Short Keys and Formulas of Excel

02 Process Analysis
Summary
Capacity = # Resources / Procesing Time
#R
C = --
PT
Processing Capacity = Min{Capacity}
PC = Min{C}
Flow Rate = Min{Demand, Capacity}
R = Min{D, C}
Utilization = Flow Rate / Capacity
R
U = ---
C
Cycle Time = 1 / Flow Rate
1
CT = ---
R
Direct Labor Content = p1 + p2 + p3 + p4 (total green in graph)
LC = p1 + p2 + p3 + p4 where p(n) = processing time
If one worker per resource: Direct Idle Time = (CT-p1) + (CT-p2) + (CT-p3)
IT = (CT-p1) + (CT-p2) + (CT-p3)
Average labor utilization = labor content / (labor content + direct idle time)
LC
LU = ------- LC + IT
Cost of direct labor =
Total wages / time

Cost = ------------------
Flow rate / time
Intro
In this module, you'll learn how to identify key elements of process analysis: flow rates
(throughput), and flow times, how to uncover bottlenecks, how to optimize labor
and inventory, and how to handle the complexities of multiple flow units.
At the end of this module, you'll be able to break down operations into processes which
can then be improved to maximize profits and efficiency.
02.01 The 3 Measures: Flow Rate, Inventory, and Flow

Time
Subway - Sitting in Front of the Store

Draw a graph of Customers (y) vs Time (x)
 Cumulative Inflow = point when customer enters

 Cumulative Outflow = point when customer leaves
 Inventory = Vertical distance in (Cumulative Inflow - Cumulative Outflow)
 Flow Time = horizontal distance in (Time to serve the customer)
The 3 Basic Measures
 Flow rate / throughput: number of flow units going through the process per unit
of time
o = (Customer/hour)
 Flow Time: time it takes a flow unit to go from the beginning to the end of the
process
o horizontal dist in 2 lines
 Inventory: the number of flow units in the process at a given moment in time
o vertical dist in 2 lines
 Flow Unit: What we want to measure e.g. Customer or Sandwich
Immigration department Champagne
FU = Applications Bottle of champagne
FT = Approved/rejected cases Bottles sold per year
FT = Processing time Time in the cellar
Inv
Pending cases Content of cellar
=
MBA Program Auto company
FU = Student Car
FT = Graduating class Sales per year
FT = 2 years 60 days
Inv
Total population Inventory
=
Quiz
Between the hours of noon and 1pm, 70 customers enter ACME pizza and 60 leave with
pies in hand. What is ACME's inventory of customers at 1pm assuming it was zero at
noon?
 2
 5
 10
 20
Summary
Inventory = # flow units in system
Flow rate = # flow units going through the system
Flow Time = total time for flow unit to go from beginning to end
Inventory happens whenever there is a mismatch between supply and demand
02.02 Finding the Bottleneck

3 Steps
 Create a process flow diagram

 Find the bottleneck of the process and determine the maximum flow rate
 Conduct a basic process analysis 3. Conduct a basic process analysis
Example Subway
Processing Times = Unit of time / Flow Unit
 e.g. Station 1 = 37 secs/customer
 e.g. Station 2 = 46 secs/customer
 same as activity times
 Time
Processing Time = --------- Flow Unit
Image above
 need 3 workers
 understand activities to make a sandwich
 can calculate total processing times
Process Flow Diagram
 arrow = flow of unit

 box = activity i.e. 37s/unit processing time for station 1
 triangle = flow unit waiting
Basic Process Vocabulary

Processing times: how long does the worker spend on the task?
 i.e. 46 secs/cust * 3600 sec/hour = 78 customers / hour
Capacity = 1/processing time: how many units can the worker make per unit of time
 If there are m workers at the activity: Capacity=m/activity time
 1
Capacity = --------------- Processing Time
Bottleneck: process step with the lowest capacity
Process capacity: capacity of the bottleneck
Flow rate = Minimum{Demand rate, Process Capacity)
Utilization = Flow Rate / Capacity
Flow Time: The amount of time it takes a flow unit to go through the process
Inventory: The number of flow units in the system
Example spreadsheet for Subway example above
Station
Resource Station 1 Station 3 Units
2
Proc Time 37 46 37 sec/unit
Capacity
0.027027 0.021739 0.027027 units/sec
(1/ProcT)
Capacity/Hour 97.2973 78.26087 97.2973 units/hour
Proc Capacity
Demand 50 50 50
Utilization 0.513889 0.638889 0.513889
Quiz
The flow rate of a process is always less or equal to the capacity of the process
 true
 false
 It depnds on the number of resources
 Cannot be determined
Summary
Introduced lots of vocabulary.
Allow to calculate flow rate without viewing process in action.
We can now predict the flow rate
02.03 Labor Cost and Labor Utilization
Review of Capacity Calculations

Capacity =
# Resources
---------------
Processing Time
Process Capacity =
Min{Capacity}
Flow Rate =
Min{Demand, Capacity}
Utiliziation =
Flow Rate
---------
Capacity
Labor Productivity Measures

Cycle time CT =
1
_________
Flow Rate
Direct Labor Content = p1 + p2 + p3 + p4 (total green in graph)
If one worker per resource: Direct Idle Time = (CT-p1) + (CT-p2) + (CT-p3)
Average labor utilization =
labor content
----------------------------------
(labor content + direct idle time)
Cost of direct labor =
Total wages / time

------------------
Flow rate / time
Example: Assembly Line with Six Stations

Station 1 2 3 4 5 6 Measure
Processing
3 5 2 3 6 2 min/unit
Time
Capacity 0.3 1/5 1/2 1/3 1/6 1/2
Proc Capacity 1/6
Flow Rate 1/6
Cycle Time 6
Idle 3 1 4 3 0 4
Total Idle Time 15 1 4 3 0 4
Labor content 21
labor utilization 0.58333
0.33 0.33
Utilization 0.5 0.833 0.5 1
3 3
Avg Utilization 0.583333
Assuming wages = $6/hr, Cost of Direct labor = (6 * 20) / 10 = $12/unit
Quiz
A process has four activities with processing times of 3, 2, 5, and 1 minutes per unit
respectively. What is the direct labor content?
Example from automative company

While labor costs appear small at first, they are important
 look relative to value added look relative to value added

 role up costs throughout the value chain
Implications
 also hunt for pennies (e.g. line balancing)

 spread operational excellence through the value chain
Summary
2 measures: labor utilization vs labor cost
Firms can hide labor by relying on suppliers (i.e. outsourcing). e.g. Apple outsourcing to
FoxCon. Looks good on Apple's books due to lower labor cost passed on to FoxCon.
02.04 Little's Law
Inventory = Cumulative Inflow - Cumulative Outflow
Little's Law: Inventory (I) = Flow Rate (R) * Flow Time (T)
Flow Rate = slope of the graph above on outflow
Customers (I) = Cust/Time (R) * Time (T)

Implications:
 Can only control for 2 of (I,R,T).

 Hold throughput constant: Reducing inventory = reducing flow time
Given two of the three measures, you can solve for the third:
 Indirect measurement of flow time: how long does it take you on average to
respond to an email?
o You write 60 email responses per day
o You have 240 emails in your inbox
240 = 60 * T T = 4 days
i.e. takes an average of 4 days to respond to an email
Examples for Little's Law Appliations

In a large Philadelphia hospital, there are 10 births per day.
 80% of the deliveries are easy and require mother and baby to stay for 2 days
 20% of the cases are more complicated and require a 5 day stay
What is the average occupancy of the department?
R = 10 babies/day
T = 80% * 2 + 20$ * 5 = 2.6 days
I = R * T
= 10 babies/day * 2.6 days = 26 babies
Quiz
In a pizaa restaurant, on average, customers order 30 pizzas an hour. A pizza needs to
stay in the oven for 10 mintues. How many pizzas will there be, on average, in the oven?
 10
 30
 180
 5
Summary
 Not an empirical law - requires heavy math to optimize

 Robust to variation, what happens inside the black box
 Deals with averages – variations around these averages will exist
 Holds for every time window
 Shown by Professor Little in 1961
02.05 Inventory Turns / Inventory Costs

REDO THIS: Doesn't make sense
Dell vs Compaq
Dell Compaq
Inventory = $ 391 M Inventory = $ 2.003 B
Cost of Goods = $20 B /yr Cost of Goods = $ 25.264 B /yr
T = (391/20000) * 365 = 7 days T = 365 * (2.003/25.263) = 29
Inv Turns = 1/T = 51 Inv Turns = 1/T = 12
Make sure to use COGS in this calculation and not revenue
Inventory Turns = COGS / Inventory

Started with low inventory turn. In the 90s, optimized significantly.
2001 was the tech bubble.
More recent due to change in the business model incl. new manufacting e.g. TVs etc.
Inventory Turns in Retailing and Its Link to Inventory Costs

Per Unit Inventory costs =
Annual inventory costs

----------------------
Inventory turns
Annual inventory costs = cost to warehouse an item
Retailer A: per unit Inv Cost = 30% / 4 = 7.5%
Retailer B: per unit Inv Cost = 30% / 8 = 3.75%
Retailer B has dramatic competitive advantage just in per unit inventory cost.
Powerful metric to measure how well you're using inventory capital.
02.06 Make to Stock vs Make to Order | Reasons for

Inventory
While we want to be lean, there are reasons to hole inventory despite the holding cost.
5 reasons for inventory => 5 reasons for longer flow time
Simple Process Flow - A Food Truck

Every five minutes:
 You get 0, 1, or 2 orders with equal probability

 You have a capacity of 0, 1, or 2 with equal probability
 It is not possible to make a sandwich before the order
 Customers are not willing to wait
=> How many sandwiches will you sell per five minute slot?
R = Min{D, Cap} = 1 (this is misleading)

Variability will be a key factor in waiting time
Scenari
D Cap R
o
A 0 0 0
B 0 1 0
C 0 2 0
-------- - -- ---
D 1 0 0
E 1 1 1
Scenari
D Cap R
o
F 1 2 1
-------- - -- ---
G 2 0 0
H 2 1 1
I 2 2 2
-------- - -- ---
Avg 1 1 5/9
Buffer or Suffer := in a system where we cannot buffer inventory, flow rate will suffer
 decouples supply from demand

 By allowing for inventory, we can have a higher flow rate
Buffering is easier in production settings than in services (make to order vs make to

stock)
 Preview two different models: Queue and Newsvendor
Difference Between Make-to-Order and Make-to-Stock -

McDonald's vs Subway
McDonald’s (Make-to-Stock) Subway (Make-to-Order)
1. Make a batch of sandwiches 1. Customer orders

McDonald’s (Make-to-Stock) Subway (Make-to-Order)
2. Sandwiches wait for customer

2. Customer waits for sandwich
orders
3. orders filled immediately 3. orders filled with delay
=> Sandwich waits for customer => Customer waits for sandwich
Which approach is better?
Make-to-Stock advantages include:
 Scale economies in production

 Rapid fulfillment (short flow time for customer order)
Make-to-Order advantages include:
 Fresh preparation (flow time for the sandwich)

 Allows for more customization - you can hold all versions of a sandwich in stock
 Produce exactly in the quantity demanded
 longer flow time for customer order
Quiz
Suppose a pizza resturant wants ot make pizzas to order. Which of the following actions
would make their make-to-order system look a little more like a make-to-stock-system?
 Reduce the time to make a pie so that customers do not wait as long
 Standardize the size and saucing (white/red) of offered pizzas in order to pre-
make basic pies
 Prohibit orders for multiple pies to reduce the variability of order size
 none of the above
Five Reasons for Inventory

Pipeline inventory: you will need some minimum inventory because of the flow time
>0
 direct result of little's law I = R * T
 e.g. wine sales that need to be held for at least 2 years
Seasonal inventory: driven by seasonal variation in demand and constant capacity
 e.g. christmas sales spike
Cycle inventory: economies of scale in production (purchasing drinks)
 e.g. purchasing a 6-pack for home consumption instead of going to store for
each single bottle
Safety inventory: buffer against demand (Mc Donald’s hamburgers)
 safety stock to ensure inventory never runs out
Decoupling inventory/ buffers: buffers between several internal steps
 e.g. don't want to run out of lettuce when making burgers
Examples of Demand Waiting for Supply

Service Examples
 ER Wait Times: 58-year-old Michael Herrara of Dallas died of a heart attack after
an estimated 19 hours in the local Hospital ER. Some ER’s now post expected wait
times online / via Apps
 It takes typically 45 days do get approval on a mortgage; Strong link between
wait times and conversion
 Waiting times for drive-through at McDonald's: 159 seconds; Long queues deter
customers to join
Production Examples
 Buying an Apple computer

 Buying a Dell computer
o => Make to-order vs Make-to-Stock
Summary
Inventory guides processes (supply and demand mismatches)
make-to-stock looks fast to the customer but may be slow internally
02.06 Multiple Flow Units
Processes with Multiple Flow Units
Finding the flow rate is more complex.
Approach 1: Adding-up Demand Streams to calculate total flow

Resource Capacit EZ
F Dem Reg Dem Total Dem/Cap
s y Dem
File 1/3 3 11 4 18 18/20
Foreign 6 3 3 3/6
D1 12 3 11 14 14/12
D2 15 4 14 4/15
Print 30 3 11 4 18 18/30
 D1 has highest implied utilization (14/12) i.e. bottleneck

 Dem/Cap = Implied Utilization
Approach 2: A Generic Flow Unit ("Minute of Work")
Resource Min F EZ
Reg Dem Total Impl Util
s Avail Dem Dem
File 60 mins 3*3 11 * 3 4*3 54 m 54/60
Foreign 120 3 * 20 3 60/120
D1 180 3 * 15 11 * 15 14 210/180
D2 120 4*8 14 32/120
Print 60 3*2 11 * 2 4*2 18 36/60
 For Demand, Use min/app in each step

 Total = mins of work / hour
 Bottleneck is the same (D1)
Note Implied Utilization results are the same in both approaches
2nd approach gives more flexibility
Processes with Attrition Loss

Example of script reviews for TV season.
Only 2 scripts make it to "New Series"
Misleading to look at capacity to find the bottleneck (min{capacity, demand})
Better way:
1. Flow
2. Cap
3. Implied Utilization = flow / capacity (unlike the previous example)
Other examples where bottleneck calculation is more complex:
 underwriting
 assembly process with quality issues
Steps for Basic Process Analysis with Multiple Types of Flow Units
1. For each resource, compute the number of minutes that the resource can
produce
2. Create a process flow diagram, indicating how the flow units go through the
process the process
3. Create a table indicating how much workload each flow unit is consuming at each
resource
4. Add up the workload of each resource across all flow units Add up the workload
of each resource across all flow units.
5. Compute the implied utilization of each resource as
6. Result of Step 3
*Implied utilization = ---------------- Result of Step 1
The resource with the highest implied utilization is the bottleneck
Note: you can also find the bottleneck based on calculating capacity for each step and
then dividing the demand at this resource by the capacity
Review of Process Analysis
Unfusion US
Infusion US is a startup that offers powerful and energiing infusions in a non-hospital
setting for competitive athletes (just electrolytes, no doping!). The service process
includes five activities that are conductind in the sequence described below. (The time
requried for each activity is shown in parantheses):
 Activity 1: (7 mins) Welcome a patient and explan the procedure

 Activity 2: (13 mins) Take vitals, insert IV, and take blood
 Activity 3: (12 mins) Mix infusion treatment
 Activity 4: (30 mins) Chemo infusion
 Activity 5: (5 mins) Debrief the patient
Three nurses (S1, S2, S3) offer the services in a worker-paced line. The assignment of
activities to nurses is the following:
 S1 does Activitiy 1 and Activity 2
 S2 does Activitiy 3
 S3 does Activitiy 4 and Activity 5 Assume that there exists unlimited demand and
that the process only admits patients at the rate of the bottleneck.
IU1 Which nurse is the bottlneck of the process?
Capacity:
 S1 = 1/20
 S2 = 1/12
 S3 = 1/35
Bottleneck = S3 (lowest capacity)
IU2 What is the process utilization (ie the utilization of the bottleneck resource)?
S3 Process Utilization = 100%
IU3 What is the utilization of nurse 2?
U = FR / Cap = (1/35) / (1/12) = 12/35
IU4 What is the cycle time (in minutes)?
CT = 1 / FR = 1 / (1/35) = 35 mins/customer
IU5 What is the idle time per unit at nurse 1 (in minutes)?
IT = CT - p1 = 35 - 20 = 15 mins
IU6 What is the average labor utilization across all three nurses?
LU = (20 + 12 + 35) / ( (20 + 12 + 35) + (15 + 23) ) = 67 / 105
IU7 What are the costs of direct labor associated with serving one patient?
 assume a wage rate of $30 per hour for Nurses 1 and 2 and $60 for nurse 3
 assume workers are paid regardless of whether they are busy or idle
Cost DL = = $120/hr / [ (1/35 cust/hr) * (60 mins/hr) ] = $70/customer

Ruhpolding
Ruhpolding is a village in the German Alps. Given its enormous populatiry among the
Swiss, German, Austrian, and Italian skiers, all of its beds are always booked in the winter
season and there are 1200 beds in the village. On average, skiers stay in Ruhpolding for
10 days.
Qn 1. How many new skiers are arriving on average in Ruhpolding every day?
I=R*T
I = 1200 skiers
T = 10 days
R = I / T = 120 skiers/day
Qn 2. A study done by the largets hoetle in the village has shown that skiers spend on
average $50 per person on the first day and $30 each additional day in local restaurants.
The study also forecasts that the average length of stay for the 2010/2011 season will be
reduced to five days. What will be the impact on revenues of local restaurants compared
to last year (when skiers sill stayed for 10 days)? Assume that hotles continue to be fully
booked! Express your answers in $'s per day.
10 day R = 120 skiers/day
10 day Revenue = 120 * 50 + 1080 * 30 = $38400 / day
5 day R = 1200 / 5 = 240
5 day revenue = 240 * 50 + 960 * 30 = $40800 / day
Diff = 40800 - 38400 = $2400 / day
Summer's Sweets
Summer's Sweets is a small chain of gelato stores in E. North Carolina. In 2009 the
company's revenue was $4.3M and its cost of sales was $2.6M. Assume 52 weeks and
365 days per year.
SS1 Summer keeps only 4.5 days of supply of inventory on avg b'se much of her
inventory is gelato and fresh squeezed orange juice, both of which have a short shelf
life. What is his annual inventory turns?
Flow Time (T) = 4.5 days
Turns = 1 / T = 1 / 4.5 days * 365 days/yr = 81.4 (yearly)
i.e. turning over inventory 81.4 times per year
SS2 Given that he has 4.5 days of supply of inventory on average, how much inventory
does summer have on average (in $s)?
T = I/COGS * 365
4.5 = I / 2.6M * 365
I = (4.5 / 365) * 2.6M = $32054
Dept of Motor Vehicles

To obtain your first drivers license you must successfully ocmplete several activities. First
you must produce the appropriate identification. Then you must pass a written exam.
Finally you must pass the road exam. At each of these steps 1%, 15%, 30% of drivers
license hopefuls fail to fulfill the step's requirements. You are only allowed to take the
written exam if your identification is approved and you are only allowed to take the road
test if you have passed the written exam.
The average daily number of driver's license applicants is 400 people. Each step takes 5,
3, and 20 minutes. Currently the DMV staffs 4 people to process license applications, 2
to administer written exams, and 15 to judge the road exam. DMV staff work 8 hours per
day
DMV1 How many liense applications would the DMV process each day if it had
unlimited capacity?
F1 (Id) = 400 * 99% = 396
F2 (exam) = 396 * 85% = 336.6
F3 (road) = 336.6 * 70% = 235.62
DMV2 Which stage is the bottleneck according to the current staffing plan?
Capacity: (480 mins in 8 hours)
 C1 = 480 * 4 / 5 = 384
 C2 = 480 * 2 / 3 = 320
 C3 = 480 * 15 / 20 = 360
Demand:
 D1 = 400
 D2 = 396
 D3 = 336.6
Implied Utilization:
 U1 = 400 / 384 = 1.04

 U1 = 396 / 320 = 1.23
 U1 = 360 / 336.6 = 0.935
Bottleneck = Station 2
i.e. system can only handle 320 applicants a day
DMV3 with the current staffing plan, how many newly licensed drivers will the DMV turn
out each day?
85% * 320 * 70% = 190.4 people get their license
Homework
Close Homework Assignment: Module 2 - Process Analysis
10 questions
1.
Posh Nails
Katie Posh runs an upscale nail salon. The service process includes five activities that are
conducted in the sequence described below. (The time required for each activity is
shown in parentheses):
Activity 1: Welcome a guest. (1 minute) Activity 2: Clip and file nails. (3 minutes) Activity
3: Paint. (5 minutes) Activity 4: Dry. (10 minutes) Activity 5: Check out the customer. (4
minutes) Three servers (S1, S2, and S3) offer the services in a worker-paced line. The
assignment of tasks to servers is the following: S1 does Activity 1. S2 does Activities 2
and 3. S3 does Activities 4 and 5. The drying process does not require server 3’s
constant attention; she/he needs to only escort the customer to the salon’s drying chair
(equipped with fans for drying). The time to do this is negligible. There exists only one
drying chair in the salon.
Which resource is the bottleneck of the process?
S2
Dryer chair
S3
S1 2. Posh Nails
What is the utilization of server 2 (in decimal form)? Assume that there is unlimited
demand and that the process only admits customers at the rate of the bottleneck.
Enter answer here 3. Posh Nails
What is the average labor utilization of the servers (in decimal form)? Assume that there
is unlimited demand and that the process only admits customers at the rate of the
bottleneck.
Assume a wage rate of $12 per hour. What are the direct labor costs for one customer
(in dollars)?
Enter answer here 5. BN1. Butternut is a ski resort in Massachusetts. One of their triple
chair lifts unloads 1296 skiers per hour at the top of the slope. (A triple chair lift can
carry three passengers per chair. Note that each lift contains multiple chairs.) The ride
from the bottom to the top takes 5 minutes. On average, how many skiers are riding on
the lift at any one time?
Enter answer here 6. Tech Company is a medium-sized consumer electronics retailer.

The company reported $155,000,000 in revenues for 2007 and $110,050,000 in Costs of
Goods Sold (COGS). In the same year, Tech Co. held an average of $20,000,000 in
inventory.
How many times did Tech Co. turn its inventory in 2007?

inventory.
Inventory cost at Tech Co. is 35 percent per year. What is the per unit inventory cost (in
dollars) for an MP3 player sold at $50? Assume that the margin corresponds to the
retailer’s average margin.
Enter answer here 8. The Gamer Company is a video game production company that
specializes in educational video games for kids. The company’s R&D department is
always looking for great ideas for new games. On average, the R&D department
generates about 25 new ideas a week. To go from idea to approved product, the idea
must pass through the following stages: paper screening (a 1-page document
describing the idea and giving a rough sketch of the design), prototype development,
testing, and a focus group. At the end of each stage, successful ideas enter the next
stage. All other ideas are dropped. The following chart depicts this process, and the
probability of succeeding at each stage.
The paper screening for each idea takes 2 hours of a staff member’s time. After that,
there is a stage of designing and producing a prototype. A designer spends 4 hours
designing the game in a computer-aided-design (CAD) package. The actual creation of
the mock-up is outsourced to one of many suppliers with essentially limitless capacity. It
takes 4 days to get the prototype programmed, and multiple prototypes can be created
simultaneously. A staff member of the testing team needs 2 days to test an idea.
Running the focus group takes 2 hours of a staff member’s time per idea, and only one
game is tested in each focus group. Finally, the management team meets for 3 hours
per idea to decide if the game should go into production.
Available working hours for each staff member are 8 hours per day, 5 days a week. The
current staffing plan is as follows:
A. Paper screening: 3 staff members.
B. Design and Production: 4 staff members.
C. Testing: 6 staff members.
D. Focus Group: 1 staff member.
E. Final Decision: 1 management team
How many new ideas would Gamer Co. approve for production per week if it had
unlimited capacity (staff) in its R&D process?
Which stage is the bottleneck according to the current staffing plan?
Focus group
Final decision
Design and production
Testing
Paper screening 10. The Gamer Company is a video game production company that
With the current staffing plan, how many new ideas will be put into production per
week?
Enter answer here 9 questions unanswered Submit Quiz
Close Homework Assignment: Module 2 - Process Analysis
10 questions 1. Posh Nails

Which resource is the bottleneck of the process?
S2
Dryer chair
S3
S1 2. Posh Nails
What is the utilization of server 2 (in decimal form)? Assume that there is unlimited
demand and that the process only admits customers at the rate of the bottleneck.

What is the average labor utilization of the servers (in decimal form)? Assume that there
is unlimited demand and that the process only admits customers at the rate of the
bottleneck.
Assume a wage rate of $12 per hour. What are the direct labor costs for one customer
(in dollars)?
Enter answer here 5. BN1. Butternut is a ski resort in Massachusetts. One of their triple
chair lifts unloads 1296 skiers per hour at the top of the slope. (A triple chair lift can
carry three passengers per chair. Note that each lift contains multiple chairs.) The ride
from the bottom to the top takes 5 minutes. On average, how many skiers are riding on
the lift at any one time?
inventory.
How many times did Tech Co. turn its inventory in 2007?

inventory.
Inventory cost at Tech Co. is 35 percent per year. What is the per unit inventory cost (in
dollars) for an MP3 player sold at $50? Assume that the margin corresponds to the
retailer’s average margin.

How many new ideas would Gamer Co. approve for production per week if it had
unlimited capacity (staff) in its R&D process?
Which stage is the bottleneck according to the current staffing plan?

Focus group
Final decision
Design and production
Testing
Paper screening 10. The Gamer Company is a video game production company that
designing the game in a computer-aided-design ()

Short Keys and Formulas of Excel

Uploaded by

Copyright:

Available Formats

You might also like

Short Keys and Formulas of Excel

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Short Keys and Formulas of Excel

Uploaded by

Copyright:

Available Formats

02 Process Analysis

Cost of direct labor =

Total wages / time

02.01 The 3 Measures: Flow Rate, Inventory, and Flow

Subway - Sitting in Front of the Store

 Cumulative Inflow = point when customer enters

The 3 Basic Measures

Immigration department Champagne

FU = Applications Bottle of champagne

FT = Approved/rejected cases Bottles sold per year

FT = Processing time Time in the cellar

MBA Program Auto company

FT = Graduating class Sales per year

Flow rate = # flow units going through the system

Inventory happens whenever there is a mismatch between supply and demand

02.02 Finding the Bottleneck

 Create a process flow diagram

 e.g. Station 1 = 37 secs/customer

 e.g. Station 2 = 46 secs/customer

 same as activity times

Processing Time = --------- Flow Unit

Process Flow Diagram

 arrow = flow of unit

Basic Process Vocabulary

 i.e. 46 secs/cust * 3600 sec/hour = 78 customers / hour

Capacity = --------------- Processing Time

Bottleneck: process step with the lowest capacity

Process capacity: capacity of the bottleneck

Flow rate = Minimum{Demand rate, Process Capacity)

Utilization = Flow Rate / Capacity

Inventory: The number of flow units in the system

Example spreadsheet for Subway example above

Proc Time 37 46 37 sec/unit

Capacity/Hour 97.2973 78.26087 97.2973 units/hour

Utilization 0.513889 0.638889 0.513889

Allow to calculate flow rate without viewing process in action.

We can now predict the flow rate

02.03 Labor Cost and Labor Utilization

Review of Capacity Calculations

Labor Productivity Measures

Total wages / time

Example: Assembly Line with Six Stations

Capacity 0.3 1/5 1/2 1/3 1/6 1/2

Proc Capacity 1/6

Flow Rate 1/6

Total Idle Time 15 1 4 3 0 4

labor utilization 0.58333

Avg Utilization 0.583333

Assuming wages = $6/hr, Cost of Direct labor = (6 * 20) / 10 = $12/unit

Example from automative company

 look relative to value added look relative to value added

 also hunt for pennies (e.g. line balancing)

Flow Rate = slope of the graph above on outflow

Customers (I) = Cust/Time (R) * Time (T)

 Can only control for 2 of (I,R,T).

o You write 60 email responses per day

o You have 240 emails in your inbox

File 60 mins 33 11 3 4*3 54 m 54/60

Print 60 32 11 2 4*2 18 36/60