4. Flow-Time Analysis Flow Time 1-Introduction Based on the book: Managing Business Process Flows 4. Flow-Time Analysis Competitive Advantages of a shorter flow time Shorter response time (both in production and product design). More responsive to changes in customer preferences and technological advancements. Delayed differentiation (Postponement). Moving from the extreme of MTS towards MTO. Lower inventory costs (due to Littles Law). Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 2 4. Flow-Time Analysis Lean Operations: The Real Cost of Inventory Inventory adversely affects all competing edges (P/Q/V/T) Has cost: Physical carrying costs Financial costs

Causes obsolescence: Due to market changes Due to technology changes Leads to poor quality: Feedback loop is long Hides problems: Unreliable suppliers. High defect rate. Long set-up times. Frequent machine breakdowns. Leads to long flow time Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 3 4. Flow-Time Analysis Direct Methods of Measuring Flow Time Randomly sample flow units over an extended period of time. Measure the flow time for each flow unit from entry to exit. Compute the average of flow times. During a given month, a sample of 50 applications was taken The average flow time = 20.85 working days. Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 4

4. Flow-Time Analysis Indirect Methods of Measuring Flow Time Count the number of units produced over an extended period of time. R = number of units produced / duration of time period . Count the number of units of inventory at random points during the time period. Compute the average inventory (I). Compute flow time T =I/R 200 applications processed during 20 days; average throughput of R=200/20 = 10 applications per day. The number of applications were counted at 4 random points during these days, the average inventory (I) was 860/4 =215. T = I/R T = 215/10 flow time is 21.5 days Ardavan Asef-Vaziri, Sep. 2013 Flow Time - Introduction 5 4. Flow-Time Analysis Process Flow Chart Process : Network of activities performed by resources 1-2. Flow unit (input/output): Unit of analysis Level of detail 3. Network of Activities & Buffers - Define Process Boundaries - Activities with activity times

Key for capacity analysis - Buffers with waiting times - Routes: precedence relationships (solid lines) with throughputs 4. Resources & Allocation - Who does what? 5. Information Structure & flow (dashed lines) Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 6 4. Flow-Time Analysis Flowcharting Activity Buffer Decision Event Physical flow Information flow See the total process; a systems view

Define flow units and process boundaries Include only the key steps Clarify the level of detail needed. Processes can be broken down into sub-activities. On the other hand, cascading allows several activities to be combined in a single sub-process Depicts resources required to carry out activities Identify the processes that need attention (weak Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 7 4. Flow-Time Analysis Wondershed Inc: Narrative Representation 1. Separate the roof and the base sheets 2. Punch the base 3. Punch the roof 4. Form the base 5. Form the roof 6. Sub-assemble the base 7. Assemble 8. Inspect Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013

8 4. Flow-Time Analysis Wondershed Inc. : Schematic Representation Start Start Punch base Form base Punch roof Form roof Sub assemble base Separate Sheet Activity A

Flow Time - Introduction Activity B Activity C Assemble Inspect End End Ardavan Asef-Vaziri, Sep. 2013 9 4. Flow-Time Analysis Theoretical Flow Time Entry Buffer Activity Exit

Theoretical Flow Time: The minimum amount of time required for processing a typical flow unit without any waiting. Activity Time: The time required by a typical flow unit to complete the activity. Unless stated otherwise, we assume that an activity cannot be broken down into smaller activities that can be executed in parallel. What does that mean??? Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 10 4. Flow-Time Analysis Critical Path Activity Time 1 Activity Time 4 Activity Time 2 Activity Time 5 Activity Time 3 Activity Time 6 Sequential Activities Sequential Activities

Parallel Activities Theoretical flow time of each path in the process flowchart = sum of the activity times of all activities on that path Critical Path: the longest path Critical Activities: activities that lie on the critical path Theoretical flow time of the process = Time of the theoretical critical path Activity Time 1 Activity Time 2 Activity Time 3 How many Paths? Activity Time 1 Flow Time - Introduction Activity Time 2 Activity Time 3 Ardavan Asef-Vaziri, Sep. 2013 11 4. Flow-Time Analysis Wondershed Inc. Theoretical Flow Time

Activity 1 Separate 2 Punch the base 3 Punch the roof 4 Form the base 5 Form the roof 6 Subassemble the base 7 Assemble 8 Inspect Activity Time (Work Content) 10 25 20 5 10 10 10 30 Path 1 (roof) Start 1 3 5 7 8 End 10 +20 +10 +10+30 = 80 min Path 2 (base) Start 1 2 4 6 7 8 End 10 +25+5 + 10 +10+30 = 90 min Theoretical Flow Time = 90 min Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 12 4. Flow-Time Analysis

Wondershed Inc. Flow Time Activity 1 Separate 2 Punch the base 3 Punch the roof 4 Form the base 5 Form the roof 6 Subassemble the base 7 Assemble 8 Inspect Activity Time (Work Content) 10 25 20 5 10 10 10 30 Waiting Time Flow Time 20 45 90 35 75 60 45 75

30 70 110 40 85 70 55 105 Path 1 (roof) Start 1 3 5 7 8 End 30 + 110 + 85 + 55 + 105 = 385 min Path 2 (base) Start 1 2 4 6 7 8 End 30 + 70 + 40 + 70 + 55+ 105 = 370 min Flow Time = 385 min Flow Time - Introduction Ardavan Asef-Vaziri, Sep. 2013 13 4. Flow-Time Analysis Flow Time Efficiencies in White Collar Processes Flow Time Efficiency = Theoretical Flow Time / Flow Time IndustryEfficiency Process Average= 23.4% Theoretical Flow Time Flow Time

= 90/385 Life Insurance New Policy Application Consumer New Packaging Graphic Design Commercial Consumer Bank Loan Hospital Patient Billing Automobile Financial Manufacture Closing Flow Time - Introduction Flow Time Flow Time 72 hrs. 7 min. Effi ciency 0.16% 18 days 2 hrs. 0.14%

24 hrs. 34 min. 2.36% 10 days 3 hrs. 3.75% 11 days 5 hrs 5.60% Ardavan Asef-Vaziri, Sep. 2013 14