Some firms have tried to satisfy simultaneous demands for low cost, flexibility, speed and variety simply by investing in process technology.
In many businesses the use of Enterprise Resource Planning (ERP) systems provides the information infrastructure to meet the needs of fast response to customer requirements. In manufacturing, many firms have made substantial investments in technology, including:
Flexible Manufacturing Systems (FMS) – small groups of machine tools linked together by robotized loading and transportation facilities
Computer-aided Design and Manufacturing (CAD/CAM) – see Chapter 3
Computer-integrated Manufacturing (CIM) – where entire processes are linked through a single controlling computer.
These have often accompanied the modification of existing processes though cell layouts. However, such approaches, although possibly providing opportunities for the firm to develop competencies, are not sufficient in themselves. General Motors spent $80 billion on
technology during the 1980s, only to see their domestic market share shrink from around 56 per cent in 1979 to around 30 per cent by 1999.
Turning technology into competitive advantage is a major challenge for firms. Operations must manage the capabilities of both staff and systems (including suppliers) prior to investment in technology in order to prepare for the new capabilities and limitations of these systems. Failure to do so will often result in wasted investment. Indeed, there is a need for a comprehensive, coherent strategic framework to be in place within firms if investment in process technology is to contribute to competitive advantage. During the 1980s, firms investing in flexible manufacturing systems found that the processes were often not fulfilling their potential for improving productivity and reducing costs, due to:
Operator error – the controlling computers were usually complex to operate and required considerably more operator training than firms were prepared to pay for
Poor materials – the requirements for consistency of materials was far greater; a robotized handling systems at that time was markedly less able to handle any variety (such as small dimensional changes) in the materials than a human-operated system
Maintenance problems – when you have a highly complex machine that employs computer controls, electronics systems, electrical systems and usually some hydraulics that all come from different manufacturers, and something goes wrong, who do you call to come and fix it?
The problem is often that firms do not take the time to learn; they expect and budget for instant results. There are many cases of firms that spent sufficient sums but failed to take the time to learn from successes and failures in using technology. As a result, investments became financial millstones. For others, such investment created leverage, brought about by advanced technology allied to enhanced skills, know-how and learning.
Clearly, managing the process transformation is an enormously important challenge for operations managers in both service and manufacturing settings. Success does not come about purely by having the right technology. Other factors, including the way that it is used and integrated into the layouts and overall processes, may be more important.
SUMMARY
The five basic types of process choice are: project, job, batch, line and continuous. The basic types of layout are: fixed, process, hybrid (cell) and product, and there are links between the layout (the physicality of operations) and process choice (the transformation). A process choice will indicate what a firm can and cannot do. Process choice may significantly influence what the company sells and what it is able to offer.
Process technology is not a quick-fix solution, and investment must be made alongside skills and capabilities. Any investment has to be made to support the company in its chosen market, and should not be at the whim of a particular technical specialist but a holistic decision for the company.
Understanding processes is as important to services as it is to manufacturing. The five types of processes can be mapped on to services, but the Schmenner matrix model also helps to aid under-standing into the nature of service processes.
Case study
Service processes at Social Services
Oakmead is the area head office of a Social Services department in the South of England. Its catchment area deals with around 100 000 people. The range of services includes an ‘intake’ unit, devoted to initial assessments, care for the elderly, child care, help for the disabled and support for mental health clients. The demands placed upon Social Services can be enormous, and social workers are often in no-win situations in a range of critical areas. For example, if a child is brought into care then Social Services may be accused of breaking up the family unit; if on the other hand a tragic event happens within a family during the time when Social Services were beginning to be involved, the consequences can be devastating for all concerned. Moreover, both the local and national press seem keen to highlight instances when things go wrong. Perhaps the most well known of these came in 1988 in the North of England, where there was a series of reports of what were perceived as ‘bad practice’ relating to detecting child abuse.
Like all Social Services Oakmead is subject to a shortage of funds, and this calls for the very best of operations management to make the greatest use of limited resources, in particular with regard to how to manage a range of different operations processes. Back in 1995 the Oakmead office had been arranged by four geographic areas – North, South, East and West – in order to cover the geographic region. Each area had its own specialist teams, but the arrangement placed emphasis on area rather than on process. By 1997 the Oakmead office was struggling to meet clients’ needs, and in 1998 the County Council Head Office hired management consultants to assess the current position in order to make suggestions for improvements throughout the region.
When the management teams in Oakmead were asked to work with consultants, a number of key problems came to light. The first was a layout problem. Consultants had been surprised, when reading the breakdown of figures for types of clients, to see that there was a low referral rate for both elderly and disabled clients.
However, when they came to the Oakmead office the reason for this became clear; the reception area was on the third floor in a building that had no lift! The other problem was that there was confusion with process flows, resulting in duplication of process tasks throughout the office. For example, when a potential client telephoned the office the approach was very resource-driven rather than client-led. Great emphasis was placed upon where the person lived rather than what the needs of the client were. Once the need had been determined the client would be forwarded to a particular geographic grouping, and would then need to provide the same details that had been given in the initial telephone conversation.
After agreeing with senior-level managers that there were problems with how processes were managed, the following changes took place. First, the physical aspects needed to be changed, and so the reception area was moved to the ground floor. Not surprisingly it was then found that the number of elderly and disabled clients increased dramatically in the follow-ing 12 months – by 32 per cent for elderly and 56 per cent for disabled clients, who had formerly been put off by having to climb stairs. Second, walls that had created barriers between geographic teams were demolished. Three months after the changes were made, the area manager commented: ‘immediately,
the atmosphere changed – we got things done by talking with each other rather than being huddled in our separate offices’.
In addition to changing the physical aspects of the layout, Social Services were fundamentally reorganized around focused process groupings rather than by the former geographic layout.
For example, when examining the flow of operations it became clear that the intake process was the high-volume centre of the system. As a result of this assessment, additional staff were recruited to deal with the high number of intake calls. The process was rearranged so that the intake team (a high-volume, service factory process) would now quickly forward the clients’
details to a specialist group. Once the call was put through, the process then became that of a professional service – a unique encounter between the client and the service provider. The specialist process groups – care for the elderly, childcare, help for the disabled and support for mental health clients – would deal with needs across the region rather than within specific geo-graphic boundaries.
The improvements were dramatic, including response times to child-at-risk situations cut by a half; and the number of disabled people seen over a year period increased by 36 per cent.
Clearly, understanding the nature of the service delivery and then managing processes by grouping around focused areas has enormous benefits for service and manufacturing environments.
Key questions
1 Describe the process choice and layout that you would expect to find in the following:
a. A fast food restaurant b. A general hospital c. A car repair workshop.
2 Explain why flexible manufacturing systems are now in place in many high volume industries.
3 Provide three examples of each of the following:
a. A professional service b. A mass service
c. A service factory.
Key terms
Cellular layouts Continuous process Job
Line
Mass Service Process choice Process technology Professional services Project
Service factory
References
Bateman, T. and Zeithaml, C. (1993). Management: Function and Strategy. Irwin.
Bessant, J. (1991). Managing Advanced Manufacturing Technology.
Blackwell.
Bessant, J., Brown, S., Francis, D. and Meredith, S. (2001). Developing manufacturing agility in SMEs. Int. J. Technol. Man., 1–3, 12–33.
Hill, T. (1995). Manufacturing Strategy. Macmillan.
Kidd, P. (1994). Agile Manufacturing – Forging New Frontiers. Addison Wesley.
Schmenner, R. W. (1986). How can services business survive and prosper? Sloan Man. Rev., 27(3), 21–32.
Further reading
Åhlstr¨om, P. and Westbrook, R. (1999). Implications of mass custom-ization for operations management. An exploratory survey. Int. J.
Operations Product. Man., 19(2).
Bessant, J. (1993). The lessons of failure: learning to manage new manufacturing technology. Special issue on Manufacturing Technol-ogy. Int. J. Technol. Man., 8(2/3/4), 197–215.
Buchanan, D. A. and Boddy, D. (1983). Organizations in the Computer Age: Technological Imperatives and Strategic Choice. Gower.
Burgess, T. (1994). Making the leap to agility. Int. J. Operations Product.
Man., 14(11), 23–34.
Duguay, C., Landry, S. and Pasin, F. (1997). From mass production to flexible/agile production. Int. J. Operations Product. Man., 17(12), 1183–95.
Feitzinger, E. and Lee, H. (1997). Mass customization at Hewlett-Packard: the power of postponement. Harvard Bus. Rev., 75(1), 116–22.
Lau, R. (1999) Critical factors for achieving manufacturing flexibility.
Int. J. Operations Product. Man., 19(3).
Lei, D., Hitt, M. and Goldhar, J. D. (1996). Advanced manufacturing technology: organizational design and strategic flexibility. Org. Stud., 17(3), 501(23).
Leonard-Barton, D. (1993). Core capabilities and core rigidities: a paradox in managing new product development. Strategic Man. J., 13, 111–25.
Pine, B. J. (1993). Mass Customization: The New Frontier in Business Competition. Harvard Business School
Pine, B. J., Victor, B. and Boynton, A. C. (1993). Making mass customization work. Harvard Bus. Rev., Sep-Oct.
Piore, M. J. and Sabel, C. F. (1984). The Second Industrial Divide:
Possibilities for Prosperity. Basic Books.
Upton, D. (1994). The management of manufacturing flexibility.
California Man. Rev., 36(2), 72–89.
Victor, B. and Boynton, A. C. (1998). Invented Here: Maximizing Your Organization’s Internal Growth and Profitability, A Practical Guide to Transforming Work. Harvard Business School Press.
The business of the organization
The needs and wants of the organization’s
customers or clients