1. Operations Managment Kristen’s Cookie - Lecture 4 (Chapters 4 and 5)
Dr. Ursula G. Kraus

2. Review Process Characterization
Operational Measures: Flow Time, Inventory and Throughput
Little’s Law
Flow Time Analysis

3. Learning Objectives
Study current performance of a process as well as identify target areas for improvement
Perform a flow rate analysis and understand the managerial concept of a bottleneck.

4. Agenda
Capacity Analysis
Kristen’s Cookie Company
Resource Pools

5. Process Flow Measures Little’s Law I = R x T
Flow Time (T): The average time a job spends in the process
Inventory (I): The average number of jobs accumulated in the process
Throughput, or Flow Rate (R): The average rate at which jobs flow through a process
Little’s Law
I = R x T
Source: Managing Business Process Flows (1999)

6. Eliminating “Muda” (Waste) to Reduce Flow Time
Overproduction Producing too much, or producing too soon
Inventory Any more than the minimum to get the job done
Intellect Any failure to fully utilise the time and talents of people
Motion Any motion that does not add value
Conveyance Any non-essential transport is waste
Muda
Waiting Waiting on parts, waiting for a machine to finish cycle
Rework Any repair
Processing Over-processing

7. Additional 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”

8. Most Time Inefficiency Comes from Waiting
Flow Times in White Collar Processes

9. Chapter 5

10. Process Flow Measures Little’s Law I = R x T
Flow Time (T): The average time a job spends in the process
Inventory (I): The average number of jobs accumulated in the process
Throughput, or Flow Rate (R): The average rate at which jobs flow through a process
Little’s Law
I = R x T
Source: Managing Business Process Flows (1999)

11. Operational Measures - Capacity
(Theoretical) Capacity of a Resource: Max. number of flow units that can be processed per time unit if it were fully utilized (max. flow rate)
Bottleneck Resource: Resource with min. theoretical capacity
(Theoretical) Process Capacity: The largest sustainable flow rate possible; theoretical capacity of its slowest (bottleneck) resource
Capacity utilization =
Flow Rate [units/hr]
Capacity [units/hr]
Source: Managing Business Process Flows (1999)

12. Reasons for Reduced Capacity Utilization
Starvation: Idleness caused by a lack of material from an upstream resource
Blockage: Idleness because completed work cannot be passed to a downstream resource
Resource idleness: Time lost to starvation and blocking
Throughput Rate  Theoretical Capacity
(Flow Rate)

13. Kristen's Cookies

14. [Template] Kristen’s Cookies

15. [Template] Kristen’s Cookies

16. [Template] Kristen’s Cookies

17. Average Flow Time consists of …
Theoretical Flow Time
(Processing Time) +
Waiting time

18. Operational Measures – Flow Time
Activity Time, or Cycle time: Is the time required by a typical flow unit to complete an activity once
Work Content: Activity time multiplied by the avg. number of visits to that activity
(Theoretical) Flow Time: Min. time required for processing a typical flow unit through the whole process – without any waiting
Critical Path: The theoretical flow time of the longest path(s) in the process flow chart
Critical Activities: All activities on a critical path
Flow Time Efficiency =
Source: Managing Business Process Flows (1999)

19. Example: Work Content & Flow Time
Activity time multiplied by the avg. number of visits to that activity

20. Resources and Resource Pools
Resource Pool: A collection of interchangeable resources (resource units) that can perform an identical set of activities
Unit Load: The sum of all the work contents of all activities that utilize that resource unit
Source: Managing Business Process Flows (1999)

21. Operational Measures – Capacity (of Resource Pools)
(Theoretical) Capacity of a Resource Unit: Max. number of flow units that can be processed per time unit if it were fully utilized (during its scheduled availability)
(Theoretical) Capacity of a Resource Pool: The theoretical capacity of all the resource units in that pool.
(Theoretical) Process Capacity: The theoretical capacity of its slowest resource pool
(Theoretical) Bottleneck Resource: Resource pool with min. theoretical capacity
Source: Managing Business Process Flows (1999)

22. Example: Pharmacy
Task/Activity
Resource
Qty of Resource
Activity Time/Pres.
Take Order
Ord. Taker 1
2 min
Verify Insurance
Assistant
8 min
Find stock
Fill container
Pharmacist 2
Type/apply label
3 min
Accept payment
Clerk
4 min } }
What is the maximum sustainable throughput for this system?
Where is the bottleneck? How can we address the problem?

23. Levers for Managing Flow Rate
Increase net availability
Decrease resource idleness
Manage supply/demand
Increase theoretical capacity
Increase scheduled availability of bottleneck resources
Invest in bottleneck resources
Increase size of load batches of bottleneck resources
Decrease unit load on bottleneck resource pools
Adjust product mix