Download Process Structure in Services…….Contd.

Chapter: FOUR
Major Process Design Decision
This lecture will cover the following topic:
Major Process Design Decisions
•Process Structure
•Process Structure in Services
•Process Structure in Manufacturing
•Customer Involvement
•Vertical Integration
•Resource Flexibility
•Capital Intensity
Major Process Design Decisions
Whether dealing with processes for offices, service providers, or
manufacturers, operations managers must consider five common
process decisions.
1.Process structure determines how processes are designed
relative to the kinds of resources needed, how resources are
partitioned between them, and their key characteristics.
2.Customer involvement reflects the ways in which customers
become part of the process and the extent of their participation.
3.Vertical integration is the degree to which a firm’s own
production system or service facility handles the entire value
chain.
4.Resource flexibility is the ease with employees and
equipment can handle a wide variety of products, output levels,
duties, and functions.
5.Capital intensity is the mix of equipment and human skills
in a process. The greater the relative cost of equipment, the
greater is the capital intensity.
Process Structure in Services
One of the first decisions a manager makes in designing a
well-functioning process. Strategies for designing
processes can be quite different, depending on whether a
service is being provided or a product is being
manufactured.
An effective service process design in one situation can be
a poor choice in another. A process design that gets
customers in and out of a fast-food restaurant quickly
would not be the right process design strategy for a fivestar restaurant, where customers seek a leisurely dining
experience. Further, a good design strategy for the servers
at a restaurant might be totally inappropriate for a
process back in the restaurant’s business office.
Process Structure in Services…….Contd.
A good process design for a service process depends first
and foremost on the type and amount of customer
contact. Customer contact is the extent to which the
customer is present, is actively involved, and receives
personal attention during the service process. Customer
contact at a process is important, regardless of whether
the customer is internal or external, and regardless of
whether the service process is at a manufacturing or
service organization.
Process Structure in Services…….Contd.
High Contact
Dimension
Low Contact
Present
Physical Presence
Absent
People
What is Processed
Possessions
Active, Visible
Contact Intensity
Passive, out of
sight
Personal
Personal Attention
Impersonal
Face-to-face
Method of Delivery
Regular Mail
Figure : Different Dimensions of Customer Contact
in Service Processes
Process Structure in Services…….Contd.
The first dimension is whether or not the customer is
physically present at the process. The higher the
percentage of time that the customer is present, the
higher the customers contact. Face-to-face interaction,
sometimes called a moment of truth or service encounter,
brings the customer and service providers together. At
that time, customer attitudes about the quality of the
service provided are shaped. Many processes requiring
physical presence are found in health care, hospitality
services, and passenger transportation.
Process Structure in Services…….Contd.
A second dimension is what is being processed at the
service encounter. People processing services involve
tangible actions to customers in person. The service is
provided to the person, rather that for the person,
and so it requires physical presence. Customers
become part of the process, making the
service’s
production simultaneous with its consumption. The
service is consumed after the process is finished, rather
than simultaneously with the service’s creation. Such
processes are common in insurance, news, banking,
education, and legal services.
Process Structure in Services…….Contd.
The intensity of customer contact goes one step
beyond physical presence and what is processed. It deals
with the extent to which the process accommodates the
customer, and it involves considerable interaction and
service customization. Active contact usually means the
process is visible to the customer. Passive contact means
that the customer is not involved in tailoring the process
to meet special needs or in how the process is performed.
Even if the customer is present, he may simply be sitting
in a waiting room, standing in line, or perhaps living in a
hospital bed.
Process Structure in Services…….Contd.
A fourth dimension is the extent of personal attention
provided. High-contact processes are more intimate, and
they exhibit mutual confiding and trust between the
service provider and the customer. Impersonal contact lies
at the other end of the customer-contact continuum. At a
less intimate process, for example, the customer might
move through a standardized work flow or stand in line at
a ticket counter.
Process Structure in Services…….Contd.
A final dimension of customer contact is the method used
to be in contact. A high contact process would use faceto-face
or
the
telephone,
assuring
more
clarity
is
identifying customer needs and in deliver in the service. A
low-contact process would likely use a less personable
means to deliver the service. Regular mail or standardized
e-mail messages would be the preferred way to exchange
information for low-contact process.
Process Structure in Manufacturing
Manufacturing processes convert materials into goods that
have a physical form. The transformation processes change
the properties of materials on one or more of the following
dimensions:
•change the material’s physical properties,
•change the material’s shape,
•machine parts to a fixed dimension,
•obtain a surface finish,
•assemble or join parts and materials.
For example, changing the material’s physical properties
could be a chemical reaction, cold working, hot working,
heat treatment, or refining/extraction.
Customer Involvement
The second key decision in process design strategy is
customer involvement. It reflects the way in which
customers become part of the process and the extent
of their participation. It is important for many service
processes, particularly if customers contact is high.
A good place to begin increasing customer involvement is
making more of the process visible to the customer.
Vertical Integration
Management decides the level of vertical integration by
looking at all the processes performed between the acquisition
of raw materials or outside services and the delivery of
finished products or services. The more processes in the value
chain that the organization performs itself the more process
vertically integrated it is. If it does not perform some process
itself, it must rely on outsourcing, or paying suppliers and
distributors to perform those processes and provide needed
services and materials. When managers opt for more vertical
integration, there is by definition less outsourcing. These decisions
are sometimes called make-or-buy decisions, with a make
decision meaning more integration and a buy decision meaning
more outsourcing.
Vertical Integration
Vertical integration can be in two directions:
(i)Backward integration represents a firm’s movement
upstream toward the source of raw materials and parts,
such as a major grocery chain having its own plants to
produce house brands of ice cream, frozen pizza dough,
and peanut butter.
(ii) Forward integration means that the firm acquires
more channels of distribution, such as its own distribution
centers and retail stores. It can also mean that the firm
goes even further by acquiring its business customers.
Resource Flexibility
Just as managers must account for customer contact
when making customer involvement decisions, so must
they account for process divergence and diverse process
flows when making resource flexibility decisions. High
task divergence and jumbled process flows require
more
flexibility
of
the
process’s
resources-its
employees, facilities, and equipment. Employees need
to perform a broad range of duties, and equipment must
be general purpose. Otherwise, resource utilization will be
too low for economical operations.
Capital Intensity
For either the design of a new process or the redesign of
an existing one, managers must determine the amount of
capital intensity required. 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 very little human intervention.