Topic 5 Process Analysis PDF

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Process Analysis

BSc in International Business Economics 2019-2020

Jessica Rodríguez Pereira

Process Analysis A process is a set of coordinated activities relying on various resources to transform inputs (labor, materials, customers) to outputs (goods, services)

Inputs

Activities

Resources

Outputs

Process Analysis In a business there are several processes; any part of an organization that takes inputs and transforms them into outputs is a PROCESS. Measuring the process help to improve them… Design the right process is fundamental to improve the overall operations and performance of the business.

Process Analysis Process Analysis involves adjusting the capacities and balance among differen parts of the process to maximize output or minimize the costs with available resources. How many customers ca we process per hour? How long does it take to serve a customer? What change is needed in the process to expand capacity? How much does the process cost? What steps do not add value??

HOW to evaluate and measure the processes??

Process Flowcharting Flowcharting is the use of a diagram to show the main elements of a process. The basic elements can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues. It is an ideal methodology by which to begin analyzing a process.

Flowcharting symbols Task or Operation

Storage area or Queue (waiting line)

Decision point

Flow of material or customers

Flowcharting – Types of Processes SINCLE-STAGE PROCESS: Stage 1

MULTIPLE-STAGE PROCESS: Stage 1

Stage 2

Stage 3

Flowcharting – Types of Processes BUFFERING: storage area between stages

Buffer Stage 1

Stage 2

Flowcharting

BLOCKING: activities in a stage must stop because there is no place to deposit the item just completed.

STARVING: activities in a stage must stop because there are no units to process (no work to do).

Flowcharting – Types of Processes PARALLEL PROCESSES: “Alternative paths”

Buffer

Flowcharting – Types of Processes PARALLEL PROCESSES: “Simultaneous activities”

Buffer

Flowcharting – Types of Processes PARALLEL PROCESSES: “Different products”

Buffer

EXAMPLES Student going to University Slot machine Bottle-filling line for a shampoo

Other Types of Processes – Make-to-Stock (MTS) Process activated to meet expected or forecast demand. Inventory is stored in locations (warehouse, retail stores..) Customer orders are served from target stocking level. Standard products.

Other Types of Processes – Make-to-Order (MTO) Only activated in response to an actual order. Work-in-process is kept to a minimum. Cannot be stored in advance. Customized products.

Other Types of Processes – Hybrid Combines features of both MTS and MTO. Generic product made to stock and customized at the end of the process. Example: customized snowboards art.

MTS, MTO – Advantages and Disadvantages Efficiency Customization Stockout Sufficient cappacity Waiting time Stock obsolescence

Performance Measures We will learn some Performance Measures that help the Process Analysis... But before: PLEASE Use ALWAYS UNITS!!! You will always know what you are talking about, and wil help you to detect mistakes. Get used to deal with these UNITS (transformation). Example: Capacity = 360 units per year ฀฀฀฀฀฀ ฀฀฀฀฀฀฀฀฀฀฀฀ ฀฀฀฀฀฀฀฀ = ฀฀฀฀ ฀฀฀฀฀฀฀฀฀฀/฀฀฀฀฀฀฀฀฀฀ ฀฀฀฀฀฀฀฀ ฀฀฀฀ ฀฀฀฀฀฀฀฀฀฀฀฀

Performance Measures

Performance Measures SETUP TIME: is the time for preparation (time). RUN TIME: is the time required to produce a batch of parts/products (time). OPERATION TIME: is the sum of the setup time and the run time (time). Operation time = Setup time + Run time

Performance Measures EXAMPLE: Process  baking a pizza. Setup time: 5 min to preheat the oven. Run time: 15 min to cook a pizza. Operation time = 5 + 15 = 20 min

Performance Measures CAPACITY: what we can produce in a period of time (units/time). EXAMPLE: Process  baking a pizza. The oven’s capacity is: 3 pizza per hour, 24 pizza per day (8 working hours a day), 600 pizza per month (25 working days a month), 6.600 pizza per year (11 months a year).

Performance Measures THROUGHPUT RATE (TH): is the output rate that the process is expected to produce over a period of time (units/time). What we ACTUALLY produce in a period of time. EXAMPLE: Process  baking a pizza. The oven’s capacity is: 3 pizza per hour; but we produce 2,5 pizza per hour.

Performance Measures CYCLE TIME (CT): is the average time between the completion of successive units (time/unit). CT = 1/TH

EXAMPLE: Process  baking a pizza. We produce 2,5 pizza per hour (TH= 2,5 pizza/hour) CT = 1/ 2,5 u/h = 0,4 hours/pizza

Performance Measures CYCLE TIME (CT): is the average time between the completion of successive units (time/unit). CT = 1/TH

EXAMPLE: Process  baking a pizza. We produce 2,5 pizza per hour (TH= 2,5 pizza/hour) CT = 1/ 2,5 u/h = 0,4 hours/pizza  24 min/pizza

But, is that information useful?? Is it not like saying: “I’ve got 0,00001 million €”???  I’ve got 10 €

Performance Measures THROUGHPUT TIME (TT): is the average time that it takes to move through an entire process (time).

WORK IN PROCESS (WIP): units in process in the system, can also be considered in transit (units).

Performance Measures EFFICIENCY: Actual Output / Standard Output. UTILIZATION: the ratio of the time a resource is actually actived relative to the time that it is avalaible for use. Time Used / Time Avalilable

EXAMPLE: Process  baking a pizza. EFFICIENCY = 20 u/d / 24 u/d = 0.8333  83,33 % UTILIZATION = (20 u/d * 20 min/u)/480 min/d =

0.8333  83,33 %

Performance Measures PROCESSING TIME: time that the part is being processed (time). QUEUE TIME: time that a part waits for a resource while the resource is busy with something else (time) . WAIT TIME: time that a part waits not for a resource but for another part so that they can be assembled together (time). IDLE TIME: unused time (time).

Performance Measures LITTLE’S LAW: fundamental relationship between WIP, TT and TH. WIP = TH * TT TT = WIP / TH

More-Real-Life Example CARAVAN PIZZA is a small business operated by YOU alone. You are the cook, the waiter, the operations manager… In a small caravan, you have a well equipated kitchen, where you prepare your pizzas. Your customers order their pizza to take away There is always someone waiting for a pizza.

More-Real-Life Example Caravan Pizza is opened 8 hours a day. Caravan Pizza has all the ingredients needed, a frigde, and TWO ovens.

Caravan Pizza This is your process: You take the pizza dough from the fridge, unpack it and add some toppings. It takes 3 min to do that. You clean up the oven and preheat it, and then you place the pizza in the oven. It takes 4 min. The oven starts baking automatically at the end of the preheat operation. Baking time is 8 min. You take the pizza out of the oven and serve it (and € it). It takes 2 min.

Caravan Pizza This is your process: You work alone, what it means that meanwhile you are doing one of this things, you CANNOT do anything else. But, in the 8 minutes during which the oven/s is/are baking the pizza, you CAN do other activity. You CANNOT leave any of the activities unfinished, waiting to go on with them later. YOU START IT  YOU FINISH IT!!

Caravan Pizza What is your CAPACITY now??

Caravan Pizza What is your THROUGHPUT RATE (TH)?? What are you ACTUALLY producing in a period of time??? TH = CAPACITY???? This not always so.

CARAVAN PIZZA RESOLUTION

Throughput time reduction How can we reduce TT?? Change the sequence of activities . Perform activities in parallel. Reduce interruptions. Try IT with Caravan pizza!!

Batch sizes PROCESS BATCH: batch of units processed between consecutive setups. TRANSFER BATCH: batch of units moved from one station to the other. WHAT IS THE BATCH SIZE OF AN ASSEMBLY LINE?? Batch size

Processing Setup time time

WIP

Cost Material handling

Lead time

Small

+

-

-

+

-

Large

-

+

+

-

+

Theory of Constraints (TOC)- E.Goldratt (1980) TOC is a problema-solving approach that can be applied to many business areas. 1. Identify bottleneck 2. Exploit bottleneck 3. Subordinate processes to bottleneck 4. Elevate bottleneck 5. Go back to step 1...