Operations & Supply Chain Management

Class 2
Fundamentals of Process Analysis

Ali SHANTIA

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Class Participation Guidelines
Let’s Get to Know Each Other
• Use Your Name Card
• Place your name card in front of you during each class

Staying Focused Together

• No Cell phones (unless for QR codes)
• We’ll keep our focus on the class, so let's minimize
distractions

Laptops with Purpose

• Limited Laptop Use
• Your laptops are awesome tools for learning—let’s use them
for taking notes and tackling problems

Punctuality matters
• Be on Time
• Arriving on time shows respect for everyone’s time and helps
us all get the most out of every session. Let’s make it a habit!
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Part 1
Process view – Process types – Strategic fit
 • What is a “process”?

Process view of • A process is a collection of tasks connected by a

flow of goods and information that transforms
inputs to outputs.
supply chain • How can a supply chain be thought of as a process?
• SCM can also be applied to services!
Taxonomy of
process types
• Do we need different
processes for producing
different
products/services?
Taxonomy of process types

A Construction Project
A Refinery Continues Flow
Taxonomy of
process types
• Different types of process
Single-Piece vs
Batch Production
Flow
• Illustrative Example
• Scan the QR code or go to
bit.ly/hbsp2pIlZPE
Taxonomy of
process types
• Different types of process
Taxonomy of process types
• Job Shop vs. Continuous Process

Machine
Product Equipment Labor Fixed Variable
Setup
Volume Specialization Skills Cost Cost
Frequency

Job Shop Low Low High High Low High

Continuous
flow shop High High Low Low High Low

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The Product Process Matrix: Matching Product Positioning and Process Choice

highly customized standardized solution

high margin Product low cost
low volume Positioning high volume

flexible general inefficient

hospital organizations
Process

FI
T
RE
GI
ON

typically
Shouldice
rigid infeasible
(cash cow)

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 Process Choice: Matching products and processes
Low High Very high
Product volume; volume; volume;
One of a Very low
kind Many Standard Commodity
Process volume
products products products
Lost sales
Project
Opportunity costs
Job shop

Job shop

Batch

Assembly
Flow shop

line

Continuous Low utilization

flow High capital costs

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Process choice
• Should a production process change as a product matures?
Annual Sales
•Stable volumes Product
•Stable product design
•Stable process technology Lifecycle
•No first-mover advantage

•Low volumes
•Rapid changes in product design
•Process technology evolution
•Speed to the market is critical •Decreasing volumes
•No new model variations
•Service parts/Repairs dominate

Growth Maturity Decline

Time
Product
Introduction
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Lessons learned
• Product and process are closely inter-related
• They both go through life cycles

• Process needs to match product attributes

• A company’s competitive and marketing strategies need to be

translated to product attributes; process needs to be designed
accordingly

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Part 2
Process Analysis
Process Analysis: 3 steps

1) Process Flow Diagram

• Determine the inputs and outputs
• Determine the tasks and their sequence
• Determine which resources are used for each task
• Determine where inventory is kept in the process

2) Bottleneck analysis
• Determine the capacity of each stage/resource
• Determine the bottleneck stage/resource
• Determine the capacity of the process

3) Improvement decisions
• Recommend on how to improve the system

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Process Analysis Step 1: The Process Flow Diagram
• How do we represent the major elements of a process?

Activity/Task
Material Flow

Inventory Buffer

Information Flow

Decision Point
Process Analysis Step 1: The Process Flow Diagram
• Single Stage:

Single Station
Parallel Stations Parallel Stations
Separate Lines Single Line
Process Analysis Step 1: The Process Flow Diagram
• Multiple Stages:

Serial Process

Serial Process with

Inventory Buffer

Mixed Process
Process Analysis: 3 steps

1) Process Flow Diagram

• Determine the inputs and outputs
• Determine the tasks and their sequence
• Determine which resources are used for each task
• Determine where inventory is kept in the process

2) Bottleneck analysis
• Determine the capacity of each stage/resource
• Determine the bottleneck stage/resource
• Determine the capacity of the process

3) Improvement decisions
• Recommend on how to improve the system

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Example: Shopping in
• Process
1. The customer lists items to purchase
2. The customer pays at the cashier’
3. Items are retrieved from Darty’s warehouse
4. Customer receives items

• Benefits of drawing the process

• No need to have everything on display
• Easier to manage inventory (higher transparency)

• Let’s try to map this process...remember the recipe!

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Example: Shopping in
1. The Process Flow Diagram:
• Determine the inputs and outputs:

Customer Completed
Order Order

Input Output

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Example: Shopping in
1. The Process Flow Diagram:
• Determine the tasks and their sequence:

Customer Completed
Order Order

Input Output
Payment Retrieval Reception

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Example: Shopping in
1. The Process Flow Diagram:
• Determine which resources are used for each task:

Customer Completed
Cashier Mover Receptionist
Order Order

Input Output
Payment Retrieval Reception

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Example: Shopping in
1. The Process Flow Diagram:
• Determine where inventory is kept in the process:

Customer Completed
Cashier Mover Receptionist
Order Order

Input Output
Payment Retrieval Reception

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Process Analysis: 3 steps

1) Process Flow Diagram

• Determine the inputs and outputs
• Determine the tasks and their sequence
• Determine which resources are used for each task
• Determine where inventory is kept in the process

2) Bottleneck analysis
• Determine the capacity of each stage/resource
• Determine the bottleneck stage/resource
• Determine the capacity of the process

3) Improvement decisions
• Recommend on how to improve the system

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Definitions

• Flow (or Throughput) Time: The length of time a unit spends at a given
stage/process
• Cycle Time: The average time between the completion of successive
units
• Flow (or Throughput) Rate: The rate at which units flow through the
stage/process
• Capacity: The maximum rate at which units flow through the
stage/process
• Inverse of cycle time (if the process works at capacity)

To-do
=
Can do
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Example: Shopping in
2. Bottleneck Analysis:
• Determine the capacity of each stage/resource
• First determine the cycle time and then convert it to the capacity
for each stage:

Cashier Movers Receptionist

10 min/ord
Customer Completed
Order Order
4 min/ord 0.5 min/ord

10 min/ord

Payment Retrieval Reception

• Payment: It takes 4 mins per order per cashier; there is 1 cashier

• Cycle Time = 4 min; Flow Time = 4 min
• Capacity = 1/4 orders/min = 15 orders/hr
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Example: Shopping in
2. Bottleneck Analysis:
• Determine the capacity of each stage/resource
• First determine the cycle time and then convert to the capacity for
each stage:

Cashier Movers Receptionist

10 min/ord
Customer Completed
Order Order
4 min/ord 0.5 min/ord

10 min/ord

Payment Retrieval Reception

• Retrieval: It takes 10 mins per order per mover; there are 2 movers
• Cycle Time = 5 min; Flow Time = 10 min Flow time does not
depend on the number
• Capacity = 2/10 orders/min = 1/5 order/min = 12 orders/hr of parallel resources
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Example: Shopping in
2. Bottleneck Analysis:
• Determine the capacity of each stage/resource
• First determine the cycle time and then convert to the capacity for
each stage:

Cashier Movers Receptionist

10 min/ord
Customer Completed
Order Order
4 min/ord 0.5 min/ord

10 min/ord

Payment Retrieval Reception

• Reception: It takes 0.5 mins per order per recept.; there is 1 recept.
• Cycle Time = 0.5 min; Flow Time = 0.5 min
• Capacity = 1/0.5 orders/min = 2 orders/min = 120 orders/hr
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Example: Shopping in
2. Bottleneck Analysis:
• Determine the bottleneck of the process

• The bottleneck is the slowest stage/resource in the process. It

determines the capacity and the cycle time of the entire process.
Cashier Movers Receptionist

10 min/ord
Customer Completed
Order Order
4 min/ord 0.5 min/ord

10 min/ord

Payment Retrieval Reception

(15 orders/hr) (12 orders/hr) (120 orders/hr) Utilizations?
• Retrieval is the bottleneck!
• Process Cycle Time = 5 min; Process Flow Time = 14.5 min
• Process Capacity = 12 orders/hr
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Cycle Time

• Illustrative Example
• Scan the QR code or go to
https://qrco.de/bfMSIJ
Example: Shopping in
2. Bottleneck Analysis
• Why is the bottleneck so important?
• “An hour lost on a bottleneck is an hour lost for the entire plant”
• “An hour lost on a non-bottleneck is a mirage”
• “Manage the plant by the bottlenecks”

• And this brings us to the third part of the recipe!

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Process Analysis: 3 steps

1) Process Flow Diagram

• Determine the inputs and outputs
• Determine the tasks and their sequence
• Determine which resources are used for each task
• Determine where inventory is kept in the process

2) Bottleneck analysis
• Determine the capacity of each stage/resource
• Determine the bottleneck stage/resource
• Determine the capacity of the process

3) Improvement decisions
• Recommend on how to improve the system

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Process Analysis Step 3: Improvement Decisions

Identify the
system’s
bottlenecks

Remove the Decide how to

system’s exploit the
bottlenecks bottlenecks

Subordinate
everything else to
the bottlenecks
Goal: Utilize Bottleneck @ 100%
Example: Shopping in
3. Improvement Decisions: Managing by the bottleneck
• Implications:
• Always keep bottleneck running
• Add capacity only at the bottleneck:

• At Darty:
• Add more movers
• Simplify the pick-up process so that each mover can complete an order faster

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 Supply- and Demand- Constrained Processes

Bottleneck
Demand
Input

Flow Rate

Supply-Constrained Demand-Constrained
Why is it important to actively manage the bottleneck?
• Increases productivity: Can serve more customers within the
same amount of time
• Example: Nintendo Wii

“Nearly two years after the Wii’s launch, US consumers still can’t walk into a retailer such
as Best Buy or Wal-Mart and pick one up off the shelf. Online retailers haven’t done
much better, though secondary market sites like eBay have Wii consoles in stock - for a
price jacked up from the $249.99 retail cost of the console”
Source: Thomas Wailgum, CIO, August 22 2008

• Speculative Explanations:

“Perhaps, packaging problems with the console could be one source of delay”
“It is not a simple or cheap process to create a new set of molds in order to increase the
number of shells produced, and the plant may not have the capacity to generate more
shells even if it received additional molds”
Source: Thomas Wailgum, CIO, August 22 2008
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Let’s verify what we learned

We go for the Ace!

Other ways to increase bottleneck capacity

Resources
Labor Machines

Cross-train workers Invest in new equipment

Long Term Adjust number of Outsourcing
workers Improve reliability

Time Reduce setup time

Horizon Medium Term Subcontracting Preventive maintenance
Flexible time
Subcontracting
Hire part-time
workers
Short Term Priority management
Use overtime
Add shifts

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Process Improvement:
• Reduce process flow time:
• Be more responsive, i.e., produce/serve a unit within a shorter period
of time

• Why is this important?

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A few interesting facts about
• Zara was described by Louis Vuitton fashion director Daniel Piette
as “possibly the most innovative and devastating retailer in the
world”.

• Zara can offer considerably more products than similar

companies. It produces about 11,000 distinct items annually
compared with 2,000 to 4,000 items for its key competitors.

• The company can design a new product and have finished goods
in its stores in four to five weeks; it can modify existing items in
as little as two weeks, compared to a six-month industry average.

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Recap
• Flow time and cycle time are not necessarily the same:
• Flow time refers to a unit
• Cycle time refers to a task/stage in the process or the entire process
itself

• Relationships between bottleneck, system capacity and cycle

time:
• The bottleneck is the slowest stage/resource in the process
• The capacity of the bottleneck is the capacity of the process
• System capacity and cycle time are inverses of each other

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Next Class

• Quiz 1 – Process Analysis (due date by the next session)

• Preparation:
• Read the Metalarm case

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