Process Management and Capacity Planning

Flashcards covering key concepts in process management and capacity planning based on lecture notes.

Process Strategy

The pattern of decisions made in managing processes to achieve competitive priorities.

Process Analysis

The documentation and detailed understanding of how work is performed and how it can be redesigned.

Capital Intensity

Measures how much a business depends on physical assets rather than people to produce things.

Economies of Scope

Economies that reflect the ability to produce multiple products more cheaply in combination than separately.

DMAIC

A Six Sigma process improvement model consisting of

Define: the scope and boundaries of the process to be analyzed are

first established

Measure: the metrics to evaluate how to improve the process are

determined

Analyze: a process analysis is done, using the data on measures, to

determine where improvements are necessary

Improve: the team uses analytical and critical thinking to generate a

long list of ideas for improvement

Control: the process is monitored to make sure that high performance

levels are maintained

Benchmarking

A systematic procedure that measures a firm’s processes, services, and products against those of industry leaders.

Reengineering

The fundamental rethinking and radical redesign of processes to improve performance dramatically.

Customer Contact

The extent to which the customer is present and actively involved during the service process.

Capacity

The maximum rate of output of a process or a system.

Utilization

The degree to which equipment, space, or workforce is currently being used.

Economies of Scale

The concept that states the average unit cost can be reduced by increasing the output rate.

 Spreading fixed costs

 Reducing construction costs

 Cutting costs of purchased materials

 Finding process advantages

Capacity Planning

Establishing the overall level of resources needed to meet customer demand.

 Economies and diseconomies of scale

 Capacity timing and sizing strategies

 Systematic approach to capacity decisions

Expansionist Strategy

Stays ahead of demand by minimizing chances of lost sales due to inefficient capacity.

Diseconomies of Scale

Occurs when the average cost per unit increases as the facility’s size increases.

Capacity Cushion

The amount of reserve capacity a process uses to handle sudden increases in demand.

Decision Trees

Useful when demand is uncertain and sequential decisions are involved.

Constraint

Any factor that limits the performance of a system and restricts its output.

Theory of Constraints

A systematic management approach focused on actively managing constraints that impede a firm’s progress toward a goal

Throughput Time

Total elapsed time from the start to finish of a job at one or more work centers.

Drum-Buffer-Rope

A planning and control system that regulates the flow of work-in-process materials at the bottleneck.

Drum = bottleneck schedule

Buffer= time buffer

Rope = tying material release to the drumbeat

Bottleneck

A capacity constraint resource (CCR) whose available capacity limits the organization’s ability to meet the product volume, product mix, or demand fluctuation required by the marketplace

Cycle Time

Maximum time allowed for work on a unit at each station.

Theoretical Minimum

A benchmark for the smallest number of stations possible.

Front office

A process with higher customer contact where the service provider interacts directly with the internal or external customer.

Hybrid office

A process with moderate levels of customer contact and standard services with some options available.

Back office

A process with low customer contact and little customization.

Reengineering

The fundamental rethinking and radical redesign of processes to improve performance dramatically in terms of cost, quality, service, and speed.

Base case

The act of doing nothing and losing orders from any demand that exceeds current capacity, or incur costs because capacity is too large.