BA4204 - OPERATIONS

MANAGEMENT
COURSE OBJECTIVE:
• To provide a broad introduction to the field of operations
management and explain the Concepts, Strategies, Tools
and Techniques for managing the Transformation
Process that can lead to competitive advantage.
BA4204 - OPERATIONS
MANAGEMENT
UNIT I - Introduction to Operations
Management
• Operations Management:-
• Nature, Importance, Historical Development,
• Transformation processes,
• Differences between services and goods,
• A system perspective, Functions,
• Challenges, Current priorities, Recent trends.
• Operations Strategy:-
• Strategic fit, Framework. Productivity; World-class
manufacturing practices.
UNIT I - Introduction to Operations
Management
Retail Business perfecting your inventory
Restaurant
UNIT I - Operations Management - Introduction

The Systems Model

UNIT I - Operations Management - Introduction
“Activities that businesses engage in on a daily basis
to increase the value of the enterprise and earn a profit.”

Operations Management

“a process of getting the work or the task done that is required

for achieving the goals of an organisation in an
efficient and effective manner.”
UNIT I - Operations Management - Introduction
Things to know:-
Something that happens, especially something important or
Event unusual.
Action Something that you do, often for a particular purpose
Activity Something that you spend time doing.
Act of putting something in order to get output (Raw
Input materials, fuels, Data, efforts, People etc.. )
The amount / Quantity that a person or machine produces
Output (Product, Power, Result, Achievement, Service etc..)
Series of Actions/Events/Activities that are performed to
process achieve a particular result.
UNIT I - Introduction to Operations
Management
• Business Process:-
A business process is a collection of structured activities
or tasks that
- To achieve an Outcome
- Produce a Service or Product for a Customer.
- Accomplish a Specific Organizational Goal.
UNIT I - Introduction to Operations
Management
• Business Process:-
The four main types of business processes are:
Management Processes,
Operational Processes,
Support Processes, and
Strategic Processes.
UNIT I - Introduction to Operations
Management
• Operations Management:-

Operations management (OM) is the administration of

business practices to create the highest level of efficiency
possible within an organisation.
It is concerned with converting materials and labour
into goods and services as efficiently as possible to maximize
the profit of an organization.
UNIT I - Introduction to Operations
Management
Operations Management:-
• Administration of Business Practices.
• To create the highest level of efficiency possible within an
organisation.
• It is concerned with converting materials and labour into
goods and services as efficiently as possible to maximize the
profit of an organization.
• Operations management teams attempt to balance costs with
revenue to achieve the highest net operating profit possible.
UNIT I - Introduction to Operations
Management
• Operations Management:-

Operations management (OM) is the management of the

processes that transform inputs into goods and services
that add value for the customer.
Operations management is the administration of business
structure, practices, and processes to enhance efficiency
and maximize profit.
UNIT I - Responsibilities of Operations
Managers:-
• Evaluating, designing, and implementing business processes,
• Managing logistical processes and supply chain,
• Overseeing production, distribution, and quality assurance,
• Managing and analysing financial budgets,
• Making strategic decisions and engaging with other senior
staff members on business strategy,
• Supervising employees,
• Supporting HR with recruitment initiatives,
• Building relationships with stakeholders and suppliers
UNIT I – Operations Management :-
A system perspective
UNIT I - Responsibilities of Operations
Managers:-
• Evaluating, designing, and implementing business processes,
• Managing logistical processes and supply chain,
• Overseeing production, distribution, and quality assurance,
• Managing and analysing financial budgets,
• Making strategic decisions and engaging with other senior
staff members on business strategy,
• Supervising employees,
• Supporting HR with recruitment initiatives,
• Building relationships with stakeholders and suppliers
Operations Management = OM
• Management of ANY activities/process that create goods and provide services
• Exemplary Activities: Forecasting, Scheduling, Quality management
• Why to study OM
• At a typical manufacturing company

Profit 5%
OM Cost 21%

Marketing
Cost 26%

Manufacturing
Cost 48%
17
Operations Management = OM
The management of systems or processes that create goods
and/or provide services

Organization

Finance Operations Marketing

The distinct –active- role of operations:

Inputs become Outputs after some
Transformation
18
 Operations example in Manufacturing:
Food Processing
INPUTS PROCESS OUTPUTS

Raw vegetables Cleaning Clean vegetables

Metal sheets Cutting/Rolling/Welding Cans

Energy, Vegetables Cutting Cut vegetables

Energy, Water, Cooking Boiled

Vegetables vegetables
Energy, Cans, Boiled Placing Can food
vegetables
19
 Operations example in service:
Health care
Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

20
Types of Operations
Operation Examples

Goods producing Farming, mining, construction

Storage/transportation Warehousing, trucking, mail, taxis,

buses, hotels, location
Exchange Trade, retailing, wholesaling, renting,
leasing, loans
Entertainment Radio, movies, TV, concerts, recording

Communication Newspapers, journals, magazines, radio,

TV, telephones, satellite

21
Why OM?
• Core of all business organizations
• Many areas interrelated with OM activities
• Management of operations is critical to create and maintain
competitive advantages

22
Organization of Businesses
• Three basic functions
• Operations/Production
• Goods oriented (manufacturing and assembly)
• Service oriented (health care, transportation and retailing)
• Value-added (the essence of the operations functions)
• Finance-Accounting
• Budgets (plan financial requirements)
• Economic analysis of investment proposals
• Provision of funds (the necessary funding of the operations)

23
 Organization of Businesses
(Cont.)
• Marketing
• Selling
• Promoting
• Assessing customer wants and needs
• Communicating those needs to operations
• The need for working closely
Operations

Marketing Finance

24
Operations Interfaces
Industrial
Engineering Maintenance

Distribution
Operations Public Relations

Purchasing Personnel
Accounting

25
Systems (Holistic) Approach
• Emphasizes interrelations among subsystems.
• A systems approach is essential whenever something is being designed,
redesigned, implemented, or improved. It is important to take into account the
impact on all parts of the system.

• Example: A new feature is added to a product.

• Designer must take into account how customers will view the change, instruction
for using new feature, the cost, training of workers, production schedule, quality
standard, advertising must be informed about the new feature.

26
 Systems Approach
“The whole is greater than
the sum of the parts.”

Suboptimization

27
Value Added
Value added: The difference between cost of inputs and
price (??) of outputs.

Is this definition right? Should value added include profit?

Value added: The difference between the cost of inputs

and the (market or fair) value or price of outputs.

28
 Value-Added

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback

29
Degree of Standardization !
• Standardized output
• Take advantage of standardized methods, less skilled workers, materials…
• Example: Iron, Wheat, most of commodities

• Customized output
• Each job is different
• Workers must be skilled
• Example: Hair cut

30
 Manufacturing (=Goods) vs. Service
operations

• Production of goods (goods oriented)

• Tangible products
• Automobile
• Refrigerator
• Services (TV and auto repair, lawn care)
• Government
• Regulatory bodies, FAA, FDA
• Wholesale/retail
• Financial services
• Education

31
Goods vs. Service Operations (Cont)
• Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory

32
Manufacturing vs. Service !
Characteristic Manufacturing Service
Output Tangible Intangible
Customer contact Low High
Uniformity of output High Low
Labor content Low High
Uniformity of input High Low
Measurement of Easy Difficult
productivity
Opportunity to correct Easy Difficult
quality problems

33
 Goods-service Continuum

Steel production Home remodeling Auto Repair Maid Service Teaching

Automobile fabrication Retail sales Appliance repair Manual car wash Lawn mowing

High percentage goods Low percentage goods

Low percentage service High percentage service

34
Manufacturing vs. Service Industries in US

Year Mfg. Service U.S. Manufacturing vs. Service Employment

45 79 21
50 72 28 100
55 72 28
60 68 32 80
65 64 36
60
70 64 36

Percent
75 58 42 40
80 44 46
85 43 57 20
90 35 65 0
95 32 68
45 50 55 60 65 70 75 80 85 90 95 00
00 30 70
Year

35
Responsibilities of Operations
Management
• Planning
• Capacity, utilization
• Location
• Choosing products or services
• Make or buy
• Layout
• Projects
• Scheduling
• Market share
• Plan for risk reduction, plan B?
• Forecasting

36
Operations Managers
• Controlling
• Inventory
• Quality
• Costs
• Organization
• Degree of standardization
• Subcontracting
• Process selection
• Staffing
• Hiring/lay off
• Use of overtime
• Incentive plans
• Job assignments

37
 Scope of Operations Management
• Operations Management includes:
• Forecasting
• Capacity planning
• Scheduling
• Managing inventories
• Assuring quality
• Motivating employees
• Deciding where to locate facilities
• And more . . .

38
Help comes from Models
• A structure which has been built purposefully to exhibit
features and characteristics of some other object.

Do not use “thing” or “something” in a definition.

• For
• Improved understanding and communication
• Experimentation
• Standardization for analysis
• Abstraction vs. computability
39
Modeling !
• Use models
• Physical models (prototypes)
• Schematic models (Graphs, charts, pictures)
• Mathematical models,
• Statistical models
• Inventory models
• Linear programming
• Queuing techniques
• Project management models

40
What type of models
• Simulation models : to test a proposed idea
– Monte Carlo Simulation
• Optimization models : to create an optimal idea
– Linear programming
• Pattern recognition models : to recognize a pattern
– Statistics, Forecasting, data mining

Other classes to learn the rest.

41
Decision Making

• Models
• Quantitative approaches
• Analysis of trade-offs
• Systems approach

42
Models Are Beneficial
• Easy to use, less expensive
• Require users to organize
• Increase understanding of the problem
• Consistent tool
• Standardized format
• Specific objectives
• Systematic approach to problem solving
• Analysis of tradeoffs
• Enable “what if” questions
• Power of mathematics

43
 Pareto Phenomenon
• A few factors account for a high percentage of the
occurrence of some event(s).
• 80/20 Rule - 80% of problems are caused by 20% of
the activities.

How do we identify the vital few?

44
Historical Evolution of Operations
Management

• Industrial revolution (1770’s)

• Scientific management (1911)
• Mass production
• Interchangeable parts
• Division of labor
• Human relations movement (1920-60)
• Unemployment insurance
• Pension plans
• Decision models (1915, 1960-70’s)
• Influence of Japanese manufacturers (1970-1990)

45
Trends in Business
• Major trends
• The Internet, e-commerce, e-business
• Management technology
• Globalization
• Management of supply chains
• Agility

46
Recent Trends !
• Worker involvement
• Environmental issues, emission reductions are popular after Central European floods
• Service economy in US, foreign production
• E-business – information technology
• Supply chain management
• Total Quality Management
• Globalization, emerging markets, NAFTA
• Lean Production – see the next page

47
Production systems classified
• Craft Production : System in which highly skilled workers use simple, flexible tools
to produce small quantities of customized goods.
• Carpenter
• Lean production : System that uses minimal amounts of resources to produce a
high volume of high-quality goods with some variety.
• Dell
• Mass production: System in which lower-skilled workers use specialized
machinery to produce high volumes of standardized goods.
• Ford

48
Production systems classified
Agile=Lean manufacturing
• It provides flexibility to switch quickly and economically from one product design
to another with little disruption. This characteristic, in turn enables faster
response to changes in customer demand.
• A sophisticated computerized inventory control system allows the plant to keep
track of large number of parts.
• Keys to being an agile manufacturer are :
• Reduction in inventories,
• Reduction in turnaround times,
• Availability of automated flexible machinery,
• Rapid collection and processing of information

49
 Simple Product Supply Chain

Suppliers’ Direct Final

Producer Distributor
Suppliers Suppliers Consumer

Supply Chain: A sequence of activities and

organizations involved in producing and delivering
a good or service

50
 A Supply Chain for Bread

Stage of Production Value Added Value of

Product
Farmer produces and harvests wheat $0.15 $0.15

Wheat transported to mill $0.08 $0.23

Mill produces flour $0.15 $0.38

Flour transported to baker $0.08 $0.46

Baker produces bread $0.54 $1.00

Bread transported to grocery store $0.08 $1.08

Grocery store displays and sells bread $0.21 $1.29

Total Value-Added $1.29

51
Other Important Trends
• Ethical behavior
• Operations strategy
• Working with fewer resources
• Cost control and productivity
• Quality and process improvement
• Increased regulation and product liability
• Lean production

52
Operations Management
Operations function consists of all activities directly related to
producing goods or providing services.

Organization

Production/
Finance Marketing
Operations
Business Operations
Overlap
Production/
Operations

Marketing Finance
Examples of operations:
Operations Examples

 Goods Production  Farming, Mining, Construction,

Manufacturing, Power Generation

 Storage / Transportation  Warehousing, Trucking, Mail Service,

Moving, Taxis, Buses, Hotels, Airlines

 Exchange  Retailing, Wholesaling, Banking, Renting,

Leasing, Library, Loans

 Films, Radio, Television, Concerts,

 Entertainment
Recordings

 Communication  Newspapers, Radio and Television,

Newscasts, Telephone, Satellites
Definitions
• Operations management is the management of an
organization’s productive resources or its production
system.
• A production system takes inputs and converts them
into outputs.
• The conversion process is the predominant activity of
a production system.
• The primary concern of an operations manager is the
activities of the conversion process.
Value added
The difference between the cost of inputs and the value
or price of outputs.

Value added

Inputs Transformation / Outputs

Material Conversion Goods
Labor Process Services
Capital

Feedback

Control
Feedback Feedback
What is Operations Management?
Defined
Operations management (OM) is defined as the
design, operation, and improvement of the
systems that create and deliver the firm’s
primary products and services
The Importance of Operations
Management

• Synergies must exist with other functional areas

of the organization

• Operations account for 60-80% of the direct

expenses that burden a firm’s profit.
The historical development of
operations management

• Operations in some form has been around as long as

human endeavor itself but, in manufacturing at least,
it has changed dramatically over time
Three Major Phases
Craft manufacturing
• Craft manufacturing describes the process by which skilled
craftspeople produce goods in low volume, with a high degree of
variety, to meet the requirements of their individual customers.
Mass production

• In many industries, craft manufacturing began to be replaced by mass

production in the 19th century. Mass production involves producing
goods in high volume with low variety – the opposite of craft
manufacturing.
Mass Production(Innovations 1)

• Standardization:
• An important innovation in operations that made mass production
possible was the system of standardised and interchangeable parts
known as the ‘American system of manufacture’, which developed in
the United States and spread to the United Kingdom and other
countries.
Mass production(Innovations 2)
Scientific Management:
• A second innovation was the development by Frederick Taylor (1911)
of the system of 'scientific management’, which sought to redesign
jobs using similar principles to those used in designing machines.
Mass Production(Innovations 3)
Moving Assembly Line:
• A third innovation was the development of the moving assembly line
by Henry Ford. Instead of workers bringing all the parts and tools to a
fixed location where one car was put together at a time, the assembly
line brought the cars to the workers.
Mass Production (in nut shell)
• A system through which large volumes of
standardized products could be assembled by
unskilled workers at constantly decreasing costs .
Modern Period
• During the 1970s, markets became highly fragmented, product life
cycles reduced dramatically and consumers had far greater choice
than ever before.
• TQM
• JIT
• SCM
Modern Period(Different
Approaches)
• Flexible specialization
• Lean production
• Mass customization
• Agile manufacturing
Modern Period(in a nutshell)

• These approaches all seek to combine the

high volume and low cost associated with
mass production with the craft production.
Transformation Process
The transformation model
Random
Disturbances
Input
Some inputs are used up in the process of creating goods or services;
others play a part in the creation process but are not used up. To
distinguish between these, input resources are usually classified as:
• Transformed Resources
• Transforming Resources
Input
Three types of resource that may be transformed in operations are:
• Materials
• Information
• customers
Input
The two types of transforming resource are:
• staff
• facilities
Output
• The principal outputs of a doctor's surgery are cured patients; the
outputs of a nuclear reprocessing plant include reprocessed fuel and
nuclear waste. Many transformation processes produce both goods
and services. For example, a restaurant provides a service, but also
produces goods such as food and drinks.
• Transformation processes may result in some undesirable outputs
(such as nuclear waste)
Activity
Organisation Inputs Outputs
Restaurant

MBA Institute

Refrigerator Mfc.
 Transformation Process
A transformation process is defined as a user of
resources to transform inputs into some desired
outputs
Transformations
• Physical--manufacturing

• Locational--transportation

• Exchange--retailing

• Storage--warehousing

• Physiological--health care

• Informational--telecommunications
Transformation Process
One useful way of categorising different types of transformation is
into:
• manufacture
• transport
• supply
• service
Feedback
Feedback information is used to control the operations system, by
adjusting the inputs and transformation processes that are used to
achieve desired outputs.
Random Disturbances
• It is unplanned or uncontrollable environmental influences.
• It causes planned and actual output to differ.
Examples:-
Weather
Inflation
Equipment breakdown
Government controls
Activity
Organisation Inputs Outputs Random
Feedback
Disturbances
Restaurant

MBA Institute

Refrigerator Mfc.
Boundary Of Operations
• suppliers
• customers
• the environment.
Product & Services
Product
• People buy ,want satisfaction, not objects.
• Example: Consumers buy televisions because they want entertainment, not
because they want a box with a screen.
• Product Bundle of physical, service, and symbolic attributes designed to
satisfy a customer’s wants and needs
Goods & Services
• Services Intangible tasks that satisfy the needs of consumer and
business users.
• Goods Tangible products that customers can see, hear, smell, taste,
or touch.
Products & Services
• Purely Manufacturing organizations do not just sell a product but
provides services also.
• Pure service industries such as banks , hospitals , education and
consultancies also often provides a product.
Product & Services
• In manufacturing we get a tangible or identifiable product,
which is obtained as a series of transformation process.
• In service industry end product is often intangible. Here it is the
customer that has been processed.
• In services it is often the process that are bought rather than the
product.
• Some organizations may be considered as hybrid.
Example :Restaurant
Flying in an aeroplane.
Role of a operations
manager
Human resource management
The people employed by an organization either work directly to
create a good or service or provide support to those who do. People
and the way they are managed are a key resource of all
organizations.
Asset management
• An organization's buildings, facilities, equipment and stock are
directly involved in or support the operations function
Break Even Analysis
Break Even Analysis is the concept that links capacity to cost.It
explains the significance of having greater productive capacity to
lower cost and maximize profit or contribution.
Breakeven point is that at which the contribution margin is able to
cover total fixed cost.
Break Even Analysis
Let:
F-Fixed cost of production
v-variable cost of production per unit.
p-selling price of per unit of the product.
c-contribution of one unit of product towards fixed cost.
S-sales volume required to achieve break even.
Contibution margin c=p-v
BEP S=F/c
Cost management
Most of the costs of producing goods or services are directly related
to the costs of acquiring resources, transforming them or delivering
them to customers
Decision making
Decisions need to be made in:
• designing the operations system
• managing the operations system
• improving the operations system.
Decision making
The five main kinds of decision in each of these relate to:
• the processes by which goods and services are produced
• the quality of goods or services
• the quantity of goods or services (the capacity of operations)
• the stock of materials (inventory) needed to produce goods or
services
• the management of human resources.
Designing of Product & Process
 PURPOSE OF DESIGN

• Produce a technological solution to a need!

• Create a physically recognizable object.
• Create an object with economic worth and financial
feasibility.
• Choose an optimum alternative solution.
• Develop a new way to do something.
• Reduce cost, inconvenience, improve safety.
• Produce convenience, service, value.
Product Design
• Product design must support product manufacturability
(the ease with which a product can be made)
• Product design defines a product’s characteristics of;
• appearance,
• materials,
• dimensions,
• tolerances, and
• performance standards
Design of Services versus Goods
• Service design is unique in that the service and entire service
concept are being designed
• must define both the service and concept
- Physical elements, aesthetic & psychological benefits
e.g. promptness, friendliness, ambiance
 The four “C’s of
Design

• Creativity
• Requires creation of something that has not existed or not existed in the
proposed state.
• Complexity
• Requires decisions on many variables & parameters
• Choice
• Requires making choices between many possible solutions at all levels, from
basic concept to small details.
• Compromise
• Requires balancing multiple and sometimes conflicting requirements.
Manufacturing and Process Selection
 Factors Influencing
Process Choices
 Volume: Average quantity of the products produced in a
manufacturing system
– Low volume: Turnkey project management firms such as L&T and BHEL
– High volume: Consumer non-durable and FMCG sector firms,
Automobile, Chemical Processing
– Mid-volume: Consumer durables, white goods and several industrial
products

 Variety: Number of alternative products and variants of each

product that is offered by a manufacturing system
– Variety of product offerings is likely to introduce variety at various
processes in the system; alternative production resources, materials,
and skill of workers

 Flow: Flow indicates the nature and intensity of activities

involved in conversion of components and material from raw
material stage to finished goods stage
 Relationship between
volume and variety
Hi h
gh ig
H

Volume Variety

Mass Mid volume Project

Production Mid variety Organisations
Petrochemicals, Motor Manufacturing Turnkey Project
Automobile Pharmaceuticals Execution
 Processes & Operations
Systems
Available Alternatives
Two broad process classifications include

Intermittent operations – produce a variety of

products in lower volumes

Repetitive operations – produce one or a few

standardized products in high volume
Process Selection
• Process selection is based on five considerations
• Type of process; range from intermittent to continuous
• Degree of vertical integration
• Flexibility of resources
• Mix between capital & human resources
• Degree of customer contact
Process Selection
• Process types can be:

• Project process /Job Shop– make a one-at-a-time product exactly to

customer specifications

• Batch process – small quantities of product in groups or batches based on

customer orders or specifications
Process Selection
• Line process – large quantities of a standard product

• Continuous process – very high volumes of a fully standard

product
© 2007 Wiley
© 2007 Wiley
© 2007 Wiley
© 2007 Wiley
© 2007 Wiley
Underlying Process Relationship Between Volume and
Standardization Continuum
Differences between Intermittent and
Repetitive Operations
Decision Intermittent Operation Repetitive Operation
Product variety Great Small
Degree of standardization Low High
Organization of resources Grouped by Function Line flow
Path of products Varied, depends on product Line flow
Factor driving production Customer orders Forecast of demand
Critical resource Labor Capital
Type of equipment General purpose Specialized
Degree of automation Low High
Throughput time Longer Shorter
Work-in-process inventory More Less
Designing Processes
• Process design tools include
• Process flow analysis
• Process flowchart (Also used to evaluate and improve processes.)
• Design considerations include
• Make-to-stock strategy
• Assemble-to-order strategy
• Make-to-order strategy
 Process Design Tools
• Process flow analysis is a tool used to analyze and
document the sequence of steps within a total
process. Usually first step in Process Reengineering.

• Process Re-engineering is a structured approach used

when major business changes are required as a result
of:
• Major new products
• Quality improvement needed
• Better competitors
• Inadequate performance
 Flowchart Symbols

Tasks or operations Examples:

Examples:Giving
Givinganan
admission
admissionticket
ticketto
toaa
customer,
customer,installing
installingaa
engine
enginein
inaacar,
car,etc.
etc.

Examples:
Examples:How
Howmuch
much
Decision Points change
changeshould
shouldbebegiven
giventotoaa
customer,
customer,which
whichwrench
wrench
should
shouldbe
beused,
used,etc.
etc.

Process Analysis Terms

Process: Is any part of an organization that takes
inputs and transforms them into outputs
 Flowchart Symbols

Storage areas or Examples:

Examples:Sheds,
Sheds,lines
linesof
of
queues people
peoplewaiting
waitingforforaaservice,
service,
etc.
etc.

Examples:
Examples:Customers
Customers
Flows of materials moving
movingtotoaaseat,
seat,mechanic
mechanic
or customers getting
gettingaatool,
tool,etc.
etc.

Process Analysis Terms

Cycle Time: Is the average successive time between
completions of successive units
Example: Flowchart of Student Going to School

Go to Yes
Drive to Walk to
school
school class
today?

No

Goof
off
Process Analysis Terms
Utilization: Is the ratio of the time that a resource is
actually activated relative to the time that it is available for
use
Types of Processes
Single-stage Process
Stage 1

Multi-stage Process
Stage 1 Stage 2 Stage 3

Other Process Terminology

Blocking
Occurs when the activities in a stage must stop because there is no place to
deposit the item just completed
Starving
If an employee is waiting at a work station and no work is coming to the
employee to process.
Other Process Terminology
• Bottleneck
• If an employee works too slow in a multi-stage process, work will begin to
pile up in front of that employee. In this is case the employee represents the
limited capacity causing the bottleneck.
• Pacing
• Refers to the fixed timing of the movement of items through the process
A buffer refers to a storage area between stages where the output of
a stage is placed prior to being used in a downstream stage
• Make-to-order
• Only activated in response to an actual order

• Make-to-stock
• Customer orders are served from target stocking level
Process Design Tools

© 2007 Wiley
 Process Performance Metrics
• Operation time = Setup time + Run time

• Throughput time = Average time for a unit to move through the

system

• Velocity = Throughput time

Value-added time
• Cycle time = Average time between completion of units

• Throughput rate = 1 .
Cycle time

• Efficiency = Actual output

Standard Output
Process Performance Metrics (Cont.)

• Productivity = Output
Input

• Utilization = Time Activated

Time Available
Process Throughput Time Reduction
Perform activities in parallel

Change the sequence of activities

Reduce interruptions
Process Performance Metrics