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LECTURE 4 HOW CAN OM HELP? Production and operations Management

Four Dimensions of Performance: Trade-offs

CostEfficiencyTimeResponsiveness to demandQualityProduct quality (how good?)

Process quality (as good as promised?)VarietyCustomer heterogeneityExample: Call center of a large retail bank - objective: 80% of incoming calls wait less than 20 seconds - starting point: 30% of incoming calls wait less than 20 seconds - Problem: staffing levels of call centers / impact on efficiency

OM helps: Provides tools to support strategic trade-offs. In this case OM provides tools to balanceresponsiveness with efficiency. ResponsivenessLabor Productivity(e.g. $/call)LowHighLow laborproductivityHigh laborproductivityTrade-offVery short waiting times,Comes at the expense ofFrequent operator idle timeLong waiting times,yet operators are almostfully utilizedWhat Can OM Do to Help? Step 1: Help Making Operational Trade-OffsResponsivenessLowHighEliminate inefficienciesCurrent frontierIn the industryLabor Productivity(e.g. $/call)Low laborproductivityHigh laborproductivityCompetitor ACompetitor CCompetitor BOM helps: Provides tools to identify and eliminate inefficiencies => Define Efficient Frontier

Types of inefficiencies:Poor process design Inconsistencies in activity networkWhat Can OM Do to Help?Step 2: Overcome InefficienciesOM helps: Evaluates system designs before they occurResponsivenessLowHighRedesignprocessCurrent frontierIn the industryLabor Productivity(e.g. $/call)Low laborproductivityHigh laborproductivityNew frontierWhat Can OM Do to Help?Step 3: Evaluate Proposed Redesigns/New TechnologiesOM Modules to be studiedModule 1: Process AnalysisModule 2: ProductivityModule 3: VarietyModule 4: ResponsivenessModule 5: Quality

Read handout 1Lecture 4: Module 1 Process AnalysisProcess analysiswhy are some operations more productive than others?Why are some operations more responsive than others?To answer these questions, we have to go inside the business processes that make up for the operations, our sole purpose of this module, process analysis. The three measuresIn this module, we'll introduce the three most important performance measures of an operation which are called: flow rate/through-put;Inventory;flow time.Subway Sitting in Front of the Store

We'll just spend some time observing how people come into and out of the restaurant

Subway Sitting in Front of the Store25 Minutes later.Subway Sitting in Front of the Store

Flow Unit: atomic unit of analysis (Customer)

Flow rate / throughput: number of flow units going through the process per unit of time

Flow Time: time it takes a flow unit to go from the beginning to the end of the process

Inventory: the number of flow units in the process at a given moment in time

Processes: The Three Basic MeasuresProcess Analysis: The Three MeasuresImmigration department

Applications

Approved or rejected cases

Processing time

Pending casesMBA program

Student

Graduating class

2 years

Total campus populationAuto company

Car

Sales per year

60 days

InventoryFlow unit

Flow rate

Flow time

InventoryFinding the bottleneckLecture 4: Module 1 Process AnalysisProcess AnalysisIn this session, we will take you INSIDE the black box

Specifically, you will learn how to:

1. Create a process flow diagram

2. Find the bottleneck of the process

3. Conduct a basic process analysis

Subway Inside the Store

Drawing a Process Flow DiagramSymbols in a process flow diagram

Customers

Station 1

Station 2

Station 3

capture activitiesCapturing wherever there is waiting linesor inventory/bufferIndicate the flow of flow unitsBasic Process Vocabulary Processing times/Activity time: how long does the worker spend on the task?

Capacity=1/processing time: how many units can the worker make per unit of time If there are m workers at the activity: Capacity=m/activity time

Bottleneck: process step with the lowest capacity

Process capacity: capacity of the bottleneck

Flow rate =Minimum{Demand rate, Process Capacity)

Utilization =Flow Rate / Capacity

Flow Time: The amount of time it takes a flow unit to go through the process

Inventory: The number of flow units in the system

Practice problem

Read handout 2