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Process Design and Analysis

Operations and Supply Chain Management

Lecture 4
Process Selection
Process Mapping Tools
Process Analysis
This lecture and its associated materials have been produced by Dr. Pichawadee Kittipanya-ngam (PhD, Cambridge) of
iAcademy for the purposes of lecturing on the above described subject and the material should be viewed in this
context. The work does not constitute professional advice and no warranties are made regarding the information
presented. The Author and iAcademy do not accept any liability for the consequences of any action taken as a result of
the work or any recommendations made or inferred. Permission to use any of these materials must be first granted by
iAcademy.
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Agenda
• Review of Week 3 Lecture
• Week 4 Lecture Coverage
– Process Selection
– Process Mapping Tools
– Process Analysis

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Review Of
Week 3 Lecture

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What is “Service”?
• Watch a video. Play a video.
– McDonalds Great Service, not Good Service

Don’t settle for

good service.
Do settle for the
great service!!

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Summary: Week 3 Lecture

• Services represent the fastest growing sector of
the global economy.
• Services are “acts, deeds, performances, or
relationships that produce time, place, form or
psychological utilities for customers.”
• There are 5 key steps of service design process
• Service Blueprinting has 4 important lines: line of
influence, line of interaction, line of visibility, and
line of support.

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QUESTIONS & ANSWERS

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Let’s get started with Lecture 4

Process Design and Analysis

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Lecture 4 Coverage

• Process Selection
• Process Mapping Tools
• Process Analysis

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What is a “process”?

How is this
car made?

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What is a “process”?
• Watch a video. Play the video.
– BMW Factory

What are the

production
PROCESS of
BMW cars?

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What is a “process”?
• Processes involved making BMW cars are?
– Forming the car chassis
– Painting the cars
– Assembling the engine & other accessories
– Quality control & Testing the cars
• How does BWM decide the details of processes
such as
– Whether to use robots or workers in a particular
process?
– How long each process should be for a worker?
• The answer lies in the “process selection”
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1. Process Selection

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What is a “process”?
• A process is “a group of related tasks with
specific inputs and outputs.”
• Processes exist to create value for the customer,
the shareholder, or society.
• Process design defines what tasks need to be
done and how they are to be coordinated
among functions, people, and organizations.
– Processes are planned, analyzed, and redesigned as
required by changes in strategy and emerging
technology.
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Why is Process Selection important?

• Case of Kellogg’s Pop-Tart Production
– Kellogg’s produces more than 10 million pop-tarts a
day. It uses the highly automated line process. Each
step has specially designed equipment that often
costs a quarter million dollars or more.
– For example, the mixer is not the same as your
ordinary home mixer, or even the same as the larger
mixers seen in commercial bakeries.
– The mixer for pop-tarts at Kellogg’s
mixes thousands of pounds of dough at
a time.
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Why is Process Selection important?

• Let’s see a VDO clip of pop tart production
process. Play the video.
– Pop Tart Production Process

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Why is Process Selection important?

• Case of Kellogg’s Pop-Tart Production
– The icing machine that follows baking in the oven is
specially designed to lay sheets of icing and
decorations on a continuously moving series of
precut and baked pop-tarts. This process turns out
thousands of pop-tarts per hour at a very low cost.
– A commercial bakery may also make pastries similar
to pop-tarts using a process that can be
diagrammed similarly, yet the equipment
and techniques used to make the
pastries will be quite different.
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Why is Process Selection important?

• Case of Kellogg’s Pop-Tart Production
– The filling application, cutting, icing, and packaging
will all be done using general-purpose equipment
that can be used for multiple types of products.
– The oven in a commercial bakery will be less
efficient than that at Kellogg’s, as the pastries will
have to be loaded, unloaded, and checked for
doneness manually, rather than being fed through
the oven automatically on a moving line.
– The end result is much more flexible but a
plenty in terms of cost per pastry.
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Comparison of Processes
Filling process at Kellogg at high volume production

Filling process at a smaller firm

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Why is Process Selection important?

• Learning from the Case of Kellogg’s Pop-Tarts

Choosing appropriate processes is a

fundamental step in developing the ability
to deliver products and services most
effectively in a manner that best reduces
cost, most improves delivery flexibility or
speed, depending on the strategic objective
that is of foremost importance.
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Process Selection
• The selection involves numerous decisions
regarding the relationships among workers,
technology, raw materials, and job assignments.
• On a macro level, production processes can
each be grouped into several aggregate types
based on 2 dimensions
– the degree of capitalized investment
– the degree of customer involvement.

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Product-Process Matrix
• The matrix shows the trade-off between high-
volume standardized products that get
produced for a low per-unit cost and low-
volume customized products that have a high
per-unit cost.
• 5 product-process types are shown in the next
slide.

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Product-Process Matrix

The degree to which

customers are involved
in shaping the end
service/product

The amount of labour needed to provide a service relative

to the total amount of physical resources needed (product volume)
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Projects
• A project process has a high degree of
customization, a large scope, and the use of
primarily generalized tools and equipment.
• Examples of projects are
– building a shopping center
– planning a major event/party
– running a political campaign
– constructing a new hospital
– developing a new technology or product.

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Projects
• The critical characteristic of projects is the
requirement for close coordination among the
various people and organizations involved with
the project. This coordination involves the
exchange of information and resources across
several different businesses.
• An example is the coordination of an Olympic
Games, which involves construction of facilities,
coordination of thousands of people and
supplies, and innumerable important details.
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Job Shop Processes

• Examples include a bakery with a large variety of
breads and dessert, a plumber, airline
manufacturers, custom furniture manufacturers,
or a machine shop.
• This process provides high flexibility to produce
variety of products in limited volumes. High
customization while production volume is low.
• Workers’ skills tend to be broad to set up
equipment for a verity of orders whereas the
production equipment itself is rather general.
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Example of Job Shop Process

• Let’s watch a video. Play the video.
– A380 Assembly: How to build A380 in 7 Minutes

Airplane manufacturers produce in response

to a specific order of each particular airline
(high product variety, low volume)
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Job Shop Processes

• Companies with a job shop process typically produce in
response to a specific order rather than being
produced ahead of time for inventory
• Most resources are organized around common
processing characteristics rather than around a
given product.
– For example, a cake might require 15 mins of mixing
and 15 ingredients, whereas a bread need only 5
mins and 6 ingredients. However, many tools for
making breads and cakes are similar, while time and
specific steps and ingredients required are different.

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Batch Processes
• Examples include car loan processing, the
production of parts or components to feed
assembly line, or the production of swimsuits.
• This process is a higher-volume job shop in
which the same or similar products are
produced repetitively. The product variety is
significantly lower than in a job shop.
• Once one batch is finished at a location, then a
batch of another product is made. Different
batch requires unique processing steps.
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Example of Batch Processes

• Let’s watch a video. Play the video.
– Bagel Bakery Production

Bagels are made in batches

due to a certain degree of
product variety and higher
volume than job shop
processes.

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Line Processes
• Examples include computer production, food
production, book printing, or car production.
• This process has high volumes, standardized
products, and dedicated resources.
– The flow of products is organized around a single
product. The steps are arranged in a linear sequence
and broken up into the smallest pieces possible.
– Workers specialize in a single task, and equipment
may be designed to perform a single action only.
– This type of product is made-to-stock with little
variety in product
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Example of Line Processes

• Let’s watch a video. Play the video.
– Dell Factory Tour

Dell Factory has adopted

the line assembly processes
to produce its laptops and
desktops with small variety
in its products.

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Continuous Processes
• Examples include soda production, chemical
production, brewing beer, and sugar and paint
production.
• This process has high volume and low flexibility,
and works with non-discrete items that are not
divided into their final packages until the very
end of production.
• The process is extremely capital intensive, very
standardized, and very inflexible. They tend to
be operated 24 hours a day.
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Example of Continuous Processes

• Let’s watch a video. Play the video.
– How it’s made - Beer

This beer brewery is a continuous process

producing a standardized beer product
running 24 hours a day.
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Process Selection with

Break-even Analysis
• This analysis is a tradeoff between costs and
demand volume. The factors for analysis are
volume, cost, revenue, and profit.
– Volume is the level of production units
– Cost is divided into 2 categories: fixed cost (constant
regardless of production volume e.g. equipment
cost) and variable cost (vary with the production
volume)
– Revenue on a per-unit basis is the price of the sold
product
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Process Selection with

Break-even Analysis
• In selecting a process, we need to know at what
volume of sales and production we can expect
to earn a profit.
• The cost of production should not exceed the
revenue. Therefore, we equating total revenue
with total cost as shown in the next page.

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Process Selection with

Break-even Analysis
Total Revenue = Total Cost

Volume x price per unit = fixed cost + (volume x variable cost per unit)

Volume x (price per unit – variable cost per unit) = fixed cost

Volume = fixed cost / (price per unit – variable cost per unit)

Therefore, V = FC/(P-VC)

V = volume, FC = fixed cost, P = price per unit, VC = variable cost/unit

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Example of Breakeven Analysis

• Consider a neighborhood bakery that can form cookies
in one of 3 ways:
– By hand using a cookie cutter
– With an automated cookie-forming machine (The CookiePro
1000) that costs $10,000
– With another automated machine (the CookiePro 2000) that
costs $15,000
• Forming cookies by hand is time consuming, with one
worker earning $12 per hour being able to form 120
cookies/hr. Thus, the per-transaction cost is
$0.10/cookie.

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Example of Breakeven Analysis

• If the bakery buys the CookiePro 1000, the same
worker will be able to form 600 cookies/hr. the per-
cookie cost is then $12/600, or $0.2 per cookie.
• The CookiePro 2000 can make 900 cookies/hr, with
a per-cookie cost of $12/900 or $0.0133 per cookie.
• If the bakery produces 200,000 cookies per day,
how long will it take to recoup the costs of the two
choices of automated machine?

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Example of Breakeven Analysis

• This case, there are multiple breakeven points
because 3 cases will be compared.
• The breakeven point is found by
– setting the cost equations for manual and
automated forming of cookies equal to each other.
– The cost equation is equal to the fixed cost of the
equipment plus the variable cost per unit times the
number of units produced.
– Solving for the number of units produced provides
the breakeven quantity.

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Example of Breakeven Analysis

(1) Comparison between manual cookie forming
and CookiePro 1000
Cost of cookies cutter = Cost of CookiePro 1000
Given Q = number of units produced at the breakeven
point;
$0.10 x Q = $10,000 + ($0.02 x Q)
Q x ($0.10-$0.02) = $10,000
$0.08 Q = $10,000
Q = 125,000
cookies
With Q value (breakeven point), we can now calculate
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Example of Breakeven Analysis

Given that the breakeven point is 125,000
cookies, how long it will take for the
CookiePro1000 to produce this amount?

It will take 7.5 months to pay for the CookiePro

1000 machine
= (125,000 cookies to breakeven/200,000 cookies a year)
12 months
= 7.5 months to produce 250,000 cookies

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Example of Breakeven Analysis

(2) The breakeven point between the two
automated machines: CookiePro 1000 and
CookiePro 2000
Cost of CookiePro 1000 = Cost of CookiePro 2000
Given Q = number of units produced at the breakeven
point;
$10,000 + ($0.02 x Q) = $15,000 + ($0.0133 x Q)
Q x ($0.02-$0.0133) = $15,000 - $
10,000
$0.0066 Q = $5,000
Q
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Example of Breakeven Analysis

• Shown in the next slide
– the manual process is best if fewer than 125,000
cookies will be made
– the CookiePro 1000 is least expensive if between
125,000 cookies and 750,000 cookies will be made
– the CookiePro 2000 is least expensive if more than
750,000 cookies will be made

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Breakeven Analysis: Cookie Case

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QUESTIONS & ANSWERS

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2. Process Mapping
Tools

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Process Mapping Tools

• The basic tools of process mapping are: process
flowcharts, diagrams, and maps – all these tools
are used to map the process for the purpose of
operations improvements e.g.
– To make it faster
– To make it more efficient
– To make it less costly, or
– To make it more responsive to the customer
• Flowcharting has been one of the most popular
and useful tools in mapping the process.
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Flowcharting
• Flowcharting is a mean to convey the key
elements and steps of a process. With
flowchart, the areas of improvement can be
identified.
• The key steps of mapping a flowchart are
– List the steps and their sequences
– Draw the boundaries of the process
– Identify key players and functional groups
– Identify sub-processes
– Identify with suppliers/customers interfaces
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Flowcharting
• To draw a flowchart
of a process, there
are 5 common
symbols widely
used.
• The symbols, their
names, and the
functions they
represent are shown
here.
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Example of Flowcharting
• This flowchart illustrates the
process of fixing a broken lamp.
– It starts with “lamp doesn’t work”
– Then, the lamp’s plug is
investigated. If the lamp isn’t
plugged in, then plugs it. If it’s
plugged in, then go to the next
step.
– Check if the bulb is burnt. If yes,
then replace the bulb. If no, then
repair the lamp.

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Process Improvement in Flowchart

• To improve the process productivity, time or
resources used in each step can be noted down
into the flowchart. This allows people to see the
whole process from the value perspective (e.g.
time, cost, numbers of workers, distance, for
example).
• The steps that consume the most resources
would then come to the attention.

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Example of Flowcharting with Time

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QUESTIONS & ANSWERS

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3. Process Analysis

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Process Analysis
• Process analysis is the systematic examination
of all aspects of a process to improve its
operation – to make it faster, more efficient, less
costly, or more responsive to the customer.
• The basic tools of process analysis are: process
flowcharts, diagrams, and maps.
• To analyse and improve the process, there are
several terminologies you need to know.

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Important Terms
• Bottleneck = the activity in a process that limits the
overall capacity of the process
• Cycle time = the average time between completions of
successive units
• Capacity = Volume of products that can be generated by
a production plant or enterprise in a given period by
using current resources
• Utilisation = is a ratio of time that a resource is activated
relative to the time that it is available for use.
• Throughput time = the time the unit spends being
worked on together with the time spent waiting in a
queue until the product is finished
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Process Analysis: Case Study

• Case of Bread Making Operations (Bakery)
– There are 2 steps required to make a loaf of bread
1. Preparing a dough and making the loaves (bread-
making)
2. Packing the loaves
– Each step has different productivity rates. The
breads are made in batches in each step.
– The flowchart of bread-making process is shown in
the next slide.

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Process Analysis: Case Study

• The triangles represent the inventory of raw
materials, work-in-process (WIP), and finished goods
whereas the rectangles represent the steps of bread-
making process.

• The 1st step requires 1 hour to make 100 loaves.

• The 2nd step requires 45 minutes to pack 100 loaves
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Process Analysis: Case Study

• What is the cycle time of each step in the

process?
– Cycle time of bread-making step = 1 hour. It means
every 1 hour, there are 100 loaves come out of the
bread-making station.
– Cycle time of packing step = 0.75 hour. With this
rate, every 1 hour, there are 100/0.75 = 133.33
loaves come out of the station.
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Process Analysis: Case Study

• What is the throughput time of the process?

– Throughput time = total cycle time
= cycle
time of bread-making +
cycle
time of packing
= 1 + 0.75
= 1.75 hrs
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Process Analysis: Case Study

Bottleneck

• Where is the bottleneck in the process?

– Bottleneck is where the activity in a process limits
the overall capacity of the process
– The activity in a process that limits the overall
capacity of the process is the “bread-making” step

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Process Analysis: Case Study

Bottleneck

• What is the capacity of the process?

– The capacity is the productivity at the bottleneck.
– Hence, the capacity of this whole process is 100
loaves/hour (at bottleneck).

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Process Analysis: Case Study

Bottleneck

• What is the capacity of the process?

– Though the packing step produces at a faster rate
(133.33 loaves/hr), the whole process still cannot be
operated at that rate.
– What happens is that every hour, the packing person
will be free for 15 minutes and working for 45 minutes
because he has to wait for the bread-making person to
complete the job (which takes 1 hour per cycle)
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Process Analysis: Case Study

Bottleneck

• Where is the utilization rate of each step?

– The worker at bread-making step works 100% of his
time to complete the job. Therefore, his utilization is
100%
– The worker at packing step works for 45 mins and is
free for 15 mins every 1 hour. Therefore, his
utilization is 75%
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Process Analysis: Case Study

• How to improve the process?

– The only way to improve the process is to improve
at the bottleneck
– Therefore, the problem is at the bread-making
process (bottleneck)

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Process Analysis: Case Study

• How to improve the process?

– Now the process is making 100 loaves/hour at the
maximum rate at the bread-making process, even
though the packing can make roughly 133.33
loaves/hour.

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Improved Bread-making process

• What if we add another bread-making machine
in the process to fasten the bread-making
process as shown in the picture below?

• Now the new capacity at the bread-making

process is 200 loaves/hour.
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Improved Bread-making process

• Where is the new bottleneck?

– Packing step is now the bottleneck because its
capacity is at 133.33 loaves/hour whereas the
bread-making is at 200 loaves/hour
– This means that every hour there will be 66.67
loaves waiting as WIP for packing
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Improved Bread-making process

• How to operate this process in reality as there

will be many WIP waiting to be packed at the
end of the day?
– We can make 2 working shifts (8hrs/shift) of bread
making to produce totally 3,200 loaves/day and 3
working shifts of packing to produce totally 3,200
loaves/day
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QUESTIONS & ANSWERS

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Summary: Week 4 Lecture

• Processes exist to create value for the customer,
the shareholder, or society.
• There are 5 types of product processes, differing
along 2 dimensions: capitalized investment and
customer involvement.
• Process analysis is the systematic examination of
all aspects of a process to improve its operation at
the bottleneck

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What to Expect: Week 4 Tutorial

• 2 Activities in this tutorial
– To answer comprehensive questions on process
design and analysis
– To solve the given problems on process design and
analysis

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