Managing Business Process Flows - the-eye.eu

1 Managing Business Process FlowsThis page intentionally left blank Third EditionManaging Business Process FlowsPRINCIPLES OF OPERATIONS MANAGEMENTRavi AnupindiUniversity of MichiganSunil ChopraNorthwestern UniversitySudhakar D. DeshmukhNorthwestern UniversityJan A. Van MieghemNorthwestern UniversityEitan ZemelNew York UniversityPrentice HallBostonColumbusIndianapolisNew YorkSan FranciscoUpper Saddle RiverAmsterdamCape TownDubaiLondonMadridMilanMunichParisMon trealTorontoDelhiMexico CityS o PauloSydneyHong KongSeoulSingapore TaipeiTokyoEditorial Director:Sally YaganEditor in Chief:Eric SvendsenSenior Acquisitions Editor:Chuck SynovecSenior Project Manager: Mary Kate MurrayEditorial Assistant: Ashlee BradburyDirector of Marketing: Patrice Lumumba JonesExecutive Marketing Manager: Anne FahlgrenProduction Project Manager: Clara BartunekCreative Art Director: Jayne ConteCover Designer: Suzanne DudaCover Art: FotoliaManager, Rights and Permissions: Hessa AlbaderMedia Project Manager: John CassarMedia Product Manager: Sarah PetersonFull-Service Project Management: Mohinder Singh/Aptara.

2 Edwards Brothers IncorporatedCover Printer: Lehigh-Phoenix Color/HagerstownText Font: PalatinoCredits and acknowledgments borrowed from other sources and reproduced, with permission, in thistextbook appear on appropriate page within 2012, 2006, 1999 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street,Upper Saddle River, New Jersey rights reserved. Manufactured in the United States of publication is protected by Copyright, and permission should be obtained from the publisher prior toany prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means,electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material fromthis work, please submit a written request to Pearson Education, Inc., Permissions Department, One LakeStreet, Upper Saddle River, New Jersey of the designations by manufacturers and seller to distinguish their products are claimed astrademarks.

3 Where those designations appear in this book, and the publisher was aware of a trademarkclaim, the designations have been printed in initial caps or all of Congress Cataloging-in-Publication DataManaging Business Process Flows : principles of operations management / Ravi Anupindi .. [et al.]. 3rd : 978-0-13-603637-1 ISBN-10: 0-13-603637-61. Production Process Anupindi, Ravi. dc23201102336610987654321 ISBN 10:0-13-603637-6 ISBN 13: 978-0-13-603637-1 BRIEF CONTENTSP reface xvPA RT IProcess Management and Strategy 1 Chapter 1 Products, Processes, and Performance2 Chapter 2 Operations Strategy and Management20 PART IIProcess Flow Metrics 45 Chapter 3 Process Flow Measures46 Chapter 4 Flow-Time Analysis80 Chapter 5 Flow Rate and Capacity Analysis 102 Chapter 6 Inventory Analysis121 PART IIIP rocess Flow Variability 151 Chapter 7 Managing Flow Variability: Safety Inventory152 Chapter 8 Managing Flow Variability: Safety Capacity188 Chapter 9 Managing Flow Variability: Process Control and Capability229 PART IVProcess Integration 271 Chapter 10 Lean Operations.

4 Process Synchronization and Improvement272 Appendix IMBPF Checklist303 Appendix IIProbability Background306 Solutions to Selected Problems 311 Glossary 317 Index 324vThis page intentionally left blank CONTENTSP reface xvPA RT IProcess Management and Strategy 1 Chapter 1 Products, Processes, and The Process View of Organizations Performance Measures The Importance of Measurement: Management by Fact Types of Measures: Financial, External, and Internal Products and Product Attributes Processes and Process Competencies Enabling Process Success Some Basic Process Architectures The Plan of the Book 17 Summary 18 Key Terms 18 Discussion Questions 18 Selected Bibliography 19 Chapter 2 Operations Strategy and Management20 Introduction Strategic Positioning and Operational Effectiveness The Strategy Hierarchy Strategic Fit Focused Operations Matching Products and Processes The Operations Frontier and Trade-Offs The Evolution of Strategy and Operations Management The Opportunity Today in Service Operations 40 Summary 41 Key Terms 42 Discussion Questions 42 Selected Bibliography 43 PART IIProcess Flow Metrics 45 Chapter 3 Process Flow Measures46 Introduction The Essence of Process Flow

5 Three Key Process Measures Flow Time, Flow Rate, and Inventory Dynamics Throughput in a Stable Process Little s Law: Relating Average Flow Time, Throughput, andAverage Inventory Material Flow Customer Flow Job Flow Cash Flow Cash Flow (Accounts Receivable) Service Flow (Financing Applications at Auto-Moto) Analyzing Financial Flows through Financial Statements Assessing Financial Flow Performance Cash-to-Cash Cycle Performance Targeting Improvement with Detailed Financial Flow Analysis Two Related Process Measures: Takt Time and Inventory Turns(Turnover Ratio) Takt Time Inventory Turns Linking Operational to Financial Metrics: Valuing an Improvement Linking Operational Improvements to NPV Linking Operational Improvements to Financial Ratios 73 Summary 75 Key Equations and Symbols 75 Key Terms 76 Discussion Questions 76 Exercises 76 Selected Bibliography 79 Chapter 4 Flow-Time Analysis80 Introduction Flow-Time Measurement The Process Flowchart Flow Time and Critical Paths Theoretical Flow Time and the Role of Waiting Flow-Time Efficiency Levers for Managing Theoretical Flow Time Moving Work Off the Critical Path Reduce Non-Value-Adding Activities Reduce the Amount of Rework Modifying the Product Mix Increase the Speed of Operations Zhang & Associates Revisited 93 ContentsixSummary 94 Key Equations and Symbols 95 Key Terms 95 Discussion Questions 95 Exercises 96

6 Selected Bibliography 97 Appendix and Cascading 98 Appendix Critical Path Method 99 Appendix Rework and Visits 101 Chapter 5 Flow Rate and Capacity Analysis102 Introduction Flow Rate Measurements Resources and Effective Capacity Resources and Resource Pools Effective Capacity Capacity Utilization Extensions: Other Factors Affecting Effective Capacity Effect of Product Mix on Effective Capacity and Profitability of a Process Effective Capacity for Product Mix Optimizing Profitability Capacity Waste and Theoretical Capacity Theoretical Capacity Theoretical Capacity Utilization Levers for Managing Throughput Throughput Improvement Mapping Increasing Resource Levels Reducing Resource Capacity Waste Shifting Bottlenecks and the Improvement Spiral 113 Summary 114 Key Equations and Symbols 114 Key Terms 114 Discussion Questions 115 Exercises 115 Selected Bibliography 116 Appendix Factors Affecting Effective Capacity.

7 LoadBatches, Scheduled Availability, and Setups 117 Appendix Product Mix with Linear Programming 119 Chapter 6 Inventory Analysis121 Introduction Inventory Classification Inventory Benefits Economies of Scale Production and Capacity Smoothing Stockout Protection Price Speculation Inventory Costs Inventory Dynamics of Batch Purchasing Economies of Scale and Optimal Cycle Inventory Effect of Lead Times on Ordering Decisions Periodic Ordering Levers for Managing Inventories 142 Summary 143 Key Equations and Symbols 144 Key Terms 144 Discussion Questions 144 Exercises 145 Selected Bibliography 146 Appendix Derivation of EOQ Formula 147 Appendix Price Discounts 148 PART IIIP rocess Flow Variability 151 Chapter 7 Managing Flow Variability: Safety Inventory152 Introduction Demand Forecasts and Forecast Errors Safety Inventory and Service Level Service Level Measures Continuous Review, Reorder Point System Service Level Given Safety Safety Inventory Given Service Optimal Service Level.

8 The Newsvendor Problem Leadtime Demand Variability Fixed Replenishment Lead Time Variability in Replenishment Lead Time Pooling Efficiency through Aggregation Physical Centralization Principle of Aggregation and Pooling Inventory Shortening the Forecast Horizon through Postponement Periodic Review Policy Levers for Reducing Safety Inventory 182 Summary 183 Key Equations and Symbols 183 Key Terms 184 Discussion Questions 184 Exercises 184 Selected Bibliography 186 AppendixCalculating Service Level for a Given SafetyInventory 187 Chapter 8 Managing Flow Variability: Safety Capacity188 Introduction Service Process and Its Performance Service Processes Service Process Attributes Service Process Performance Relationships between Performance Measures Effect of Variability on Process Performance Drivers of Process Performance The Queue Length Formula The Exponential Model Process Capacity Decisions Buffer Capacity, Blocking.

9 And Abandonment Effect of Buffer Capacity on Process Performance The Buffer Capacity Decision Joint Processing Capacity and Buffer Capacity Decisions Performance Variability and Promise Customer Pooling and Segregation Pooling Arrivals with Flexible Resources Segregating Arrivals with Specialized Resources Performance Improvement Levers Capacity Utilization Levers Variability Reduction Levers Capacity Synchronization Levers Buffer Capacity Levers Pooling and Segregation Levers Managing Customer Perceptions and Expectations 221 Summary 222 Key Equations and Symbols 223 Key Terms 223 Discussion Questions 224 Exercises 224 Selected Bibliography 227 AppendixThe Exponential Model with Finite Buffer Capacity 228 ContentsxixiiContentsChapter 9 Managing Flow Variability.

10 Process Control and Capability229 Introduction Performance Variability Analysis of Variability Check Sheets Pareto Charts Histograms Run Charts Multi-Vari Charts Process Control The Feedback Control Principle Types and Causes of Variability Control Limit Policy Control Charts Cause Effect Diagrams Scatter Plots Process Capability Fraction of Output within Specifications Process Capability Ratios (Cpkand Cp) Six-Sigma Quality Capability and Control Process Capability Improvement Mean Shift Variability Reduction Effect of Process Improvement on Process Control Product and Process Design Design for Producibility Robust Design Integrated Design 265 Summary 226 Key Equations and Symbols 267 Key Terms 267 Discussion Questions 268 Exercises 268 Selected Bibliography 270 PART IVProcess Integration 271 Chapter 10 Lean Operations: Process Synchronization and Improvement272 Introduction Processing Networks The Process Ideal: Synchronization and Efficiency Waste and Its Sources Improving Flows in a Plant: Basic Principles of Lean Operations Improving Process Architecture: Cellular Layouts Improving Information and Material Flow: Demand Pull Improving Process Flexibility.