1. An Integrated Goods and Services Approach
OPERATIONS MANAGEMENT
An Integrated Goods and Services Approach
CHAPTER 7
Designing Manufacturing and Service Processes
JAMES R. EVANS
AND
DAVID A. COLLIER
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western 1

2. Chapter 7 Learning Objectives
To understand the major characteristics of different types of processes, and why certain process choices (projects, job shops, flow shops, and continuous flow) are more appropriate for different types of goods and services (custom, option, and standard) than others.
To understand why product and process decisions must be made simultaneously, and how the product-process matrix can guide key process choice decisions for manufacturing firms.
To understand the relationship between services and service delivery processes, and how the service-positioning matrix can be used to help guide process choice decisions in services.

3. Chapter 7 Learning Objectives
To understand product life cycles and how operations must respond as goods and services enter different stages of their life cycle, and therefore, may require different process choices.
To understand the objectives of process design, approaches and tools used in process design, including process mapping and value stream mapping, technology selection, and key issues of implementation planning.
To be able to identify opportunities for improving processes and to understand how to use process maps to analyze and find specific areas for improvement.

4. Chapter 7 Learning Objectives
To understand how processes can be designed to achieve high utilization of resources, to identify bottlenecks in processes, and to be able to apply Little’s law to evaluate relationships among flow time, throughput, and work in process.

5. Three Types of Goods and Services
Chapter 7 Designing Manufacturing and Service Processes
Three Types of Goods and Services
Custom, or make-to-order, goods and services are generally produced and delivered as one-of-a-kind or in small quantities, and are designed to meet specific customers’ specifications.
Examples include ships, weddings, certain jewelry, estate plans, buildings, and surgery.

6. Three Types of Goods and Services
Chapter 7 Process Choice
Three Types of Goods and Services
Option, or assemble-to-order, goods and services are configurations of standard parts, subassemblies, or services that can be selected by customers from a limited set.
Examples are Dell computers, Subway sandwiches, machine tools, and travel agent services.

7. Three Types of Goods and Services
Chapter 7 Process Choice
Three Types of Goods and Services
Standard, or make-to-stock, goods and services are made according to a fixed design, and the customer has no options from which to choose.
Examples: appliances, shoes, sporting goods, credit cards, on-line Web-based courses, and bus service.

8. Four Types of Processes
Chapter 7 Process Types
Four Types of Processes
Projects are large-scale, customized initiatives that consist of many smaller tasks and activities that must be coordinated and completed to finish on time and within budget.
Characteristics: one-of-a-kind, large scale, complex, resources brought to site, wide variation in specs and tasks.
Examples of projects: legal defense preparation, construction, customer jewelry, consulting, and software development.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

9. Four Types of Processes
Chapter 7 Process Types
Four Types of Processes
Job shop processes are organized around particular types of general-purpose equipment that are flexible and capable of customizing work for individual customers.
Characteristics: Significant setup and/or changeover time, batching, low to moderate volume, many routes, many different products, high work force skills, and customized to customer’s specs.
Examples: Many small manufacturing companies are set up as job shops, as are hospitals, legal services, and some restaurants.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

10. Four Types of Processes
Chapter 7 Process Types
Four Types of Processes
Flow shop processes are organized around a fixed sequence of activities and process steps such as an assembly line to produce a limited variety of similar goods or services.
Characteristics: Little or no setup time, dedicated to small range of goods or services that are similar, similar sequence of process steps, moderate to high volume.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

11. Four Types of Processes Flowshops continued
Chapter 7 Process Types
Four Types of Processes
Flowshops continued
An assembly line is a common example of a flow shop process. Many option-oriented and standard goods and services are produced in flow-shop settings.
Examples: automobiles, appliances, insurance policies, checking account statements, and hospital laboratory work.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

12. Four Types of Processes
Chapter 7 Process Types
Four Types of Processes
A continuous flow process creates highly standardized goods or services, usually around the clock in very high volumes.
Characteristics: not made from discrete parts, very high volumes in a fixed processing sequence, high investment in system, 24hour/7day continuous operation, automated, dedicated to a small range of goods or services.
Examples: chemical, gasoline, paint, toy, steel factories; electronic funds transfer, credit card authorizations, and automated car wash.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

13. Characteristics of Different Process Types
Exhibit 7.1
Characteristics of Different Process Types
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

14. Product-Process Matrix
Exhibit 7.2
Product-Process Matrix
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

15. Process Choice in Services
Chapter 7 Process Choice in Services
Process Choice in Services
The product-process matrix does not transfer well to service businesses and processes.
In the product-process matrix, product volume, the number of products, and the degree of standardization/customization determine the manufacturing process that should be used. This relationship between volume and process is not found in many service businesses.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

16. Process Choice in Services (continued)
Chapter 7 Process Choice in Services
Process Choice in Services (continued)
For example, to meet increased volume, service business such as retail outlets, banks, and hotels have historically added capacity in the form of new stores, branch banks, and hotels (i.e., bricks and mortar) to meet demand but do not change their processes.
So, new ways to think about services and their processes are needed such as the Service Positioning Matrix.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

17. Process Choice in Services
Chapter 7 Process Choice in Services
Process Choice in Services
A pathway is a unique route through a service system. Pathways can be customer- or provider-driven, depending on the level of control that the service firm wants to ensure.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

18. Service Positioning Matrix
Chapter 7 Process Choice in Services
Service Positioning Matrix
The service encounter activity sequence consists of all the process steps and associated service encounters necessary to complete a service transaction and fulfill customer’s wants and needs.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

19. The Service Positioning Matrix
Exhibit 7.3
The Service Positioning Matrix
Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 20 (no. 5–6), pp. 705–729.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

20. Service Positioning Matrix
Chapter 7 Process Choice in Services
Service Positioning Matrix
Customer-routed services are those that offer the customer broad freedom to select the pathways that are best suited for their immediate needs and wants from many possible pathways through the service delivery system.
The customer decides what path to take through the service delivery system with only minimal guidance from management.
Examples include searching the Internet, museums, health clubs, and amusement parks.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

21. Service Positioning Matrix
Chapter 7 Process Choice in Services
Service Positioning Matrix
Provider-routed services constrain customers to follow a very small number of possible and predefined pathways through the service system.
A newspaper dispenser is an extreme example of a service system design with only one pathway, thus allowing a single service encounter activity sequence.
Logging on to your secure on-line bank account is provider-routed.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

22. The Service Positioning Matrix
Exhibit 7.3
The Service Positioning Matrix
Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 20 (no. 5–6), pp. 705–729.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

23. Service Positioning Matrix
Chapter 7 Process Choice in Services
Service Positioning Matrix
The position along the horizontal-axis of the Service-Positioning Matrix is described by the sequence of service encounters. It depends on two things:
The degree of customer discretion, freedom, and decision-making power in selecting their service encounter activity sequence.
Customers may want the opportunity to design their own unique service encounter activity sequence, in any order they choose.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

24. Service Positioning Matrix
Chapter 7 Process Choice in Services
Service Positioning Matrix
The position along the horizontal-axis of the Service
Positioning Matrix is described by the sequence of
service encounters. It depends on two things:
The degree of repeatability of the service encounter activity sequence.
Service encounter repeatability refers to the frequency that a specific service encounter activity sequence is used by customers.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

25. Service Positioning Matrix
Chapter 7 Process Choice in Services
Service Positioning Matrix
The position along the vertical-axis of the Service
Positioning Matrix reflects the number of pathways
built into the service system design by management.
It depends on two things:
The number of unique pathways (routes) that customers can take as they move through the service system during delivery of the service.
Management’s degree of control designed into the service delivery system.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

26. The Service Positioning Matrix
Exhibit 7.3
The Service Positioning Matrix
Source: Adapted from D. A. Collier and S. M. Meyer, “A Service Positioning Matrix,” International Journal of Production and Operations Management, 18, no. 12, 1998, pp. 1123–1244. Also see D. A. Collier and S. Meyer, “An Empirical Comparison of Service Matrices,” International Journal of Operations and Production Management, 20 (no. 5–6), pp. 705–729.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

27. Exhibit 7.4 Product Life Cycles
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

28. Chapter 7 Process Design -- Hierarchy of Work
The hierarchy of work is defined as follows:
(1) Value Chain
(2) Process
(3) Activity
(4) Task
Value chain and process have been previously defined.
An activity is a group of tasks (sometimes called a workstation) needed to create and deliver an intermediate or final output. Workstations might be a position on an assembly line, a manufacturing cell, or an office cubicle.
A task is a specific unit of work required to create an output. One example is drilling a hole in a steel part or completing an invoice.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

29. Hierarchy of Work Content and Design Complexity and Coordination
Exhibit 7.8
Hierarchy of Work Content and Design Complexity and Coordination
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

30. The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets
Exhibit 7.7
Exhibit 7.7
The Hierarchy of Work and Cascading Flowcharts for Antacid Tablets
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

31. Chapter 7 Process Design and Flowcharting
A process map (flowchart) describes the sequence of all process activities and tasks necessary to create and deliver a desired output or outcome.
A process map can include the flow of goods, people, information, or other entities, as well as decisions that must be made and tasks that are performed.
Process maps document how work either is, or should be, accomplished, and how the transformation process creates value.
Process maps delineate the boundaries of a process. A process boundary is the beginning or end of a process.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

32. Chapter 7 Process Design and Flowcharting
A process flowchart is the basis for value stream mapping, service blueprinting, and service maps.
Service blueprints add a “line of visibility” that separates the back and front office (rooms) as shown in Exhibit 7.6.
Many names are used for the analysis and development of process flowcharts so don’t let corporate fads and buzz words confuse you—the basics of process analysis don’t change just the buzz words and consultant’s sales pitch!
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

33. Automobile Repair Flowchart
Exhibit 7.6
Automobile Repair Flowchart
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

34. Basic Process Design Questions
Exhibit 7.5
Basic Process Design Questions
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

35. Restaurant Order Posting and Fulfillment Process
Exhibit 7.9
Restaurant Order Posting and Fulfillment Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

36. Chapter 7 Value Stream Mapping & Flowcharting
The value stream refers to all value-added activities involved in designing, producing, and delivering goods and services to customers.
A value stream map (VSM) shows the process flows in a manner similar to a traditional process flowchart or service blueprint.
Traditional flowcharting, service blueprinting, and value stream mapping all try to analyze wait and process times, bottleneck work stations, process throughput, and so on.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

37. There are many formats for VSM such as Exhibit 7.10.
Chapter 7 Value Stream Mapping & Flowcharting
Value Stream Mapping
However, the difference between VSM and these other flowcharting and analysis approaches lies in that value stream maps highlight value-added versus non-value-added activities, and include costs associated with work activities for both value- and non-value added activities.
That is, VSM tries to include the economics of the process on the flowcharts.
There are many formats for VSM such as Exhibit 7.10.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

38. Value Stream Map for Restaurant Order Posting and Fulfillment Process
Exhibit 7.10
Value Stream Map for Restaurant Order Posting and Fulfillment Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

39. Examples of non-value-added activities include:
Chapter 7 Value Stream Mapping
Examples of non-value-added activities include:
transferring materials between two nonadjacent workstations,
overproduce,
waiting for service or work to do,
not doing work correctly the first time, and
requiring multiple approvals for a low cost electronic transaction.
Eliminating non-value-added activities in a process
design, is one of the most important responsibilities
of operations managers (see Chapter 17 on Lean
Operating Systems).
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

40. Future state maps are compare
Chapter 7 Value Stream Mapping
A future state map defines a possible new process design using simple graphs and symbols depicting the sequence of all process activities and tasks necessary to create and deliver a desired output or outcome.
Future state maps are compare
to the current state map looking for opportunities for improvement.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

41. Process Analysis and Improvement
Chapter 7 Process Improvement Objectives
Process Analysis and Improvement
Few processes are designed from scratch. Many
process design activities involve re-designing an
existing process to improve performance.
Management strategies to improve process
designs usually focus on one or more of the following:
Increasing revenue by improving process efficiency in creating goods and services and delivery of the customer benefit package.
Increasing agility by improving flexibility and response to changes in demand and customer expectations.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

42. Process Analysis and Improvement
Chapter 7 Process Improvement Objectives
Process Analysis and Improvement
Management strategies to improve process designs
usually focus on one or more of the following
(continued from previous slide):
Increasing product and/or service quality by reducing defects, mistakes, failures, or service upsets.
Decreasing costs through better technology or elimination of non-value-added activities.
Decreasing process flow time by reducing waiting time or speeding up movement through the process and value chain.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

43. Exhibit 7.11
Original Flowchart from the Boise Marketing and Sales Department (slide 1)
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

44. Exhibit 7.11
Original Flowchart from the Boise Marketing and Sales Department (slide 2)
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

45. Exhibit 7.12
New Small Adjustment Request Form Process Flowchart for Boise Marketing and Sales Department
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

46. Reengineering and Creative Destruction
Chapter 7 Process Improvement Objectives
Reengineering and Creative Destruction
Reengineering has been defined as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.
Example: IBM Credit Corporation reduced the time to finance equipment from 7 days to 4 hours.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

47. Process Design and Resource Utilization
Chapter 7 Process Analysis & Resource Utilization
Process Design and Resource Utilization
Utilization is the fraction of time a workstation or individual is busy over the long run.
Understanding resource utilization is an important aspect of process design and improvement.
Utilization (U) = Resources Demand (Eq. 7.1)
Resource Availability
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

48. Process Design and Resource Utilization
Chapter 7 Process Analysis & Resource Utilization
Process Design and Resource Utilization
U = Demand Rate/[Service Rate*Number of Servers]
U = DR/[SR*NS] (Equation 7.2)
If you know any three of the four variables in Equation 7.2 you can solve for the 4th!
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

49. U = Demand Rate/[Service Rate*Number of Servers] U = DR/[SR*NS]
Chapter 7 Example of Using Equation 7.2
U = Demand Rate/[Service Rate*Number of Servers]
U = DR/[SR*NS]
Assume that a telephone call center receives 30 calls
per hour (the demand rate) between 7:00 to 8:00 a.m.
and the call center has two service-providers on duty,
each of whom can handle 20 calls per hour (the service
rate).
Labor utilization = 30/(2*20) = 75% with 2 servers;
Labor utilization = 30/(3*20) = 50% with 3 servers;
Labor utilization = 30/(1*20) = 150% with 1 server;
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

50. Clearly, it is impossible to use more than 100
Chapter 7 Example of Using Equation 7.2
Clearly, it is impossible to use more than 100
percent of a resource, because utilization is defined
as the fraction of time the worker is busy.
In this situation, the calls arrive faster than the
Service provider is able to keep up with, so the
Service provider will always be busy (actual
utilization is 100 percent) and many callers must
wait.
If only one server is used and this resource
bottleneck continues an infinite queue will build up.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

51. Chapter 7 Example of Using Equation 7.2
U = Demand Rate/[Service Rate*Number of Servers]
U = DR/[SR*NS]
Problem
If a manager knows any three of the four variables in Equation
7.2, then the fourth can easily be found. For example, what
would be the maximum demand the call center could handle if
the target utilization was 80%, the service rate was 20 calls per
hour, and two telephone service providers were on duty between
7 and 8 am?
Solution
This is found by solving the equation: 80% = D/(2*30), or
D = 60*0.8 = 48 calls/hour.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

52. Restaurant Order Posting and Fulfillment Process
Exhibit 7.9
Restaurant Order Posting and Fulfillment Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

53. Exhibit 7.13
Utilization Analysis of Restaurant Order Posting and Fulfillment Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

54. Where’s the bottleneck work activity in Exhibits 7.9 and 7.13?
Chapter 7 Process Analysis & Resource Utilization
The average number of entities completed per unit time – the output rate – from a process is called throughput.
Throughput might be measured as parts per day, transactions per minute, or customers per hour, depending on the context.
A bottleneck is the work activity that effectively limits throughput of the entire process.
Where’s the bottleneck work activity in Exhibits 7.9 and 7.13?
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

55. Exhibit 7.14
Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 chefs)
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

56. Exhibit 7.15
Revised Utilization Analysis of Restaurant Order Posting and Fulfillment Process (4 ovens)
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

57. Simplified Restaurant Fulfillment Process
Exhibit 7.16
Simplified Restaurant Fulfillment Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

58. Funnel Analogy of Bottleneck Work Activities
Exhibit 7.17
Funnel Analogy of Bottleneck Work Activities
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

59. Chapter 7 Queues
A queue is a waiting line; queuing theory is the analytical study of waiting lines. Waiting in line at a supermarket, post office, bank, or for a specific exercise machine at a health club are common experiences for everyone. Queues also exist in manufacturing, as work-in-process builds up at workstations.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

60. Chapter 7 Queues
Message management uses queuing models to help manage, track and predict the flow of audio, video, and text data packets through their entire life cycle. Because each Internet application works at a certain speed and throughput rate, one cannot assume two applications can communicate in a perfectly synchronous way.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

61. All queuing systems have three elements in common:
Chapter 7 Queues
All queuing systems have three elements in common:
Customers that wait for service. Customers need not be people but can be machines awaiting repair, airplanes waiting to take off, subassemblies waiting for a machine, computer programs waiting for processing, or telephone calls awaiting a customer service representative.
Servers that provide the service. Again, servers need not be only people, such as clerks, customer service representatives, or repairpersons; servers may be airport runways, machine tools, repair bays, ATMs, or computers.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

62. All queuing systems have three elements in common:
Chapter 7 Queues
All queuing systems have three elements in
common:
A waiting line or queue. In many cases, a queue is a physical line, as you experience in a bank or grocery store. In other situations, a queue may not even be visible or even in one location, as with computer jobs waiting for processing or telephone calls waiting for an open line (see OM Spotlight: Queuing Analysis on the Web).
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

63. Example of Queuing Messages over the Internet
Exhibit 7.18
Example of Queuing Messages over the Internet
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

64. Single and Parallel Queuing Systems
Exhibit 7.19
Single and Parallel Queuing Systems
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

65. Queues in Series in a Typical Voting Facility
Exhibit 7.20
Queues in Series in a Typical Voting Facility
Source: Floyd H. Grant, III, “Reducing Voter Waiting Time,” Interfaces, 10, no. 5, October 1980, pp. 19–25.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

66. In 1961, Dr. J.D.C. Little developed a simple formula that
Chapter 7 Little’s Law
In 1961, Dr. J.D.C. Little developed a simple formula that
explains the relationship among flow time (T), throughput (R)
and work-in-process (WIP), which has come to be known as
Little’s Law. Stated simply, Little’s Law is
WORK-IN-PROCESS = THROUGHPUT * FLOW TIME or
WIP = R* T (Equation 7.3)
Flow time, or cycle time, is the average time it takes to complete one cycle of a process.
Little’s Law provides a simple way of evaluating average process performance.
If we know any two of the three variables, we can compute the third using Little's Law.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

67. Suppose that a voting facility similar to the one in
Chapter 7 Example of Applying Little’s Law
Suppose that a voting facility similar to the one in
Exhibit 7.20 processes an average of 50 people per
hour and that on average, it takes 10 minutes for each
person to complete the voting process. Using Equation
7.3, we can compute the average number of voters in
process:
WIP = R*T
WIP = 50 voters/hr*(10 minutes/60 minutes per hour)
WIP = 8.33 voters
Therefore, on average, we would expect to find about 8
or 9 voters inside the facility.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

68. An inspection station for assembling printers receives
Chapter 7 Solved Problem #1
An inspection station for assembling printers receives
40 printers/hour and has two inspectors, each of which
can inspect 30 printers per hour. What is the utilization
of the inspectors? What service rate would be required
to have a utilization of 85 percent?
Solution:
The labor utilization at this inspection station is
calculated to be 40/(2*30) = 67%. If the utilization
rate is 85%, we can calculate the target service rate by
solving the equation:
85% = 40/(2*SR)
1.7*SR = 40
SR = 23.5 printers/hour.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

69. An accounts receivable manager processes 200 bills per
Chapter 7 Solved Problem #2
An accounts receivable manager processes 200 bills per
day with an average processing time of 5 working days.
What is the average number of bills in her office?
What if she reduces the processing time from 5 to 1
day using better information technology? What other
advantages are there of reducing accounts receivable?
Solution:
WIP=R*T=(200 invoices/day)*(5 days) = 1,000 bills.
If flow time is reduced from 5 days to 1 day then WIP = R*T = (200 bills/day)*(1 day) = 200 bills.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

70. Chapter 7 Solved Problem #3
A manufacturer of personal computers operates a telephone customer contact center that provides technical assistance. Management has decided to set target labor utilization for its customer service representatives (CSRs) at 80%, the demand rate is 40 customer inquiries per hour, and 5 CSRs are on duty from 1:00 to 2:00 pm. The manager of the contact center does not have standard times and when ask about his service rate, he said, "We never had the time to develop service standards. Five CSRs seems to would well—we experiment with different staffing levels and eventually pick the one with the least customer complaints." What is the implied service rate? What is wrong with his approach to staff scheduling and customer service?
Solution:
A trail and error approach to staff scheduling in this situation means they maximize customer service and probably incur high costs. The objective is to maximize customer service at minimal costs, and therefore, this contact center needs a more formal approach to setting staffing levels. This can be done using Equation (7.2):
Utilization (U) = Demand Rate/[Service Rate*Number of Servers]
Service Rate = Demand Rate/Number of Servers*U
= 40 inquiries/hour/(5 CSRs)*(0.8)
= 10 inquiries/hour/CSR.
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

71. Exhibit 7.21
Solved Problem # 4 -- Flow Time Analysis of the Air Conditioner Compressor Value Chain
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

72. Exhibit 7.22
Case: Janson Medical Clinic Results of Satisfaction Survey
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

73. Exhibit 7.23 Case: Janson Medical Case -- Current Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western

74. Janson Medical Clinic Case -- Current Patient Registration Process
Exhibit 7.24
Janson Medical Clinic Case -- Current Patient Registration Process
Operations Management/Ch. 7 Designing Manufacturing and Service Processes
©2007 Thomson South-Western