5.3 Managing Processes to Meet Demand
An essential objective of process management is to align process capacity with customer demand. Ideally, a process should be designed so that its output precisely matches demand levels. Excess capacity leads to inefficiencies and increased operational costs, while insufficient capacity results in unmet customer needs, lost revenue, and potential damage to the organization’s reputation.
Achieving this balance requires:
- Accurate demand forecasting
- Translation of forecasts into capacity requirements
- Processes capable of adapting to expected demand levels
However, even with robust planning, process variation and demand variability can make it challenging to maintain this alignment. Therefore, effective process management must also include strategies for managing and mitigating variation.
Process Variation
Variation is an inherent characteristic of all business processes. It can arise from both intentional choices (e.g., offering a wide range of products) and uncontrollable factors (e.g., random fluctuations in demand). Understanding the sources of variation is critical for designing resilient and responsive operations.
There are four primary sources of variation:
Variety of Goods or Services Offered The broader the range of products or services, the more complex and variable the production or service delivery requirements become.
Structural Variation in Demand These include predictable patterns such as seasonality, trends, and cyclical fluctuations. While they can be anticipated, they still require proactive capacity planning and resource allocation.
Random Variation This type of variation is inherent in all processes and demand patterns. It is unpredictable and cannot be eliminated, though its impact can be mitigated through statistical analysis and buffer strategies.
Assignable Variation These variations stem from identifiable causes such as defective inputs, inefficient work methods, or malfunctioning equipment. Unlike random variation, assignable variation can often be reduced or eliminated through root cause analysis and corrective action.
The Impact of Variation
Process variation can significantly disrupt operations and supply chains. Its consequences include:
- Increased operational costs
- Delays and inventory shortages
- Reduced product or service quality
- Inefficient workflows
- Customer dissatisfaction and reputational damage
Given these risks, the ability to identify, analyze, and manage variation is a critical competency for operations and supply chain managers. Effective variation management not only enhances process stability but also supports strategic goals such as customer satisfaction, cost efficiency, and continuous improvement.
“4. Process Management: Types of Process and its Implication in Operation Strategy” from Operations Management by Sudhanshu Joshi is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License, except where otherwise noted.—Modifications: Used section 2.1; reworded; added further content.
