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1 OMG 402 - Operations Management Spring 1997 CLASS 2: PROCESS ANALYSIS Harry Groenevelt.

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Presentation on theme: "1 OMG 402 - Operations Management Spring 1997 CLASS 2: PROCESS ANALYSIS Harry Groenevelt."— Presentation transcript:

1 1 OMG 402 - Operations Management Spring 1997 CLASS 2: PROCESS ANALYSIS Harry Groenevelt

2 2 Agenda Recap Capacity Bottlenecks and Congestion The Multi-Product Case Types of Processes and Process Strategy Conclusion

3 3 Process mapping Little’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). add value Data information flow hold Recap

4 4 entrance line ‘plaza’ 3 booths exit line throughput: # cars across entrance line / min. lead time: time to cross plaza + time in booth (min.) stock: # cars in plaza + # in booth Recap: The Toll Booth Process

5 5 plaza = ‘workstation 1’ toll booths = ‘workstation 2’ Traverse plaza Toll booth Arrivals Recap Possible process flow diagram:

6 6 Recap Will 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 7 Capacity: Definition capacity: 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 the –time horizon –type of demand (if there are multiple products) –mix of demand (if changeovers take time)

8 8 Capacity Example: Toll Booth 0.2 min. to process toll (raw process time), for each of 3 toll booths. 0.5 min. to cross plaza (raw process time). 0.5 min. 0.2 min. Arrivals Booths

9 9 Capacity Example: Toll Booth If 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 10 Bottlenecks and Congestion: Definitions bottleneck: 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 11 capacity Throughput: Utilization: number in system Bottlenecks and Congestion: Definitions Utilization of a workstation = throughput / capacity For random systems, congestion builds at the bottleneck as throughput approaches capacity (utilization approaches 1)…. 0

12 12 Production of precision aluminum panels Milling is continuous with capacity 12 ft 2 /hour Shot-peening is done in batches in a chamber: a batch of 24 ft 2 takes 2 hours Loading of batches is essentially instantaneous Assume both processes are deterministic (not random) Bottlenecks and Congestion: A Deterministic (Non-Random) Example milling shot-peening (S-P) buffer raw materials

13 13 What 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…? milling shot-peening (S-P) buffer raw materials Capacity: A Deterministic Example

14 14 hours inventory in buffer (ft 2 ) 1234 Capacity: A Deterministic Example 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)?

15 15 Capacity and Bottleneck Insights Insight 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 16 The Multi-Product Case Things 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 17 Bottlenecks in the Multi-Product Case Consider a retail bank offering two products: Home equity line ActivitiesResources ‘consumed’ credit checkresearch staff rate assignmentresearch staff line approvalunderwriter Home Mortgage ActivitiesResources ‘consumed’ credit checkmortgage sales staff appraisalmortgage sales staff package designmortgage sales staff mortgage approvalunderwriter

18 18 credit line: arrival rate =10/day mortgages: arrival rate = 10/day Multiple Products: Lines and Mortgages Credit research capacity = 30/day Underwriters For credit line: capacity = 30/day For mortgage: capacity = 20/day Mortgage research capacity = 15/day

19 19 Multiple Products: Calculating Utilization utilization of resource i example: utilization of the underwriters = _______________________

20 20 Mortgage Thruput ( m ) (jobs/day) Credit Line Thruput ( c ) (jobs/day) 0 5 10 15 20 0 4060 Multiple Products: A Capacity Constraint Utilization of underwriters (UW) must be less than 1: Underwriters constraint: c /50 + M /20 < 1 when throughput mix is close to the ‘capacity constraint’, the underwriters are a bottleneck.

21 21 Multiple Products: Capacity Constraints 0 5 10 15 20 01020304050 Credit Line Thruput (jobs/day) Mortgage Thruput (jobs/day) feasible production region credit research underwriters mortgage sales

22 22 Multiple Products: Capacity Constraints Increase mortgage throughput from 10 to 15. Where is the bottleneck (the ‘binding capacity constraint’)?

23 23 Multiple Products: Capacity Constraints 0 5 10 15 20 01020304050 Credit Line Thruput (jobs/day) Mortgage Thruput (jobs/day) feasible production region credit research underwriters mortgage sales

24 24 Multiple Products and The Value of Capacity Suppose we keep this arrival rate: throughput of credit lines = 10 jobs/day throughput of mortgages = 15 jobs/day Consider new products: product X uses mortgage sales staff product Y uses credit research staff Accounting measures indicate: X and Y have equal unit cost and profit contribution Are the products equally costly?

25 25 Multi-Product Bottleneck Insights Insight 1: bottlenecks are binding capacity constraints, resources with utilization close to 1 Insight 2: the identity of the bottleneck is determined by product mix as well as resource capacity Insight 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 26 Types of Processes and Process Strategy Calculation of capacity and control of bottlenecks becomes increasingly difficult as: –product variety increases –routings through resources become more complex –arrival and process variability increase one end of spectrum: large volume mass production other end: small volume customized production.

27 27 Line Flow (large volume mass production) product A product B Batch Process (more customized, small volume) product A product C product B B CA AA C B Types of Processes

28 28 Types of Processes continuous process: chemicals, oil, paper line flows (‘mass production’): fast food assembly, automobiles, single-use cameras, batch process: auto parts, machine tools, tour guides, bookbinders job shop: auto repair, health clinic, machine shop projects: product development, consulting

29 29 low volume, high variety one of a kind high volume, low variety standardized project, job shop batch flow assembly line continuous flow process focus product focus none where is The Goal’s factory on this graph? Types of Processes

30 30 Types of Processes and Process Strategy Process-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. Examples:

31 31 Types of Processes and Process Strategy Intermediate strategies: Assemble-to-order or Finish-to-order: –use make-to-stock strategy for subassemblies –final assembly (or finishing) of these subassemblies initiated by customer orders. Examples:

32 32 Types of Processes and Process Strategy Raw Material Major Subas- semblies Finished Products Product A: Make to stock Product C: Make to order Product B: Assemble-to-order Production FG SA RM Width indicates the variety of items at that point in the production process Major stocking point

33 33 Conclusions The 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.

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