evaluating process capacity the maximum amount a process can produce in a given unit of time....

Evaluating Process Capacity

The maximum amount a process can produce in a given unit of time.

CHAPTER 3

Objective: to take a fairly technical and complex operation and simplify it to a level suitable for managerial analysis.

Elements: preparing a process flow diagram, finding the capacity and bottleneck of the process, computing the utilization of various process steps, and computing a few other performance measures.

Sources: MSWD 3e PPT, Terwiesch Coursera Notes and Others as Noted

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Managing Toward Perfection

A Toyota view:

“We get brilliant results from average people managing brilliant processes.

We observe that our competitors often get average (or worse) results from brilliant people managing broken processes.”

Source: James P. Womack, “In Search of the Perfect Process.”


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3.1 How to Create a Process Flow Diagram?A process flow diagram is a graphical way to describe the process and it will help us to structure the information we collect during the process improvement project.

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3 5

7 8

2 4 6

Activities• Carried out by resources• Add value and are required

for completion of the flow unit• May or may not carry

inventory• Have a capacity (maximum

number of flow units that can flow through the activity within a unit of time)

Arrows• Indicate the flow of the flow unit• Multiple flow unit types possible

(see Section 3.5)

Inventory / Buffers• Do NOT have a capacity; however,

there might be a limited number of flow units that can be put in this inventory space at any moment of time

• Multiple flow unit types possible


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1. Reduce the work content of an activity on the critical path

• Eliminate non-value-adding aspects of the activity (“work smarter”).

• Increasing the speed at which the activity is done (“work faster”),

• Acquire faster equipment

• Increase incentives to work faster

• Reduce the number of repeat activities (“do it right the first time”), and

• Change the product mix to produce products with smaller work content with respect to the specified activity.

2. Move some of the work content off the critical path.

• Move work from a critical path to a non-critical path, and

• Move work from a critical path to the outer loop (pre- or post processing).

• Calculating times on paths through the network

• Determining the critical path through the network

• Theoretical flow time

Anupindi, et al, Managing Business Process Flows


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“Just track any work items as it flows through the process and classify the time into one of three categories: (1) value-added work, (2) waste that is required for business reasons, and (3) delays/waste. Then draw a timeline and mark off the time segments for each of these categories. In the example shown, the value-added work (shaded above the centerline) shows the buyer in this purchasing organization is only working the order for 14 minutes of the 4 day cycle. The majority of the time, delineated by white space, is idle queueing time.”

Value Added vs. NVA Time

Lean Six Sigma by George, et al.


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ProductivityThe Seven Sources of Waste

81.6 kg of food are trashed by the averageGerman

61% of the trashing happens by households

Large package sizes is the main reason

Overproduction

Match Supply with DemandMatch Supply with Demand

To produce sooner or in greater quantities than what customers demand

• Overproduced items need to be stored (inventory) and create further waste

• Bad for inventory turns• Products become obsolete / get stolen / etc

To produce sooner or in greater quantities than what customers demand

• Overproduced items need to be stored (inventory) and create further waste

• Bad for inventory turns• Products become obsolete / get stolen / etc

Examples

Crabs fished in the North Sea

Shipped 2,500km South to Morocco

Produced in Morocco

Shipped back to Germany

TransportationExamples

Relocate processes, then introduce standard sequences for transportation

Relocate processes, then introduce standard sequences for transportation

Unnecessary movement of parts or people between processesExample: Building a dining room and kitchen at opposite ends of a house, then keeping it that way

• Result of a poor system design and/or layout• Can create handling damage and cause

production delays

Unnecessary movement of parts or people between processesExample: Building a dining room and kitchen at opposite ends of a house, then keeping it that way

• Result of a poor system design and/or layout• Can create handling damage and cause

production delays

Readmissions to the ICU in a hospital (also called “Bounce backs”)

Readmissions to the hospital afterdischarge (major component of AffordableCare Act)

ReworkExamples

Analyze and solve root causes of rework=> More in quality module

Analyze and solve root causes of rework=> More in quality module

Repetition or correction of a processExample: Returning a plate to the sink after it has been poorly washed

• Rework is failure to meet the “do it right the first time” expectation

• Can be caused by methods, materials, machines, or manpower

• Requires additional resources so that normal production is not disrupted

Repetition or correction of a processExample: Returning a plate to the sink after it has been poorly washed

• Rework is failure to meet the “do it right the first time” expectation

• Can be caused by methods, materials, machines, or manpower

• Requires additional resources so that normal production is not disrupted

Keeping a patient in the hospital longer than what is medically required

Over-processingExamples

Provide clear, customer-driven standards for every process

Provide clear, customer-driven standards for every process

Processing beyond what the customer requiresExample: Stirring a fully mixed cup of coffee

• May result from internal standards that do not reflect true customer requirements

• May be an undesirable effect of an operator’s pride in his work

Processing beyond what the customer requiresExample: Stirring a fully mixed cup of coffee

• May result from internal standards that do not reflect true customer requirements

• May be an undesirable effect of an operator’s pride in his work

Ergonomics

Look at great athletes

MotionExamples

Arrange people and parts around stations with work content that has been standardized to minimize motion

Arrange people and parts around stations with work content that has been standardized to minimize motion

Unnecessary movement of parts or people within a process

Example: Locating (and keeping) a refrigerator outside the kitchen

• Result of a poor work station design/layout• Focus on ergonomics

Unnecessary movement of parts or people within a process

Example: Locating (and keeping) a refrigerator outside the kitchen

• Result of a poor work station design/layout• Focus on ergonomics

Loan applications at a bank

InventoryExamples

Improve production control system and commit to reduce unnecessary “comfort stocks”

Improve production control system and commit to reduce unnecessary “comfort stocks”

Number of flow units in the system

• “Product has to flow like water”• For physical products, categorized in: raw material,

WIP, or finished products • Increases inventory costs (bad for inventory turns)• Increases wait time (see above) as well as

the customer flow time• Often times, requires substantial real estate

=> the BIGGEST form of waste

Number of flow units in the system

• “Product has to flow like water”• For physical products, categorized in: raw material,

WIP, or finished products • Increases inventory costs (bad for inventory turns)• Increases wait time (see above) as well as

the customer flow time• Often times, requires substantial real estate

=> the BIGGEST form of waste

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Waiting

Often, the time in the waiting room exceedsthe treatment time by more than 5x

Examples

Understand the drivers of waiting; more in Responsiveness module

Understand the drivers of waiting; more in Responsiveness module

Underutilizing people or parts while a process completes a work cycleExample: Arriving an hour early for a meeting

Labor utilization Idle time

Note: - Waiting can happen at the resource (idle time)- But also at the customer level (long flow time)

Underutilizing people or parts while a process completes a work cycleExample: Arriving an hour early for a meeting

Labor utilization Idle time

Note: - Waiting can happen at the resource (idle time)- But also at the customer level (long flow time)

Wasteful vs LeanThe IMVP Studies

General Motors Framingham Assembly Plant Versus Toyota Takaoka Assembly Plant, 1986

GM Framingham Toyota TakaokaGross Assembly Hours per Car 40.7 18Assembly Defects per 100 Cars 130 45Assembly Space per Car 8.1 4.8Inventories of Parts (average) 2 weeks 2 hours

Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars producedDefects per car were estimated from the JD Power Initial Quality Survey for 1987Assembly Space per Car is square feet per vehicle per year, corrected for vehicle sizeInventories of Parts are a rough average for major parts

Source: Womack et al

Understand Sources of Wasted Capacity

Overproduction Transportation

WaitingInventory

Over-processing MotionRework

The seven sources of waste (Muda)

Potential eighth source of waste: The waste of intellect

Not “orthogonal to each other”

Poor flow – Waste of Customer’s time

Poor use of capacity – Waste of the Resource’s time

• Taichi Ohno, Chief Engineer at Toyota• The first five sources are RESOURCE centric (and correspond to capacity): • Ask yourself: “What did I do the last 10 minutes? How much was value-add?”

Look around at the work-place (360 degree) – what percentage of people are working?• The last two sources are FLOW UNIT centric (and correspond to Flow Time and Inventory)• Ask yourself: “Did I really have to be here that long?”


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Source: Lean Learning Center, Value Stream Mapping Course Notes.


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Source: Lean Learning Center, Value Stream Mapping Course Notes.


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Process AnalysisIntroduction / The three measures


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• Flow rate / throughput: number of flow units going through the process per unit of time

• Flow Time: time it takes a flow unit to go from the beginning to the end of the process

• Inventory: the number of flow units in the process at a given moment in time

• Flow Unit: Customer or Sandwich

Processes: The Three Basic Measures


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Process Analysis: The Three Measures

Immigration department

Applications

Approved or rejected cases

Processing time

Pending cases

Champagne

Bottle of champagne

Bottles sold per year

Time in the cellar

Content of cellar

MBA program

Student

Graduating class

2 years

Total campus population

Auto company

Car

Sales per year

60 days

Inventory


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Summary

When observing a process, always aim to understand the three process measures

• Flow rate / throughput: number of flow units going through the process per unit of time

• Flow Time: time it takes a flow unit to go from the beginning to the end of the process

• Inventory: the number of flow units in the process at a given moment in time

In the next session, we will discuss what drives these measures

We will then find out that the three measures are related to each other


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Process AnalysisLittle’s Law


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Processes: The Three Key Metrics


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What it is: Inventory (I) = Flow Rate (R) * Flow Time (T)

How to remember it: - units

Implications:• Out of the three fundamental performance measures (I,R,T), two can be chosen by

management, the other is GIVEN by nature• Hold throughput constant: Reducing inventory = reducing flow time

Given two of the three measures, you can solve for the third:• Indirect measurement of flow time: how long does it take you on average to respond to an email?

You write 60 email responses per dayYou have 240 emails in your inbox

Little’s law: It’s more powerful than you think...


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Not an empirical law

Robust to variation, what happens inside the black box

Deals with averages – variations around these averages will exist

Holds for every time window

Shown by Professor Little in 1961

Little’s law: Some remarks


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Process AnalysisFinding the bottleneck


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Flow Rate=Min{Demand, Capacity}

Demand

Input

Bottleneck(Capacity)

Excess capacity

Flow RateDemand

Input


Excess capacity

Flow Rate

Demand constrained

Demand

Input


Excess capacity

Flow RateDemand

Input


Excess capacity

Flow Rate

Supply constrained Demand constrained

Flow Rate R: Demand vs. Capacity Constrained

3.2 Bottleneck, Process Capacity and Flow Rate (Throughput)

The overall process capacity is determined by the resource with the smallest capacity. We refer to that resource as the bottleneck.

Steps for basic process analysis

with one type of flow unit

1.Find the capacity of every resource; if there are multiple resources performing the same activity, add their capacities together.

2.The resource with the lowest capacity is called the bottleneck. Its capacity determine the capacity of the entire process (process capacity).

3.The flow rate is found based on

Flow Rate = Minimum {Available input, Demand, Process Capacity}

We find the utilization of the process as

Similarly, we find the utilization of each resource as

Flow rate

Utilization of resource = --------------------------------

Capacity of resource

Flow rate

Process utilization = --------------------------------

Process capacity


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Drawing a Process Flow Diagram

Symbols in a process flow diagram

Difference between project management and process management

Customers Station 1 Station 2 Station 3


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Basic Process Vocabulary

• Processing times: how long does the worker spend on the task?

• Capacity=1/processing time: how many units can the worker make per unit of time If there are m workers at the activity: Capacity=m/activity time

• Bottleneck: process step with the lowest capacity

• Process capacity: capacity of the bottleneck

• Flow rate =Minimum{Demand rate, Process Capacity)

• Utilization =Flow Rate / Capacity

• Flow Time: The amount of time it takes a flow unit to go through the process

• Inventory: The number of flow units in the system


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Process AnalysisMultiple flow units

3 cases per hour11 cases per hour4 cases per hour EZ form

Regular

Foreign acc.

File

Contact faculty/other persons

Contact prioremployers

Benchmarkgrades

Confirmationletter

Filem=1

3 min/app

Foreign Dep.m=2

20 min/app

Print invoicem=1

2 min/app

Department 1m=3

15 min/app

Department 2m=2

8 min/app

Processes with Multiple Flow Units

Approach 1: Adding-up Demand Streams

Approach 2: A Generic Flow Unit (“Minute of Work”)

Steps for Basic Process Analysis with Multiple Types of Flow Units

1. For each resource, compute the number of minutes that the resource can produce

2. Create a process flow diagram, indicating how the flow units go through the process

3. Create a table indicating how much workload each flow unit is consuming at each resource

4. Add up the workload of each resource across all flow units.

5. Compute the implied utilization of each resource as

The resource with the highest implied utilization is the bottleneck

Note: you can also find the bottleneck based on calculating capacity for each step and then dividing the demand at this resource by the capacity

Pitches

Processes with Attrition Loss

Scripts Pilots New Series

Shows

500 ideasper year

70/500 20/70 6/20 2/6

Processing time 2 days 10 days 30 days 70 days 200 days

Resources 5 judges 3 script writers 2 pilot teams 2 Series crews 1 Main crew(250 days per year)

Where is the Bottleneck?

evaluating process capacity the maximum amount a process can produce in a given unit of time....

Documents

process flow diagram

process capacity1managing

perfect process

process capacity4just

process capacity3

process capacity233

business process flows4sources

valueadded work