OPERATIONS MANAGEMENT
PROCESS ANALYSIS
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Source: Link 3
PROCESS ANALYSIS
▪ Process: any part of an organization that takes inputs and transforms them into
outputs
▪ Cycle time: the average successive time between completions of successive units
▪ Utilization: the ratio of the time that a resource is actually activated relative to the
time that it is available for use
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LITTLE’S LAW
▪ Total average value of inventory
▪ Sum of the value of raw materials, work-in-process, and finished goods inventory
▪ Inventory turns
▪ Cost of goods sold divided by the average inventory value
▪ Days-of-supply
▪ Inverse of inventory turns scaled to days
▪ Little’s law
▪ There is a long-term relationship among inventory, throughput, and flow time
Inventory = Throughput rate x Flow time
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EXAMPLE – CAR BATTERIES
▪ Average cost $45
▪ 12 hours to make a car
▪ Assembles 200 cars per 8-hour shift
▪ Currently one shift
▪ Holds on average 8,000 batteries in raw material inventory
Question: What is the total number of batteries in plant on average?
How much are they worth? How many days of supply are held in raw
material inventory?
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EXAMPLE – CAR BATTERIES
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EXAMPLE - BAKERY
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EXAMPLE - BAKERY
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EXAMPLE - BAKERY
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EXAMPLE - BAKERY
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EXAMPLE – RESTAURANT (NON STEADY STATE)
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EXAMPLE – RESTAURANT (NON STEADY STATE)
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EXAMPLE – RESTAURANT (NON STEADY STATE)
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EXAMPLE – RESTAURANT (NON STEADY STATE)
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EXAMPLE – RESTAURANT (NON STEADY STATE)
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EXAMPLE – RESTAURANT (NON STEADY STATE)
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REDUCING PROCESS FLOW TIME
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A SIMPLE PROBLEM
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A SIMPLE PROBLEM - EXTENDED
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A SIMPLE PROBLEM – EXTENDED (2)
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THE QUESTION!
The company wants to
know whether the changes
have improved service
performance?
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THE PROCESS MAP
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▪ In Process I, each application spent, on average of 15 days with the company
before receiving an accept/reject decision
▪ What about Process 2?
▪ It involves multiple steps, so it makes sense to focus on the flowchart. On
average 1,000 application arrive per month for initial review. After initial
review 50% of these are rejected, 25% are categorized as Type A (excellent),
25% as type B (more detailed evaluation)
▪ Further analysis of Type A: 70% rejected & 30% accepted
Further analysis of Type B: 10% accepted & 90% rejected
Each month, an average of 200 applications get accepted and 800 rejected
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