chapter 3 process capacity 09-16-13spots.gru.edu/jgrayson/mbaopsmgt...m=1 3 min/app foreign dep. m=2...

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Process Capacity 1

Evaluating Process Capacity

The maximum amount a process can produce in a given unit of time.

CHAPTER 3

Objective: to take a fairly technical and complex operation and simplify it to a level suitable for managerial analysis.

Elements: preparing a process flow diagram, finding the capacity and bottleneck of the process, computing the utilization of various process steps, and computing a few other performance measures.

Managing Toward Perfection

A Toyota view:

“We get brilliant results from average people managing brilliant processes.

We observe that our competitors often get average (or worse) results from brilliant people managing broken processes.”

Source: James P. Womack, “In Search of the Perfect Process.”

2Sources: Cachon & Terwiesch: MSWD 3e PPT; Terwiesch Coursera Ops Class Notes; Anupindi, et al: MBPF; and Others as Noted

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Process Capacity 2

3

How to Create a Process Flow Diagram?A process flow diagram is a graphical way to describe the process and it will help us to structure the information we collect during the process improvement project.

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3 5

7 8

2 4 6

Activities• Carried out by resources• Add value and are required

for completion of the flow unit• May or may not carry inventory• Have a capacity (maximum number

of flow units that can flow through

the activity within a unit of time)

Arrows• Indicate the flow of the flow unit• Multiple flow unit types possible

(see Section 3.5)

Inventory / Buffers• Do NOT have a capacity; however,

there might be a limited number offlow units that can be put in this inventory space at any moment of time

• Multiple flow unit types possible

Sources: Cachon & Terwiesch: MSWD 3e PPT; Terwiesch Coursera Ops Class Notes; Anupindi, et al: MBPF; and Others as Noted

1. Reduce the work content of an activity on the critical path

• Eliminate non-value-adding aspects of the activity (“work smarter”).

• Increasing the speed at which the activity is done (“work faster”),

• Acquire faster equipment

• Increase incentives to work faster

• Reduce the number of repeat activities (“do it right the first time”), and

• Change the product mix to produce products with smaller work content with respect to the specified activity.

2. Move some of the work content off the critical path.

• Move work from a critical path to a non-critical path, and

• Move work from a critical path to the outer loop (pre- or post processing).

• Calculating times on paths through the network

• Determining the critical path through the network

• Theoretical flow time

Anupindi, et al, Managing Business Process Flows4


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Process Capacity 3

“Just track any work items as it flows through the process and classify the time into one of three categories: (1) value-added work, (2) waste that is required for business reasons, and (3) delays/waste. Then draw a timeline and mark off the time segments for each of these categories. In the example shown, the value-added work (shaded above the centerline) shows the buyer in this purchasing organization is only working the order for 14 minutes of the 4 day cycle. The majority of the time, delineated by white space, is idle queueing time.”

Value Added vs. NVA Time

Lean Six Sigma by George, et al.

5Sources: Cachon & Terwiesch: MSWD 3e PPT; Terwiesch Coursera Ops Class Notes; Anupindi, et al: MBPF; and Others as Noted

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Productivity

The Seven Sources of Waste


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Understand Sources of Wasted Capacity

Overproduction Transportation

WaitingInventory

Over-processing MotionRework

The seven sources of waste (Muda)

Potential eighth source of waste: The waste of intellect

Not “orthogonal to each other”

Poor flow – Waste of Customer’s time

Poor use of capacity – Waste of the Resource’s time

• Taichi Ohno, Chief Engineer at Toyota• The first five sources are RESOURCE centric (and correspond to capacity): • Ask yourself: “What did I do the last 10 minutes? How much was value-add?”

Look around at the work-place (360 degree) – what percentage of people are working?• The last two sources are FLOW UNIT centric (and correspond to Flow Time and Inventory)• Ask yourself: “Did I really have to be here that long?”


Source: Lean Learning Center, Value Stream Mapping Course Notes.

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Source: Lean Learning Center, Value Stream Mapping Course Notes.9


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Process AnalysisIntroduction / The three measures


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Process Capacity 6

• Flow rate / throughput: number of flow units going through the process per unit of time

• Flow Time: time it takes a flow unit to go from the beginning to the end of the process

• Inventory: the number of flow units in the process at a given moment in time

• Flow Unit: Customer or Sandwich

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Processes: The Three Basic Measures


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Process Analysis

Little’s Law


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Process Capacity 7

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Processes: The Three Key Metrics


What it is: Inventory (I) = Flow Rate (R) * Flow Time (T)

How to remember it: - units

Implications:• Out of the three fundamental performance measures (I,R,T), two can be chosen by

management, the other is GIVEN by nature• Hold throughput constant: Reducing inventory = reducing flow time

Given two of the three measures, you can solve for the third:• Indirect measurement of flow time: how long does it take you on average to respond to an email?

You write 60 email responses per dayYou have 240 emails in your inbox

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Little’s law: It’s more powerful than you think...


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Process Capacity 8

Not an empirical law

Robust to variation, what happens inside the black box

Deals with averages – variations around these averages will exist

Holds for every time window

Shown by Professor Little in 1961

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Little’s law: Some remarks


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Process Analysis

Finding the bottleneck


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Process Capacity 9

Flow Rate=Min{Demand, Capacity}

Demand

Input

Bottleneck(Capacity)

Excess capacity

Flow RateDemand

Input


Excess capacity

Flow Rate

Demand constrained

Demand

Input


Excess capacity

Flow RateDemand

Input


Excess capacity

Flow Rate

Supply constrained Demand constrained

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Flow Rate R: Demand vs. Capacity Constrained

3.2 Bottleneck, Process Capacity and Flow Rate (Throughput)

The overall process capacity is determined by the resource with the smallest capacity. We refer to that resource as the bottleneck.


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Steps for basic process analysis

with one type of flow unit

1. Find the capacity of every resource; if there are multiple resources performing the same activity, add their capacities together.

2.The resource with the lowest capacity is called the bottleneck. Its capacity determine the capacity of the entire process (process capacity).

3.The flow rate is found based on

Flow Rate = Minimum {Available input, Demand, Process Capacity}

We find the utilization of the process as

Similarly, we find the utilization of each resource as

Flow rate

Utilization of resource = --------------------------------

Capacity of resource

Flow rate

Process utilization = --------------------------------

Process capacity


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Process Capacity 10

Basic Process Vocabulary

• Processing times: how long does the worker spend on the task?

• Capacity=1/processing time: how many units can the worker make per unit of timeIf there are m workers at the activity: Capacity=m/activity time

• Bottleneck: process step with the lowest capacity

• Process capacity: capacity of the bottleneck

• Flow rate =Minimum{Demand rate, Process Capacity)

• Utilization =Flow Rate / Capacity

• Flow Time: The amount of time it takes a flow unit to go through the process

• Inventory: The number of flow units in the system

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Process Analysis

Multiple flow units


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Process Capacity 11

3 cases per hour11 cases per hour4 cases per hour EZ form

Regular

Foreign acc.

File

Contact faculty/other persons

Contact prioremployers

Benchmarkgrades

Confirmationletter

Filem=1

3 min/app

Foreign Dep.m=2

20 min/app

Print invoicem=1

2 min/app

Department 1m=3

15 min/app

Department 2m=2

8 min/app

Processes with Multiple Flow Units


Approach 1: Adding‐up Demand Streams


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Process Capacity 12

Approach 2: A Generic Flow Unit (“Minute of Work”)


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Steps for Basic Process Analysis with Multiple Types of Flow Units

1. For each resource, compute the number of minutes that the resource can produce

2. Create a process flow diagram, indicating how the flow units go through the process

3. Create a table indicating how much workload each flow unit is consuming at each resource

4. Add up the workload of each resource across all flow units.

5. Compute the implied utilization of each resource as

The resource with the highest implied utilization is the bottleneck

Note: you can also find the bottleneck based on calculating capacity for each step and then dividing the demand at this resource by the capacity

Sources: MSWD 3e PPT, Terwiesch Coursera Notes and Others as Noted

chapter 3 process capacity 09-16-13spots.gru.edu/jgrayson/mbaopsmgt...m=1 3 min/app foreign dep. m=2...

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