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Operations Managment

Kristen’s Cookie - Lecture 4(Chapters 4 and 5)

Dr. Ursula G. Kraus

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Review

• Process Characterization• Operational Measures:

Flow Time, Inventory and Throughput• Little’s Law• Flow Time Analysis

4/23

Agenda

• Capacity Analysis• Kristen’s Cookie Company• Resource Pools

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Process Flow Measures

Flow Time (T): The average time a job spends in the process Inventory (I): The average number of jobs accumulated in

the process Throughput, or Flow Rate (R): The average rate at which

jobs flow through a process

Little’s Law

I = R x T

Source: Managing Business Process Flows (1999)

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OverproductionProducing too much,or producing too soon

ProcessingOver-processing

IntellectAny failure to fully utilise the time and talents of people

MotionAny motion that does not add value

ReworkAny repair

ConveyanceAny non-essential transport is waste

InventoryAny more than the minimum to get the job done

WaitingWaiting on parts, waiting for a machine to finish cycle

Eliminating “Muda” (Waste) to Reduce Flow Time

Muda

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Additional Levers for Reducing Flow Time

Decrease the work content of critical activities

– “work smarter”

– “work faster”

– “do it right the first time”

– change product mix

Move work content from critical to non-critical activities

– to non-critical path or to “outer loop”

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Industry Process Average Flow Time

Theoretical Flow Time

Flow Time Efficiency

Life Insurance New Policy Application

72 hrs. 7 min. 0.16%

Consumer Packaging

New Graphic Design

18 days 2 hrs. 0.14%

Commercial Bank Consumer Loan

24 hrs. 34 min. 2.36%

Hospital Patient Billing 10 days 3 hrs. 3.75%

Automobile Manufacture

Financial Closing

11 days 5 hrs 5.60%

Most Time Inefficiency Comes from Waiting

Flow Times in White Collar Processes

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Process Flow Measures

Flow Time (T): The average time a job spends in the process Inventory (I): The average number of jobs accumulated in

the process Throughput, or Flow Rate (R): The average rate at which

jobs flow through a process

Little’s Law

I = R x T

Source: Managing Business Process Flows (1999)

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Operational Measures - Capacity

(Theoretical) Capacity of a Resource: Max. number of flow units that can be processed per time unit if it were fully utilized (max. flow rate)

Bottleneck Resource: Resource with min. theoretical capacity

(Theoretical) Process Capacity: The largest sustainable flow rate possible; theoretical capacity of its slowest (bottleneck) resource

Capacity utilization =

Source: Managing Business Process Flows (1999)

Flow Rate [units/hr]

Capacity [units/hr]

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Reasons for Reduced Capacity Utilization

Starvation: Idleness caused by a lack of material from an upstream resource

Blockage: Idleness because completed work cannot be passed to a downstream resource

Resource idleness: Time lost to starvation and blocking

Throughput Rate Theoretical Capacity (Flow Rate)

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Kristen's Cookies

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[Template] Kristen’s Cookies

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[Template] Kristen’s Cookies

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[Template] Kristen’s Cookies

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Average Flow Time consists of …

Theoretical Flow Time

(Processing Time)

+Waiting time

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Operational Measures – Flow Time

Activity Time, or Cycle time: Is the time required by a typical flow unit to complete an activity once

Work Content: Activity time multiplied by the avg. number of visits to that activity

(Theoretical) Flow Time: Min. time required for processing a typical flow unit through the whole process – without any waiting

Critical Path: The theoretical flow time of the longest path(s) in the process flow chart

Critical Activities: All activities on a critical path Flow Time Efficiency =

Source: Managing Business Process Flows (1999)

TimeFlowAverage

TimeFlowlTheoretica

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Example: Work Content & Flow Time

Work Content:

Activity time multiplied by the avg. number of visits to that activity

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Resources and Resource Pools

Resource Pool: A collection of interchangeable resources (resource units) that can perform an identical set of activities

Unit Load: The sum of all the work contents of all activities that utilize that resource unit

Source: Managing Business Process Flows (1999)

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Operational Measures – Capacity (of Resource Pools)

(Theoretical) Capacity of a Resource Unit: Max. number of flow units that can be processed per time unit if it were fully utilized (during its scheduled availability)

(Theoretical) Capacity of a Resource Pool: The theoretical capacity of all the resource units in that pool.

(Theoretical) Process Capacity: The theoretical capacity of its slowest resource pool

(Theoretical) Bottleneck Resource: Resource pool with min. theoretical capacity

Source: Managing Business Process Flows (1999)

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Example: PharmacyTask/Activity Resource Qty of

ResourceActivity Time/Pres.

Take Order Ord. Taker 1 2 min

Verify Insurance Assistant 1 8 min

Find stock Assistant 2 min

Fill container Pharmacist 2 8 min

Type/apply label Pharmacist 3 min

Accept payment Clerk 1 4 min

What is the maximum sustainable throughput for this system?

Where is the bottleneck? How can we address the problem?

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Levers for Managing Flow Rate Increase net availability Decrease resource idleness Manage supply/demand Increase theoretical capacity

– Increase scheduled availability of bottleneck resources

– Invest in bottleneck resources

– Increase size of load batches of bottleneck resources

– Decrease unit load on bottleneck resource pools Adjust product mix