Presentation on theme: "OMG Operations Management Spring 1997"— Presentation transcript:
1 OMG 402 - Operations Management Spring 1997 OMG Spring 1997LN 2: Process AnalysisOMG Operations Management Spring 1997CLASS 2: PROCESS ANALYSISHarry GroeneveltBring:- course packets- lecture notes- Boeing article- Course Overview- gray cards- nameplates- marker
2 Agenda Recap Capacity Bottlenecks and Congestion OMG Spring 1997LN 2: Process AnalysisAgendaRecapCapacityBottlenecks and CongestionThe Multi-Product CaseTypes of Processes and Process StrategyConclusion
3 Recap Process mapping Little’s Law: OMG Spring 1997LN 2: Process AnalysisRecapProcess mappingLittle’s Law:(average throughput) = (average WIP)/(average lead time)Observing throughput is not the same as observing lead time (one is flow, the other is time).information flowDataholdaddvalue
4 Recap: The Toll Booth Process OMG Spring 1997LN 2: Process AnalysisRecap: The Toll Booth Process3 booths‘plaza’entrancelineexitlinethroughput:# cars across entrance line / min.stock:# cars in plaza +# in boothlead time:time to cross plaza +time in booth (min.)
5 Recap Possible process flow diagram: toll booths = ‘workstation 2’ OMG Spring 1997LN 2: Process AnalysisRecapPossible process flow diagram:Toll boothArrivalsTraverse plazatoll booths =‘workstation 2’plaza = ‘workstation 1’
6 Recap Will Little’s Law ‘work’ if toll booth service time is variable? OMG Spring 1997LN 2: Process AnalysisRecapWill Little’s Law ‘work’ if toll booth service time is variable?Will Little’s Law work if arrivals are ‘lumpy’?How can we predict the maximum possible throughput?
7 OMG Spring 1997LN 2: Process AnalysisCapacity: Definitioncapacity: the upper limit on the throughput of a process (or of a workstation within the process)For even the simplest systems, capacity estimates can vary with thetime horizontype of demand (if there are multiple products)mix of demand (if changeovers take time)
8 Capacity Example: Toll Booth OMG Spring 1997LN 2: Process AnalysisCapacity Example: Toll BoothBooths0.2 min.0.2 min. to process toll (raw process time), for each of 3 toll booths.0.5 min. to cross plaza (raw process time).Arrivals0.5 min.0.2 min.0.2 min.
9 Capacity Example: Toll Booth OMG Spring 1997LN 2: Process AnalysisCapacity Example: Toll BoothIf items are handled one at a time, then: capacity = 1/(raw process time).(This is just Little’s Law, applied to a server who is assumed to be always busy)Capacity of one toll booth = ______Capacity of three toll booths = _______Is the capacity of the plaza 1/(0.5 min.)? Why or why not?
10 Bottlenecks and Congestion: Definitions OMG Spring 1997LN 2: Process AnalysisBottlenecks and Congestion: Definitionsbottleneck: any workstation with capacity less than or equal to the demands placed on it or - the bottleneck is the limiting constraint on the entire process as demand increases. By definition, the capacity of the bottleneck determines the capacity of the entire process.
11 Bottlenecks and Congestion: Definitions OMG Spring 1997LN 2: Process AnalysisBottlenecks and Congestion: DefinitionsUtilization of a workstation = throughput / capacityFor random systems, congestion builds at the bottleneck as throughput approaches capacity (utilization approaches 1)….capacitynumberin systemThroughput: Utilization:0.20.40.60.81.0
12 Bottlenecks and Congestion: A Deterministic (Non-Random) Example OMG Spring 1997LN 2: Process AnalysisBottlenecks and Congestion: A Deterministic (Non-Random) ExampleProduction of precision aluminum panelsMilling is continuous with capacity 12 ft2/hourShot-peening is done in batches in a chamber: a batch of 24 ft2 takes 2 hoursLoading of batches is essentially instantaneousAssume both processes are deterministic (not random)raw materialsbuffermillingshot-peening (S-P)- describe shot-peening…Squares are “processes” or “activities”; triangles are storage.This is a rudimentary “bottlneck analysis”; S-P is the bottlneck.Hhow fast can milling go?If S-P at 20, is nothing in the buffer? No - if S-P is a batch process.
13 Capacity: A Deterministic Example OMG Spring 1997LN 2: Process AnalysisCapacity: A Deterministic ExampleWhat is the capacity of the S-P chamber?What is the capacity of the line?Where is the bottleneck?What do we see in the milling/SP buffer…?raw materialsbuffermillingshot-peening (S-P)
14 Capacity: A Deterministic Example OMG Spring 1997LN 2: Process AnalysisCapacity: A Deterministic Exampleinventoryin buffer(ft2)Find the average inventory in the buffer:Find the avg. time spent waiting in the buffer:What happens if batches are cut in half?Would it help to expand milling capacity (say, to 24 ft2/hour)?1234hours
15 Capacity and Bottleneck Insights OMG Spring 1997LN 2: Process AnalysisCapacity and Bottleneck InsightsInsight 1: Bottlenecks determine the overall capacity of a process.Insight 2: In a system with randomness, stock and lead time explode as utilization at the bottleneck approaches 1.Insight 3: Even in a deterministic system, large batches increase stock and extend lead times.
16 The Multi-Product Case OMG Spring 1997LN 2: Process AnalysisThe Multi-Product CaseThings are more complicated when multiple products each have different processing times on the same machine.For such a system, we’ll consider:What is capacity?What is a bottleneck?
17 Bottlenecks in the Multi-Product Case OMG Spring 1997LN 2: Process AnalysisBottlenecks in the Multi-Product CaseConsider a retail bank offering two products: Home equity line Activities Resources ‘consumed’ credit check research staff rate assignment research staff line approval underwriter Home Mortgage Activities Resources ‘consumed’ credit check mortgage sales staff appraisal mortgage sales staff package design mortgage sales staff mortgage approval underwriter
18 Multiple Products: Lines and Mortgages OMG Spring 1997LN 2: Process AnalysisMultiple Products: Lines and MortgagesCreditresearch capacity= 30/daycredit line:arrival rate=10/dayUnderwriters For credit line: capacity = 30/day For mortgage: capacity = 20/dayMortgageresearch capacity= 15/daymortgages:arrival rate= 10/day
19 Multiple Products: Calculating Utilization OMG Spring 1997LN 2: Process AnalysisMultiple Products: Calculating Utilizationutilization of resource iexample: utilization of the underwriters = _______________________
20 Multiple Products: A Capacity Constraint OMG Spring 1997LN 2: Process AnalysisMultiple Products: A Capacity ConstraintUtilization of underwriters (UW) must be less than 1:20Underwriters constraint:lc/50 + lM/20 < 1when throughput mix is closeto the ‘capacity constraint’, the underwriters are a bottleneck.15Mortgage Thruput (lm) (jobs/day)105204060Credit Line Thruput (lc) (jobs/day)
21 Multiple Products: Capacity Constraints OMG Spring 1997LN 2: Process AnalysisMultiple Products: Capacity Constraintsmortgage sales20underwriters1510Mortgage Thruput (jobs/day)5credit researchfeasible production region1020304050Credit Line Thruput (jobs/day)
22 Multiple Products: Capacity Constraints OMG Spring 1997LN 2: Process AnalysisMultiple Products: Capacity ConstraintsIncrease mortgage throughput from 10 to 15. Where is the bottleneck (the ‘binding capacity constraint’)?
23 Multiple Products: Capacity Constraints OMG Spring 1997LN 2: Process AnalysisMultiple Products: Capacity Constraintsmortgage sales20underwriters1510Mortgage Thruput (jobs/day)5credit researchfeasible production region1020304050Credit Line Thruput (jobs/day)
24 Multiple Products and The Value of Capacity OMG Spring 1997LN 2: Process AnalysisMultiple Products and The Value of CapacitySuppose we keep this arrival rate: throughput of credit lines = 10 jobs/day throughput of mortgages = 15 jobs/dayConsider new products: product X uses mortgage sales staff product Y uses credit research staffAccounting measures indicate: X and Y have equal unit cost and profit contributionAre the products equally costly?
25 Multi-Product Bottleneck Insights OMG Spring 1997LN 2: Process AnalysisMulti-Product Bottleneck InsightsInsight 1: bottlenecks are binding capacity constraints, resources with utilization close to 1Insight 2: the identity of the bottleneck is determined by product mix as well as resource capacityInsight 3: Time on a bottleneck is an opportunity cost. Time spent on the bottleneck is more expensive than time on an under-utilized resource, regardless of the ‘actual’ cost
26 Types of Processes and Process Strategy OMG Spring 1997LN 2: Process AnalysisTypes of Processes and Process StrategyCalculation of capacity and control of bottlenecks becomes increasingly difficult as:product variety increasesroutings through resources become more complexarrival and process variability increaseone end of spectrum: large volume mass productionother end: small volume customized production.
27 Types of Processes Line Flow (large volume mass production) OMG Spring 1997LN 2: Process AnalysisTypes of ProcessesLine Flow (large volume mass production)product Aproduct BBatch Process (more customized, small volume)product AACproduct BCBAAproduct CB
28 Types of Processes continuous process: chemicals, oil, paper OMG Spring 1997LN 2: Process AnalysisTypes of Processescontinuous process: chemicals, oil, paperline flows (‘mass production’): fast food assembly, automobiles, single-use cameras,batch process: auto parts, machine tools, tour guides, bookbindersjob shop: auto repair, health clinic, machine shopprojects: product development, consulting
29 Types of Processes where is The Goal’s factory on this graph? project, OMG Spring 1997LN 2: Process AnalysisTypes of Processesproject,job shopprocessfocusnonebatchflowassemblylineproductfocuscontinuousflownonelow volume,high varietyone of a kindhigh volume,low varietystandardizedwhere is The Goal’s factory on this graph?
30 Types of Processes and Process Strategy OMG Spring 1997LN 2: Process AnalysisTypes of Processes and Process StrategyProcess-Focused facilities typically follow a Make-to-order strategy:produce to satisfy specific, in-hand orders.Examples:Product-Focused facilities typically follow a Make-to-stock strategy:produce to replenish inventories.
31 Types of Processes and Process Strategy OMG Spring 1997LN 2: Process AnalysisTypes of Processes and Process StrategyIntermediate strategies:Assemble-to-order or Finish-to-order:use make-to-stock strategy for subassembliesfinal assembly (or finishing) of these subassemblies initiated by customer orders.Examples:
32 Types of Processes and Process Strategy OMG Spring 1997LN 2: Process AnalysisTypes of Processes and Process StrategysembliesSubas-MajorProductsFinishedMaterialRawMajor stocking pointProduct A:Make to stockFGProduct B:Assemble-to-orderSAWidth indicates the variety of items at that point in the production processProduct C:Make to orderRMProduction
33 Conclusions The realities of ‘process physics’: OMG Spring 1997LN 2: Process AnalysisConclusionsThe realities of ‘process physics’:there will always be a bottleneck to limit production.in most systems, congestion builds in front of a fully loaded bottleneck.bottlenecks are binding capacity constraints.Complexity of constraints varies with the type of process.Process strategy is shaped by product complexity and strategic priorities.Jonah’s measures most appropriate for Bob Donovan’s levels, and aligned with goals at all levels. In trouble when measures encourage ‘sub-optimization’, an individual maximizing their own measure but hurting others.In general, most measures are inherited. But are they the best?