Flow Concepts (source: Anupindi, Managing Business Process Flows) A process is a transformation of inputs into outputs.

Five process elements: 1. Inputs and outputs 2. Flow units 3. A network of activities and buffers 4. Resources and 5. Information structure Some generic business processes Process Order fulfillment Production Customer service Cash cycle Flow Unit Orders Products Customers Cash Transformation From the receipt of an order to the delivery of the product From the receipt of materials to the completion of the finished product From the arrival of a customer to the departure From the expenditure of funds to the collection of revenues

Information

Process Management

Network of Activities and Buffers Inputs

Outputs

Resources

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

Process View is a tool for: 1. Evaluating processes and 2. Studying the ways in which processes can be designed, restructured, and managed to improve performance. Process Attributes: 1. Process cost is the total cost incurred in producing and delivering outputs. 2. Process flow time is the total time needed to transform a flow unit from input into output. 3. Process flexibility is the ability of the process to produce and deliver desired product variety. 4. Process quality is the ability of the process to produce and deliver quality products. Flow Time: the total amount of time that a flow unit spends in a process, and included theoretical flow time (the minimal time require to process a flow unit that does not have to wait at any point in the process), and waiting time (the total amount of time that a flow unit spends in the process waiting to be processed. Process flow time: the advantages of a shorter flow time are: 1. Flow time affects delivery response time. 2. Shorter flow times reduce the inventory and associated costs. 3. It is an integrative measure of overall process performance short flow time frequently requires a high level of overall operational excellence. Activity Major Categories: 1. Value adding activities increase the economic value of a flow unit because they are valued by the customer. For example: performing surgery, piloting an airplane, evaluating a loan application, serving meals in a hospital. 2. Non value adding activities while not directly increasing the value of a flow unit are required by the firms current process structure. For example: moving work, setting up a machine, filling out a form, auditing and inspection. Process flow chart is a graphical representation of all the elements that make up a process. Direct measurement of flow time: 1. Observe the process over a specified, extended period of time. 2. Take a random sample of flow units over the specified period. 3. For each flow unit in the sample, measure its flow time from entry to exit. 4. Compute the average of flow times measured.

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

Indirect measurement of flow time: Littles Law: T = I / R

T (average flow time) = I (average inventory) / R (average throughput or flow rate)

Example (customer flow): A restaurant processes, on average, 1500 customers per 15-hour work day. At any point in time, there are, on average, 75 customers in the restaurant. Given: Throughput rate = R = 1500/day or 100 customers / hour Average inventory = I = 75 customers Derived: Time = I/R = 75/100 or average customer spends hour in the restaurant. Average flow time: we can combine the process flow chart with information about waiting in its various buffers to study flow time using this procedure: 1. Treat waiting in each buffer as an additional (passive) activity with activity time equal to the amount of time spend in that buffer, 2. Add waiting times in buffers to the theoretical flow time of the appropriate path, and 3. Obtain the average flow time of the process by finding the path whose overall length (activity plus waiting) is maximal. Theoretical flow time = minimal amount of time required for processing a typical flow unit without any waiting. Flow time = value adding flow time + non value adding flow time Flow time efficiency = theoretical flow time / average flow time EXAMPLE (Hospital Process) A hospital has undertaken a series of process improvement initiatives. One of the first processes targeted for improvement is the X-ray service. A major concern is the amount of time required to get an X ray. In addition, management would like to make sure that available resources are utilized efficiently. A process improvement team was set up to study the X-ray service process and recommend improvements. The team identified the point of entry into the process as the instant that a patient leaves the physicians office to walk to the X-

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

ray lab. The point of exit was defined as the instant that both the patient and the completed X-ray film are ready to enter the physicians office for diagnosis. To determine the flow time of the existing process, a random sample of 50 patients was observed over a two-week period. For each patient, the team recorded times of entry and exit from the X-ray service process. The difference between these two times was then used as a measure of flow time for each patient. The average of the 50 data points was 154 minutes. This figure, then, serves as an estimate of the average flow time for the X-ray service process. To further study process flow time, the team examined the entire process in detail and broke it down into the constituent activities identified in the following table. Activity/ Event Dep Start 1 2 3 4 Description Patient leaves the physicians office Patient walks to the X-ray lab The X-ray request travels to the X-ray lab by messenger 2 An X-ray technician fills out a standard form based on the information supplied by the physician 1,3 The receptionist receives the patient information concerning insurance prepares and signs a claim form, and sends to the insurer 4 Patient undresses in preparation for X-ray 5 A lab technician takes X-ray 6 A darkroom technician develops X-ray 7 The X-ray technician checks X-ray for clarity: If an X-ray is not satisfactory, activities 7, 8, and 9 are repeated (on average 75% of X-rays are found satisfactory the first time, while 25% require on retake; virtually no units require more than two takes. 8 Patient puts on clothes and get ready to leave lab 9 Patient walks back to the physicians office 8 The X-rays are transferred to the physician by a messenger 10,11 Patient and X-rays arrive at the Physicians office Type Event: start of process Activity: Transport Activity: Transport Activity: Support

5 6 7 8

Activity: Support Activity: Support Activity: Value added Activity: Value added

Activity: Inspection Activity: Support Activity: Transport Activity: Transport Event: end of process 4

9 10 11 End

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

A process flow chart is developed based on the information in the table. Next, another sample of 50 patients was studied over a two-week period. For each patient, the times required to perform each activity, as well as the number of visits to that activity were recorded. Because activity 6, 7 and8 were repeated once for 25% of the patients, the average number of visits to these activities is 1.25. The average work content for each of these activities is thus obtained by multiplying their activity times by 1.25. The data and computations are recorded below. Activity Start 1 2 3 4 5 6 7 8 9 10 11 End Activity Time 7 20 6 5 3 6 12 2 3 7 20 Number of visits per flow unit 1 1 1 1 1 1 1.25 1.25 1.25 1 1 1 1 Work content per flow unit 7 20 6 5 3 7.5 15 2.5 3 7 20 -

Four activity paths are identified. The total work content of these paths are 50, 69, 60 and 79. The path with the theoretical flow time of 79 minutes is the CRITICAL PATH. Because the actual flow time was measured at 154 minutes, flow-time efficiency is expressed as: 79/154 = 51%. This implies that waiting corresponds to about half the time in this process. Because theoretical flow time is determined by the work content of its critical path, the only way to reduce it is by shortening the length of every critical path. There are two basic approaches to reducing the work content of a critical path: 1. Decrease the work content of an activity on the critical path 2. Move some of the work content off the critical path. Reducing work content: 1. Eliminate non-value-adding aspects of the activity (work smarter). 2. Increase the speed at which the activity is performed (work faster). 3. Reduce the number of repeat activities (do it right the first time). 4. Change the product mix.

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

The average flow rate (throughput) of a stable process can be determined by the following four-step process: 1. Identify a particular entry and exit point in the process. 2. Observe the process over a given, extended period of time. 3. Measure the number of flow units that pass through the selected point over the selected period of time. 4. Compute the average number of flow units per unit of time. Capacity utilization =Throughput / Theoretical capacity The theoretical capacity of a resource unit is its maximum sustainable flow rate if it were fully utilized during its scheduled availability. The theoretical capacity of a resource pool is the sum of the theoretical capacities of all the resources units in that pool. The theoretical capacity of a process is the theoretical capacity of its slowest resource pool. Resource pools with minimum theoretical capacity are called theoretical bottlenecks. Theoretical capacity of a resource unit: (1/unit load) * load batch * scheduled availability Continuing the previous example: By observing the number of patients processed over a three-week period the hospital found that its X-ray unit process, on average, 44 patients per eight hour day, or 5.5 patients per hour. All resources are scheduled for operation from 9:00 a.m. to 5:00 p.m. each day, six days per week. Theoretical capacity
Resource Unit load Resource pool (min/pat) Messenger 40 Receptionist 5 X-ray tech 16 X-ray lab 7.5 Darkrm tech 15 Darkroom 15 Chang rm 6 Theoret Capacity Res Units (pat/hr) 1.5 12 3.75 8 4 4 10 Theoret Cap of No. units in Res Pool Resource Pool (pat/hr) 6 9 1 12 4 15 2 16 3 12 2 8 2 20

Load Batch (pat/batch) 1 1 1 1 1 1 1

Note that the theoretical bottleneck resource is the darkroom with a capacity for processing 8 patients per hour. Based on a throughput of 5.5 patients/hour utilization is computed:

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

Theoret ical Capacity Of Resource Pool Resource pool (min/pat) Messenger 9 Receptionist 12 X-ray tech 15 X-ray lab 16 Darkrm tech 12 Darkroom 8 Chang rm 20

Capacity Utilization (%) 61.11 45.83 36.67 34.38 45.83 68.75 27.50

Key Managerial Levers for Managing Flow Rate: 1. Manage supply and demand to increase the throughput. a. Have reliable suppliers; produce better forecasts of demand. 2. Decrease resource idleness to increase process capacity. a. Synchronize flows within the process to reduce starvation. b. Set appropriate size buffers to reduce blockage. 3. Increase the net availability of resources to increase process capacity. a. Improve maintenance policies, perform preventative maintenance outside periods of scheduled availability, institute effective problem solving measures that reduce frequency and duration of breakdowns. b. Institute motivational programs and incentives to reduce absenteeism, increase employee morale. c. Reduce the frequency of or time required for setups or changeovers for a given product mix or change the product mix. 4. Increase the theoretical capacity. a. Decrease unit load on the bottleneck resource pool. i. Work faster, work smarter, do it right the first time, change product mix. ii. Subcontract or outsource. iii. Invest in flexible resources. b. Increase the load batch of resources in the bottleneck resource pool (increase scale of resource). c. Increase the number of units in the bottleneck resource pool (increase scale of process). d. Increase scheduled availability of the bottleneck resource pool (work longer).

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

Project Management (source: Finch, Operations Now) A small printing shop has determined that it has the demand and market potential to build a new, larger facility. It has identified eight activities necessary to bring the new facility into production, as listed below. Precedence relationships and an estimated time are included for each activity. Identify the critical path. Activity Needs analysis Architect plans Equipment selection Building permits and zoning Vendor ID and equipment order Construction Interior finish Installation and setup Designation 1 2 3 4 5 6 7 8 Immediate Predecessors 1 2 2 3 4,5 6 7 Time (weeks) 4 10 2 4 3 16 4 1

3 (2) 1 (4) 2 (10) 4 (4)

5 (3) 6 (16) 7 (4) 8 (1)

ES
1 (21)

EF

ES = earliest start EF = earliest finish LS = latest start LF = latest finish EF = ES + t LS = LF - t

LS

LF

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

Steps: 1. Determine the activities that need to be accomplished to complete the project. 2. Determine the precedence relationships and estimated completion times for each activity. 3. Construct a network diagram for the project. 4. Determine the critical path by identifying the path that takes the longest. 5. Determine the earliest start schedule and latest start schedule by calculating ES, EF, LS and LF for each activity. Add this information to the network diagram using conventional notation.

3 (2) 1 (4) 2 (10) 4 (4)

5 (3) 6 (16) 7 (4) 8 (1)

If a single estimate of the time required to complete an activity is not reliable, the best procedure is to use three time estimates: minimum (a), most likely (m), maximum (b). ET = ( a + 4m + b ) / 6 Variance (2 ) = ( (b a) / 6 )2

Z=

D TE cp
2

D = Desired completion date for the project. TE = Expected completion time for the project. 2 cp = Sum of all the variances along the critical path.

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

Activity Needs analysis Architect plans Equipment selection Building permits and zoning Vendor ID and equipment order Construction Interior finish Installation and setup

Time Estimates (weeks) Desg. a m b 1 3 4 5 2 8 10 12 3 1 2 4 4 5 6 7 8 3 2 13 3 1 4 3 16 4 1 6 4 20 6 2

ET

Variances

Steps (Expanded): 1. Determine the activities that need to be accomplished to complete the project. 2. Determine the precedence relationships and estimated completion times for each activity. Create estimates for a, m and b. 3. Construct a network diagram for the project. 4. Determine the critical path by identifying the path that takes the longest. 5. Determine the earliest start schedule and latest start schedule by calculating ES, EF, LS and LF for each activity using TE for the estimated times. Add this information to the network diagram using conventional notation. 6. Calculate the variances (2) for the activity times. 7. Calculate the probability of the desired due date D.

What is the probability of completing the project in 39 weeks?

Source: OperationsNow by Finch & Managing Business Process Flows by Anupindi, et al.

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