Process Analysis

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 Terms
• Bottleneck
• Cycle time/ Throughput rate
• Starving
• Blocking
• Throughput Time also known as Flow time.
• Process Capacity/ Rate of production
 Process Performance Metrics
• Utilization: is the ratio of the time that a resource is
actually being used relative to the time that it is
available for use.
• It is always measured in reference to some resource, e.g.
direct labor utilization, machine utilization.
 Process Performance Metrics
• Productivity: is the ratio of output to input.
• Total factor productivity and partial factor productivity.
For example
• Total Factor Productivity =
Dollar value of output/dollar cost of all inputs
• Partial Factor Productivity =
Dollar Value of output/dollar cost of direct labor
 Productivity Example
A local market research firm has just won a contract for several thousand small projects
involving data gathering and statistical analysis. In the past the firm has assigned each project
to a member of its highly trained professional staff. This person would both gather and analyze
the data. Using this approach an experienced person can complete an average of 10 such
projects in an eight-hour day. The firm’s management is thinking of assigning two people to
each project in order to allow them to specialize and become more efficient. The process would
require the data gatherer to fill out a matrix on the computer, check it, and transmit it to the
statistical analysis program for the analyst to complete. Data can be gathered on one project
while the analysis is being completed on another, but the analysis must be complete before the
statistical analysis program can accept the new data. After some practice, the new process can
be completed with a standard time of 20 minutes for the data gathering and 30 minutes for the
analysis.
•What is the production for each alternative? What is the productivity?
•What would be the labor content for 1,000 projects for each alternatives?
 Process Performance Metrics
• Efficiency , is the ratio of actual output of a process
relative to some standard.

• Operation Time = Run time + Set up time

• Process Velocity also know as throughput ratio is the

ratio of the value-added time to the throughput time.
 Run Time, Setup time Example
A student has set up an internship assistance company.
Each student who uses the service fills out a form and lists
up to 10 companies that she would like to have contacted.
The company has a choice of two methods for processing
the forms. The first method requires about 20 mins to
review the form and two minutes per company to process.
The second method takes two minutes to review but five
minutes to process. When should each method be used?
 Performance Measure Metric
• Total Average Value of Inventory, is the investment in
RM, WIP and FG.
• Inventory Turnover Ratio, is the ratio of the Cost of
Goods sold to total average value of inventory.
• Days-of-supply
 Little’s Law
• Little’s law states a mathematical relationship between
throughput rate, throughput time and the amount of
work-in-process inventory.

Inventory = Throughput rate X Throughput time

 Little’s Law - Examples
1. On a typical weekday in January, 4,200 customers visit
the Pittsburgh Wal-Mart. It is estimated that, on
average, there are 350 customers in the store. Assuming
that the store is open 14 hours a day, how much time
does the average customer spend in the store?
2. A voting booth processes 50 voters per hour on
average. Each voter spends 10 minutes on average at
the voting booth. How many voters are at the booth on
average?
 Little’s Law - Examples
3. Certain Japanese company has 36,000 employees, 20% of
whom are women. The average term of employment for a
woman is 37 months, whereas for men it is 200 months.
Assume that the total employment level and the mix of men and
women are stable over time. What is average number of women
employees hired every month?
4. An insurance company processes 10,000 claims per year. The
average processing time for a claim is 3 weeks. Assuming 50
weeks per year, what is the average number of backlog claims?
 Little’s Law - Examples
3. An automobile company assembles cars in a plat and purchases
batteries from a vendor in China. The average cost of each
battery is $45. The automobile company takes ownership of the
batteries when they arrive at the plant. It takes exactly 12 hours
to make a car in the plant and the plant assembles 200 cars per
8-hour shift. Each car uses one battery. The company holds on
average 8,000 batteries in raw material inventory at the plant as
a buffer. Find the total number of batteries in the plant on
average. How much are these batteries worth? How many days
of supply are held in raw material inventory on average.