MSBA 7004

Operations Analytics

Class 1-2: Process Flow Analysis (I)

Capacity Rate, Flow Time, Bottleneck
2024
1
 Process Analysis
• Improving a process
– Capacity
• Bottleneck Analysis
• Levers for Improvement

– Flow Time (Responsiveness)

• Critical Path Analysis
• Improvement Levers

2
 Learning Objectives
• Understand the following concepts:

Flow Time Capacity Rate Bottleneck

• Tool: Process Analysis

– Objective: Improve the process
– Process mapping
– Capacity analysis (also called bottleneck analysis)
• Applications
– McDonald’s make-to-order system
– Kristen’s Cookie Company case (Assignment 1)
– Shouldice Hospital case (Assignment 2)

3
 Processes are complex: Example

Restaurant

• What is the “capacity” of a restaurant?

– How many customers you can serve in a given period of time, X
customers/day.
• What does it depend on?
– Resources (number of staffs)
• Why is it important?
– Affects revenue
4
 Understanding Process
… and Making Them Visible
• Process Flow Diagram: A good tool for understanding process and
making them visible
• Process mapping: The activity of constructing a process flow
diagram
– First identify the boundary of the process to analyze
• Ex. Program (Module 1 – 5) or MSBA 7004 (Class 1 - 10)
– Identify all activities in the process and how items flow through the
process
• Ex. Classes, exams….
– Identify all resources in the process and which activities they are
responsible for
• Ex. Instructor, TAs…
– Multiple products (flow units) and/or exceptions: Conditional routing
depending on the product’s characteristics
• Ex. Different customer orders, Different courses to take…
– Flow: Not only materials, but also capital and information to drive and
control processes (production, service processes)
• We focus on material flows. How the flow units flow through the process. 5
 Understanding Process
… and Making Them Visible
• Process Flow Diagram: A good tool for understanding process and making
them visible
• Process mapping: The activity of constructing a process flow diagram
– First identify the boundary of the process to analyze
– Identify all activities in the process and how items flow through the process
– Identify all resources in the process and which activities they are responsible
for
– Multiple products and/or exceptions: Conditional routing depending on the
product’s characteristics
– Flow: Not only materials, but also capital and information to drive and control
processes
• Generating a map and visualizing a processes makes it easier to analyze
and can lead to new insights into how to better manage the process
• Types of process flow diagram: Standard, Linear, Swim-Lane, Gantt Chart,
etc.

6
 Process Entities
• Flow units: The items that flow through the process
– May be homogenous (identical) or heterogeneous (different)
– Ex. Red marker, MSBA student, etc.

• Activities: The transformation steps in the process where value is added to

the flow units (and resources being used)
– Each activity takes some time to complete
– Ex. MSBA 7004, MSBA 7003, etc.

• Resources: They perform the activities (value-adding)

– Each resource has its own capacity
– Ex. Instructor, TA, classroom, program staff, etc.

• Buffers: Storage units for flow units (non value-adding)

– May have finite size
– Any non value-adding time spent corresponds to a buffer
– Ex. Break between Module 1 and 2, etc.
7
 Process Flow Diagram Elements
Activities, tasks or operations

Buffers: Queues or inventories

Decision points (multiple types of units)

Flow of materials

• Example: Bread making

Bread
Raw Finished Packing Packed
Making
Material Bread Bread
Note: For different type of breads, the bread-making and packing activities may differ for each
8
Which resources are being used?
 Process Flow Diagram Elements
Activities, tasks or operations

Buffers: Queues or inventories

Decision points (multiple types of units)

Flow of materials

• Example: Bread making

Bread
Raw Finished Packing Packed
Making
Material Bread Bread
Note: For different type of breads, the bread-making and packing activities may differ for each
9
Employees, oven
 Flow through a process
At any time in a EXAMPLE EXAMPLE
process, Process: Security Process: Shipping an
screening at HKG order of paper from a
A flow unit may be Flow unit: A passenger paper mill to a customer
… Flow unit: An order

Undergoing an The passenger may be The order may be in

activity, or … actively involved in some transit, or
portion of the screening
process, or

Waiting in a buffer to Waiting (in buffer) to Waiting (in buffer) to be

undergo an activity undergo a screening shipped on some leg of
activity its route

10
 Key Steps in Process Analysis
Step 1: Determine the Purpose of the analysis
Step 2: Process mapping (Define the process)
• Determine the process boundary
• Determine the flow units
• Determine the activities, and the sequence of them
• Determine the time for each activity
• Determine which resources are used in each activity
• Determine where inventory is kept in the process (buffer)
• Record this through a process flow diagram

Step 3: Capacity Analysis (also called Bottleneck Analysis)

• Determine the capacity of each resource, and of the process

11
 Process Map Example: CT Scan

Patient Is the contrast Patient receives

Patient
Available? enters CT exam dye required? dye injection
room in preparation for
the procedure

Need to
Patient be admitted? CT scan
waits for porter
in the waiting area

Porter arrives and

Patient exits
patient is placed
on stretcher CT facility

12
 Example: McDonald’s Kitchen
• Purpose of the analysis: To determine the
capacity rate of a McDonald’s restaurant
• Given this purpose, we draw the process
boundary around the kitchen
– We do not consider customers’ queue
– We do not consider meat cooking processes (we
assume cooked meat is always available when
needed during the make-to-order process)

13
 Linear Flow Chart
• Flow unit: An order (each order = one burger)
• Tasks (activities) and their sequences
• Flow time (activity time) of each task
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

8s 10s 8s 6s 2s 2s

• Determine which resources are used in each task

• Could indicate resources along each task
• Swim-lane diagram or Gantt chart may be better
14
 Swim-Lane (Deployment) Flowchart
RESOURCES ACTIVITIES

Cashier Place an
order

Toaster Toast
buns

Toast
Worker1 buns

Add
Worker 2 dressings

Add meat
Worker 3 patties

Worker 4 Package

Worker 5 Deliver
15
 Swim-Lane (Deployment) Flowchart
RESOURCES ACTIVITIES

Cashier Place an
order

Toaster Toast
buns

Toast
Worker1 buns

Add Add meat

Worker 2 dressings patties
Package

Worker 5 Deliver
16
 Gantt Chart
RESOURCES ACTIVITIES Time Span

Place an 8s
Cashier
order
Worker1 10s
Toast buns
Toaster
Add 8s
Worker 2
dressings
Add meat 6s
Worker 3
patties
2s
Worker 4 Package
2s
Worker 5 Deliver
Time
17
 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 map itself is informative
– Visualization always work
• Starting point for process analysis
– Great tool for brainstorming process improvements

18
 Capacity of a Resource
• Unit Load of a Resource (Ti)
– The average time it takes for a resource to perform all activities (task) it is in
charge on one flow unit
– Ex) An ATM machine takes 60 seconds per customer on average

• Capacity of a resource (1/ Ti)

– The maximum number of flow units that a resource can complete in a certain
period of time
– Ex) 1 customer / 60 seconds= 1/60 customer per second = 1 customer per min
• A Pool of Resources
– Effective capacity of a pool of Resource (ci/Ti)
– ci=number of servers in the resource pool
• Ex) 3 ATM machines
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 Basic Process Analysis
Single Stage Process

Toast buns

Toaster
Worker 1

Flow Time
(Time that buns spend in the toaster = worker 1’s
time required for each bun)
10 sec

Capacity Rate (of toaster and worker 1)

6 orders/min, or 360 orders/hr

20
Process Performance Characteristics: Capacity Rate and
Flow Time VS. Cycle Time
• Capacity rate: Maximum rate at which (flow) units can flow
through the process
• (Theoretical) Flow time (or Throughput time): Total length
of time a unit spends in the process
– Shortest time (hence without waiting at all) for a flow unit to go
through the entire process
– In practice, flow time is often referred to as cycle time, but we
should distinguish
• Cycle time: In theory, the inverse of the capacity rate
– Equivalent to the average time between completion of
successive flow units
– Think as interval between consecutive finishes
– McDonald’s Example
• You may wait 5 minutes for one order. Every minute, there could be
multiple orders finished.
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 Basic Process Analysis
Multiple Stage Process
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toaster
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec

? ? ? ? ? ?

23
 Basic Process Analysis
Multiple Stage Process
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toaster
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec

450/hr 360/hr 450/hr 600/hr 1800/hr 1800/hr

Note: The theoretical

Theoretical Flow Time of the whole process: 36
???
sec flow time ignores the
possibility of waiting;
so it is the lowest
possible flow time
Capacity rate of the whole process: 360???
orders/hr
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 Basic Process Analysis
Multiple Stage Process
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toaster
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec

450/hr 360/hr 450/hr 600/hr 1800/hr 1800/hr

Note: The theoretical

Theoretical Flow Time of the whole process: 36 sec flow time ignores the
possibility of waiting;
so it is the lowest
possible flow time
Capacity rate of the whole process: 360 orders/hr
25
 Gantt Chart: Multiple Stage Process
RESOURCES ACTIVITIES Time Span

Place an 8s 8s 8s
Cashier
order
Worker 1 10s 10s 10s
Toast buns
Toaster
Add 8s 8s 8s
Worker 2
dressings
Add meat 6s 6s 6s
Worker 3
patties
2s 2s
Worker 4 Package
2s 2s
Worker 5 Deliver
Flow Time =36s Cycle Time =10s
26
 The Bottleneck
• The resource(s) with the lowest capacity rate
– The “slowest” resource(s)
– Unit load (Ti): Total amount of time the resource
works to process each flow unit
– A process can have multiple bottlenecks
• Determines the capacity rate of the entire
process
• Will the increase of the capacity of non-
bottleneck resources increase the capacity rate of
the process??
27
 Capacity and Bottleneck

Bottleneck
Input

Maximum Flow Rate

(Capacity Rate)

Flow Time

28
 Capacity and Bottleneck

Bottleneck
Input

Maximum Flow Rate

(Capacity Rate)

Flow Time

29
Increasing the capacity rate of a process:
Place an
What if we add a cashier?
order
Toast Add Add meat
Package Deliver
Place an buns dressings patties
order
Worker 1
Cashiers Worker 2 Worker 3 Worker 4 Worker 5
Toaster
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec
900/hr
450/hr ??? 360/hr 450/hr 600/hr 1800/hr 1800/hr
(2 * 450/hr)

Theoretical Flow Time of the whole process: 36 sec

Capacity rate of the whole process: 360 orders/hr

30
 Increasing the capacity rate of a process:
What if we add a toaster (and another worker)?
Toast buns
Place an Add Add meat
Package Deliver
order dressings patties
Toast buns

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toasters
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec
720/hr
450/hr 450/hr 600/hr 1800/hr 1800/hr
(2 * 360/hr)

Theoretical Flow Time of the whole process: 36 sec

Which resource is the bottleneck?

Capacity rate of the whole process: 450 orders/hr

31
 Adding a Toaster: Gantt Chart
RESOURCES ACTIVITIES Time Span
Place an After adding a toaster
Cashier 8s 8s
order and worker 6, worker 2
and cashier become
Worker 1 10s
Toast buns the bottleneck
Toaster 1
Worker 6 10s
Toast buns
Toaster 2
Add 8s 8s
Worker 2
dressings
6s 6s
Add meat
Worker 3
patties
2s 2s
Worker 4 Package
2s 2s
Worker 5 Deliver
Flow Time = 36s Cycle Time =328s
Increasing the Capacity Rate of a Process
• Increase the capacity rate of the bottleneck
– Expand the resource pool (add resource)
Other way?
– Reduce Unit Load
• Some other resources may become a bottleneck
when capacity is increased
– Shifting the bottleneck
– Increase in bottleneck capacity does not always result in
commensurate increase in process capacity
– Important when we justify additional capacity

33
 Increasing Capacity (1)
Increase the Size of the “Resource Pool”
• One Toaster • Two Toasters
Capacity rate: 360/hr Working in Parallel
Capacity rate: 720/hr
10 sec
Toast buns Toast buns
10 sec
Toast buns
10 sec

34
Expand the resource pool at the bottleneck

Toast buns
Place an Add Add meat
Package Deliver
order dressings patties
Toast buns

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toasters
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec
720/hr
450/hr 450/hr 600/hr 1800/hr 1800/hr
(2 * 360/hr)

Theoretical Flow Time of the whole process: 36 sec

Capacity rate of the whole process: 450 orders/hr

35
 Increasing Capacity (2)
Reducing the Unit Load
• Current Toaster • Faster Toaster
Capacity rate: 360/hr Works twice as fast
Capacity rate: 720/hr

Toast buns Toast buns

10 sec 5 sec

36
 Reduce Unit Load at the Bottleneck
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toaster
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 450/hr 720/hr 450/hr 600/hr 1800/hr 1800/hr
Rate

Theoretical Flow Time : 31 sec Capacity rate of the process: 450 /hr
37
 Any operational benefit of reducing unit
load at non-bottlenecks?
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

Worker 1
Cashier Worker 2 Worker 3 Worker 4 Worker 5
Toaster
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 900/hr 360/hr 600/hr 900/hr 3600/hr 3600/hr
Rate

Theoretical Flow Time : 26 sec Capacity rate of the process: 360 /hr
38
 Beyond Basics:
Unit Load & Buffer Effects
Resource Unit Load Capacity Rate Capacity rate
(sec/unit) (unit/min) (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

39
 Thinking in terms of “Unit Loads”
Place an Toast Add Add meat
Package Deliver
order buns dressings patties

Worker 1
Cashier Worker 2 Worker 3 Worker 3 Worker 3
Toaster
8 sec 10 sec 8 sec 6 sec 2 sec 2 sec

Note: The theoretical

Theoretical Flow Time of the whole process: 36 sec flow time ignores the
possibility of waiting;
so it is the lowest
possible flow time
Capacity rate of the whole process: 360 orders/hr
40
Thinking in terms of “Unit Loads”
Resource Unit Load Capacity Rate Capacity rate
(sec/unit) (unit/min) (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

41
 Whiteboard I (Formula for Capacity Rate)
• Capacity Rate of a single resource
= maximum output (or throughput) rate of a single resource
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒
=
𝑈𝑛𝑖𝑡 𝐿𝑜𝑎𝑑

• Capacity Rate (by default, of a process)

= maximum output (or throughput) rate of a process
= capacity rate of bottleneck resource
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐵𝑜𝑡𝑡𝑙𝑒𝑛𝑒𝑐𝑘 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒 By formula for capacity rate of a single
=
𝑈𝑛𝑖𝑡 𝐿𝑜𝑎𝑑 𝑜𝑓 𝐵𝑜𝑡𝑡𝑙𝑒𝑛𝑒𝑐𝑘 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒 resource
1
= By definition of cycle time (see next slide)
𝐶𝑦𝑐𝑙𝑒 𝑇𝑖𝑚𝑒

42
 Whiteboard II (Formula for Flow Time)
• (Theoretical) Flow Time of a single activity
= Unit Load of the Resource for that activity
• (Theoretical) Flow Time (by default, of the Process)
= Sum of Flow Time of all activities
• Cycle Time, defined as Additional Time Required for
Producing One More Unit
𝑈𝑛𝑖𝑡 𝐿𝑜𝑎𝑑 𝐹𝑜𝑟 𝐵𝑜𝑡𝑡𝑙𝑒𝑛𝑒𝑐𝑘 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒
=
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐵𝑜𝑡𝑡𝑙𝑒𝑛𝑒𝑐𝑘 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒
1
=
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑅𝑎𝑡𝑒
• Flow Time for producing k flow units
= Flow Time + (k-1)*cycle time Because each additional Unit takes
= Flow time +(k-1) *1/capacity rate another cycle to produce, see
example in the next slide (after the
process being stable)
43
 𝑇𝑜𝑡𝑎𝑙 𝑇𝑖𝑚𝑒 𝑓𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑖𝑛𝑔 𝑘 𝑢𝑛𝑖𝑡𝑠
= 𝐹𝑙𝑜𝑤 𝑇𝑖𝑚𝑒 36𝑠 + 𝑘 − 1 ∗ 𝐶𝑦𝑐𝑙𝑒 𝑇𝑖𝑚𝑒 10𝑠
= 36 + 10 𝑘 − 1 𝑠

RESOURCES ACTIVITIES Time Span

Place an 8s 8s
Cashier
order
Worker1 10s 10s
Toast buns
Toaster
Add 8s 8s
Worker 2
dressings
Add meat 6s 6s
Worker 3
patties
2s 2s
Worker 4 Package
2s 2s
Worker 5 Deliver
Flow Time = 36s Cycle Time = 10s
44
 1 1
𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑅𝑎𝑡𝑒 = ≠ , Why?
𝐶𝑦𝑐𝑙𝑒 𝑇𝑖𝑚𝑒 𝐹𝑙𝑜𝑤 𝑇𝑖𝑚𝑒

RESOURCES ACTIVITIES Time Span

Place an 8s 8s
Cashier
order
Worker1 10s 10s
Toast buns
Toaster
Add 8s 8s
Worker 2
dressings
Add meat 6s 6s
Worker 3
patties
2s 2s
Worker 4 Package
2s 2s
Worker 5 Deliver
Flow Time =36s Cycle Time =10s
45
 Whiteboard III
CR: Capacity Rate (of the Process)
FL: Flow Time (of the Process)

Reduce Unit Load Increase Number Increase Unit Load

of Resources

Non- CR = CR = CR ↓ if it becomes
Bottleneck FL ↓ FL = the new
Resource bottleneck;
= otherwise
FL ↑
Bottleneck CR = if not CR = if not unique; CR ↓
Resource unique; ↑ if unique FL ↑
↑ if unique FL =
FL ↓

46
 Whiteboard III
CR: Capacity Rate (of the Process)
FL: Flow Time (of the Process)

Reduce Unit Load Increase Number Increase Unit Load

of Resources

Non- CR = CR = CR ↓ if it becomes
Bottleneck FL ↓ FL = the new
Resource bottleneck;
= otherwise
FL ↑
Bottleneck CR = if not CR = if not unique; CR ↓
Resource unique; ↑ if unique FL ↑
↑ if unique FL =
FL ↓

47
 In Class Practice Problems
• Assume that you have been hired to improve a new product
development process in an electronics manufacturer. Currently, the
new product development process consists of a market study done
by the marketing department (stage 1), a design study done by the
design department (stage 2), a manufacturing study done by the
manufacturing department (stage 3), and a final financial study
done by the finance department (stage 4) that leads to a pricing
decision for the product. For each stage, we characterize the
processing time (in months) that department takes to complete its
study for one new product. Since the firm has a severe labor
shortage, staff at each stage can only work on only one new
product development project at a time.

48
 In Class Practice Problems

• Which resource(s) (corresponds to the process stage(s)) is the bottleneck?

What is the capacity rate of the firm in developing new products?
• Bottleneck is the resource(s) with lowest capacity. Design and manufacturing
departments are both bottleneck. Capacity rate is 0.25 projects/month = 3
projects/year.
• How long the development of a new product takes in this company? (What is
the theoretical flow time?)
2+4+4+0.5=10.5 months

49
You observe a long line at a Bakery with
customers leaving every 4 minutes. What is the
capacity (in customers per hour) of the bakery?

Cycle time: 4 minutes.

Capacity: ¼ customers/minutes = 15 customers/hour.

50