Module 1: Process analysis Flashcards
(31 cards)
Four dimensions of performance
1) Cost: Efficiency
2) Quality: Product & process
3) Variety: Customer heterogeneity
4) Time: Responsiveness to Demand
Processes: Three basic measures
1) Flow rate / throughput
2) Flow time
3) Inventory
Flow rate / throughput
# of flow units going through the process per unit of time min(demand rate, process capacity)
Flow time
time it takes a flow unit to go from beginning to end of a process
Inventory
of flow units in process at a given moment in time
Cause of inventory
Supply/demand mismatch
Process flow diagram
Project management vs. Process management
Project: Completion of one single project
Process: Doing things repeatedly
Bottleneck
Process step with lowest capacity
Process capacity
Capacity of bottleneck
Utilization
flow rate / capacity
Capacity
1 / processing time
Cycle time
CT = 1 / flow rate
Time between the completion of subsequent units
Direct labor content
p1 + p2 + p3 + …
Direct idle time
If one worker per resource: (CT - p1) + (CT - p2) + …
Avg labor utilization
Labor content / (Labor content + Direct idle time)
Cost of direct labor
Total wages per unit of time / Flow rate per unit of time
Labor content is overstated or understated on financial statements?
Understated due to use of suppliers
Little’s law
In any process,
avg Inventory = avg Flow rate x avg Flow time
I = R * T
Inventory turns
COGS / Inventory
Per unit inventory costs
Annual inventory costs / Inventory turns
Meaning of “Buffer or Suffer”
Inventory helps improve flow rate
Pros of “Make to stock”
+ Scale economies in production
+ Rapid fulfillment
Pros of “Make to order”
+ Fresh preparation
+ Allows for more customization
+ Quantity produced = quantity demanded
