Process Analysis & Selection

Operations Management

Instructor: Dr. Rizwan 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
 Symbolic Operations
representation of
processes Inspection
Transportation
Delay
Storage
 Date: 9-30-14 Location: Graves Mountain
Analyst: TLR Process: Apple Sauce
Process

Distance
Operation
Transport
Description

Storage
Inspect

(feet)
(min)
Time
flowchart

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 branches of
process flow
 Draw and label the process
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 then an instruction to
pay the publishers is made, and subsequently a cheque is
sent. If no corresponding delivery note is found, the invoice is
stored in a pending file.
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 $3,000 —
Total
cost
vp - vcv = cf line

v(p - cv) = cf $2,000 —

cf
$1,000 —
v= p-c Total
revenue
v 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= p-c = = 400 unit
v 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= p-c = = 1250 units
v 10 - 2

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

Selection: $15,000 —
Graph
$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
$20,000 — Total cost of
Process process A

Selection: $15,000 —
Graph
$10,000 —

$5,000 — Choose Choose

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 it costs about the same amount per
minute for processing with either of the two methods,
when should each be used?
Process Performance Metrics
[between starting and
completing a job]
 Cycle time = Average time between
completion of successive units

[measured in units]
 Efficiency = Actual output
Standard Output
[theoretical machine or system
design, a.k.a “capacity”]
 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.