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Operations Management Lecture 2 1 Review of Lecture 1 Inputs Buy Make/create Move Sell Outputs Move 2 Review of Lecture 1 3 Review of Lecture 1 High Trade-off Innovation Quality Trade-off Improvement Low Low Productivity High 4 Airline Industry – Continued “Southwest says that if its boarding times increased by 10 minutes per flight, it would need 40 more planes at a cost of $40 million each to run the same number of flights it does currently.” - textbook 5 Learning Objectives Process Analysis: Understand the concepts » » » » » » Flow time Capacity (rate) Throughput rate (output rate) Utilization Cycle time Bottlenecks Toolbox: Process Analysis – Process mapping – Capacity analysis (also called bottleneck analysis) 6 Paper Airplane “Factory” With those seated next to you form a group of 5. Manufacture as many planes as you can in 200 seconds. (1 paper at a time) At most 2 “Tasks” per group member (includes bringing papers to group). Write down times to preform task. 7 8 Basic Process Measures Utilization (ρ) Ratio of time a resource is used relative to the time it is available (dimensionless quantity). Examples Commercial Call Center: 90% Car Factory Robot: 80% Emergency Call Center: 30% 9 Basic Process Measures Capacity (rate) Dictionary definition: “the maximum amount that something can contain”. General Business Definition The amount of output that a system is capable of achieving over a period of time. The maximum possible output or service rate. Examples Bank: Car Factory: 200 customers/day 10,000 cars/month 10 Process Flows: Single Stage, Single Machine/Server Input rate [units/hr] Output rate [units/hr] ... Flow Time [hr] • Capacity = 1 / FlowTime [units/hr] Assuming resources are available (all input except demand), Only for single stage, single machine/server. The maximum possible output rate that can be achieved. • Output rate = min{Input Rate, Capacity} In the long run. Also called the throughput rate. • Utilization = Throughput Rate / Capacity = min{Input Rate, Capacity} / Capacity = min{Input Rate / Capacity, 1} 11 Process Flows: Single Stage, Single Machine/Server Input rate [units/hr] ... Inventory [units] ... ... Output rate [units/hr] ... ... Flow Time [hr] 12 Example In SingleTeller bank, it takes the teller 15 minutes to serve a customer. Every 30 minutes a customer goes to the teller. – – – – What is flow unit? What is the capacity? At what rate the process generates output? What is the utilization of the teller? 13 The physics of process flows Identify “flow units”: Unit of analysis. Flow through the process, starting as input and later leaving the process as output. – What is my product? e.g. cars, noodle bowls, customers Identify Rates – Input rate: Rate at which units are arriving to the system – Output rate (throughput, flow rate): Rate at which units are leaving the system – Capacity: Maximum rate at which units can leave the system Flow Times (Time spent in process) – How long does it take me to produce one product? Stocks (Inventory build-up) – What parts of the process do units spend more time at? e.g. parking lot full of finished cars, warehouse full of raw materials, queue of customers waiting. 14 Basic Process Measures in Production and Service Operations Production process Service process Flow unit Materials Customers Input rate Raw material releasing rate (e.g., iron ore) Customer arrival rate Output rate Finished goods output rate Customers departure rate (service completion rate) Flow time Time required to turn materials into a product Time that a customer is being served Theoretical Flow Time Total time a product spends in different activities Total time a customer spends in different activities Inventory Amount of work-inprocess Number of customers being served Capacity (rate) Maximum output rate Maximum service completion rate 15 Some Basics What is the output rate of a process? – Capacity rate = maximum possible output rate – Throughput rate = actual output rate What is the input rate of a process? – Depends on the process and flow units – It could be demand rate (e.g., arrivals into a restaurant, bank, etc.) – It could be a planned arrival rate (e.g., raw material arrival into a factory) 16 Some Basics Is input rate always equal to output rate? What is the difference between the short-run and the long-run? In the short-run: What happens if input rate is greater than output rate? What happens if input rate is less than output rate? In the long-run: What happens if input rate is greater than output rate? What happens if input rate is less than output rate? 17 Short Run Analysis: Funnel Analogy • In the short run, the input rate can be larger than the capacity rate for a period of time A properly sized buffer is needed to store units waiting to be processed (build-up inventory) Buffer 18 Long Run Analysis • In the long run, the input rate must be no larger than the capacity rate What goes in the process, must come out of the process. Input rate must be less than or equal to the output rate; Otherwise the system will overflow. 19 Key Steps in Process Analysis Step 1: Determine the Purpose of the analysis Step 2: Process mapping (Define the process) • • • • • • Determine the flow units Determine the tasks (sub-processes), and the sequence of the tasks Determine the time for each task Determine which resources are used in each task Determine where inventory is kept in the process Record this through a process flow diagram (Linear flow chart, Swim-lane (deployment) flow chart, Gantt chart) Step 3: Capacity Analysis (also called Bottleneck Analysis) • Determine the capacity of each resource, and of the process Further analysis will be covered later during the course 20 Process Flow Diagram Elements Activities, tasks or operations Buffers: Queues or inventories Decision points Flow of materials • Example: Bread making Raw Material Bread Making Finished Bread Packing Packed Bread Note: If different types of breads, the bread-making and packing activities may differ for each 21 Tim Horton's / Burger King Suppose we order a Hot Breakfast Sandwich (490 Cal, 31g Fat): Purpose of the analysis: – To determine the capacity (rate) of the Tim Horton’s make-to-order (“Made-just-for-you”) system. Given this purpose, the process map does not need to consider the following: – Queued customers (i.e., customers in line) – The baked meat cooking processes (we assume cooked meat is always available when needed during the make-to-order process). 22 Hot Breakfast Sandwich Steps Recall from process mapping: – Determine the flow units – Determine the tasks (subprocesses), and the sequence of the tasks – Determine the time for each task – Determine which resources are used in each task – Determine where inventory is kept in the process – Record this through a process flow diagram » Linear flow chart » Swim-lane (deployment) flowchart » Gantt chart We observed the following steps: 1. Cashiers takes the order (8s) 2. Worker1 toasts buns (it takes the toaster 10s) 3. Worker2 adds dressing (8s) 4. Worker3 adds meat patties (6s) 5. Worker4 wraps it (2s) 6. Worker5 delivers (2s). 23 Linear Flow Chart • Flow unit: An order (each order = one burger) • Tasks and sequences • Flow time of each task Place an order 8s Toast buns 10s Add dressings 8s Add meat patties Package 6s 2s Deliver 2s • Determine which resources are used in each task • Could indicate resources along each task • Swim-lane diagram or Gantt chart may be better 24 Swim-Lane (Deployment) Flowchart RESOURCES Cashier Worker1 Toaster Worker 2 Worker 3 Worker 4 Worker 5 ACTIVITIES Place an order Toast buns Add dressings Add meat patties Package Deliver 25 Swim-Lane Flowchart: Modified RESOURCES Cashier Worker1 Toaster Worker 2 ACTIVITIES Place an order Toast buns Add dressings Add meat patties Package Worker 3 Worker 4 Worker 5 Deliver 26 Gantt Chart RESOURCES ACTIVITIES Cashier Place an order Worker1 Toaster Toast buns Worker 2 Add dressings Worker 3 Add meat patties Worker 4 Package Worker 5 Deliver Time Span 8s 10s 8s 6s 2s 2s Time Process Mapping: Some Notes • There is no one way to draw a process map • Get feedback from all the people involved in the process to validate the process map – Do not map the process as you think it works – Map it as it actually works • Process maps are surprisingly informative – Common response: “I never knew we did it that way!” • Starting point for process analysis, and a great tool for brainstorming process improvements 28 Basic Process Analysis Single Stage Process Toast buns Toaster Worker 1 Flow Time (Time that buns spend in the toaster) 10 sec Capacity Rate 6 orders/min,??? or 360 orders/hr 29 Basic Process Analysis Multiple Stage Process Place an order Toast buns Add dressings Add meat patties Package Deliver Cashier Worker 1 Toaster Worker 2 Worker 3 Worker 4 Worker 5 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec 450/hr 360/hr 450/hr 600/hr 1800/hr 1800/hr Theoretical ofwhole the whole process: FlowFlow TimeTime of the process: ??? 36 sec Note: The theoretical flow time ignores the possibility of waiting; so it is the lowest possible flow time Capacity rate of theofwhole process: 360 orders/hr Capacity rate the whole process: ??? 30 Beyond Basics Consider Unit Loads Resource Unit Load (sec/unit) Capacity Rate (unit/min) Capacity rate (unit/hr) Cashier 8 7.5 450 Toaster 10 6 360 Worker 1 10 6 360 Worker 2 8 7.5 450 Worker 3 6 10 600 Worker 4 2 30 1800 Worker 5 2 30 1800 Unit Load: Total amount of time the resource works to process each flow unit 31 What information do unit loads give us? • Unit Load tells you something about how work is organized Small Unit Load for Each Resource High Unit Load for Each Resource Labor Skills Low High Equipment Specialization High Low Process Type Flow Shop Job Shop 32 Gantt Chart: Multiple Stage Process RESOURCES ACTIVITIES Cashier Place an order Worker1 Toaster Toast buns Worker 2 Add dressings Worker 3 Add meat patties Worker 4 Package Worker 5 Deliver Time Span 8s 8s 10s 10s 8s 8s 6s 6s 2s 2s 2s Time 2s The Bottleneck • The resource with the lowest capacity rate – The “slowest” resource (or the resource with the highest “unit load”) – Unit load: Total amount of time the resource works to process each flow unit • Determines the capacity rate of the entire process • Increasing the capacity of non-bottleneck resources does not increase the capacity rate of the process 34 Pipes with Different Capacities 35 Increasing the capacity rate of a process What if we add a cashier? Place an order Place an order Toast buns Add dressings Add meat patties Package Deliver Cashiers Worker 1 Toaster Worker 2 Worker 3 Worker 4 Worker 5 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec 900/hr (2 * 450/hr) 360/hr 450/hr 600/hr 1800/hr 1800/hr Theoretical Flow Time sec Theoretical Flow Timeofofthe thewhole wholeprocess: process:36 ??? Capacity rate of theofwhole process: 360 orders/hr Capacity rate the whole process: ??? 36 Increasing the capacity rate of a process What if we add a toaster? Place an order Toast buns Toast buns Add dressings Add meat patties Package Deliver Cashier Worker 1 Toasters Worker 2 Worker 3 Worker 4 Worker 5 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec 450/hr 720/hr (2 * 360/hr) 450/hr 600/hr 1800/hr 1800/hr Theoretical Time sec TheoreticalFlow Flow Timeofofthe thewhole wholeprocess: process:36 ??? Which task is the bottleneck? Capacity rate of theofwhole process: 450 orders/hr Capacity rate the whole process: ??? 37 Cycle Time Cycle time is the time between completed units Flow time is the time to complete each unit For a multi-stage process, the cycle time and the flow time are not the same Cycle time=1/(capacity rate) 38 Gantt Chart (Visualize Cycle Time) Resources Activities Cashier Place order Time Span 8s Worker 1 Toast buns Worker 2 Add dressings Worker 3 Add meat patties Worker 4 Package 8s 10s 8s 10s 10s 8s 8s 8s 6s 6s 2s Worker 5 Deliver 2s 6s 2s 2s 10s 2s 10s 2s Time 39 Adding a Toaster: Gantt Chart RESOURCES ACTIVITIES Cashier Place an order Worker1 Toaster 1 Toast buns Worker1 Toaster 2 Toast buns Worker 2 Add dressings Worker 3 Add meat patties Worker 4 Package Worker 5 Deliver Time Span 8s 8s 10s 10s 8s Worker 1 is not busy all the time, and can take care of 2 toasters 8s 6s 6s 2s 2s 2s Time 8s 2s Main Insights To increase the capacity rate of the entire system, increase the capacity of the bottleneck process. The bottleneck may change when capacity is added (i.e., a new bottleneck process may now appear). – Important when we are justifying additional capacity Questions – What does increasing the capacity of the bottleneck process do to the utilization of the bottleneck station? » Flow time? Cycle time? – If we double the bottleneck capacity, does the capacity of the entire system also double? 41 What if we further add one cashier and relocate one worker? Cashier 2 Place an order Place an order Cashier 1 8s Toaster 2 Toast buns Toast buns Toaster 1 Worker 1 10s 900/hr 720/hr 2 x 450/hr 2 x 360/hr Worker 4 Add dressings Add dressings Add meat patties Worker 2 8s 900/hr Package and deliver Worker 3 6s 600/hr Worker 5 4s 900/hr 2 x 450/hr Flow time of the whole process: _________ sec Which task is the bottleneck? __________________________ Capacity rate of the entire process: ________ orders / hr Cycle time of the entire process: ________ seconds/ order 42 Adding one cashier and relocating one worker: Gantt chart Resources Activities Cashier 1 Place an order Cashier 2 Place an order Time Span 8s Wkr 1,Toaster 1 Toast buns Wkr 1,Toaster 2 Toast buns Worker 2 Add dressings Worker 4 Add dressings Worker 3 Add meat patties Worker 5 Package and Deliver We assume worker 1 is not busy all the time and can take care of two toasters. 8s 10s 10s 8s 8s 6s 6s 2s 2s 2s 2s 6s Time 43 Another Example Place an order Toast buns Add dressings Add meat patties Package Deliver Cashier Worker 1 Toaster Worker 2 Worker 3 Worker 3 Worker 3 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec Theoretical Flow Time of the whole process: 36 sec Note: The theoretical flow time ignores the possibility of waiting; so it is the lowest possible flow time Capacity rate of theofwhole process: 360 orders/hr Capacity rate the whole process: ??? 44 Thinking in terms of “Unit Loads” Resource Unit Load (sec/unit) Capacity Rate (unit/min) Capacity rate (unit/hr) Cashier 8 7.5 450 Toaster 10 6 360 Worker 1 10 6 360 Worker 2 8 7.5 450 Worker 3 10 6 360 Unit Load: Total amount of time the resource works to process each flow unit 45 Increasing Capacity (1) Increase the Size of the “Resource Pool” • One Toaster Capacity rate: 360/hr • Two Toasters Working in Parallel Capacity rate: 720/hr 10 sec Toast buns Toast buns 10 sec Toast buns 10 sec 46 Increasing Capacity (2) Decreasing the Unit Load • This Toaster Capacity rate: 360/hr • Faster Toaster Works twice as fast Capacity rate: 720/hr Toast buns Toast buns 10 sec 5 sec 47 Increasing the Capacity Rate of a Process • Increase the capacity rate of the bottleneck • Some other resources may become a bottleneck when capacity is added – Important when we justify additional capacity 48 Increasing the capacity rate of a process Expand the resource pool at the bottleneck Place an order Toast buns Toast buns Add dressings Add meat patties Package Deliver Cashier Worker 1 Toasters Worker 2 Worker 3 Worker 4 Worker 5 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec 450/hr 720/hr (2 * 360/hr) 450/hr 600/hr 1800/hr 1800/hr Theoretical Flow Time of the whole process: 36 sec Capacity rate of the whole process: 450 orders/hr 49 Increasing the capacity rate of a process Reduce Unit Load at the Bottleneck Place an order Toast buns Add dressings Add meat patties Package Cashier Worker 1 Toaster Worker 2 Worker 3 Worker 4 Worker 5 Old Flow Time 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec Old Capacity Rate 450/hr 360/hr 450/hr 600/hr 1800/hr 1800/hr New Flow Time 8 sec 5 sec 8 sec 6 sec 2 sec 2 sec New Capacity Rate 450/hr 720/hr 450/hr 600/hr 1800/hr 1800/hr Theoretical Flow Time : ??? Deliver Capacity rate of the process: ??? 50 Any operational benefit of reducing unit load at non-bottlenecks? Place an order Toast buns Add dressings Add meat patties Package Cashier Worker 1 Toaster Worker 2 Worker 3 Worker 4 Worker 5 Old Flow Time 8 sec 10 sec 8 sec 6 sec 2 sec 2 sec Old Capacity Rate 450/hr 360/hr 450/hr 600/hr 1800/hr 1800/hr New Flow Time 4 sec 10 sec 6 sec 4 sec 1 sec 1 sec New Capacity Rate 900/hr 360/hr 600/hr 900/hr 3600/hr 3600/hr Theoretical Flow Time : ??? Deliver Capacity rate of the process: ??? 51 Processes may be unbalanced Place an Order Toast buns Flow Time 8 sec 10 sec Capacity Rate 450/hour 360/hour Process is “Blocked” • When the next stage is busy, the order cannot be sent to the next stage after finishing the current stage, unless an inventory buffer is introduced 52 Another example Add dressings Add meat patties Flow Time 8 sec 6 sec Capacity Rate 450/hour 600/hour Process is “starved” 53 Bottleneck Characteristics • The bottleneck is fully utilized while other resources are not utilized • If a buffer is provided at some upstream stage to the bottleneck, inventory may build up at the buffer • Inventory will not build up at the (immediately) downstream stages to the bottleneck even if buffers are provided • Shortening non-bottleneck tasks decreases flow time but does not affect capacity rate – Reducing flow time improves response time 54 Process Analysis: Multiple Flow Units Resource Unit Load (minutes/unit) Product A Product B Product C 1 2.5 2.5 2.5 2 1.5 2 2.5 3 12 0 0 4 0 3 3 5 3 3 3 • If you produce only Product A, what is capacity rate of the process (per hour)? Which resource is the bottleneck? • If your product mix is 1 unit of A, 2 units of B and 2 units of C, what is your capacity rate? Bottleneck? 55 Process Analysis: Multiple Flow Units Resource Unit Load (minutes/unit) Product A Product B Product C 1A+2B+2C 1 2.5 2.5 2.5 12.5 2 1.5 2 2.5 10.5 3 12 0 0 12 4 0 3 3 12 5 3 3 3 15 • When multiple flow units go through a process, the “product mix” needs to be considered while determining the unit load and the capacity • The bottleneck depends on the product mix 56 Process Analysis: Multiple Flow Units • Flow diagrams are not easy to draw • How to identify bottleneck? – Count the total amount of work per resource (also known as the “unit load”) • When multiple flow units go through a process, a “product mix” needs to be considered while determining capacity • The bottleneck depends on the product mix • The bottlenecks can move as the product mix changes 57 Theoretical versus Effective Capacity • Some capacity is lost due to machine maintenance, machine set-ups, etc. • Example. Changing over from one product type to another may require adjustments to the machine, tools, etc (“set-ups”) 58 Try to do it for yourself again at home Consider four consecutive stages A, B, C, and D with the following capacity rates: 12 units/hr, 15 units/hr, 11 units/hr, and 14 units/hr, respectively. Assume that the demand on the system is 13 units/hr (Short run). – Where you would add buffers to the system (minimum number of buffer)? – What if stage C had a variable capacity rate of 13+-1 units/hr, instead of the original given 11 units/hr. Would you add or remove any buffer from the system compared to the previous part of the question. 61 Summary: Process terminology Capacity rate – The maximum rate at which units can flow through a process Bottleneck Process – The resource with the lowest capacity rate in a process – It determines the capacity rate of the entire system Flow Time or Throughput Time – The length of time a unit spends in the system Cycle time – The Inverse of the capacity rate (i.e., the average time between completion of successive units) Confusingly, in practice many firms use the terms flow time and cycle time interchangeably: always clarify what is being referred to! 62 Summary: Capacity Analysis The bottleneck is fully utilized (ρ=1) while other resources are not fully utilized (ρ≤1). To increase the capacity rate of the system, focus on increasing the capacity of the bottleneck process. The bottleneck can change when capacity is added to it – important when we are justifying additional capacity. Shortening non-bottleneck tasks decreases flow time – This improves response time (which is still important), but it does not affect capacity rate of the process. 63 Readings & More… Interesting Articles: – Deep Change: How operational innovation can transform your company, by Michael Hammer, Harvard Business Review, April 2004 – BPMS Watch: Analyzing and Optimizing Process Performance (http://www.bpminstitute.org/articles/article/article/bpmswatch-analyzing-and-optimizing-processperformance.html) – Shining examples, The Economist, June 17, 2006. – One Word: Logistics: The unheralded key to the New Economy, By Daniel Gross, Slate, Jan. 20, 2006. (http://www.slate.com/id/2134513/) 64 Readings & More… For next class, please: – Take a good look at the Quercus site for the course. – Please finalize your groups for the case studies. Next Class: Forecasting 65 Self-Test: Question 1 What is the difference between (a) and (b)? (a) Two parallel 10-sec toasters: 10 s Toast Toast 10 s (b) One faster 5-sec toaster: Toast 5s 66 Self-Test Question 2 What if both Worker 1(toast buns) and worker 3(add meat patties) need to share the toaster (one toaster is available and toasting buns takes 10 seconds on toaster and toasting patties takes 6 seconds)? 67