1. Copyright © 2014 McGraw-Hill Higher Education. All rights reserved. CHAPTER 3 Managing Processes and Capacity McGraw-Hill/Irwin

2. Learning Objectives LO3-1 Understand the importance of processes and process thinking LO3-2 Define the various components of a process LO3-3 Distinguish between operational, tactical, and strategic capacity planning LO3-4 Estimate capacity and utilization LO3-5 Explain the impacts of bottlenecks, variance, and other factors on performance. LO3-6 Describe process improvement methodologies 3–2

3. What is a process? A system of structured activities that use resources to turn inputs into valuable outputs. Process thinking views activities in an organization as a collection of processes 3–3 LO3-1

4. Activities of a process Operations change inputs Transportation moves an input from place to place Inspection verifies the results of an activity Delay unintentionally stops the flow of an input Storage is the formal inventorying of an input 3–4 LO3-2

5. Process Capacity Capacity: amount of input that can go into or the amount of output that can be created by a process, at a given level of resources over a given time period 3–5 LO3-4

6. Theory of Constraints (TOC) 1.Every process has a constraint 2.Every process has variance that consumes capacity 3.Every process must be managed as a system 4.Process measures are crucial to the processs success 5.Every process must continually improve 3–6 LO3-5

7. Measures of process flow: Flow time: time for one unit to get through a process Cycle time: time it takes to process one unit at an operation in the overall process Littles Law: there is a relationship between flow time (F), inventory level (I) and throughput rate (TH) Every Process has a Constraint 3–7 LO3-5

8. Variability in: Outputs: product variety and variable schedules Processes: quality variance, resource availability, and processing speed Inputs: variance in quality and delivery 3–8 Variance Consumes Capacity LO3-5

9. Processes Managed as Systems 3–9 Changing one element of a process may impact other elements, sometimes in unexpected ways. Process elements are interdependent –Activities –Inputs/Outputs/Flows –Process structures –Management policies LO3-5

10. Measure Processes for Success Metrics should address aspects of performance that are important to both customers and the organization. 3–10 LO3-5

11. Continuous Improvement of Processes Kaizen: focused, incremental improvement efforts small + small + small + small + … + n = LARGE 3–11 LO3-5

12. 3–12 Managing Process and Capacity: A Summary - Part I 1.Processes define a business. 2.A process is a collection of activities. 3.Processes are characterized by activities, flows, structures, resources, and metrics. 4.Supply chain capacity should be managed strategically. 5.There is a proven link between output volumes and process economies.

13. 3–13 6.The bottleneck activity sets the maximum level of output of any process. 7.Capacity requirements depend on processing and setup times. 8.Variability consumes capacity, cost, and lead times. 9.Processes need to be continuously improved Managing Process and Capacity: A Summary - Part II