OPNS Process Analysis Module
Bottleneck Management and ImprovementTime and
Throughput:Critical Path vs. Bottleneck AnalysisPizza Pazza
CompanyLevers for ImprovementMulti-product Capacity Management and
InvestmentJoint Marketing & Production DecisionsOptimal
Capacity InvestmentBariatric Surgery
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis &
Apps1Operational Performance MeasuresHow to measure and decrease
flow times?How to measure and increase throughput?
What is the best achievable performance?Slide #Time and
Throughput Management & Improvement Van MieghemS.
Chopra/Operations/Process Analysis & Apps2Flow TimeCritical
Path(Theoretical) Capacity of a ResourceBottleneck Resource
(Theoretical) Capacity of the Process
Concepts to Cover and AnalyzeSlide #Time and Throughput
Management & Improvement Van MieghemJ.A. Van
Mieghem/Operations/Process Analysis & Apps3Will use Pizza to
illustrate. Pizza Goal =Concepts and calculationsShows how some
decisions (finance, investment, pricing) should be interfunctional
and process view is helpful.
Need to understand 2 points about BNs:What is their
capacity?What is their cost?Simple point: you typically dont want
an inexpensive resource to be your BN
Analyzing Process Performance:Mortgage ApplicationCredit
rating
Kiki15minVerify/CheckEmployment etcMarcus20min Initial
policyoptions/ratesMaxi15minAssemble,Present to client
Karolien15minApplication review,Data entryShannon5min Slide
#Time and Throughput Management & Improvement Van MieghemJ.A.
Van Mieghem/Operations/Strategy4To illustrate the concepts,
consider a simple examplewhich could be that of requesting a home
mortgage.
Q1: What is the minimal amount of time to process an input into
an output?Find the critical activities = longest path = bottom path
= 1 hour = theoretical flow time.
Q2: What is the maximal number of flow units we can process per
hour?Find the slowest resource = bottleneck = R2 whose resource
capacity is 1 every 20 min. The weakest link determines the chains
strength, so process capacity can not go above 3/hr.
Note: BN need not be on the critical path. Both concepts address
different questions: critical activities is about input-output
flow/response timebottleneck resources are about throughput
rate
Pizza Pazza: Flow Chartif job order = 2 identical
pizzasstartTake OrderSauce PrepDough PrepSpreadActivity time:2312 =
2Resource:JeanJeanJean, PanendBillUnload & PackBakeLoad &
Set timerActivity time:21 2 = 23151Resource:JaquelineJaqueline,
PanPanOven, PanJaqueline, Oven, PancoolSlide #Time and Throughput
Management & Improvement Van MieghemJ.A. Van
Mieghem/Operations/Process Analysis & Apps5Levers for Reducing
Flow TimeDecrease the work content of critical activitieswork
smarterwork fasterdo it right the first timechange product mixMove
work content from critical to non-critical activitiesto
non-critical path or to ``outer loopRestructure sequential
activities into parallel activitiesReduce waiting time.Slide #Time
and Throughput Management & Improvement Van MieghemJ.A. Van
Mieghem/Operations/Process Analysis & Apps6A Recipe for
Capacity Measurements: Minimal resource capacity = bottleneck
*assuming system is processing at full capacityDefine a job =
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis &
Apps7Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis &
Apps8Product Mix Decisions:Pizza Pazza offers 2 pizza typesSale
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?
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis &
Apps9Product Mix DecisionsUnit 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/hrMargin rate
from deep dish = 5.40 * 4/hr = 21.60/hr
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis &
Apps10Think of a process as printing cash = speed (throughput) x
unit margin.How increase capacity? Summary of Typical ActionsKey
action = optimize only bottleneck management
Decrease the work content of bottleneck activitiesNever
unnecessarily idle (starve) bottlenecks = eliminate bottleneck
waits:Reduce variability if it leads to bottleneck
waitingSynchronize flows to and from the bottleneck: sync when
resources start an activitywork smarter:Reduce & externalize
setups/changeover times, streamline + eliminate non-value added
workdo it right the first time: eliminate rework/correctionswork
faster
Move work content from bottlenecks to non-bottleneckscreate
flexibility to offload tasks originally assigned to bottleneck to
non-critical resource or to third partyCan we offload tasks to
cross-trained staff members?
Increase Net Availability of Processwork longer: increase
scheduled availabilityincrease scale of process: invest in more
human and capital resourceseliminate unscheduled
downtimes/breakdownsPreventive maintenance, backups, etc.Slide
#Time and Throughput Management & Improvement Van MieghemJ.A.
Van Mieghem/Operations/Process Analysis & Apps11Pizza Goal
=Concepts and calculationsShows how some decisions (finance,
investment, pricing) should be interfunctional and process view is
helpful.
Need to understand 2 points about BNs:What is their
capacity?What is their cost?Simple point: you typically dont want
an inexpensive resource to be your BNis to increase the capacity of
only the bottlenecksensure the bottlenecks time is not
wastedincrease availability of bottleneck resourceseliminate
non-value added work from bottlenecksreduce/eliminate setups and
changeoverssynchronize flows to & from bottleneckreduce
starvation & blockage the load of the bottlenecks (give it to
non-bottlenecks)move work from bottlenecks to non-bottlenecksneed
resource flexibility unit capacity and/or #of units.investTheory of
Constraints in The Goal Increasing Process CapacitySlide #Time and
Throughput Management & Improvement Van MieghemJ.A. Van
Mieghem/Operations/Process Analysis & Apps12Bariatric Surgery
Flow Chart5 x 1.2 = 6 min(20% callback)Patient Receptionist
CashRequesttestsInitialconsul-tationInitialphonecallSetappointmt
for test 1Test 1delaydecide30 minPatient Surgeon 10
minPatientSurgeon5 minPatientReceptionist 60
minPatientCare-nurseOutpatient room 2 daysPatient Setappointmt5
minPatientReceptionist 40% quitMore tests (50%)80% approvedYes
(50%)Insurance90%MedicalNecessityLetterInsuranceApprovaldecide20
minPatientSurgeon 10% quitSetappointmt for test 25
minPatientReceptionistVisit 215 minPatientSurgeon Test 230
minPatientCare-nurseOutpatient room delay2 daysPatient
InsuranceApproval2 wksPatient 20% denied & quitPre-surgeryVisit
320 minPatientSurgeonOutpatient room Schedulesurgery10
minPatientCare-nurse PatientsArrive
&Check-inPre-surgerySeminar60 min6 PatientsSurgeonSeminar room
OR Cleaning15 min2 s-nursesOR Patient Prep30 minPatientCare-nurse
Drs. Prep15 minSurgeonanesthetist LaparoscopicSurgery75 min2
surgery nursesAnesthetist, surgeonpatient, OR
Check-ups&Recovery2 daysPatient, Inpatient roomCare nurse
120min(10minx6x2)OpenSurgeryCheck-ups&Recovery4 daysPatient,
Inpatient roomCare nurse 240min (10minx6x4)FollowUp30
minPatientCare-nurse 45 min2 surgery nursesAnesthetist,
surgeonpatient, OR PatientLeavesx % 1- x % Slide #Process Analysis
& Improvement Van MieghemJ.A. Van Mieghem/Operations/Process
Analysis & Apps13To illustrate bottleneck and capacity concepts
in more complex processes, consider Bariatric Surgery.The
complications here are:Not everyone that enters goes through the
entire process > drop-out or yield rates.Not everyone follows
the same process > There are several types of flow units
(product mix)
Dealing with 2 is not to difficult: we simply focus on a
specific type of flow unit; e.g. patients that pay cash and select
open surgery.Let us discuss how to deal with drop-out or yield
rates for such specific flow unit.Bariatric Surgery Flow Chart for
cash & open surgery5 x 1.2 = 6 min(20% callback)Patient
Receptionist
CashRequesttestsInitialconsul-tationInitialphonecallSetappointmt
for test 1Test 1delaydecide30 minPatient Surgeon 10
minPatientSurgeon5 minPatientReceptionist 60
minPatientCare-nurseOutpatient room 2 daysPatient Setappointmt5
minPatientReceptionist 40% quitPre-surgeryVisit 320
minPatientSurgeonOutpatient room Schedulesurgery10
minPatientCare-nurse PatientsArrive
&Check-inPre-surgerySeminar60 min6 PatientsSurgeonSeminar room
OR Cleaning15 min2 s-nursesOR Patient Prep30 minPatientCare-nurse
Drs. Prep15 minSurgeonanesthetist
OpenSurgeryCheck-ups&Recovery4 daysPatient, Inpatient roomCare
nurse 240min (10minx6x4)FollowUp30 minPatientCare-nurse 45 min2
surgery nursesAnesthetist, surgeonpatient, OR PatientLeavesSlide
#Process Analysis & Improvement Van MieghemJ.A. Van
Mieghem/Operations/Process Analysis & Apps14First, this
simplifies the flow chart greatly.Second, note that outflow rate
< inflow rate. We can express throughput & capacity either
in inflow patients or served patients. Either way works b/c one can
reconvert: #outflows = 60% #inflows.But this has a great impact on
resource consumption. To illustrate, let us calculate the unit load
of surgeons (in terms of inflow units):Surgeons unit load = 30 +
60%*(10 + 20 + 60/6 + 15 + 45) = 30 + 60%*(100 min) = 90 min.Thus,
surgeons capacity = 1 inflow patient/90min = 2/3 /hr = .66/hr.
Equivalently (multiplying by 60%) = .6 x 2/3 = .40 served
patients/hr.Doing this now for each resource pool, we get the
capacity table on next page.Bariatric Surgery Capacity Open
Surgeries & Cash Payment* inpatient rooms used 5 days/wk
Expected unit workload per inflow patientSlide #Time and
Throughput Management & Improvement Van MieghemJ.A. Van
Mieghem/Operations/Process Analysis & Apps15Notice: the surgeon
capacity is .4/hr, total pool capacity = 96/hr BN =
inpatient-rooms: patients only check in on Sunday Thursday = 5
days/wk. Unit load = 4 days. Thus, 1.25 patients/room,wk.
Why would they have excess staff and doctors? Consider
Laproscopic surgery: (next page)Now surgeons are BN. Bariatric
Surgery Capacity Laparoscopic Surgeries & Cash Payment
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis & Apps16Now
surgeons are BN.
> insight: capacity depends on product mix.
Say we have 50% cash & open and 50% cash and Lapa, what is
capacity?In general, it is not 50%*78.75 + 50%* 80.00 b/c the BN
may shift.Rather, you should recalculate the average unit
workload.Bariatric Surgery Capacity Open Surgeries & Insurance
Payment
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis & Apps17As
a last exercise, let us calculate the unit load of surgeons for the
open & insurance. (go back to full flowchart) First, compute
drop-out rates: starting from 100 patients flowing in> 60> 30
(more test) > (30+24).9=48.6 served.
2. Surgeon expected workload on 1 inflow patient thus is:
30 + .6 (10+20) + .3 x 15 + .486 (20+60/6+15+45)= 52.5 + 43.74 =
96.25 min/inflow patient.
3. Equivalently, this is 96.24/.486 = 198.02 min/served patient.
[Sunil gets same, but the spreadsheet above and TN have wrong
number.] Bariatric Surgery Capacity Laparoscopic Surgeries &
Insurance Payment
Slide #Time and Throughput Management & Improvement Van
MieghemJ.A. Van Mieghem/Operations/Process Analysis &
Apps18Product Mix Decisions:Open or Laparoscopic SurgeryRevenue per
open surgery:$15,000Variable Cost of Materials:$1,000
Revenue per Laparoscopic surgery:$18,000Variable Cost of
Materials: $2,000
Slide #Time and Throughput Management & Improvement Van
MieghemS. Chopra/Operations/Process Analysis & Apps19Open 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.
Product Mix DecisionsSlide #Time and Throughput Management &
Improvement Van MieghemS. Chopra/Operations/Process Analysis &
Apps20Margin per Open surgery = $14,000Margin per Laparoscopic
surgery = $16,000
Margin per week from Open surgery = 72.72*(15,000 - 1,000) =
$1,018,055 / weekMargin per week from Laparoscopic surgery =
63.15*(18,000 - 2,000) = $1,010,400 / week
Product Mix DecisionsSlide #Time and Throughput Management &
Improvement Van MieghemS. Chopra/Operations/Process Analysis &
Apps21Manage 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 activitiesCapacity manage bottleneck resources
Many marketing and financial decisions are linked to
processEffect of product mix decisions on process capacitymarginal
contribution per unit of bottleneck capacity usedBottleneck may
shift on adding capacity diminishing returns to capacity investment
Learning Objectives: Time and Throughput ManagementSlide #Time and
Throughput Management & Improvement Van MieghemS.
Chopra/Operations/Process Analysis & Apps22ResourceUnit
Load
Resource Capacity
ProcessResource
(time/job)Unit Capacity# of unitsTotalCapacityUtilization*