Flow Rate and Capacity Analysis 1 v Throughput

Flow Rate and Capacity Analysis 1 v Throughput v Resources and Resource Pools v Theoretical v Bottleneck v Capacity v Product and Capacity Resources Utilization Mix; its effect on theoretical capacity and profitability v Capacity Improvement

Flow Rate and Capacity Analysis Throughput and Takt Time 2 Throughput: Average Flow Rate The average number of flow units in a stable process that flow through any given point of a process per unit of time. Takt time = 1/(throughput) The time interval between exit of two consecutive products. The average activity time at each workstation on an assembly line. Chapter 4 was on flow time minimization. Chapter 5 is on throughput maximization. Chapter 4 and 5 are both “time” minimization. Why?

Flow Rate and Capacity Analysis Resources in a Process 3 Information structure Inputs Process Management Network of Activities and Buffers Flow units (customers, data, material, cash, etc. ) Resources Labor + Capital Outputs Goods Services

Flow Rate and Capacity Analysis Resources, Resource Pools, and Resource Pooling 4 Capital Resources – Fixed Assets such as land, buildings, facilities, machinery and equipment. Human Resources – People such as engineers, operators, assemblers, chefs, customer-service representatives, etc. Resource Unit: An individual resource (chef, mixer, oven, etc. ) Resource Pool: A collection of interchangeable resource units that can perform an identical set of activities. Resource Pooling: The combining of separate resource pools into a single pool to perform several activities. Unit Load of a Resource Unit (Tp): The amount of time the resource works to process each flow unit.

Flow Rate and Capacity Analysis Activity, Work Content, Resource, and Unit Load 5 Activity Resource Work Content (minutes) Mailroom Clerk 0. 6 Data Entry Data-entry Clerk 4. 2 Initial Processing Claims processor 4. 8 Inspection Claims Supervisor 2. 2 Final Processing Claims processor 1. 8 Resource Unit Load (minutes) Mailroom Clerk 0. 6 Data-entry Clerk 4. 2 Claims processor 6. 6 Claims Supervisor 2. 2

Flow Rate and Capacity Analysis Theoretical Capacity 6 Theoretical capacity of a resource unit – maximum sustainable flow rate if it were fully utilized Theoretical Capacity of a Resource unit = 1/unit load = 1/ Tp Theoretical capacity of a resource pool – sum of all theoretical capacities of all the resource units in that pool Theoretical capacity of a Resource pool = Rp = cp / Tp Theoretical bottleneck – The resource pool with the minimum theoretical capacity Theoretical capacity of a process: Theoretical capacity of theoretical bottleneck

Flow Rate and Capacity Analysis Theoretical Capacity 7 Cross train Claim supervisor to help Mail room clerk Increase Theoretical Capacity

Flow Rate and Capacity Analysis Load Batch and Scheduled Availability 8 Load batching – a resource processes several flow units simultaneously (one oven and 10 loaves of bread) Scheduled availability – the scheduled time period during which a resource unit is available for processing flow units (certain hours, certain days, total hours per week). Theoretical capacity of a resource unit = (1 / Tp) × Load batch × Scheduled availability Theoretical capacity of a resource pool = Rp = (cp / Tp) × Load batch × Scheduled availability

Flow Rate and Capacity Analysis Theoretical Capacity for Physicians Claims 9 Claims supervisors are the bottleneck. Cross train claim processor to do a part of claim supervisor job increase theoretical capacity Throughput ( due to internal constraints and external constraints) is always less than theoretical capacity. Suppose while Theoretical capacity = 545. 5, Throughput = 480

Flow Rate and Capacity Analysis Capacity Utilization 10 Capacity utilization of a resource pool ρp = Throughput/Theoretical capacity of a resource pool = R/Rp Capacity utilization of the process ρ = Throughput/Theoretical capacity of the bottleneck resource pool Resource pool (p) Theoretical capacity of Resource pool (claims/day) (Rp) Capacity Utilization (ρp=R/Rp) Throughput = 480 Mailroom clerk 750 480/750=64% Data-entry clerk 856. 8 480/857=56% Claims processor 654 480/654=73% Claims supervisor 545. 5 88% 480/545=88%

Flow Rate and Capacity Analysis Unit Load for a Product Mix 11 Unit load for a given product mix is computed as the weighted average of unit loads of individual products. Billing: Physician claims, Hospital claims, and 60/40 mix Resource Pool UL (Physician) min/claim UL (Hospital) min/claim UL (60%-40%) mix min/claim Mailroom clerk 0. 6 1. 0 0. 6(. 6)+1(. 4) =0. 76 Data-entry clerk 4. 2 5. 2 4. 60 Claims processor 6. 6 7. 5 6. 96 Claims supervisor 2. 2 3. 2 2. 60

Flow Rate and Capacity Analysis Theoretical Capacity for Physicians Claims 12 Resource pool Scheduled (p) availability (min/day) Unit Load Theoretical (min/claim) Capacity of (Tp) Resource Unit (claims/day) Number of Units in Resource Pool Theoretical Capacity of Resource Pool (claims/day) (Rp) Mailroom clerk 450 0. 6 450/0. 6 = 750 1 760× 1 = 750 Data-entry clerk 450 4. 2 450/4. 2=107. 1 8 107. 1× 8 = 856. 8 Claims processor 360 6. 6 360/6. 6=54. 5 12 54. 5× 12 = 654 Claims supervisor 240 2. 2 240/2. 2=109. 1 5 109. 1× 5 = 545. 5

Flow Rate and Capacity Analysis Theoretical Capacity for Hospital Claims 13 Resource pool (p) Scheduled availability (min. /day) Unit Load (Tp) (min. /claim) Theoretical Capacity of Resource Unit (claims/day) Number of Units in Resource Pool Theoretical Capacity of Resource Pool (Rp) (claims/day) Mailroom clerk 450 1. 0 450 / 1. 0 = 450 1 450× 1 = 450 Data-entry clerk 450 5. 2 450 / 5. 2= 86. 5 8 86. 5 × 8 = 692 Claims processor 360 7. 5 360 / 7. 5 = 48 12 48 × 12 = 576 Claims supervisor 240 3. 2 240 / 3. 2 = 75 5 75 × 5 = 375

Flow Rate and Capacity Analysis Theoretical Capacity for 60% / 40% Mix 14 Resource pool (p) Scheduled availability (min. /day) Unit Load (Tp) (min. /claim) Theoretical Capacity of Resource Unit (claims/day) Number of Theoretical Units in Capacity of Resource Pool Rp (claims/day) Mailroom clerk 450 0. 76 450/0. 76=592 1 592× 1 = 592 Data-entry clerk 450 4. 60 450/4. 60=98 8 98× 8 = 784 Claims processor 360 6. 96 360/6. 96=51. 7 12 51. 7× 12 = 621 Claims supervisor 240 2. 60 240/2. 60=92 5 92× 5 = 460 Linear Programming: Find the optimal product mix to maximize profit. Greedy Algorithm. Produce products with highest unit contribution margin

Flow Rate and Capacity Analysis Optimal Product Mix 15

Flow Rate and Capacity Analysis From Theoretical Capacity to Effective Capacity; Setup Batch, Total Unit Load, and Net Availability Setup or Changeover: activities related to cleaning, resetting and retooling of equipment in order to process a different product. Qp : Setup batch or lot size; the number of units processed consecutively after a setup; Sp : Average time to set up a resource at resource pool p for a particular product We can add setup time to work content or subtract it from schedule availability. From a managerial control point which one is better? Average setup time per unit is then Sp / Qp Tp = Unit load (it does not count for the setup time) Total unit load = Tp + Sp / Qp 16

Flow Rate and Capacity Analysis Setup Batch Size 17 What is the “right” lot size or the size of the set up batch? lot size unit load Capacity. lot size inventory Flow Time. Reducing the size of the setup batch is one of the most effective ways to reduce the waiting part of the flow time. Load batch: the number of units processed simultaneously. Often constrained by technological capabilities of the resource. Setup batch: the number of units processed consecutively after a setup. Setup is determined managerially

Flow Rate and Capacity Analysis Total Unit Load for Product mix 18 Compute unit load and total unit load for each Load batch of Regular tile, Jumbo tile, and a product mix of 75% Regular and 25% Jumbo Regular Jumbo Mix 2 1 (2× 0. 75)+(1× 0. 25)=1. 75 Sp/Qp 30/300=0. 1 30/100=0. 3 (0. 1× 0. 75)+(0. 3× 0. 25)=0. 15 Total unit load 2+0. 1=2. 1 1+0. 3=1. 3 1. 75+0. 15 = 1. 9 (2. 1× 0. 75)+(1. 3× 0. 25)=1. 9 Unit Load (Tp)

Flow Rate and Capacity Analysis Net Availability 19 Theoretical Capacity of a resource unit = (1/Unit load) ×Load batch ×Scheduled availability – the scheduled time period during which a resource unit is available for processing flow units. Availability loss factor = 1 – (Net Availability/Scheduled Availability) Effective Capacity of a resource unit = (1/Total unit load) × Load batch × Net availability Effective Capacity of a pool = (cp/Total unit load) × Load batch ×Net availability The effective capacity of a process is the effective capacity of its slowest resource pool (effective bottleneck).

Flow Rate and Capacity Analysis Effective Capacity of a Resource Pool and Process 20

Flow Rate and Capacity Analysis From Theoretical Capacity to Throughput 21 Throughput ≤ Process capacity ≤ Effective capacity ≤ Theoretical capacity Effective Capacity - Breakdown or absenteeism (Schedule Availability Net Availability) - Preventive maintenance (Schedule Availability Net Availability) - Setup time (Unit load Total unit load) total unit load is unit load plus setup time per unit, Tp+Sp/Qp, v Effective Capacity Process Capacity - Internal starvation (from preceding station) - Internal blockage (due to next station) v Process Capacity Throughput - External starvation (supply of row material) - External blockage (product demand) v

Flow Rate and Capacity Analysis Improving Theoretical Capacity 22 Theoretical capacity of a pool = (cp/Total unit load) × Load batch ×Scheduled availability v Decrease unit load on the bottleneck: Decrease the work content of the activity performed by the bottleneck resource pool. v Increase Scheduled Availability of the bottleneck: Add more hours to the resource such as adding overtime or second shift operations v Increase the Load Batch of the bottleneck: Expanding the resource will increase resource capacity v Increase the number of resources at bottleneck resource : Adding units to the bottleneck resource pool will increase resource capacity

Flow Rate and Capacity Analysis Improving Effective Capacity 23 Increasing net availability - Regular Maintenance of equipment - Perform maintenance after production time Reducing setup waste - Reduce the setup time - Improve product mix Caution: Increasing batch size or length of run increased inventory longer flow times.

Flow Rate and Capacity Analysis Internal Bottlenecks 24 Internal Bottleneck Throughput is equal to Process Capacity - The output of the process is limited by the process’s own constraints (the bottleneck resource) - Starvation: If we have two raw material for a process and one is unavailable. - Blockage: If the buffer is not big enough upstream and there is no place for the product to go - Internal bottle neck will require increasing the capacity of the bottle neck to a capacity where a new bottleneck will appear. - Once the old bottleneck does not have the lowest capacity do not continue to increase capacity. It will not increase overall capacity any further.

Flow Rate and Capacity Analysis External Bottlenecks 25 External Bottleneck Throughput is less than to Process Capacity - The output of the process is limited by conditions external to the boundaries of the internal process constraints. Examples include: demand for product, raw material shortages.