Managing Processes and Capabilities CHAPTER THREE

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 3–2

Activities 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 3–3

Process Flowchart

Process 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 3–5

Process 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 3–6

Process 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% 3–7 Example 3-1

Yield rate If 100 items began to process, and only 80 were successfully completed, Then yield rate is 80%. 3–8

Expanding 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 3–9 Creativity Before Capital

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 3–10

Expanding 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 3–11 Creativity Before Capital

1. Every process has a constraint Serial/Sequential Structure: processes occur one after another Parallel Structure: two or more processes occur simultaneously 3–12 Figure 3-1 and Example 3-2 ABCD Finished Item 325 items400 items275 items375 items per hour per hour per hour per hour Bottleneck

1. Every process has a constraint 3–13 Figure 3-2 and Example 3-3 ABCD Finished Item 325 items90 items275 items375 items per hour per hour per hour 400 items per hour E F 180 items 130 items

1. Every process has a constraint wMhttp:// wM 3–14

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 3–15 Example 3-4

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 3–16 Example 3-4

Example: Bread making process 3–17 Example 3-4 Initial Assumption 1) 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 lines

Which process is the bottleneck within each baking line? What is the cycle time of the 1 st baking line? The 2 nd ? Bread making lines

What is the cycle time for the entire baking line operation? What is the cycle time for the entire bread-making process? Bread making lines

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

2. 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. 3–24 B A Wait time 0%100% Capacity utilization Process B has greater variability than process A

2. Variance consumes capacity (cont’d) 3–25 c a = coefficient of variation (standard deviation/average) of job arrival times c p = coefficient of variation of job processing times u = utilization of the work center t p = average processing (cycle) time for jobs

2. Variance consumes capacity (cont’d) 3–26 c a = 2 c p = 1.5 u = 85% t p = 3 minutes Example 3-5

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 3–27

3. 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 3–28

4. 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. 3–29

5. 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 3–30

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

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)

3–34 Homework (Problem 2: XYZ component operation) Consider XYZ component operation below

3–35 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)

3–36 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)

3–37 Do problem 8 on page 75 of the text Homework (Problem 3)

3–38 Do the case of “American Vinyl products” on page 77 of the text Case analysis with Homework