1. OPSM 301 Operations Management Spring 2012 Class 7 Business Process Analysis: Flow Rate and Capacity

2. 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

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

4. 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

5. Multi-Stage Processes
Processes can be either single-stage or multiple-stage. For multiple-stage processes buffers or storage areas may exist between activities
Key issues that can arise from multiple-stage operations, include buffering, blocking, starving, and bottlenecks

6. One unit is completed
in 30 seconds
One unit is completed
in 45 seconds

7. Smiley Faces Factory...
Volunteers? 1 3 2

8. Smiley Faces Factory...
Modification: 1 3 2

9. The bottleneck of a process is the factor which limits production

10. Bottleneck in Traffic

11. 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

12. Gantt Chart Time A A A A Resources and Activities 5 20 10 15 B B B B 712 17 22
Takt time=5min

13. Example of a two-stage production lineB
5 min A2
2 min
5 min

14. Gantt Chart A1 A1 A1 A1 15 5 10 20 A2 A2 A2 A2 5 17 22 12 B B B B B B9 12 14 17 19 22 24
2 min
3 min
Takt time=2.5 min

15. 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)

16. Effective Capacity (net availability)
Scheduled availability: The amount of time that a resource is scheduled for operationtheoretical capacity
Net availability:The actual time during which a resource is available for processing flow unitseffective capacity
Effective capacity depends on the following
Number of shifts
Product variety (setups)
Maintenance
Idleness

17. Operational Measure: Capacity Drivers: Resource Loads
(Theoretical) Capacity of a Resource
Bottleneck Resource
(Theoretical) Capacity of the Process
Capacity Utilization of a Resource/Process =
Realized throughput [units/hr]
Theoretical capacity [units/hr]

18. Unit Load
Unit Load of a resource: Total amount of time the resource works to process each unit (time/flow unit)
Note that this is different than the activity time!
If the same resource performs more than one activitiy on a flow unit, then Unit Load is found by adding those activitiy times

19. Theoretical Capacity of a Resource Pool
Theoretical capacity of a resource=1/unit load=1/Tp
Example: If a machine works for 15 min on each flow unit, the
theoretical capacity=(1/15)*60=4 per hr
If more than one resource exits to do the same job, capacity of the resource pool is calculated as, Rp= (# of resources in the pool)/Tp
Example:If there are 3 machines in the pool, capacity=3x4=12 per hour.

20. Bottleneck Resource
A resource pool with minimum theoretical capacity is called a theoretical bottleneck
Theoretical capacity of a process is equal to the theoretical capacity of the theoretical bottleneck

21. Analyzing Process Performance
20min
Assembly R5
15min R1
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 R3
15min R4
15min
J.A. Van Mieghem/Operations/Strategy

22. X-ray revisited 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

23. X-Ray revisited Resource Pool Res. Unit Load Load Batch
Theoretical Capacity of Res. unit
No of units in pool
Theoretical capacity of pool
Messenger
20+20 min/patient 1 6
Receptionist 5
X-ray technician 4
X-ray lab 2
Darkroom technician 3
Darkroom
Changing room

24. X-Ray revisited Resource Pool Res. Unit Load Load Batch
Theoretical Capacity of Res. unit
No of units in pool
Theoretical capacity of pool
Messenger
20+20 min/patient 1
60/40=1.5 patients/hr 6
9 patients/hr
Receptionist 5
60/5=12 12
X-ray technician
=16
60/16=3.75 4 15
X-ray lab
7.5 8 2 16
Darkroom technician
15 (12x1.25) 3
Darkroom
Changing room
3+3=6 10 20

25. Utilizations given an observed throughput of 5.5 patients/hr
Resource pool
Theoretical capacity
Patients/hr
Capacity utilization
Messenger 9
5.5/9=61.11%
Receptionist 12
5.5/12=45.83%
X-ray technician 15
36.67%
X-ray lab 16
34.38%
Darkroom technician
45.83%
Darkroom 8
68.75%
Changing room 20
27.50%

26. A Recipe for Capacity Measurements
* assuming system is processing at full capacity

27. Effect of Product Mix- Example 5.7
Resource pool
Unit Load (Physician)
Unit Load (Hospital)
Unit Load (60%-40% mix)
Mailroom clerk
0.6
1.0
0.76
Data-entry clerk
4.2
5.2
4.60
Claims processor
6.6
7.5
6.96
Claims supervisor
2.2
3.2
2.60

28. Theoretical capacity for hospital claims
Resource
Sch. availability
Unit Load min/claim
Th. Capacity resource
Number in pool
Th. Capacity pool
Mailroom clerk
450
1.0
450/1=450 1
Data entry clerk
5.2
450/5.2=86.5 8
692
Claims processor
360
7.5
360/7.5=48 12
576
Claims supervisor
240
3.2
240/3.2=75 5
375

29. Theoretical capacity for 60%-40% mix
Resource
Sch. availability
Unit Load min/claim
Th. Capacity resource
Number in pool
Th. Capacity pool
Mailroom clerk
450
0.76
592 1
Data entry clerk
4.60 98 8
784
Claims processor
360
6.96
51.7 12
621
Claims supervisor
240
2.60 92 5
460

30. Levers for Increasing Process Capacity
Decrease the work content of bottleneck activities
work smarter
work faster
do it right the first time
change product mix
Move work content from bottlenecks to non-bottlenecks
to non-critical resource or to third party
Increase Net Availability
work longer
increase scale (invest)
increase size of load batches
eliminate availability waste
Note that the bottleneck may shift after improvement!

31. Structuring The Service Enterprise
Example: Automobile’s Driver’s License Office
License Renewal Process
Activity Description Time (Sec)
1 Review application for correctness 15
2 Process and record payment 30
Check for violations and restrictions 60
4 Conduct eye test 40
5 Photograph applicant 20
6 Issue temporary license 30

32. Present Flow Diagram Flow time: sec Throughput rate: per hour
Activity
Activity
Activity 30
Activity
Activity 40
Activity 20 30 15 60
/hr
/hr
/hr
/hr
/hr
/hr
sec
sec
sec
sec
sec
sec
Flow time: sec
Throughput rate: per hour
What happens if you hire one more employee?
Activity
flow rate
per hour
time (sec)

33. Throughput rate: per hour
Proposed Flow Diagram
Activity
Activity 1, 55 60
/hr
/hr
sec
sec
Activity
Activity 30
Activity 20 30
/hr
/hr
/hr
sec
sec
sec
Activity
Activity 1, 55 60
/hr
/hr
sec
sec
Flow time: sec
Throughput rate: per hour

34. Throughput rate: per hour
Another Design
165
sec
/hr
Activity
165
sec
/hr
Activity
165
sec
/hr
Activity
Activity 30
/hr
165
sec
/hr
Activity
sec
165
sec
/hr
Activity
Flow time: sec
Throughput rate: per hour
165
sec
/hr
Activity

35. Study question:
Consider the following process for production of wooden toys. The
artist works for 8 hours a day.
Cutting wood
WIP
Painting
Cutting machine
Artist
2 min.
4 min.
What is the bottleneck of this process? Assume there is demand for 350 toys per day.
Find the capacity and average flow time of this process.
Hints:
The bottleneck works for more hours than the non-bottleneck.
Use Little’s Law to find waiting time in the WIP.
Average Inventory=Maximum Invenotry/2

36. Summary of fundamental process principles
identify and eliminate bottlenecks
reduce as much variability as possible
eliminate handoffs, improve communication to minimize resource interference
for high utilization processes build-in more slack

37. Assignments
Read and be ready to analyze Kristen’s Cookie Case on Thursday (March 1)
Assignment 2 on Thickedwood case – you may work in groups of 2 (due March 6):
Draw the process flow chart for Thicketwood
Find the capacity of the current process and the bottleneck. Find the flow time for a cabinet.
Calculate the net benefits of both used and new CNC routers
Identify the qualitative pros and cons of each machine
Are there other factors that Taylor should consider? (Think about implications on labor relations, and sales)
Which machine would you purchase?
What is the future demand for cabinets? Balance the process so that it meets the demand. What changes if any, do you suggest?