October 02, 2008

Operations Management Lesson 2

Writing about web page http://blogs.warwick.ac.uk/louiseholding/

Take two processes with different volume and variety characteristics. Profile these processes and establish the process choice and layout decisions they have taken. Critically appraise the design decisions taken.

ATM Banking and Interior Design Consulting differ in performance objectives and therefore have different process designs.

Performance Objectives:

ATM Banking

Quality

High - each transaction has to be 100% accurate

Speed

High – each transaction should be rapid with no processing delays between prompted questions to the customer

Flexibility

Low – customers will generally accept that only very simple  transactions are offered

Dependability

Medium - the service (technology) has to be dependable, ie is always available, otherwise customers will choose an alternative ATM with another bank or building society

Cost

High – Cost to the bank is lowered, and customer not impacted by cost reduction as they have availability 24/7

Interior Design Consulting

Quality

High - quality is extremely important to this process as the end product has to be a perfect fit for the customer

Speed

Medium - This is not required as a priority unless the customer has explicitly requested a deadline

Flexibility

High - large amount required as the process is creative and requires a bespoke and variable service to match each customer requirement

Dependability

Medium - required in terms of working to any agreed deadlines within the process which are agreed depending between the customer and consultant at each stage

Cost

Low - the process is highly variable and therefore not extremely cost effective

The ATM process in the financial sector requires an efficient, cost-effective, accurate and non-flexible approach. The Interior Design consultancy service process is much more flexible, offering variety to customers. Therefore the Interior Design process key objectives are quality and flexibility rather than cost effectiveness and speed. However if you define quality in the interior design process as being able to match customer requirements rapidly, in order to compete with other interior design consultants, and with suitably creative solutions, then lower cost, speed and dependability increases.

Process Analysis & Design:

Further analysis of both processes can be done via the 4V model (Slack et al, 2006) and illustrated below:

4 V’s

ATM Banking

Interior Design Consulting

Volume

High volumes require high repetition

Low volume so low repetition and high unit costs

Variety

Low variety so requires well defined routine standard consistent process

High variety which brings flexibility, complexity in the process and a high unit cost

Variation in Demand

Low, so high utilisation, stable and predictable requirements

High, so flexibility required and ability to cope with change. Low capital equipment investment by the process owner would be attractive as the process is so variable.

Visibility

Low in terms of producing a standard binary process

Process design is automated and repeatable

High as customer contact and relationship is very important, including meeting deadlines

Variation and volume within a process is a large determinant of the design of the process.

Thus considering Process Types:-

ATM Banking is a Mass Service as it provides high volumes of transactions to the customer but restricts the customer to only certain offerings within the banking industry (cash dispensing, providing a current bank balance and changing a PIN no on a banking card.) If customers require a more complex banking service they must attend a bank during bank opening hours.  The service is based on technology, with no skilled staff visible within the process.

Interior Design Consulting is a Professional Service offering skilled services which are unique to the customer. Therefore the service is more intermittent and costs more.

In considering Layout Types:-

ATM Banking, with its high volumes and low variety within the process is a product layout, where the process flows along a very well defined and narrow sequence of events to optimise efficiency in service and cost.

Interior Design consulting, however, is a fixed-position layout because the consultancy service moves to the customer in order that the consultant may experience the customers home to solution the design.

BIBLIOGRAPHY

Slack, N.; Chambers, S.; Johnston, R. and Betts, A. (2006)

Operations and Process Management

London: FT Prentice Hall

ATM Banking

(1) Performance Objectives:

Quality:          High - each transaction has to be 100% accurate

Speed:           High - this matters in terms of the transaction going through smoothly without long waits for processing

Flexibility:       Low - this does not matter as the customer will accept that only very simpletransactions are offered

Dependability: Medium - the service (technology) has to be dependable, ie is always available, otherwise customer                          will cease to use it, however customers can use an alternative ATM

Cost:             High – Cost to the bank is lowered, and customer not impacted by cost  reduction as they have

                      availability 24/7

Interior Design Consulting

Performance Objectives:

Quality:         High - quality is extremely important to this process as the end product has to be a perfect fit for the                       customer

Speed:           Medium - This is not required as a priority unless the customer has explicitly requested a deadline

Flexibility:      High - large amount required as the process is creative and requires a bespoke and variable service to  

                    match each customer requirement

Dependability: Medium - required in terms of working to any agreed deadlines within the process which are agreed

                    depending between the customer and consultant at each stage

Cost:               Low - the process is highly variable and therefore not extremely cost effective

These 2 processes differ in performance objectives and are in two completely different industries. The ATM process in the financial sector requires a much more efficient, cost-effective, accurate and non-flexible approach. The Interior Design consultancy service is a much more flexible service offering variety to customers. Therefore the Interior Design process key objectives are quality and flexibility rather than cost effectiveness and speed. However if you define quality in the interior design process as being able to match customer requirements rapidly, in order to compete with other interior design consultants, and with suitably creative solutions, then lower cost, speed and dependability increases.

ATM Banking

4 V’s:

Volume:                      High volumes require high repetition

Variety:                       Low variety so requires very well defined routine standard consistent processes

Variation in Demand:    Low, so high utilisation, stable and predictable requirements

Visibility:                     Low visibility in terms of producing a standard binary process.  Process design is automated and

                                repeatable

Interior Design Consulting

4 V’s:

Volume:                    Low volume so low repetition and high unit costs

Variety:                     High variety which brings flexibility, complexity in the process and a high unit cost

Variation in Demand:  High, so flexibility required and ability to cope with change. Low capital equipment investment by

                               the process owner would  be attractive as the process is so variable.

Visibility:                    High, customer contact and relationship very important, including meeting deadlines

Variation within a process is a large determinant of the design of the process.

Process Types

ATM Banking is a Mass Service as it provides high volumes of transactions to the customer but constricts the customer to only certain offerings within the banking industry (cash dispensing, providing a current bank balance and changing a PIN no on a banking card.) If customers require more complex banking service they must attend a bank during bank opening hours.  The service is based on technology, with no skilled staff visible within the process.

Interior Design Consulting is a Professional Service offering skilled services which are unique to the customer. Therefore the service is more intermittent and costs more.

Layout Types

Layout types reflect the volume and variety of the process. It is important to choose the correct layout type to optimise efficiencies in both the service and the cost. ATM Banking, with its high volumes and low variety within the process is a product layout, where the process flows along a very well defined and narrow sequence of events.

Interior Design consultancy, however, is a fixed-position layout because the consultancy service moves to the customer in order that the consultant may experience the customers home in order to solution the design.


- 2 comments by 1 or more people Not publicly viewable

  1. Louise,

    Very good choice of processes. Well done to look at the performance objectives as well as the 4Vs. You need to get into the practice of academic writing – namely, that where you are using operations management terms and theory, you should cite within your text according to the Harvard system and provide a bibliography.

    Otherwise, sound work showing knowledge, understanding and application.

    03 Oct 2008, 17:28

  2. Louise,

    On reflection, I think it would be a good idea to include a diagram profiling the 4Vs of your two processes.

    04 Oct 2008, 10:32


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