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4

Process Analysis

PowerPoint Slides
by Jeff Heyl

For Operations Management, 9e by


Krajewski/Ritzman/Malhotra
2010 Pearson Education

41

Process Analysis
Processes may be the least understood
and managed aspect of a business
A firm can not gain a competitive
advantage with faulty processes
Processes can be analyzed and improved
using certain tools and techniques
Process analysis can be accomplished
using a six-step blueprint

42

A Systematic Approach
Define
scope
2
Identify
opportunity
1

Document
process
3

Implement
changes
6

Evaluate
performance
4
Redesign
process
5

Figure 4.1 Blueprint for Process Analysis


43

Documenting The Process


Three effective techniques for
documenting and evaluating processes are
1)

Flowcharts

2)

Service blueprints

3)

Process charts

They help you see how a process operates


and how well it is performing
Can help find performance gaps

44

Flowcharts
Marketing
lead
Sales: Initial
conversation
with client

Sales and/or
consulting
drafts proposal

Sales
lead

Follow-up
conversation
between client
and sales
No

Consulting:
Initial
conversation
with client

Consulting
lead

Consulting
drafts
proposal

Follow-up
conversation
between client
and consulting

Line of visibility
Follow-up by
accounting,
sales, or
consulting

Client billed by
accounting,
sales, or
consulting

Yes

Approval
by
consulting?

Is
proposal
complete?
Yes
Nested Process
Client agreement
and service
delivery

Final invoice
created by
accounting, sales,
or consulting

No
No

Payment
received?

Yes

Finish

Figure 4.2 Flowchart of the Sales Process


for a Consulting Company
45

Flowcharts

Is
proposal
complete?

Final invoice
created by
accounting, sales,
or consulting

Verbal OK
from client

Form
completed by
sales or
consulting

Project
manager
assigned

Delivery of
service by
consulting

50% invoiced
by accounting,
sales, or
consulting

Letter of
agreement
signed

Figure 4.3 Flowchart of the Nested Subprocess of


Client Agreement and Service Delivery
46

CUSTOMER

Order
completed
and submitted

100%
of credit
checked within
24 hours

Two
scheduling
errors per
quarter

Payment
sent

FINANCE

Yes
New
customer?

Credit
check
OK?
Yes

Production
scheduled

Order

Items
manufactured

Packages
assembled and
inventoried

Invoice
sent

Order
stopped

Order
picked

Product packages

Inventory
adjusted

Invoice
prepared

Payment
received

Notice of shipment

Production Control
and Manufacturing

Order
entered

No

Order cancellation

Order

Order
received

No

Assembly and
Shipping

Payment

Order
cancelled

Credit and
invoicing

PRODUCTION

Product
and invoice
received

Order

Order
generated

SALES

Flowcharts

Order
shipped

Figure 4.4 Flowchart of the Order-Filling Process Showing Handoffs


Between Departments
47

Process Charts
An organized way to document all the
activities performed by a person or group
Activities are typically organized into five
categories
Operation,

Transportation,
Inspection,
Delay,

Storage,

48

Process Charts
Step
No.

Time
(min)

Distance
(ft)

0.50

15.0

10.00

0.75

3.00

0.75

1.00

1.00

4.00

5.00

10

2.00

11

3.00

12

2.00

13

3.00

14

2.00

15

1.00

16

4.00

17

2.00

18

4.00

Enter emergency room, approach patient window

Sit down and fill out patient history

X
40.0

Nurse escorts patient to ER triage room

Nurse inspects injury

X
40.0

Return to waiting room

X
X

60.0

Nurse takes patient to radiology

Technician x-rays patient

Return to bed in ER

X
X

Return to emergency entrance area


Check out

X
180.0

Wait for doctor to return


Doctor provides diagnosis and advice

X
60.0

Wait for doctor


Doctor inspects injury and questions patient

200.0

Wait for available bed


Go to ER bed

200.0

Step Description

X
X

20.0 for Emergency


Figure
Process Chart
19 4.5 1.00
X Room Admission

Walk to pharmacy
Pick up prescription
Leave the building
49

Process Charts
Step
No.

Time
(min)

Distance
(ft)

0.50

15.0

10.00

0.75

3.00

0.75

1.00

1.00

4.00

5.00

10

2.00

11

3.00

12

2.00

13

3.00

14

2.00

15

1.00

16

4.00

17

2.00

18

4.00

Activity

Operation

X
X

40.0

Transport

Inspect
X
60.0

Delay
X
X

200.0

Store

(ft)

5 to ER triage
23.00room
Nurse escorts patient
Nurse inspects injury

Return to waiting room

Wait for available2bed


Go to ER bed

Wait for doctor

11.00

815

8.00
8.00

Doctor inspects injury


patient
and questions

Return to bed in ER

X
X

Wait for doctor to return


Doctor provides diagnosis and advice

X
X

Return to emergency entrance area


Check out

X
180.0

(min)

Technician x-rays patient

60.0

of Steps

Nurse takes patient to radiology

200.0

Number
TimepatientDistance
Enter emergency
room, approach
window
Sit down and fill out patient history

X
40.0

Summary
Step Description

X
X

20.0 for Emergency


Figure
Process Chart
19 4.5 1.00
X Room Admission

Walk to pharmacy
Pick up prescription
Leave the building
4 10

Process Charts
The annual cost of an entire process can
be estimated
It is the product of
1)

Time in hours to perform the process each


time

2)

Variable costs per hour

3)

Number of times the process is performed


each year

Annual
labor cost

Time to perform
the process in hours

Variable costs
per hour

Number of times process


performed each year

4 11

Process Charts
If the average time to serve a customer is
4 hours
The variable cost is $25 per hour
And 40 customers are served per year
The total labor cost is
4 hrs/customer $25/hr 40 customers/yr = $4,000

4 12

Work Measurement Techniques


Used to estimate the average time each
step in a process would take
1)

Time study method

2)

Elemental standard data approach

3)

Predetermined data approach

4)

Work sampling method

Learning curve analysis is appropriate for


new products or processes

4 13

Time Study of Revised Process


EXAMPLE 4.1
A process at a watch assembly plant has been changed. The
process is divided into three work elements. A time study has
been performed with the following results. The time standard
for process previously was 14.5 minutes. Based on the new
time study, should the time standard be revised?
SOLUTION
The new time study had an initial sample of four observations,
with the results shown in the following table. The performance
rating factor (RF) is shown for each element, and the allowance
for the whole process is 18 percent of the total normal time.

4 14

Time Study of Revised Process


Obs 1

Obs 2

Obs 3

Obs 4

Average
(min)

RF

Normal
Time

Element 1

2.60

2.34

3.12

2.86

2.730

1.0

2.730

Element 2

4.94

4.78

5.10

4.68

4.875

1.1

5.363

Element 3

2.18

1.98

2.13

2.25

2.135

0.9

1.922

Total Normal Time = 10.014

The normal time for an element in the table is its average time,
multiplied by the RF. The total normal time for the whole
process is the sum of the normal times for the three elements,
or 10.01 minutes. To get the standard time (ST) for the process,
just add in the allowance, or
ST = 10.014(1 + 0.18) = 11.82 minutes/watch

4 15

Work Sampling

Figure 4.6 Work Sampling Study of Admission Clerk at Health


Clinic Using OM Explorer
4 16

Learning Curves
140,000

Labor Hours per Unit

120,000
100,000
80,000
60,000
40,000
20,000
0
|

20

40

60

80

100

120

Cumulative Units Produced


Figure 4.7 Learning Curve with 80% Learning Rate Using OM Explorer

4 17

Evaluating Performance
Chapter 5, Quality and Performance
Customer satisfaction measures
Error rate
Rework or scrap rate
Internal failure costs
Chapter 6, Capacity Planning; Supplement C, Waiting Lines; Supplement H,
Measuring Output Rates; Supplement I, Learning Curve Analysis
Processing time
Total time from start to finish (throughput time)
Setup time
Operating expenses
Capacity utilization
Average waiting time
Average number of customers or jobs waiting in line
Figure 4.8 Metrics for Flowcharts, Process Charts, and Accompanying Tables
4 18

Evaluating Performance
Chapter 7, Constraint Management
Cycle time
Idle time
Chapter 8, Lean Systems
Setup time
Average waiting time
Total time from start to finish (throughput time)
Waste

Figure 4.8 Metrics for Flowcharts, Process Charts, and Accompanying Tables
4 19

Data Analysis Tools


Help identify causes of problems
1)

Checklists

2)

Histograms and bar charts

3)

Pareto charts

4)

Scatter diagrams

5)

Cause-and-effect diagrams

6)

Graphs

4 20

Pareto Chart for a Restaurant


EXAMPLE 4.2
The manager of a neighborhood restaurant is concerned about
the smaller numbers of customers patronizing his eatery.
Complaints have been rising, and he would like to find out what
issues to address and present the findings in a way his
employees can understand.
SOLUTION
The manager surveyed his customers over several weeks and
collected the following data:
Complaint

Frequency

Discourteous server

12

Slow service

42

Cold dinner

Cramped table

20

Atmosphere

10
4 21

Pareto Chart for a Restaurant

Failures

Figure 4.9 is a bar chart and Figure 4.10 is a Pareto chart, both
created with OM Explorers Bar, Pareto, and Line Charts solver.
They present the data in a way that shows which complaints are
more prevalent (the vital few).

50
45
40
35
30
25
20
10
5
0

Discourteous
server

Slow
service

Cold
dinner

Cramped
tables

Atmosphere

Failure Name

Figure 4.9 Bar Chart

4 22

Pareto Chart for a Restaurant


(42 + 20)
100% = 69.7%
89
45

100.0%

40

Failures

30

60.0%

25

40.0%

20

20.0%

10

Percent of Total

80.0%

35

0.0%

5
0
Slow
service

Cramped
tables

Discourteous
server

Atmosphere

Cold
dinner

Failure Name

Figure 4.10 Pareto Chart

4 23

Analysis of Flight Departure Delays


EXAMPLE 4.3
The operations manager for Checker Board Airlines at Port
Columbus International Airport noticed an increase in the
number of delayed flight departures.
SOLUTION
To analyze all the possible causes of that problem, the
manager constructed a cause-and-effect diagram, shown in
Figure 4.11. The main problem, delayed flight departures, is the
head of the diagram. He brainstormed all possible causes
with his staff, and together they identified several major
categories: equipment, personnel, materials, procedures, and
other factors that are beyond managerial control. Several
suspected causes were identified for each major category.

4 24

Analysis of Flight Departure Delays


Equipment

Personnel

Aircraft late to gate

Other

Passenger processing at gate

Mechanical failures

Late cabin cleaners

Weather

Unavailable cockpit crew

Air traffic delays

Late cabin crew

Late baggage to aircraft


Late fuel
Late food service
Contractor not provided
with updated schedule
Materials

Poor announcement of departures

Delayed
flight
departures

Weight/balance sheet late


Delayed check-in procedure
Waiting for late passengers

Procedures

Figure 4.11 Cause-and-Effect Diagram for Flight Departure Delays


4 25

Data Analysis Tools


Tools can be used together for data
snooping to analyze data and determine
causes
Simulation can show how a process
changes over time
Process simulation is the act of
reproducing the behavior of a process
using a model that describes each step

4 26

Causes of Headliner Process Failures


EXAMPLE 4.4
The Wellington Fiber Board Company produces headliners, the
fiberglass components that form the inner roof of passenger
cars. Management wanted to identify which process failures
were most prevalent and to find the cause.
SOLUTION
Step 1: A checklist of different types of process failures is
constructed from last months production records.
Step 2: A Pareto chart is prepared from the checklist data.
Step 3: A cause-and-effect diagram for identifies several
potential causes for the problem.
Step 4: The manager reorganizes the production reports into a
bar chart according to shift because the personnel on
the three shifts had varied amounts of experience.
4 27

Causes of Headliner Process Failures


Step 2. Pareto Chart

Figure 4.12 shows the sequential


application of several tools for
improving quality

50

100

40

80

Step 1. Checklist
Defect type

Tally

Total

A. Tears in fabric

|| ||

B. Discolored fabric

|||

C. Broken fiber board

|||| |||| |||| ||||


|||| |||| |||| |

D. Ragged edges

|||| ||

30

60

20

40

10

20

D
A

0
B

36
7

Total

Number of Failures

Cumulative Percentage

SOLUTION

50

Defect Failure
Figure 4.12 Application of the Tools
for Improving Quality
4 28

Causes of Headliner Process Failures


SOLUTION

Step 4. Bar Chart

Step 3. Cause-and-Effect Diagram


People

Materials

Training

Out of specification

Absenteeism

Not available

Communication

Humidity

Machine
maintenance

Schedule change

Machine speed
Other

Wrong setup
Process

Broken
fiber
board

20
Number of Broken Fiber Boards

Figure 4.12 shows the sequential


application of several tools for
improving quality

15

10

First Second Third


Shift
Figure 4.12 Application of the Tools
for Improving Quality
4 29

Redesigning the Process


After a process is documented, metrics are
collected, and disconnects are identified,
the process analyst determines what
changes should be made
People directly involved in the process are
brought in to get their ideas and inputs

4 30

Generating Ideas
Ideas can be uncovered by asking six
questions
1.

What is being done?

2.

When is it being done?

3.

Who is doing it?

4.

Where is it being done?

5.

How is it being done?

6.

How well does it do on the various metrics of


importance?

4 31

Generating Ideas
Brainstorming involves a group of people
knowledgeable about the process
proposing ideas for change by saying
whatever comes to mind
After brainstorming the design team
evaluates ideas and identifies those with
the highest payoff

4 32

Generating Ideas
Benchmarking is a systematic procedure
that measures a firms processes, services,
and products against another firm
Competitive benchmarking is based on
comparisons with a direct competitor
Functional benchmarking compares areas
with those of outstanding firms in any
industry
Internal benchmarking compares an
organizational unit with superior
performance with other units
4 33

Benchmarking
There are four basic steps
Step

1. Planning

Step

2. Analysis

Step

3. Integration

Step

4. Action

Collecting data can be a challenge


Some corporations and government
organizations have agreed to share data

4 34

Benchmarking
Customer Relationship Process
Total cost of enter, process, and track orders per $1,000 revenue
System costs of processes per $100,000 revenue
Value of sales order line item not fulfilled due to stockout, as percentage of
revenue
Average time from sales order receipt until manufacturing logistics is
notified
Average time in direct contact with customer per sales order line item
Order Fulfillment Process

Value of plant shipments per employee


Finished goods inventory turnover
Reject rate as percentage of total orders processed
Percentage of orders returned by customers due to quality problems
Standard customer lead time from order entry to shipment
Percentage of orders shipped on time

Figure 4.13 Illustrative Benchmarking Metrics by Type of Process


4 35

Benchmarking
New Service/Product Development Process

Percentage of sales due to services/products launched last year


Cost of generate new services/products process per $1,000 revenue
Ratio of projects entering the process to projects completing the process
Time to market for existing service/product improvement project
Time to market for new service/product project
Time to profitability for existing service/product improvement project

Supplier Relationship Process


Cost of select suppliers and develop/maintain contracts process per
$1,000 revenue
Number of employees per $1,000 of purchases
Percentage of purchase orders approved electronically
Average time to place a purchase order
Total number of active vendors per $1,000 of purchases
Percentage of value of purchased material that is supplier certified
Figure 4.13 Illustrative Benchmarking Metrics by Type of Process
4 36

Benchmarking
Customer Relationship Process

Systems cost of finance function per $1,000 revenue


Percentage of finance staff devoted to internal audit
Total cost of payroll processes per $1,000 revenue
Number of accepted jobs as percentage of job offers
Total cost of source, recruit, and select process per $1,000 revenue
Average employee turnover rate

Figure 4.13 Illustrative Benchmarking Metrics by Type of Process


4 37

Managing Processes
Failure to manage processes is failure to
manage the business
Seven common mistakes
1.

Not connecting with strategic issues

2.

Not involving the right people in the right way

3.

Not giving the design teams and process


analysts a clear charter and then holding them
accountable

4 38

Managing Processes
Seven common mistakes
4.

Not being satisfied unless fundamental


reengineering changes are made

5.

Not considering the impact on people

6.

Not giving attention to implementation

7.

Not creating an infrastructure for continuous


process improvement

4 39

Solved Problem 1
Create a flowchart for the following telephone-ordering process
at a retail chain that specializes in selling books and music
CDs. It provides an ordering system via the telephone to its
time-sensitive customers besides its regular store sales.
The automated system greets customers, asks them to choose
a tone or pulse phone, and routes them accordingly.
The system checks to see whether customers have an existing
account. They can wait for the service representative to open a
new account.
Customers choose between order options and are routed
accordingly.
Customers can cancel the order. Finally, the system asks
whether the customer has additional requests; if not, the
process terminates.

4 40

Solved Problem 1
SOLUTION

Figure 4.14 Flowchart of Telephone Ordering Process


4 41

Solved Problem 1
SOLUTION

Figure 4.14 Flowchart of Telephone Ordering Process


4 42

Solved Problem 2
An automobile service is having difficulty providing oil changes
in the 29 minutes or less mentioned in its advertising. You are
to analyze the process of changing automobile engine oil. The
subject of the study is the service mechanic. The process
begins when the mechanic directs the customers arrival and
ends when the customer pays for the services.
SOLUTION
Figure 4.15 shows the completed process chart. The process is
broken into 21 steps. A summary of the times and distances
traveled is shown in the upper right-hand corner of the process
chart.
The times add up to 28 minutes, which does not allow much
room for error if the 29-minute guarantee is to be met and the
mechanic travels a total of 420 feet.

4 43

Solved Problem 2
Step
No.

Time
(min)

Distance
(ft)

0.80

50.0

1.80

2.30

0.80

0.60

0.70

0.90

1.90

0.40

10

0.60

11

4.20

12

0.70

13

2.70

14

1.30

15

0.50

16

1.00

17

3.00

18

0.70

19

0.30

20

0.50

Operation

X
X

X
X
X

420

5.00
0.70
0.30

Fill engine with oil, start engine


X

Inspect for leaks

Walk to pit
X

Inspect for leaks

Clean and organize work area


X

Return to auto, drive from bay


X

60.0

5.50

Climb from pit, walk to automobile

80.0

16.50

Perform under-car services


X

40.0

Recommend
Transport
additional8services
Wait for customer decision
4
InspectWalk to storeroom

1
Delay Look up filter
number(s)
Check filter number(s) 1
Store Carry filter(s)
to service pit

X
40.0

Walk to customer in waiting area

Distance
(ft)

Open hood, verify engine type, inspect hoses, check fluids

50.0

Summary

Number
Time
ActivityRecord name and desired service
of Steps
(min)
X

70.0

Step Description

Direct customer into service bay

0.30

Park the car


Walk to customer waiting area

Figure
4.15
Process Chart
for Changing Engine
Oil
21
2.30
X
Total charges, receive payment

4 44

Solved Problem 3
What improvement can you make in the process shown in
Figure 4.14?
SOLUTION
Your analysis should verify the following three ideas for
improvement. You may also be able to come up with others.
a. Move Step 17 to Step 21. Customers should not have to wait
while the mechanic cleans the work area.
b. Store small inventories of frequently used filters in the pit.
Steps 7 and 10 involve travel to the storeroom.
c. Use two mechanics. Steps 10, 12, 15, and 17 involve running
up and down the steps to the pit. Much of this travel could
be eliminated.

4 45

Solved Problem 4
Vera Johnson and Merris Williams manufacture vanishing
cream. Their packaging process has four steps: (1) mix, (2)
fill, (3) cap, and (4) label. They have had the reported defects
analyzed, which shows the following:
Defect
Lumps of unmixed product
Over- or underfilled jars
Jar lids did not seal

Frequency
7
18
6

Labels rumpled or missing

29

Total

60

Draw a Pareto chart to identify the vital defects.

4 46

Solved Problem 4
SOLUTION
Defective labels account for 48.33 percent of the total number
of defects:
29
100% = 48.33%
60
Improperly filled jars account for 30 percent of the total number
of defects:
18
100% = 30.00%
60
The cumulative percent for the two most frequent defects is
48.33% + 30.00% = 78.33%

4 47

Solved Problem 4
7
of defects; the
100% = 11.67%
60
cumulative percentage is
Lumps represent

78.33% + 11.67% = 90.00%


Defective seals represent
cumulative percentage is

6
of defects; the
100% = 10.00%
60

10% + 90% = 100.00%


The Pareto chart is shown in Figure 4.16

4 48

Solved Problem 4
100
90%

36

Frequency of Defects

32

100%

90
80

78%

28

70

24

60

20

50

16

48%

40

12

30

20

10

Label

Fill

Mix

Cumulative Percentage of Defects

40

Seal

Figure 4.16 Pareto Chart


4 49

4 50

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