Lecture 2: Process Analysis Part I

Instructor: Nooshin Salari

Office: RJC 225
Email: Salarin@[Link]

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Lecture 1 Review

• Is it possible to be both cost leader and differentiator?

• Attempting both differentiation and cost leadership is challenging, as

differentiation often incurs higher costs.

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Is it possible to be both cost leader and differentiator?
Example: Costco

• Costco’s core strategy revolves around providing products at the lowest possible
prices.
• Bulk Sales: By selling products in large quantities, Costco reduces per-unit costs
and passes savings to customers.

• Costco also differentiates itself in ways that enhance its customer value
proposition, even while maintaining low prices. Membership Exclusivity
• The membership model itself creates differentiation

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Review: What is Operations Management?

• What is “Operations”
• The set of activities that creates value in the form of goods and services by
transforming inputs into outputs
• Without Operations: No goods or services to sell.

• What is “Operations Management”

• Management of “Operations”
• It is concerned with planning and execution of the transforming activities
• How much coffee beans to buy?
• How many employees to schedule for each shift
•…

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Review: Operations
Value Added

Transformation/ Outputs:
Inputs:
Materials Conversion Goods,
Services
Information Activities

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 What is a process?
• A process is a group of related tasks with
specific input and output.

Process vs Operations
✓An operation refers to the entire set of activities that
transform inputs into outputs—it's broader and often
includes multiple processes, people, and technologies.
✓A process is a subset of an operation—a specific sequence
of steps designed to achieve a task or produce a
product/service.

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Example
Operation: Running the entire coffee shop. Objective: Provide coffee and related beverages
to customers efficiently
➢Processes within the operation:
✓Order Taking – Cashier or app input
✓Drink Preparation – Barista grinds, brews, adds milk/syrup
✓Customer Delivery – Handing over the drink

• Operation: Manufacturing cars, Objective: Assemble and deliver finished vehicles

• Processes within the operation:
✓ Body Assembly – Welding and frame construction
✓ Painting – Automated spray booths and drying
✓ Engine Installation – Adding mechanical systems

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Process Strategy vs Operations Strategy

• Lecture 1: Operations Strategy: A high-level plan that aligns the operations

function with the overall business strategy. It sets the long-term goals and
priorities for how operations will support the organization’s mission and
competitive positioning.

• Process Strategy: an organization’s overall approach to designing, managing, and

improving the processes used to produce goods and services. Should we use
assembly line? How much automation do we need?
• Processes can vary significantly depending on the type of product or service being
offered, the volume of production, and the level of customization required.
Understanding these variations is key to selecting the right process strategy.
• In this lecture we focus on processes and process strategies

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What are the
differences
between the
processes

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Process Strategies Overview

• Process strategy is an organization’s approach to producing products and services

efficiently.
• These strategies vary based on product variety, production volume, and
customer requirements.

• Four process strategies

• Process focus
• Repetitive focus
• Product focus
• Mass customization

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1. Process Focus Strategy
• Hospitals can handle diverse medical services and patient
requirements.

• Manage low to medium patient volumes with high variability

• Hospitals are typically organized into specialized departments
(e.g., cardiology, neurology, orthopedics) arranged based on
similar functions or services.

• Customized Patient Care

• Skilled and Multi-Functional Workforce

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 Process focus

• When to use: When every customer/product is

unique
• Layout: Organized by department
• Resources: General-purpose equipment,
highly skilled labor

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1. Process Focus (Job Shop/Intermittent)
• Custom manufacturing workshops (e.g., handmade furniture)
• Hospitals (patient-specific treatments)
• Consulting Firms

• Characteristics:
• Facilities are organized around specific activities or processes
• General purpose equipment and skilled workers
• Low volume, high variety
• Flexible processes, often customized per order (high
customization )

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2. Repetitive Focus Strategy
• These plants utilize highly standardized assembly line
processes to produce vehicles efficiently while still offering
a range of models, colors, and features to meet diverse
customer preferences.
• These plants usually use modular production which allows
for flexibility in assembling different models and
configurations..
• Modules are parts or components previously prepared.
• Larger quantities than in a process focus strategy but with
less customization.

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2. Repetitive Focus Strategy
• Example: Fast-food restaurants:
• Highly standardized processes to deliver consistent
quality and service across its global network of
restaurants while offering a variety of menu items to
cater to different tastes and preferences.

• The kitchen and service areas are designed for

maximum efficiency, with clear roles and
responsibilities assigned to staff.

• Modules (e.g., meat, cheese, sauce, tomatoes, onions)

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2. Repetitive focus
• Repetitive focus involves the systematic assembly or
production of items in a repetitive manner using pre-made
modules or components.
• This process is commonly used in industries where efficiency,
consistency, and moderate customization are required.

➢ When to use: When products have variations but are built

from standard modules
➢ Layout: Assembly line or work cells
➢ Resources: Mixed use of people and automation

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 2. Repetitive Focus (Assembly Line)
• Automobile manufacturing (e.g., Ford assembly line)
• Electronics (e.g., smartphone assembly)

• Characteristics:
• Facilities often organized as assembly lines.
• Characterized by modules with parts and assemblies made previously
• Create more standardized products in larger quantities compared to
process focused facilities.
• Low flexibility than process focused facilities but more efficient
• Skill requirement are lower than in process focused strategy.
• Moderate Volume, Moderate Variety

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3. Product Focus
• By manufacturing large quantities of the same product,
Intel reduces per-unit costs, enhancing profitability and
competitiveness.

• Intel produces a range of standardized microprocessors

(e.g., Intel Core, Intel Xeon) that are designed to meet
the needs of different market segments

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3. Product Focus

• Mass production of standardized products

• Minimal product variation
• High automation level

➢When to use: When producing large volumes

of standardized products
➢Layout: Continuous flow
➢Resources: Specialized machinery, capital-
intensive

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3. Product Focus (Continuous Flow/Line Flow)

• Products such as glass, paper, tin sheets, lightbulbs, beer, and potato chips

• Characteristics:
• Facilities often organized by product
• High volume, low variety of products
• Highly standardized, long, continuous production
• Generally less skilled labor
• Specialized equipment (high levels of automation)

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4. Mass customization
• Nike By You: mass customization in 1999
• User-Friendly Customization Interface allows customers to
personalize their own footwear, apparel, and accessories
without significant delays or increased costs.
• Enhanced customer satisfaction
• Brand differentiation
➢When to use: When customers want individual preferences at scale
➢Layout: Flexible, often supported by digital platforms
➢Resources: Advanced tech (AI, robotics)
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4. Mass customization

• Dell Computers is a leading example of a

mass customization strategy successfully
implemented in the technology sector.
• This strategy allows Dell to deliver
personalized computers to customers while
maintaining efficiency and cost control.
• Dell produces computers only after receiving
a customer's order.
• By eliminating intermediaries and
maintaining a flexible production system,
Dell can quickly deliver products to
customers.

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4. Mass Customization

• Customized computers (e.g., Dell build-to-order model)

• Apparel (e.g., Nike customized shoes)

• Characteristics:
• Rapid process design
• High volume, high variety
• Combines efficiency with customization
• Uses flexible processes for personalized products

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Example

• Business Strategy: Cost leadership by offering fast, consistent, affordable meals to

a broad customer base.
• Operations Strategy: Use standardized menus. Use self-service kiosks to reduce
labor and increase throughput.
• Process strategy: Use a Repetitive Focus strategy.
✓Moderate volume and variety (e.g., burgers, fries, soft drinks with minor
variations).
✓Tasks are divided and sequenced across workstations: grilling, assembling,
wrapping, packing.

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Note!

• While the four classic process strategies (Process Focus, Repetitive Focus, Product
Focus, and Mass Customization) are foundational in operations management
literature, real-world operations often don’t fit neatly into just one category.
• Many companies combine elements of two or more strategies to meet complex
needs.
Example: Aircraft assembly typically falls under the project process strategy:
➢Each product (aircraft) is unique or made in small quantities.
➢The product is too large to move, so a fixed-position layout is used.
➢The process requires highly skilled labor, complex coordination, and long lead
times.
➢Low Volume, Low to Moderate Variety, High Flexibility

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Discussion

• You are the operations manager of a startup launching customizable tech gadgets.
How would you decide on a process strategy?

• Market demand (volume vs. variety).

• Cost constraints and investment capacity
• Technological requirements
• Complexity and modularity
• Degree of customization
• Production volume
• workforce skills

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Process Analysis

• How to describe and analyze a process?

✓Does the process eliminate steps that don't add value?

• To describe a process we often use a process flow diagram.

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Process Flow Diagram

• Process Flow Diagram: A schematic or drawing of the movement of material,

product, or people.
• Flowcharts come in many different sizes, shapes, and forms
• Drawing the process flow diagram should be the first step in process analysis
• It is important to define the flow unit(s)
• Flow units: the entities flowing through the process.
✓Example: patients in hospital, cars in an auto plant, insurance claims at the
insurance company.

• When you're writing a report that includes a flowchart, and the report is for
general readers it is important to explain the meaning of the shapes.

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 Flow Unit

The flow unit is what is tracked through the process and generally defines the process
output of interest.

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Basic Flowcharting Shapes

Storage
Triangle

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Building A Flowchart

1. Determine objectives
2. Define units of flow (i.e., patients, products, data)
3. List all Activities
4. Sequence the Steps
5. Arrange the Steps Sequentially
6. Map out process
7. Validate chart (with user, expert, or observation)

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Create a flow chart for making coffee at home

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Solution

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What Are The Key Metrics in
Process Analysis

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How to measure a process?

• Key Metrics in Process Analysis

Process Capacity
Utilization and Efficiency
Process cycle time
Process flow time
Process time
Throughput rate (Flow rate)

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 Process capacity

An imported attribute of any operating system is its ability to produce enough output to meet demand.
Process capacity is the maximum capability to produce.

The maximum output that a manufacturing unit can

produce under ideal conditions. This is the theoretical
Design Capacity
maximum production rate, assuming no downtime, no
Types of delays, and perfect efficiency in all processes.
capacity
Takes into account the realities of the production process. It
considers factors such as scheduled maintenance, worker
Effective Capacity
breaks, and typical delays in the supply chain. As such,
effective capacity is often lower than design capacity.

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Example

• A restaurant is designed with 50 tables, and under ideal conditions, it can serve 200
customers per hour (assuming 4 customers per table and fast turnover).
➢This is the maximum theoretical capacity the restaurant can handle based on its
design.
• In real-world conditions:
➢There are natural constraints like time taken to clean tables, customers spending longer
than expected, and occasional staff shortages.
➢Under these normal operating conditions, the restaurant can realistically serve 150
customers per hour.
➢This is the realistic maximum capacity, accounting for disruptions and inefficiencies.

200 150
• For this restaurant: Design Capacity………….. And Effective Capacity ………..

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Utilization

• Utilization: The ratio of the actual output to the maximum possible output
(capacity) during a given period.

Actual Output
Utilization=
Design Capacity

✓A measure of how much a resource or process is being used relative to its

designed potential.

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Efficiency

• Efficiency: The ratio of actual output to the effective capacity of a resource or

process.
Actual Output
Efficiency=
Effective Capacity

✓A measure of how well a process converts inputs into outputs relative to

achievable (realistic) capacity.

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Example

• TechGadgets Inc., a startup in the wearable technology sector, operates an 8-hour

daily production cycle to manufacture advanced, customizable smartwatches.
Leveraging cutting-edge manufacturing technologies, the company balances
customization with scalability to maintain a competitive advantage. Under ideal
conditions, TechGadgets can theoretically produce 100 smartwatches per day.
However, considering factors like maintenance, employee breaks, and minor
inefficiencies, the attainable capacity is 90 units daily. On average, the facility
manufactures 75 smartwatches each day.
• Calculate the Utilization and Efficiency rates

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Solution

• The company is using 75% of its total design capacity.

• The company is operating at 83.33% of its effective capacity.

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Note!

• Utilization is the percentage of resources, such as labor, raw materials or

equipment, that's being used for its intended purpose.
• Efficiency is the ability to produce without wasting materials, time or energy.

• In case we are given both the design capacity and effective capacity and asked to
find either Utilization and Efficiency, we should distinguish between them.

• However, if only one measure of capacity is given both terms Utilization and
Efficiency are used interchangeably.

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Utilization and Efficiency

• A utilization rate of 85% is considered ideal for most businesses. The higher the
rate, the more a business is using all of its available resources, which is beneficial
to productivity.
• However, a singular focus on utilization rates may leave little or no time for
maintenance, repairs or accidents.
• An efficiency of 100% indicates that products and goods are being made at the
lowest average cost.
• In reality, many companies may operate at a significantly lower percentage
depending on their business needs. Usually, a business compares its current
efficiency rate to past measurements or with their competitors in their field to
decide on a desired efficiency rating.

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Cycle time

• Cars coming in from one end and cars coming out, and we are standing out and
watching the cars as they leave.

On average, cars are leaving every

10 minutes. The gap in between one
car leaving and the next car
leaving=10 minutes.

cycle time: The average time between the completion of successive

units in a process. In this case 10 minutes
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Note

• In the literature there are two different definition for Cycle time. We use the
definition in this lecture note for our analysis:

Cycle time: The average time between the completion of successive units in a
process.

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Flow time

25 minutes

Even though there's a car coming out every 10 minutes, when the red car goes in, it took it 25
minutes to go through the car wash to come out at the other end.

This 25 minutes we will call the flow time or the throughput time.

Flow time: The total time a unit spends in the system, from start to finish
Flow time includes both processing time and any waiting time between steps.

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Process time

• Process time is the average time that a unit is worked on.

• Process time is flow time less idle time.
• Based on process time of a station, we can compute the capacity of the station

1
𝐂𝐚𝐩𝐚𝐜𝐢𝐭𝐲 𝐨𝐟 𝐚 𝐬𝐭𝐚𝐭𝐢𝐨𝐧 =
𝐏𝐫𝐨𝐜𝐞𝐬𝐬 𝐭𝐢𝐦𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐬𝐭𝐚𝐭𝐢𝐨𝐧

• To find the capacity of a process first you need to find the capacity of each station!

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Example

Suppose, we have 3 consecutive tasks to complete the unit, task A to task C.

The process sequence chart:

Calculate the flow time

and cycle time.

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Example (Cont)

• The flow time is …… minutes and cycle time is …… minutes.

• This means that it takes……..minutes to complete one sequence to build one unit.
Also, this system produces one unit every ….. minutes after completion of 1st
unit.

• The sequence involves…….. minutes of idling time with Task A and…… minutes
of idling time for Task C. This is where inefficiency takes place.

• Eliminating The Slowest Task In The System is The Key For Cycle Time
Optimization

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Solution

• The flow time is 19 minutes and cycle time is 7 minutes.

• This means that it takes 19 minutes to complete one sequence to build one unit.
Also, this system produces one unit every 7 minutes after completion of 1st unit.

• The sequence involves 4 minutes of idling time with Task A and 2 minutes of
idling time for Task C. This is where inefficiency takes place.

• Eliminating The Slowest Task In The System is The Key For Cycle Time
Optimization

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Note!

• The overall cycle time is determined by the slowest process in the entire sequence.
• In this example, there are 3 different tasks to produce 1 unit. Task A takes 3
minutes, Task B takes 7 minutes, Task C takes 4 minutes. The slowest task
(process) in this sequence is Task B which takes 7 minutes.
• This becomes the cycle time of entire sequence.

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Example A

• 3 sequential activities: A, B, C
• A: Preparation, B: Bake ,and C: package and label
• 4 resources: Operator1, operator2, operator 3, oven
• To produce each batch of muffin, operator 1 prepare the material, operator 2 put
the batch in the oven, operator 3 take the batch out and does packaging and
labeling.
• Calculate the capacity for this bakery
• How long does it take to produce a batch of muffin?
• How often a batch of muffin exit the process?
• What is the utilization of the oven

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 Solution: capacity for this bakery

A B C
15 minutes 20 minutes 5 minutes

Capacity per hour 60/15=4 60/20=3 60/5=12

• Process Capacity=min{4,3,12}=3
• Each hour we produce 3 units.

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 Per min and per hour reach the same results

A B C
15 minutes 20 minutes 5 minutes

Capacity per 1/15 1/20 1/5

minute

• Process Capacity=min{1/15, 1/20,1/5}=1/20

• Each min we produce 1/20 units.

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Solution: How long does it take to produce a batch of muffin?

• How long does it take to produce a batch of muffin?

• Flow time=15+20+5=40 min

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Solution-How often a batch of muffin exit the process?

Operation A
Operation B
Operation C
CT CT

0 40 60 80

How often a batch of muffin exit the process? Every 20 minutes

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Solution-Utilization

• Utilization of the oven:

✓Oven is always working. Output=3 per hour, capacity=3 per hour,
3
✓Utilization= = 100%
3

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Example B

• Suppose there are 2 ovens, calculate the processing time and capacity of the oven?

B
20 minutes

B
20 minutes

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Solution

• Assume that we add another oven, calculate the processing time and capacity of
the oven?
B
20 minutes

B
20 minutes

• Processing time=20 min

• Capacity of each oven: 1/20 per min
• Capacity of 2 ovens: 2(1/20)=1/10 per min (every 1 minute 0.1 product)

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Example

• In Example A, suppose that there are 2 ovens, calculate the flow time. And
capacity of the system

B
20 minutes
A C
15 minutes 5 minutes
B
20 minutes

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Solution

• Suppose that there are 2 ovens, calculate the flow time. And capacity of the system

• Flow time= 15+20+5=40 min

• Capacity of recourses: A: 1/15, B: 1/10, C: 1/5
• Capacity of the system=min{1/15, 1/10, 1/5)=1/15

B
20 minutes
A C
15 minutes 5 minutes
B
20 minutes

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Example

A warehouse has a process for packing orders that consists of the following steps:
1. Pick items from shelves: 5 minutes.
2. Pack items into a box: 3 minutes.
3. Label and seal the box: 2 minutes.

• Additional Details:
✓There is only one worker who completes all steps.
✓Orders may spend 4 minutes waiting between each step due to task switching and
coordination.
✓Calculate the process time and flow time.

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Example (Cont.)

• process time= Time to Pick + Time to Pack + Time to Label/Seal

• process Time = 5 + 3 + 2 = 10 minutes per order

• Interpretation: It takes 10 minutes for an order to go from the start (picking) to

the end (labeling/sealing), without waiting.

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Example (Cont.)

• Flow Time: The total time a single unit (order) spends in the process, including
waiting time.

• Flow Time = (Time to Pick) + (Waiting Time after Picking) + (Time to Pack) +
(Waiting Time after Packing) + (Time to Label/Seal)
•
Flow Time = 5 + 4 + 3 + 4 + 2 = 18 minutes per order

• Interpretation: It takes 18 minutes for an order to go from the start (picking) to

the end (labeling/sealing), including waiting.

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Capacity and strategy

• Sustained profits come from building competitive advantage, not just from a good
financial return on a specific process.
• Capacity decisions must be integrated into the organization's mission and strategy.
Strategy on a Page : 5 Steps to Create a Winning Strategy - Skefto

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 Managing Demand

• Demand: The quantity of goods or services

customers want or need over a specific time
period.
• Even with good forecasting and facilities built to
that forecast, there may be poor match between
the actual demand and that occurs and available
capacity.
• A poor match may mean demand exceeds
capacity or capacity exceeds demand.
• In both cases, firms have options.

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Scenarios in Demand and Capacity: Capacity Matches
Demand

• The system’s capacity is well-aligned with customer needs.

• Implications:
• Optimal resource utilization
• Balanced workload for employees and equipment.
• High customer satisfaction due to timely delivery of
goods/services.

• Example: A car rental service with a fleet of 50 cars

experiences demand for exactly 50 cars, leading to efficient
operations.

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 Scenarios in Demand and Capacity: Demand Exceeds
Capacity

• Customers request more goods/services than the system can

deliver.

• Implications:
• Long customer wait times or service delays.
• Loss of customers to competitors if needs aren’t met.

• Example: A restaurant designed to serve 50 customers per

hour experiences demand for 70 customers per hour, leading
to overcrowding and slow service.

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Balancing Demand and Capacity- Demand Exceeds
Capacity

When Demand > Capacity:

• Increase Capacity:
✓Hire more staff or add equipment.
✓Expand operating hours.
✓Use outsourcing or subcontracting to meet peak demand.
• Manage Demand:
✓Implement pricing strategies to shift or reduce demand
(e.g., surge pricing).
✓Use reservations or appointments to smooth out demand
spikes.

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Scenarios in Demand and Capacity: Capacity Exceeds
Demand

The system has more resources or capability than needed to meet

current demand.

• Implications:
• Idle resources and underutilized staff or equipment.
• Higher operational costs per unit of output due to fixed costs
being spread over fewer units.

• Example: A manufacturing plant capable of producing 100 units

per hour operates at only 50% of its capacity due to low customer
orders.

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Balancing Demand and Capacity- Capacity Exceeds Demand

When Capacity > Demand:

• Utilize Excess Capacity:
✓Offer discounts or promotions to attract more customers.
✓Diversify products/services to appeal to new markets.
• Reduce Capacity:
✓Scale down operations during low-demand periods.
✓Cross-train employees to work in other areas of the business.

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 Matching Demand with Capacity
• Managing Demand
• Too much demand
• Short-term solution: Discourage demand (raise price, longer leadtime, etc)
• Long-term solution: Increase capacity in the long term

• Too little demand

• Stimulate demand (reduce price)

• Seasonal demand
• Offer products with complementary demand patterns
• For example, the demand for swim suits tend to be higher in summer than winter. If the manufacturer
established a high capacity (e.g., hired many workers) to satisfy the strong demand in summer, the
capacity will be wasted in winter due to low demand. The manufacturer can use the capacity to
produce a product with complementary demand pattern, such as winter jackets. (So in winter, the
workers can focus on producing winter jackets.)

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Demand Management in Service Sector

• In some businesses, such as doctors' and lawyers' offices, an appointment system

is scheduled and adequate.
• A reservation system works well in rental car agencies, hotels, and some
restaurants as a means of minimizing customer waiting time and avoiding
disappointment over unfilled service.
• In retail shops, post offices, or fast-food restaurants, a first-come, first-served rule
for serving customers may suffice.
• When demand and capacity are fairly well matched, demand management can
often be handled with appointments, reservations, or first-come, first-served rule

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Capacity Management in Service Sector

• When managing demand is not feasible, then managing capacity through changes
in full-time, temporary, or part-time staff may be an option.
• For instance, hospitals may find capacity limited by a shortage of board-certificate
radiologists willing to cover the graveyard shifts.
• Getting fast and reliable radiology readings can be the difference between life and
death for an emergency patient.
• When an overnight reading is required, the image can be sent by email to a doctor
in Europe or Australia for immediate analysis.

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Discussion

• QuickPrint Solutions, a small printing company based in Springfield, specializes in custom

business cards, brochures, and promotional materials. Since its establishment two years ago, it has
built a steady local client base through word-of-mouth referrals and targeted online marketing.
• Despite having the capacity to produce up to 1,000 custom brochures per month under optimal
conditions with its current machinery and workforce, the company faces challenges that limit its
actual production to only 600 brochures monthly.
• Consequently, QuickPrint Solutions struggles with frequent machine downtimes and a higher rate
of print defects.
• Recently marketing efforts have surged demand to 1,500 brochures per month.
• Analyze the operational challenges faced by QuickPrint Solutions in meeting the increased demand
for brochures

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