Page 214 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes 7.3 Process Decisions

Process decisions are the building blocks that are used to design the operational requirements of
the organization. One of the most important decisions of Operations Management is to choose a
well-designed, well-functioning process that meets the objectives of the organization. The process
related decisions that the organization has to take include the following:
1. Make or Buy: What parts of the product should be made in-house and what should be
outsourced?
2. Flexibility: What are the requirements of the organization to handle products and processes,
their variety and complexity?

3. Level of Mechanization: How to balance the mix of people skills and automation?
4. Process Choice: What processes should the organization employ, and why?
One can start by exploring the make or buy decision. Once it is decided what we are going to
make, it is easier to take a decision on the process or processes that will be employed.

7.3.1 Buy or Make Decisions

Processes underlie all activities and hence are found in all organizations and functions. In
addition, processes create an inter-connected set of linkages, which connect the external and
internal linkages. These linkages are critical because it is not possible for an organization to
manufacture or process all its requirements internally. For instance, an automobile manufacturer
would seldom consider manufacturing steel although it forms the largest single item used in
his product. Nor would an automobile manufacturer manufacture headlights or dashboard
instruments.

There are different categories of components, sub-assemblies and other inputs that go into an
organization’s products. These categorizes are as follows:
1. Proprietary items: Proprietary items are based on the design of the supplier and used in
the end product without change in its basic form or characteristics, for example, headlights,
and dashboard instruments.
2. Standard components: These components are universally designed for general use. For
example, standard or customized fasteners are used in most manufactured products.
3. Specialty components: These components are specialized in nature like the types which
though used in all vehicles are a speciality product supplied by manufacturers of rubber
products.

4. Commodity type items: These items are supplied either to standard specifications, or
customized to the requirements of the user by the supplier. In the case of an automobile
manufacturer, steel would constitute such an item. In the case of a steel manufacturer,
coking coal, iron ore, limestone, dolomite, etc. would fall in this category.
These items involve large investments and are generally classified as different industries. An

investment in such bulk commodities or products, as a vertical integration strategy, is not very
common.
The remaining components, sub-assemblies, etc., are those designed for the product. These can
be related to what the management considers as:

1. Core, and
2. Non-core activities.

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