Managing Toward Perfection

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1 CHAPTER 3 Evaluating Process Capacity The maximum amount a process can produce in a given unit of time. 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. 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. 2 Process Capacity 1

2 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 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 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) 3 Calculating times on paths through the network Determining the critical path through the network Theoretical flow time 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). Anupindi, et al, Managing Business Process Flows 4 Process Capacity 2

3 Value Added vs. NVA Time 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. Lean Six Sigma by George, et al. 5 Productivity The Seven Sources of Waste 6 Process Capacity 3

4 Understand Sources of Wasted Capacity Poor use of capacity Waste of the Resource s time Overproduction Transportation Rework Over-processing Motion The seven sources of waste (Muda) Potential eighth source of waste: The waste of intellect Not orthogonal to each other Inventory Waiting Poor flow Waste of Customer 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? 7 Source: Lean Learning Center, Value Stream Mapping Course Notes. 8 Process Capacity 4

5 Source: Lean Learning Center, Value Stream Mapping Course Notes. 9 Process Analysis Introduction / The three measures 10 Process Capacity 5

6 Processes: The Three Basic 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 Flow Unit: Customer or Sandwich 11 Process Analysis Little s Law 12 Process Capacity 6

7 Processes: The Three Key Metrics 13 Little s law: It s more powerful than you think... 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 ? You write 60 responses per day You have 240 s in your inbox 14 Process Capacity 7

8 Little s law: Some remarks 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 Process Analysis Finding the bottleneck 16 Process Capacity 8

9 3.2 Bottleneck, Process Capacity and Flow Rate (Throughput) Flow Rate R: Demand vs. Capacity Constrained Supply constrained Demand constrained Input Bottleneck (Capacity) Input Bottleneck (Capacity) Flow Rate Flow Rate Demand Excess capacity Excess capacity Demand Flow Rate=Min{Demand, Capacity} The overall process capacity is determined by the resource with the smallest capacity. We refer to that resource as the bottleneck. 17 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 Flow rate Process utilization = Process capacity Similarly, we find the utilization of each resource as Flow rate Utilization of resource = Capacity of resource 18 Process Capacity 9

10 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 19 Process Analysis Multiple flow units 20 Process Capacity 10

11 Processes with Multiple Flow Units Foreign Dep. m=2 Contact 20 min/app faculty/ other persons Foreign acc. 3 cases per hour 11 cases per hour EZ form 4 cases per hour Regular File m=1 File 3 min/app Contact Department prior 1 employers m=3 15 min/app Print invoice Confirmation m=1 letter 2 min/app Benchmark Department 2 gradesm=2 8 min/app Approach 1: Adding up Demand Streams Process Capacity 11

12 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 24 Sources: MSWD 3e PPT, Terwiesch Coursera Notes and Others as Noted Process Capacity 12

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