Process Design

Module 1(Topic 2)
 Topics to be Covered

• Process Analysis

• Process Flowcharting

• Types of Processes

• Types of Production/Manufacturing Process

• Process Selection

• Process Performance Metrics

 Process Analysis
• Process: is any part of an organization
that takes inputs and transforms them into
outputs that are of greater value to the
organization than the original inputs
• Process analysis is a systematic
examination of all aspects of the
organization to improve its operation –
– Make it faster
– More efficient
– Less costly
– More responsive to customer
 Process Flowcharting
Defined
• Process flowcharting is the use of a
diagram to present the major elements of a
process. The basic elements can include
tasks or operations, flows of materials or
customers, decision points, and storage
areas or queues.

• It is an ideal methodology by which to begin

analyzing a process.
Process Flow Charts
Graphical description of a process:

– Holding:
• Raw Materials, RM
• Work in Process, WIP
• Finished Goods Inventory, FGI

– Flow of material or work

– Processing step

– Decision point
Example: Flowchart of Student Going to
College
Go to Yes
Drive to Walk to
College
today? College class

No

Go back
to bed
 Types of Processes
1] Single Vs Multistage Process
2]Make to order Vs Make to Stock
3]Paced Vs Non Paced

Single Stage

Stage 1

Multi Stage Process

Stage 1 Stage 2 Stage 3

 Multistage Process with Buffer

Buffer

Stage 1 Stage 2
 Conti….
• Buffering: It refers to the storage area
between stages where the output of a stage
is placed prior to being used in a downstream
stage.

What might happen without buffer?

• Blocking: It occurs when the activities in the stage must
stop because there is no place to deposit the item just
completed. ( when Stage 1 is faster)
• Starving: It occurs when the activities in a stage must
stop because there is no work.( when stage 2 is faster)
• Bottleneck: The stage that limits the capacity of process
 Make–to-order Vs Made-to- stock
• Make-to-order
– Only activated in response to an actual order.
– Both work-in-process and finished goods
inventory kept to a minimum.
• Make-to-stock
– Process activated to meet expected or forecast
demand.
– Customer orders are served from target stocking
level.
• Hybrid
– It combines the features of both make to order
and make to stock
 III] Paced Vs Non-paced

• Pacing refers to fixed time of movement of items

through the process
• Assemble lines are mostly paced. For eg. items
moves from one stage to other every 40 sec.
• Services are mostly non paced.
Production / Manufacturing Processes

Types of Production
Processes

Continuous Mass Production Project

Production
Batch
Production Job Shop
 Types of production System
Continuous
• Flow of production is
continuous
• Products are standardized
• Volume of production is high.
• Special-purpose equipment is
used
• Make to Stock(Based on
anticipated demand)
• Standardized production
planning and schedules
• Sequence of operations are
fixed
Intermittent
• Flow of production is not
continuous ( intermittent)
• Variety of products are produced
• Volume of production is low
• General purpose machines are
used
• Make to order(as per customer
requirement)
• Production planning is variable
and complex
• Sequence of operations may
change as per Design
Continuous/Flow Production
•Used for high-volume commodity products that are very
standardized.
•The output is continuous, not discrete-meaning individual
units are measured, rather than counted.
•The system is highly automated.
•Dedicated plant and equipment.
•Product differentiation is limited.
•High Initial investment
•Companies that operate in this fashion are referred to
as process industries.
•The set-up time for starting such process is very long.
•Predetermined sequence of process.

• e.g. Steel, paper, paints, chemicals, textiles

Mass/Line Production

•Mass production is usually associated with assembly

lines.
•Standardized products with little variety
•Products are made-to-stock for a mass market
•Demand is stable, and volume is high.
•Work in Progress is low.
•Planning and scheduling is routine
•System tends to be capital-intensive and highly
repetitive, with specialized equipment and limited labor
skills.
•It result in low cost per unit
• e.g. automobiles, electronics, fast food
 Advantages- Continuous & Mass
production

• Standardization of product and

sequence(as per quality standards )
• Higher rate of production
• Highest capacity utilization
• Manpower with limited skills required
• Cost per unit is less due to higher volume
 Batch Process
•A production system that processes items in small groups
or batches( 100 to 1000) is called Batch production.
•It characterized by fluctuating demand, short production
runs of a wide variety of products,
•Products requiring same or similar processing needs are
manufactured(same product family).
•A job may be routed through many different machine
centers in batches or lots before it is completed.
• Work on a particular product is not continuous; it
is intermittent.
• e.g. bakery, print shops, education system
Job Shop

• Handles a large variety of products

• The products have different processing requirements,
different machines, sequences and processing time
• The batches vary in size
• Job shop results in low volume of output and thus the
products are costly.
• Largest percentage of inventory is Work in progress
• Detailed production planning is essential
• Highly skilled workers
• General purpose Machine an facilities
• e.g. restaurant
 Batch and Job Shop
Advantages
• Large variety
• Operators more skilled and competent
• Opportunity for innovation and creativity
• Lower investment in plant and machinery

Limitation
• Material handling
• Production planning Complicated
• High set up cost
• WIP high
Project
•Projects represent one-of-a-kind production for an
individual customer.
•Highly Flexible and low volume
•Item produced stay at one place and all resources
come to it.
•Involve large sums of money and last a considerable
length of time.
•Customers are few and customer involvement intense.
•Most companies do not have the resources (or time) so
subcontracting is common.
•In services , teaming of people to work on development
of a service is also called project, eg-Software
development
e.g. R&D, Construction, Shipbuilding, Spacecraft etc.
 Process Selection: Comparison
between production process

• Manufacturing Cost • Flexibility in production

– Variable Cost • Type of Products
– Fixed Cost • Material handling
• Capital Investment Equipment usage
– Plant • Organizational structure
– Inventory • Job security
• Size of the plant – Worker
• Technical requirements – Employee
– Level of machines
– Level of Operator
 Process Selection with
Break-Even Analysis
• Break Even Analysis examines cost trade-offs
associated with demand volume
• Cost
– Fixed costs
• Constant regardless of the number of units
produced
– Variable costs
• Vary with the volume of units produced
• Revenue
– Price at which an item is sold
• Total revenue
– Is price times volume sold
• Profit
– Difference between total revenue and total cost
 Process Selection with
Break-Even Analysis (cont.)

Total cost = fixed cost + total variable cost

TC = cf + vcv
Total revenue = volume x price
TR = vp
Profit = total revenue - total cost
Z = TR – TC = vp - (cf + vcv)
 Process Selection with
Break-Even Analysis (cont.)

TR = TC
vp = cf + vcv
vp - vcv = cf
v(p - cv) = cf
cf
v= p-c
v

Solving for Break-Even Point (Volume)

Break-Even Analysis: Example

Fixed cost = cf = $2,000

Variable cost = cv = $5 per raft
Price = p = $10 per raft

Break-even point is
cf
v= p-c = = rafts
v
Break-Even Analysis: Graph
Dollars

$3,000 — Total
cost
line

$2,000 —

$1,000 —

Total
revenue
line

400 Units
Break-even point
 Choosing Between Three
Processes
Process A Process B Process C
$2,000 + $5v $10,000 + $2v $14,000 +
$v

Point of Indifference between Processes A

and B
$2,000 + $5v = $10,000 + $2v
v=

Example 4.2
 Choosing Between Three Processes

Total cost of
process C
$20,000 — Total cost of
process A

$15,000 — Total cost of

process B

$10,000 —

$5,000 —

| | | |
1000 2000 3000 4000 Units

Example 4.3
Copyright 2009 John Wiley & Sons, Inc. 6-29
 Choosing Between Three Processes

✓A → Below 2667 units,

✓B → Between 2667 and 4000 units,

✓ Above 4000 units, choose Process C

 Process Performance Metrics
• Productivity = Output
Input
• Utilization = Time Activated
Time Available
• Efficiency = Actual output
Standard Output

• Run Time = Time required to produce a batch of products

• Set up Time= Time required to prepare a machine to make
a particular item
• Operation time = Setup time + Run time
 Process Performance Metrics
(Continued)
• Cycle time = Average time between completion of units
• Throughput time = Average time for a unit to move through
the system(actual work +waiting time)
• Value added time: It is the time when actual work is done on
the unit.
• Process Velocity(Throughput Ratio)
= Throughput time
Value-added time

• Throughput rate = ___1___

Cycle time
• Little’s Law
Throughput Time= Work-in-process
Throughput rate
 Metrics Example
• At ABC Dry Cleaning, it takes an average of 3 ½
hours to dry clean & press a shirt, with value-
added time estimated at 110 min. Workers are
paid for a 7-hour workday but work 5 ½ hr/day,
accounting for breaks and lunch. The company
completes 25 shirts per day, while the industry
standard is 28 for a comparable facility.
• Performance metrics- Efficiency, Throughput time,
Process Velocity, Utilization
 Process Throughput Time Reduction
• Perform activities in parallel.

• Change the sequence of activities.

• Reduce interruptions.