Lecture Fundamentals of operations management (4/e): Chapter 6 - Davis, Aquilano, Chase

DAVIS
F   O   U   R   T   H       E   D   I   T   I   O   N

AQUILANO
CHASE

chapter 5

Process Measurement 
and Analysis

© The McGraw-Hill Companies, Inc., 2003

PowerPoint
Presentation
by
Charlie
Cook


Chapter Objectives
Chapter Objectives
• Illustrate how all activities within an organization are
actually processes that need to be managed.
• Present the various measures of performance that can
be used to evaluate a process.
• Show how process analysis can provide managers
with an in-depth understanding of how a process is
performing, while at the same time identifying areas
for improvement.
• Present the concept of service blueprinting and

illustrate how it is used to evaluate processes within a
© The McGraw­Hill 
service environment.
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
5–2


Chapter Objectives (cont’d)
Chapter Objectives (cont’d)
• Introduce the concept of business processes and
show how they are providing managers with a broader
perspective for managing their organizations.
• Present the concepts of benchmarking and
reengineering and show their roles in creating worldclass operations.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–3


Managerial Issues
Managerial Issues
• Recognizing that every set of activities represents a
process to be managed.
• Acknowledging that processes are linked to other

processes in other functional areas.
• Choosing strategically critical performance measures
by which to monitor processes so that corrective
actions are taken when needed.
• Using benchmarking to identify ways in which to
create or improve world-class design, production and
delivery operations for products.
Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–4


Defining a Process
Defining a Process
• Selecting a Process
–Identifying the strengths and weaknesses of
each process’s capability to support the
strategic focus of the firm on particular market
segments.
• Standardization
• Flexibility
• Customization
• Speed of delivery

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–5


Process Flowcharts for Making Hamburgers
Process Flowcharts for Making Hamburgers

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.1a
5–6


Process Flowcharts for Making Hamburgers
Process Flowcharts for Making Hamburgers

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.1b
5–7


Relative Comparison of 

Relative Comparison of 
Hamburger Preparation Processes
Hamburger Preparation Processes

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.2
5–8


Process Measurement
Process Measurement
• Importance of Measuring Processes
–Is the basis for good management—“If you can’t
measure it, you can’t manage it.”
–Allows a firm to determine if its strategically
important goals and standards are being met.
–Allows for performance comparisons with other
competing firms.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–9

Types of Performance Measures
Types of Performance Measures
• Productivity
–The operational efficiency with which inputs are
transformed (converted) into outputs.
• A relative measure that becomes meaningful when
compared to itself over time, similar operations
internally, or externally within its industry.

–Partial measures of productivity can be taken
using the various inputs (e.g., labor, energy, and
materials) that are combined to create a product.

Productivity
Fundamentals of Operations 
Management 4e 

Outputs
© The McGraw­Hill 
Inputs

Companies, Inc., 2003
5–10


Partial Measures of Productivity
Partial Measures of Productivity

Fundamentals of Operations 

Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.3
5–11


Types of Performance Measures (cont’d)
Types of Performance Measures (cont’d)
• Capacity
–Output of a process in a given period of time—
units of output per unit of time.
–Design capacity
• The ideal output rate at which the firm would like
to produce under normal circumstances and for
which the system was designed.

–Maximum capacity
• The maximum potential output rate that could be
achieved when productive resources are used to
their maximum.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–12

Types of Performance Measures (cont’d)
Types of Performance Measures (cont’d)
• Capacity Utilization
–Percentage of available capacity actually used.
• Design capacity versus maximum capacity

Homogeneous output
Capacity
Utilization

Actual output
Design capacity

Variable output
Capacity
Utilization

Actual machine hours used
Total machine hours available

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–13


Measures of Capacity

Measures of Capacity

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.4
5–14


Types of Performance Measures (cont’d)
Types of Performance Measures (cont’d)
• Quality
–Usually measured by the defect rate of the
products produced.

• Speed of Delivery
–Product’s lead time—amount of time from when
product is ordered to when it is shipped.
• Inventoried versus customized products

–Variability/Uncertainty in delivery time
• Less uncertainty in delivery times is better.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003

5–15


Types of Performance Measures (cont’d)
Types of Performance Measures (cont’d)
• Flexibility
–The measure of how readily a firm’s
transformation process can adjust to changes in
customer demand (i.e., agile manufacturing).

• Flexibility Measures
–How quickly a process can convert from
producing one product to another product.
–How quickly a process can adjust to changes in
volume (demand).
–How capable is the process in producing more
than one type of product. © The McGraw­Hill 
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
5–16


Types of Performance Measures (cont’d)
Types of Performance Measures (cont’d)
• Process Velocity (Manufacturing Velocity)
–Ratio of total throughput time for a product to
the value-added time.
• Throughput time—the time the product spends in
the process.

• Value-added time—the time it takes to complete
the product.

Process velocity =

Fundamentals of Operations 
Management 4e 

Total throughput time
Value-added time
© The McGraw­Hill 
Companies, Inc., 2003
5–17


Process Analysis in Manufacturing
Process Analysis in Manufacturing
• Multistage Process
–A process that consists of more than one step.

• Hybrid Process
–A multistage process that consists of more than
one type of process.

• Make-to-Stock
–Process for making highly standardized
products for finished goods inventory.

• Make-to-Order
–Process for making customized

products to
© The McGraw­Hill 
meet individual customer requirements.
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
5–18


Manufacturing: Make­to­Stock
Manufacturing: Make­to­Stock

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.5a
5–19


Manufacturing: Make­to­Order
Manufacturing: Make­to­Order

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.5b

5–20


Process Analysis in Manufacturing
Process Analysis in Manufacturing
• Modularization
–Use of standard components and
subassemblies to produce customized
products.

• Tightness and Dependence
–The degree to which various process stages are
related. Tight process are highly related,
creating strongly dependence between the
stages.
–Buffer inventories can make a process “looser.”
© The McGraw­Hill 
Fundamentals of Operations 
Companies, Inc., 2003
Management 4e 
5–21


Manufacturing: Modularization 
Manufacturing: Modularization 

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 

Companies, Inc., 2003
Exhibit 5.5c
5–22


Process Analysis in Manufacturing
Process Analysis in Manufacturing
• Bottleneck
–A stage with the lowest output capacity that
limits the total output of the process.

• Capacity versus Demand
–Capacity is the firm’s output capability; demand
is the level of output that the market requires to
meet customer needs.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–23


Process Analysis in Manufacturing
Process Analysis in Manufacturing
• Process Flowcharts
–A schematic diagram for describing a process.
• What the official or documented method is.
• How the work is actually being performed.

• What the proper procedures should be.

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
5–24


Elements in a Process Flowchart
Elements in a Process Flowchart

Fundamentals of Operations 
Management 4e 

© The McGraw­Hill 
Companies, Inc., 2003
Exhibit 5.6
5–25