Managing Processes and Capabilities

CHAPTER THREE

What is a process?What is a process?What is a process?What is a process?

• A system of structured activities that use resources to turn inputs into valuable outputs.

• Process thinking views activities in an organization as a collection of processes

• Processes consist of:

–Activities

–Inputs/Outputs/Flows

–Process structures

–Management policies

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Activities of a processActivities of a process

Operations change inputs

Transportation moves an input from place to place

Inspection verifies the results of an activity

Delay unintentionally stops the flow of an input

Storage is the formal inventorying of an input

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Process FlowchartProcess Flowchart

Process CapacityProcess Capacity

• Capacity: amount of input that can go into or the amount of output that can be created by a process, at a given level of resources over a given time period

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Process Capacity DefinitionsProcess Capacity Definitions

• Maximum capacity: highest achievable level under ideal conditions, for a limited time

• Effective capacity: achievable level under normal conditions, for an extended time

• Utilization: how much available capacity is actually used

• Efficiency: how well a resource is used compared to set standards

• Yield: usable output from input

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Process Capacity DefinitionsProcess Capacity Definitions

Maximum capacity = 200,000 units per day

Effective capacity =120,000 units per day

Actual orders = 150,1000 units per day

Utilization of maximum capacity =

(150,000/200,000) x 100% = 75%

Utilization of effective capacity =

(150,000/120,000) x 100% = 125%

3–3–77Example 3-1

Yield rateYield rate

If 100 items began to process, and only 80 were successfully completed,

Then yield rate is 80%.

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Expanding Process CapacityExpanding Process Capacity

• Increase Utilization– Increase up-time–Reduce changeovers and set-up times– Improve scheduling)

• Improve Efficiency– Improve layout–Break bottlenecks–Reduce or buffer variation– Increase labor productivity

• Increase Yield–Voice of the customer–Poka-Yoke– Increase process capability and control– Improve in-coming materials quality

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CreativityBeforeCapital

Theory of Constraints (TOC)Theory of Constraints (TOC)

1. Every process has a constraint

2. Every process has variance that consumes capacity

3. Every process must be managed as a system

4. Process measures are crucial to the process’s success

5. Every process must continually improve

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Expanding Process CapacityExpanding Process Capacity

• Increase Utilization– Increase up-time–Reduce changeovers and set-up times– Improve scheduling)

• Improve Efficiency– Improve layout–Break bottlenecks–Reduce or buffer variation– Increase labor productivity

• Increase Yield–Voice of the customer–Poka-Yoke– Increase process capability and control– Improve in-coming materials quality

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CreativityBeforeCapital

1. Every process has a constraint1. Every process has a constraint

• Serial/Sequential Structure: processes occur one after another

• Parallel Structure: two or more processes occur simultaneously

33––1212Figure 3-1 and Example 3-2

A B C D FinishedItem

325 items 400 items 275 items 375 items per hour per hour per hour per hour

Bottleneck

1. Every process has a constraint1. Every process has a constraint

33––1313Figure 3-2 and Example 3-3

A B C D FinishedItem

325 items 90 items 275 items 375 items per hour per hour per hour

400 itemsper hour

E

F

180 items

130 items

1. Every process has a constraint1. Every process has a constraint

• http://www.youtube.com/watch?v=h7AqXe6AewM

33––1414

1. Every process has a constraint (cont’d)1. Every process has a constraint (cont’d)

• Measures of process flow:

– Manufacturing lead time: The time it takes one unit of product to go through the entire empty assembly line from start to finish

–Flow time: time for one unit to get through a process, i.e. processing time plus waiting time

33––1515Example 3-4

1. Every process has a constraint (cont’d)1. Every process has a constraint (cont’d)

• Measures of process flow:

–Cycle time: time it takes to process one unit at an operation (or station) in the overall process

–Throughput rate or a capacity of a process: is a reciprocal of the cycle time at the bottleneck operation

33––1616Example 3-4

Example: Bread making processExample: Bread making process

33––1717Example 3-4

Initial Assumption1) Two parallel baking lines, each equipped with a mixer, a proofer, and an oven.2) The two baking lines share a single packaging line.3) 8-hour work day

Bread making linesBread making lines

Figure 1 Process Flow Diagram and Cycle Times for Bread-Making with Two Parallel Lines

Raw Cycle Time: Cycle Time: Cycle Time: Work in Finished

Materials 3/4 hour/ 3/4 hour/ 1 hour/ Process Goods 100 loaves 100 loaves 100 loaves Cycle Time:

3/4 hour/ 100 loaves Cycle Time: Cycle Time: Cycle Time: 3/4 hour/ 3/4 hour/ 1 hour/ 100 loaves 100 loaves 100 loaves

Mix

Mix Proof Bake

Bake Proof

Pack

•Which process is the bottleneck within each baking line?

•What is the cycle time of the 1st baking line?

•The 2nd ?

Bread making linesBread making lines

Bread making linesBread making lines

Figure 2 Cycle Times for each Bread-Making Line

Raw Materials Cycle Time: Work in Finished

1 hour/100 loaves Process Goods Cycle Time: 3/4 hour/ 100 loaves Cycle Time: 1 hour/100 loaves

Mix Bake Proof

Pack

Mix Bake Proof

• What is the cycle time for the entire baking line operation?

• What is the cycle time for the entire bread-making process?

Bread making linesBread making lines

Bread making linesBread making lines

Figure 3 Cycle Times for the Bakery

Raw Work in Finished

Goods

Materials Process

Cycle Time: 3/4 hour/

100 loaves Cycle Time:

1/2 hour/100 loaves Cycle Time: 3/4 hour/100 loaves

Mix Bake Proof

Pack

Mix Bake Proof

•What is the overall daily capacity of the bread-making operation?

Bread making linesBread making lines

2. Variance consumes capacity2. Variance consumes capacity

• Variance occurs in a process’s inputs, activities and outputs.

• Increased complexity and uncertainty makes it difficult to create plans to efficiently and effectively use resources.

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B

A

Waittime

0% 100%Capacity utilization

Process B has greater variabilitythan process A

2. Variance consumes capacity (cont’d)2. Variance consumes capacity (cont’d)

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ca = coefficient of variation (standard deviation/average) of job arrival timescp = coefficient of variation of job processing timesu = utilization of the work centertp = average processing (cycle) time for jobs

ppa t

u

ucctimeWait ]

1[

2

22

2. Variance consumes capacity (cont’d)2. Variance consumes capacity (cont’d)

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ca = 2cp = 1.5u = 85%tp = 3 minutes

ppa t

u

ucctimeWait ]

1[

2

22

min125.53

385.1

85.

2

5.12 22

Example 3-5

2. Variance consumes capacity (cont’d)2. Variance consumes capacity (cont’d)

•Variability in:

– Products: changeovers

– Schedules: batching creates complex, moving bottlenecks

– Quality: rework, scrap, starving

– Resource availability: downtime

– Process speed: blocking / starving

– Input deliveries: starving

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3. Processes managed as systems3. Processes managed as systems

• Changing one element of a process may impact other elements, sometimes in unexpected ways.

• Process elements are interdependent–Activities–Inputs/Outputs/Flows–Process structures–Management policies

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4. Measuring processes for success4. Measuring processes for success

• Metrics should address aspects of performance that are important to both customers and the organization.

–They should be verifiable and quantifiable.

–They should align with standards and rewards.

–They should support strategy and priorities.

–They provide the basis for monitoring, controlling and improving processes.

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5. Continuous improvement of processes5. Continuous improvement of processes

• Kaizen: focused, incremental improvement efforts

small + small + small + small + … + n = LARGE

– Team focus: utilize the knowledge and experience of the people associated with the process

– Short term and focused: quick, local improvement

– Action-oriented: quick implementation

– Repetitive: regular events

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• Homework for this chapter will be bread making lines and XYZ component operations

Homework(Three problems)

Homework(Three problems)

• Now the bakery is considering replacing some of its existing equipment with more advanced and faster equipment. The choice is between option 1) replacing two new baking ovens that are each capable of baking a batch of 100 loaves in 3/4 hour (instead of 1 hour) or

option 2) replacing the packing station with one capable of packaging a batch of 100 loaves in 1/2 hour.

Homework(Problem1: Bread making

lines)

Homework(Problem1: Bread making

lines)

1) Which option would allow the greater increase in the bakery’s overall capacity

2) What is the new overall daily capacity with a new option?

3) What is the percentage increase in daily capacity?

Homework(Bread making lines)

Homework(Bread making lines)

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Figure 6 XYZ Component Operation Raw Molded parts Materials Inventory Finished Components

Purchased parts Inventory

Mold parts

Purchase parts From Vendors

Final Assembly

Homework(Problem 2: XYZ

component operation)

Homework(Problem 2: XYZ

component operation)

Consider XYZ component operation below

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Assumptions•One worker is needed to operate each machine in the molding dept.•The molding dept. has 6 machines and currently 6 workers in the molding dept.•Each molding machines produce 25parts/hour.•The purchased parts operation has virtually unlimited capacity.•15 workers in final assembly.•Assembly line moves 150 parts per hour as the 15 workers work together. •Work 8- hour work day and 5-day work week.

Homework(XYZ component operation)

Homework(XYZ component operation)

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1)What is the weekly capacity of the molding operation?2)What is the weekly capacity of the assembly operation?3)What is the weekly capacity of the entire operation?

Homework(XYZ component operation)

Homework(XYZ component operation)

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Do problem 8 on page 75 of the text

Homework(Problem 3)Homework(Problem 3)

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Do the case of “American Vinyl products” on page 77 of the text

Case analysis with Homework

Case analysis with Homework