Process View of
Organisation & Operations
Rahul Pandey
rahul.pandey@igsalabs.com
Process in an automobile plant
Flow Time
Operation Steps
Stamp 1 Vehicle
1. Blanking & Stamping Wait Time
Weld
(Inventory)
2. Welding Paint
Machine
3. Painting Assemble
4. Machining Inspect
Time
5. Assembly
6. Final Inspection Wait Time
(Inventory)
Flow Time 10 Vehicles
car 10
car 9
Vehicle Units
View of Product car 8
car 7
vs. car 5
car 6
car 4
View of Resources car 3
car 2 Cycle
car 1 Time
Time
Process in an interventional radiology unit
1. Registration
2. Initial consult with doctor
3. Preparation of room
4. Preparation of patient
See Figs 2.2, 2.3, 2.4 in the textbook
5. Actual procedure
6. Removal of equipment
7. Recovery
8. Consult with doctor
View of Customer (Patient)
vs.
View of Resources
Some Terms & Process Performance Measures
• Process flow
• Flow unit
• Process performance measures:
• (Capacity)
• Flow rate or Throughput rate
• Flow time
• Inventory
Little’s Law
Avg Inventory = Avg Flow Rate X Avg Flow Time
Inventory
See Fig 2.7 in the textbook for
Cumulative radiology process example
Vehicle Units
inflow Cumulative
Flow time
outflow
Inventory
Flow
time e=
Inventory
Time o p
Sl rate
w
Flo
Flow time
Little’s Law & Inventory Turnover Ratio (ITR)
ITR (turns per yr) = 1 / Flow time (yrs)
= Avg Flow Rate (units per yr) / Inventory (units)
= COGS (value per yr) / Inventory (value)
Implications of ITR:
• Financial cost of holding inventory Inventory Holding Cost per unit
• Loss, obsolescence, quality problems = Annual Inventory Cost X Flow Time
= Annual Inventory Holding Cost / ITR per year
• Storage overheads
• Waiting time, responsiveness
• Cash flow rate (working capital)
Is inventory justified?
1. Pipeline inventory (due to processing flow time)
2. Seasonal inventory (to stabilise supply in face of seasonal demand)
3. Cycle inventory (batching due to economy of scale)
4. Buffer / decoupling inventory (to protect critical process operations)
5. Safety inventory (to offer service level in face of uncertain demand)
Types of Processes: Product-Process Matrix
Low Volume Med Volume Hi Volume V. Hi Volume
Unique Hi Variety Low Variety Standardized
Job Shop
Batch Process
Worker Paced Line
Machine Paced Line
Continuous Process
Process Flow Diagrams: 1st Step in Process Analysis
• View of the Flow Unit (product, work, customer)
• 1 Flow Unit = 1 vehicle, 1 case of shampoo bottles, 1 ton of steel, 1 patient in a hospital,
1 customer in a bank, 1 guest (guest family) in a hotel
• Process boundary
Stamp Weld Paint WIP
Raw Material / WIP
Components
(blanked steel sheets)
Final
Assembly
Inspection
Finished Products
(vehicles)
Steps in Process Analysis
Stamp Weld Paint WIP
Raw Material / WIP Holds 8 cars batch
35 cars/hr 50 cars/hr
Components 15 min per batch
(blanked steel sheets) So, 32 cars/hr
Final
Assembly
Inspection
Finished Products 4 parallel resources 30 cars/hr
(vehicles) 9 cars/hr at each
So, 36 cars/hr
• Define process boundary, Draw process flow diagram, Identify flow unit
• Estimate each resource’s capacity
• Process Capacity = Max possible flow rate
= Min {Res1 cap, Res2 cap, … ResN Cap}
= 30 cars/hr = 30 cars/hr X 14 hrs/day X 25 days/month = 10,500 cars/month
• Flow Rate = Min {Available Input Rate, Process Capacity, Demand}
• Utilization = Flow Rate / Capacity
• Implied Utilization = Demand / Capacity
Steps in Process Analysis: Supply Constrained Case
Stamp Weld Paint WIP
Raw Material / WIP Holds 8 cars batch
35 cars/hr 50 cars/hr
Components 15 min per batch
(blanked steel sheets) So, 32 cars/hr
Final
Assembly
Inspection
Finished Products 4 parallel resources 30 cars/hr
(vehicles) 9 cars/hr at each
So, 36 cars/hr
SCENARIO 1: SUPPLY-CONSTRAINED: Demand = 14,000 cars/month = 40 cars/hr; Sufficient input availability
Process Step Capacity (units/hr) Flow Rate (units/hr) Utilization (%) Implied Utilization (%)
Stamp 35 30 85.7 114.3
Weld 50 30 60 80
Paint 32 30 93.8 125
Assembly 30 30 100 133.3
Inspection 36 30 83.3 111.1
TOTAL 30 30 100 133.3
Steps in Process Analysis: Demand Constrained Case
Stamp Weld Paint WIP
Raw Material / WIP Holds 8 cars batch
35 cars/hr 50 cars/hr
Components 15 min per batch
(blanked steel sheets) So, 32 cars/hr
Final
Assembly
Inspection
Finished Products 4 parallel resources 30 cars/hr
(vehicles) 9 cars/hr at each
So, 36 cars/hr
SCENARIO 2: DEMAND-CONSTRAINED: Demand = 8,750 cars/month = 25 cars/hr; Sufficient input availability
Process Step Capacity (units/hr) Flow Rate (units/hr) Utilization (%) Implied Utilization (%)
Stamp 35 25 71.4 71.4
Weld 50 25 50 50
Paint 32 25 78.1 78.1
Assembly 30 25 83.3 83.3
Inspection 36 25 69.4 69.4
TOTAL 30 25 83.3 83.3
Steps in Process Analysis: Multiple Types of Flow Units
Model1
Stamp Weld Paint WIP
Model2
Raw Material / WIP Holds 8 cars batch
35 cars/hr 50 cars/hr
Components 15 min per batch
(blanked steel sheets) So, 32 cars/hr
30 cars/hr
Model1 Final
Assembly1
Demand = 15 (model1) + 10 (model2) Model2
Inspection
Finished Products 4 parallel resources
(vehicles) 9 cars/hr (model1) 20 cars/hr
Flow Unit = 1 minute of work 4 cars/hr (model2) Assembly2
So, 36 cars/hr or 16 cars/hr
Process Step Process. Time No. of m/c or Capacity Workload (min/hr) Implied
(min/car) lines or (min/hr) Utilization
workers Model1 Model2 Total (%)
Stamp 1.714 1 60 15 X 1.714 10 X 1.714 42.85 71.4
Weld 1.2 1 60 15 X 1.2 10 X 1.2 30 50
Paint 1.875 1 60 15 X 1.875 10 X 1.875 46.875 78.1
Assembly1 2 1 60 15 X 2 10 X 2 50 83.3
Assembly2 3 1 60 0 10 X 3 30 50
Process Analysis: Estimating Labour Cost & Utilization
Motivation: We wish to improve the performance of Auto Assembly Process
Activity 1 Activity 2 Activity 3 Activity 4
• Engine assy • Axle assy • Dashboard • Other interiors
• Trans. assy • Wheels • Seats • Accessories
Painted body & 2 workers 2 workers 2 workers 1 worker Assembled
components cars
Processing Time 3.5 min/car 4 min/car 3 min/car 1.5 min/car
(if 1 wkr did work)
Labour Content 3.5 + 4 + 3 + 1.5 = 12 min/car
Resource 2/3.5 = 0.57 cars/min 2/4 = 0.5 cars/min = 2/3 = 0.67 cars/min = 1/1.5 = 0.67 cars/min
Capacity = 34.29 cars/hr 30 cars/hr 40 cars/hr = 40 cars/hr
Process Capacity 30 cars/hr = 10,500 cars/month
Demand 14,000 cars/month = 40 cars/hr
Flow Rate 30 cars/hr
Cycle Time 1/Flow Rate = 1/30 hrs/car = 2 min/car
Idle Time 2 – 3.5/2 = 0.25 min 2 – 4/2 = 0 2 – 3/2 = 0.5 min 2 – 1.5 = 0.5 min
(of each wkr)
Total Idle Time (2 X 0.25) + 0 + (2 X 0.5) + 0.5 = 2 min/car
Utilization 30/34.29 = 87.5% 30/30 = 100% 30/40 = 75% 30/40 = 75%
Avg Labour Util [ (2 X 87.5) + (2 X 100) + (2 X 75) + (1 X 75) ] / 7 = 85.7% or 12 / (12 + 2) = 85.7%
Direct Labour Cost Total wage per pd / Flow rate per pd = (7 workers/shift X 2 shifts/day X Rs 2000/shift) / (30 cars/hr X 14 hrs/day) = Rs 66.7/car
Process Analysis: Reducing Labour Cost & Increasing Utilization by Line
Balancing
Shift some of the tasks of Activity 2 to other activities! Let’s see what happens in an ideal scenario!
Activity 1 Activity 2 Activity 3 Activity 4
• Engine assy • Axle assy • Dashboard • Other interiors
• Trans. assy • Wheels • Seats • Accessories
Painted body & 2 workers 2 workers 2 workers 1 worker Assembled
components cars
Processing Time 12 X 2/7 = 3.43 min/car 12 X 2/7 = 3.43 min/car 12 X 2/7 = 3.43 min/car 12 X 1/7 = 1.71 min/car
(if 1 wkr did work)
Labour Content 3.43 + 3.43 + 3.43 + 1.71 = 12 min/car
Resource 2/3.43 = 0.583 cars/min 2/3.43 = 0.583 cars/min 2/3.43 = 0.583 cars/min 1/1.71 = 0.583 cars/min
Capacity = 35 cars/hr = 35 cars/hr = 35 cars/hr = 35 cars/hr
Process Capacity 35 cars/hr = 12,250 cars/month
Demand 14,000 cars/month = 40 cars/hr
Flow Rate 35 cars/hr
Cycle Time 1/Flow Rate = 1/35 hrs/car = 1.71 min/car
Idle Time 0 0 0 0
(of each wkr)
Total Idle Time 0
Utilization 100% 100% 100% 100%
Avg Labour Util 100%
Direct Labour Cost Total wage per pd / Flow rate per pd = (7 workers/shift X 2 shifts/day X Rs 2000/shift) / (35 cars/hr X 14 hrs/day) = Rs 57.1/car
If demand increases further, how do we scale up to
much higher volumes?
1. Replicate the line (and maybe, outsource)
2. Selectively add workers (resources)
3. Specialize the tasks further
4. Create parallel integrated (de-specialized) work cells
