Flow Rate and Capacity Analysis

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Flow Rate and Capacity Analysis

• Throughput and Capacity
• Resources and Resource Pools
• Theoretical Capacity
• Bottleneck Resources
• Capacity Utilization
• Product Mix its effect on theoretical capacity
  and profitability
• Capacity Improvement

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Throughput and Takt Time

• 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?

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Resources in a Process
Process Management
Information structure
Network of Activities and Buffers
Inputs
Outputs
Goods Services
Flow units (customers, data, material, cash,
etc.)
Resources
Labor Capital
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Resources, Resource Pools, and Resource Pooling

• 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.

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Activity, Work Content, Resource, and Unit Load
Activity Resource Work Content (minutes)
Mailroom 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
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Theoretical Capacity

• 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 the 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 the theoretical bottleneck

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Theoretical Capacity
Cross train Claim supervisor to help Mail room
clerk ? Increase Theoretical Capacity
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Load Batch and Scheduled Availability

• 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

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Theoretical Capacity for Physicians Claims

• 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 the
  theoretical capacity.
• Suppose while Theoretical capacity 545.5,
  Throughput 480

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Capacity Utilization
Capacity utilization of a resource pool ?p
Throughput/Theoretical capacity of a resource
pool R/Rp
Capacity utilization of the process ?
Throughput/Theoretical capacity of the
bottleneck resource pool
Resource pool (p) Theoretical capacity of Resource pool (claims/day) (Rp) Capacity Utilization (?pR/Rp) Throughput 480
Mailroom clerk 750 480/75064
Data-entry clerk 856.8 480/85756
Claims processor 654 480/65473
Claims supervisor 545.5 480/54588
88
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Unit Load for a Product Mix

• 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
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Theoretical Capacity for Physicians Claims
Resource pool (p) Scheduled availability (min/day) Unit Load (min/claim) (Tp) Theoretical Capacity of 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 7601 750
Data-entry clerk 450 4.2 450/4.2107.1 8 107.18 856.8
Claims processor 360 6.6 360/6.654.5 12 54.512 654
Claims supervisor 240 2.2 240/2.2109.1 5 109.15 545.5
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Theoretical Capacity for Hospital Claims
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
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Theoretical Capacity for 60 / 40 Mix
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 0.76 450/0.76592 1 5921 592
Data-entry clerk 450 4.60 450/4.6098 8 988 784
Claims processor 360 6.96 360/6.9651.7 12 51.712 621
Claims supervisor 240 2.60 240/2.6092 5 925 460
Linear Programming Find the optimal product mix
to maximize profit. Greedy Algorithm. Produce
products with highest unit contribution margin
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Optimal Product Mix
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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

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Setup Batch Size

• 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

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Total Unit Load for Product mix
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
Unit Load (Tp) 2 1 (20.75)(10.25)1.75
Sp/Qp 30/3000.1 30/1000.3 (0.10.75)(0.30.25)0.15
Total unit load 20.12.1 10.31.3 1.750.15 1.9 (2.10.75)(1.30.25)1.9
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Net Availability

• Theoretical Capacity of a resource unit
• (1/Unit load) Load batch Scheduled
  availability
• 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).

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Effective Capacity of a Resource Pool and Process
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From Theoretical Capacity to Throughput

• Throughput Process capacity Effective
  capacity Theoretical 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,
  TpSp/Qp,
• Effective Capacity ? Process Capacity
• Internal starvation (from preceding station)
• Internal blockage (due to next station)
• Process Capacity ? Throughput
• External starvation (supply of row material)
• External blockage (product demand)

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Improving Theoretical Capacity

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

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Improving Effective Capacity

• 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.

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Internal Bottlenecks

• Internal Bottleneck ? Throughput is equal to
  Process Capacity
• The output of the process is limited by the
  processs 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.

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External Bottlenecks

• 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.