Table Of Content

Managing Business Process Flows This page intentionally left blank Third Edition Managing Business Process Flows PRINCIPLES OF OPERATIONS MANAGEMENT Ravi Anupindi University of Michigan Sunil Chopra Northwestern University Sudhakar D. Deshmukh Northwestern University Jan A. Van Mieghem Northwestern University Eitan Zemel New York University Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director:Sally Yagan Editor in Chief:Eric Svendsen Senior Acquisitions Editor:Chuck Synovec Senior Project Manager: Mary Kate Murray Editorial Assistant: Ashlee Bradbury Director of Marketing: Patrice Lumumba Jones Executive Marketing Manager: Anne Fahlgren Production Project Manager: Clara Bartunek Creative Art Director: Jayne Conte Cover Designer: Suzanne Duda Cover Art: Fotolia Manager, Rights and Permissions: Hessa Albader Media Project Manager: John Cassar Media Product Manager: Sarah Peterson Full-Service Project Management: Mohinder Singh/Aptara®, Inc. Printer/Binder: Edwards Brothers Incorporated Cover Printer: Lehigh-Phoenix Color/Hagerstown Text Font: Palatino Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text. Copyright © 2012, 2006, 1999 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, Upper Saddle River, New Jersey 07458.All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any 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 from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458. Many of the designations by manufacturers and seller to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps. Library of Congress Cataloging-in-Publication Data Managing business process flows : principles of operations management / Ravi Anupindi . . . [et al.].—3rd ed. p. cm. Includes index. ISBN-13: 978-0-13-603637-1 ISBN-10: 0-13-603637-6 1. Production management. 2. Process control. I. Anupindi, Ravi. TS155.M33217 2012 658.5—dc23 2011023366 10 9 8 7 6 5 4 3 2 1 ISBN 10: 0-13-603637-6 ISBN 13: 978-0-13-603637-1 BRIEF CONTENTS Prefacexv PART I Process Management and Strategy 1 Chapter 1 Products, Processes, and Performance 2 Chapter 2 Operations Strategy and Management 20 PART II Process Flow Metrics 45 Chapter 3 Process Flow Measures 46 Chapter 4 Flow-Time Analysis 80 Chapter 5 Flow Rate and Capacity Analysis 102 Chapter 6 Inventory Analysis 121 PART III Process Flow Variability 151 Chapter 7 Managing Flow Variability: Safety Inventory 152 Chapter 8 Managing Flow Variability: Safety Capacity 188 Chapter 9 Managing Flow Variability: Process Control and Capability 229 PART IV Process Integration 271 Chapter 10 Lean Operations: Process Synchronization and Improvement 272 Appendix I MBPF Checklist 303 Appendix II Probability Background 306 Solutions to Selected Problems 311 Glossary 317 Index 324 v This page intentionally left blank CONTENTS Prefacexv PART I Process Management and Strategy 1 Chapter 1 Products, Processes, and Performance 2 Introduction 2 1.1 The Process View of Organizations 3 1.2 Performance Measures 7 1.2.1 The Importance of Measurement: Management by Fact 7 1.2.2 Types of Measures: Financial, External, and Internal 7 1.3 Products and Product Attributes 10 1.4 Processes and Process Competencies 13 1.5 Enabling Process Success 14 1.6 Some Basic Process Architectures 15 1.7 The Plan of the Book 17 Summary 18 Key Terms 18 Discussion Questions 18 Selected Bibliography 19 Chapter 2 Operations Strategy and Management 20 Introduction 20 2.1 Strategic Positioning and Operational Effectiveness 21 2.2 The Strategy Hierarchy 23 2.3 Strategic Fit 25 2.4 Focused Operations 27 2.5 Matching Products and Processes 30 2.6 The Operations Frontier and Trade-Offs 31 2.7 The Evolution of Strategy and Operations Management 37 2.8 The Opportunity Today in Service Operations 40 Summary 41 Key Terms 42 Discussion Questions 42 Selected Bibliography 43 PART II Process Flow Metrics 45 Chapter 3 Process Flow Measures 46 Introduction 46 3.1 The Essence of Process Flow 47 3.2 Three Key Process Measures 48 vii viii Contents 3.3 Flow Time, Flow Rate, and Inventory Dynamics 50 3.4 Throughput in a Stable Process 55 3.5 Little’s Law: Relating Average Flow Time, Throughput, and Average Inventory 55 3.5.1 Material Flow 57 3.5.2 Customer Flow 57 3.5.3 Job Flow 58 3.5.4 Cash Flow 58 3.5.5 Cash Flow (Accounts Receivable) 58 3.5.6 Service Flow (Financing Applications at Auto-Moto) 59 3.6 Analyzing Financial Flows through Financial Statements 63 3.6.1 Assessing Financial Flow Performance 63 3.6.2 Cash-to-Cash Cycle Performance 67 3.6.3 Targeting Improvement with Detailed Financial Flow Analysis 67 3.7 Two Related Process Measures: Takt Time and Inventory Turns (Turnover Ratio) 70 3.7.1 Takt Time 70 3.7.2 Inventory Turns 70 3.8 Linking Operational to Financial Metrics: Valuing an Improvement 71 3.8.1 Linking Operational Improvements to NPV 71 3.8.2 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 Analysis 80 Introduction 80 4.1 Flow-Time Measurement 81 4.2 The Process Flowchart 83 4.3 Flow Time and Critical Paths 84 4.4 Theoretical Flow Time and the Role of Waiting 86 4.4.1 Flow-Time Efficiency 87 4.5 Levers for Managing Theoretical Flow Time 90 4.5.1 Moving Work Off the Critical Path 91 4.5.2 Reduce Non-Value-Adding Activities 91 4.5.3 Reduce the Amount of Rework 92 4.5.4 Modifying the Product Mix 92 4.4.5 Increase the Speed of Operations 92 4.4.6 Zhang & Associates Revisited 93 Contents ix Summary 94 Key Equations and Symbols 95 Key Terms 95 Discussion Questions 95 Exercises 96 Selected Bibliography 97 Appendix 4.1 Subprocesses and Cascading 98 Appendix 4.2 The Critical Path Method 99 Appendix 4.3 Rework and Visits 101 Chapter 5 Flow Rate and Capacity Analysis 102 Introduction 102 5.1 Flow Rate Measurements 103 5.2 Resources and Effective Capacity 103 5.2.1 Resources and Resource Pools 103 5.2.2 Effective Capacity 104 5.2.3 Capacity Utilization 105 5.2.4 Extensions: Other Factors Affecting Effective Capacity 106 5.3 Effect of Product Mix on Effective Capacity and Profitability of a Process 106 5.3.1 Effective Capacity for Product Mix 107 5.3.2 Optimizing Profitability 108 5.4 Capacity Waste and Theoretical Capacity 109 5.4.1 Theoretical Capacity 109 5.4.2 Theoretical Capacity Utilization 110 5.5 Levers for Managing Throughput 110 5.5.1 Throughput Improvement Mapping 111 5.5.2 Increasing Resource Levels 112 5.5.3 Reducing Resource Capacity Waste 112 5.5.4 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 5.1 Other Factors Affecting Effective Capacity: Load Batches, Scheduled Availability, and Setups 117 Appendix 5.2 Optimizing Product Mix with Linear Programming 119 Chapter 6 Inventory Analysis 121 Introduction 121 6.1 Inventory Classification 122