OPSM 301 Operations Management Spring 2012 Class 6: Business Process Analysis

Key Learnings: Little’s Law Relates three leading performance measures based on process flows: throughput, inventory, flow time Applies to processes in steady state Important to First determine process boundaries for analysis Then identify appropriate flow unit for your analysis

From measurement to analysis So far we have considered Measuring process flows-R, T, I Relating these measures through Little’s Law: I=RxT Next: understand what drives each measure What drives flow time? What drives throughput rate? What drives inventory?

Process Architecture is defined and represented by a process flow chart: Process = network of activities performed by resources 1. Process Boundaries: input output 2. Flow unit: the unit of analysis 3. Network of Activities & Storage/Buffers activities with activity times routes: precedence relationships (solid lines) 4. Resources & Allocation 5. Information Structure & flow (dashed lines) ........................................................................................................................................................................................................................................ ........................................................................................................................................................................................................................................ ........................................................................................................................................................................................................................................

Flowchart Symbols Tasks or operations Decision Points Examples: Giving an admission ticket to a customer, installing an engine in a car, etc. Examples: How much change should be given to a customer, which wrench should be used, etc. Decision Points 4

Flowchart Symbols Storage areas or queues Examples: Lines of people or cars waiting for a service, parts waiting for assembly etc. Examples: Customers moving to a seat, mechanic getting a tool, etc. Flows of materials or customers 4

Recall:Terminology Flow Time (T) The flow time (also called variously throughput time, cycle time) of a given routing is the average time from release of a job at the beginning of the routing until it reaches an inventory point at the end of the routing. Flow time 1 2 3 4

Operational Measure: Flow Time Driver: Activity Times, Critical Activity (Theoretical) Flow Time: The minimum amount of time required for processing a typical flow unit- without any waiting Flow Time efficiency =

Smiley Guys Factory... 2 x2 1 3 4

Critical Path & Critical Activities Critical Path: A path with the longest total cycle time. Critical Activity: An activity on the critical path.

Analyzing Process Performance 20min Assembly R5 15min R1 15min R3 15min R4 15min To illustrate the concepts, consider a simple example—which could be that of requesting a home mortgage. Q1: What is the minimal amount of time to process an input into an output? Find the critical activities = longest path = bottom path = 1 hour = theoretical flow time. Q2: What is the maximal number of flow units we can process per hour? Find the slowest resource = bottleneck = R2 whose resource capacity is 1 every 20 min. The weakest link determines the chain’s strength, so process capacity can not go above 3/hr. Note: BN need not be on the critical path. Both concepts address different questions: critical activities is about input-output flow/response time bottleneck resources are about throughput rate J.A. Van Mieghem/Operations/Strategy

X-Ray Service Process 1. Patient walks to x-ray lab 2. X-ray request travels to lab by messenger 3. X-ray technician fills out standard form based on info. From physician 4. Receptionist receives insurance information, prepares and signs form, sends to insurer 5. Patient undresses in preparation of x-ray 6. Lab technician takes x-ray 7. Darkroom technician develops x-ray 8. Lab technician checks for clarity-rework if necessary 9. Patient puts on clothes, gets ready to leave lab 10. Patient walks back to physicians office 11. X-rays transferred to physician by messenger

Example-Valley of Hope Hospital Measured actual flow time: 154 minutes 3 7 1 2 9 10 6 12 7 75% 4 5 6 7 8 start end 5 3 2 3 25% 11 20 6 20 transport support Dark room dark room technician messanger X-ray technician receptionist Changing room X-ray Lab Value added decision

Consider all possible paths Flow time efficiency of the process=79/154=51%

Most time inefficiency comes from waiting: E. g Most time inefficiency comes from waiting: E.g.: Flow Times in White Collar Processes ........................................................................................................................................................................................................................................ ........................................................................................................................................................................................................................................ ........................................................................................................................................................................................................................................

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’’ Reduce waiting time. ........................................................................................................................................................................................................................................ ........................................................................................................................................................................................................................................ ........................................................................................................................................................................................................................................

Theoretical Capacity Theoretical capacity: The capacity (throughput rate) of a process under ideal conditions (units / time) Effective capacity: The capacity that one expects of a process under normal working conditions (units/time) Effective capacity < Theoretical capacity

Effective Capacity (scheduled availability) Effective capacity depends on the following Number of shifts Product variety Maintenance Idleness

Realized Capacity (net availability) Actual production or realized throughput rate Usually lower than effective capacity. Machine and equipment failures Quality problems Workforce losses Other uncertainties

Tools: Gantt Chart Gantt charts show the time at which different activities are performed, as well as the sequence of activities 1 2 3 4 activities Resources time

Gantt Chart Time A A A A Resources and Activities 5 20 10 15 B B B B 7 12 17 22 Takt time=5min

Example of a two-stage production line B 5 min A2 2 min 5 min

Gantt Chart A1 A1 A1 A1 15 5 10 20 A2 A2 A2 A2 5 17 22 12 B B B B B B 9 12 14 17 19 22 24 2 min 3 min Takt time=2.5 min

Theoretical Capacity Capacity of the Process= Capacity of the Bottleneck Theoretical capacity: The capacity (throughput rate) of a process under ideal conditions (units / time) If resource is fully utilized during scheduled availability (e.g. 8 hr per day) Effective capacity: The capacity that one expects of a process under normal working conditions (units/time) If resource is fully utilized during net availability Effective capacity < Theoretical capacity (net availability<scheduled availability)