MSBA 7004

Operations Analytics

Class 2-1: Process Flow Analysis (I)

Capacity Rate, Flow Time, Bottleneck
2024
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 Assessment
Individual assignments 30%
Group assignment 10%
In-Class Participation + Attendance 10%
Final Exam 50%
Total 100%
▪ Objectives:
– 1. Develop an Inventory policy for a simulation game (group assignment part 1)
– 2. Participate in a simulation game (8th lecture)
– 3. Reflect on the outcomes and effectiveness of your strategy (group assignment
part 2)
▪ Group formation: 4-5 students
▪ Deliverables:
– 1. Submit your strategy (inventory policy) at the beginning of the 8th lecture.
– 2. After the game, submit a reflection analyzing your group’s performance.
▪ Peer evaluation form 2
 Assessment
Individual assignments 30%
Group assignment 10%
In-Class Participation + Attendance 10%
Final Exam 50%
Total 100%

▪ Take attendance (>=70% attendance rate = 5% final grade)

▪ In-Class Participation (5% = 2.5% (first half) + 2.5% (second half))
– In-class practice problems will count. If you are able to submit all the in-class practice problems,
you already get 70%*2.5%. For the rest 30%, you need to participate more during class.
– If you participate (ask or answer questions) during the class, I will distribute you a sticky note.
Please write down your name and UID and return it to me. If I forget to distribute the note,
please ask for it during the break.
– If you forget to do this, please send TA (cc me) an email (including what you asked or
answered) at the end of every class (no later than 10:30 pm of the day).
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 Definition: Arrival Rate
• Arrival Rate
– The number of flow units (customers) that arrive in a
unit of time
– unit: # of customers/ unit time, e.g., 2 orders per
hour
– If Arrival Rate ≥ Capacity,
then the process cannot handle all the jobs, and hence
the manager needs to find ways to increase capacity
• Primary reason we see queues (waiting)
• Long waiting lines everywhere - HKQU
Match supply and demand

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 Bottleneck Characteristics
• The bottleneck is fully utilized while other
resources are not utilized
– Always working (100% of the available time)
• Shortening tasks of non-bottleneck resources
decreases flow time but does not affect
capacity rate
– Reducing flow time improves response time

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 Processes may be unbalanced
Place an Order Toast buns

Flow Time 8 sec 10 sec

Capacity Rate 450/hour 360/hour

Process is “Blocked”

• When the next stage is busy, the order cannot be

sent to the next stage after finishing the current
stage, unless an inventory buffer is introduced

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 Another example
Add dressings Add meat patties

Flow Time 8 sec 6 sec

Capacity Rate 450/hour 600/hour

Process is “starved”

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 More Bottleneck Characteristics
• The bottleneck is fully utilized while other resources
are not utilized
• Shortening tasks of non-bottleneck resources
decreases flow time but does not affect capacity rate
– Reducing flow time improves response time
• If a buffer is provided at some upstream stage to the
bottleneck, inventory may build up at the buffer
• Inventory will not build up at the (immediately)
downstream stages to the bottleneck even if buffers
are provided

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Summary of Bottleneck Characteristics
• Increasing capacity rate of bottleneck resource(s) increases
process capacity rate only when the bottleneck is unique
– With multiple bottlenecks (same capacity rate), we need to
increase capacity rate for all of them to increase process
capacity rate
• Two ways of increasing capacity rate of bottleneck
resources:
1. Increase number of bottlenecks’ resources
2. Reduce unit load of bottlenecks’ task
• Reducing unit load on a non-bottleneck resource reduces
flow time but does not affect cycle time (or capacity rate)

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 Process Analysis
• Improving a process
– Throughput (Capacity)
• Bottleneck Analysis
• Levers for Improvement

– Flow Time (Responsiveness)

• Critical Path Analysis
• Improvement Levers

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Process Performance Characteristics: Capacity Rate and
Flow Time

• Capacity rate: Maximum rate at which (flow) units can flow

through the process
• (Theoretical) Flow time (or Throughput time): Total length of
time a unit spends in the process
– Shortest time (hence without waiting at all) for a flow
unit to go through the entire process

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 Analyzing Process Performance:
Mortgage Application
Verify/Check
Employment etc
Marcus Assemble,

Application review,
20min Present to client

Data entry
Shannon Karolien
5min 15min
Credit rating Initial policy
options/rates
Kiki Maxi
15min 15min
• Flow time?
• Flow time: 50 mins
• How to reduce flow time? 25
 Analyzing Process Performance:
Mortgage Application
Verify/Check
Employment etc
Marcus Assemble,

Application review,
20min Present to client

Data entry
Shannon Karolien
5min 15min
Credit rating Initial policy
options/rates
Kiki Maxi
15min 15min

• How to reduce flow time?

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 Improving Flow Time
• Critical path: The longest path in the process
flowchart.
• Critical activities: Activities on a critical path.
• Flow time = Activity time + Waiting (buffer)
time
• Theoretical flow time = Value-adding flow
time (on the critical path)

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 Levers for Reducing Flow Time
• Decrease the work content on the critical path
(reducing activity time)
– work faster (reduce flow time of critical activities)
– move work content off the critical path
• Rearrange the process
• Reduce waiting (buffer) time

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 Analyzing Process Performance:
Mortgage Application
Verify/Check
Employment etc
Marcus Assemble,

Application review,
20min25 min Present to client

Data entry
Shannon Karolien
5min 15min
Credit rating Initial policy
options/rates
Kiki Maxi
15min10 min 15min

• How to reduce flow time?

• What is the consequence?
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 Analyzing Process Performance:
Mortgage Application
Verify/Check
Employment etc
Marcus Assemble,

Application review,
20min Present to client

Data entry
Shannon Karolien
5min 15min
Credit rating Initial policy
options/rates
Kiki Maxi
15min 15min

• How to increase capacity?

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 Mortgage Application
Verify/Check
Employment etc
Marcus Assemble,
20min Present to client
Application review,
Data entry
Shannon Karolien
5min 15min
Credit rating Initial policy
options/rates
Kiki Maxi
15min 15min

Resource Unit Load Resource Capacity Process

(time/job) Capacity
Unit Capacity # of units Total Capacity

Shannon 5min 12/hr 1 12/hr 3/hr

Marcus 20min 3/hr 1 3/hr 3/hr
Kiki 15min 4/hr 1 4/hr 3/hr
Maxi 15min 4/hr 1 4/hr 3/hr
Karolien 15min 4/hr 1 4/hr 3/hr

The bottleneck doesn’t have to be on the critical path

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