Process-Based and Concurrent Engineering

Large quantities of identical or similar products or services justify focus on operational processes. The process-based organization succeeds when product/service variety exists to a small degree, and the quantity of each type is very large. Management in this case is divided according to the main processes.

Maintaining the best possible organizational structure is an important and difficult task. A structure that was very effective for a long period may not work properly when the environment changes. For example, the deliv- ery process that was successful for a functional organization when it was a monopoly and served a stable market may fail suddenly if the market is opened up to competition. When competition increases, it creates pressure to increase the range of products and improve service delivery time to cus- tomers. An example from the distant past is the telephone companies such

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Modeling the Organizational Structure and the Facility Layout

as Bell or AT&T that lost their monopoly and had to compete in the open market. An example from the more recent past is the development of cell phone technology that forced the traditional phone companies to change the old ways of management.

Increased competition may also lead to pressure for shorter lead times. A functional organization may have difficulties meeting this demand.

Consider the process of developing new products. For many years, the functional organization included special organizational units whose role was to develop new products. When marketing people recognized the need for a new product, the new product development department or R&D department focused on the design issues, producing the required drawings and documents for the new product, defining its physical and functional attributes. Based on product definition, manufacturing engineering devel- oped processes for manufacturing, assembly, and testing of the product, and logistics found suppliers for raw materials and components, developed packaging and transport processes, etc. This process is very slow and suffers from communication problems between functional units. The process does not provide enough “value” to customers (customer value can be defined as what the customer is willing to pay for when buying the product or service).

The traditional process is slow because it is built on a set of actions per- formed in sequence by different organizational units. Each organizational unit is a link in this chain of activities. It gets its input from the unit pre- ceding it in the process, and produces output, which is the input of the succeeding organizational unit in the process. Since each unit operates inde- pendently, the duration of the development cycle is the sum of the duration of the processes performed in sequence, and therefore, it creates relatively long development times.

Another reason for the length of this development process is uncertainty. Some activities may have to be repeated, as early development efforts fail and this may cause cycles and repetitions in the process. A typical reason for such failures is communication problems among the various organizational units, especially in the transition from development to production. Product prototypes, built during development and that may have successfully passed tests, may be very expensive to manufacture or to maintain, and therefore, the design must be changed. This problem stems from the serial structure of the process. The solution is to integrate all the knowledge required for devel- opment, design, production, and assembly to reduce or eliminate develop- ment cycles and to shorten the duration of the process. Decisions regarding product features, made early on in the product life cycle (product definition phase and the phases of product development) must take into account the ability to manufacture, serve, and maintain the product. Although the cost of new product design processes may be relatively small, most future costs associated with its manufacture, maintenance, and operation are determined at this stage. Since new product development experts are not always well versed in methods to reducing production costs, operation, and maintenance

of products, their decisions are based on a local optimum—which often means a product with a wide range of operating options, but very expensive to manufacture, operate, and maintain.

In today’s competitive markets, companies have abandoned this slow route and moved, by necessity, to a rapid process of developing new products of high value to the customer. Many organizations are implementing a new approach to new product development dubbed concurrent engineering (CE), which is process based. Experts in various areas—development, production, operation, and maintenance of products—work together as a team (in many cases, also in cooperation with the client) in the product design process to develop high-value products for the customer. The focus is on delivering to the client what he or she wants, at the lowest cost of manufacturing, mainte- nance, and service.

CE, though process based, differs from the project structure, the matrix structure, and functional structure because it has a different rai- son d’être: to develop a new product. Unlike the functional structure, a CE team includes experts from various fields, is assembled for a particular project, and disbands on completion of the project. The team follows the product throughout its life cycle, including manufacturing, operation, and maintenance.

All five basic processes defined in Chapter 1 can adopt an approach similar to that used by CE for developing new products.

1. The development process: The process starts with an idea for a new product or service and ends with the design of the new product or service and a working prototype.

2. Preparation of infrastructure: The process starts with a working proto- type of a new product and ends with the successful completion and testing of the production facility for the product.

3. Sales: The process starts with market research and ends with an order from a customer.

4. Delivery: The process starts with an order from a customer and ends with a delivery and receipt of payment from the customer who received the requested products.

5. Service: The process starts with a customer’s request for service and ends when the service is provided to his or her satisfaction.

Process-based organization is the key to success of the development process in today’s competitive market. The objective of CE is to develop high-quality products with the lowest life cycle cost in the fastest way, while maintaining the flexibility necessary in the constantly changing environment. A similar goal exists for the other four processes and similar organizational models can be used.

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Modeling the Organizational Structure and the Facility Layout