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Chapter 11

Process Design and Analysis

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 Chapter 11: Process Design and Analysis

LO11–1: Exemplify a typical business process and how it can

be analyzed.
LO11–2: Compare different types of processes.
LO11–3: Explain how jobs are designed.
LO11–4: Analyze manufacturing, service, and logistics
processes to ensure the competitiveness of a firm.

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 Amazon’s Amazingly Efficient Processes

Amazon fulfillment is an example

of a super efficient process.
How does Amazon run the
fulfillment centers?
• Employs over 1.3 million
workers around the world.
• Uses optimal combinations of
humans and machines.
• Delivers within two days,
sometimes even same day.
• Experiments with drone
delivery.

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 Process Analysis
Process: any part of an organization that takes inputs and
transforms them into outputs.
• A process that does not match the needs of the firm will
punish the firm every minute that the firm operates.

Process Example:
Let’s consider a coffee shop that brews and serves coffee to
customers. The coffee-making process is part of the shop’s
operations—it takes inputs (coffee beans, water, milk, etc.) and
transforms them into outputs (prepared coffee drinks for
customers).

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 Process Analysis
Process: any part of an organization that takes inputs and
transforms them into outputs.
• A process that does not match the needs of the firm will
punish the firm every minute that the firm operates.

Process Example:
Let’s consider a coffee shop that brews and serves coffee to
customers. The coffee-making process is part of the shop’s
operations—it takes inputs (coffee beans, water, milk, etc.) and
transforms them into outputs (prepared coffee drinks for
customers).

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 Process Analysis
Step-by-Step Example:
1.Inputs:

1. The coffee shop’s process uses various inputs: coffee beans, milk, water, cups, and labor (baristas).
2.Transformation Process:

1. The baristas grind the coffee beans, brew coffee, steam milk, and pour the drinks to create a finished coffee product. This
process transforms raw ingredients into a ready-to-serve coffee beverage.
3.Output:

1. The output of this process is the finished coffee drinks that are served to customers.
4.Matching the Process to the Needs of the Firm:

1. Suppose the coffee shop is in a busy location with high customer demand, but the coffee-making process is slow or
inefficient. If each drink takes 10 minutes to prepare due to an inefficient process (e.g., outdated equipment or poor
workflow), customers may get frustrated, and the shop could lose business.
5.Impact of an Inefficient Process:

1. In this case, the coffee-making process does not match the needs of the business, as it cannot keep up with demand. This
inefficiency “punishes” the firm by reducing its ability to serve customers quickly, leading to long wait times, lost sales, and
potentially negative reviews.
6.Solution:

1. To better match the needs of the firm, the coffee shop might invest in faster equipment, train baristas to improve speed, or
reorganize the workspace to streamline the process. This would enable the shop to meet demand and serve customers
more efficiently.

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 Process Analysis
The output of many processes are services.
Cycle time: the average successive time between
completions of successive units.
Example:
Imagine a factory that produces custom furniture. In this factory, workers
are assembling tables one at a time on an assembly line. Here’s how
cycle time works in this scenario:
Cycle Time Definition: Cycle time is the average time between the
completion of one table and the next. It measures how long it takes, on
average, to finish one unit before starting the next.

cycle time = time between completion of successive units.

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 Process Analysis
The output of many processes are services.
Utilization: the ratio of the time that a resource is actually
activated relative to the time that it is available for use.
Imagine a factory with a machine that can
run for 8 hours a day to produce parts.
However, due to demand, maintenance, or
other scheduling factors, the machine
doesn’t operate the entire time it’s available.

Calculte: The machine is available to operate for 8 hours a day (480 minutes).

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 Example: Analyzing a Las Vegas Slot Machine

1. Analyzing the old slot

machine.
2. Analyzing the new
electronic slot machine.
3. Comparison.
4. The slot machine is one
of many casino
processes.

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 Process Flowcharting
• Process flowcharting: the use of a diagram to present the
major elements of a process.
• The basic elements can include tasks or operations, flows
of materials or customers, decision points, and storage
areas or queues.
• Separating a diagram into different horizontal or vertical
bands sometimes is useful.
• It is an ideal methodology by which to begin analyzing a
process.

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 Process Flowchart Example

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 Understanding Processes
• One way to categorize a process is single–stage or
multiple–stage.
• Single–stage: all of the activities could be collapsed and
analyzed using a single cycle time to represent the speed
of the process.
• Multiple–stage: has multiple groups of activities that are
linked through flows.
• Stage: multiple activities that have been pulled together for
analysis purposes.

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 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.
• Starving: occurs when the activities in a stage must stop
because there is no work.
• Bottleneck: a resource that limits the capacity of the process.

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 Make to Stock versus Make to Order
Make to order.

• Only activated in response to an actual order.

• Both work–in–process and finished goods inventory kept to a
minimum.
• Response time is slow.
Make to stock.

• Process activated to meet expected or forecasted demand.

• Customer orders are served from target stocking level.
Hybrid.

• Combines the features of both make–to–order and make–to–

stock.
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 Making Hamburgers at McDonald’s, Burger King,
and Wendy’s

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 Pacing
A process can be either paced or non-paced.
Pacing: having a fixed time for the movement of items through the
process.
In a serial process, the movement of items through each activity is
often paced in some mechanical way in order to coordinate the
line.
Dividing the time available to produce a certain product by
customer demand for the product calculates the required cycle
time for a process.

• Manufacturer needs to produce 1,000 automobiles.

• A shift is 420 minutes.
420 minutes
• Cycle time =  60 seconds = 25.2 seconds
1,000 automobiles minute
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 Measuring Process Performance Terms 1

Benchmarking: comparing the metrics of one company to

another.
Productivity: the ratio of output to input.

• Total factor productivity usually measured in dollars.

• Partial factor productivity measured based on an individual
input.
• Labor is the most common.
Efficiency: a ratio of the actual output of a process relative to
some standard.

• An alternative way that the term efficiency is used is to measure

the loss or gain in a process.
Run time: the time required to produce a batch of parts.
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 Measuring Process Performance

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 Measuring Process Performance Terms 2

Setup time: the time required to prepare a machine to make a particular

item.
• In practice, setup time is often not included in the utilization of the
process.
Operation time: the sum of the setup time and run time for a batch of
parts that are run on a machine.
Flow time: includes the time the unit spends actually being worked on,
together with the time spent waiting in a queue.
• In practice, the term cycle time is often used to mean flow time.
Value–added time: the time in which useful work is actually being done
on the unit.
Process velocity: the ratio of the value–added time to the flow time.

• Also known as throughput ratio.

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 Production Process Mapping and Little’s Law

Total average value of inventory.

• Sum of the value of raw materials, work–in–process, and

finished goods inventory.
Inventory turns.

• Cost of goods sold divided by the average inventory value.

Days–of–supply.

• Inverse of inventory turns scaled to days.

Little’s law.

• There is a long–term relationship among inventory, throughput,

and flow time.
• Inventory = Throughput rate × Flow time.
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 Example 11.1: Automobile Assembly Plant
Analysis

Average cost of a car battery is $45.

12 hours to make a car.
Assembles 200 cars per 8–hour shift.
• Currently one shift.
Holds on average 8,000 batteries in raw material inventory.

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 Example 11.1–Average Inventory
WIP = Throughput × Flow time.
WIP = 25 batteries/hour × 12 hours.
WIP = 300 batteries.
Total = 8,000 + 300 = 8,300 batteries.
• There are 8,000 batteries in raw material inventory.

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 Example 11.1–Value and Flow Time
Value = 8,300 × $45 = $373,500

Flow time = Inventory/Throughput.

Flow time = 8,000/200 = 40 days.
• So they have a 40–day supply of inventory.

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 Job Design Decisions
Job design: the function of specifying the work activities of
an individual or group in an organizational setting.
Objective is to develop job structures that meet the
requirements of the organization and its technology.
• Also satisfies the jobholders’ personal and individual
requirements.
Work measurement methods are used to determine the most
efficient means of performing a given task, as well as to set
reasonable standards for performing it.

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 Behavioral Considerations in Job Design

Specialization of labor.
• Made high–speed, low–cost production possible.
• Greatly enhanced standard of living.
• Adverse effects on workers.
Job enrichment.
• Making job more interesting to the worker.
• Horizontal enrichment: worker performs a greater
number of variety of tasks.
• Vertical enrichment: worker is involved in planning,
organizing, and inspecting work.

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 Work Measurement and Standards
• Work measurement: a process of analyzing jobs for the
purpose of setting time standards
• Why use it?
1. Schedule work and allocate capacity.
2. Motivate and measure work performance.
3. Evaluate performance.
4. Provide benchmarks.
Work measurement and its resulting work standards have been
controversial.

• Management may set the rate too high.

• Workers who find a better way get penalized by having a
revised rate set.
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 Four Basic Work Measurement Techniques

• Direct methods.
1. Time study: uses a stopwatch to time the work.
2. Work sampling: entails recording random observations
of a person or teams at work.
• Indirect methods.
3. Predetermined motion–time data system: sums data
from tables of generic movement times developed in
the laboratory to arrive at a time for the job.
4. Elemental data: sums times from a database of similar
combinations of movements to arrive at job time.

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 Process Analysis Example 1
Example 11.2: Bread Making
Read on Canvas

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 Example 11.2: Bread Making 1

• Two steps are required.

1. Preparing the dough and baking the loaves (bread
making).
2. Packaging the loaves.
Bread is made in batches of 100 loaves.
• A batch is completed every hour, which is the cycle time.
• Slower process, so is the bottleneck.
Packaging needs only 0.75 hour to place the 100 loaves in
bags.
• Has 75 percent utilization.

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 Example 11.2: Bread Making 2

Suppose we have two bread

making lines.
• Cycle time on each is still one
hour to make 100 loaves.
Bread making runs two shifts.
• Produces 200 × 8 × 2 = 3,200.
Packaging runs three shifts.
• Produces 133.3 × 8 × 3 = 3,200
Capacities are roughly equal.

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 Example 11.3: A Restaurant 1

Consider the restaurant in the casino.

Managers have set up a buffet arrangement where customers
serve themselves.
The buffet is continually replenished to keep items fresh.
To further speed service, a fixed amount is charged for the meal.
Customers take an average of 30 minutes to get their food and
eat.
They typically eat in groups (or customer parties) of two or three to
a table.
The restaurant has 40 tables.

• Each table can accommodate four people.

What is the maximum capacity of this restaurant?
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 Example 11.3–Solution 1

Utilization.

• The restaurant can accommodate 160 people at a time.

• It might be more convenient to measure the capacity in terms of customer
parties because this is how the capacity will be used.
• If the average customer party is 2.5 individuals, then the average seat
utilization is 62.5 percent when the restaurant is operating at capacity.
Cycle time.

• When operating at capacity, 0.75 minute.

• 30 minutes ÷ 40 tables.
• On average, a table would become available every 0.75 minute or 45 seconds.
Capacity.

• The restaurant could handle 80 customer parties per hour.

• 60 minutes ÷ 0.75 minute/party.
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 Example 11.3–Solution 2

• The problem with this

restaurant is that everyone Time Parties Arriving
wants to eat at the same 11:30–11:45 15
time. 11:45–12:00 35
12:00–12:15 30
• Management has collected
12:15–12:30 15
data and expects the profile
12:30–12:45 10
below for customer parties
12:45–1:00 5
arriving during lunch, which
Total parties 110
runs from 11:30 am until 1:30
pm.
• Customers are seated only
until 1:00 pm.

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 Example 11.3–Solution 3

Restaurant operates for two hours for lunch.

The capacity is 80 customer parties per hour.
A simple way to analyze the situation is to calculate how the system looks
at the end of each 15–minute interval.
The key is to look at the cumulative numbers.

• The difference between cumulative arrivals and cumulative departures

gives the number of customer parties in the restaurant.
Because there are only 40 tables, when the cumulative difference
through is greater than 40, a waiting line forms.
Cycle time for the entire restaurant is 45 seconds per customer party at
this time.
The last party will need to wait for all of the earlier parties to get a table,
so the expected waiting time is the number of parties in line multiplied by
the cycle time.
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 Example 11.3: A Restaurant 2

In the table, when the cumulative number of parties is 50, there are 10 parties waiting to be seated.
The average wait time is 10 × 45 seconds = 7.5 minutes.
During 12:00 to 12:15.

• Parties that arrived during 11:30 to 11:45 would have left.

• The cumulative number of parties at the end of 12:00 = 50.
• 50 (number at the end of 12:00) + 30 (arrivals during 12:00 to 12:15) − 15 (departures during
12:00 to 12:15) = 65.

Parties Either at
Parties Arriving Parties Departing Tables Used Customer Parties Expected Waiting
Table or Waiting
Period during Period during Period (at End of Waiting (at End of Time (at End of
to Be Served (at
(Cumulative) (Cumulative) Period) Period) Period)
End of Period)
11:30–11:45 15 0 15 15
11:45–12:00 35 (50) 0 50 40 10 7.5 minutes
12:00–12:15 30 (80) 15 65 40 25 18.75 minutes
12:15–12:30 15 (95) 20 (35) 60 40 20 15 minutes
12:30–12:45 10 (105) 20 (55) 50 40 10 7.5 minutes
12:45–1:00 5 (110) 20 (75) 35 35
1:00–1:30 0 (110) 35 (110)

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 Example 11.3–Customers in the Restaurant

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 Example 11.4: Transit Bus Operation
Takes two hours for the route during peak traffic.
Route has 60 stops.
Each bus has seating capacity of 50.
• Another 30 passengers can stand.

Busy much of the day.

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 Example 11.4: Transit Bus Operation
Takes two hours for the route during peak traffic.
Route has 60 stops.
Each bus has seating capacity of 50.
• Another 30 passengers can stand.

Busy much of the day.

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 Example 11.4–Initial Analysis
With one bus, maximum wait is two hours.
If bus is halfway through cycle, wait is one hour.
Average wait is one hour.

• In general, average wait is ½ cycle time.

If two buses used:

• Cycle time is one hour.

• Average wait is 30 minutes.
For a two–minute wait:

• Need four–minute cycle time.

• Need 30 buses (120 minutes ÷ 4–minute cycle time).

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 Example 11.4–Capacity
Each bus has total capacity of 80 passengers.
• 50 seated.
• 30 standing.
30 buses can accommodate:
• 1,500 seated.
• 2,400 total.

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 Example 11.4–Detailed Analysis

Buses Needed
Load Minimum
Number of Average Time for All
Time (Passenger Number of
Customers on Bus Passengers to Be
Hours) Buses Needed
Seated
8:00–9:00 A.M. 2,000 45 minutes 1,500 18.75 30
9:00–10:00 A.M. 4,000 30 minutes 2,000 25 40
10:00–11:00 A.M. 6,000 30 minutes 3,000 37.5 60
11:00 A.M.–12:00
5,000 30 minutes 2,500 31.25 50
noon
12:00–1:00 P.M. 4,000 30 minutes 2,000 25 40
1:00–2:00 P.M. 3,500 30 minutes 1,750 21.875 35
2:00–3:00 P.M. 3,000 45 minutes 2,250 28.125 45
3:00–4:00 P.M. 3,000 45 minutes 2,250 28.125 45
4:00–5:00 P.M. 3,000 45 minutes 2,250 28.125 45
5:00–6:00 P.M. 4,000 45 minutes 3,000 37.5 60
6:00–7:00 P.M. 3,000 45 minutes 2,250 28.125 45
7:00–8:00 P.M. 1,500 45 minutes 1,125 14.0625 22.5
TOTALS 42,000 25,875

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 Example 11.4–Conclusion
With 30 buses, many will stand.
During morning and afternoon rush, not all customers can be
accommodated.
• Need at least 40 buses during rush hours.
With 40 buses all the time:
• 24,000 seat–hours available.
• 40 buses × 12 hours × 50 seats per bus.
• 25,875 seat–hours needed.
• 107.8 percent utilization.
• 7.8 percent of customers must stand.

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 Process Flow Time Reductions
1. Perform activities in parallel.
2. Change the sequence of activities.
3. Reduce interruptions.

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 What Goes Into a Process Must Come Out of the
Process

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 Solved Problem 2 1

• Daffy Dave’s sub shop makes custom submarine

sandwiches to order.
• It is analyzing the process at its shop.
• The general flow of the process is shown at right.
• A different person is working at each step in the process.
• What is the current maximum output of the process per
hour?

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© McGraw Hill LLC
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 Solved Problem 2 2

Maximum orders per hour in each of the four steps is:

• “Take order”: 60 min. per hour/1 min. per order = 60 subs per
hour.
• “Slice”: 60 min. per hour/3 min. per order = 20 subs per hour.
• “Add the”: 60 min. per hour/4 min. per order = 15 subs per hour.
• “Bag”: 60 min. per hour/2 min. per order = 30 subs per hour.
• Overall capacity per hour, determined by the bottleneck
operation (that is. “Add toppings”) is 15 per hour.

For other parts, refer to the text.

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 Summary 1

A process takes inputs and transforms them into outputs that

create value for the organization.
• A company may have literally thousands of different processes.
Understanding a process usually starts with a flowchart.
With multistage process, it is useful to buffer the activities by
placing inventory between the activities.
The bottleneck is the activity or stage that limits the capacity of the
process.
A process that is only activated after an actual order arrives is
called make–to–order process.
Make–to–stock processes supply inventory from which actual
customer orders are filled.

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 Summary 2

• Little’s law is a mathematical formula that captures the

relationship between the amount of inventory of all types in the
process.
• Job design is the study of how work activities are designed for
workers.
• A key design decision is the amount of specialization that a job
entails.
• Trade–offs exist between the quality and relative productivity of
a process.
• A fundamental concept is that what goes into a process must
come out of the process in some form.
• Coordinating the inputs and outputs is important to having a
good process.
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 Practice Exam 1

1. This is a part of an organization that takes inputs and transforms them

into outputs.
2. This is the ratio of the time that a resource is activated relative to the
time it is available for use.
3. This is when one or more activities stop because of lack of work.
4. This is when an activity stops because there is no place to put the
work that is completed.
5. This is a step in a process that is the slowest compared to the other
steps. This step limits the capacity of the process.
6. What is the difference between McDonald’s old and current process?
7. This refers to the fixed timing of the movement of items through a
process.

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 Practice Exam 2

8. This is when one company compares itself to another relative to

operations performance.
9. This is the time it takes for a unit to travel through the process from
beginning to end. It includes time waiting in queues and buffers.
10. The relationship between time and units in a process is called this.
11. What is the mathematical relationship between time and units in a
process?
12. What is the major assumption about how a process is operating for
Little’s law to be valid?
13. What is the double–edged sword of job design?
14. This is when a job is increased vertically or horizontally.
15. What are the four basic work measurement techniques?

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