Process Analysis, Selection

and Design - Deterministic

Situations
How Much Inefficiency Exists?
Mean levels of technical inefficiency:
• 43 Chilean manufacturers: 72-81%

• 10 French industries: 71-94%

• Brazilian manufacturing: 62.5%

• Colombian apparel/footwear: 55%

• Indonesian weaving: 62-68%

• 365 US Industries: 63-95%

Caves and Barton, Efficiency in U.S. Manufacturing Industries, MIT 1990.

 Process Analysis Objectives
• How many customers (products) can the process
handle per time period?

• How long will it take to serve the customer?

• What change is needed in the process to meet the

requirements ?
 Types of Processes
• Single Stage

• Multi Stage

• Deterministic

• Stochastic
 Types of Processes
• Make to Order

• Make to Stock

• Assemble to Order
 Make To Order Example-
Wendy’s Burger
Customer
Places Order

Raw
Mat Cook Assemble Deliver
 Make to Stock Example –
McDonald Burger Old Process
Customer
Places Order

Raw Finished
Mat Cook Assemble Goods Deliver
 Assemble to Example –
McDonald Burger New Process
Customer
Places Order

Raw
Mat Cook WIP
Assemble Deliver
 Process Fundamentals
• Buffers

• Blocking
– Activities at a stage stop because space is not available
to store the part just produced.

• Starving
– Activities at a stop because there is no work available
from the previous stage.
 Definitions
• Cycle Time for a repetitive process is average time
between completion of units.

• Throughput time: Average time for a unit to move

through the system.

• Throughput rate is output rate that the process is

expected to produce over a period of time.
 Example

• Consider an assembly line with six stations

with stations located one after other and
activity time of 30 seconds each.

• Cycle time is 30 seconds

• Throughput time: 30 x 6 = 180 sec = 3 min
• Throughput rate : 60/ 30 = 2 / min= 120 /hr
 Utilization
• Utilization of the resource is

• Time for which the resource is needed

• = --------------------------------------------------------
• Time for which resource is actually available
 Bottleneck
• Bottleneck is the resource that limits the
capacity of the entire process.
 Little’s Law
• States relationship between throughput rate,
throughput time and work in process
inventory.

work in process
Throughput time 
throughput rate
• Retail shelf space in Bandra is extremely
costly. Hence, an electronics shop owner
wants to find out
• For how many days on average, the product
is staying in shelf inventory before it is sold ?
• Cost of goods sold in a year : 52,762 Rs
• Inventory : 4,574 Rs

• Flow time : 4,574/ 52,762 =0.09 years =

33days
 Employment Verification Agency-
Multiple Flow Units Situation

Contact faculty/
other persons
Consulting

Staff Verified Applications

File
Internship
Contact prior
employers Confirmation
letter

Benchmark
grades

Process flow diagram with multiple product types

Total Application rate = 180 /day out of which

Consulting = 3/hr, staff= 11/hr, internship = 4/hr

Working Day is of 10 hours. Resource available are:

File: 1 , Contact Faculty: 2 , Contact Employees: 3

Grade School Analysis: 2, Confirmation letter : 1
Stage No of Capacity Activity
Workers in time units Time

min/
in minutes application
File 1 60 3
Contact Person 2 120 20
Contact Employees 3 180 15
Grade School Analysis 2 120 8
Confirmation Letter 1 60 2
Compute load at each stage
file station   arrival rate  process time per unit
jobtypes

 3  3  11  3  4  3  54 min
 Computing production rate in
process industry ?
• How much time iron ore spends in the
stationary fluidized reactor ?

• How much is the reactor can hold ?

• Using little’s law ,

• Throughput rate = 400/4 = 100 tons per

hour
 Adjusting for yield losses
• There is mass reduction of 15 % and yield
loss of 7 % at the first reactor. How much
should be input to this stage if we desire
100 tons at the second reactor ( bottleneck)

• We need 100 / (0.85 *0.93) tons at the start

of the first reactor to get 100 tons for the
second reactor.
 Break-Even Analysis
• A standard approach to choosing among
alternative processes or equipment.
• Can help in selecting particular technology
and its associated market.

• Model seeks to determine the point in units

produced (and sold) where we will start
making profit on the process or equipment .
Break Even Analysis-Evaluating Multiple
Options
• Manager has identified the following options to obtain a
machined part.

• It can buy the part at Rs. 200 per unit ( including

materials). Fixed cost is negligible here.

• It can make the part on NC machine at Rs. 75 per unit.

Semiautomatic late costs Rs. 80,000.

• Or It can make the part on machine center at Rs. 15 per

unit. Machine center costs Rs. 2,00,000.
• Purchase cost= 200 x demand

• Produce using lathe cost = 80000 + 75 x demand

• Produce with machining center cost = 200000 +

15 x demand
 When to buy
• 200 x demand = 80000 + 75 x demand

This gives,
Demand = 80000/ 125 = 640 units

When demand is less than 640 units it makes

to buy
 When to purchase machining
centre
• 80000 + 75 x demand= 200000 + 15 x
demand
• This gives ,
• Demand= 120000/ 60 = 2000 units

• When demand is more than 2000 units

purchase machining center
• Otherwise purchase the lathe machine.
 Other Variables Affecting
Equipment/Process Selection
• Labor Requirements.
– Enough skilled labor and training options

• Maintenance Requirements
– Can we handle complexity, spare parts and load

• Set up Requirements
– set up time required and complexity

• Other Issues such as

– Investment Required, Output, Administration Issues etc