1. Process and Capacity Analysis Process Measurement
What is process measurement?
Why is it important?
What do we measure?
Measuring productivity
Operational measures
Compiled by:
Alex J. Ruiz-Torres, Ph.D.
From information developed by many.

2. What is process measurement?
Understanding the behavior of the BP – its performance characteristics.
Is it resulting in the desired output?
How often does it fail to meet the customer needs?
How much time it is taking?
How busy are the resources involved in completing this process?
How much is it costing?
How much $ is it generating?

3. Why is it important? Measuring processes allows organizations to
Understand their current situation.
Track behavior over time.
Understand effect of changes.
Evaluate performance when compared to competitors.

4. What do we measure?
The quality of the output is often the key measure. Examples:
Recruiting process: was the right candidate hired?
Cooking process: food tasted good?
Assembly process: did the TV pass the quality test? TV worked correctly when customer uses it?
Medical process: patient got well?

5. What do we measure? Other very important measurers relate to:
How long did it take to complete the process? = cycle time (time from start to finish of a process)
How long did the entity (person, car, loan application) have to wait?
For processes associated with sales, of course a key measure is did we make money?

6. What do we measure? Critical measure: Productivity.
Productivity = output/input.
Productivity is measured at multiple levels (different process levels)
Individual
Group/ cell
Area/department
Facility/plant

7. Measuring productivity
Labor Productivity = Output/Labor Input
Labor Input is either hours of labor or dollars paid for labor.
Week output =120 chairs
Work hours to make them = 300 h
Labor Productivity = 120 chairs/300 h = 0.4 chair/ h
Inverse = 2.5 h/ chair
Inverse is sometimes more intuitive

8. Measuring productivity
Capital Productivity
= Output/Capital Input
Capital Input is dollars of capital resources needed to create the output.
Facility/equipment/materials costs = $21,000 for the week;
Capital productivity = 120 chairs/ $21,000 = chair/$
Inverse =$175 capital/chair

9. Measuring productivity
3. Multifactor Productivity = Output/Total Inputs
Multifactor Input is dollars for all resources including labor and capital.
Each work hour costs $30.
Thus 300 hours = $9,000 for the week.
Capital costs = $21,000.
Combined costs = $30,000.
Multifactor productivity
= 120 chairs / $30,000 = chair/$.
Inverse = $250 /chair.
Clearly these chairs must be sold for much more than $250 to generate a profit.

10. Week 1 2 3 4
Chairs produced
120
132
150
130
Hours used
300
320
340
235
Capital costs
$ 21,000
$ 20,500
$ 22,400
$ 20,900
Multifactor cost
$ 30,000
$ 30,100
$ 32,600
$ 27,950
Labor productivity (chair/hour)
0.40
0.41
0.44
0.55
Labor prod. Inverse (hours/ chair)
2.50
2.42
2.27
1.81
Capital productivity (chair/$)
0.0057
0.0064
0.0067
0.0062
Capital prod. Inverse ($/chair)
175
155.3
149.3
160.8
MF Productivity (chair/$)
0.0040
0.0044
0.0046
0.0047
Multifactor Inverse ($/chair)
250
228
217.3
215

11. Week 1 2 3 4
Chairs produced
120
132
150
130
Hours used
300
320
340
235
Capital costs
$ 21,000
$ 20,500
$ 22,400
$ 20,900
Multifactor cost
$ 30,000
$ 30,100
$ 32,600
$ 27,950
Labor productivity (chair/hour)
0.40
0.41
0.44
0.55
Labor prod. Inverse (hours/ chair)
2.50
2.42
2.27
1.81
Capital productivity (chair/$)
0.0057
0.0064
0.0067
0.0062
Capital prod. Inverse ($/chair)
175
155.3
149.3
160.8
MF Productivity (chair/$)
0.0040
0.0044
0.0046
0.0047
Multifactor Inverse ($/chair)
250
228
217.3
215

12. Week 1 2 3 4
Chairs produced
120
132
150
130
Hours used
300
320
340
235
Capital costs
$ 21,000
$ 20,500
$ 22,400
$ 20,900
Multifactor cost
$ 30,000
$ 30,100
$ 32,600
$ 27,950
Labor productivity (chair/hour)
0.40
0.41
0.44
0.55
Labor prod. Inverse (hours/ chair)
2.50
2.42
2.27
1.81
Capital productivity (chair/$)
0.0057
0.0064
0.0067
0.0062
Capital prod. Inverse ($/chair)
175
155.3
149.3
160.8
MF Productivity (chair/$)
0.0040
0.0044
0.0046
0.0047
Multifactor Inverse ($/chair)
250
228
217.3
215

13. Week 1 2 3 4
Chairs produced
120
132
150
130
Hours used
300
320
340
235
Capital costs
$ 21,000
$ 20,500
$ 22,400
$ 20,900
Multifactor cost
$ 30,000
$ 30,100
$ 32,600
$ 27,950
Labor productivity (chair/hour)
0.40
0.41
0.44
0.55
Labor prod. Inverse (hours/ chair)
2.50
2.42
2.27
1.81
Capital productivity (chair/$)
0.0057
0.0064
0.0067
0.0062
Capital prod. Inverse ($/chair)
175
155.3
149.3
160.8
MF Productivity (chair/$)
0.0040
0.0044
0.0046
0.0047
Multifactor Inverse ($/chair)
250
228
217.3
215

14. Week 1 2 3 4
Chairs produced
120
132
150
130
Hours used
300
320
340
235
Capital costs
$ 21,000
$ 20,500
$ 22,400
$ 20,900
Multifactor cost
$ 30,000
$ 30,100
$ 32,600
$ 27,950
Labor productivity (chair/hour)
0.40
0.41
0.44
0.55
Labor prod. Inverse (hours/ chair)
2.50
2.42
2.27
1.81
Capital productivity (chair/$)
0.0057
0.0064
0.0067
0.0062
Capital prod. Inverse ($/chair)
175
155.3
149.3
160.8
MF Productivity (chair/$)
0.0040
0.0044
0.0046
0.0047
Multifactor Inverse ($/chair)
250
228
217.3
215

15. Week 1 2 3 4
Chairs produced
120
132
150
130
Hours used
300
320
340
235
Capital costs
$ 21,000
$ 20,500
$ 22,400
$ 20,900
Multifactor cost
$ 30,000
$ 30,100
$ 32,600
$ 27,950
Labor productivity (chair/hour)
0.40
0.41
0.44
0.55
Labor prod. Inverse (hours/ chair)
2.50
2.42
2.27
1.81
Capital productivity (chair/$)
0.0057
0.0064
0.0067
0.0062
Capital prod. Inverse ($/chair)
175
155.3
149.3
160.8
MF Productivity (chair/$)
0.0040
0.0044
0.0046
0.0047
Multifactor Inverse ($/chair)
250
228
217.3
215

16. Other productivity measures
There are many operations productivity measures that relate Outputs to Inputs:
Pounds of tomatoes per acre
Sales per square foot of retail space
Tax forms prepared per hour
Customers served per hour per worker
Checks processed per machine
Lines of code per programmer
Orders delivered on time per truck
Customers reached per Ad
Products developed per team
Cases won per lawyer …

17. Time based measures Time based measures:
Cycle time: The time from start to finish of a process.
Wait time: The time waiting for a resource or activity.
Value time ratio: The ratio of time spent on value activities over the cycle time.
Customer arrives for a car wash at 9am.
Waits. The wash starts at 9:30. Ends at 10:15.
Cycle time = 75 minutes (9am to 10:15).
Wait time = 30 minutes (9am to 9:30)
Value activity = 45 minutes (9:30 to 10:15).
VTR = 45/75 = 0.6 = 60%. 1 is a perfect VTR.