3.

Process Flow Measures

Process Flow
K1 . The Coffee Shop
Analysis
The Little’s Law 1

The Core Concept in Business Processes Engineering

Problem Set 2-Basics

Eyes must be washed; to see things differently.

Sohrab Sepehri, Persian Poet, 1928 – 1980.
 3. Process Flow Measures

E1. Admission Flow – Similar to Coffee

Shop 2

Marshall provides higher education to executives and

receives about 1000 applications per month. The
evaluation starts with a preliminary classification:
 Group A: Applicants with desired recommendations,
working experience, etc. (50% of the applicants)
 Group B: Other applicants. (50% of the applicants)
 Applicants in group A will be further considered through
an advanced review. Applicants in group B will be
rejected.
On average there were are 200 applications in the
preliminary review stage, and 100 applications in the
advanced review stage
 a) How long does group A spend in the application
process?
 b) How long does group B spend in the application
 3. Process Flow Measures

E1. Difference Between R and I

3

Throughput is 1000 per month, inventory in the first process is 200.

Lets assume a month is 30 days. Then I can state: R=1000/30 = 33.33
per day but I in the first process is still 200.
Now suppose a day is 8 hours. Then I can state: R= 33.33/8 = 4.167
per hour but I is still 200.​
I can also state: R=4.167/60 =0.0694 per minutes but I is still 200.​
Assuming a year to be 12 month, R = 12000 per year, but I is still 200.​

In all these cases, Inventory in processes A and B are 200 and 100,
respectively.
 3. Process Flow Measures

E1. Admission Flow

4

100 Accept Process

50%
1000
200
50% Reject Process

a) How long do the applicants spend in the

preliminary stage?
RT=I  T = I/R=200/1000 = 0.2 month
Applicants spend 0.2(30) = 6 days in the first
stage
Applicants from group B receive an answer in 6
 3. Process Flow Measures

E1. Admission Flow

5

b) How long do the

applicants from group
A spend in the
advanced review
Istage?
=100 , R = 1000(0.5) = 500
TR= I  T=I/R  T= 100/500 = 0.2
Applicants from group A spend 0.2(30) = 6
days on average in the advanced review
stage.

Applicants from group A receive answer in 12

 3. Process Flow Measures

E1. Admission Flow

6

 c) What is the average processing time?

 0.5(6)+0.5(12) = 9 days
 Is there an alternative way to calculate the average
waiting time? Do it------

Little’s Law holds for complicated

 3. Process Flow Measures

E2. Bank Loan – The Same as the

Previous Example 7

Bank XYZ receives 20 loan requests per hour on average.

Each loan request goes through an initial processing stage,
after which an “accept or reject” decision is made.
Approximately 80% of the loans are accepted, and these
require additional processing. Rejected loans require no
additional processing. Suppose that on average 5 loans are
in the initial processing stage, and 25 (accepted) loans are
Accept
in the additional processing
20 stage.80% 25
5

20% Reject

a) What is the average processing time required for a loan

b)What is the average processing time required for a rejected
loan?
c) What is the average processing time required for an
 3. Process Flow Measures

E2. Bank Loan

8

a) What is the average processing time required for a loan request?

R = 20 loans/hour
I = 5+25 = 30 loans
Average processing time = Throughput Time
RT= I  T = I/R = 30/20 = 1.5 hours
b) What is the average processing time required for a rejected loan?
R = 20 loans/hour
I = 5 loans
Average processing time = Throughput Time
RT= I  T = I/R = 5/20 = 0.25 hours
 3. Process Flow Measures

E2. Bank Loan

9

c) What is the average processing time required for an accepted loan

(including the initial processing stage)?
Initial Stage: As computed for rejected applications the time for the
initial process is
T = I/R = 5/20 = 0.25 hours
Additional Processing Stage:
R = 20 × 0.8 = 16 loans/hour, I = 25 loans
T = I/R = 25/16 = 1.5625
Average Total Processing Time =
= 0.25 + 1.5625 = 1.8125 hours
 3. Process Flow Measures

E3. Fresh Juice and Fruit

10

Consider a roadside stand that sells fresh oranges, and fresh

orange juice. Every hour, 40 customers arrive to the stand,
and 60% purchase orange juice, while the remaining
purchase oranges. Customers first purchase their items.
Customers that purchased oranges leave immediately after
purchasing their oranges. Any customer that ordered orange
juice must wait while the juice is squeezed. There are 3
customers on average waiting to purchase either oranges or
orange juice, and 1 customer on average waiting for orange
4
juice to be squeezed. 0.6(40) =
3 1
0 24

How long on average must customers that purchase

fresh
orange juice wait?
 3. Process Flow Measures

E3. Fresh Juice and Fruit

11

4 24
3 1
0

How long on average must customers that purchase

fresh orange juice wait?

In the ordering process

RT =I  40T = 3 
T = 3/40 hours  T = 60(3/40) = 4.5 minutes
In the juice squeezing process
RT =I  24T = 1 
T = 1/24 hours  T = 60(1/24) = 2.5 minutes
Average waiting time = T = 4.5 + 2.5 = 7 minutes
 3. Process Flow Measures

E4. Call Center

12

3. A call center employs 1000 agents. Every month 50

employees leave the company and 50 new employees are
hired.
a) How long on average does an agent work for this call
center?
Now suppose the cost of hiring and training a new agent is
$1000. The manager of this call center believes that
increasing agents’ salary would keep them working
longer term in the company. The manager wants to
increase the average time that an agent works for the
call center to 24 months, or 2 years.
b) If an agent works for the call center for 24 months on
average, how much can the company save on hiring and
training costs over a year? Hint: first determine the
current annual cost for hiring and training, then
determine the new annual cost for hiring and training.
 3. Process Flow Measures

E4. Call Center

13

50/month 1000 50/month

Agent
a) How long on average s
does an agent work for this call
center?
R = 50 people/month
I = 1000 people
Average working time = Throughput Time
= I/R = 1000/50 = 20 months or 20/12 = 1.67
years
Suppose the cost of hiring and training a new agent is
$1000. The manager of this call center believes that
increasing agents’ salary would keep them working
longer term in the company. The manager wants to
increase the average time that an agent works for the
 3. Process Flow Measures

E5. Call Center

14

b) If an agent works for the call center for 24 months on average, how
much can the company save on hiring and training costs over a
year? Hint: first determine the current annual cost for hiring and
training, then determine the new annual cost for hiring and training.

50/month 1000 50/month ?/month 1000 ?/month

Agent Agent
20 2
s s
months years
Current annual cost for hiring and training:
Throughput Rate = 50 people/month
= 600 people/year
Annual hiring and training cost is 600 (1000) =
$600,000
 3. Process Flow Measures

E5. Call Center

15

New annual cost for hiring and training:

Average working time = Throughput Time = 24 months =
2 years
Throughput Rate  R= I/T = 1000 people / 2 years = 500
people/year  41.7 per month
Annual hiring and training cost is 500 (1000) = $500,000
Annual saving on hiring and training cost is $600,000-
$500,000 = $100,000
c) How much the monthly salary of each agent can be
increased?
Average # of employees = 1000
Annual saving on hiring and training cost = $100,000
Monthly saving = $8,333.33
8333.33/1,000 = $8.33 per employee/month
 3. Process Flow Measures

Practice. Compute the Flow Time

16

B 30% D
T = 15 T = 18 70%
40% 10%
100% A F 100%
T = 10 T = 10
40%
60% 30%
C 20% E
T = 12 T = 16