Chapter 8 Process Technology

OPERATIONS MANAGEMENT AND PROCESS TECHNOLOGY

How operations managers deal with process technology is one of the most important
decisions that shape the capabilities of the operations. There used to be a simple
division of operations that used a lot of process technology, usually manufacturing
operations, and those that used little or no process technology, usually service
operations. But this is no longer true. High-volume services have for year
understood the value of process technology. Yet even professional services can
benefit from new and value-adding technologies.
Operations managers dont need to be technologists yet they should be able to do
three things.
- Understand the technology to the extent that they are able to articulate what
is should be able to do
- Be able to evaluate alternative technologies and share the decision in which
technology to choose
- Must implement the technology so that it can reach its full potential in
contributing to the performance of the operation as a whole.
(See figure 8.2, page 225)

WHAT DO OPERATIONS MAANGERS NEED TO KNOW ABOUT PROCESS

TECHNOLOGY?
Process technology = the machines, equipment, and devices that create and/or
deliver products and services. It has a significant effect on quality, speed,
dependability, flexibility and cost.

Process technology and transformed resources

One common method of distinguishing between different types of process
technology is by what the technology actually processes materials, information or
customers.

Material-processing technologies
These include any technology that shapes, transports, stores, or in any way changes
physical objects. In manufacturing operations, technological advances have meant
that the ways in which materials are processed have improved over time. Generally,
it is the initial forming and shaping of materials at the start, and the handling and
movement through the supply network, that have been most affected by technology.

Information-processing technology
Information-processing technology (IT) includes any device which collects,
manipulates, stores or distributes information. Its advantage is that it increases both
reach and richness. Traditionally, selling involved a trade-off between reach and
richness. The internet effectively overcame this trade-off.

Customer-processing technology
There are three types of customer-processing technologies:
Active interaction technology in all of these, customers themselves are
using the technology to create the service
 Passive interactive technology they process and control customers by
constraining their actions in some way
Technologies aware of customers, but not the other way around objective is
to track customers movement or transactions in an unobtrusive way

Integrating technologies
Many new technologies process combinations of material, people and customers.
These technologies are called integrating technologies.

Understanding process-technologies the four key questions

Understanding technology does not mean knowing the details of the science and
engineering embedded in the technology. But it does mean knowing enough about
the principles behind the technology to be comfortable in evaluating some technical
information, capable of dealing with experts in the technology and confident enough
to ask relevant questions.

What does the technology do that is different from other similar technologies?
How does it do it? That is, what particular characteristic of the technology are
used to perform its function?
What benefits does using the technology give to the operation?
What constraints or risks does using the technology place on the operation?

HOW ARE PROCESS TECHNOLOGIES EVALUATED?

The most common technology-related decision in which operations managers will be
involved is the choice between alternative technologies. It is an important decision
because process technology can have a significant effect on the operations long
term strategic capabilities. This means that the characteristics of alternative
technologies need to be evaluated so that they can be compared. Here we use three
sets of criteria for evaluation:
Does the technology fit the processing task for which it is intended?
How does the technology improve the operations performance?
Does the technology give an acceptable financial return?

Does the process technology fit the processing task?

Different process technologies will be appropriate for different types of operations,
not just because they process different transformed resources, but also because
they do so at different levels of volume and variety.

High variety, low volume process technology that is general purpose, because it
can perform the wide-range of processing activities that high variety demands.
High volume, low variety use technology that is more dedicated to its narrower
range of processing requirements.

Within the spectrum from general-purpose to dedicated-purpose technologies, three

dimensions in particular tend to vary with volume and variety.
Its degree of automation
The capacity of the technology to process work, that is, its scale or scalability
The extent to which it is integrated with other technologies; that is, its degree
of coupling or connectivity
(See figure 8.5, page 238)
The degree of automation of technology
To some extent, all technology needs human intervention. The ratio of technological
to human effort it employs is sometimes called the capital intensity of the process
technology. Generally, processes that have a high variety and low volume will
employ process technology with lower degrees of automation than those with higher
volume and lower variety.

The scale/scalability of the technology

There is usually some discretion as to the scale of individual units of technology. The
advantage of large-scale technologies is that they can usually process items
cheaper than small-scale technologies, but usually need high volume and can cope
only with low variety. By contrast, the virtues of smaller-scale technology are often
the nimbleness and flexibility that is suited to high-variety, lower-volume processing.

Scalability = the ability to shift to a different level of useful capacity quickly and
cost-effectively.

The coupling/connectivity of the technology

Coupling means the linking together of separate activities within a single piece of
process technology to form an interconnected processing system. Tight coupling
usually gives fast process throughput. Tight coupling also means that the flow is
simple and predictable. However, coupling can be both expensive and vulnerable.
Coupling is generally most suited to relatively low variety and high volume. Higher-
variety processing requires a more open and unconstrained level of coupling
because different products and services will require a wider range of processing
activities.

How does technology improve the operations performance?

A sensible approach to evaluating the impact of any process technology on an
operation is to assess how it affects the quality, speed, dependability, flexibility and
cost performance of the operation.
(Read example, page 239)

Does the technology give an acceptable financial return?

Assessing the financial value of investing in process technology is in itself a
specialized subject. It is important to highlight one important issue that is central to
financial evaluation: while the benefits of investing in new technology can be spread
over many year into the future, the costs associated with investing in the technology
usually occur upfront. So we have to consider the time value of money.
We can ask ourselves how much would have to be invested now to receive 1000 in
one years time. This amount (lower than 1000) is called the net present value of
receiving 1000 in one years time.

The present value of x in n years time, at a discount rate of r per cent is:

x
(1+ r ) n
100
(See example and worked examples, page 240, 240-241, 242)

HOW ARE PROCESS TECHNOLOGIES IMPLEMENTED?

Implementing process technology means organizing all the activities involved in
making the technology work as intended. No matter how potentially beneficial and
sophisticated the technology, it remains only a prospective benefit until it has been
implemented successfully.

Resource and process distance

The degree of difficulty in the implementation of process technology will depend on
the degree of novelty of the new technology resources and the changes required in
the operations processes. The less that the new technology resources are
understood, the greater their distance from the current technology resource base of
the operation. Similarly, the extent to which an implementation requires an
operation to modify its existing processes, the greater the process distance. The
greater the resource and process distance, the more difficult any implementation is
likely to be.
(see figure 8.6, page 243)

Customer acceptability
When an operations customers interact with its process technology it is essential to
consider the customer interaction when evaluating it. If customers are to have direct
contact with technology, they must have some idea of how to operate it. Where
customers have an active interaction with technology, the limitations of their
understanding of the technology can be the main constraint for its use.
Walley and Amin suggest that the ability of the operation to train its customers in
the use of its technology depends on three factors: complexity, repetition, and the
variety of takss performed by the customer. In other cases, technology may not be
trusted by the customer because it is technology and not a person.

Anticipating implementation problems

The implementation of any process technology will need to account for the
adjustment issues that almost always occur when making any organizational
change. By adjustment issues we mean the losses that could be incurred before the
improvement is functioning as intended. But estimating the nature and extend of
any implementation issues is notoriously difficult. Murphys Law states if anything
can go wrong, it will.

Chew suggests that adjustment costs stem from unforeseen mismatches between
the new technologys capabilities and needs and the existing operation. New
technology rarely behaves as planned and as changes are made their impact ripples
throughout the organization.

See figure 8.7, page 245. It shows a Murphy Curve, a typical pattern of performance
reduction as a new process technology is introduced. It is recognized that
implementation may take some time; therefore allowances are made for the length
and cot of a ramp-up period. However, as the operation prepares for the
implementation, the distraction causes performance actually to deteriorate. Even
after the start of the implementation, this downward trend continues and it is only
weeks, indeed maybe months, later that the old performance level is reached. The
area of the dip indicates the magnitude of the adjustment costs, and therefore the
level of vulnerability faced by the operation.