Unformatted text preview: Resource capacity: e.g. Resource capacity =
Doctor capacity = Bottleneck:
If there are demand rate given, then the flowrate of the process: FR = min (DR, PC)
Types of Constraints
Capacity Constrained: When Demand > Capacity; therefore produce at capacity rate (i.e. produce
at process capacity)
Demand Constrained: When Demand < Capacity; therefore produce at demand rate
Draw Process Flow with Triangle and Square
A process flow comprises many activities (represented by square)
Throughput Time (Flow Time) VS Cycle Time
Throughput Time refers to the time to fill a rush order on an empty process
Throughput Time = sum of activity times
Cycle Time refers to the time to produce an additional unit on an ongoing process
Cycle Time = 1/ Flow Rate
Total time taken to make n units when the process starts from scratch
Total time = Throughput Time + (n1) x Cycle Time the lowest is the process capacity or bottleneck
Available Resource per unit time / Resource required per flow unit
(10 Doc x 4 Ops per day x 5 day per week)/ 1 Doc per patient
= 200 patients per week'
(i.e. in a week, the doctor can operate up to 200 patients)
Lowest resource capacity, which is termed as Process Capacity (PC) e demand rate given, then the flowrate of the process: FR = min (DR, PC) onstrained: When Demand > Capacity; therefore produce at capacity rate (i.e. produce
capacity)
onstrained: When Demand < Capacity; therefore produce at demand rate ess Flow with Triangle and Square
flow comprises many activities (represented by square) ut Time (Flow Time) VS Cycle Time
ut Time refers to the time to fill a rush order on an empty process
ut Time = sum of activity times
e refers to the time to produce an additional unit on an ongoing process
e = 1/ Flow Rate taken to make n units when the process starts from scratch
= Throughput Time + (n1) x Cycle Time Author:
Example: Given flow rate is 100 tons
per hour, how long to produce
10000ton?
Ans: Assume this is an ongoing
process, then time to fulfill 10000
ton = 10000 ton / 100 ton per hour
= 100 hours Flow unit inside
inside
outlet Three way to measure how good or the performance of process
1
2
3 Assessment: 1
2
3
Little's Law
Examples (product shelf life type) Examples (customer type) Examples (Cash Conversion Cycle) Textbook Q on Dell enter process as input and later leave process as output w good or the performance of process
Work in process: number of flow units contained in the process
Flow Time or Throughput time: Time it takes a flow unit to go through the process
Flow Rate or Throughput rate: Rate at which the process delivers output
Smaller WIP the better e.g. productivity
Smaller FT the better e.g. efficiency or less delay in fuflil demand
Bigger FR the better e.g. more output
Avg WIP = Avg FT x Avg FR
Flow unit = One Dollar worth of inventory
WIP = Inventory
FR = Daily COGS
FT = Days of Inventory (i.e. from goods received till goods sold)
(Slide 17: Given per year basis where Avg inventory = 0.12, COGS = 14.9; Therefore, Days of
inventory = [0.12/ (14.9/365)]
i.e. if FR is given in year and FT has to be in days, then convert FR into days by / 365
Flow unit = One Dollar claim on customer cash
WIP = Account Receivable
FR = Daily Revenue
FT = Days of Account Receivable (i.e. from goods sold till customer paid)
(Slide 15: Given per year basis where Avg Account Receivable = 0.2; Revenue = 5.2; Therefore, Days
of Account Receivable = [0.2/ (5.2/ 365)] )
Flow unit = One Dollar owed to supplier
WIP = Account Payable
FR = Daily COGS
FT = Days of Payables (i.e. from goods received till you pay supplier)
i.e. Days of Payables = Average Account Payable/ Daily COGS
Days of Working Capital = Days of Inventory + Days of Account receivable  Days of Account Payables
Positive working capital (current assets exceed current liabilities) or Negative working capital
(current assets are less than current liabilities).
Given Dell yearly inventory cost is 40% of its cost of capital, Given in 2001, Dell's report shows
$400million in inventory and COGS is $26442million, what percentage of cost of a Dell computer
reflects inventory cost?
Understanding: Percentage of cost of a Dell computer reflects inventory cost means "Perunit
inventory cost"
Understanding: Formula of Perunit inventory cost = (Annual Inventory Cost% / Annual Inventory
Turns) = Ans % per unit
Step 1: Annual Inventory Cost % = 40% Step 2: Treat Inventory of $400million as Avg WIP; Treat COGS of $26442million as Avg FR,
therefore Avg FT = (400/ 26442) = 0.015127
Step 3: Formula of Inventory Turn = 1/ Flow Time = 1/ 0.015127 = 66.107
Step 4: Perunit inventory cost = 40%/ 66.107 = 0.605 % per unit Examples
Flow unit
MBA Student
WIP = No of Flow unit
1200 students
FT = Number of unit time e.g. hours, day, 2 years
FR = No of Flow unit per unit time
600 student per year
<<Learn to identify by their unit of measurement>> Format of answering: Identify what is a flow unit and process boundary before identifying WIP, FT and FR
Q1: Given: "receive 50 messages each day" <<hint: number of flow unit per unit time means FR>>
Given: "Over last semester, the size is an average of 150 message <<hint: number of flow unit m
Hence, Avg FT = 150/ 50 = 3 days to clear or answer a message on average Q2: Intent is to verify if agent of Avg FT is 100 days is understated or overstated?
Given that over the past years, the no of flats for sale is on an average of 25 flats (i.e. Avg WIP is
Given by annual statistics that Avg FR is 75 flats sold per year
Hence, FT = 25/ (75/365) = 122 days. Hence, agent has understated *Q3: Given arrival rate is 10000 claims per quarter (i.e. based on the hint "rate & unit of measuremen
Given a claim rep needs to perform 4 hrs to close a claim
Given average age of a claim at closing is 6 months (i.e. hint "average age", Avg FT = 6 months)
Given a claim rep can perform 400hrs of claims per quarter
Qa: What is average level of pending claims or number of open claims at any point of time (i.e. A
Answer: Avg WIP = Avg FR x Avg FT = 10000 claims per quarter x (6/3) quarters = 20000 claims
Qb: How many claims reps should be employed next year?
Analysis: Firstly, should base on FR not WIP (i.e. arrival rate of claims to the process). Secondly, w
a claim (i.e. a claim rep needs 4hrs to close a claim). Hence, the requirement of hours to comple
quarter x 4 hrs = 40000 hrs per quarter. Thirdly, it is given that a claim rep can perform 400 hrs
number of claims rep be employed = 40000 hrs per quarter/ 400 hrs per quarter = 100 claims re Qc: What is the average number of pending claims per claims rep experience?
Analysis: Firstly, pending claims means WIP, hence refers to Avg WIP of 20000 claims. Secondly,
claims rep. Hence, average number of pending claims per claims rep experience = 20000/ 100 = Q4 Q4a (part 1): Flow unit is dedicated bus and Process boundary is from start of one loop till rest p
Analysis for Peak Hours: Firstly, Avg FT is time required for one loop + rest taken (in min). Second
(from the expression of one bus every 10min). Therefore, Avg number of bus required (i.e. Avg W
Avg FT x Avg FR = (40min + 5min) x (1/10) = rdup 5 buses. Repeat the same for the rest of bus no
find out the no of bus needed for each service no. (Part 2): repeat the same of above
Q4b (part 1): To use pooling strategy. Flow unit is one common bus. Process boundary is loop of
Analysis for Peak Hours: Firstly, Avg FT is the summation of all bus service no time required for o
computation). Secondly, similarly, Avg FR is (1/10) bus per min. Hence, Avg WIP for pool strategy
Repeat the same above for nonpeak.
(Part 2): compare to find saving of bus.
Q5 Draw Process Flow with Triangle and Square
Every square is an activity and have the following:
 processing time (aka FT)
 Number of resources required or available e.g. machine (Not WIP)
 processing rate of output (aka FR or Resource Capacity) Example:
(1) Treating Stage: has 1 treating bin which takes 1 hour to complete treatment up to 400 curtai
hr, no of resource required is 1 machine, processing rate is 400 curtain per hour)
(2) Drying Stage: Moved to a drying station where it takes 60min and can do up to 800 curtain p
no of resources required is 1 machine (based on a drying station), processing rate is 800 curtain
(3) Cutting Stage: 2 cutting machines can each process 100 curtain panels per hour (i.e. processi
required is 2 machines, processing rate is 200 curtains per hour)
(4) Sewing Stage: 20 employees can each sew one panel every 4 min (i.e. processing time is 4mi Example:
(1) Treating Stage: has 1 treating bin which takes 1 hour to complete treatment up to 400 curtai
hr, no of resource required is 1 machine, processing rate is 400 curtain per hour)
(2) Drying Stage: Moved to a drying station where it takes 60min and can do up to 800 curtain p
no of resources required is 1 machine (based on a drying station), processing rate is 800 curtain
(3) Cutting Stage: 2 cutting machines can each process 100 curtain panels per hour (i.e. processi
required is 2 machines, processing rate is 200 curtains per hour)
(4) Sewing Stage: 20 employees can each sew one panel every 4 min (i.e. processing time is 4mi
employees, then processing rate is (1/4 panel per min x 60min x 20 = 300 curtain per hour)
(5) Cleaning Stage: 2 packaging machines that can each package curtains at a rate of 1 min per p
given, no of resources required is 2 machines, then processing rate is (1/1 panel per min x 60mi
Therefore, the bottleneck is (5) which is also the process capacity as it has the lowest processing Qc: How many employees can be reduced without affecting the process capacity? Step 1: Process Capacity = 120 curtain per hour
Step 2: Only Sewing Stage involves employees
Step 3: Use of Processing Rate: (1/4 x 60min x ?? Employees) = 120 curtain per hour.
15?? = 120
?? = 8 employees are needed to achieve 120 curtain per hr. Hence the answer is the 20 employe
employees. Q6 Draw Process Flow with Triangle and Square
(1) Receiving Stage: The receptionist intakes each batch of sheets which takes 1min (i.e. process
required is 1 receptionist, therefore processing rate is 1/1 batch of sheet per min or 60 batches
(2) Washing Stage: Sheets are washed taking 20min and there are 5 washing machine that can p
(i.e. processing time is 20min, therefore processing rate is 1/20 batch of sheet per min x 60min x
(3) Drying Stage: Sheets are dried taking 30min and there are 7 dryers that can process one batc
time is 30min, therefore, processing rate is 1/30 batch of sheet per min x 60min x 7 = 14 batche
(4) Ironing Stage: Sheets are ironed taking 10min for each batch and there are two employees ir
10min, no of resources required is two employees, therefore processing rate is [(1/10 batch per
sheet per hr
(5) Billing Stage: The receptionist takes 2min (i.e. processing time is 2min, therefore, processing
batches per hr) Note: In modern answer approach, it calculate processing rate by resources not by activities wh
do receiving and billing, hence processing rate is 1/3 batch per min or 20 batches per hr Answer A: Ironing Stage is the bottleneck and is the process capacity
Qb: What is the average throughput time of a batch of sheets?
Answer B: 1min + 20min + 30min + 10min + 2min = 63min
Note: Avg Throughout time = Avg FT Qc: If FR is 10 batches per hr, what is the average number of batches of sheets in the system?
Given Avg FR = 10 batch per hr, and Avg FT = 63min or 63/60 hr
Hence, Avg WIP = 10 x 63/60 = 10.5 batches of sheet in the system Textbook Q3 Given:
Resource
1
2
3 Processing Time (Min/ Unit)
10
6
16 Qa: what is the process capacity or bottleneck?
For resource 1: Processing Rate = (1/10) unit per min x 60min x 2 = 12 unit per hr
For resource 2: Processing Rate = (1/6) unit per min x 60min x 1 = 10 unit per hr
For resource 3: Processing Rate = (1/16) unit per min x 60min x 3 = 11.25 unit per hr
Answer A: the process capacity is 10 unit per hr where resource 2 is the bottleneck
Qb: what is the flow rate if demand is eight units per hr?
Flow rate = min {Demand Rate, Process Capacity}
Answer B is Flowrate is 8 unit per hr
Qc: What is the utilisation of each resource if demand is eight units per hour?
Formula: Uiliisation = Flow Rate / Processing Rate = Answer %
Author:
where Flow rate can be For resource 1: Uilisation = 8/ 12 = 0.66 or 66%
demand rate or
For resource 2: Utilisation = 8/ 10 = 0.8 or 80%
process capacity
For resource 3: Utilisation = 8/ 11.25 = 0.71 or 71%
whichever is lowest ry before identifying WIP, FT and FR er of flow unit per unit time means FR>>
50 message <<hint: number of flow unit means WIP>>
message on average erstated or overstated?
is on an average of 25 flats (i.e. Avg WIP is 25 flats) s understated ed on the hint "rate & unit of measurement", hence Avg FR = 10000 claims per quarter) e. hint "average age", Avg FT = 6 months) r of open claims at any point of time (i.e. Avg WIP)
r quarter x (6/3) quarters = 20000 claims l rate of claims to the process). Secondly, what is the requirement of closing
Hence, the requirement of hours to complete is FR x 4 hrs = 10000 claims per
given that a claim rep can perform 400 hrs of claims per quarter. Therefore,
uarter/ 400 hrs per quarter = 100 claims rep r claims rep experience?
ers to Avg WIP of 20000 claims. Secondly, number of claims needed is 100
per claims rep experience = 20000/ 100 = 200 pending claims per claims rep oundary is from start of one loop till rest period is over
d for one loop + rest taken (in min). Secondly, Avg FR is (1/10) bus per min
ore, Avg number of bus required (i.e. Avg WIP) for dedicated bus no 201 =
ses. Repeat the same for the rest of bus no (i.e. every row of the table) to common bus. Process boundary is loop of all service no buses with their respective rests till
on of all bus service no time required for one loop + rest taken (i.e. column
per min. Hence, Avg WIP for pool strategy = Avg FT x Avg FR. ine (Not WIP)
ity) ur to complete treatment up to 400 curtain panels: (i.e. processing time is 1
ate is 400 curtain per hour)
akes 60min and can do up to 800 curtain panels (i.e. processing time is 1hr,
ing station), processing rate is 800 curtain per hour)
s 100 curtain panels per hour (i.e. processing time not given, no of resources
per hour)
nel every 4 min (i.e. processing time is 4min, no of resources required is 20 Given processing time
Then, processing rate = 1/ processing time. Will x 60mi ecting the process capacity? loyees) = 120 curtain per hour. er hr. Hence the answer is the 20 employees can be reducted to 8 Author:
did not
for process flow, it gives hint to base on
ch of sheets which takes 1min (i.e. processing timeIfisQ1min,
noask
of resource
resources
than
activity:
1/1 batch of sheet per min or 60 batches of sheet per hr)
Resource:
nd there are 5 washing machine that can process one
batch of sheet each
te is 1/20 batch of sheet per min x 60min x 5 = 15 Number:
batches
of sheet per hr)
Processing Time:
here are 7 dryers that can process one batch of sheet
each
(i.e. processing
Processing Rate: h of sheet per min x 60min x 7 = 14 batches of sheets per hr)
each batch and there are two employees ironing (i.e. processing time is
erefore processing rate is [(1/10 batch per min) Author:
x 60min x 2] = 12 batches of Own: Given processing time, then one can simply essing time is 2min, therefore, processing rate iscalculate
1/2 batchprocessing
per min orrate
30 by reciporal or fraction expression. The no of machine will determine the
processing rate thru simultaneous processing sing rate by resources not by activities where the receptionist takes 3min to
batch per min or 20 batches per hr rocess capacity mber of batches of sheets in the system?
63/60 hr
n the system Number of Worker
2
1
3 x 60min x 2 = 12 unit per hr
60min x 1 = 10 unit per hr
x 60min x 3 = 11.25 unit per hr
e resource 2 is the bottleneck d is eight units per hour? Given processing time
Then, processing rate = 1/ processing time. Will x 60min if want to express in essing time. Will x 60min if want to express in an hour. And also x no of resources if any. 0min if want to express in an hour. And also x no of resources if any. ...
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 Fall '16
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 International System of Units, Hour

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