4 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Analysis 4 For Operations Management, 9e by Krajewski/Ritzman/Malhotra © 2010 Pearson Education Modified by Ken Shaw for BA 357

4 – 2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Analysis A review from BA 302 Processes may be the least understood and managed aspect of a business A firm can not gain a competitive advantage with faulty processes Processes can be analyzed and improved using certain tools and techniques Process analysis can be accomplished using a six-step blueprint

4 – 3 Process Variables Inputs/Outputs (materials, data, services, products) Cost Time Yield Priority Deadline Quality Probability Downtime/Uptime Distance

4 – 4 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. A Systematic Approach Figure 4.1 – Blueprint for Process Analysis Define scope 2 Identify opportunity 1 Implement changes 6 Evaluate performance 4 Redesign process 5 Document process 3

4 – 5 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Documenting The Process Some effective techniques for documenting and evaluating processes are 1)Service blueprints 2)Simple flowcharts 3)Activity diagrams 4)Process charts They help you see how a process operates and how well it is performing Can help find performance gaps

4 – 6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Service Blueprint No Yes NoYes No Yes Line of visibility Finish Figure 4.2 –Flowchart of the Sales Process for a Consulting Company Payment received? Client billed by accounting, sales, or consulting Follow-up by accounting, sales, or consulting Approval by consulting? Final invoice created by accounting, sales, or consulting Nested Process Client agreement and service delivery Is proposal complete? Follow-up conversation between client and sales Sales and/or consulting drafts proposal Sales: Initial conversation with client Marketing lead Follow-up conversation between client and consulting Consulting drafts proposal Consulting: Initial conversation with client Consulting lead Sales lead

4 – 7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Flowcharts Final invoice created by accounting, sales, or consulting Delivery of service by consulting 50% invoiced by accounting, sales, or consulting Letter of agreement signed Project manager assigned Form completed by sales or consulting Verbal OK from client Is proposal complete? Figure 4.3 –Flowchart of the Nested Subprocess of Client Agreement and Service Delivery

4 – 8 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Credit and invoicing Production Control and Manufacturing Assembly and Shipping PRODUCTION FINANCE SALES CUSTOMER Activity Diagrams No Yes No Yes Payment received Payment Order stopped Order cancellation Order cancelled Payment sent Product packages Product and invoice received 100% of credit checked within 24 hours Two scheduling errors per quarter Invoice sent Notice of shipment Order shipped Order picked Order Packages assembled and inventoried ` Items manufactured Production scheduled Inventory adjusted Invoice prepared Credit check OK? New customer? Order received Order Order entered Order completed and submitted Order Order generated Figure 4.4 –Flowchart of the Order-Filling Process Showing Handoffs Between Departments

4 – 9 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Charts An organized way to document all the activities performed by a person or group Activities are typically organized into five categories  Operation,  Transportation,   Inspection,  Delay,   Storage, 

4 – 10 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Step No. Time (min) Distance (ft)    Step Description 1X 2X 3X 4X 5X 6X 7X 8X 9X 10X 11X 12X 13X 14X 15X 16X 17X 18X 19X Process Charts Figure 4.5 –Process Chart for Emergency Room Admission Sit down and fill out patient history Enter emergency room, approach patient window Nurse escorts patient to ER triage room Nurse inspects injury Return to waiting room Wait for available bed Go to ER bed Wait for doctor Doctor inspects injury and questions patient Nurse takes patient to radiology Technician x-rays patient Return to bed in ER Wait for doctor to return Doctor provides diagnosis and advice Return to emergency entrance area Check out Walk to pharmacy Pick up prescription Leave the building

4 – 11 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Step No. Time (min) Distance (ft)    Step Description 1X 2X 3X 4X 5X 6X 7X 8X 9X 10X 11X 12X 13X 14X 15X 16X 17X 18X 19X Process Charts Figure 4.5 –Process Chart for Emergency Room Admission Sit down and fill out patient history Enter emergency room, approach patient window Nurse escorts patient to ER triage room Nurse inspects injury Return to waiting room Wait for available bed Go to ER bed Wait for doctor Doctor inspects injury and questions patient Nurse takes patient to radiology Technician x-rays patient Return to bed in ER Wait for doctor to return Doctor provides diagnosis and advice Return to emergency entrance area Check out Walk to pharmacy Pick up prescription Leave the building Summary Activity Number of Steps Time (min) Distance (ft) Operation Transport  Inspect Delay  Store  ――

4 – 12 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Charts The annual cost of an entire process can be estimated It is the product of 1)Time in hours to perform the process each time 2)Variable costs per hour 3)Number of times the process is performed each year Annual labor cost Time to perform the process in hours Variable costs per hour Number of times process performed each year =

4 – 13 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Charts If the average time to serve a customer is 4 hours The variable cost is $25 per hour And 40 customers are served per year The total labor cost is 4 hrs/customer  $25/hr  40 customers/yr = $4,000 Note: Given the annual costs for various processes, they could be classified as ABC in much the same way as inventory items. Class A processes requiring more attention than Class C processes.

4 – 14 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Learning Curves 140, ,000 – 100,000 – 80,000 – 60,000 – 40,000 – 20,000 – 0 Labor Hours per Unit Cumulative Units Produced ||||||| Figure 4.7 –Learning Curve with 80% Learning Rate Using OM Explorer

4 – 15 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Evaluating Performance Chapter 6, Capacity Planning; Supplement C, Waiting Lines; Supplement H, Measuring Output Rates; Supplement I, Learning Curve Analysis  Processing time  Total time from start to finish (throughput time)  Setup time  Operating expenses  Capacity utilization  Average waiting time  Average number of customers or jobs waiting in line Chapter 5, Quality and Performance  Customer satisfaction measures  Error rate  Rework or scrap rate  Internal failure costs Figure 4.8 –Metrics for Flowcharts, Process Charts, and Accompanying Tables

4 – 16 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Evaluating Performance Chapter 8, Lean Systems  Setup time  Average waiting time  Total time from start to finish (throughput time)  Waste Chapter 7, Constraint Management  Cycle time  Idle time Figure 4.8 –Metrics for Flowcharts, Process Charts, and Accompanying Tables

4 – 17 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Data Analysis Tools Help identify causes of problems 1)Checklists 2)Histograms and bar charts 3)Pareto charts 4)Scatter diagrams 5)Cause-and-effect diagrams 6)Graphs

4 – 18 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Pareto Chart for a Restaurant EXAMPLE 4.2 The manager of a neighborhood restaurant is concerned about the smaller numbers of customers patronizing his eatery. Complaints have been rising, and he would like to find out what issues to address and present the findings in a way his employees can understand. SOLUTION The manager surveyed his customers over several weeks and collected the following data: ComplaintFrequency Discourteous server12 Slow service42 Cold dinner5 Cramped table20 Atmosphere10

4 – 19 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Pareto Chart for a Restaurant 50 – 45 – 40 – 35 – 30 – 25 – 20 – 10 – 5 – 0 – Failures Discourteous server Slow service Cold dinner Cramped tables Atmosphere Failure Name Figure 4.9 –Bar Chart Figure 4.9 is a bar chart and Figure 4.10 is a Pareto chart, both created with OM Explorer’s Bar, Pareto, and Line Charts solver. They present the data in a way that shows which complaints are more prevalent (the vital few).

4 – 20 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Pareto Chart for a Restaurant Figure 4.10 – Pareto Chart  100% = 69.7% ( ) 89 – 100.0% – 80.0% – 60.0% – 40.0% – 20.0% – 0.0% 45 – 40 – 35 – 30 – 25 – 20 – 10 – 5 – 0 – Failures Discourteous server Slow service Cold dinner Cramped tables Atmosphere Failure Name Percent of Total

4 – 21 Used to find possible relationship between two or more variables (e.g., lot size versus shift, time of day, percentage of defects, or…)  Other names are: Shmoo plots and correlation plots Steps  Identify variables to check for correlation  Draw x-y axis and plot values  Ask ‘Does there appear to be a relationship?’ Scatter Diagram

4 – 22 Scatter Diagram Example RunSizeDefects (%) 11, , , , , , , , , , , , , , , , , , , ,5007.0

4 – 23 Brainstorming tool used to identify possible causes of a problem Other names  Fish-bone diagram, Ishikawa diagram Steps  Identify problem to correct  Draw main causes for problem as ‘bones’ Ask ‘What could have caused problems in these areas?’  Repeat for causes in each sub-area. Cause and Effect Diagram

4 – 24 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Analysis of Flight Departure Delays EXAMPLE 4.3 The operations manager for Checker Board Airlines at Port Columbus International Airport noticed an increase in the number of delayed flight departures. SOLUTION To analyze all the possible causes of that problem, the manager constructed a cause-and-effect diagram, shown in Figure The main problem, delayed flight departures, is the “head” of the diagram. He brainstormed all possible causes with his staff, and together they identified several major categories: equipment, personnel, materials, procedures, and “other factors” that are beyond managerial control. Several suspected causes were identified for each major category.

4 – 25 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Possible Causes of Flight Departure Delays Delayed flight departures Weather Air traffic delays Other Aircraft late to gate Mechanical failures Equipment Passenger processing at gate Late cabin cleaners Unavailable cockpit crew Late cabin crew Personnel Poor announcement of departures Weight/balance sheet late Delayed check-in procedure Waiting for late passengers Procedures Late baggage to aircraft Late fuel Late food service Contractor not provided with updated schedule Materials Figure 4.11 – Cause-and-Effect Diagram for Flight Departure Delays

4 – 26 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Data Analysis Tools Tools can be used together for data snooping to analyze data and determine causes Simulation can show how a process changes over time Process simulation is the act of reproducing the behavior of a process using a model that describes each step

4 – 27 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Causes of Headliner Process Failures EXAMPLE 4.4 The Wellington Fiber Board Company produces headliners, the fiberglass components that form the inner roof of passenger cars. Management wanted to identify which process failures were most prevalent and to find the cause. SOLUTION Step 1:A checklist of different types of process failures is constructed from last month’s production records. Step 2:A Pareto chart is prepared from the checklist data. Step 3:A cause-and-effect diagram for identifies several potential causes for the problem. Step 4:The manager reorganizes the production reports into a bar chart according to shift because the personnel on the three shifts had varied amounts of experience.

4 – 28 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Causes of Headliner Process Failures Defect typeTallyTotal A. Tears in fabric4 B. Discolored fabric3 C. Broken fiber board 36 D. Ragged edges7 Total50 | | | | || | ||| || | |||| |||| |||| ||| |||||||| | ||| || C D A B 50 – 40 – 30 – 20 – 10 – 0 – – 100 – 80 – 60 – 40 – 20 – 0 Number of Failures Cumulative Percentage Defect Failure SOLUTION Figure 4.12 shows the sequential application of several tools for improving quality Step 1. Checklist Step 2. Pareto Chart Figure 4.12 –Application of the Tools for Improving Quality

4 – 29 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Causes of Headliner Process Failures SOLUTION Figure 4.12 shows the sequential application of several tools for improving quality Step 3. Cause-and-Effect Diagram Step 4. Bar Chart Humidity Schedule change Other Out of specification Not available Materials Training Absenteeism Communication People Machine maintenance Machine speed Wrong setup Process Broken fiber board 20 – – 15 – – 10 – – 5 – – 0 – Number of Broken Fiber Boards Shift FirstSecondThird Figure 4.12 –Application of the Tools for Improving Quality

4 – 30 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Redesigning the Process After a process is documented, metrics are collected, and disconnects are identified, the process analyst determines what changes should be made People directly involved in the process are brought in to get their ideas and inputs

4 – 31 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Generating Ideas Ideas can be uncovered by asking six questions 1.What is being done? 2.When is it being done? 3.Who is doing it? 4.Where is it being done? 5.How is it being done? 6.How well does it do on the various metrics of importance?

4 – 32 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Generating Ideas Brainstorming involves a group of people knowledgeable about the process proposing ideas for change by saying whatever comes to mind After brainstorming the design team evaluates ideas and identifies those with the highest payoff

4 – 33 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Generating Ideas Benchmarking is a systematic procedure that measures a firm’s processes, services, and products against another firm Competitive benchmarking is based on comparisons with a direct competitor Functional benchmarking compares areas with those of outstanding firms in any industry Internal benchmarking compares an organizational unit with superior performance with other units

4 – 34 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Benchmarking There are four basic steps  Step 1. Planning  Step 2. Analysis  Step 3. Integration  Step 4. Action Collecting data can be a challenge Some corporations and government organizations have agreed to share data

4 – 35 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Benchmarking Customer Relationship Process  Total cost of “enter, process, and track orders” per $1,000 revenue  System costs of processes per $100,000 revenue  Value of sales order line item not fulfilled due to stockout, as percentage of revenue  Average time from sales order receipt until manufacturing logistics is notified  Average time in direct contact with customer per sales order line item Order Fulfillment Process  Value of plant shipments per employee  Finished goods inventory turnover  Reject rate as percentage of total orders processed  Percentage of orders returned by customers due to quality problems  Standard customer lead time from order entry to shipment  Percentage of orders shipped on time Figure 4.13 –Illustrative Benchmarking Metrics by Type of Process

4 – 36 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Benchmarking New Service/Product Development Process  Percentage of sales due to services/products launched last year  Cost of “generate new services/products” process per $1,000 revenue  Ratio of projects entering the process to projects completing the process  Time to market for existing service/product improvement project  Time to market for new service/product project  Time to profitability for existing service/product improvement project Supplier Relationship Process  Cost of “select suppliers and develop/maintain contracts” process per $1,000 revenue  Number of employees per $1,000 of purchases  Percentage of purchase orders approved electronically  Average time to place a purchase order  Total number of active vendors per $1,000 of purchases  Percentage of value of purchased material that is supplier certified Figure 4.13 –Illustrative Benchmarking Metrics by Type of Process

4 – 37 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Benchmarking Customer Relationship Process  Systems cost of finance function per $1,000 revenue  Percentage of finance staff devoted to internal audit  Total cost of payroll processes per $1,000 revenue  Number of accepted jobs as percentage of job offers  Total cost of “source, recruit, and select” process per $1,000 revenue  Average employee turnover rate Figure 4.13 –Illustrative Benchmarking Metrics by Type of Process

4 – 38 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Managing Processes Failure to manage processes is failure to manage the business Seven common mistakes 1.Not connecting with strategic issues 2.Not involving the right people in the right way 3.Not giving the design teams and process analysts a clear charter and then holding them accountable

4 – 39 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Managing Processes Seven common mistakes (continued) 4.Not being satisfied unless fundamental “reengineering” changes are made 5.Not considering the impact on people 6.Not giving attention to implementation 7.Not creating an infrastructure for continuous process improvement

4 – 40 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 1 Create a flowchart for the following telephone-ordering process at a retail chain that specializes in selling books and music CDs. It provides an ordering system via the telephone to its time-sensitive customers besides its regular store sales. The automated system greets customers, asks them to choose a tone or pulse phone, and routes them accordingly. The system checks to see whether customers have an existing account. They can wait for the service representative to open a new account. Customers choose between order options and are routed accordingly. Customers can cancel the order. Finally, the system asks whether the customer has additional requests; if not, the process terminates.

4 – 41 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Figure 4.14 –Flowchart of Telephone Ordering Process Solved Problem 1 SOLUTION

4 – 42 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 1 Figure 4.14 –Flowchart of Telephone Ordering Process SOLUTION

4 – 43 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2 An automobile service is having difficulty providing oil changes in the 29 minutes or less mentioned in its advertising. You are to analyze the process of changing automobile engine oil. The subject of the study is the service mechanic. The process begins when the mechanic directs the customer’s arrival and ends when the customer pays for the services. SOLUTION Figure 4.15 shows the completed process chart. The process is broken into 21 steps. A summary of the times and distances traveled is shown in the upper right-hand corner of the process chart. The times add up to 28 minutes, which does not allow much room for error if the 29-minute guarantee is to be met and the mechanic travels a total of 420 feet.

4 – 44 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2 Step No. Time (min) Distance (ft)    Step Description XDirect customer into service bay 21.80XRecord name and desired service 32.30XOpen hood, verify engine type, inspect hoses, check fluids XWalk to customer in waiting area 50.60XRecommend additional services 60.70XWait for customer decision XWalk to storeroom 81.90XLook up filter number(s) 90.40XCheck filter number(s) XCarry filter(s) to service pit XPerform under-car services XClimb from pit, walk to automobile XFill engine with oil, start engine XInspect for leaks XWalk to pit XInspect for leaks XClean and organize work area XReturn to auto, drive from bay XPark the car XWalk to customer waiting area XTotal charges, receive payment Summary Activity Number of Steps Time (min) Distance (ft) Operation Transport  Inspect Delay  Store  Figure 4.15 –Process Chart for Changing Engine Oil

4 – 45 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 3 What improvement can you make in the process shown in Figure 4.14? SOLUTION Your analysis should verify the following three ideas for improvement. You may also be able to come up with others. a.Move Step 17 to Step 21. Customers should not have to wait while the mechanic cleans the work area. b.Store small inventories of frequently used filters in the pit. Steps 7 and 10 involve travel to the storeroom. c.Use two mechanics. Steps 10, 12, 15, and 17 involve running up and down the steps to the pit. Much of this travel could be eliminated.

4 – 46 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 4 DefectFrequency Lumps of unmixed product7 Over- or underfilled jars18 Jar lids did not seal6 Labels rumpled or missing29 Total60 Vera Johnson and Merris Williams manufacture vanishing cream. Their packaging process has four steps: (1) mix, (2) fill, (3) cap, and (4) label. They have had the reported defects analyzed, which shows the following: Draw a Pareto chart to identify the vital defects.

4 – 47 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 4 SOLUTION Defective labels account for percent of the total number of defects:  100% = 48.33% Improperly filled jars account for 30 percent of the total number of defects: The cumulative percent for the two most frequent defects is  100% = 30.00% % % = 78.33%

4 – 48 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 4 10% + 90% = % Defective seals represent of defects; the cumulative percentage is 6 60  100% = 10.00% The Pareto chart is shown in Figure % % = 90.00% 7 60  100% = 11.67% Lumps represent of defects; the cumulative percentage is

4 – 49 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 4 40 – 36 – 32 – 28 – 24 – 20 – 16 – 12 – 8 – 4 – 0 – – 100 – 90 – 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0 Frequency of Defects LabelFillMixSeal Cumulative Percentage of Defects 100% 90% 78% 48% Figure 4.16 –Pareto Chart

4 – 50 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.