Operations Managment Kristen’s Cookie - Lecture 4 (Chapters 4 and 5)

Dr. Ursula G. Kraus

1/23

Review • • • • Process Characterization Operational Measures: Flow Time, Inventory and Throughput Little’s Law Flow Time Analysis 2/23

Agenda • • • Capacity Analysis Kristen’s Cookie Company Resource Pools 4/23

Process Flow Measures   

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) 5/23

Eliminating “Muda” (Waste) to Reduce Flow Time

Overproduction

Producing too much, or producing too soon

Intellect

Any failure to fully utilise the time and talents of people

Inventory

Any more than the minimum to get the job done

Motion

Any motion that does not add value

Muda Conveyance

Any non-essential transport is waste

Rework

Any repair

Processing

Over processing

Waiting

Waiting on parts, waiting for a machine to finish cycle 6/23

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” 7/23

Most Time Inefficiency Comes from Waiting Flow Times in White Collar Processes Industry Life Insurance Consumer Packaging Commercial Bank Hospital Process New Policy Application New Graphic Design Consumer Loan Patient Billing Average Flow Time 72 hrs. 18 days 24 hrs. 10 days Theoretical Flow Time 7 min. 2 hrs. 34 min. 3 hrs. Automobile Manufacture Financial Closing 11 days 5 hrs Flow Time Efficiency 0.16% 0.14% 2.36% 3.75% 5.60% 8/23

Process Flow Measures   

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) 10/23

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] 11/23 Source: Managing Business Process Flows (1999)

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) 12/23

Kristen's Cookies

13/23

[Template]

Kristen’s Cookies 14/23

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Kristen’s Cookies 15/23

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Kristen’s Cookies 16/23

Average Flow Time consists of … Theoretical Flow Time (Processing Time)

+

Waiting time 17/23

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

=

Theoretica l Flow Time Average Flow Time

Source: Managing Business Process Flows (1999) 18/23

Example: Work Content & Flow Time

Work Content:

Activity time multiplied by the avg. number of visits to that activity 19/23

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 20/23 Source: Managing Business Process Flows (1999)

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 21/23 Source: Managing Business Process Flows (1999)

Example: Pharmacy Task/Activity Take Order Verify Insurance Find stock Fill container Type/apply label Resource Qty of Resource 1 Ord. Taker Assistant Assistant Pharmacist Pharmacist } } 1 2 Clerk 1 Activity Time/Pres.

2 min 8 min 2 min 8 min 3 min 4 min Accept payment What is the maximum sustainable throughput for this system?

Where is the bottleneck? How can we address the problem?

22/23

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

23/23