Slide 1Operational Performance MeasuresProcess Architecture is defined and represented by a process flow chart:Pizza Pazza Flow ChartOperational Measure: Flow Time Driver: Activity TimesMost time inefficiency comes from waiting: E.g.: Flow Times in White Collar ProcessesLevers for Reducing Flow TimeOperational Measure: Capacity Drivers: Resource LoadsA Recipe for Capacity MeasurementsBariatric Surgery : Flow ChartBariatric Clinic Capacity – Open Surgeries & Cash PaymentBariatric Clinic Capacity – Laparoscopic Surgeries & Cash PaymentBariatric Clinic Capacity – Open Surgeries & Insurance PaymentBariatric Clinic Capacity – Laparoscopic Surgeries & Insurance PaymentLevers for Increasing Process CapacityIncreasing Process Capacity in The GoalOther factors affecting Process CapacityProduct Mix Decisions: Open or Laparoscopic SurgeryProduct Mix DecisionsSlide 20Learning Objectives: Process AnalysisS. Chopra/Operations/Process Analysis & Apps 1Operations Management:Process Analysis and Applications ModuleOperational Measures: Time T, Inventory I, Throughput rate RCapacity and Flow Time Analysis»Pizza Pazza / Bariatric Surgery»Levers for ImprovementMulti-product Capacity Management and Investment»Joint Marketing & Production Decisions»Optimal Capacity InvestmentS. Chopra/Operations/Process Analysis & Apps 2Operational Performance MeasuresHow to measure and decrease flow times?How to measure and increase throughput?S. Chopra/Operations/Process Analysis & Apps 3Process Architecture is defined and represented by a process flow chart:Process = network of activities performed by resources1. Process Boundaries:–input–output2. Flow unit: the unit of analysis3. Network of Activities & Storage/Buffers–activities with activity times–routes: precedence relationships (solid lines)4. Resources & Allocation5. Information Structure & flow (dashed lines)S. Chopra/Operations/Process Analysis & Apps 4Pizza Pazza Flow ChartS. Chopra/Operations/Process Analysis & Apps 5Operational Measure: Flow TimeDriver: Activity Times(Theoretical) Flow TimeCritical ActivityFlow Time efficiencyS. Chopra/Operations/Process Analysis & Apps 6Industry Process Average FlowTimeTheoretical FlowTimeFlow Time EfficiencyLife Insurance New PolicyApplication72 hrs. 7 min. 0.16%ConsumerPackagingNew GraphicDesign18 days 2 hrs. 0.14%Commercial Bank Consumer Loan 24 hrs. 34 min. 2.36%Hospital Patient Billing 10 days 3 hrs. 3.75%AutomobileManufactureFinancialClosing11 days 5 hrs 5.60%Most time inefficiency comes from waiting: E.g.: Flow Times in White Collar ProcessesS. Chopra/Operations/Process Analysis & Apps 7Levers for Reducing Flow TimeDecrease the work content of critical activities–work smarter–work faster–do it right the first time–change product mixMove work content from critical to non-critical activities–to non-critical path or to ``outer loop’’Reduce waiting time.S. Chopra/Operations/Process Analysis & Apps 8Operational Measure: CapacityDrivers: Resource Loads(Theoretical) Capacity of a ResourceBottleneck Resource (Theoretical) Capacity of the ProcessCapacity Utilization of a Resource/Process = throughput [units/hr]capacity [units/hr]S. Chopra/Operations/Process Analysis & Apps 9A Recipe for Capacity MeasurementsResource Unit Load Resource Capacity Process Resource(time/job)Unit Capacity # of units TotalCapacity Utilization** assuming system is processing at full capacityS. Chopra/Operations/Process Analysis & Apps 10Bariatric Surgery : Flow ChartS. Chopra/Operations/Process Analysis & Apps 11Bariatric Clinic Capacity – Open Surgeries & Cash PaymentS. Chopra/Operations/Process Analysis & Apps 12Bariatric Clinic Capacity – Laparoscopic Surgeries & Cash PaymentS. Chopra/Operations/Process Analysis & Apps 13Bariatric Clinic Capacity – Open Surgeries & Insurance PaymentS. Chopra/Operations/Process Analysis & Apps 14Bariatric Clinic Capacity – Laparoscopic Surgeries & Insurance PaymentS. Chopra/Operations/Process Analysis & Apps 15Levers for Increasing Process CapacityDecrease the work content of bottleneck activities–work smarter, work faster–do it right the first time–eliminate non-value added work from bottlenecks»reduce/eliminate setups and changeovers–synchronize flows to & from bottleneck»reduce starvation & blockageMove work content from bottlenecks to non-bottlenecks–to non-critical resource or to third partyIncrease Net Availability–work longer–increase scale (invest)–increase size of load batches–eliminate availability wasteS. Chopra/Operations/Process Analysis & Apps 16Increasing Process Capacity in The Goal“is to increase the capacity of only the bottlenecks”–“ensure the bottlenecks’ time is not wasted”»increase availability of bottleneck resources»eliminate non-value added work from bottlenecksreduce/eliminate setups and changeovers»synchronize flows to & from bottleneckreduce starvation & blockage–“ the load of the bottlenecks (give it to non-bottlenecks)”»move work from bottlenecks to non-bottlenecks»need resource flexibility– unit capacity and/or #of units.»investS. Chopra/Operations/Process Analysis & Apps 17Other factors affecting Process CapacityBatch (Order) SizesProduct Mixother managerial policies ...S. Chopra/Operations/Process Analysis & Apps 18Product Mix Decisions:Open or Laparoscopic SurgeryRevenue per open surgery: $15,000Variable Cost of Materials: $1,000Revenue per Laparoscopic surgery:$18,000Variable Cost of Materials: $2,000S. Chopra/Operations/Process Analysis & Apps 19Product Mix DecisionsOpen and Laparoscopic have exactly the same process. Theonly difference is in surgery (laparoscopic takes 30 minutesextra) and in the rooms (laparoscopic uses rooms for 2 dayswhereas open uses rooms for 4 days.S. Chopra/Operations/Process Analysis & Apps 20Product Mix DecisionsMargin per Open surgery = $14,000Margin per Laparoscopic surgery = $16,000Margin per week from Open surgery = 72.72*(15,000 - 1,000) = $1,018,055 / weekMargin per week from Laparoscopic surgery = 63.15*(18,000 - 2,000) = $1,010,400 / weekS. Chopra/Operations/Process Analysis & Apps 21Learning Objectives: Process AnalysisManage better with the three key operational measures and an inter-functional macro process view of the organizationProcess measures: –Flow time manage critical activities–Capacity manage bottleneck resourcesLevers for
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