Process-Flow Analysis

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McGraw-Hill Education
 Learning Objectives
 Describe process thinking and system boundaries.
 Explain how the process view of business is cross-
functional.
 Construct a process flowchart for a given process.
 Analyze a process by asking a wide variety of questions
informed by the process flowchart.
 Explain the principles of process redesign.

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 Process Flow Analysis
 Processes are encountered in all parts of a business, not only in operations and
supply chain management.
 Accountants use many processes, including collecting transactions, posting to the
ledger, trial balance, adjusting entries, financial statements, and closing entries.
Marketing managers also use numerous processes, including strategic planning,
marketing research, advertising, selling, and customer relations.
 All of these processes can be improved by the ideas of process-flow analysis
 Process-flow analysis requires viewing and analyzing the transformation process
as a sequence of steps connecting inputs to outputs. It is used to discover better
methods or procedures for producing and delivering a product or a service
deemed to be of value to customers.
 Measuring process flows is essential to process-flow analysis and to improving
transformation processes. Several process measures, including processing time,
throughput time, flow rate, inventory, and capacity.

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 Process Flow Analysis
 Throughput time refers to the total amount of time that it takes to run a particular
process in its entirety from start to finish. For example, a manufacturer can measure
how long it takes to produce a product, from initial customer order to sourcing raw
materials to manufacturing to sale.
 Processing time is the time between when an order is placed by a customer and
when the order is fulfilled by the business. how long you can expect it will take us to
process an application under normal circumstances. A processing time starts the day
we receive an application and ends when we make a decision.
 Flow rate is the speed at which fluid in a pipe moves, or the speed at which it moves
from a reservoir into a wellbore. the heart of a resting adult pumps blood at a rate of
5.00 liters per minute (L/min). Note that a liter (L) is 1/1000 of a cubic meter or 1000
cubic centimeters (10−3 m3 10 − 3 m 3 or103 cm3 10 3 cm 3 ).
 Inventory refers to all the items, goods, merchandise, and materials held by a
business for selling in the market to earn a profit. Example: If a newspaper vendor
uses a vehicle to deliver newspapers to the customers, only the newspaper will be
considered inventory.
 Production capacity is the maximum output that can be achieved in the production
of manufactured goods. It is generally a part-based metric that identifies the most
goods that can be created given a set amount of resources (time, labor, materials).
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 1. Process Thinking
 All work is a process.
 All business functions use processes.
 System: Collection of interrelated elements where…
Whole system > Sum of parts
 Apply systems thinking to business.
 Define system boundaries
 Use cross-functional teams for systems analysis.
 Include all affected functions

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 Process Thinking
 Process thinking is the point of view that all work can be seen as a
process. It begins by describing the process of interest as a system.
 A system is defined by its boundaries, inputs, outputs, suppliers,
customers, and system flows.
 System definition is needed before detailed measurement and
process flowcharting can begin.
 A system is a collection of interrelated elements whose whole is
greater than the sum of its parts. .
 A business organization can also be viewed as a system. Its parts are
the functions of marketing, operations, finance, accounting, human
resources, and information systems. Each of these functions
accomplishes nothing by itself.
 A business cannot sell what it cannot produce, and it does no good
to produce a product or service that cannot be sold.
 The functions in an organization are highly interactive and have
value as a system that they do not have separately.
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 Process Thinking
 Within operations, the transformation or conversion system is made up of workers,
equipment, customers (for services), and the activities that carry out the
transformation.
 The transformation system can be analyzed by first specifying the system
boundaries. The boundaries delineate the resources and activities in the system
being analyzed from those that are outside of the analysis and decision area.
 Identification of the system boundaries is always difficult and somewhat arbitrary,
but it must be done to separate the system being analyzed from the larger system
or organization in which it operates.
 In this sense, the boundaries of a firm separate the firm from the larger supply
chain in which it resides.
 To illustrate these concepts, consider the case of a bank that is installing a new information system.
The new system will replace the current one, with larger capacity, new hardware, and new software.
 Training will be required to operate the new system, and so human resources can be considered part
of the system.
 Operations will be affected by the new software and must be included within the system boundaries.
 Each part of the organization that is affected by the new information system should be included
within the system boundaries, and functions that are not affected can be excluded as being outside
the system boundaries.
 In this way, the appropriate system boundaries can be identified for purposes of analysis.
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 Process Thinking
 A cross-functional team should be formed, consisting of the
functions that are affected by the conversion to the new
information system.
 This team will be responsible for overseeing the conversion from
each of their functional perspectives and should handle the
interactions between functions.
 If this is done by a cross-functional team rather than workers from a
single function, a systems view of the project will be taken.
 This sort of process thinking considers all the interacting functions
within the system boundaries when making the conversion.

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 2. Process View of Business
 One of the most important contributions of process thinking is that a business
can be viewed as a system that consists of a collection of interconnected
processes.
 The process view of a business is horizontal in nature; the functional view is
vertical. This is shown graphically in Figure 6.1.

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 Process View of Business

CEO

M a rke ting O p e ra tio ns Fin an ce

Customer
request

Order
fulfillment

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 Process View of
Business
 As an illustration of interconnected processes in a business, consider a scenario.
• A sales team has a process for creating the customer order, while at the same time
interacting with operations to ensure adequate capacity is available to fill the order.
• Other marketing personnel use a process for pricing the customer order. Once
operations receives the order, the necessary processes are used to produce enough
output to fill the order.
• The shipping area has a process for securing the order for delivery, and
transportation is scheduled to deliver the order to the customer.
• Finance uses its own processes to bill and receive payment from the customer, while
relying on pricing information from marketing and order size and delivery
confirmation from operations.
 Viewing a business as a collection of processes emphasizes the cross-functional
nature of decision making. It illustrates that functions must make handoffs to
one another in executing a process.
 As a result, time and information can be lost between processes. In some cases,
the number of steps in a process is so large that the system cannot function in
an efficient and effective manner.

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 3. Process
Flowcharting

Creating a visual diagram to describe (represent) a

transformation process
Also called (or similar to):
◦ Process mapping
◦ Flow-process charting
◦ Service blueprinting
◦ Systems flowchart

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 Process Flowcharting
 Process flowcharting is a tool for beginning to understand and improve processes
within a larger system. This is a very commonly used tool in a wide variety of
industries.
 It can be useful for almost any type of process, to gain understanding of the
activities that must occur for the process to successfully produce a product or
service.
 Process flowcharting refers to the creation of a visual diagram to describe a
transformation process. Flowcharting is known by several names: process
mapping, flow-process charting, and in a service operations context as service
blueprinting.
 Value stream mapping is yet another approach to process flowcharting
popularized by firms that implement lean systems and lean thinking.
 Creating a visual diagram can be invaluable in documenting what happens within
a transformation process. This pictorial documentation, when it includes process
measurements, such as time or cost, can help to identify how the transformation
process can be improved by changing some or all of the following elements:
1. Raw materials, 2. Product or service design, 3.Job design, 4. Processing steps or
activities used, 5. Management control information, 6.Equipment or tools, 7. Suppliers
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 Process Flowcharting
 While there are many different specific forms of the flowchart in use, the most
common is the systems flowchart.
 An example of a systems flowchart for the “selecting a supplier” process is
shown in Figure 6.2.
 In this example, the systems flowchart is drawn from the perspective of the
buyer within an organization and shows the discrete steps, along with decision
points and flow sequences, in selecting a supplier.

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 Process Flowcharting
The principles are as follows:
1. Identify and select a relevant transformation process (or system)
to study. This can be the entire supply chain for a product or a
service, the entire firm, or a part of the firm, for example, the
shipping department. Ideally, the selected transformation process
is thought to affect performance.
2. Identify an individual or a team of individuals to be responsible
for developing the flowchart and for subsequent analyses. This
individual or team should have some familiarity with the
transformation process and should have process ownership, that
is, authority for initiating and/or implementing changes to the
process. When a selected transformation process cuts across
different functions, a cross-functional team should be involved.
When a selected transformation process cuts across the supply
chain, interfirm collaboration becomes critical.
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 Process Flowcharting
3. Specify the boundaries of the transformation process. The
boundaries denote where the selected transformation process
begins and ends, identify the customer(s) and the supplier(s) of
the transformation process, and determine how many processing
steps or activities are to be evaluated. In some cases, a function
or department within an organization is the customer or supplier;
in other cases, another firm is the customer or supplier.
4. Identify and sequence the operational steps or the activities
necessary to complete the output for the customer(s). It is
important in process flowcharting to depict what is actually
happening and not what one thinks is happening. Once the “as it
is” flowchart has been created and the transformation process
has been analyzed, creating a “to be” flowchart may help show
what the transformation process should look like when
improvement changes have been implemented.
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 Process Flowcharting
5. Identify the performance metrics for the operational steps or
the activities within the selected transformation process.
These metrics should be tied to the performance of the overall
transformation process. For example, if delivery performance
is of interest, it may be useful to track the processing times for
each operational step or activity. Alternatively, if quality
performance is of interest, it may be useful to track the defect
rate for each operational step or activity.
6. Draw the flowchart, defining and using symbols in a
consistent manner. Figure 6.4 shows the common symbols in
Microsoft Visio for creating a systems flowchart. These
symbols were used in Figures 6.2 and 6.3 and are also
consistent with ISO 9000 standards for flowcharting.

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 Process Flowcharting
1. Select a transformation process to study.
2. Form a team to develop flowchart & for analysis (to
improve the system).
3. Specify the boundaries of transformation process.
4. Identify and sequence the operational steps.
5. Identify the performance metrics for the steps.
- e.g., time to complete each step

6. Draw the flowchart, using consistent symbols.

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 4. Questions to Ask in Process-
Flow Analysis
 Creating a flowchart of a transformation process is an important
first step in process-flow analysis.
 Once created, the flowchart can be analyzed to yield insights into
how the transformation process can be improved, given a specific
improvement goal.
 The improvement goal, for example, can be to increase efficiency,
reduce throughput time, improve quality, or even boost worker
morale.
 A systematic approach should be followed to analyze the created
flowchart and the underlying transformation process. This
approach is epitomized by asking questions about the flowchart
and, by extension, the underlying transformation process.
 Table 6.1 shows typical questions about the performance of a system
regarding flow, time, quality, quantity, and cost.
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 Table 6.1: Process-flow
Questions about Performance

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 5. Process Redesign
 Process redesign usually starts with identifying critical processes required to
meet the customers’ needs. Then the critical processes, many of which cut
across organization boundaries, are analyzed in detail using the methods
described in this chapter.
 Changes are often made to these processes as a result of the insight from
process-flow analysis. These changes might include eliminating some steps and
combining others, or could be as extreme as a complete reconfiguration of
process steps. As a result, business processes are redesigned and integrated to
better serve the customer.
 The term business process reengineering (BPR) has also been used to label
extensive process redesign activities.
 In their famous book Reengineering the Corporation, Michael Hammer and
James Champy argue that most business processes are antiquated and need to
be completely redesigned. Many existing processes have been designed within
the confines of individual functions, such as marketing, operations, and finance
and also do not make use of complete information systems. As a result, these
processes take far too long to provide customer service and are inefficient and
wasteful.
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 Process Redesign
 Process redesign is radical redesign when processes simply cannot
be improved in small steps and require a complete rethinking and
rearrangement of process activities to improve them in a major
way, as was the case for the insurance company described above.
 Often radical redesign is supported by new technology, in the form
of either production technology or information technology.
 To pursue a successful radical redesign requires four principles:
1. Organize around outcomes, not tasks. The insurance company
was originally organized according to tasks, using the classic
division of labor. When the company reorganized around the
outcome, which was customer service, dramatic improvements
were made. A customer service representative handled all
activities associated with the desired outcome. Although it is not
always possible to have one person do everything, jobs can be
broadened and handoffs between departments can be
minimized.
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 Process Redesign
2. Have the people who do the work process their own information.
When bedside or portable information system access is available,
nurses can update patient electronic medical records as they are
dispensing medications to the patient. By doing so, nurses avoid
delaying the record update and also do not “hand off” the
information for input by someone else, thus reducing the
likelihood of inadvertent errors. This principle can be applied in
many situations in which information is passed from one
department to another.
3. Put the decision point where the work is performed, and build
control into the process. It is better to push decision making to the
lowest possible level. This will eliminate layers of bureaucracy and
speed up the decision-making process. In the insurance example,
the customer service representative had greater latitude to make
decisions directly for the customer rather than referring decisions
to other departments. To accomplish this, however, information
and controls must be built into the process itself.
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 Process Redesign
4. Eliminate unnecessary steps in the process. Simplifying the
processes frequently means that unnecessary steps and
paperwork are eliminated. Every step is examined by using
the flowcharting techniques discussed earlier, and only those
that add value for the customer should be retained. Process
redesign can be used to streamline and implify work flows.
 Process redesign is just one of many methods that can be used
to improve operations. It uses a process view of the organization
as a way of improving process flows. As a result of process
redesign, processes will be simplified, process flows improved,
and non-value-added work eliminated.

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 Principles of Process
Redesign
• Organize around outcomes, not tasks.
• Have the people who do the work process their own
information.
Avoid handoffs, whenever possible.

• Put the decision point where work is performed, and

build control into the process.
Make decisions at lowest possible level.

• Eliminate unnecessary steps in the process.

Simplify, eliminate non-value-added activities.

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 END

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Process Flowcharting

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 Fig 6.4: Common
Flowcharting Symbols

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Symbols for Flow-Process
Chart

Operation: task or work activity

Inspection: checking product quantity or quality

Transportation: movement of material from point to point

Storage: inventory of materials awaiting next operation

Delay: delay in sequence of operations

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Common Flowcharting
Symbols
Terminator: “START” and “END”

Process: operation, activity, or task

Decision: evaluation or “IF-THEN”

Flow: materials, information, customer

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 5.Process Analytics
 Once a process flowchart aimed at improving a transformation process has
been created, some basic measures of a transformation process can be
described. Process analytics uses these measures to yield insights into the
structure and performance of a transformation process.
 Once a process flowchart aimed at improving a transformation process has
been created, some basic measures of a transformation process can be
described. Process analytics uses these measures to yield insights into the
structure and performance of a transformation process.
 Little’s Law shows that the average number of items in a system (I) is the
product of the average arrival rate to the system (R) and the average time an
item stays in the system (T). This average time in the system is throughput time,
the time from when the processing begins until the product or service is
completely finished. It includes both active processing time and any waiting
time that occurs during processing.
 In mathematical terms Little’s Law is stated as follows:

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Measuring Process Flows
Little’s Law I=TxR

I = average number of things in the system (or

“inventory”)
T: average throughput time (processing time + waiting
time)
R = average flow rate into the process

◦ Relates number of items in the system (I) to arrival rate (R) and throughput
time (T).
◦ Assumes system is in a ‘steady state.’

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 Process Analytics
 In the case of airport security,
 if the security screeners can process an average of five passengers per minute (R = 5)
and it takes an average of 20 minutes to get through the security line (T = 20), the
average number of passengers in line (I) will be 100 (R × T = 100).
 An assumption is that the process is in a steady state in which the average output rate
equals the average input rate to the process.
 Little’s Law is very powerful and is widely used in practice. It applies to
manufacturing and service transformation processes. Little’s Law can be used in
a variety of settings and situations.
 Little’s Law applies to any steady-state transformation process including
manufacturing, people waiting in lines, invoice processing, transactions in a legal
office, and even accounts receivable processing. Little’s Law is useful when any
two of the three variables in the formula are known, then the third can be
calculated. The examples above show how this is done to calculate I and T. We
can also calculate R if we know I and T (R = I/T).

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 Process Analytics
 Next, we extend process analytics to include capacity, supply, and demand.
Capacity is the maximum rate of output from a transformation process or
the maximum flow rate that can be sustained over a period of time.
 In the airport security example, the average flow rate was five passengers
per minute, but the capacity of the security checkpoint may have been
greater, say, eight passengers per minute. With random arrivals (such as
passengers arriving to enter the line) it is necessary to have capacity that
exceeds the average arrival rate.
 If the arrival rate is greater than the capacity, the line will build up to an
infinite length due to the randomness of the arrivals. This occurs because
there are periods when the arrivals are less than the average and the full
capacity cannot be used during those times. Queuing (or waiting line)
theory, which is covered in a technical chapter,1 explains these phenomena
in detail.

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 Process Analytics
 Most processes are composed of several activities that require certain resources.
In the airport screening example resources include the workers who check each
passenger’s identification and boarding pass, operators who run the scanning
equipment, and the equipment itself. In general, if there are n resources that
process each transaction, then
Capacity = Minimum (capacity of resource1,...., capacity of resourcen)
 Note that the capacity of the entire process cannot be greater than the capacity
of the most constraining (the smallest capacity) resource, which is called the
bottleneck.
 The amount of output a transformation process actually produces will depend on
its capacity as well as the supply and demand of the process. The flow rate is as
follows: Flow rate = Minimum (Supply, demand, Capacity)

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Measuring Process Flows
System Capacity = capacity of the most constraining resource

→ The single resource with the least capacity is

called the bottleneck

Flow rate = minimum (Supply, Demand, Capacity)

Throughput time = from when processing begins until product or

service is completed

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Little’s Law Example
◦ People are in a line to get through security checks at a music festival.
An average of 10 people per minute are processed. People spend 24
minutes in line, on average.
◦ What is the average number of people in line?
◦ I=TxR
◦ I = 24 x 10 → I = 240 people in line, on average

◦ Same problem, but an average of 4 people per minute are processed,

and the average number of people in line is 240.
◦ What is the average time spent in line?
◦ T=I/R
◦ T = 240 / 4 → T = 60 minutes in line, on average

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 6. Pizza U.S.A. example
 To cement our understanding of the concepts of process analytics, let us look at a Pizza
U.S.A. example.
 Suppose that one of the pizza stores produces fresh pizza with seven different topping
choices, including the most popular “everything dump” pizza. The store is staffed by two
employees: a pizza chef and an assistant. It has an oven that can bake up to four pizzas at a
time. The transformation process (sequence of steps) followed at the store is as follows:
See Table1
Details: Assume all toppings added to every pizza. Two employees working
at a time.Oven can bake up to 4 pizzas at a time.
Activity Minutes Who/What
Take the order 1 Assistant
Make the crust 3 Chef
Prepare and add 2 Chef
ingredients
Bake the pizza 24 Oven
Cut pizza and box the 1 Assistant
order
Take payment 1 Assistant
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 Pizza U.S.A
1. What is the capacity of this process?
Looking at the three resources, we have:
The assistant takes 3 minutes per order (1 + 1 + 1) and thus can process 20
orders per hour. The chef takes 5 minutes per order (3 + 2) and can process 12
orders per hour.
The oven takes an average of 6 minutes per order (24 ÷ 4, because the oven
holds 4 pizzas at a time), or 10 orders per hour. For simplicity, we assume that
each order is for one pizza and that pizzas can be added to the oven any time
during the cooking cycle. The minimum of the three resource capacities is 10
orders per hour, and so the system can produce 10 orders per hour.
2. What is the bottleneck in this process?
The bottleneck in this case is the oven. The assistant is busy only half the time,
and the chef has 1 minute of idle capacity out of every 6 minutes of average
baking time. Reallocating jobs between the chef and the assistant to balance
the workload may make the chef happy but will not increase the flow rate of
the process. If Pizza U.S.A. wants to make more pizzas, something must be
done to accelerate the flow of pizzas through the oven, or another oven must
be added. The lesson here is that the process cannot produce more than the
bottleneck can process.
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 Pizza U.S.A
3. What is the throughput time?
If we assume there is no waiting time in this system, we simply add the times
of all the steps to fill an order: 1+3+2+24+1+1= 32mn
It takes 32 minutes to complete all the steps and make one pizza. Note that
adding an oven will increase the capacity and move the bottleneck to the
chef, but it will not change the throughput time. Changes would have to be
made in the actual process of cooking, preparation, or other flow times to
reduce throughput time.
4. What is the flow rate?
Assuming that demand and supply exceed capacity, the flow rate is
determined by the bottleneck capacity of 10 orders per hour. However, this is
the maximum flow rate; the actual flow rate could be much less. If either
demand or supply is less than capacity, then the smaller of the two will
determine the flow rate. In the following question, we assume demand is
only 60 percent of capacity, for a flow rate of six pizzas per hour.

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 Pizza U.S.A
5. What does it cost to make a pizza if the average demand is 60 percent of
capacity?
Assume the chef gets paid $15 per hour, the assistant gets paid $11 per hour,
and overhead cost is 50 percent of direct labor cost. At 60 percent of capacity,
the average flow rate is six pizzas per hour. The cost per hour of operations is
$15 + $11 = $26 for labor plus 50 percent added for overhead = $39 per hour, or
$39 ÷ 6 = $6.50 per pizza. Assume the cost of ingredients is $2.00 per pizza.
Therefore, the total cost is $6.50 + $2.00 = $8.50 per pizza.
6. How can the unit cost of pizzas be reduced?
• Three possibilities are:
 Increase demand through pricing, advertising, or other means.
 If demand increases to exceed capacity, increase the flow rate of the entire
transformation process by means of automation or process improvements.
 Reduce the unit cost of labor, materials, or overhead.
• As you can see, these three approaches are interconnected because increasing
demand will also require an increase in capacity at some point, and increasing
the flow rate does no good unless demand is increased to sell the additional
product.
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 Map the Process

STAR
Take Make Prep/add
T order crust ingredie
1 min. 3 min. nts2 min.

END
Take Cut/ Bake
payme box pizza
1 nt
min. pizza
1 min. 24
min.

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What is the Throughput
Time?

Throughput time = time to complete one

product or service

Pizza throughput time?

1 + 3 + 2 + 24 + 1 + 1 =
32 min.

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 What is Process Capacity?
3
resource
s
Assistant: 1+1+1=3 min. per pizza, 20
pizzas per hr.

Chef: 3+2=5 min. per pizza, 12 pizzas

per hr.

Therefore…
Oven: 24/4=6 min. per pizza, 10 pizzas per
hr. process capacity (flow rate) = 10 pizzas/hour
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 What is the Process
Bottleneck?
At an average process time of 6 min. per pizza…
the OVEN is the slowest activity…..
and that determines process capacity….
and is, therefore, the bottleneck.

The process cannot produce more

than the slowest activity.
(flow rate = 10 pizzas/hr)

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6-45
 Principles of Process
Redesign
• Organize around outcomes, not tasks.
• Have the people who do the work process their own
information.
Avoid handoffs, whenever possible.

• Put the decision point where work is performed, and

build control into the process.
Make decisions at lowest possible level.

• Eliminate unnecessary steps in the process.

Simplify, eliminate non-value-added activities.

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