Process and Layout Choices
References:
Ballou, Business Logistics Management,
4th Ed., Prentice-Hall, 1999.
Anupindi, Chopra, Deshmukh, Van
Mieghem, Zemel, Managing Business
Process Flows, Prentice-Hall,1999.
1
Process View of Organization
Input
Value added
Goods
Services
2
Process Architecture/Structure
1. Inputs and outputs
2. Flow units
3. Network of activities and buffers
4. Resources (capital and labour)
5. Information structure
3
Table 1.1 (ACDVZ, p. 5)
Table 1.1 Some Generic Business Processes
Process
Flow Unit
Input-output Transformation
Order fulfillment
Orders
From the receipt of an order to the
delivery of the product
Production
Products
From the receipt of materials to the
completion of the finished product
Outbound logistics
Products
From the end of production to the
delivery of the product to the customer
Supply cycle
Supplies
From issuing of a purchase order to
the receipt of the supplies
Customer service
Customers
New product development
Projects
From the arrival of a customer to the
departure
From the recognition of a need to the
launching of a product
Cash cycle
Cash
From the expenditure of funds (costs)
to the collection of revenues
4
A Business Process is a network of
activities performed by resources that
transforms inputs into outputs.
Process Flow Management is a set of
managerial policies specifying how a
process should be operated over time.
Design of processes
How and when to operate
Resources allocated
Goal: Improve performance
5
Product Attributes
Cost
Total costs (purchase and maintenance) incurred by
customer to own and experience the product
Delivery response time
Total time a customer waits before receiving the
product
Depends on availability and accessibility
Product variety
Range of choice to meet needs of customer
Quality
What functions and how well product performs
Depends on product design and conformance to
standards
6
Product Space
A product is a bundle of these four attributes.
A point in the 4-dimensional product space.
Customers make trade-off between different
product choices, according to her utility.
Company must select the right combination
of attributes for product range to appeal to
target market segment.
7
Goods vs. Services ?
Services are experiential, requiring close
interaction between service providers,
and participation by the customer
Services cannot be produced in advance
and stored as inventory
Service quality difficult to measure
8
Process Attributes
Process Cost
Total costs incurred in producing and delivering
outputs
Process Flow Time
Total time needed for transforming one unit of input
into output
Process Flexibility
Ability of the process to produce and deliver desired
product variety
Process Quality
Includes process accuracy, conformance to design
specifications, reliability and maintainability
9
Flow-Time Analysis
Flow time is the total amount of time a flow unit
spends in a process, and includes:
Theoretical flow time – minimal time required for
processing if no waiting occurs,
Waiting time – time spent waiting to be processed.
Flow-time efficiency = . theoretical flow time .
average total flow time
10
Flow-time as performance measure
Flow time affects response time
Short flow time leads to lower inventory
Little’s law
WIP earns no revenue, incurs costs
Short flow time in product design and
development => early market introduction
=> first-mover advantage
Short manufacturing flow time => can delay
production until better demand forecast
Short flow time requires better quality control
11
Process Flow Chart
A graphical representation of all the
elements that make up a process
Decisions
Activities
Buffers
Transport
Delay
Events
Information flow
Resources
Value-added and non-value added activities
Sub-processes and cascading
12
Theoretical Flow Time
Activity time is the time required by a
typical flow unit to complete the activity
once
Repetitions of the activity during
processing are called visits
Can be fractional to represented expected
proportion that needs rework
Work content is the activity time
multiplied by average number of visits.
13
Critical Paths and Critical Activities
If unit is processed sequentially (process chart
consists of a single path), total theoretical time
is sum of work content.
If process consists of parallel and sequential
activities, a flow unit can exit only after all the
activities along all the paths are complete.
Theoretical flow time is the time to complete the
longest path(s) in the process flow chart.
Any such path is a Critical path; activities on
path are critical activities
Delay of critical activities delays total flow-time
14
The Critical Path Method
CPM (critical path method)
J. E. Kelly of Remington-Rand and M. R. Walker of
Du Pont (1957)
Scheduling maintenance shutdowns of chemical
processing plants
PERT (program evaluation and review
technique)
U.S. Navy Special Projects Office (1958)
Polaris missile project
15
CPM Framework
Set of activities with precedence relationships
1. Develop activity network with precedence
relationships and activity times.
2. Compute the critical path (the longest path
through the network).
3. Use the network to plan, schedule, monitor
and control the project.
16
CPM Example
CPM ACTIVITY DESIGNATIONS AND TIME ESTIMATES
Activity
Designation
Immediate predecessors
Time in weeks
Design
A
-
21
Build prototype
B
A
5
Evaluate equipment
C
A
7
Test prototype
D
B
2
Write equipment report
E
C, D
5
Write methods report
F
C, D
8
Write final report
G
E, F
2
7
8
C
F
G
A
21
2
B
D
E
5
2
5
17
Earliest start time (ES) : the earliest time that an activity
can begin (without violating precedence relationships)
Earliest finish time (EF): the earliest time an activity can
finish
7
8
C
F
G
A
21
2
B
D
E
5
2
5
18
Latest finish time (LF) : the latest time that an activity
can finish (without delaying the entire project)
Latest start time (LS): the latest time an activity can start
(without delaying the entire project)
7
8
C
F
G
A
21
2
B
D
E
5
2
5
19
A Critical Path
A critical path is a sequence of activities that
establishes the earliest completion time.
A delay (or increase in duration) of any
activity on the critical path delays the entire
project.
Slack = amount of time an activity can be
delayed without delaying the entire project
Slack = LS - ES = LF - EF
20
Managing Theoretical Flow Time
Decrease work content of activities on
critical path(s)
“Principles of Scientific Management” –
Taylor, Gilbreths
Move some work content off the
critical path
21
Reducing Work Content
Work smarter
Work analysis – eliminate unnecessary and non-value added
activities
Work faster
Change process and/or environment to reduce fatigue
Offer incentives to boost morale
Acquire faster equipment
Do it right the first time
Improve quality, reduce rework
Statistical process control, Autonomation
Change the product mix
Focus on products in demand and has short processing times
22
Moving Work OFF the Critical Path
Move to non-critical path
Concurrent engineering
Parallelize activities
Move work to “Outer Loop”
Pre-processing
Post-processing
23
Process Choice
Process types:
project
job
batch
line
continuous
Best choice depends on volume and degree of
customisation of goods and services produced.
24
Project process
one-of-a-kind products
complex, large scale and scope
high degree of job customisation
unique process/task sequence
release of substantial resources on
completion
e.g. technology/product development, political
campaign, construction, Y2K assurance
Firm’s competitive focus on capabilities rather
than products
25
Job Process
high customisation, low volume
each job has different processing sequence
order-bidding, repeat orders infrequent and
unpredictable
flexible workforce and equipment
make-to-order
e.g. emergency room care, customised
furniture/machine parts manufacture, “health
farms”
Firm’s resources organised around the process.
26
Batch Process
higher volume
narrower range of services and products
assemble-to-order
production in batches, “rotating” through the
product range
jumbled flow patterns, but with some
dominant paths
e.g. packaged tours, parts manufacturing for an
assembly line, grants/admissions processing
27
Line Process (Mass production)
high volume
standardised products or services
materials move “linearly” from operation to
operations in fixed sequence
production orders not linked to customer
orders
make-to-stock (finished goods inventory)
e.g. automobile/appliance manufacture, fastfood restaurants
Mass customisation?
28
Continuous Process
high volume
rigid line flows
single product
capital intensive
specialised equipment
“non-stop” production
e.g. petroleum refinery, beer production,
electricity generation
29
Layout Planning
The physical arrangement of economic
activity centres within a facility.
Which centres to consider?
How much space?
Configuration?
Location?
Relative position
Absolute location
30
Production/Service Layout:
General Principles
Product Layout vs Process Layout
31
Product layout
Equipment placed along the “flow-path” of a
particular product
e.g. assembly lines
Equipment duplicated to avoid “backtracking”
Dedicated equipment, low flexibility
Low unit processing costs, low WIP inventory
Appropriate for high volume production, low
product variety
Key: avoid bottlenecks, balance workload,
avoid unnecessary idleness
32
1. Review application for
correctness
2. Process and record payment
3. Check for violations and
restrictions
4. Conduct eye test
5. Photograph applicant
6. Issue temporary license (state
trooper)
33
• Capacity analysis
• Flow analysis
34
Assembly Lines
Product manufactured by visiting a sequence of
workstations
PACED - each workpiece spend exactly the same
amount of time at each workstation
(Cycle time = C)
Cycle time determined by desired production rate
Assembly line balancing
tasks, precedence relations
determine no. of workstations and task assignments (n)
Efficiency = (Total task time)/[(Cycle
time)(#workstations)]
35
Assembly line balancing example
Precedence graph for model J. Wagon
12s
11s
40s
B
9s
F
C
A
12s
G
50s
15s
12s
D
E
H
J
K
8s
9s
I
12s
36
Assembly line balancing example
C = cycle time = 50.4 seconds
A. Balance made according to largest number of following task rule
Task
Task
time
(s)
Remaining
unassigned
time (s)
Feasible
remaining
tasks
Task with
most
followers
Task with
longest
operation
time
Station 1
A
45
5.4
Idle
None
Station 2
D
50
0.4
Idle
None
Station 3
B
E
C
F*
11
15
9
12
39.4
24.4
15.4
3.4
C,E
C
F,G,H,I
E
Idle
C,E
C,H,I
F,G,H,I
None
G
H*
I
J
12
12
12
8
38.4
26.4
14.4
6.4
H,I
H,I
Idle
H, I
I
J
None
K
9
41.4
Idle
None
Station 4
Station 5
F,G,H,I
*Denotes task arbitrarily selected where there is a tie between longest operation times
Efficiency = T / NC = 195 / (5)(50.4) = 77%
37
Assembly line balancing example
WS1
45s
11s
B
WS3
12s
9s
F
C
A
12s
G
50s
15s
12s
D
E
H
WS5
WS2
I
J
K
8s
9s
WS4
12s
38
Process Layout
Similar equipment or functions grouped together
Appropriate for low-volume, high-variety production
Each product visit the functional areas (departments) in a
different sequential order
e.g. hospitals, mail-order warehouse, job shops
In service context: allow each customer to define his/her own
sequence of service activities (customization)
general purpose equipment, flexible to adapt to new products
loss production due to setups, fluctuating workloads
jumbled work flow, costly material-handling
waiting between activities , higher WIP inventory
Key: job dispatching, minimize material handling costs
39
Ocean World Theme Park
Major attractions:
A: killer whale
B: sea lions
C: dolphins
D: water skiiing
E: aquarium
F: water rides
Want to minimize visitors’travel distance between
attractions.
(From Fitzsimmons and Fitzsimmons,Service Management for Competitive Advantage)
40
41
CRAFT (1964)
(Computerised Relative Allocation of
Facilities Technique)
Tries to place departments with large
interdepartmental traffic adjacent to each
other
Data requirements:
interdepartmental flow
cost per unit distance travelled
SPACECRAFT
multi-storey layout
42
CRAFT
 Cost of layout = pairwise sum of
(flow)(distance)(cost/unit distance)
 Heuristic:
starts with an initial layout
interchange of locations of two departments if
cost reduced
stop when no pairwise improvements found
 Limitations:
optimality not guaranteed
distance may not be reflect true material handling costs
Assumes every department same-sized and rectangular
43
44
Process Layout:
Systematic Layout Planning
Numerical flow of items between departments
Can be impractical to obtain
Does not account for the qualitative factors that
may be crucial to the placement decision
Systematic Layout Planning
Accounts for the importance of having each
department located next to every other
department
Is also guided by trial and error
Switching departments then checking the results of the
“closeness” score
Copyright: The McGraw-Hill
Companies, Inc., 1998
45
Systematic Layout Planning-Example: Reasons for Closeness
Code
Reason
1
Type of customer
2
Ease of supervision
3
Common personnel
4
Contact necessary
5
Share same price
6
Psychology
Copyright: The McGraw-Hill
Companies, Inc., 1998
46
Systematic Layout Planning-Example
Importance of Closeness
Line
code
Numerical
weights
Value
Closeness
A
Absolutely necessary
16
E
Especially important
8
I
Important
4
O
Ordinary closeness OK
2
U
Unimportant
0
X
Undesirable
80
Copyright: The McGraw-Hill
Companies, Inc., 1998
47
Systematic Layout Planning--Example
Relating Reasons and Importance
From
1. Credit department
2. Toy department
2
I
3
U
6
-U
--
To
3. Wine department
4
A
5
U
4
I
1
U
--
-A
1,6
X
1
X
1
4. Camera department
5. Candy department
Irwin/McGraw-Hill
Area
(sq. ft.)
100
400
300
100
100
Letter
Closeness rating
Number
Reason for rating
48
Systematic Layout Planning-Example
Initial Relationship Diagram
E
1
I
3
4
U
2
U
5
A
Copyright: The McGraw-Hill
Companies, Inc., 1998
49
Systematic Layout Planning-Example
Initial and Final Layouts
5
2
3
2
4
1
3
5
1
20 ft
4
50 ft
Initial Layout
Final Layout
Ignoring space and
building constraints
Adjusted by square
footage and building
size
Copyright: The McGraw-Hill
Companies, Inc., 1998
50
Flow shops – Product Layout
Uses specialized resources that perform
limited tasks but with precision and speed
Limited product variety, large volume
High fixed cost spread over huge volume,
leading to low per unit cost
Resources located according to the sequence
of activities needed to produce particular
product; may duplicate resources
Low unit processing cost, high volume,
consistent quality
51
Job Shop – Process Layout
Uses flexible resources to produce low volumes of
customized high-variety products
Uses general purpose equipment
Resources with similar functional capabilities located in
close proximity
Many products simultaneously flowing through, each
with its own route
Jumbled work flows, large WIP, waiting between
activities
Frequent setups, fluctuating workload, long flow times
High process flexibility and product customization
52
Matching Products and Process
Hayes and Wheelwright (1979)
53
External Performance Measures
Estimate a firm’s ability to attract and retain
customers
Competitive industry analysis
Demand estimates
Customer satisfaction survey
Cost of attracting new customer is 5 times that of
keeping old customers
Only 4 % of dissatisfied customers bother to
complain
Lagging indicator
54
Internal Performance Measures
External measures can be linked to internal
measures via the process attributes
Process Cost
Per unit production cost
Process Flow Time
Lead time and delivery time
Process Flexibility
Customization, delivery response time
Process Quality
Failure rates
55
Process Planning
Strategic Positioning and Operational
Effectiveness
Strategic Fit
Terry Hill’s procedure to develop a
manufacturing strategy
56
Operations Frontier
The smallest curve(surface) that contains all the
current industry positions
Firms located on the same ray (from origin) share
same competitive priorities
Firms on operations frontier have superior performance
(best practices, benchmarks)
Operational effectiveness measured by “distance”
between current position and the operations frontier
Concave frontier => tradeoffs between performance
dimensions
Operational frontier shifts outward
57
The Operations Frontier
58
Process Flow Measures
Questions:
Average flow rate?
Units processed per unit time?
Average flow time?
Time unit spends within “process boundaries”
Average Work-in-Process?
Units being process
59
Flow rate and flow time
Flow rate = number of units flowing through
a specific point in process per unit time
Stable process :
average in flow rate = average out flow rate
(throughput rate)
Flow time = processing and waiting time
May vary from unit to unit depending on
process choice
60
WIP Inventory
Inventory accumulation rate =
inflow rate – outflow rate
Little’s law:
I=RxT
Inventory turns (turnover ratio)=
Ratio of throughput to average inventory
= R/I = 1/T
61
Managing Flow Rate
Flow rate depends on:
theoretical capacity
resource unavailability & idleness
Manage supply and demand
have reliable suppliers
better forecasts
Decrease resource idleness
synchronise flows to reduce starvation
set appropriate buffer size to reduce blockage
Increase net availability
improve maintenance
improve worker morale, reduce absenteeism
reduce setup/changeover frequency
Increase theoretical capacity
decrease unit load
increase load batch or resource units
increase scheduled availability
62
Summary
Process choice and impact on
competitive priorities
Flow Time Analysis
Critical Path Method
Job shop vs. flow shop
Layout Design methods
Flow rate/flow time/WIP measures
63