Operations > Process Analysis

Process Analysis

An operation is composed of processes designed to add value by transforming inputs into useful outputs. Inputs may be materials, labor, energy, and capital equipment. Outputs may be a physical product (possibly used as an input to another process) or a service. Processes can have a significant impact on the performance of a business, and process improvement can improve a firm's competitiveness.

The first step to improving a process is to analyze it in order to understand the activities, their relationships, and the values of relevant metrics. Process analysis generally involves the following tasks:

Process Flow Diagram

The process boundaries are defined by the entry and exit points of inputs and outputs of the process.

Once the boundaries are defined, the process flow diagram (or process flowchart) is a valuable tool for understanding the process using graphic elements to represent tasks, flows, and storage. The following is a flow diagram for a simple process having three sequential activities:

Process Flow Diagram

The symbols in a process flow diagram are defined as follows:

In a process flow diagram, tasks drawn one after the other in series are performed sequentially. Tasks drawn in parallel are performed simultaneously.

In the above diagram, raw material is held in a storage bin at the beginning of the process. After the last task, the output also is stored in a storage bin.

When constructing a flow diagram, care should be taken to avoid pitfalls that might cause the flow diagram not to represent reality. For example, if the diagram is constructed using information obtained from employees, the employees may be reluctant to disclose rework loops and other potentially embarrassing aspects of the process. Similarly, if there are illogical aspects of the process flow, employees may tend to portray it as it should be and not as it is. Even if they portray the process as they perceive it, their perception may differ from the actual process. For example, they may leave out important activities that they deem to be insignificant.

Process Performance Measures

Operations managers are interested in process aspects such as cost, quality, flexibility, and speed. Some of the process performance measures that communicate these aspects include:

Little's Law

The inventory in the process is related to the throughput rate and throughput time by the following equation:

W.I.P. Inventory  =  Throughput Rate  x  Flow Time

This relation is known as Little's Law, named after John D.C. Little who proved it mathematically in 1961. Since the throughput rate is equal to 1 / cycle time, Little's Law can be written as:

Flow Time  =  W.I.P. Inventory  x  Cycle Time

The Process Bottleneck

The process capacity is determined by the slowest series task in the process; that is, having the slowest throughput rate or longest cycle time. This slowest task is known as the bottleneck. Identification of the bottleneck is a critical aspect of process analysis since it not only determines the process capacity, but also provides the opportunity to increase that capacity.

Saving time in the bottleneck activity saves time for the entire process. Saving time in a non-bottleneck activity does not help the process since the throughput rate is limited by the bottleneck. It is only when the bottleneck is eliminated that another activity will become the new bottleneck and present a new opportunity to improve the process.

If the next slowest task is much faster than the bottleneck, then the bottleneck is having a major impact on the process capacity. If the next slowest task is only slightly faster than the bottleneck, then increasing the throughput of the bottleneck will have a limited impact on the process capacity.

Starvation and Blocking

Starvation occurs when a downstream activity is idle with no inputs to process because of upstream delays. Blocking occurs when an activity becomes idle because the next downstream activity is not ready to take it. Both starvation and blocking can be reduced by adding buffers that hold inventory between activities.

Process Improvement

Improvements in cost, quality, flexibility, and speed are commonly sought. The following lists some of the ways that processes can be improved.

In some cases, dramatic improvements can be made at minimal cost when the bottleneck activity is severely limiting the process capacity. On the other hand, in well-optimized processes, significant investment may be required to achieve a marginal operational improvement. Because of the large investment, the operational gain may not generate a sufficient rate of return. A cost-benefit analysis should be performed to determine if a process change is worth the investment. Ultimately, net present value will determine whether a process "improvement" really is an improvement.

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