1. Slide 1Time and Throughput Management & Improvement© Van Mieghem Bottleneck Management and Improvement  Time and Throughput: –Critical Path vs. Bottleneck Analysis Pizza Pazza Company Levers for Improvement –Multi-product Capacity Management and Investment Joint Marketing & Production Decisions Optimal Capacity Investment Bariatric Surgery

2. Slide 2Time and Throughput Management & Improvement© Van Mieghem Operational Performance Measures  How to measure and decrease flow times?  How to measure and increase throughput?  What is the best achievable performance?

3. Slide 3Time and Throughput Management & Improvement© Van Mieghem  Flow Time  Critical Path  (Theoretical) Capacity of a Resource  Bottleneck Resource  (Theoretical) Capacity of the Process Concepts to Cover and Analyze

4. Slide 4Time and Throughput Management & Improvement© Van Mieghem Analyzing Process Performance: Mortgage Application Credit rating Kiki 15min Verify/Check Employment etc Marcus 20min Initial policy options/rates Maxi 15min Assemble, Present to client Karolien 15min Application review, Data entry Shannon 5min

5. Slide 5Time and Throughput Management & Improvement© Van Mieghem Pizza Pazza: Flow Chart if job order = 2 identical pizzas startTake OrderSauce PrepDough PrepSpread Activity time:23 1  2 = 2 Resource:Jean Jean, Pan endBill Unload & Pack Bake Load & Set timer Activity time:2 1  2 = 2 3151 Resource:JaquelineJaqueline, PanPanOven, PanJaqueline, Oven, Pan cool

6. Slide 6Time and Throughput Management & Improvement© Van Mieghem 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’’  Restructure sequential activities into parallel activities  Reduce waiting time.

7. Slide 7Time and Throughput Management & Improvement© Van Mieghem A Recipe for Capacity Measurements: Minimal resource capacity = bottleneck *assuming system is processing at full capacity Define a “job” = …

8. Slide 8Time and Throughput Management & Improvement© Van Mieghem

9. Slide 9Time and Throughput Management & Improvement© Van Mieghem Product Mix Decisions: Pizza Pazza offers 2 pizza types Sale Price of thin crust:€5 Cost of Direct Materials:€1.40 Sale Price of deep dish:€7.50 Cost of Direct Materials:€2.10 Which of these two products should Jean push to customers that call in and are undecided?

10. Slide 10Time and Throughput Management & Improvement© Van Mieghem Product Mix Decisions Unit margin of thin crust pizza = €3.60 Unit margin of deep dish pizza = €5.40 Margin rate from thin crust = €3.60 * 7.5/hr = € 27/hr Margin rate from deep dish = €5.40 * 4/hr = € 21.60/hr

11. Slide 11Time and Throughput Management & Improvement© Van Mieghem How increase capacity? Summary of Typical Actions  Key action = optimize only bottleneck management  Decrease the work content of bottleneck activities – Never unnecessarily idle (“starve”) bottlenecks = eliminate bottleneck waits:  Reduce variability if it leads to bottleneck waiting  Synchronize flows to and from the bottleneck: sync when resources start an activity – work smarter:  Reduce & externalize setups/changeover times, streamline + eliminate non-value added work – do it right the first time: eliminate rework/corrections – work faster  Move work content from bottlenecks to non-bottlenecks – create flexibility to offload tasks originally assigned to bottleneck to non-critical resource or to third party  Can we offload tasks to cross-trained staff members?  Increase Net Availability of Process – work longer: increase scheduled availability – increase scale of process: invest in more human and capital resources – eliminate unscheduled downtimes/breakdowns  Preventive maintenance, backups, etc.

12. Slide 12Time and Throughput Management & Improvement© Van Mieghem “is to increase the capacity of only the bottlenecks” – “ensure the bottlenecks’ time is not wasted”  increase availability of bottleneck resources  eliminate non-value added work from bottlenecks reduce/eliminate setups and changeovers  synchronize flows to & from bottleneck reduce starvation & blockage – “ the load of the bottlenecks (give it to non-bottlenecks)”  move work from bottlenecks to non-bottlenecks  need resource flexibility – unit capacity and/or #of units.  invest “Theory of Constraints” in The Goal Increasing Process Capacity

13. Bariatric Surgery Flow Chart 5 x 1.2 = 6 min (20% callback) Patient Receptionist Cash Request tests Initial consul- tation Initial phone call Set appointmt for test 1 Test 1 delay decide 30 min Patient Surgeon 10 min Patient Surgeon 5 min Patient Receptionist 60 min Patient Care-nurse Outpatient room 2 days Patient Set appointmt 5 min Patient Receptionist 40% quit More tests (50%) 80% approved Yes (50%) Insurance 90% Medical Necessity Letter Insurance Approval decide 20 min Patient Surgeon 10% quit Set appointmt for test 2 5 min Patient Receptionist Visit 2 15 min Patient Surgeon Test 2 30 min Patient Care-nurse Outpatient room delay 2 days Patient Insurance Approval 2 wks Patient 20% denied & quit Pre- surgery Visit 3 20 min Patient Surgeon Outpatient room Schedule surgery 10 min Patient Care-nurse Patients Arrive & Check-in Pre- surgery Seminar 60 min 6 Patients Surgeon Seminar room OR Cleaning 15 min 2 s-nurses OR Patient Prep 30 min Patient Care-nurse Drs. Prep 15 min Surgeon anesthetist Laparoscopic Surgery 75 min 2 surgery nurses Anesthetist, surgeon patient, OR Check-ups & Recovery 2 days Patient, Inpatient room Care nurse 120min (10minx6x2) Open Surgery Check-ups & Recovery 4 days Patient, Inpatient room Care nurse 240min (10minx6x4) Follow Up 30 min Patient Care-nurse 45 min 2 surgery nurses Anesthetist, surgeon patient, OR Patient Leaves x % 1- x %

14. Bariatric Surgery Flow Chart for “cash & open surgery” 5 x 1.2 = 6 min (20% callback) Patient Receptionist Cash Request tests Initial consul- tation Initial phone call Set appointmt for test 1 Test 1 delay decide 30 min Patient Surgeon 10 min Patient Surgeon 5 min Patient Receptionist 60 min Patient Care-nurse Outpatient room 2 days Patient Set appointmt 5 min Patient Receptionist 40% quit Pre- surgery Visit 3 20 min Patient Surgeon Outpatient room Schedule surgery 10 min Patient Care-nurse Patients Arrive & Check-in Pre- surgery Seminar 60 min 6 Patients Surgeon Seminar room OR Cleaning 15 min 2 s-nurses OR Patient Prep 30 min Patient Care-nurse Drs. Prep 15 min Surgeon anesthetist Open Surgery Check-ups & Recovery 4 days Patient, Inpatient room Care nurse 240min (10minx6x4) Follow Up 30 min Patient Care-nurse 45 min 2 surgery nurses Anesthetist, surgeon patient, OR Patient Leaves

15. Slide 15Time and Throughput Management & Improvement© Van Mieghem Bariatric Surgery Capacity – Open Surgeries & Cash Payment * inpatient rooms used 5 days/wk Expected unit workload per inflow patient

16. Slide 16Time and Throughput Management & Improvement© Van Mieghem Bariatric Surgery Capacity – Laparoscopic Surgeries & Cash Payment

17. Slide 17Time and Throughput Management & Improvement© Van Mieghem Bariatric Surgery Capacity – Open Surgeries & Insurance Payment

18. Slide 18Time and Throughput Management & Improvement© Van Mieghem Bariatric Surgery Capacity – Laparoscopic Surgeries & Insurance Payment

19. Slide 19Time and Throughput Management & Improvement© Van Mieghem Product Mix Decisions: Open or Laparoscopic Surgery Revenue per open surgery:$15,000 Variable Cost of Materials:$1,000 Revenue per Laparoscopic surgery:$18,000 Variable Cost of Materials: $2,000

20. Slide 20Time and Throughput Management & Improvement© Van Mieghem Open and Laparoscopic have exactly the same process. The only difference is in surgery (laparoscopic takes 30 minutes extra) and in the rooms (laparoscopic uses rooms for 2 days whereas open uses rooms for 4 days. Product Mix Decisions

21. Slide 21Time and Throughput Management & Improvement© Van Mieghem Margin per Open surgery = $14,000 Margin per Laparoscopic surgery = $16,000 Margin per week from Open surgery = 72.72*(15,000 - 1,000) = $1,018,055 / week Margin per week from Laparoscopic surgery = 63.15*(18,000 - 2,000) = $1,010,400 / week Product Mix Decisions

22. Slide 22Time and Throughput Management & Improvement© Van Mieghem  Manage better using the key operational measures and an inter-functional process view of the organization  Process measures and corresponding improvement levers: – Flow time  manage critical activities – Capacity  manage bottleneck resources  Many marketing and financial decisions are linked to process – Effect of product mix decisions on process capacity  marginal contribution per unit of bottleneck capacity used – Bottleneck may shift on adding capacity è diminishing returns to capacity investment Learning Objectives: Time and Throughput Management