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Transcript of © 2007 Pearson Education Process Analysis Chapter 5.
© 2007 Pearson Education
Process Analysis
Chapter 5Chapter 5
© 2007 Pearson Education
How Process Analysis fits the Operations Management
Philosophy
Operations As a Competitive Weapon
Operations StrategyProject Management Process Strategy
Process AnalysisProcess Performance and Quality
Constraint ManagementProcess LayoutLean Systems
Supply Chain StrategyLocation
Inventory ManagementForecasting
Sales and Operations PlanningResource Planning
Scheduling
© 2007 Pearson Education
Omego
Omego is the leading provider of complete global trade management services, processing more than one million trades per day and servicing 6,000 broker-dealers, custodian banks and investment managers in more than 40 countries.
Through process analysis, it was able to reduce the typical trade expense from $10 or $12 down to between 20 cents and a dollar.
Trade processing time was reduced from 20 hours down to three hours.
These changes were the result of considerable customer contact and reflect more automation and process reengineering.
© 2007 Pearson Education
Process Analysis
Process analysis is the documentation and detailed understanding of how work is performed and how it can be redesigned.
1Identify
Opportunity
1Identify
Opportunity
2Define Scope
2Define Scope
3DocumentProcess
3DocumentProcess
5RedesignProcess
5RedesignProcess
6ImplementChanges
6ImplementChanges
4Evaluate
Performance
4Evaluate
Performance
© 2007 Pearson Education
A Systematic Approach to Process Analysis
Suggestion system: a voluntary system by which employees submit their ideas on process improvements.
Design team: A group of knowledgeable, team-oriented individuals who work at one or more steps in the process, do the process analysis and make the necessary changes.
Metrics: Performance measures that are established for a process and the steps within it.
Flowcharts: A diagram that traces the flow of information, customers, equipment, or materials through the various steps of a process. Service Blueprint: A special flowchart of a service
process that shows which steps have high customer contact (line of visibility).
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Flowchart for the Sales Process of a Consulting Company
Service Blueprint
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Flowchart of aNested Subprocess
Client Agreement & Service Delivery Step
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Showing the Handoffs Between Departments
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Process Charts
Process chart: An organized way of documenting the activities performed by a person or group of people at a work station, with a customer, or on materials.
Five categories of process charts:1. Operations that change, create or add something.
2. Transportation (materials handling): Moving something.
3. Inspection: Checking or verifying something.
4. Delays: Time spent awaiting further action.
5. Storage: When something is put away until a later time.
© 2007 Pearson Education© 2007 Pearson Education
Process Chart for an Emergency Room Admission
1 X Enter emergency room, approach patient window 2 X Sit down and fill out patient history3 X Nurse escorts patient to ER triage room4 X Nurse inspects injury5 X Return to waiting room
6 X Wait for available bed 7 X Go to ER bed8 X Wait for doctor9 X Doctor inspects injury and questions patient
10 X Nurse takes patient to radiology
11 X Technician x-rays patient12 X Return to bed in ER13 X Wait for doctor to return14 X Doctor provides diagnosis and advice15 X Return to emergency entrance area
16 X Check out17 X Walk to pharmacy18 X Pick up prescription 19 X Leave the building
0.50 1510.0 -0.75 403.00 -0.75 40
1.00 -1.00 604.00 -5.00 -2.00 200
3.00 -2.00 2003.00 -2.00 -1.00 604.00 -2.00 1804.00 -1.00 20
Process: Emergency room admissionSubject: Ankle injury patientBeginning: Enter emergency roomEnding: Leave hospital
Step no.
Time (min)
Distance (ft)
SummaryNumber of stepsActivity
Time (min)
Distance (ft)
Step description
Insert Step
Append Step
Remove Step
Transport 9 11 815 Operation 5 23 —
Inspect 2 8 —
Store — — —Delay 3 8 —
© 2007 Pearson Education
Evaluating Performance
Checklist: A form used to record the frequency of occurrence of certain service or product characteristics related to performance.
Histogram: A summarization of data measured on a continuous scale, showing the frequency distribution of some quality characteristic (the central tendency and dispersion of the data).
Bar chart: A series of bars representing the frequency of occurrence of data characteristics measured on a yes-or-no basis.
Pareto Chart: A bar chart on which factors are plotted in decreasing order of frequency along the horizontal axis.
© 2007 Pearson Education
Bar ChartExample 5.1
The manager of a neighborhood restaurant is concerned about rising customer complaints. He would like to present his findings in a way that his employees will understand.
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Pareto ChartExample 5.1
© 2007 Pearson Education
More Tools for Evaluating Performance
Scatter-diagram: A plot of two variables showing whether they are related.
Cause-and-effect diagram: A diagram that relates a key performance problem to it’s potential causes.Sometimes called the fishbone diagram.
Graphs: Representation of data in a variety of pictorial forms, such as line charts and pie charts.
© 2007 Pearson Education
Checker Board AirlinesExample 5.2
Passenger processing at gatePassenger processing at gate
Late cabin cleanersLate cabin cleaners
Unavailable cockpit crewUnavailable cockpit crew
Late cabin crewLate cabin crew
Personnel
Aircraft late to gateAircraft late to gate
Mechanical failuresMechanical failures
Equipment
Procedures
Waiting for late passengersWaiting for late passengers
Weight/balance sheet lateWeight/balance sheet late
Poor announcement of departuresPoor announcement of departures
Delayed check-in procedureDelayed check-in procedure
Delayed flight departures
Materials
Late food serviceLate food service
Late fuelLate fuel
Late baggage to aircraftLate baggage to aircraft
Contractor not providedContractor not provided updated scheduleupdated schedule
WeatherWeather
Air traffic delaysAir traffic delays
Other
Analyzing Flight Delays Using a Cause-And-Effect Diagram
© 2007 Pearson Education
They decide to use the following tools:
The Wellington Fiber Board Company produces headliners, the fiberglass components that form the inner roof of passenger cars. Management wants to identify which defects were most prevalent and to find the cause.
Wellington Fiber Board Co.Example 5.3
Step 1. Checklist
Step 2. Pareto chart
Step 3. Cause-and-effect diagram
Step 4. Bar chart
© 2007 Pearson Education
Example 5.3 Checklist
Headliner Defects
Defect type Tally Total
A. Tears in fabric //// 4
B. Discolored fabric /// 3
C. Broken fiber board //// //// //// //////// //// //// / 36
D. Ragged edges //// // 7
Total 50
Wellington Fiber Board Co.
© 2007 Pearson Education
CC
DDAA BB
Example 5.3 Pareto Chart
100100
8080
6060
4040
2020
00
Cu
mu
lati
ve P
erce
nta
ge
Cu
mu
lati
ve P
erce
nta
ge
Nu
mb
er o
f D
efec
tsN
um
ber
of
Def
ects
5050
4040
3030
2020
1010
00Defect typeDefect type
Wellington Fiber Board Co.
© 2007 Pearson Education
Example 5.3 Cause-and-Effect Diagram
Out of specificationOut of specification
Not availableNot available
Materials
HumidityHumidity
Schedule changesSchedule changes
Other
Machine maintenanceMachine maintenance
Machine speedMachine speed
Wrong setupWrong setup
Process
TrainingTraining
AbsenteeismAbsenteeism
CommunicationCommunication
People
Broken fiber
board
Wellington Fiber Board Co.
© 2007 Pearson Education
Example 5.3 Bar Chart
2020
1515
1010
55
00
Nu
mb
er
of
Bro
ken
Fib
er
Bo
ard
sN
um
be
r o
f B
roke
n F
ibe
r B
oar
ds
FirstFirst SecondSecond ThirdThirdShiftShift
Wellington Fiber Board Co.
© 2007 Pearson Education
Process Simulation
Process simulation is the act of reproducing the behavior of a process using a model that describes each step. It shows how a process dynamically changes
over time. Using SimQuick, the first step is to draw a
flowchart of the process using SimQuick’s building blocks.
Flowchart for one-teller bankFlowchart for one-teller bank
Served CustomersTellerLineDoor
BufferWork StationBufferEntrance
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Flowchart
for two-teller bankfor two-teller bank
Teller 2
Work Station
Served CustomersLineDoor
BufferBufferEntrance
Teller 1
Work Station
© 2007 Pearson Education
Element Element Statistics Overall
Types Names Means
Entrance(s) Door Service level 0.90
Buffer(s) Line Mean inventory 4.47
Mean cycle time 11.04
Bank Simulation Results
© 2007 Pearson Education
Redesigning the Process
Ideas for process redesign and improvement can be uncovered by asking six questions about each step in the process and about the process as a whole.
1. What is being done?
2. When is it being done?
3. Who is doing it?
4. Where is it being done?
5. How is it being done?
6. How well does it do on the various metrics of importance?
© 2007 Pearson Education
Answers to the previous six questions are challenged by asking still another set of questions. Why is the process even being done? Why is it being done where it is being done? Why is it being done when it is being done?
Brainstorming is letting a group of people, knowledgeable about the process, propose ideas for change by saying whatever comes to mind.
Redesigning the Process
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Benchmarking
Benchmarking is a systematic procedure that measures a firm’s processes, services, and products against those of industry leaders. Benchmarking focuses on setting quantitative goals for
improvement. Competitive benchmarking is based on
comparisons with a direct industry competitor. Functional benchmarking compares functional
areas in the firm with those of outstanding firms in any industry.
Internal benchmarking involves using an internal unit with superior performance as the benchmark for other units.
© 2007 Pearson Education
Benchmarking Steps
Planning: Identify the process, service or product to be benchmarked and the firm(s) to be used for comparison. Determine the performance metrics and collect the data.
Analysis: Determine the gap between the firm’s current performance and that of the benchmark firm(s).
Integration: Establish goals and obtain the support of managers who must provide the resources for accomplishing the goals.
Action: Develop cross-functional teams of those most affected by the changes, develop action plans, implement the plans and monitor progress.
© 2007 Pearson Education© 2007 Pearson Education
Illustrative Benchmarking Metrics by Type of Process
• Total cost of “enter, process, and track orders” per $1,000 revenue• System costs of process per $100,000 revenue• Value of sales order line item not fulfilled due to stockouts, as % of revenue• Percentage of finished goods sales value that is returned• Average time from sales order receipt until manufacturing or logistics is notified• Average time in direct contact with customer per sales order line item
Customer Relationship Process
• Value of plant shipments per employee• Finished goods inventory turnover• Reject rate as percentage of total orders processed• Percentage of orders returned by customers due to quality problems• Standard customer lead time from order entry to shipment• Percentage of orders shipped on time
Order Fulfillment Process
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• Percentage of sales due to services/products launched last year• Cost of “generate new services/products” process per $1,000 revenue• Ratio of projects entering the process to projects completing the process• Time to market for existing service/product improvement project• Time to market for new service/product project• Time to profitability for existing service/product improvement project
New Service/Product Development Process
• Cost of “select suppliers and develop/maintain contracts” process per $1,000 revenue
• Number of employees per $1,000 of purchases• Percentage of purchase orders approved electronically• Average time to place a purchase order• Total number of active vendors per $1,000 of purchases• Percentage of value of purchased material that is supplier certified
Supplier Relationship Process
Illustrative Benchmarking Metrics by Type of Process
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• Systems cost of finance function per $1,000 revenue• Percentage of finance staff devoted to internal audit• Total cost of payroll processes per $1,000 revenue• Number of accepted jobs as percentage of job offers• Total cost of “source, recruit, and select” process per $1,000 revenue• Average employee turnover rate
Support Process
Illustrative Benchmarking Metrics by Type of Process
© 2007 Pearson Education
Process Management Mistakes
1. Not Connecting with Strategic Issues
2. Not Involving the Right People in the Right Way
3. Not Giving the Design Teams and Process Analysts a Clear Charter and Then Holding Them Accountable
4. Not Being Satisfied Unless Fundamental “Reengineering” Changes Are Made
5. Not Considering the Impact on People
6. Not Giving Attention to Implementation
7. Not Creating an Infrastructure for Continuous Process Improvement.
© 2007 Pearson Education© 2007 Pearson Education
Flowchart of Telephone Ordering ProcessSolved Problem 1
Create a flowchart for the following telephone-ordering process at a retail chain that specializes in selling books and music CDs. It provides an ordering system via the telephone to its time-sensitive customers besides its regular store sales.
• First, the automated system greets customers and identifies whether they have a tone or pulse phone. Customers choose 1 if they have a tone phone; otherwise, they wait for the first available service representative to process their request. If customers have a tone phone, they complete their request by choosing options on the phone.
• The system checks to see whether customers have an existing account. Customers choose 1 if they have an existing account or choose 2 if they want to open a new account. Customers wait for the service representative to open a new account if they choose 2.
• Next, customers choose between the options of making an order, canceling an order, or talking to a customer representative. If customers choose to make an order, then they specify the order type as a book or a music CD, and a specialized customer representative for books or music CDs picks up the phone to get the order details. If customers choose to cancel an order, then they wait for the automated response. By entering the order code via phone, customers can cancel the order.
• The automated system says the name of the ordered item and asks for the confirmation of the customer. If the customer validates the cancellation of the order, then the system cancels the order; otherwise, the system asks the customer to input the order code again.
• After responding to the request, the system asks whether the customer has additional requests; if not, the process terminates.
© 2007 Pearson Education© 2007 Pearson Education
© 2007 Pearson Education
Automobile ServiceSolved Problem 2
• An automobile service is having difficulty providing oil changes in the 29 minutes or less mentioned in its advertising.
• You are to analyze the process of changing automobile engine oil.
• The subject of the study is the service mechanic.
• The process begins when the mechanic directs the customer’s arrival and ends when the customer pays for the services.
© 2007 Pearson Education
Process Chart
for Changing
Engine Oil
© 2007 Pearson Education
© 2007 Pearson Education
Vanishing Cream AnalysisSolved Problem 4Solved Problem 4
Vera Johnson and Merris Williams manufacture vanishing cream. Their packaging process has four steps: mix, fill, cap, and label. They have had the reported defects analyzed, which shows the following.
Draw a Pareto chart to identify the vital defects.
© 2007 Pearson Education
2960
× 100% = 48.33%
Defective labels account for 48.33 percent of the total number of defects:
Vanishing Cream Analysis
Improperly filled jars account for 30 percent of the total number of defects:
1860
× 100% = 30.00%
The cumulative percent for the two most frequent defects is
48.33% + 30.00% = 78.33%
Lumps represent of defects; the cumulative percentage is
760
× 100% = 11.67%
78.33% + 11.67% = 90.00%
Solution:
© 2007 Pearson Education
Vanishing Cream AnalysisPareto ChartPareto Chart
Fre
qu
ency
of
Def
ects
100
90
80
70
60
50
40
30
20
10
0
40
36
32
28
24
20
16
12
8
4
0
Cu
mu
lati
ve P
erce
nta
ge
of
Def
ects
Label Fill Mix Seal
48%
78%
100%90%