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4 – 1Copyright © 2010 Pearson Education, Inc.
Analyzing ProcessesAnalyzing Processes4
For For Operations Management, 9eOperations Management, 9e (Global Edition) by (Global Edition) by Krajewski/Ritzman/Malhotra Krajewski/Ritzman/Malhotra © 2010 Pearson Education© 2010 Pearson Education
PowerPoint Slides PowerPoint Slides by Jeff Heylby Jeff Heyl
4 – 2Copyright © 2010 Pearson Education, Inc.
Process AnalysisProcess Analysis
Processes may be the least understood and managed aspect of a business
A firm can not gain a competitive advantage with faulty processes
Processes can be analyzed and improved using certain tools and techniques
Process analysis can be accomplished using a six-step blueprint
4 – 3Copyright © 2010 Pearson Education, Inc.
A Systematic ApproachA Systematic Approach
Figure 4.1 – Blueprint for Process Analysis
Define scope
2
Identify opportunity
1
Implement changes
6
Evaluate performance
4
Redesign process
5
Document process
3
4 – 4Copyright © 2010 Pearson Education, Inc.
Documenting The ProcessDocumenting The Process
Three effective techniques for documenting and evaluating processes are
1) Flowcharts
2) Service blueprints
3) Process charts
They help you see how a process operates and how well it is performing
Can help find performance gaps
4 – 5Copyright © 2010 Pearson Education, Inc.
FlowchartsFlowcharts
No
Yes
No Yes
No
Yes
Line of visibility
Finish
Figure 4.2 – Flowchart of the Sales Process for a Consulting Company
Payment received?
Client billed by accounting,
sales, or consulting
Follow-up by accounting,
sales, or consulting
Approvalby
consulting?
Final invoice created by
accounting, sales, or consulting
Nested Process Client agreement
and service delivery
Is proposal
complete?
Follow-up conversation
between client and sales
Sales and/or consulting
drafts proposal
Sales: Initial conversation
with client
Marketing lead
Follow-up conversation
between client and consulting
Consulting drafts
proposal
Consulting: Initial
conversation with client
Consulting lead
Sales lead
4 – 6Copyright © 2010 Pearson Education, Inc.
FlowchartsFlowcharts
Final invoice created by
accounting, sales, or consulting
Delivery of service by consulting
50% invoiced by accounting,
sales, or consulting
Letter of agreement
signed
Project manager assigned
Form completed by
sales or consulting
Verbal OK from client
Is proposal
complete?
Figure 4.3 – Flowchart of the Nested Subprocess of Client Agreement and Service Delivery
4 – 7Copyright © 2010 Pearson Education, Inc.
Credit and invoicing
Production Control and Manufacturing
Assembly and Shipping
PR
OD
UC
TIO
NF
INA
NC
ES
AL
ES
CU
ST
OM
ER
FlowchartsFlowcharts
No
Yes No
Yes
Payment received
Paym
ent
Order stopped
Ord
er cancellatio
nOrder
cancelled
Payment sent
Pro
du
ct packag
esProduct
and invoice received
100% of credit
checked within 24 hours
Two scheduling errors per
quarter
Invoice sent
No
tice of sh
ipm
ent
Order shipped
Order pickedOrder
Packages assembled and
inventoried
`Items manufactured
Production scheduled
Inventory adjusted
Invoice prepared
Credit check OK?
New customer?
Order received
Ord
er
Order entered
Order completed
and submitted
Ord
er
Order generated
Figure 4.4 – Flowchart of the Order-Filling Process Showing Handoffs Between Departments
4 – 8Copyright © 2010 Pearson Education, Inc.
Process ChartsProcess Charts
An organized way to document all the activities performed by a person or group
Activities are typically organized into five categories Operation, Transportation, Inspection, Delay, Storage,
4 – 9Copyright © 2010 Pearson Education, Inc.
Step No.
Time (min)
Distance (ft) Step Description
1 X
2 X
3 X
4 X
5 X
6 X
7 X
8 X
9 X
10 X
11 X
12 X
13 X
14 X
15 X
16 X
17 X
18 X
19 X
0.50 15.0
10.00
0.75 40.0
3.00
0.75 40.0
1.00
1.00 60.0
4.00
5.00
2.00 200.0
3.00
2.00 200.0
3.00
2.00
1.00 60.0
4.00
2.00 180.0
4.00
1.00 20.0
Process ChartsProcess Charts
Figure 4.5 – Process Chart for Emergency Room Admission
Sit down and fill out patient history
Enter emergency room, approach patient window
Nurse escorts patient to ER triage room
Nurse inspects injury
Return to waiting room
Wait for available bed
Go to ER bed
Wait for doctor
Doctor inspects injury and questions patient
Nurse takes patient to radiology
Technician x-rays patient
Return to bed in ER
Wait for doctor to return
Doctor provides diagnosis and advice
Return to emergency entrance area
Check out
Walk to pharmacy
Pick up prescription
Leave the building
4 – 10Copyright © 2010 Pearson Education, Inc.
Step No.
Time (min)
Distance (ft) Step Description
1 X
2 X
3 X
4 X
5 X
6 X
7 X
8 X
9 X
10 X
11 X
12 X
13 X
14 X
15 X
16 X
17 X
18 X
19 X
0.50 15.0
10.00
0.75 40.0
3.00
0.75 40.0
1.00
1.00 60.0
4.00
5.00
2.00 200.0
3.00
2.00 200.0
3.00
2.00
1.00 60.0
4.00
2.00 180.0
4.00
1.00 20.0
Process ChartsProcess Charts
Figure 4.5 – Process Chart for Emergency Room Admission
Sit down and fill out patient history
Enter emergency room, approach patient window
Nurse escorts patient to ER triage room
Nurse inspects injury
Return to waiting room
Wait for available bed
Go to ER bed
Wait for doctor
Doctor inspects injury and questions patient
Nurse takes patient to radiology
Technician x-rays patient
Return to bed in ER
Wait for doctor to return
Doctor provides diagnosis and advice
Return to emergency entrance area
Check out
Walk to pharmacy
Pick up prescription
Leave the building
Summary
Activity Number of Steps
Time (min)
Distance (ft)
Operation 5 23.00
Transport 9 11.00 815
Inspect 2 8.00
Delay 3 8.00
Store ― ―
4 – 11Copyright © 2010 Pearson Education, Inc.
Process ChartsProcess Charts
The annual cost of an entire process can be estimated
It is the product of1) Time in hours to perform the process each
time
2) Variable costs per hour
3) Number of times the process is performed each year
Annual labor cost
Time to performthe process in hours
Variable costsper hour
Number of times processperformed each year=
4 – 12Copyright © 2010 Pearson Education, Inc.
Process ChartsProcess Charts
If the average time to serve a customer is 4 hours
The variable cost is $25 per hour
And 40 customers are served per year
The total labor cost is
4 hrs/customer $25/hr 40 customers/yr = $4,000
4 – 13Copyright © 2010 Pearson Education, Inc.
Work Measurement TechniquesWork Measurement Techniques
Used to estimate the average time each step in a process would take
1) Time study method
2) Elemental standard data approach
3) Predetermined data approach
4) Work sampling method
Learning curve analysis is appropriate for new products or processes
4 – 14Copyright © 2010 Pearson Education, Inc.
Time Study of Revised ProcessTime Study of Revised Process
EXAMPLE 4.1
A process at a watch assembly plant has been changed. The process is divided into three work elements. A time study has been performed with the following results. The time standard for process previously was 14.5 minutes. Based on the new time study, should the time standard be revised?
SOLUTION
The new time study had an initial sample of four observations, with the results shown in the following table. The performance rating factor (RF) is shown for each element, and the allowance for the whole process is 18 percent of the total normal time.
4 – 15Copyright © 2010 Pearson Education, Inc.
Time Study of Revised ProcessTime Study of Revised Process
Obs 1 Obs 2 Obs 3 Obs 4 Average (min) RF Normal
Time
Element 1 2.60 2.34 3.12 2.86 2.730 1.0 2.730
Element 2 4.94 4.78 5.10 4.68 4.875 1.1 5.363
Element 3 2.18 1.98 2.13 2.25 2.135 0.9 1.922
Total Normal Time = 10.014
The normal time for an element in the table is its average time, multiplied by the RF. The total normal time for the whole process is the sum of the normal times for the three elements, or 10.01 minutes. To get the standard time (ST) for the process, just add in the allowance, or
ST = 10.014(1 + 0.18) = 11.82 minutes/watch
4 – 16Copyright © 2010 Pearson Education, Inc.
Work SamplingWork Sampling
Figure 4.6 – Work Sampling Study of Admission Clerk at Health Clinic Using OM Explorer
4 – 17Copyright © 2010 Pearson Education, Inc.
Learning CurvesLearning Curves
140,000
120,000 –
100,000 –
80,000 –
60,000 –
40,000 –
20,000 –
0
Lab
or
Ho
urs
per
Un
it
Cumulative Units Produced
| | | | | | |
0 20 40 60 80 100 120
Figure 4.7 – Learning Curve with 80% Learning Rate Using OM Explorer
4 – 18Copyright © 2010 Pearson Education, Inc.
Evaluating PerformanceEvaluating Performance
Chapter 6, Capacity Planning; Supplement C, Waiting Lines; Supplement H, Measuring Output Rates; Supplement I, Learning Curve Analysis
Processing time
Total time from start to finish (throughput time)
Setup time
Operating expenses
Capacity utilization
Average waiting time
Average number of customers or jobs waiting in line
Chapter 5, Quality and Performance
Customer satisfaction measures
Error rate
Rework or scrap rate
Internal failure costs
Figure 4.8 – Metrics for Flowcharts, Process Charts, and Accompanying Tables
4 – 19Copyright © 2010 Pearson Education, Inc.
Evaluating PerformanceEvaluating Performance
Chapter 8, Lean Systems
Setup time
Average waiting time
Total time from start to finish (throughput time)
Waste
Chapter 7, Constraint Management
Cycle time
Idle time
Figure 4.8 – Metrics for Flowcharts, Process Charts, and Accompanying Tables
4 – 20Copyright © 2010 Pearson Education, Inc.
Data Analysis ToolsData Analysis Tools
Help identify causes of problems1) Checklists
2) Histograms and bar charts
3) Pareto charts
4) Scatter diagrams
5) Cause-and-effect diagrams
6) Graphs
4 – 21Copyright © 2010 Pearson Education, Inc.
Pareto Chart for a RestaurantPareto Chart for a Restaurant
EXAMPLE 4.2
The manager of a neighborhood restaurant is concerned about the smaller numbers of customers patronizing his eatery. Complaints have been rising, and he would like to find out what issues to address and present the findings in a way his employees can understand.
SOLUTION
The manager surveyed his customers over several weeks and collected the following data:
Complaint Frequency
Discourteous server 12
Slow service 42
Cold dinner 5
Cramped table 20
Atmosphere 10
4 – 22Copyright © 2010 Pearson Education, Inc.
Pareto Chart for a RestaurantPareto Chart for a Restaurant
50 –45 –40 –35 –30 –25 –20 –10 –5 –0 –
Fa
ilu
res
Discourteous server
Slow service
Cold dinner
Cramped tables
Atmosphere
Failure Name
Figure 4.9 – Bar Chart
Figure 4.9 is a bar chart and Figure 4.10 is a Pareto chart, both created with OM Explorer’s Bar, Pareto, and Line Charts solver. They present the data in a way that shows which complaints are more prevalent (the vital few).
4 – 23Copyright © 2010 Pearson Education, Inc.
Pareto Chart for a RestaurantPareto Chart for a Restaurant
Figure 4.10 – Pareto Chart
100% = 69.7%(42 + 20)
89
– 100.0%
– 80.0%
– 60.0%
– 40.0%
– 20.0%
– 0.0%
45 –
40 –
35 –
30 –
25 –
20 –
10 –
5 –
0 –
Fa
ilu
res
Discourteous server
Slow service
Cold dinner
Cramped tables
Atmosphere
Failure Name
Pe
rce
nt
of
To
tal
4 – 24Copyright © 2010 Pearson Education, Inc.
Analysis of Flight Departure DelaysAnalysis of Flight Departure Delays
EXAMPLE 4.3
The operations manager for Checker Board Airlines at Port Columbus International Airport noticed an increase in the number of delayed flight departures.
SOLUTION
To analyze all the possible causes of that problem, the manager constructed a cause-and-effect diagram, shown in Figure 4.11. The main problem, delayed flight departures, is the “head” of the diagram. He brainstormed all possible causes with his staff, and together they identified several major categories: equipment, personnel, materials, procedures, and “other factors” that are beyond managerial control. Several suspected causes were identified for each major category.
4 – 25Copyright © 2010 Pearson Education, Inc.
Analysis of Flight Departure DelaysAnalysis of Flight Departure Delays
Delayed flight departures
Weather
Air traffic delays
Other Aircraft late to gate
Mechanical failures
Equipment
Passenger processing at gate
Late cabin cleaners
Unavailable cockpit crew
Late cabin crew
Personnel
Poor announcement of departures
Weight/balance sheet late
Delayed check-in procedure
Waiting for late passengers
Procedures
Late baggage to aircraft
Late fuel
Late food service
Contractor not provided with updated schedule
Materials
Figure 4.11 – Cause-and-Effect Diagram for Flight Departure Delays
4 – 26Copyright © 2010 Pearson Education, Inc.
Data Analysis ToolsData Analysis Tools
Tools can be used together for data snooping to analyze data and determine causes
Simulation can show how a process changes over time
Process simulation is the act of reproducing the behavior of a process using a model that describes each step
4 – 27Copyright © 2010 Pearson Education, Inc.
Causes of Headliner Process FailuresCauses of Headliner Process Failures
EXAMPLE 4.4
The Wellington Fiber Board Company produces headliners, the fiberglass components that form the inner roof of passenger cars. Management wanted to identify which process failures were most prevalent and to find the cause.
SOLUTION
Step 1: A checklist of different types of process failures is constructed from last month’s production records.
Step 2: A Pareto chart is prepared from the checklist data.
Step 3: A cause-and-effect diagram for identifies several potential causes for the problem.
Step 4: The manager reorganizes the production reports into a bar chart according to shift because the personnel on the three shifts had varied amounts of experience.
4 – 28Copyright © 2010 Pearson Education, Inc.
Causes of Headliner Process FailuresCauses of Headliner Process Failures
Defect type Tally Total
A. Tears in fabric 4
B. Discolored fabric 3
C. Broken fiber board36
D. Ragged edges 7
Total 50
|
|
|
|
| |
|
| ||
||
|
| | | | || | | || | |
| | | || | | || | | ||
|| ||
C
D
A B
50 –
40 –
30 –
20 –
10 –
0 –
– 100
– 80
– 60
– 40
– 20
– 0
Nu
mb
er o
f F
ailu
res
Cu
mu
lati
ve P
erce
nta
ge
Defect Failure
SOLUTION
Figure 4.12 shows the sequential application of several tools for improving quality
Step 1. Checklist
Step 2. Pareto Chart
Figure 4.12 – Application of the Tools for Improving Quality
4 – 29Copyright © 2010 Pearson Education, Inc.
Causes of Headliner Process FailuresCauses of Headliner Process Failures
SOLUTION
Figure 4.12 shows the sequential application of several tools for improving quality
Step 3. Cause-and-Effect Diagram
Step 4. Bar Chart
Humidity
Schedule change
Other
Out of specification
Not available
Materials
Training
Absenteeism
Communication
People
Machine maintenance
Machine speed
Wrong setup
Process
Broken fiber board
20 –
–
15 –
–
10 –
–
5 –
–
0 –
Nu
mb
er o
f B
roke
n F
iber
Bo
ard
sShift
First Second Third
Figure 4.12 – Application of the Tools for Improving Quality
4 – 30Copyright © 2010 Pearson Education, Inc.
Redesigning the ProcessRedesigning the Process
After a process is documented, metrics are collected, and disconnects are identified, the process analyst determines what changes should be made
People directly involved in the process are brought in to get their ideas and inputs
4 – 31Copyright © 2010 Pearson Education, Inc.
Generating IdeasGenerating Ideas
Ideas can be uncovered by asking six questions
1. What is being done?
2. When is it being done?
3. Who is doing it?
4. Where is it being done?
5. How is it being done?
6. How well does it do on the various metrics of importance?
4 – 32Copyright © 2010 Pearson Education, Inc.
Generating IdeasGenerating Ideas
Brainstorming involves a group of people knowledgeable about the process proposing ideas for change by saying whatever comes to mind
After brainstorming the design team evaluates ideas and identifies those with the highest payoff
4 – 33Copyright © 2010 Pearson Education, Inc.
Generating IdeasGenerating Ideas
Benchmarking is a systematic procedure that measures a firm’s processes, services, and products against another firm
Competitive benchmarking is based on comparisons with a direct competitor
Functional benchmarking compares areas with those of outstanding firms in any industry
Internal benchmarking compares an organizational unit with superior performance with other units
4 – 34Copyright © 2010 Pearson Education, Inc.
BenchmarkingBenchmarking
There are four basic steps Step 1. Planning Step 2. Analysis Step 3. Integration Step 4. Action
Collecting data can be a challenge
Some corporations and government organizations have agreed to share data
4 – 35Copyright © 2010 Pearson Education, Inc.
BenchmarkingBenchmarking
Customer Relationship Process
Total cost of “enter, process, and track orders” per $1,000 revenue System costs of processes per $100,000 revenue Value of sales order line item not fulfilled due to stockout, as percentage of
revenue Average time from sales order receipt until manufacturing logistics is
notified Average time in direct contact with customer per sales order line item
Order Fulfillment Process
Value of plant shipments per employee Finished goods inventory turnover Reject rate as percentage of total orders processed Percentage of orders returned by customers due to quality problems Standard customer lead time from order entry to shipment Percentage of orders shipped on time
Figure 4.13 – Illustrative Benchmarking Metrics by Type of Process
4 – 36Copyright © 2010 Pearson Education, Inc.
BenchmarkingBenchmarking
New Service/Product Development Process
Percentage of sales due to services/products launched last year Cost of “generate new services/products” process per $1,000 revenue Ratio of projects entering the process to projects completing the process Time to market for existing service/product improvement project Time to market for new service/product project Time to profitability for existing service/product improvement project
Supplier Relationship Process
Cost of “select suppliers and develop/maintain contracts” process per $1,000 revenue
Number of employees per $1,000 of purchases Percentage of purchase orders approved electronically Average time to place a purchase order Total number of active vendors per $1,000 of purchases Percentage of value of purchased material that is supplier certified
Figure 4.13 – Illustrative Benchmarking Metrics by Type of Process
4 – 37Copyright © 2010 Pearson Education, Inc.
BenchmarkingBenchmarking
Customer Relationship Process
Systems cost of finance function per $1,000 revenue Percentage of finance staff devoted to internal audit Total cost of payroll processes per $1,000 revenue Number of accepted jobs as percentage of job offers Total cost of “source, recruit, and select” process per $1,000 revenue Average employee turnover rate
Figure 4.13 – Illustrative Benchmarking Metrics by Type of Process
4 – 38Copyright © 2010 Pearson Education, Inc.
Managing ProcessesManaging Processes
Failure to manage processes is failure to manage the business
Seven common mistakes1. Not connecting with strategic issues
2. Not involving the right people in the right way
3. Not giving the design teams and process analysts a clear charter and then holding them accountable
4 – 39Copyright © 2010 Pearson Education, Inc.
Managing ProcessesManaging Processes
Seven common mistakes4. Not being satisfied unless fundamental
“reengineering” changes are made
5. Not considering the impact on people
6. Not giving attention to implementation
7. Not creating an infrastructure for continuous process improvement
4 – 40Copyright © 2010 Pearson Education, Inc.
4 – 41Copyright © 2010 Pearson Education, Inc.
Solved Problem 1Solved Problem 1
SOLUTION
4 – 42Copyright © 2010 Pearson Education, Inc.
Solved Problem 1Solved Problem 1
Figure 4.14 – The Pareto Chart
SOLUTION
4 – 43Copyright © 2010 Pearson Education, Inc.
Solved Problem 2Solved Problem 2
Create a flowchart for the following telephone-ordering process at a retail chain that specializes in selling books and music CDs. It provides an ordering system via the telephone to its time-sensitive customers besides its regular store sales.
The automated system greets customers, asks them to choose a tone or pulse phone, and routes them accordingly.
The system checks to see whether customers have an existing account. They can wait for the service representative to open a new account.
Customers choose between order options and are routed accordingly.
Customers can cancel the order. Finally, the system asks whether the customer has additional requests; if not, the process terminates.
4 – 44Copyright © 2010 Pearson Education, Inc.
Solved Problem 2Solved Problem 2
SOLUTION
4 – 45Copyright © 2010 Pearson Education, Inc.
Solved Problem 2Solved Problem 2
SOLUTION
4 – 46Copyright © 2010 Pearson Education, Inc.
Solved Problem 3Solved Problem 3
An automobile service is having difficulty providing oil changes in the 29 minutes or less mentioned in its advertising. You are to analyze the process of changing automobile engine oil. The subject of the study is the service mechanic. The process begins when the mechanic directs the customer’s arrival and ends when the customer pays for the services.
SOLUTION
Figure 4.15 shows the completed process chart. The process is broken into 21 steps. A summary of the times and distances traveled is shown in the upper right-hand corner of the process chart.
The times add up to 28 minutes, which does not allow much room for error if the 29-minute guarantee is to be met and the mechanic travels a total of 420 feet.
4 – 47Copyright © 2010 Pearson Education, Inc.
Solved Problem 3Solved Problem 3Step No.
Time (min)
Distance (ft) Step Description
1 0.80 50.0 X Direct customer into service bay
2 1.80 X Record name and desired service
3 2.30 X Open hood, verify engine type, inspect hoses, check fluids
4 0.80 0.30 X Walk to customer in waiting area
5 0.60 X Recommend additional services
6 0.70 X Wait for customer decision
7 0.90 70.0 X Walk to storeroom
8 1.90 X Look up filter number(s)
9 0.40 X Check filter number(s)
10 0.60 50.0 X Carry filter(s) to service pit
11 4.20 X Perform under-car services
12 0.70 40.0 X Climb from pit, walk to automobile
13 2.70 X Fill engine with oil, start engine
14 1.30 X Inspect for leaks
15 0.50 40.0 X Walk to pit
16 1.00 X Inspect for leaks
17 3.00 X Clean and organize work area
18 0.70 80.0 X Return to auto, drive from bay
19 0.30 X Park the car
20 0.50 60.0 X Walk to customer waiting area
21 2.30 X Total charges, receive payment
Summary
Activity Number of Steps
Time (min)
Distance (ft)
Operation Transport Inspect Delay Store
Figure 4.15 – Process Chart for Changing Engine Oil
7 16.50
8 5.50 420
4 5.00
1 0.70
1 0.30
4 – 48Copyright © 2010 Pearson Education, Inc.
Solved Problem 4Solved Problem 4
What improvement can you make in the process shown in Figure 4.14?
SOLUTION
Your analysis should verify the following three ideas for improvement. You may also be able to come up with others.
a. Move Step 17 to Step 21. Customers should not have to wait while the mechanic cleans the work area.
b. Store small inventories of frequently used filters in the pit. Steps 7 and 10 involve travel to the storeroom.
c. Use two mechanics. Steps 10, 12, 15, and 17 involve running up and down the steps to the pit. Much of this travel could be eliminated.
4 – 49Copyright © 2010 Pearson Education, Inc.
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