Chapter 6: Process Analysis (II)

Process flow chart steps

Define the Process Boundaries
- Identify where the process begins and where it ends (its boundaries).
- Determine its inputs and outputs.
- Recognize other processes that impact on the process under evaluation.
Link the Process to the Corporate Strategy
- Understand how the process contributes to the firm's competitive advantage.
- Identify key measures to be used evaluate the process.

Process Maps - Flowcharting

Flow chart symbol conventions
- Boxes
---Activities / Tasks
- Arrows (label each arrow)
---Flow of goods & services
---Flow of information
---Flow of dollars
-Diamonds
---Decision points
-Upside down triangles
---Waits, queues, storage

Tasks or operations (boxes)

Examples: Giving an admission ticket to a customer, installing a engine in a car, etc.

Decision Points (diamonds)

Examples: How much change should be given to a customer, which wrench should be used, etc.

Storage areas or queues (upside down triangle)

Examples: Sheds, lines of people waiting for a service, etc.

Flows of materials or customers (arrows)

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Types of Processes: Single-stage and multi-stage

single-stage process - stage 1 -->
multi-stage process - stage 1 --> stage 2 --> stage 3

Buffer

A buffer refers to a storage area between
stages where the output of a stage is
placed prior to being used in a downstream
stage

Muti-stage process with buffer: stage 1 --> buffer --> stage 2

Cross-Functional Process Maps (also called swim lane)

- Left side - major roles and organizational entities
- Across the Top --> The Customer
- Left Side --> Organizational entities (bands going across)
---Order entry / customer contact
---Sales & Marketing
---Engineering / R & D
---Finance
---Purchasing / Procurement
---Operations
---Inventory Control / Distribution

Bottleneck

Process Capacity = Minimum (Capacity of Resource1 .... Capacity of resource n)

The throughput of a process is the minimum of
- Supply
- Demand
- Capacity

Throughput and Bottlenecks

A bottleneck (BN) is anything that limits throughput (TP).

Throughput (TP) is the rate at which the system generates money through sales.

What could limit throughput (i.e., what are potential
bottlenecks)?

Bottleneck - System or Market Demand?

Throughput can be limited by either the capacity of the system or by the market (i.e., the bottleneck is either the system or the market.)

The capacity of the system is the number of units the system is capable of producing in a given units of time.

The system is the bottleneck if the capacity of the system is less than market demand.
The market is the bottleneck if the systems has excess capacity.

Blocking

- Occurs when the activities in a stage must stop because there is no place to deposit the item just completed
- If there is no room for an employee to place a unit of work down, the employee will hold on to it and not able to continue working on the next unit

Starving

- Occurs when the activities in a stage must stop because there is no work
- If an employee is waiting at a work station and no work is coming to the employee to process, the employee will remain idle until the next unit of work comes

Managing Bottlenecks: How to increase time available for production

1. Make sure the bottleneck resource is not idle
- policies (e.g., lunch breaks)
- waiting for items to process
- excessive downtime due to setups

2. Make sure time on the bottleneck resource is not wasted
- processing defective parts
- processing units that are not going to result in a sale
- processing units that don't require processing on the bottleneck

3. Off-load tasks to other non-bottleneck resources

4. Increase capacity of bottleneck resource

Process Performance Metrics: Time is a critical dimension

Operation time = Setup time + Run time
- flow time (throughput time) = Average time for a unit to move through the system (including waiting time)
- Cycle time = Average time between completions of successive units in a process.

Process Performance Metrics: Relative measures

Utilization = Time Activated/Time Available

Little's Law

The flow of items through a production process can be described using Little's Law

Inventory = Throughput rate x Flow time

throughput - long term average rate of flow through the process

flow time - time for a single unit to traverse the entire process

inventory - materials held by the firm for future use

Little's Law - Measuring process flows example
A ticket line for the New York Yankees game:
At one checking point, there are 100 fans on average in line ahead of you to buy tickets,
on average 5 fans will get the tickets and leave the line in one minute.
What is the average time that a ticket buyer can expect to wait in line when he/she reaches this checking point?

Answer: 20 minutes

Safety regulations require that the time between airplane takeoffs (on the same runway) will be at least 2 minutes. When taking off, the run time of an airplane on the runway is 33 seconds. Planes are on average waiting 3 minutes and 57 seconds for take-off. On average there are 14 planes taking off per hour. How many planes are either on the runway or waiting to take off?

Answer: 1.05

Little's Law - Measuring process flows example:
1. What is the capacity of the system and what is the bottleneck resource?
2. What is the flow time for each customer order (assume 1 pizza is ordered)?
3. Cycle time when fully use the capacity?
4. If 8 customers arrive per hour, What is the throughput rate?
On average how many pizzas are in the whole process?

1. Bottle neck: oven
Capacity of the system: 10 pizza/hour
2. Flow time = 14 minutes
3. 6 minutes
4. Throughput rate: = 8/hour
On average how many pizzas are in the system: =(14/60)*8 = 1.87

Little's Law - Measuring process flows example:
Now assume the oven can bake 2 pizza at a time, and 15 customer arrive per hour, redo 1,2, and 3

Solution:
1. Bottle neck: chef
Capacity of the system: 12 pizza/hour
2. Flow time: =14 minutes
= (14/60) hour
3. 5 minutes
4. Throughput rate: = 12/hour
On average how many pizzas are in the system: =(14/60)*12 = 2.8

Little's Law - Measuring process flows example:
- Assume the chef gets paid $10 per hour, the assistant gets paid $8
Per hour, overhead cost is 50% of the direct labor cost , and the cost
of ingredient is $2 per pizza
What does it cost to make a pizza if the average demand is 60% of
the capacity?
- How can the unit cost of pizzas be reduced?

Solution:
6/hour
((10+3*8) + 1/2(34)) / 6 and then + 2

= $10.5

Unit cost can be reduced by combining jobs/work stations? Also to increase demand of pizzas, capacity is 10/hr and demand is 6/hr, so increase the number as long as its not over capacity (increase demand through advertising, etc)

- What do you think is the capacity of the system? What do you think is the bottleneck in the system?

- What is the flow time for each customer order (assume 1 cake is ordered)?

- If 5 customers arrive per hour, how many cakes are there in the process?

1. Bottle neck: oven (since cooling process could cool many cakes at the same time, so oven is the bottle neck)
Capacity of the system: 6 pizza/hour

2. Flow time: =105 minutes
= (105/60) hour

3. Throughput rate: = 5/hour
On average how many cakes are in the system: =(105/60)*5 = 8.75