Process Analysis & Selection

Operations
Operations Management
Management

Instructor:
Instructor: Dr.
Dr. Rizwan
Rizwan Ahmed
Ahmed
What is a process?
 A logical set of steps/tasks
 A number of inputs are given
 A number of resources are utilized
 A number of constraints are adhered to
 Goods and/or services are produced as
output(s)
Constraints

Inputs Process Output(s)

Resources
 Significance of Process
 How to produce a product or provide a
service that
 Meets or exceeds customer requirements
 Meets cost and managerial goals
 Has long term effects on
 production flexibility & Speed
 Costs and quality

© 2008 Prentice Hall, Inc. 6–3

 Process Analysis
• A step-by-step breakdown of the
phases of a process, used to convey
the inputs, outputs, and operations that
take place during each phase/step

© 2008 Prentice Hall, Inc. 6–4

Reasons for Process Analysis
and Decisions
 New or modified product or service is
being offered
 Quality Improvement
 Competitive priorities have changed
 Change in market demand
 Performance improvement
 Cost and efficiency improvement
 New technology adoption
 Competitors are gaining by using a
new process
Process Analysis: How To?
 The first step in designing or
improving a business process is the
process analysis which entails
 Defining process goals, scope/boundaries;
process steps, inputs and outputs, and
resources required
 Identifying process flows,
interrelationships, and dependencies
 Identifying the constraints or adherence
to certain standards policies
 Determine capacity and potential
bottlenecks of each step in the process
 Identify waste activities and alternatives
Process Analysis Techniques
 Descriptive
 A paragraph/essay explaining a
process
 Difficult to communicate and
understand
 Pictorial representations
 Some common techniques
 Process flowcharts
 Process mapping
 Service Blueprints
Process Flowchart Symbols
 Process
flowcharts Operations
 Symbolic Inspection
representation of
processes Transportation
Delay
Storage
 Date: 9-30-14 Location: Graves Mountain

Process
Analyst: TLR Process: Apple Sauce

Distance
Operation
Transport
Description

flowchart

Storage
Inspect

(feet)
(min)
Time
Delay
Step
of
process

of apple 1
2
Unload apples from truck
Move to inspection station
20
100 ft

processing 3
4
Weigh, inspect, sort
Move to storage
30
50 ft
5 Wait until needed 360
6 Move to peeler 20 ft
7 Apples peeled and cored 15
8 Soak in water until needed 20
9 Place in conveyor 5
10 Move to mixing area 20 ft
11 Weigh, inspect, sort 30
Page 1 0f 3 Total 480 190 ft
 Process Mapping
 Start & End: An oval is
used to show the
materials, information or
action (inputs) to start the
process or to show the
results at the end (output)
of the process.

 Activity: A box or
rectangle is used to show
a task or activity performed
in the process.

 Decision: A diamond
shows those points in the
process where a yes/no
question is being asked or
a decision is required.

A simple example of Conference approval process

A Cross Functional/Personnel Process Map

Customer Waiter Salad Chef Dinner Chef

N
Is order
Place order complete?

Y
Give soup or salad order to chef Prepare soup or
salad order
Give dinner order to chef Prepare dinner
order
Drink Get drinks for customer

Eat salad or Deliver salad or soup order to customer Give order

soup to waiter

Eat dinner Deliver dinner to customer Give order

to waiter
Receives check Deliver check to customer

Receive payment for meal

Gives payment
to waiter
Credit
Cash or
Credit?

Cash A Process Map of

Collect change,
leave tip
Bring change to customer Restaurant
Service showing
Run credit card through
interaction
Fill in tip Return credit slip to customer customer and
amount
employees (could
Collect tip
also be
departments)
Steps to Process Mapping
 Identify
People/Department/Functions
 Identify activities/decisions
(process step), also starting and
ending activities
 Identify inputs and outputs
against each activity
 Identify interaction between
people/dept.
 Identify flows/directions and 6-12
Library Case Study
 When a library first receives a book from a
publisher it is sent, together with the
accompanying delivery note, to the library desk.
Here the delivery note is checked against a file of
books ordered.

 If no order can be found to match the note, a

letter of enquiry is sent to the publishers. If a
matching order is found, a catalogue note is
prepared from the details on the validated
delivery note.

 The catalogue note, together with the book, is

sent to the registration department. The validated
delivery note is sent to the accounts department
where it is stored.

 On receipt of an invoice from the publisher, the

accounts department checks its store of delivery
notes. If the corresponding delivery note is found
Service Blueprinting
 A tool for simultaneously
depicting the service process,
the points of customer contact,
and the evidence of service from
customer point of view.

6-14
Service Blueprints
 Customer Actions: The steps that customers take as part of the
service delivery process.
 Front stage (Visible Contact Employee) Actions: These actions are
face-to-face actions between employees and customers.
 Back stage (Invisible Contact Employee) Actions: The ‘line of
visibility’ separates the onstage from the Backstage actions.
Everything that appears above the line of visibility can be seen by
the customers, while everything under the line of visibility is
invisible for the customers. A very good example of an action in
this element, is a telephone call; this is an action between an
employee and a customer, but they don’t see each other.
 Support Processes: These are all the activities (usually invisible to
customer) carried out by individuals and units within the company.
May also involves systems. These activities need to happen in
order for the service to be delivered.
 Physical Evidence: For each customer action, and every moment
of truth, the physical evidence that customers come in contact
with is described at the very top of the service blueprint. These
are all the tangibles that customers are exposed to that can
influence their quality perceptions. 6-15
Service Blueprint of Overnight
Hotel Stay

6-16
Classroom activity
 Draw a service blueprint of
service process at McDonald

 Draw a Service Blueprint of

course registration & fee
payment process at LSE
Break-Even Analysis
Cost
 Fixed costs - constant regardless of
the number of units produced
 Variable costs - vary with the

volume of units produced

Revenue - price at which an item is
sold
Total revenue - price times volume
sold
Profit - difference between total
revenue and total cost
Break-even analysis (cont.)
 Total cost = fixed cost + total
variable cost
 TC = cf + vcv

 Total revenue = volume x price

 TR = vp

 Profit = total revenue - total cost

 TR – TC = vp - (cf + vcv)
 At Break even TR –TC = vp - (cf + vcv) = 0
 Implies at break even TR=TC
 Break-Even Analysis (cont.)

TR = TC
vp = cf + vcv Total
cost
$3,000 —
line
vp - vcv = cf
v(p - cv) = cf $2,000 —

cf
$1,000 — Total
v = p - cv revenue
line
400 Units
Solving for Break-Even Volume Break-even point
Break-Even Analysis: Example

Consider Process ‘A’

Fixed cost= cf = $2,000
Variable cost = cv = $5 per unit
Price = p = $10 per unit
Break-even point is
cf 2000
v= = = 400 unit
p - cv 10 - 5
Process Selection with
Break-Even Analysis
 Break-even analysis is especially useful
when evaluating different processes or
degrees of automation.
 More-automated processes have higher
fixed costs but lower variable costs.
 The "best" process depends on the
anticipated volume of demand for the
product and the trade-offs between fixed
and variable costs.
 Let's see how break-even analysis can guide
the selection of a process among several
alternatives.
6-22
 Consider a New process ‘B’
Fixed cost = cf = $10,000
Variable cost = cv = $2 per unit
Price = p = $10 per unit

Break-even point is
cf 10,000
v= = = 1250 units
p - cv 10 - 2

6-23
 Total cost of
process B
Process $20,000 —
Total cost of
process A

Selection:
Graph $15,000 —

$10,000 —

There comes a point

where total cost of $5,000 —
process A and
process B is the
same. Called the | | | |
cross-over point 1000 2000 3000 4000 Units

Point of indifference = 2,667 Units

Example 4.2
Process Selection

Process A Process B
$2,000 + $5v = $10,000 + $2v
$3v = $8,000
v = 2,667 rafts

Below 2,667, choose A

Above 2,667, choose B
 Total cost of
process B
Process $20,000 —
Total cost of
process A

Selection:
Graph $15,000 —

$10,000 —

Choose Choose
$5,000 — process A process B

| | | |
1000 2000 3000 4000 Units

Point of indifference = 2,667 Units

Example 4.2
 Classroom activity
An enterprising student has set up an
internship placement centre for business
students. Each student that uses the
service fills out a form and lists up to 10
companies that he or she would like to
have contacted.
The clearinghouse has a choice of two
methods to use for processing the forms.
The traditional method requires about 20
minutes to review the form and arrange the
information in the proper order for
processing. Once this setup is done, it
takes only 2 minutes per company
requested to complete the processing.
The other alternative uses an optical scan /
retrieve system, which takes only 1 minute
to prepare but requires 5 minutes per
company for completing the processing. If
Process Performance Metrics
[between starting and
completing a job]
 Cycle time = Average time
between
completion of
successive units

[measured in units]

 Efficiency = Actual output

[theoretical machine or system
design, a.k.a “capacity”]
Standard Output
Process Performance Metrics

 Productivity = Output [e.g. total $ value, products,

customers served]

Input [e.g. total $ value, per

employee, per labor hour]

 Utilization = Time Activated [man or

machine in operation]

Time Available [manned

shifts (w/wo set-up)]
 Cycle Time Example
 Suppose you had to produce 600
units in 80 hours to meet the
demand requirements of a product.
What is the cycle time to meet this
demand requirement?
 Answer: There are 4,800 minutes
(60 minutes/hour x 80 hours) in 80
hours. So the average time between
completions would have to be: Cycle
time = 4,800/600 units = 8 minutes.