Operations Managment
Kristen’s Cookie - Lecture 4
(Chapters 4 and 5)
Dr. Ursula G. Kraus
1/23
Review
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Process Characterization
Operational Measures:
Flow Time, Inventory and Throughput
Little’s Law
Flow Time Analysis
2/23
Agenda
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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 = RxT
Source: Managing Business Process Flows (1999)
5/23
Eliminating “Muda” (Waste) to Reduce
Flow Time
Intellect
Any failure to fully
utilise the time and
talents of people
Motion
Any motion that
does not add value
Overproduction
Producing too much,
or producing too soon
Muda
Rework
Any repair
Processing
Overprocessing
Inventory
Any more than the
minimum to get the
job done
Conveyance
Any non-essential
transport is waste
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
Process
Average
Flow Time
Theoretical
Flow Time
Flow Time
Efficiency
Life Insurance
New Policy
Application
72 hrs.
7 min.
0.16%
Consumer
Packaging
New Graphic
Design
18 days
2 hrs.
0.14%
Commercial Bank
Consumer
Loan
24 hrs.
34 min.
2.36%
Hospital
Patient Billing
10 days
3 hrs.
3.75%
Automobile
Manufacture
Financial
Closing
11 days
5 hrs
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 = RxT
Source: Managing Business Process Flows (1999)
10/23
Operational Measures - Capacity
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(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 =
Source: Managing Business Process Flows (1999)
Flow Rate [units/hr]
Capacity [units/hr]
11/23
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
[Template] Kristen’s Cookies
15/23
[Template] Kristen’s Cookies
16/23
Average Flow Time consists of …
Theoretical Flow Time
(Processing Time)
+
Waiting time
17/23
Operational Measures – Flow Time
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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
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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
Source: Managing Business Process Flows (1999)
20/23
Operational Measures – Capacity
(of Resource Pools)
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(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
Source: Managing Business Process Flows (1999)
21/23
Example: Pharmacy
Task/Activity
Resource
Take Order
Ord. Taker
Verify Insurance
Assistant
Find stock
Assistant
Fill container
Pharmacist
Type/apply label
Pharmacist
Accept payment
Clerk
Qty of
Activity
Resource Time/Pres.
}
}
1
2 min
1
8 min
2 min
2
8 min
3 min
1
4 min
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
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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