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MBA Help - Operations

Process Analysis

Whilst the process flow structure of an operation is important, firms must also consider how the individual processes themselves are acting to add value to the product. As an operation itself is simply any method by which a firm uses its inputs to add value to its outputs, it is clear that the efficiency and performance of a process, and the value it adds, will have an important impact on business performance. The analysis of the various processes making up an operation is hence an important step in improving the competitiveness of a firm. Process analysis thus involves understanding the processes, the relationships between them and the overall operation, and how various can be used to analyse the process. This is generally achieved through the following model:

As part of the analysis, a process flow diagram can be constructed to demonstrate the various steps in the process and the relationships between them. Within such a diagram:

In a process flow diagram, two tasks connected by a solid line will be performed one after another, whilst two tasks drawn in parallel with no connecting line will be performed simultaneously.

Construction of a process flow diagram can be complicated by the fact that many firms have confusing or inconsistent operating processes. In addition, the main source of data for constructing process flow diagrams is often the employees involved in the process. Employees are often reluctant to reveal the true nature of the process, particularly if there are any illogical or unofficial steps. This is because employees may be embarrassed to reveal any unorthodox processes or steps they use, and may also worry that revealing any workarounds they use will cause them to be disciplined, or cause the workarounds to be banned. Finally, many employees may inadvertently miss out steps which they don’t consider to be important, or which they simply do as force of habit.

Process Performance Metrics

In order to truly analyse the performance of any process, managers need to use metrics to represent factors such as cost, efficiency, quality and flexibility. Some of the most common metrics used to analyse the performance of a process are:

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Little’s Law

In 1961, John Little proved that the amount of work in process held within a process would be equal to the throughput rate multiplied by the flow time. This is Little’s Law. In other words, if a process can produce 100 units an hour, and takes five hours to complete, at any given time there will be 500 units of work in process inside the process:

WIP = Throughput Rate * Flow Time

In order to maintain a constant throughput rate, as finished units emerge from the process so new units must be fed it; thus maintaining the level of WIP. However, it is important to note that the WIP will be at various stages of completion throughout the process. In addition, as the throughput rate is the inverse of the cycle time, the law can also be shown as:

WIP = Flow Time / Cycle Time

Flow Time = WIP * Cycle Time

The Process Bottleneck

In general, in any process there will be one task which is slower than all the others, and hence limits the capacity and throughput rate of the entire process. This task is referred to as the process bottleneck. As this task determines the capacity and throughput of the entire process, it is of vital important to operations managers looking to increase the capacity and efficiency of the process. Indeed, as long as the bottleneck remains unchanged, the firm will see no benefit from improving the efficiency of any other steps in the process. Only by eliminating the bottleneck can throughput be increased.

However, once the bottleneck has been eliminated a new task will become the bottleneck, and this task should then be focused on. Indeed, the significance of the bottleneck depends on the speed of the next slowest task. If this task has a much higher throughput that the bottleneck, the bottleneck will have a significant impact on the capacity of the overall process. As such, eliminating the bottleneck would greatly improve the capacity of the overall process. If however the next slowest task has a throughput rate which is only slightly higher than that of the bottleneck, then if the bottleneck is eliminated the overall throughput rate and process capacity will not increase by a large amount. In this case, effort should be focused on improving the efficiency of both processes for maximum benefits.

Process Improvement

Most businesses are constantly looking for ways to improve the cost, efficiency, quality and flexibility of their operations. Whilst this generally involves focusing on the bottleneck, there are a variety of potential ways this can be achieved:

Other process improvements are:

In some cases, the most significant improvement can be produced by eliminating the bottleneck activity, particularly if the bottleneck is much slower than the rest of the process. However, in efficient processes, or where several bottlenecks have already been eliminated, it may be difficult to achieve more that a marginal improvement in the process. As many improvements require significant investments of time and money, such improvements may not justify their cost. As such, cost benefit analyses are generally carried out before any process improvements are undertaken to determine whether they will truly add value.

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