IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 1 IES 303 Chapter 4: Process Analysis Objectives: Introduce some practical tools used in designing and improving processes Week 4 Dec 1, 2005

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 2 Process Analysis Understanding how process work is essential to ensuring the competitiveness of a company Example of 2 fast-food restaurants If restaurant A can delivery a hamburger to customer for $0.50 in direct costs and restaurant B costs $0.75, no matter how restaurant B does, it will lose $0.25 in profit for every hamburger it sells compared to restaurant A Example of 2 fast-food restaurants If restaurant A can delivery a hamburger to customer for $0.50 in direct costs and restaurant B costs $0.75, no matter how restaurant B does, it will lose $0.25 in profit for every hamburger it sells compared to restaurant A

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 3 Objectives of Process Analysis To be able to answer the following key questions:  How many customers can the process handle per hour?  How long will it take to serve a customer?  What change is needed in the process to expand capacity?  How much does the process cost?  What part of process should be improved or eliminated in order to reduce non-value added cost?

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 4 Measuring Process Performance  Productivity Ratio of output to input “how much output we can get from a given level of input?”  Efficiency Ratio of actual output of a process relative to some standard To measure loss or gain in the process  Throughput Time Time that a unit spends in the system (including operating and waiting times)  Utilization Ratio of time activated to time available

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 5 Implement changes 6 Redesign process 5 A Systematic Approach to Process Analysis Document process 3 Define scope 2 Evaluate performance 4 Figure 4.2 Identify opportunity 1

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 6 Flowchart of the Sales Process for a Consulting Company Figure 4.3

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 7 Flowchart of Nested Subprocess of Client Agreement and Service Delivery Step Figure 4.4

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 8 Flowchart of the Process Showing Handoffs Between Departments Figure 4.5

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 9 Flow Diagrams Service visible to customer Customer departs with car Repair not authorized Repair authorized Service not visible to customer * = Points critical to the success of the service † = Points at which failure is most often experienced Collect payment Notify customer Figure 4.6 Customer drops off car Mechanic makes diagnosis* Discuss needed work with customer* Order parts Parts available Check parts availability † Perform work † Parts not available Inspect/ test and repair Perform corrected work Corrective work necessary Repair complete

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 10 Process Charts

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 11 Recommended readings  “Work measurement at United Parcel Service (UPS)” from Operations Management for Competitive Advantages, page 192  “Customer-Driven Service for McDonald’s – Self- ordering kiosks and environment” from Operations Management for Competitive Advantages, page

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 12 Case Exercise  Select a process (service or manufacturing)  Example of service system: MK restaurant (dine-in or delivery) SIIT registration process  Write a flow diagrams and/or process chart for its operations

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 13 Pareto Charts Figure 4.9 Figure 4.10

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 14 Cause-and-Effect Diagram Ex: Checker Board Airlines Passenger processing at gate Late cabin cleaners Unavailable cockpit crew Late cabin crew Personnel Aircraft late to gate Mechanical failures Equipment Procedures Waiting for late passengers Weight/balance sheet late Poor announcement of departures Delayed check-in procedure Delayed flight departures Materials Late food service Late fuel Late baggage to aircraft Contractor not provided updated schedule updated schedule Figure 4.11 Weather Air traffic delays Other

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 15 Tools for Improving Quality Tools for Improving Quality Wellington Fiber Board Co. Step 1—Checklist Step 2—Pareto chart Step 3—Cause-and-effect diagram Step 4—Bar chart

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 16 Wellington Fiber Board Co. Checklists Headliner Defects Defect typeTallyTotal A. Tears in fabric//// 4 B. Discolored fabric/// 3 C. Broken fiber board//// //// //// //// //// //// //// /36 D. Ragged edges//// // 7 Total50 Figure 4.12

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 17 Wellington Fiber Board Co. Pareto Chart CD A B Cumulative percentage Number of defects Defect type Figure 4.12

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 18 Wellington Fiber Board Co. Cause-and-Effect Diagram Figure 4.12 Out of specification Not available Not available Materials Humidity Humidity Schedule changes Other Machine maintenance Machine maintenance Machine speed Machine speed Wrong setup Process Training Absenteeism Absenteeism Communication Communication People Broken fiber board

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 19 Wellington Fiber Board Co. Bar Chart Number of broken fiber boards FirstSecondThird Shift Figure 4.12

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 20 Next week Case: Jose’s Authentic Mexican Restaurant  Read and analyze the case: Jose’s Authentic Mexican Restaurant, textbook page 166  Answer the posted questions. Also perform and construct any applicable graphical displays in analyzing the problem.