Process Analysis & Selection

Operations
Operations Management
Management
Instructor:
Instructor: Dr.
Dr. Rizwan
Rizwan Ahmed
Ahmed

What is a process?

A logical set of steps/tasks

A number of inputs are given
A number of resources are utilized
A number of constraints are adhered to
Goods and/or services are produced as output(s)
Constraints
Inputs

Process

Resources

Output(s)

Significance of Process
How to produce a product or provide a
service that
Meets or exceeds customer requirements
Meets cost and managerial goals

Has long term effects on

production flexibility & Speed
Costs and quality

2008 Prentice Hall, Inc.

63

Reasons for Process Analysis

and Decisions
New or modified product or service is being
offered
Quality Improvement
Competitive priorities have changed
Change in market demand
Performance improvement
Cost and efficiency improvement
New technology adoption
Competitors are gaining by using a new
process

Process Analysis
The first step in designing or improving a business
process is the process analysis which entails

Defining process goals, scope/boundaries; process

steps, inputs and outputs, and resources required
Identifying process flows, interrelationships, and
dependencies
Identifying the constraints or adherence to certain
standards policies
Determine capacity and potential bottlenecks of each
step in the process
Identify waste activities and alternatives

Process Analysis Techniques

Pictorial representations
Some common techniques

Process flowcharts
Process mapping
Service Blueprints

Process Flowchart Symbols

Process flowcharts

Symbolic
representation of
processes

Operations
Inspection
Transportation
Delay
Storage

Description
of
process

Unload apples from truck

Move to inspection station

Weigh, inspect, sort

Move to storage

Wait until needed

Move to peeler

Apples peeled and cored

15

Soak in water until needed

20

Place in conveyor

10

Move to mixing area

11

Weigh, inspect, sort

Page 1 0f 3

Distance
(feet)

Location: Graves Mountain

Process: Apple Sauce

Time
(min)

Operation
Transport
Inspect
Delay
Storage

Step

Process
flowchart
of apple
processing

Date: 9-30-14
Analyst: TLR

20
100 ft
30
50 ft
360
20 ft

Total

20 ft
30
480

190 ft

Process Mapping
Start & End: An oval is
used to show the
materials, information or
action (inputs) to start the
process or to show the
results at the end (output)
of the process.
Activity: A box or
rectangle is used to show
a task or activity performed
in the process.
Decision: A diamond
shows those points in the
process where a yes/no
question is being asked or
a decision is required.

A simple example of Conference approval process

A Cross Functional/Personnel Process Map

Customer

Place order

Waiter

Salad Chef

Is order
complete?

Dinner Chef

Give soup or salad order to chef

Prepare soup or
salad order
Prepare dinner
order

Give dinner order to chef

Drink

Get drinks for customer

Eat salad or
soup

Deliver salad or soup order to customer

Eat dinner

Deliver dinner to customer

Receives check

Deliver check to customer

Gives payment
to waiter

Credit

Cash

Bring change to customer

Run credit card through

Fill in tip
amount

Give order
to waiter

Receive payment for meal

Cash or
Credit?

Collect change,
leave tip

Give order
to waiter

Return credit slip to customer

Collect tip

A Process Map of
Restaurant
Service showing
interaction
customer and
employees (could
also be
departments)

Steps to Process Mapping

Identify People/Department/Functions
Identify activities/decisions (process step), also
starting and ending activities
Identify inputs and outputs against each activity
Identify interaction between people/dept.
Identify flows/directions and branches of
process flow
Draw and label the process

6-11

Library Case Study

When a library first receives a book from a publisher it is sent,
together with the accompanying delivery note, to the library
desk. Here the delivery note is checked against a file of books
ordered.
If no order can be found to match the note, a letter of enquiry is
sent to the publishers. If a matching order is found, a catalogue
note is prepared from the details on the validated delivery note.
The catalogue note, together with the book, is sent to the
registration department. The validated delivery note is sent to
the accounts department where it is stored.
On receipt of an invoice from the publisher, the accounts
department checks its store of delivery notes. If the
corresponding delivery note is found then an instruction to pay
the publishers is made, and subsequently a cheque is sent. If no
corresponding delivery note is found, the invoice is stored in a
pending file.

Service Blueprinting
A tool for simultaneously depicting the
service process, the points of customer
contact, and the evidence of service from
customer point of view.

6-13

Service Blueprints

Customer Actions: The steps that customers take as part of the service delivery
process.
Front stage (Visible Contact Employee) Actions: These actions are face-to-face
actions between employees and customers.
Back stage (Invisible Contact Employee) Actions: The line of visibility separates the
onstage from the Backstage actions. Everything that appears above the line of
visibility can be seen by the customers, while everything under the line of visibility is
invisible for the customers. A very good example of an action in this element, is a
telephone call; this is an action between an employee and a customer, but they dont
see each other.
Support Processes: These are all the activities (usually invisible to customer)
carried out by individuals and units within the company. May also involves systems.
These activities need to happen in order for the service to be delivered.
Physical Evidence: For each customer action, and every moment of truth, the
physical evidence that customers come in contact with is described at the very top of
the service blueprint. These are all the tangibles that customers are exposed to that
can influence their quality perceptions.

6-14

Service Blueprint of Overnight

Hotel Stay

6-15

Classroom activity
Draw a service blueprint of service
process at McDonald
Draw a Service Blueprint of course
registration & fee payment process at
LSE

Break-Even Analysis
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 - price times volume sold
Profit - difference between total revenue and
total cost

Break-even analysis (cont.)

Total cost

TC = cf + vcv

= fixed cost + total variable cost

Total revenue =

TR = vp

Profit

volume x price

= total revenue - total cost

TR TC = vp - (cf + vcv)
At Break even TR TC = vp - (cf + vcv) = 0

Implies at break even TR=TC

Break-Even Analysis (cont.)

TR = TC
vp = cf + vcv
vp - vcv = cf
v(p - cv) = cf
cf
v = p - cv
Solving for Break-Even Volume

$3,000

Total
cost
line

$2,000
$1,000
Total
revenue
line
400
Break-even point

Units

Break-Even Analysis: Example

Consider Process A
Fixed cost= cf = $2,000
Variable cost = cv = $5 per unit
Price = p = $10 per unit
Break-even point is
cf
2000
v= p-c =
= 400 unit
10 - 5
v

Process Selection with

Break-Even Analysis

Break-even analysis is especially useful when

evaluating different processes or degrees of
automation.
More-automated processes have higher fixed costs but
lower variable costs.
The "best" process depends on the anticipated volume
of demand for the product and the trade-offs between
fixed and variable costs.
Let's see how break-even analysis can guide the
selection of a process among several alternatives.
6-21

 Consider a New process B

Fixed cost = cf = $10,000
Variable cost = cv = $2 per unit
Price = p = $10 per unit
Break-even point is
cf
10,000
v= p-c =
= 1250 units
10 - 2
v
6-22

Process
Selection:
Graph

Total cost of
process A

$20,000

Total cost of
process B

$15,000
$10,000
$5,000

There comes a point

where total cost of
process A and
process B is the
same. Called the
cross-over point

|
1000

|
2000

|
3000

|
4000 Units

Point of indifference = 2,667 Units

Example 4.2

Process Selection
Process A
Process B
$2,000 + $5v = $10,000 + $2v
$3v = $8,000
v = 2,667 rafts

Below 2,667, choose A

Above 2,667, choose B

Process
Selection:
Graph

Total cost of
process A

$20,000

Total cost of
process B

$15,000
$10,000
$5,000
Choose
process A
|
1000

|
2000

Choose
process B
|
3000

|
4000 Units

Point of indifference = 2,667 Units

Example 4.2

Classroom activity

An enterprising student has set up an internship

placement centre for business students. Each student
that uses the service fills out a form and lists up to 10
companies that he or she would like to have contacted.
The clearinghouse has a choice of two methods to use
for processing the forms. The traditional method
requires about 20 minutes to review the form and
arrange the information in the proper order for
processing. Once this setup is done, it takes only 2
minutes per company requested to complete the
processing.
The other alternative uses an optical scan / retrieve
system, which takes only 1 minute to prepare but
requires 5 minutes per company for completing the
processing. If it costs about the same amount per
minute for processing with either of the two methods,
when should each be used?

Process Performance Metrics

[between starting and
completing a job]

Cycle time = Average time between

completion of successive units

[measured in units]

Efficiency = Actual output

Standard Output[theoretical machine or system
design, a.k.a capacity]

Process Performance Metrics

Productivity = Output [e.g. total $ value, products, customers served]
Input [e.g. total $ value, per employee, per labor hour]
Utilization = Time Activated
Time Available

[man or machine in operation]

[manned shifts (w/wo set-up)]

Cycle Time Example

Suppose you had to produce 600 units in 80
hours to meet the demand requirements of a
product. What is the cycle time to meet this
demand requirement?
Answer: There are 4,800 minutes (60
minutes/hour x 80 hours) in 80 hours. So the
average time between completions would have
to be: Cycle time = 4,800/600 units = 8
minutes.