Process Structure

Process Strategies and Design

Process Strategy 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.
Three principles concerning process strategy are particularly important:
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. Individual processes 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.
Whether dealing with processes for offices, service providers, or manufacturers, operations managers must consider
four common process decisions. These four decisions are best understood at the process or subprocess level rather
than at the firm level.
1. Process structure determines the process type relative to the kinds of resources needed, how resources are
partitioned between them, and their key characteristics. A layout is the physical arrangement of operations (or
departments) relative to each other.
2. Customer involvement reflects the ways in which customers become part of the process and the extent of their
participation.
3. Resource flexibility is the ease with which employees and equipment can handle a wide variety of products,
output levels, duties, and functions.
4. Capital intensity is the mix of equipment and human skills in progress. The greater the cost of equipment relative
to the cost of labor, the greater is the capital intensity.
The concepts developed around these four decisions establish a framework within which the appropriate process
design can be addressed in every situation. We establish the patterns of choices that create a good fit between the
four decisions.
 Process Structure
One of the first decisions a manager makes in designing a well-
functioning process is to choose a process type that best achieves the
competitive priorities for that process. Strategies for designing
processes can be quite different depending on whether a service is
being provided or a product is being manufactured.
Process Structure in Manufacturing
Process Choice
A way of structuring the process by organizing resources
around the process or organizing them around the
products.
 Manufacturing Process Structuring
The product – process matrix shows several desirable positions (often called process choices) that
effectively connect the manufactured product with the process. Process choice is the way of
structuring the process by organizing resources around the process or organizing them around the
products.
Organizing around the process means, for example, that all milling machines are grouped together
and process all products or parts needing that kind of transformation. Organizing around the product
means bringing together all the different human resources and equipment needed for a specific
product and dedicating them to producing just that product.
The manager has several process choices, which form a continuum, to choose from:
1. Project process
2. Job Process
3. Batch process
4. Line process
5. Continuous-flow process
The best choice for a manufacturing process depends on the volume and the degree of customization
required of the process. The process choice might apply to an entire manufacturing process or just
one subprocess nested within it.
It is unlikely that a manufacturing process can be top performer if its position is too far from the
diagonal.
 Product – Process Matrix
The product – process matrix brings together three elements:
1. Volume
2. Product customization
3. Process characteristics
A good strategy for a manufacturing process depends first and foremost on volume. For many
manufacturing processes, high product customization means lower volumes for many of the steps in
the process. The vertical dimension of the product-process matrix deals with divergence and flow.
Each manufacturing process should be on these two dimensions.
Process Structure in Manufacturing
Slide 4.8

Process Structure in Manufacturing

Project
Process

Mass
Production

Assembly
Line

Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition © Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Project processes

One-off, complex, large scale, high work content

products.
Specially made, ‘everyone customized’.
Defined start and finish: time, quality and cost
objectives.
Many different skills have to be
coordinated.
Jobbing processes

Very small quantities: ‘one-offs’, or only a few required.

Specially made. High variety, low repetition. ‘Strangers
everyone customized’.
Skill requirements are usually very broad.
Skilled jobber, or team, complete whole product.

A job process creates the flexibility needed to produce a wide variety of products in significant
quantities, with considerable divergence in the steps performed. Customization is high and volume
for any one product is low. The workforce and equipment are flexible to handle considerable task
divergence. Companies choosing job processes often bid for work. Typically, they make products
to order and do not produce them ahead of time. Each new order is handled as a single unit – as a
job. Examples are machining a metal casting for a customized order or producing customized
cabinets.
With a job process, all equipment and workers capable of certain types of work are positioned
together. Because customization is high and most jobs have different sequence of steps, this
process choice creates flexible flows through the operations rather than a line flow.
Batch processes

Higher volumes and lower variety than for jobbing.

Standard products, repeating demand. But can make
specials.
Specialized, narrower skills.
Set-ups (changeovers) at each stage of production.

The batch process is by far the most common process choice found in practice, leading to terms
such as small batch or large batch to further distinguish one process choice from another. A batch
process differs from the job process with respect to volume, variety, and quantity. The primary
difference is that volumes are higher the same or similar products or parts are going into them are
produced repeatedly. Some of the components going into the final product may be processed in
advance. Production lots are handled in larger quantities (or batches) than they are with job
processes. A batch of one product (or component part going into it or perhaps other products) is
processed, and then production is switched to the next one. Eventually, the first product is
produced again. A batch process has average or moderate volumes, but process divergence is still
too great to warrant dedicating a separate process for each product. The process flow is flexible,
but more dominant paths emerge than at a job process, and some segments of the process have
a line flow. Examples of batch process are making standard components that feed an assembly
line or some processes that manufacture capital equipment.
Mass (Line) processes

Higher volumes than batch.

Standard, repeat products (‘runners’).
Low and/or narrow skills.
No set-ups or almost instantaneous ones.

A line process lies between the batch and continuous process on the continuum; volumes are high
and products are standardized, which allows resources to be organized around particular
products. Divergence is minimal in the process or line flows, and little inventory is held between
processing steps. Each step performs the same process over and over, with little variability in the
products manufactured. Production and material handling equipment is specialized. Products
created by a line process include the assembly of computers, automobiles, appliances, and toys.
Standard products are produced in advance of their need and held in inventory so that they are
ready when a customer places an order. Product variety is possible by careful control of addition of
standard options to the main product.
Continuous processes

Extremely high volumes and low variety: often single

product.
Standard, repeat products (‘runners’).
Highly capital-intensive and automated.
Few changeovers required.
Difficult and expensive to start and stop the process.

A continuous-flow process is the extreme end of high-volume standardized production, with rigid
line flows. Process divergence is negligible. Its name derives from the way materials move through
the process. Usually, one primary material (such as a liquid, a gas, or a powder) moves without
stopping through the process. A continuous-flow process differs from a line process in one
important respect: Materials /be they undifferentiated or discrete) flow through the process without
stopping until the whole batch is finished. The time span can be several shifts or even several
months. Examples of a continuous-flow process are petroleum refining, chemical processes, paper
manufacturing, and processes making steel, soft drinks, and food.
Production and Inventory Strategies
Strategies for manufacturing processes differ from those in services not only because of low customer
contact and involvement but also because of the ability to use inventories not only as purchased
materials but also in the form of subassemblies or finished products.
Design-to-order, make-to-order, assembly-to-order, and make-to-stock strategies are four approaches
to inventory that should be coordinated with process choice.

1. Design-to-Order
A firm uses a design-to-order strategy when it can design new products that do not currently
exist, and then manufacture them to meet unique customer specification. Typically, a job
process is employed to create a highly customized product, such as a designer pair of shoes for
a particular client.
2. Make-to-Order
Manufacturers that make products to customer specifications in low volumes tend to use the
make-to-order strategy, coupling it with job or small batch processes. Even though the product is
based on a standard design, it is a more complex process than assembling a final product from
standard components. This strategy provides a high degree of customization and typically uses
job or small batch processes. The processes have a high divergence. Specialized medical
equipment, castings, and expensive homes are suited to the make-to-order strategy.
Production and Inventory Strategies
3. Assemble-to-Order
The assemble-to Order strategy in an approach to producing a wide variety of products from
relatively few subassemblies and components after the customer orders are received. Typical
competitive priorities are variety and fast delivery times. The assemble-to-order strategy often
involves a line process for assembly and batch process for fabrication. Because they are devoted
to manufacturing standardized components and subassemblies in high volumes, the fabrication
processes focus on creating appropriate amounts of component inventories for the assemble
processes. Once the specific order from the customer is received, the assembly processes create
the product from standardized components and subassemblies produced by the fabrication
process.
– Stocking finished products would be economically prohibitive because the numerous
possible options make forecasting relatively inaccurate. Thus, the principle of postponement
is applied, whereby the final activities in the provision of a product are delayed until the
orders are received.
– The assemble-to-order strategy is also linked to Mass Customization, where highly
divergent processes generate a wide variety of customized products at reasonably low costs.
4. Make-to-Stock
Manufacturing firms that hold items in stock for immediate delivery, thereby minimizing customer
delivery times, use make-to-stock strategy. This strategy is feasible for standardized products
with high volumes and reasonably accurate forecasts. It is the inventory strategy of choice for line
or continuous-flow processes. Examples of products produced with a make-to-stock strategy
include garden tools, electronic components, soft drinks, and chemicals.
Combining a line process with the make-to-stock strategy is sometimes called Mass Production.
 Layout
Selecting process structures for the various processes housed in a
facility is a strategic decision but must be followed by a more tactical
decision – creating a layout.
A layout is the physical arrangement of operations (or departments)
created from the various processes and puts them in tangible form. For
organizational purposes, processes tend to be clustered together into
operations or departments. An operation is a group of human and
capital resources performing all or part of one or more processes .
 Process Structure in Services
To gain insight about the suitable process strategy for a service process, we must start at the process level and
recognize key contextual variables associated with the process. A good process strategy for service process depends
first and foremost on the type and amount of customer contact.
Customer contact is the extend to which the customer is present, is actively involved, and receives personal attention
during the service process. Face-to-face interaction, sometimes called a moment of of truth or service encounter, brings
the customer and service providers together. At that time, customer attitudes about the quality of the service is provided
are shaped.

FIVE DIMENSIONS OF CUSTOMER CONTACT IN SERVICE PROCESSES

Dimension High Contact Low Contact

Physical presence Present Absent

What is processed People Possessions or information

Contact intensity Active, visible Passive, out of sight

Personal attention Personal Impersonal

Method of delivery Face-to-face Regular mail or e-mail

Many levels are possible on each of the five dimensions. Also, some parts of the process can have low contact and
other parts of the process can have high contact.
Customer-Contact Matrix
 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

• Customization
– Service level ranging from highly customized to standardized

• Process Divergence
– The extent to which the process is highly customized with considerable
latitude as to how its tasks are performed

• Flow
– How the work progresses through the sequence of steps in a process
Service process types

High
Diverse/ Professional
Intermittent
complex service
Front Office

Service shop
Process Process Variety Hybrid Office

tasks flow

Mass service
Low

Repeated/ Back Office

Continuous
divided
Low Volume High

Different process types imply different volume–variety characteristics for the process
Professional service – Front Office

High levels of customer (client) contact.

Clients spend a considerable time in the service process.

High levels of customization with service processes being highly

adaptable.

Contact staff are given high levels of discretion in servicing

customers.

People-based rather than equipment-based.

A Front-office process has high customer contact where the service provider interacts directly with
the internal or external customer. Because of the customization of the service and the variety of of
service options, many of the steps in it have have considerable divergence. Workflows are flexible,
and they vary from one customer to the next. The high-contact service process tends to be
adapted or tailored to each customer.
Service shops – Hybrid Office

Medium levels of volumes of

customers.
Medium, or mixed, levels of customer contact.
Medium, or mixed, levels of
customization.
Medium, or mixed, levels of staff discretion.

A hybrid office tends to be in the middle of of the five dimensions of customer contact, or perhaps
high on some contact measures and low on others. A hybrid-office process has moderate levels of
customer contact and standard services, with some options available from which the customer
chooses. The workflow progresses from one workstation to the next, with some dominant paths
apparent.
Mass service – Back Office

High levels of volumes of customers.

Low to medium levels of customer contact.
Low, or mixed, levels of customization.
Low, or mixed, levels of staff discretion.

A back-office process has low customer contact and little service customization. The work is
standardized and routine, with line flows from one service provider to the next until the service is
completed. Preparing the monthly client fund balance reports in the financial services industry is a
good example. It has low customer contact, low divergence, and a line flow.
 Process Strategy Decisions
Having covered process structure decisions in both service and manufacturing organizations, we turn our attention now
to the other three major process decisions: Customer involvement, resource flexibility, capital intensity.

➢ Customer Involvement
Customer involvement reflects the ways in which customers become part of the process and the extent of their
participation.

➢ 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. For
example, high task divergence and flexible 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.

• Workforce Flexibility

• Equipment Flexibility

➢ Capital Intensity
Capital intensity is the mix of equipment and human skills in the process; the greater the cost of equipment
relative to the cost of labor, 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.
 Customer Involvement

• Possible Advantages
– Increased net value to the customer
– Better quality, faster delivery, greater flexibility, and lower cost
– Reduction in product, shipping, and inventory costs
– Coordination across the supply chain
• Possible Disadvantages
– Can be disruptive
– Managing timing and volume can be challenging
– Quality measurement can be difficult
– Requires interpersonal skills
– Multiple locations may be necessary
 Strategic Fit

The manager should understand how the four major process decisions
tie together, so as to spot ways of improving poorly designed
processes. The choices should fit the situation and each other. When
the fit is more strategic, the process will be more effective.
Deviating from the ‘natural’ diagonal on the product-
process matrix has consequences for cost and flexibility
Manufacturing Service Low volume Product/service High volume
operations operations characteristics
process types process types High variety Low variety

Project Professional
service
More process
flexibility than is
Jobbing needed, so high
cost

Service
Batch shop
Less process
flexibility than is
needed, so high
Mass cost

Mass The ‘natural’ line of fit of process to

Continuous service volume/variety characteristics

Source: Based on Hayes and Wheelwright

Decision Patterns for Manufacturing Processes