Slide 1Time and Throughput Management & Improvement© Van Mieghem Bottleneck Management and Improvement Time and Throughput: –Critical Path vs. Bottleneck.

Slide 1Time and Throughput Management & Improvement © Van Mieghem

Bottleneck Management and Improvement

Time and Throughput:– Critical Path vs. Bottleneck Analysis

• Pizza Pazza Company• Levers for Improvement

– Multi-product Capacity Management and Investment• Joint Marketing & Production Decisions• Optimal Capacity Investment• Bariatric Surgery


Operational Performance Measures

How to measure and decrease flow times? How to measure and increase throughput?

What is the best achievable performance?


Flow Time

Critical Path

(Theoretical) Capacity of a Resource

Bottleneck Resource

(Theoretical) Capacity of the Process

Concepts to Cover and Analyze


Analyzing Process Performance:Mortgage Application

Credit rating

Kiki15min

Verify/CheckEmployment etc

Marcus20min

Initial policyoptions/rates

Maxi15min

Assemble,Present to client

Karolien15min

Application review,Data entry

Shannon5min


Pizza Pazza: Flow Chartif job order = 2 identical pizzas

start Take Order Sauce Prep Dough Prep Spread

Activity time: 2 3 12 = 2Resource: Jean Jean Jean, Pan

end BillUnload &

PackBake

Load & Set timer

Activity time: 2 1 2 = 2 3 15 1Resource: Jaqueline Jaqueline, Pan Pan Oven, Pan Jaqueline, Oven, Pan

cool


Levers for Reducing Flow Time

Decrease the work content of critical activities– work smarter– work faster– do it right the first time– change product mix

Move work content from critical to non-critical activities– to non-critical path or to ``outer loop’’

Restructure sequential activities into parallel activities Reduce waiting time.


A Recipe for Capacity Measurements: Minimal resource capacity = bottleneck

Resource Unit Load Resource Capacity Process Resource(time/job) Unit Capacity # of units Total Capacity Utilization*

*assuming system is processing at full capacity

Define a “job” = …


Jacky Jean Oven0

2

4

6

8

10

12

14

16

18

Unit workload


Product Mix Decisions:Pizza Pazza offers 2 pizza types

Sale Price of thin crust: €5

Cost of Direct Materials: €1.40

Sale Price of deep dish: €7.50

Cost of Direct Materials: €2.10

Which of these two products should Jean push to customers that call in and are undecided?


Product Mix Decisions

Unit margin of thin crust pizza = €3.60

Unit margin of deep dish pizza = €5.40

Margin rate from thin crust

= €3.60 * 7.5/hr = € 27/hr

Margin rate from deep dish

= €5.40 * 4/hr = € 21.60/hr


How increase capacity? Summary of Typical Actions

Key action = optimize only bottleneck management

Decrease the work content of bottleneck activities– Never unnecessarily idle (“starve”) bottlenecks = eliminate bottleneck waits:

Reduce variability if it leads to bottleneck waiting Synchronize flows to and from the bottleneck: sync when resources start an activity

– work smarter: Reduce & externalize setups/changeover times, streamline + eliminate non-value added work

– do it right the first time: eliminate rework/corrections– work faster

Move work content from bottlenecks to non-bottlenecks– create flexibility to offload tasks originally assigned to bottleneck to non-critical resource

or to third party Can we offload tasks to cross-trained staff members?

Increase Net Availability of Process– work longer: increase scheduled availability– increase scale of process: invest in more human and capital resources– eliminate unscheduled downtimes/breakdowns

Preventive maintenance, backups, etc.


“is to increase the capacity of only the bottlenecks”– “ensure the bottlenecks’ time is not wasted”

increase availability of bottleneck resources eliminate non-value added work from bottlenecks

• reduce/eliminate setups and changeovers synchronize flows to & from bottleneck

• reduce starvation & blockage

– “ the load of the bottlenecks (give it to non-bottlenecks)” move work from bottlenecks to non-bottlenecks need resource flexibility

– unit capacity and/or #of units. invest

“Theory of Constraints” in The Goal Increasing Process Capacity

Bariatric Surgery Flow Chart

5 x 1.2 = 6 min(20% callback)

Patient Receptionist

Cash

Requesttests

Initialconsul-tation

Initialphone

call

Setappointmt for test 1

Test 1delay

decide

30 minPatient Surgeon

10 minPatient

Surgeon

5 minPatient

Receptionist

60 minPatient

Care-nurseOutpatient room

2 daysPatient

Setappointmt

5 minPatient

Receptionist

40% quit

More tests (50%)

80% approved

Yes (50%)Insurance 90%MedicalNecessity

Letter

InsuranceApproval

decide

20 minPatient

Surgeon

10% quit


5 minPatientReceptionist

Visit 215 minPatientSurgeon

Test 230 minPatientCare-nurseOutpatient room

delay2 daysPatient

InsuranceApproval

2 wksPatient

20% denied & quit

Pre-surgeryVisit 3

20 minPatient

SurgeonOutpatient room

Schedulesurgery

10 minPatient

Care-nurse

PatientsArrive &Check-in

Pre-surgerySeminar

60 min6 PatientsSurgeon

Seminar room

OR Cleaning

15 min2 s-nurses

OR

Patient Prep

30 minPatient

Care-nurse

Drs. Prep

15 minSurgeon

anesthetist

LaparoscopicSurgery

75 min2 surgery nurses

Anesthetist, surgeonpatient, OR

Check-ups&

Recovery

2 daysPatient,

Inpatient roomCare nurse 120min

(10minx6x2)

OpenSurgery

Check-ups&

Recovery

4 daysPatient,


(10minx6x4)

FollowUp

30 minPatient

Care-nurse



PatientLeaves

x %

1- x %

Bariatric Surgery Flow Chart for “cash & open surgery”

5 x 1.2 = 6 min(20% callback)

Patient Receptionist

Cash

Requesttests

Initialconsul-tation

Initialphone

call


Test 1delay

decide

30 minPatient Surgeon

10 minPatient

Surgeon

5 minPatient

Receptionist

60 minPatient

Care-nurseOutpatient room

2 daysPatient

Setappointmt

5 minPatient

Receptionist

40% quit

Pre-surgeryVisit 3

20 minPatient

SurgeonOutpatient room

Schedulesurgery

10 minPatient

Care-nurse

PatientsArrive &Check-in

Pre-surgerySeminar

60 min6 PatientsSurgeon

Seminar room

OR Cleaning

15 min2 s-nurses

OR

Patient Prep

30 minPatient

Care-nurse

Drs. Prep

15 minSurgeon

anesthetist

OpenSurgery

Check-ups&

Recovery

4 daysPatient,


(10minx6x4)

FollowUp

30 minPatient

Care-nurse



PatientLeaves


Bariatric Surgery Capacity – Open Surgeries & Cash Payment

* inpatient rooms used 5 days/wk

Cash-Open

Resource Units Load/patient Patients/hr Hrs/day Patient/day Patients/wk resources Capacity/wk

Receptionist min 12 5.00 12 60.00 300.00 1 300.00Care Nurse min 222 0.27 12 3.24 16.22 10 162.16Surg. Nurse Team min 36 1.67 12 20.00 100.00 2 200.00Surgeon min 90 0.67 12 8.00 40.00 4 160.00OR min 36 1.67 12 20.00 100.00 2 200.00Inpatient rooms days 2.4 2.08 63 131.25Outpatient rooms min 48 1.25 12 15.00 75.00 2 150.00Anesthesist min 36 1.67 12 20.00 100.00 2 200.00

Capacity 131.25 inflow patients/wk78.75 outflow patients/wk

Expected unit workload per inflow patient


Bariatric Surgery Capacity – Laparoscopic Surgeries & Cash Payment

Cash-Laparoscopic


Receptionist min 12 5.00 12 60.00 300.00 1 300.00Care Nurse min 150 0.40 12 4.80 24.00 10 240.00Surg. Nurse Team min 54 1.11 12 13.33 66.67 2 133.33Surgeon min 108 0.56 12 6.67 33.33 4 133.33OR min 54 1.11 12 13.33 66.67 2 133.33Inpatient rooms days 1.2 4.17 63 262.50Outpatient rooms min 48 1.25 12 15.00 75.00 2 150.00Anesthesist min 54 1.11 12 13.33 66.67 2 133.33



Bariatric Surgery Capacity – Open Surgeries & Insurance Payment

Insurance- Open


Receptionist min 12.93 4.64 12 55.68 278.42 1 278.42Care Nurse min 195.66 0.31 12 3.68 18.40 10 183.99Surg. Nurse Team min 29.16 2.06 12 24.69 123.46 2 246.91Surgeon min 96.24 0.62 12 7.48 37.41 4 149.63OR min 29.16 2.06 12 24.69 123.46 2 246.91Inpatient rooms days 1.94 2.57 63 162.04Outpatient rooms min 54.72 1.10 12 13.16 65.79 2 131.58Anesthesist min 29.16 2.06 12 24.69 123.46 2 246.91



Bariatric Surgery Capacity – Laparoscopic Surgeries & Insurance Payment

Insurance-Laparoscopic


Receptionist min 12.9 4.64 12 55.68 278.42 1 278.42Care Nurse min 137.3 0.44 12 5.24 26.21 10 262.12Surg. Nurse Team min 43.7 1.37 12 16.46 82.30 2 164.61Surgeon min 110.8 0.54 12 6.50 32.49 4 129.94OR min 43.7 1.37 12 16.46 82.30 2 164.61Inpatient rooms days 1.0 5.14 63 324.07Outpatient rooms min 54.7 1.10 12 13.16 65.79 2 131.58Anesthesist min 43.7 1.37 12 16.46 82.30 2 164.61



Product Mix Decisions:Open or Laparoscopic Surgery

Revenue per open surgery: $15,000

Variable Cost of Materials: $1,000

Revenue per Laparoscopic surgery:$18,000

Variable Cost of Materials: $2,000


Open and Laparoscopic have exactly the same process. The only difference is

in surgery (laparoscopic takes 30 minutes extra) and in the rooms

(laparoscopic uses rooms for 2 days whereas open uses rooms for 4 days.



Margin per Open surgery = $14,000

Margin per Laparoscopic surgery = $16,000

Margin per week from Open surgery = 72.72*(15,000 - 1,000) = $1,018,055 / week

Margin per week from Laparoscopic surgery = 63.15*(18,000 - 2,000) = $1,010,400 / week



Manage better using the key operational measures and an inter-functional process view of the organization

Process measures and corresponding improvement levers: – Flow time manage critical activities– Capacity manage bottleneck resources

Many marketing and financial decisions are linked to process– Effect of product mix decisions on process capacity

marginal contribution per unit of bottleneck capacity used– Bottleneck may shift on adding capacity

diminishing returns to capacity investment

Learning Objectives: Time and Throughput Management

Slide 1Time and Throughput Management & Improvement© Van Mieghem Bottleneck Management and Improvement Time and Throughput: –Critical Path vs. Bottleneck.

Documents

improvement time

hr slide

cool slide

waiting time

time change product

increase capacity

load set timer activity

minimal resource capacity