Dr. Anupam Das 1

Management Decision Making:Operations and Decision Analysis

May 2010

Week 1-Tutorial Business Processes

Operations, Productivity & Strategy

Anupam Das, PhD

Dr. Anupam Das 2

Outline

Steps of Process design Process Mapping Protocols What Is Operations Management? What Operations Managers Do The Heritage of Operations Management The Productivity Challenge Ethics and Social Responsibility

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Steps of Process design

Process DesignProcesses that designproduct and services

Processes that produceproducts and services

Concept generation

Screening

Preliminary design

Evaluation and improvement

Prototyping and final design

Supply network design

Layout

and flow

Process technology

Job design

Ove

rlap

Stages of Design

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Process Mapping Activities

1. List all known activities through personal knowledge, experts, brainstorming, research, documentation, and standard operating procedures (SOPs),

2. Assemble activities into 4-6 groupings,3. Name the groupings noun/verb or verb noun

combinations),4. Conceptualize the process flow,5. Decompose the process(es) as required to

gain a thorough understanding of the process,6. Identify inputs, outputs, and enablers, and7. Map and document the process

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Business Process Flowcharting – “Picturing the Process”Mapping Protocols

• Use Excel to create your process map (using Insert and the Shapes button on the ribbon)

• Label your map (i.e. give it a title such “Order Fulfillment Process”)• Maps flow from left to right; top‐to‐bottom• Use a consistent font when labeling processes, decision points, inputs and outputs• Use a rectangle (use a consistent size) to represent all processes/activities under

investigation• Cascade your processes (if possible)• Group related activities together; use a dash line to denote activities related to a

process; label the process; use verb/noun or noun/verb combinations (i.e. Enter Order)• Inputs and outputs are to be denoted use a line with an arrow• All processes/activities must have inputs (entering the process on the left) and outputs

(leaving the process on the right)• All inputs and outputs must be labeled• Inputs/outputs/enablers should not cross‐over one another, however minor cross‐over is

permitted• Denote process enablers such as IT systems as inputs to the bottom of the process

Major outputs of the main process under consideration are to be aligned on the right side of

• the process map• Decision points are to be depicted using a diamond shape• Decision points logic flow; inputs to the left or top and outputs to the right and bottom;

maintain consistent logic flow (i.e. “true” to the left and “false” from the bottom

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Process Mapping

• Involves describing processes in terms of how the activities within the process relate to each other.

• Identify the different types of activity that take place during the process

• Show the flow of materials or people or information through the process

Process mapping symbolsValue adding operation

Inspection

Transport

Storage

Activity

Input or Output

Decision

Delay

Begin or End

Direction of Flow

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Process Mapping - ExampleStandard Sandwich Process

Raw Mat. Assembly StoredSandwiches

To Outlets. StoredSandwiches

Sell Take Payment

Customer Request

Raw Mat. Assembly Take Payment

Customer Request

Bread andBase Filling

Assembly of Bases

Stored bases

Customer Req.

Use Standard Base?

Yes

No

Assemble from standard base

Fillings

Assemble wholesandwich

Take Payment

Customized Sandwich Process

Old Process

New Process

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Process Mapping - Example

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Process Mapping - ExampleOrder Processing- Credit Card

YES

YES

Transactionentered in ledger

Transactioncompleted

in order system

FundsAvailable?

Credit cardvalid?

Validate throughVerified by Visa

system

IT

Transaction startedin order system

Order placed withcredit card selected as

payment method

NOCustomer must

enter new paymentmethod

Entries arereconciled at end

of month

Bob

AccountsReceivable

NO

Customer informationdatabase

Customer sentreceipt via

e-mail

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Process Mapping - ExamplePurchase Order Approval Process

Obtain CompletedCredit Application

YES

Process Order

Approved

PO & CreditApplication toController for

Approval

YES

YES

P.O. fromnon-existing

customer

Company in theUS or Canada

Receive P.O.

NO Request otherPayment form

NO

NO Does customerhave any unpaid

P.O.

Projectcompletion

certified

Kathy

Dept.

NO

YES

PO to Controller forApproval

NO Request otherPayment form

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Process Performance

– Throughput time – the time for a unit (customer) to move through the process– Cycle time - the average time between units of output (sandwich) emerging from the

process.– Work-in-process (WIP) – the number of units waiting to be served.– In the old process, say, two people are preparing sandwiches and each take 2 minutes

to prepare a sandwich (processing time). Then, in every 2 minutes 2 sandwiches are prepared. That is, the cycle time is 1 minute. So, on the average one customer is coming out with a sandwich in every minute. Now if a person join the queue behind the ninth person, his expected time to pass through the system to come out with a sandwich is 10 minutes.

– In other words, the throughput time of the process at that state is 10 min.– That is, throughput time = work-in-process x cycle time

Little’s Law, L =λWL = the average number of customers in the store λ = the arrival rateW = times the average time that a customer spends in the store,

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Process Design

• Use of Little’s Law for Process Design– Suppose it is decided that, when the new process for

sandwich is introduced, the average number of customers in the process should be limited to around 10 and the maximum time a customer is in the queue should be on average 4 minutes. If the time to assemble and sell a sandwich in the new process has reduced to 1.2 minutes, how many staff should be serving?

Throughput time = 4 minutesWIP = 10From Little’s law, cycle time required = 4 / 10 = 0.4 minutesHowever, the preparation time is 1.2 minutes. Therefore the number

of servers required = 1.2 / 0.4 = 3In other words, three servers would serve three customers in 1.2

minutes.

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Performance Objective

Change with new process Comments

Quality No Change? Check to make sure that sandwich bases do not deteriorate in storage

Speed Faster for 95% of customers

Dependability Less predictable delivery time

Need to manage customer expectations regarding delivery time for non-standard sandwiches

Flexibility No change

Cost Potentially low cost Need to forecast the number of each type of sandwich base to pre-assemble

Performance Objective

Good process design can …….

Quality Provide the appropriate resources which are capable of producing the product or service to its design specifications

Speed Move materials, information or customers through each stage of the process without delays

Dependability Provide technology and staff who are dependable

Flexibility Provides resources which can be changed quickly so as to create a range of products or service

Cost Ensure high utilization of resources and therefore efficient and low-cost processes.

Assessing the performance of new customized sandwich process

The impact of process design on operations performance objectives

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Practice Problems

Problem 1:Mance Fraily, the Production Manager at Ralts Mills, can currently expect his operation to produce 1000 square yards of fabric for each ton of raw cotton. Each ton of raw cotton requires 5 labor hours to process. He believes that he can buy a better quality raw cotton, which will enable him to produce 1200 square yards per ton of raw cotton with the same labor hours.

What will be the impact on productivity (measured in square yards per labor-hour) if he purchases the higher quality raw cotton?

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Problem 2:

C. A. Ratchet, the local auto mechanic, finds that it usually takes him 2 hours to diagnose and fix a typical problem. What is his daily productivity (assume an 8 hour day)?

Mr. Ratchet believes he can purchase a small computer trouble-shooting device, which will allow him to find and fix a problem in the incredible (at least to his customers!) time of 1 hour. He will, however, have to spend an extra hour each morning adjusting the computerized diagnostic device. What will be the impact on his productivity if he purchases the device?

Practice Problems

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Problem 3:

Joanna French is currently working a total of 12 hours per day to produce 240 dolls. She thinks that by changing the paint used for the facial features and fingernails that she can increase her rate to 360 dolls per day. Total material cost for each doll is approximately $3.50; she has to invest $20 in the necessary supplies (expendables) per day; energy costs are assumed to be only $4.00 per day; and she thinks she should be making $10 per hour for her time. Viewing this from a total (multifactor) productivity perspective, what is her productivity at present and with the new paint?

Practice Problems

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Problem 4:How would total (multifactor) productivity change if using the new paint raised Ms. French’s material costs by $0.50 per doll?

Problem 5:

If she uses the new paint, by what amount could Ms. French’s material costs increase without reducing total (multifactor) productivity? $3.77

Practice Problems