13. Process Flow MeasuresProcess Flow Analysis-Basics 1Ardavan Asef-VaziriJune/2011Process Flow AnalysisThe Littles LawThe main source for preparing these slides isManaging Business Process FlowAnupindi, Chopra, Deshmouh, !an Mieghem, and "emel23. Process Flow MeasuresProcess Flow Analysis-Basics 2Ardavan Asef-VaziriJune/2011Fi#e $lements of the Process !iewInputs OutputsGoodsServicesLabor & CapitalInformationstructureNetwork ofActivities and BuffersFlow unitscustomers! data! material! cas"! etc#$%esourcesProcessManagement33. Process Flow MeasuresProcess Flow Analysis-Basics 3Ardavan Asef-VaziriJune/2011%ow target impro#ement& 'dentify and Monitor (perational Performance Measures&imeQuality CostFlexibility InventoryFlow Rate43. Process Flow MeasuresProcess Flow Analysis-Basics 4Ardavan Asef-VaziriJune/2011Flow Time, Flow )ate, and 'n#entoryFlow &ime' &"e time re(uired b) a flow unit to move t"rou*" all t"e processes from entr) to e+it# It is not t"e same for all flow unitsdifferent t)pes of flow unitsvariabilit) in t"e flow time of a flow unitAvera*e flow time of a process is t"e avera*e flow time of all flow units#Flow %ate' &"e number of flow units passin* a specific point entr)! e+it or an) intermediate point$ in t"e process per unit of time#It c"an*es over timevariabilit) in t"e flow rateseasonalit) e#*# ta+ season for a C,A$ Avera*e flow rate in a stable process &"rou*"putInventor)' &"e number of flow unitswit"in t"e boundaries of t"e process at an) time#53. Process Flow MeasuresProcess Flow Analysis-Basics 5Ardavan Asef-VaziriJune/2011The $ssence of Process Flow ,rocess competenciesCustomer -alue ,ropositionCustomer satisfactionCustomer e+pectationsFinancial performance .ssence of process flow Quality TimeCostFlexibility InventoryFlow timeFlow rate 63. Process Flow MeasuresProcess Flow Analysis-Basics 6Ardavan Asef-VaziriJune/2011A *ta+le ProcessIn a Stable ,rocessAvera*e inflow rate is t"e same as avera*e outflow rate#Throughput (R) is t"e avera*e flow rate Ideall)! R s"ould be e(ual to t"e customer eman#Avera*e inflow rate is /00 passen*ers1"r! or 20 passen*ers1minScanner can "andle 23 passen*ers per minute It can "andle inflowIs the !ecurity Chec"pointa stable Process#Can we "ave 4 instead of 235If we "ave 30 instead of 23! could we still "ave people waitin* in t"e line5Avera*e outflow capacit) process capacit)$ must be *reater t"an avera*e inflow rate! w"ile average inventory is not 6ero#73. Process Flow MeasuresProcess Flow Analysis-Basics 7Ardavan Asef-VaziriJune/2011The Littles Law&"rou*"put x Flow &ime 7 Inventor)RT=I Inventory I[units]Flow rate/Throughput R[units/hr]### ### ### ### ###Flow Time T 8"rs9&"ere is a relations"ip between R, T, and I. Process Flow Analysis-Basics 6Ardavan Asef-VaziriJune/201183. Process Flow MeasuresProcess Flow Analysis-Basics 8Ardavan Asef-VaziriJune/2011 ,Littles Law- $.amplesIn -ancouver Airport'Avera*e waitin* line len*t" 7 I 7 2:#; passen*ers&"rou*"put or % 7 /001/0 7 20 passen*ers1minuteCompute t"e flow time atFlow time & %&7I &7 I1% &72:#; 1207 2#:; minutes 1 passen*er on avera*e$#93. Process Flow MeasuresProcess Flow Analysis-Basics 9Ardavan Asef-VaziriJune/2011Littles Law- $.amplesI73000 *ara*e doors! wit" no inventor) buildup i#e# stable process< alwa)s on avera*e we "ave 3000$%72000 *ara*e doors1week# .ac" *ara*e door costs =>!>00 to produce# ?"at is t"e Avera*e Flow &ime for =25 ?e can translate volumes into =I7 3!000>!>00$ 7 =/!/00!000 tied up in inventor) avera*e$#% 7 2!000>!>00$ 7 =>!>00!0001week#I7%& &7I1% & 7 /!/00!0001>!>00!000 7 3 weeks#/103. Process Flow MeasuresProcess Flow Analysis-Basics 10Ardavan Asef-VaziriJune/2011Littles Law applied to different process flow e.amplesMonetary Flow$ For t"e new euro introduction in 3003! ?im @uisenber* "ad to decide "ow man) new Euro coins to stamp b) 3003#.urolandAs central banksA cas"BinBcoins "andlin* was estimated at C>00 billion per)ear#&"e avera*e cas"BinBcoins "oldin* time b) consumers and businesses was estimated at 3 mont"s# Dow man) Euro coins were to be made5Customer Flow$&aco Bell processes on avera*e 2!;00 customers per da) 2; "ours$# On avera*e t"ere are :; customers in t"e restaurant waitin* to place t"e order! waitin* for t"e order to arrive! eatin* etc.$#Dow lon* does an avera*e customer spend at &aco Bell and w"at is t"e avera*e customer turnover50113. Process Flow MeasuresProcess Flow Analysis-Basics 11Ardavan Asef-VaziriJune/2011Littles Law applied to different process flow e.amples%ob Flow$&"e &ravelers Insurance Compan) processes 20!000 claims per )ear# &"e avera*e processin* time is > weeks#Assumin* ;0 weeks in a )ear! w"at is t"e avera*e number of claims Ein processF#Material Flow$?end)As processes an avera*e of ;!000 lb# of"ambur*ers per week# &"e t)pical inventor) of raw meat is 3!;00 lb#?"at is t"e avera*e "ambur*erAs c)cle time and ?end)As turnover5Cash Flow$ Gotorola sells =>00 million wort" of cellular e(uipment per)ear# &"e avera*e accounts receivable in t"e cellular *roup is=H; million# ?"at is t"e avera*e billin* to collection process c)cle time512123. Process Flow MeasuresProcess Flow Analysis-Basics 12Ardavan Asef-VaziriJune/2011Steel Compan)' ,rocesses =H00G of iron ore per )ear# &"e cost of processin* t"e ore is =300G per )ear# &"e avera*e inventor) is =200G# Dow lon* does a dollar spend in t"e process5&"e flow unit is a cost dollar#&"e process is t"e steel manufacturin* operations &"e value of t"e inventor) includes bot" ore and processin* cost# I 7 =200G1)earA &otal of =H00G I =300G 7 =/00G flows t"rou*" t"e process eac" )ear# &"rou*"put % 7 =/00G1)earAvera*e flow time & 7 I1% 7 2001/00 7 21/ )ear 7 3 mont"sLittles Law-Cash Flow11133. Process Flow MeasuresProcess Flow Analysis-Basics 13Ardavan Asef-VaziriJune/2011Littles Law- in#entory TurnsJuestion' A *eneral mana*er at Ba+ter states t"at "er inventor) turns t"ree times a )ear Cost of Goods Sold is t"ree times of avera*e inventor)$# S"e also states t"at ever)t"in* t"at Ba+ter bu)s *ets processed and leaves t"e docks wit"in si+ weeks# Are t"ese statements consistent5Of t"e > operational measures of performance! inventor)! t"rou*"put and avera*e flow time K a process mana*er onl) needs to focus on 3 measures! as t"e) directl) determine t"e t"ird measure via LittleAs Law# Geasurin* w"ic" one is c"eaper5For a *iven level of t"rou*"put in an) process! t"e onl) wa) to reduce flow time is to reduce inventor) and vice versa#13