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# Flow Rate and Capacity Analysis

Flow Rate and Capacity Analysis. Throughput and Capacity Resources and Resource Pools Theoretical Capacity Bottleneck Resources Capacity Utilization Product Mix; its effect on theoretical capacity and profitability Capacity Improvement. Throughput and Takt Time.

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## Flow Rate and Capacity Analysis

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1. Flow Rate and Capacity Analysis • Throughput and Capacity • Resources and Resource Pools • Theoretical Capacity • Bottleneck Resources • Capacity Utilization • Product Mix; its effect on theoretical capacity and profitability • Capacity Improvement

2. Throughput and Takt Time Throughput: Average Flow Rate The average number of flow units in a stable process that flow through any given point of a process per unit of time. Takt time = 1/(throughput) The time interval between exit of two consecutive products. The average activity time at each workstation on an assembly line. Chapter 4 was on flow time minimization. Chapter 5 is on throughput maximization. Chapter 4 and 5 are both “time” minimization. Why?

3. Resources in a Process Process Management Information structure Network of Activities and Buffers Inputs Outputs Goods Services Flow units (customers, data, material, cash, etc.) Resources Labor + Capital

4. Resources, Resource Pools, and Resource Pooling Capital Resources – Fixed Assets such as land, buildings, facilities, machinery and equipment . Human Resources – People such as engineers, operators, assemblers, chefs, customer-service representatives, etc. Resource Unit: An individual resource (chef, mixer, oven, etc.) Resource Pool: A collection of interchangeable resource units that can perform an identical set of activities. Resource Pooling: The combining of separate resource pools into a single pool to perform several activities. Unit Load of a Resource Unit (Tp):The amount of time the resource works to process each flow unit.

5. Activity, Work Content, Resource, and Unit Load

6. Theoretical Capacity Theoretical capacity of a resource unit – maximum sustainable flow rate if it were fully utilized Theoretical Capacity of a Resource unit = 1/unit load = 1/ Tp Theoretical capacity of a resource pool – sum of all the theoretical capacities of all the resource units in that pool Theoretical capacity of a Resource pool = Rp = cp / Tp Theoretical bottleneck – The resource pool with the minimum theoretical capacity Theoretical capacity of a process: Theoretical capacity of the theoretical bottleneck

7. Theoretical Capacity Cross train Claim supervisor to help Mail room clerk  Increase Theoretical Capacity

8. Load Batch and Scheduled Availability Load batching – a resource processes several flow units simultaneously (one oven and 10 loaves of bread) Scheduled availability – the scheduled time period during which a resource unit is available for processing flow units (certain hours, certain days, total hours per week). Theoretical capacity of a resource unit = (1 / Tp) × Load batch × Scheduled availability Theoretical capacity of a resource pool = Rp = (cp / Tp) × Load batch × Scheduled availability

9. Theoretical Capacity for Physicians Claims Claims supervisors are the bottleneck. Cross train claim processor to do a part of claim supervisor job  increase theoretical capacity Throughput( due to internal constraints andexternal constraints) is always less than the theoretical capacity. Suppose while Theoretical capacity = 545.5, Throughput = 480

10. Capacity Utilization Capacity utilization of a resource pool ρp = Throughput/Theoretical capacity of a resource pool = R/Rp Capacity utilization of the process ρ= Throughput/Theoretical capacity of the bottleneck resource pool 88%

11. Unit Load for a Product Mix Unit load for a given product mix is computed as the weighted average of unit loads of individual products. Billing: Physician claims, Hospital claims, and 60/40 mix

12. Theoretical Capacity for Physicians Claims

13. Theoretical Capacity for Hospital Claims

14. Theoretical Capacity for 60% / 40% Mix Linear Programming: Find the optimal product mix to maximize profit. Greedy Algorithm. Produce products with highest unit contribution margin

15. Optimal Product Mix

16. From Theoretical Capacity to Effective Capacity; Setup Batch, Total Unit Load, and Net Availability Setup or Changeover: activities related to cleaning, resetting and retooling of equipment in order to process a different product. Qp : Setup batch or lot size; the number of units processed consecutively after a setup; Sp :Average time to set up a resource at resource pool p for a particular product We can add setup time to work content or subtract it from schedule availability. From a managerial control point which one is better? Average setup time per unit is then Sp / Qp Tp = Unit load (it does not count for the setup time) Total unit load = Tp + Sp / Qp

17. Setup Batch Size What is the “right” lot size or the size of the set up batch?  lot size   unit load   Capacity.  lot size   inventory  Flow Time. Reducing the size of the setup batch is one of the most effective ways to reduce the waiting part of the flow time. Load batch: the number of units processed simultaneously. Often constrained by technological capabilities of the resource. Setup batch: the number of units processed consecutively after a setup. Setup is determined managerially

18. Total Unit Load for Product mix Compute unit load and total unit load for each Load batch of Regular tile, Jumbo tile, and a product mix of 75% Regular and 25% Jumbo

19. Net Availability Theoretical Capacity of a resource unit = (1/Unit load) ×Load batch ×Scheduled availability Scheduled availability – the scheduled time period during which a resource unit is available for processing flow units. Availability loss factor = 1 – (Net Availability/Scheduled Availability) Effective Capacity of a resource unit = (1/Total unit load) × Load batch × Net availability Effective Capacity of a pool = (cp/Total unit load) × Load batch ×Net availability The effective capacity of a process is the effective capacity of its slowest resource pool (effective bottleneck).

20. Effective Capacity of a Resource Pool and Process

21. From Theoretical Capacity to Throughput Throughput ≤ Process capacity ≤ Effective capacity ≤ Theoretical capacity • Theoretical capacity  Effective Capacity • Breakdown or absenteeism (Schedule Availability  Net Availability) • Preventive maintenance (Schedule Availability  Net Availability) • Setup time (Unit load  Total unit load) total unit load is unit load plus setup time per unit, Tp+Sp/Qp, • Effective Capacity  Process Capacity • Internal starvation (from preceding station) • Internal blockage (due to next station) • Process Capacity  Throughput • External starvation (supply of row material) • External blockage (product demand)

22. Improving Theoretical Capacity Theoretical capacity of a pool = (cp/Total unit load) × Load batch ×Scheduled availability • Decrease unit load on the bottleneck: Decrease the work content of the activity performed by the bottleneck resource pool. • Increase Scheduled Availability of the bottleneck: Add more hours to the resource such as adding overtime or second shift operations • Increase the Load Batch of the bottleneck: Expanding the resource will increase resource capacity • Increase the number of resources at bottleneck resource : Adding units to the bottleneck resource pool will increase resource capacity

23. Improving Effective Capacity Increasing net availability • Regular Maintenance of equipment • Perform maintenance after production time Reducing setup waste • Reduce the setup time • Improve product mix Caution: Increasing batch size or length of run  increased inventory  longer flow times.

24. Internal Bottlenecks Internal Bottleneck  Throughput is equal to Process Capacity • The output of the process is limited by the process’s own constraints (the bottleneck resource) • Starvation: If we have two raw material for a process and one is unavailable. • Blockage: If the buffer is not big enough upstream and there is no place for the product to go • Internal bottle neck will require increasing the capacity of the bottle neck to a capacity where a new bottleneck will appear. • Once the old bottleneck does not have the lowest capacity do not continue to increase capacity. It will not increase overall capacity any further.

25. External Bottlenecks External Bottleneck  Throughput is less than to Process Capacity • The output of the process is limited by conditions external to the boundaries of the internal process constraints. Examples include: demand for product, raw material shortages.

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