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S. Chopra/Operations/Process Analysis & Apps1 Operations Management: Process Analysis and Applications Module u Operational Measures: Time T, Inventory.

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Presentation on theme: "S. Chopra/Operations/Process Analysis & Apps1 Operations Management: Process Analysis and Applications Module u Operational Measures: Time T, Inventory."— Presentation transcript:

1 S. Chopra/Operations/Process Analysis & Apps1 Operations Management: Process Analysis and Applications Module u Operational Measures: Time T, Inventory I, Throughput rate R u Capacity and Flow Time Analysis »Pizza Pazza / Bariatric Surgery »Levers for Improvement u Multi-product Capacity Management and Investment »Joint Marketing & Production Decisions »Optimal Capacity Investment

2 S. Chopra/Operations/Process Analysis & Apps2 Operational Performance Measures u How to measure and decrease flow times? u How to measure and increase throughput?

3 S. Chopra/Operations/Process Analysis & Apps3 Process Architecture is defined and represented by a process flow chart: Process = network of activities performed by resources 1. Process Boundaries: –input –output 2. Flow unit: the unit of analysis 3. Network of Activities & Storage/Buffers –activities with activity times –routes: precedence relationships (solid lines) 4. Resources & Allocation 5. Information Structure & flow (dashed lines)

4 S. Chopra/Operations/Process Analysis & Apps4 Pizza Pazza Flow Chart

5 S. Chopra/Operations/Process Analysis & Apps5 Operational Measure: Flow Time Driver: Activity Times u (Theoretical) Flow Time u Critical Activity u Flow Time efficiency

6 S. Chopra/Operations/Process Analysis & Apps6 Most time inefficiency comes from waiting: E.g.: Flow Times in White Collar Processes

7 S. Chopra/Operations/Process Analysis & Apps7 Levers for Reducing Flow Time u Decrease the work content of critical activities –work smarter –work faster –do it right the first time –change product mix u Move work content from critical to non-critical activities –to non-critical path or to ``outer loop u Reduce waiting time.

8 S. Chopra/Operations/Process Analysis & Apps8 Operational Measure: Capacity Drivers: Resource Loads u (Theoretical) Capacity of a Resource u Bottleneck Resource u (Theoretical) Capacity of the Process u Capacity Utilization of a Resource/Process = throughput [units/hr] capacity [units/hr]

9 S. Chopra/Operations/Process Analysis & Apps9 A Recipe for Capacity Measurements * assuming system is processing at full capacity

10 S. Chopra/Operations/Process Analysis & Apps10 Bariatric Surgery :Flow Chart

11 S. Chopra/Operations/Process Analysis & Apps11 Bariatric Clinic Capacity – Open Surgeries & Cash Payment

12 S. Chopra/Operations/Process Analysis & Apps12 Bariatric Clinic Capacity – Laparoscopic Surgeries & Cash Payment

13 S. Chopra/Operations/Process Analysis & Apps13 Bariatric Clinic Capacity – Open Surgeries & Insurance Payment

14 S. Chopra/Operations/Process Analysis & Apps14 Bariatric Clinic Capacity – Laparoscopic Surgeries & Insurance Payment

15 S. Chopra/Operations/Process Analysis & Apps15 Levers for Increasing Process Capacity u Decrease 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 & blockage u Move work content from bottlenecks to non-bottlenecks –to non-critical resource or to third party u Increase Net Availability –work longer –increase scale (invest) –increase size of load batches –eliminate availability waste

16 S. Chopra/Operations/Process Analysis & Apps16 Increasing Process Capacity in The Goal u 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 bottlenecks u reduce/eliminate setups and changeovers »synchronize flows to & from bottleneck u reduce 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. »invest

17 S. Chopra/Operations/Process Analysis & Apps17 Other factors affecting Process Capacity u Batch (Order) Sizes u Product Mix u other managerial policies...

18 S. Chopra/Operations/Process Analysis & Apps18 Product Mix Decisions: Open or Laparoscopic Surgery Revenue per open surgery:$15,000 Variable Cost of Materials:$1,000 Revenue per Laparoscopic surgery:$18,000 Variable Cost of Materials: $2,000

19 S. Chopra/Operations/Process Analysis & Apps19 Product Mix Decisions Open and Laparoscopic have exactly the same process. The only difference is in surgery (laparoscopic takes 30 minutes extra) and in the rooms (laparoscopic uses rooms for 2 days whereas open uses rooms for 4 days.

20 S. Chopra/Operations/Process Analysis & Apps20 Product Mix Decisions Margin per Open surgery = $14,000 Margin per Laparoscopic surgery = $16,000 Margin per week from Open surgery = 72.72*(15, ,000) = $1,018,055 / week Margin per week from Laparoscopic surgery = 63.15*(18, ,000) = $1,010,400 / week

21 S. Chopra/Operations/Process Analysis & Apps21 Learning Objectives: Process Analysis u Manage better with the three key operational measures and an inter-functional macro process view of the organization u Process measures: –Flow time manage critical activities –Capacity manage bottleneck resources u Levers for improving –Flow time manage critical activities –Capacity & Throughput u Many marketing and financial decisions are linked to process –Effect of product mix decisions on process capacity »marginal contribution per unit of bottleneck capacity used –Bottleneck may shift on adding capacity è diminishing returns to capacity investment


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