by reducing waiting time or speeding up movement through
the process and value chain.
• Decreasing the carbon footprint of the task, activity, process and/or value chain.
Questions to ask for process analysis:
• Are the steps in the process arranged in logical sequence?
• Do all steps add value? Can some steps be eliminated and should others be added in order
to improve quality or operational performance? Can some be combined? Should some be
reordered?
• Are capacities of each step in balance; that is, do bottlenecks exist for which customers
will incur excessive waiting time?
• What skills, equipment, and tools are required at each step of the process? Should some
steps be automated?
• At which points in the system (sometimes called process fail points) might errors occur
that would result in customer dissatisfaction, and how might these errors be corrected?
• At which point or points in the process should performance be measured? What are
appropriate measures?
• Where interaction with the customer occurs, what procedures, behaviors, and guidelines
should employees follow that will present a positive image?
• What is the impact of the process on sustainability? Can we quantify the carbon footprint
of the current process?
Process Analysis and Improvement

• Reengineering has been defined as “the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical, contemporary measures
of performance, such as cost, quality, service, and speed.”
5-6 Process Design and Resource Utilization

• Utilization is the fraction of time a workstation or individual is busy over the long run.
Utilization (U) = Resources Used [7.1]

Resources Available
or
Utilization (U) = Demand Rate [7.2]

[Service Rate × Number
of Servers]
Restaurant Order Posting and Fulfillment Process
Utilization Analysis of Restaurant Order Posting and Fulfillment Process
Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 chefs)
Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 ovens)
Solved Problem
An inspection station for assembling printers receives 40 printers/hour and has two inspectors,
each of whom can inspect 30 printers per hour. What is the utilization of the inspectors? What
service rate would be required to have a target utilization of 85 percent?
Solution
The labor utilization at this inspection station is calculated to be 40/(2 × 30) = 67%. If the
utilization rate is 85%, we can calculate the target service rate by solving the equation:
85% = 40/(2 × SR)

1.7 × SR = 40
SR = 23.5 printers/hour
Process Design and Resource Utilization

• The average number of entities completed per unit time— the output rate—from a process
is called throughput.
– Throughput might be measured as parts per day, transactions per minute, or customers per
hour, depending on the context.
• A bottleneck is the work activity that effectively limits throughput of the entire process.
– Identifying and breaking process bottlenecks is an important part of process design
and improvement, and will increase the speed of the process, reduce waiting and
work-in-process inventory, and use resources more efficiently.
Simplified Restaurant Fulfillment Process
Little’s Law
• Flow time, or cycle time, is the average time it takes to complete one cycle of a process.
• Little’s Law is a simple formula that explains the relationship among flow time (T ),
throughput (R ), and work-in-process (WIP ).
Work-In-Process = Throughput × Flow Time
or
WIP = R × T [7.3]
Solved Problem
Suppose that a voting facility processes an average of 50 people per hour and that, on average, it
takes 10 minutes. What is the average number of voters in the process? for each person to
complete the v
Solution
WIP = R  T
= 50 voters/hr  (10 minutes/60 minutes per hour)

= 8.33 voters
Solved Problem
Suppose that the loan department of a bank takes an average of 6 days (0.2 months) to process an
application and that an internal audit found that about 100 applications are in various stages of
processing at any one time. Using Little’s Law, we see that T = 0.2 and WIP = 100. What is the
throughput? the v
Solution
R = WIP/T = 100 applications/0.2 months
= 500 applications per month
Solved Problem
Suppose that a restaurant makes 400 pizzas per week, each of which uses one-half pound of dough,
and that it typically maintains an inventory of 70 pounds of dough. In this case, R = 200 pounds
per week of dough and WIP = 70 pounds. What is the average flow time?
Solution
T = WIP/R = 70/200
= 0.35 weeks, or about 21/2 days.
Excel Model for Little’s Law Solved Problem
Little’s Law Homework Problem
Hopewell Hospital Pharmacy Case Study

1. Draw the process flowchart, including processing times and capacities for each work
activity, and total time per prescription.
2. As a baseline measure, what is the labor utilization if 30 prescriptions arrive between 8 and
9 am on Monday and four or five pharmacists are on duty doing all seven steps?
3. Clearly identify two other ways to group and divide the work among the medical
technicians and pharmacists, compute labor utilizations, and discuss the advantages and
disadvantages of each job and process-design options.
4. What are your final recommendations?

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DISCLAIMER: The information content provided in this course material is designed to provide

Subject Code: BAOPNMAX

Subject Title: Operations Management and Total Quality Management

Class Schedule: ACT102: Face-to-Face: Saturday 1:00 – 5:00pm

Course Learning Outcomes:

About the Instructor:

5-1 Process Choice Decisions

Process Choice Decisions

5-2 The Product-Process Matrix

The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets

Process and Value Stream Mapping

Automobile Repair Flowchart

Process and Value Stream Mapping

• Waiting for service or work to do

• Requiring multiple approvals for a low cost electronic transaction

Restaurant Order Posting and Fulfillment Process

Process Mapping Improves Pharmacy Service

5-5 Process Analysis and Improvement

Process Analysis and Improvement

5-6 Process Design and Resource Utilization

Utilization (U) = Resources Used [7.1]

Utilization (U) = Demand Rate [7.2]

Utilization Analysis of Restaurant Order Posting and Fulfillment Process

85% = 40/(2 × SR)

Process Design and Resource Utilization

= 50 voters/hr  (10 minutes/60 minutes per hour)

Excel Model for Little’s Law Solved Problem

Hopewell Hospital Pharmacy Case Study

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