process design and analysis oprations and supply chain management
1. Operations and Supply Chain Management
Session 3 & 4 – Process Design and Analysis
Mohit Ray
Operations Management and Decision Sciences Area
Office: Academic Block, Room C1/6
Email: mohit.ray@iimkashipur.ac.in
2. Process Strategies
Process Strategy:
• Answers how are you going to produce goods or services that:
o Meets customer demand
o Meets cost, organization’s objective and other goals
Four process strategies:
• Process Focus/ Job Shop (Hospitals, Projects)
• Repetitive Focus (Automobiles)
• Product Focus (Food industry, steel industry)
• Mass customization (Dell Computer)
3. Process Focus
Characteristics:
• Facilities are organized around specific activities or processes
• General purpose equipment and skilled personnel
• High degree of product flexibility
• Typically, high variable costs and low equipment utilization
• Product flows may vary considerably, making planning and
scheduling a challenge
• Build to order
4. Product Focus
Characteristics:
• Facilities are organized by product
• High volume but low variety of products
• Long, continuous production runs enable efficient
processes
• Typically, high fixed cost but low variable cost
• Generally, less skilled labor
• Build to stock
5. Repetitive Focus
Characteristics:
• Facilities often organized as assembly lines
• Characterized by modules with parts and assemblies made
previously
• Modules may be combined for many output options
• Less flexibility than process-focused facilities but more
efficient
• Assemble to order
6. Mass Customization
Characteristics:
• The rapid, low-cost production of goods and services to
satisfy increasingly unique customer desires
• Combines the flexibility of a process focus with the
efficiency of a product focus
• Uses high volume Assemble to order.
8. Let’s analyze process choice
Question. There are three process strategies available to a shoe manufacturing firm,
namely A, B and C. What should be the best choice for the firm.
Process Choice Total Fixed Cost Variable Cost
A: Process Focus $2,00,000 $60
B: Repetitive Focus $3,00,000 $25
C: Product Focus $4,00,000 $10
• A is most economical from volume 0 to 2,857.
• B is most economical from 2,857 to 6,666.
• C is most economical beyond 6666.
9. Process Flow Chart
A step in the process
Storage or Inventory
Transportation/Movement
• Process flowcharting: the use of a diagram to present the major elements of a process.
Decision Point
10. Analyzing Processes
Key terminology
• Flow Time: It is the average elapsed time from the first stage of the process to the last stage of the process.
It is also known as lead time. Relevant in MTO
• Cycle Time: It is the average elapsed time between two successive outputs from a system. Throughput rate
is inverse of cycle time. Relevant in MTS
• Takt Time: It is the average available time to produce an output that satisfies customer demand
• Bottleneck: That stage of the process that dictates the output of a process is the slowest.
• Buffer: Inventory accumulation between processes.
• Starving: Resource idle due to no incoming work.
• Blocking: Resource idle due to no space to deposit.
• Work in Process (WIP): Average number of units between start and finish stages.
11. MTS vs MTO vs ATO
Make to order (MTO)
• Only activated in response to an actual order.
• Both work–in–process and finished goods inventory kept to a minimum.
• Response time is slow.
Make to stock (MTS)
• Process activated to meet expected or forecasted demand.
• Customer orders are served from target stocking level.
Assemble to Order (ATO)
• Incorporates the benefits of MTO and MTS
14. Process Metrics ..
• Throughput Rate TH: Average rate (per unit time) at which units are
processed
• Flow Time (or Throughput Time): Cumulative time spent by a single unit at
all stages in the system + any intermediate times such as movement, waiting
etc.
• Work In Process WIP = Average number of units between start and finish
stages
Stage 1 Stage 2 Stage 3 Stage 4
RM
FG
15. WIP: Items in Queue
AND Items in service
Linking WIP, TH and FT: Little’s Law
Arrivals Departures
WIP = TH x FT
(Number = Rate X Time)
Analogous to:
Distance = Speed X Duration
16. Relating D = S x T to Little’s Law
• Distance (D)
• Number of entities
awaiting processing (WIP)
Speed (S)
Throughput Rate
(TH)
Time = T (FT)
17. Process Flow Example
Job Flow: The International Insurance Company processes
2,000 claims per year. The average processing turnaround time
is 3 weeks. Assuming 50 weeks in a year, what is the average
number of claims “in process” at a given time?
18. Process Flow Example
Job Flow: The International Insurance Company processes
2,000 claims per year. The average processing turnaround time
is 3 weeks. Assuming 50 weeks in a year, what is the average
number of claims “in process” at a given time?
TH =
FT =
WIP =
19. Process Flow Example
Job Flow: The International Insurance Company processes
2,000 claims per year. The average processing turnaround time
is 3 weeks. Assuming 50 weeks in a year, what is the average
number of claims “in process” at a given time?
TH = 2000 ÷ 50 = 40 per week
FT = 3 weeks
WIP = 40 X 3 = 120 claims
20. At a Toll Plaza
800 cars per hour
On an
average, 20
cars are in
the plaza
Total time spent by an average
car in the plaza area: ?
21. At a Toll Plaza
800 cars per hour =
0.222 cars per sec.
On an
average, 20
cars are in
the plaza
Total time spent by an average
car in the plaza area: ?
TH =
WIP =
FT =
22. At a Toll Plaza
800 cars per hour =
0.222 cars per sec.
On an
average, 20
cars are in
the plaza
Total time spent by an average
car in the plaza area: ?
TH = 0.222 per second
WIP = 20 cars
FT = 20 ÷ 0.222 = 90 seconds
23. Process Flow Analysis
Question: An operations manager is given a task to analyze the process flow of a bakery. The bakery involves two steps to
prepare the bread.
The first is preparing the dough and baking the loaves, here referred to as bread making.
The second is packaging the loaves.
Due to the size of the mixers in the bakery, bread is made in batches of 100 loaves. Bread making completes a batch of 100
loaves every hour, which is the cycle time for the activity. Packaging needs only 0.75 hour to place the 100 loaves in bags.
We can assume that packaging starts up an hour after bread making, otherwise it would be idle for a full hour before getting
any work at the start of the day.
1. Identify the bottleneck resource?
2. Where should you invest to expand the capacity of the bakery?
3. Calculate the flow time of the process and work in process inventory?
4. Now suppose, there are 2 units of bread making and only one unit of packaging. Answer 1, 2 and 3 again. Note:
breadmaking is operated for 2 shifts and packaging for 3 shifts.
