Lecture-1-2 Intro & Process Analysis(1)

An Introduction to Operations & Supply Chain Management

Guanyi Lu

April 19, 2023

© All Rights Reserved, G. Lu, 2014 2

Agenda

• Ice break• Review of Syllabus• Introduction to Operations Mgmt (OM) and

Supply Chain Mgmt (SCM)• Q&A


Two companies…COB & Co. (400 employees) Car TV

200 (5 people & 1 month / 1 car) 40

200 (2 people & 1 month / 1 TV) 100

OSU & Co. (400 employees) Car TV

200 (20 people & 1 month / 1 car) 10

200 (2.5 people & 1 month / 1 TV) 80

High Efficiency

Low Efficiency


Two companies…COB & Co. (400 employees) Car TV


200 (2 people & 1 month / 1 TV) 100


200 (20 people & 1 month / 1 car) 10

200 (2.5 people & 1 month / 1 TV) 80

COB & Co. (400 employees) Car TV


100 (2 people & 1 month / 1 TV) 50


0

400 (2.5 people & 1 month / 1 TV) 160


Two companies…TOTAL OUTCOME Before After

Car 50 60

TV 180 210

Both parties can be better off if they work together…

We call it cooperation (collaboration, integration, etc.).

A supply chain is formed by a number of firms that cooperate with each other in order to generate values.


A story about ice cream

• Ice cream infects my car!!– A well-educated family– A nice family tradition


Review of Syllabus

• Instructor / TAGuanyi Lu

309, Bexell Hall

Office hours: 12:15 PM – 1:45 PM, TR

Phone: 541-737-3995

Email: [email protected]. Emails should have “BA 554” in the subject line.


Tell me more about you

• I work for…• I like …• I hate…• I hope this course …


Review of Syllabus

• Grading

• MBA Exit Hurdle

• Course flow & Text book


Operations Management

• Operations and supply chain management: the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services– Functional field of business

• Concerned with the management of the entire system that produces a good or delivers a service



Inputs Outputsgoods,services

(raw material, customers)

TransformationProcess

Resources:labor & capital

A process view of OM



Organization Inputs Outputs_______________________________________________

Automobile sheet steel, cars factory engine parts

Restaurant hungry customers satisfied customers

College high school educated individuals graduates



• History of OM– Lean manufacturing, JIT, and TQC– Manufacturing strategy paradigm– Service quality and productivity– Total quality management (TQM) and quality certifications– Business process reengineering– Six-sigma quality– Supply chain management– Electronic commerce– Service science



• Matching supply with demand– Efficiency– Right balance– Push the envelop



low price

responsiveness

Eliminateinefficiency

A

B

C

Current frontier in the industry

high

low

high price

Efficiency



low price

responsiveness

Current frontier in the industryhigh

low

high price

RightBalance



Push theEnvelop

low price

responsiveness

Current frontier in the industry

high

low

high price

New frontier



• Trends in O&SCM– Supply chain integration– Manufacturing and service outsourcing– Increased co-production of goods and service– Sustainability and the triple bottom line– Managing customer touch point – enhance service experience– Raising senior management awareness of operations and supply chain

management as a significant competitive weapon

Process AnalysisPart 1

Guanyi Lu

April 19, 2023


Learning Objectives

• Understand basic flowcharting of processes.• Recognize various types of processes.• Explain how to analyze processes using Little’s law.• Understand how to calculate process performance

measures.• Understand the role and impact of bottleneck.• Understand how to interpret and compute utilizations.


Process Analysis

• Process Flowcharting– Process flowcharting: the use of a diagram to present

the major elements of a process – Symbols:


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


Process Analysis

• Single-stage vs. Multi-stage

Stage 1

Stage 1 Stage 2 Stage 3

Multi-stage process

Single-stage process


Process Analysis

• Various Multi-stage ProcessesSerial flow process

Alternative paths Different products


Process Analysis

• Analyzing a Las Vegas Slot Machine


Process Analysis

• Buffering, Blocking, and Starving– Buffer: a storage area between stages where the

output of a stage is placed prior to being used in a downstream stage

– Blocking: occurs when the activities in a stage must stop because there is no place to deposit the item

Fast Slow


Process Analysis

• Buffering, Blocking, and Starving– Starving: occurs when the activities in a stage must

stop because there is no work

– Bottleneck: stage that limits the capacity of the process

– Can a stage be bottleneck if it is blocking or starving?

Slow Fast


Process Analysis

• 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– Combine the features of both make-to-order and make-to-

stock


Process Analysis

• Example: Making Hamburgers at McDonald's (old process)


Process Analysis

• Example: Making Hamburgers at McDonald's (current process)


Process Analysis

• Pacing– Pacing: Movement of items through a process is coordinated

through a timing mechanism.– Assembly lines are usually paced.

– Moving at a constant rate (demo)– e.g., moving to the right by 1 position every 30 seconds


Process Analysis

• Cycle time: The average time between completions of successive units– Often used in the context of a process– Can also be used in the context of a specific job or process

stage

• Throughput rate (a.k.a. Flow rate): The output rate that the process is expected to produce over a period of time

• Process capacity: The maximum rate with which the process can generate outputs


Process Analysis

• Example: The BBA Bagel Store

Spreadcream

cheese

Cut&

Toast

Customerplacesorder

Rawmaterials WIP

3 minutes/order 1 minute/order

2 minutes/order

Assuming1 bagel/order

If a customer arrives every 4 minutes, thencycle time = __________ minute(s) and throughput rate = __________ /hour

Process capacity = __________/hour


Process Analysis

• Example: The BBA Bagel Store0:00 1st customer arrives

0:02 The first order is taken and payment collected

0:05 The1st bagel is cut & toasted & the 2nd order has spent 1 minute with the order taker

0:06 The 1st order is completed & the 2nd order is taken & payment collected

0:09 The 2nd bagel is cut & toasted & the 3rd order has spent 1 minute with the order taker

0:10 The 2nd order is completed & the & 3rd order is taken & payment collected

0:13 The 3rd bagel is cut & toasted & the 4th order has spent 1 minute with the order taker

0:14 The 3rd order is completed & the 4th order is taken & payment collected


Process Analysis

• Flow time: The average time that it takes a unit to move through an entire process. – Includes the time that the unit spent actually being

worked on together with the time spent waiting in a queue


Process Analysis

Spreadcream

cheese

Cut&

Toast

Customerplacesorder

Rawmaterials WIP


2 minutes/order

Assuming1 bagel/order

If a customer arrives every 4 minutes, thencycle time = __________ minute(s) and throughput rate = __________ /hour;

flow time = __________ minute(s).

Process capacity = __________/hour


Guanyi Lu

April 19, 2023


Process Analysis

• Setup Time and Run Time Example

– Production plan: make 100 units of component A, then 100 units of component B, then 100 units of component A, then 100 units of component B, and so forth.

– What is the average hourly output?

Manufacturing Packing

setup time: 5 minutesrun time: 20 minutes/100 units

setup time: 10 minutesrun time: 10 minutes/100 units

run time:2 seconds/unitnegligible


Process Analysis

• Efficiency and Productivity

• Efficiency: A ratio of the actual output of a process relative to some standard.

– Efficiency can be measured by dividing the actual output by the designed output– Efficiency can indicate the loss or gain in a process

• Productivity = Outputs / inputs

• Both measures are related to throughput rate, which measures the actual output of a process.


Process Analysis


Process Analysis

• Inventory

• Inventory: The number or value of all the flow units in a process.

• Total average value of inventory: The total average investment in raw material, work-in-process, and finished goods. This is valued at the cost to the firm, usually for accounting purposes.


Process Analysis

• Relevance of three Performance Measures

Performance Measure Impact

Inventory Use of working capital, reflected in the balance sheet

Throughput rate Rate of revenue generation, reflected in the income statement

Flow time Lead time, responsiveness


Process Analysis

• Conveyer

A conveyor moving at a constant rate Throughput rate: 2 / minute On average 6 pieces in the system Flow time ?


Process Analysis

• Little’s Law– Establishes a mathematical relationship between

Inventory, Throughput rate and Flow time– Inventory = Throughput rate x Flow time

Inventory, [units]

Throughput rate, [units/time unit]

... ......

Throughput time, [time units]

... ......


Process Analysis

• An intuitive example of Little’s Law: Student Flow– Consider a 4-year college. Every year 200 high

school graduates are admitted, on average. Every student admitted will graduate in 4 years, on average. On average, how many students are in the college at any given time?


Process Analysis

• Recall that Inventory is the number or value of all the flow units in a process

• Indirect measures– Days-of-supply: The (average) number of days until the firm

would run out of an item if not replenished» Days-of-supply is essentially flow time.

– Inventory turn: The cost of goods sold divided by the total average value of inventory» Inventory turn is also the inverse of days-of-supply


Process Analysis

• Raw Materials and WIP

12 hrs/car

Assembly(1 battery/car)

Rawmaterials

200 cars/8-hr shift

8,000 batteries are kept in Raw materials inventory, on average. Those batteries translate into _____ days of supply on average, assuming 8 hrs/day

The average number of batteries in Assembly = __________.


Process Analysis

• Inventory Turn

Inventory turn = 1 / flow time

Inventory turn = COGS / inventory


Process Analysis

• Inventory Turn: practicesK-Mart (01/29/02)

Inventory = $4,825 million COGS = $26,258 million

Inventory turn =

Wal-Mart (01/29/02)

Inventory = $22,749 millionCOGS = $171,562 million

Inventory Turn =


Process Analysis

• Material Flow: practice– Wendy’s processes an average of 5,000 lb. of hamburgers per

week. The typical inventory of raw meat is 2,500 lb. What is the average hamburger’s flow time and Wendy’s inventory turn?


Process Analysis

• Job Flow: practice– The Travelers Insurance Company processes 10,000 claims per

year. The average processing time is 3 weeks. Assuming 50 weeks in a year, what is the average number of claims “in process?”


Process Analysis

• Cash Flow: practice– Motorola sells $300 million worth of cellular equipment per year.

The average accounts receivable in the cellular group is $45 million. What is the average time between billing to revenue collection?


Process Analysis

• Decipher News ReportsThe following was reported in the Wall Street Journal:

“.. although GM and Toyota are operating with the same number of inventory turns, Toyota’s throughput rate is twice that of GM. The discrepancy could be due to much faster flow times and lower inventories by virtue of Toyota’s production system.”

Anything wrong with this statement?


Guanyi Lu

April 19, 2023


Process Analysis

• The BBA Bagel Store Revisited

Spreadcream

cheese

Cut&

Toast

Customerplacesorder

Rawmaterials WIP


2 minutes/order

Assuming1 bagel/order Process capacity = __________/hour

If a customer arrives every 2 minutes, thencycle time = __________ minute(s) and throughput rate = __________ /hour;flow time = __________ minute(s).


Process Analysis

Bottleneck refers to a resource that limits the capacity or maximum output of the process


Bottleneck and Inventory Buildup

60/hr 90/hr 120/hr 100/hr

120/hr 90/hr 60/hr 100/hr

120/hr 60/hr 90/hr 100/hr

90/hr 120/hr 60/hr 100/hr


Inventory Buildup Computation

Time

Demand

12pm 2pm 6pm10am

50

200

Time

200

Inventory

100

12pm 2pm 6pm10am

Process Capacity = 100 / hr.


Wet Cranberry Processing

Bins

Bad berries (disposed)

Sepa

rato

r Lin

es

Shipping of good berries

KiwaneeDumpers

Dechaffing

Dryers

Truck queue


Cranberry Processing Example

Bins


Sepa

rato

r Lin

es


KiwaneeDumpers

Dechaffing

Dryers

Truck queue

1,500 barrels/hr 1,250 barrels/hr 600 barrels/hr

2,400 barrels

800 barrels/hr


Demand and Capacity Information

• Demand: 6000 barrels over 12 hrs

• Kiwanee dumpers: Capacity = 1500 barrels/hr • Storage bins: Capacity = 2400 barrels• Dechaffers: Capacity = 1250 barrels/hr• Dryers: Capacity = 600 barrels/hr• Separators: Capacity = 800 barrels/hr

• Process Capacity = __________ barrels/hr

• Throughput Rate = __________ barrels/hr


Demand and Capacity Information

• Demand: 10800 barrels over 12 hrs

• Kiwanee dumpers: Capacity = 1500 barrels/hr • Storage bins: Capacity = 2400 barrels• Dechaffers: Capacity = 1250 barrels/hr• Dryers: Capacity = 600 barrels/hr• Separators: Capacity = 800 barrels/hr

• Process Capacity = __________ barrels/hr

• Throughput Rate = __________ barrels/hr


Inventory Buildup Diagram

Wetberries

Time7am 10am 1pm 4pm 7pm 1am10pm


Utilization

• Utilization of a resource is the ratio of the time that a resource is actually activated to the time that it is available for use.

• Utilization of a resource can also be expressed as throughput rate over resource capacity.

• Utilization never exceeds 100% (=1).

• When the utilization of a resource is 1, the resource may or may not be able to satisfy all the demand within its available time.


Cranberry Processing Example

Bins


Sepa

rato

r Lin

es


KiwaneeDumpers

Dechaffing

Dryers

Truck queue

1,500 barrels/hr 1,250 barrels/hr 600 barrels/hr

2,400 barrels

800 barrels/hr


Utilization Computations

• Resource utilizations: (time available = 12 hrs)

KiwaneeDumpers

Dechaffers Dryers Separators

Capacity 1,500/hr 1,250/hr 600/hr 800/hr

If demand = 500 barrels/hr

If demand = 900 barrels/hr


Demand Constrained Process

Excess capacity

Flow Rate

Demand

Input

Bottleneck(Capacity)

Throughput Rate

Throughput rate = demand for a demand constrained process


Supply Constrained Process

Demand

Bottleneck(Capacity)

Excess capacity

Flow Rate

Input

Throughput Rate

Throughput rate = process capacity for a supply constrained process


Two Types of Cranberries

Bins


Sepa

rato

r Lin

es


KiwaneeDumpers

Dechaffing

Dryers

Truck queueDestoningBins

drydry

dry

dry

wet wet wet wet

1,500 barrels/hr2,400 barrels

1,250 barrels/hr 600 barrels/hr

400 barrels/hr800 barrels

800 barrels/hr


Utilization Computations (II)

• Demand = _______ barrels of wet berries and _______ barrels of dry berries per hour (from 7am to 7pm)

• Resource utilizations:

KiwaneeDumpers

De-chaffers De-stoners Dryers Separators


Recall Bottleneck

Bottleneck: stage that limits the capacity of the process


Identify Bottleneck


Identify Bottleneck Time available = 480 minutes for each worker Utilizations:

Station A: time available = time activated = ____________________; util. = __________

Station B: time available = time activated = ____________________; util. = __________

Station C: time available = time activated = ____________________; util. = __________

Station D: time available = time activated = ____________________; util. = __________

Station E: time available = time activated = ____________________; util. = __________


Job Shop


Project Layout


Work Center


Manufacturing Cell


Assembly Line


Continuous Processes

Lecture-1-2 Intro & Process Analysis(1)

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Transcript of Lecture-1-2 Intro & Process Analysis(1)