Process Analysis & Flowcharting

1. Process Analysis & Flowcharting

2. Process Analysis Terms • Process: Is any part of an organization that takes inputs and transforms them into outputs • Utilization:Is the ratio of the time that a resource is actually activated relative to the time that it is available for use

3. Process Flowcharting Defined • Process flowcharting is the use of a diagram to present the major elements of a process • The basic elements can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues • It is an ideal methodology by which to begin analyzing a process

4. Flowchart Symbols Tasks or operations Decision Points Examples: Giving an admission ticket to a customer, installing a engine in a car, etc. Examples: How much change should be given to a customer, which wrench should be used, etc.

5. Flowchart Symbols Storage areas or queues Flows of materials or customers Examples: Sheds, lines of people waiting for a service, etc. Examples: Customers moving to a seat, mechanic getting a tool, etc.

6. Single-stage Process Stage 1 Multi-stage (Sequential) Process Stage 1 Stage 2 Stage 3 Types of Processes

7. Parallel Processes Stage 1 Stage 2 Stage 1 Stage 1 Types of Processes

8. Multi-stageProcess with Buffer Buffer Stage 1 Stage 2 Types of Processes (Continued) A buffer refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage

9. Other Process Terminology • Blocking • Occurs when the activities in a stage must stop because there is no place to deposit the item just completed • If there is no room for an employee to place a unit of work down, the employee will hold on to it not able to continue working on the next unit • Starving • Occurs when the activities in a stage must stop because there is no work • If an employee is waiting at a work station and no work is coming to the employee to process, the employee will remain idle until the next unit of work comes

10. Other Process Terminology (Continued) • Bottleneck • Occurs when the limited capacity of a process causes work to pile up or become unevenly distributed in the flow of a process • If an employee works too slow in a multi-stage process, work will begin to pile up in front of that employee. In this is case the employee represents the limited capacity causing the bottleneck. • Capacity • maximum rate of output of a process or system.

11. Process Performance Metrics • Operation time = Setup time +Run time • Cycle time = Average time between completion of units & equals time it takes to process a unit at the bottleneck • Throughput time = Time it takes a single unit to go through the process from start to finish

12. Process Performance Metrics (Continued) • Throughput rate = 1 Cycle time • Utilization = Throughput Rate Process Capacity

13. Cycle Time Example Suppose you had to produce 600 units in 80 hours to meet the demand requirements of a product. What should the cycle time be to meet this demand requirement (or in other words what should be the maximum amount of time a unit can spend at the bottleneck activity)? Answer: There are 4,800 minutes (60 minutes/hour x 80 hours) in 80 hours. So the average time between completions would have to be: Cycle time = 4,800/600 units = 8 minutes.

14. Customer No 5. Is loan approved? (5 min) 3. Check for credit rating (15 minutes) Yes 1. Check loan documents and put them in order (10 minutes) 2. Categorize loans (20 minutes) 6. Complete paperwork for new loan (10 minutes) 4. Enter loan application data into the system (12 minutes) Where the bottleneck?

15. Customer No 5. Is loan approved? (5 min) 3. Check for credit rating (15 minutes) Yes 1. Check loan documents and put them in order (10 minutes) 2. Categorize loans (20 minutes) 6. Complete paperwork for new loan (10 minutes) Bottleneck 4. Enter loan application data into the system (12 minutes) Where is the Bottleneck? What is the throughput time? What is the cycle time? What is the throughput rate? What is the utilization rate of each station?

16. Customer No 5. Is loan approved? (5 min) 3. Check for credit rating (15 minutes) Yes 1. Check loan documents and put them in order (10 minutes) 2. Categorize loans (20 minutes) 6. Complete paperwork for new loan (10 minutes) Bottleneck 4. Enter loan application data into the system (12 minutes) Bottleneck, Cycle Time and Throughput Rate & Time It takes 10 + 20 + max (15, 12) + 5+ 10 = 60 minutes to complete a loan application (throughput time).Unless more resources are added at step 2, the bank will be able to complete only 3 loan accounts per hour (note cycle time is 20 minutes), or 15 new load accounts in a five-hour day.

17. Customer No 5. Is loan approved? (5 min) 3. Check for credit rating (15 minutes) Yes 1. Check loan documents and put them in order (10 minutes) 2. Categorize loans (20 minutes) 6. Complete paperwork for new loan (10 minutes) Bottleneck 4. Enter loan application data into the system (12 minutes) Utilization Rates at the each station Utilization Rate = Throughput Rate/Capacity Rate Station 1: 3/6 = .5 (50%) Station 2: 3/3 = 1 (100%) Station 3: 3/4 = .75 (75%) Station 4: 3/5 = .6 (50%) Station 5: 3/12 = .25 (25%) Station 6: 3/6 = .5 (50%)

18. Example: Receiving goods to warehouseHigh level view Warehousesuppliesassemblyfloor Goods areput inwarehouse Goods arereceived atdock Goods areinspected

19. Somehowtellpurchasing Goods arereceived atdock Contentsmatchorder? no Goods getinspected no yes Incomingquality check Goods areaccepted? yes Receivingnotifies warehouseto pick up Example: Receiving goods to warehouse: Detailed view

20. Receiving Purchasing Quality Assurance Warehouse Goods arereceived atdock Goods getinspected yes Contentsmatchorder? Incomingquality check no no yes Somehowtellpurchasing Pick up goods from QA area Advisesupplier ofrejection Goods areaccepted?

21. Example: Receiving goods to warehouseDetailed view What is the throughput time for good items? What is the capacity of each station? Where is the bottleneck? What is the cycle time? What is the throughput rate? If there are 15 orders coming in an 8 hr day, what would each stations utilization rate be? Receive Goods Inspect Goods (30) Match order? (10) Yes Quality Check (45) No Inform Purchasing Goods 4 pick up Accept? (2) Supervisor Report (5) Yes No

22. Example: Receiving goods to warehouseDetailed view What is the throughput time for good items? What is the capacity of each station? Where is the bottleneck? What is the cycle time? What is the throughput rate? Receive Goods Goods 4 pick up Inspect Goods (30) Quality Check (45) Yes Accept? (2) Yes Match order? (10) Quality Check (45) No No Inform Purchasing Supervisor Report (5) If we get 15 orders in an 8 hr day, what would the utilization rate be for each station?

23. In class Exercise: Emergency Room Case • The first thing patients do when they arrive into an emergency room is register with the front desk unless it is a life threatening condition that requires immediate attention. Those are taken immediately inside to one of the exam rooms where they receive care from the ER doctor and nurses to stabilize them. Almost all of these patients will be admitted to the hospital for further tests, observation, or surgery. The non-critical patients have to wait in a lounge until one of the exam rooms empties at which time a nurse invites them in, takes down their vital signs (blood pressure, temperature, heart rate) and then she documents their ailment. At their leisure the ER doctor comes in examines the patient and either orders more tests or prescribes medication and releases the patient. Those requiring more tests have to wait for the test results from the lab or radiology before receiving further treatment. Some of those patients are released while others are admitted to the hospital. Patients released have to settle their bills before heading home.

24. 1 1 END EVALUATE RESULTS DISCHARGE PRESCRIBE MEDS NO MORE TESTS ? WAIT WAIT WAIT VITAL SIGNS MED EXAM REGISTER YES NC HOSP ADMIT ER CARE BLOOD WORK XRAY, OTHERS C END YES SERIOUS AILMENT ? NO EMERGENCY ROOM FLOWCHART

25. END END PRESCRIBE MEDS DISCHARGE PERFORM TESTS EVALUATE RESULTS HOSP ADMIT CHECK VITAL SIGNS NO MORE TESTS SERIOUS AILMENT ? MED EXAM WAIT YES REG NO YES IDEAL ER SCENARIO!

26. Process Throughput Time Reduction • Perform activities in parallel • Change the sequence of activities • Reduce interruptions

27. 7 Key Principles • The focus is on balancing flow, not on balancing capacity. • Maximizing output and efficiency of every resource will not maximize the throughput of the entire system. • An hour lost at a bottleneck or constrained resource is an hour lost for the whole system. An hour saved at a non-constrained resource does not necessarily make the whole system more productive. 4. Inventory is needed only in front of the bottlenecks to prevent them from sitting idle, and in front of assembly and shipping points to protect customer schedules. Building inventories elsewhere should be avoided.

28. 7 Key Principles (continued) • 5. Work should be released into the system only as frequently as the bottlenecks need it. Bottleneck flows should be equal to the market demand. Pacing everything to the slowest resource minimizes inventory and operating expenses. • 6.Activation of non-bottleneck resources cannot increase throughput, nor promote better performance on financial measures. • 7. Every capital investment must be viewed from the perspective of its global impact on overall throughput (T), inventory (I), and operating expense (OE).

29. Description Relationship to Financial Measures Operational Measures Inventory (I) Throughput (T) Operating Expense (OE) Utilization (U) Operational Measures & Financial Measures All the money invested in the system in purchasing things that it intends to sell A decrease in I leads to an increase in net profit, ROI, and cash flow Rate at which system generates money through sales An increase in T leads to an increase in net profit, ROI, and cash flows All the money the system spends to turn inventory into throughput A decrease in OE leads to an increase in net profit, ROI, and cash flows The degree to which equipment, space, or labor is currently being used, and is measured as the ratio of average output rate to maximum capacity, expressed as a % An increase in U at the bottleneck leads to an increase in net profit, ROI, and cash flows