PROCESS ANALYSIS

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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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MAKE TO STOCK VS. MAKE TO ORDER

 Make-to-order
 Only activated in response to an actual order.

 Both work-in-process and finished goods inventory kept to a minimum.

 Make-to-stock
 Process activated to meet expected or forecast demand.

 Customer orders are served from target stocking level.

 Hybrid
 Combines the features of both make-to-order and make-to-stock.

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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 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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