Process analysis:

A method to improve how you do what you do

Prepared by: Paul Mulligan and Susan West Engelkemeyer

The effective management of processes is integral to every organization, manufacturing

or service. Nearly every company has opportunities for improvement that can be
discovered by applying process analysis techniques. Therefore, an important first step
towards managing your organization more effectively is the development of process
analysis skills. This note provides an overview of the issues involved and introduces you
to the vocabulary and techniques used in process analysis.

A process is a group of related activities that produce an output. In a manufacturing

environment, examples are the production process for the companys product, the
materials acquisition process, and the orientation process for new employees. In a
service organization, examples are the process for enrolling students in a graduate
program, the process for diagnosing a patients illness, and the process for determining
automobile insurance rates.

Operations analysis encompasses several steps, with a common objective to support the
analysis, evaluation and improvement of the transformation process under study. We
will discuss the following concepts in this note:
Differentiating among process types;
Drawing a process flow chart;
Analyzing the process through quantitative performance measures.

Process Types
It is often useful to differentiate among various process types. There are five primary
process types in goods producing or manufacturing operations. These include:
1. Project: These operations are generally very low in volume, often single production
units, and involve high levels of customization. Building construction and
shipbuilding are examples of project-based production systems.
2. Job shop: A job shop is another low volume, high customization production process.
These operations generally invoke flexible machinery to perform varied tasks.
Machine shops, which contain groupings of flexible machines, are the classic
example of a job shop.
3. Batch: Batch processes are usually moderate volume operations in which multiple,
identical products are created simultaneously. This might be a batch of cookies at
Mrs. Fields or a batch of plastic molds at an injection molding company.
4. Assembly line: Assembly lines create high volumes of relatively standardized
products, such as automobiles. The flexibility and production range of assembly lines
 has increased due to recent advances in FMS (flexible manufacturing systems) and
CCM (computer controlled manufacturing). Automobile plants are an example of a
sophisticated assembly line process.
5. Continuous flow: These operations are high volume, high standardization processes.
It is often difficult or impossible to identify discreet units of production in a true
continuous flow operation. An oil refinery is common example of a continuous flow
process.

It can be difficult to make similar distinctions within a service operations environment

due to the variability that exists in services. A number of researchers have proposed
service process typologies based upon such factors as degree of customer contact (Chase,
1980; Mills and Marguilies, 1980), labor intensity and customization (Schmenner, 1986),
technology and flexibility (Wemmerlov 1990) and task-technology interaction (Mulligan,
1999, 2002). To date, none of these frameworks have achieved widespread adoption
perhaps due to the rapidly changing definition of service and service process. It is worth
noting the emerging presence of information technology in the progression from Chases
1980 contact model to the more technology dependent classification frameworks derived
in the 21st century.

It is important to consider two points when classifying a manufacturing or service

operation. First, many manufacturing and service processes are actually combinations of
several different types of processes. Second, the above manufacturing and service
process types represent points along a continuum rather than discreetly different forms of
production.

Process flow chart

Drawing a flow chart or process flow diagram is often a useful first step when analyzing
a process. Three things typically included in a process flow chart are tasks, flows,
decision points and queues. Tasks are typically depicted as boxes, flows as arrows,
decisions as diamonds and queues as inverted triangles. What is important is that the
diagram clearly indicates what activity is happening in what sequence. Process flow
charts (or diagrams) show the specific sequence of tasks or process steps necessary to
create a particular product or service. The diagram may include task times for each step,
along with the identification of required human or machine resources.

The level of detail and scope of information contained in the process flow diagram will
vary based upon the objectives of the chart. If the charts objective is to demonstrate the
high-level flow of materials through a manufacturing process or the steps of a service
process (e.g., the flow of patients through a dentists office), then the chart will contain
few details. However, a chart intended to support the detailed analysis, evaluation and
improvement of a process will incorporate a higher level of detail, including task times
and the number of resources assigned to each task.

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Consider the example of Nantasket Beach Tees.
Nantasket Beach Tees (NBT) does screen-printing for local retail outlets on the south
shore of Boston. NBTs minimum order is 120 t-shirts. T-shirts are processed in batches
and moved from station to station on a Z-rack (a clothesline-type cart on wheels that
can accommodate up to 20 T-shirts.) At any given time, each worker has three Z-racks
of work-in-process inventory (including the batch s/he is working on). T-shirt production
comprises the following steps:

Step 1: Screen printing. NBT has three automated screen printing machines that are
operated by three individual workers. It takes approximately 3 minutes for the machine
to print the logo on the t-shirt.

Step 2: Drying. After the logo is printed, a material handler wheels the batches to the
oven. One person handles the oven. The oven has a capacity of 60 T-shirts and it takes
40 minutes to dry a batch of 60 t-shirts.

Step 3: Ironing. From the oven, the T-shirts are sent to ironing. NBT has one ironing
press and operator that can press one dozen t-shirts in ten minutes.

Step 3: Packaging. At the end of the line are two people inspecting, folding, and
packaging shirts into boxes of one dozen each. It takes approximately 18 minutes for
each person to perform this task.

Below is the process flow diagram for NBT.

Print Dry Iron Packag

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Quantitative process analysis

After drawing the process flow chart, we are ready to analyze the activities in the
process. We utilize the following measures to complete this analysis.

Task Time
The task time is the time required at a particular process step to complete all activities of
that step. The task time is a duration of time, not a rate (e.g., task time = 2 minutes per
unit).

Bottleneck
This is the process step with the lowest capacity. Since a process can only produce as
fast as its slowest step, the bottleneck limits the systems output. An increase in system
capacity occurs only when we increase capacity at the bottleneck.

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Cycle time
The cycle time for a task or process step is the average interval between the completion
of two units of production. If there is only one worker at a step or all workers at the step
are simultaneously working on the same item then the task time and the cycle time are
identical. However, if there is more than one resource (human or machine) at a process
step and each resource operates independently, then the steps task time should be
divided by the number of resources to obtain the cycle time. E.g. If the task time is 2
minutes and we have 2 independent resources performing this task, then the cycle time is
1 minute (2 minutes per unit / 2 resources = cycle time of 1 minute per unit). In effect,
were stating that on average we can produce one unit per minute at this step.

System cycle time

The system cycle time is the cycle time for the process step with the longest cycle time.
The step with the longest cycle time also identifies the bottleneck for the overall process.
The system cycle time determines the systems overall output capacity.

Capacity
Capacity is the amount of work that can be processed per unit of time (e.g., pieces per
hour, tons per day, patients per shift, etc.) This may refer to an entire process, or one of
the steps in the process. Either machines or labor can constrain capacity. Theoretical
(maximum) capacity is the most output a process could generate under ideal conditions.
For planning purposes, theoretical capacity will need to be tempered with factors that will
reduce theoretical capacity (e.g., employee breaks, machine downtime, quality defects,
variability in task time, etc.) We calculate capacity for the overall process by dividing
the available processing time (e.g., minutes per day) by the system cycle time (cycle time
for the bottleneck step), which we now know is the cycle time of the slowest step in the
process. The system cannot produce more output than the capacity of the bottleneck step.
For specific tasks (or process steps), we calculate capacity by dividing the available
processing time by the cycle time.

Theoretical Capacity = Total Time Available/ System Cycle Time

Capacity seems a straightforward measure. For a process producing one product or

service, it may be. But finding relevant capacity measures for a process that produces
multiple products or delivers multiple services can be complicated. In many cases, the
system capacity will depend on the lot size and product mix. And because the capacity of
an entire process is affected by product mix, staffing, efficiency, and other factors, the
effective capacity and capacity utilization will depend on how the process is managed.

Actual output or production volume

The actual output of a process is the number of units actually produced during a given
period of time. We rarely produce at theoretical capacity due to a variety of factors. It is

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easy to understand how the actual output would be less than theoretical capacity. Would
the actual output ever be greater than theoretical capacity? Why, and how, might this
occur?

Capacity Utilization
Capacity utilization is the percent of the theoretical capacity that is actually being used at
a given production rate (demand level). Capacity utilization gives managers a feel for
how effectively they are matching available capacity to actual production. Capacity
utilization is typically expressed as a percentage. Capacity utilization can exceed 100%
if management schedules additional hours or personnel for the production process.
However, optimal capacity utilization is situation specific. For instance, under certain
economic conditions an oil refinery may wish to operate near 100% capacity utilization
but you may not want to manage a hospital emergency room at or near 100% of capacity.
Capacity Utilization = Capacity required (demand) / Capacity Available (Theoretical)

Work-in-Process (WIP)
Work-in-process or WIP is the number of in process units waiting to be completed within
the operation. If each process step in a 6-step process contains 2 production lots of 10
items each, then WIP is equal to:
WIP = 6 * 2 * 10 = 120 units of WIP
Throughput time
Throughput time is the amount of time it takes one specific unit to progress through all
steps of the process (the sum of individual task times.) If there are steps in the process
that occur simultaneously (e.g., an auto assemble line where people work on each side of
the car as it is being assembled), the throughput time is the sum of the non-simultaneous
activities. Think of throughput time as if you were walking a specific unit through each
step in the process. How long would it take? The tasks that occur simultaneously are
important factors to consider when looking at costing and labor content. However, with
throughput time, we are only concerned with the amount of time it takes for the unit to be
completed. Why? Throughput time does not consider WIP. Again, why?

Lead time
Lead time is similar to throughput time but also accounts for WIP and other delays in the
process, such as the time used in materials handling, addressing poor quality, etc.
Therefore, lead time is rarely the sum of individual task times. We can think about lead
time as the time needed to get the next unit through the production process, given the
current state of the production system. There is a direct relationship between the
production rate, the amount of WIP in the system, and lead time, as shown below.

Lead time = WIP / Production Rate

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There is also a direct relationship between actual cycle time, WIP, and lead time, where
actual cycle time = available time / production volume. Actual cycle time can never be
shorter than system cycle time. The former indicates actual time between units of
production while the latter indicates theoretical time between units of production at
100% capacity utilization.

Lead time = WIP * Actual cycle time

Direct Labor Content

The labor content of a product is the total of all direct labor time used to create the
product. If there is more than one worker at a process step, you must consider whether
the workers are simultaneously working on the same item, or whether they are each
working on their own items. If workers are working simultaneously on the same item,
then labor content must account for the activity time of all workers (well have to pay all
of them). When calculating the labor time we must account for the total time invested by
all direct workers. A similar calculation may be used to identify machine content.

Idle time
The amount of time a resource (human or machine) is unused during each process cycle.
The intent is to minimize the idle time across all workstations and resources, and
therefore create a more balanced process. Idle time can exist for one resource in a
process step. For example, a worker may load a machine then wait while the machine
automatically performs its task.

Balance
Maintaining the efficient flow of goods, services, or information through the operating
system is a key management concern. The balance of work allocated to various work
centers or resources significantly impacts this efficiency. In a process with a line
arrangement, where units must pass through each step in the process sequentially, line
balance refers to the extent to which individual cycle times are equal. An imbalance
leads to idle time for human and/or machine resources.

Labor/Machine Utilization
Labor utilization provides an indication of our overall labor utilization in an operating
system. Remember, capacity utilization is an indication of system utilization at the
bottleneck our constraint on capacity. Labor utilization provides an indication of
aggregate use of labor. A large difference between capacity utilization and labor
utilization is generally a red flag suggesting some significant imbalance across the
steps in the production function. The calculation of labor utilization is simple and is the
ratio of direct labor (DL) required to direct labor available. By substituting direct
machine (DM) time for DL and machines for workers, we can determine machine
utilization.

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 Labor Utilization = (DL per unit * Production rate) / (available time * # workers)

Machine Utilization = (DM per unit * Production rate) / (available time * # machines).

This note has provided an overview of the concepts used to analyze a process. By
carefully analyzing the way a product is produced or a service is provided, it is possible
to find opportunities for improving efficiency and effectiveness.

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 Process Analysis Practice Problem
NBT Exercise

You have been asked to perform an analysis of Nantasket Beach Tees (NBT). Average daily demand is 300 t-
shirts. However, spring is rapidly approaching; soon the parking lots will be full of day visitors to the beach.
As a result, demand rises to 500 t-shirts per day from February through June. Orders are beginning to pour in
from the local gift shops.

Assuming employees work 8 hours per day, 5 days per week:

#1. Calculate the cycle time and theoretical capacity for each step in the process.

Step Cycle time (average in minutes) Theoretical capacity (# shirts daily)

1 Printing

2 Drying

3 Ironing

5 Packaging

2. Identify the bottleneck and the system cycle time, and the capacity of the system in an 8-hour day?

3. What is the throughput time for this process?

4. What is capacity utilization given average demand? Peak demand?

5. On Friday morning at 8:00am, Pat Fisher, the owner of NBT, has decided to print custom shirts for this
weekends company picnic at Fort Revere Park in Hull. A total of 22 shirts are needed for employees and
their families. Pat finds that the company is currently processing an order that needs to be shipped out by
5:00pm. The system is full and 25 more t-shirts of that order are waiting to enter the system. Can NBT
ship out the current order in time and can they have their companys t-shirts ready by 5:00pm as well?

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 NBT ANSWER KEY

1. Calculate the cycle time and theoretical capacity for each step in the process.

Print Dry Iron Packag

e
3 min per shirt 40 min per 60 shirts 10 min per 12 shirts 18 min per 12
shirts
3 machines/ 3 workers 1 machine/1worker 1 machine/ 1 worker 2 workers

Step Cycle time (average in minutes) Theoretical capacity (# shirts daily)

1 Printing 3 min. / 3 resources = 1 min. per shirt on 480 minutes per day / 1 min = 480 shirts
average per day

2 Drying 40 min. / 60 shirts = .667 min. per shirt on 480 minutes per day / .667 min. = 719
average shirts per day

3 Ironing 10 min. / 12 shirts = .833 min. per shirt on 480 minutes per day / .833 min. = 576
average shirts per day

5 Packaging 18 min. / 2 workers / 12 shirts = 480 minutes per day / .75 min. =
.75 min. per shirt on average 640 shirts per day

2. Identify the bottleneck, the system cycle time, and the capacity of the system in an 8-hour day
The bottleneck step is Printing with a system cycle time of 1 minute and a theoretical capacity of 480 t-
shirts per day.

3. What is the throughput time for this process?

3min. + 40 min. + 10 min. + 18 min. = 71 minutes

4. What is capacity utilization given average demand? Peak demand?

Capacity utilization = demand/capacity
Capacity utilization at average demand = 300/480 = 62.5%
Capacity utilization at peak demand = 500/480 = 104.2%

5. Can NBT ship out the current order in time and can they have their companys t-shirts ready by 5:00pm
as well?
The current system is full with 20 shirts at each of the 7 workstations. Each workstation has 3 Z-racks of
WIP. Therefore, total WIP = 20 * 7 * 3 = 420. And there are a total of 25 additional shirts to process.
A total of 445 shirts have to be completed on the current order. At the 1 min. bottleneck rate, this would
take 445 minutes (or 7 hours and 25 min..) The custom order would be done by 3:25pm. The batch for
the company picnic would take 22 shirts * 1 min. = 22 minutes. The company shirts would be done by
3:47pm. However, what have we ignored/overlooked in these calculations?

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 RESOURCES

Chase, Richard B., "The Customer Contact Approach to Services: Theoretical Bases and
Practical Extensions," Operations Research, 29:4, 1981, 698-706.

Mills, Peter K. and Marguilies, N, "Toward a Core Typology of Service Organizations," Academy
of Management Review, Vol.5, No.2, 1980, 255-265.

Mulligan, Paul, Differentiating Service tasks for IT Application: An Exploratory Analysis in

Financial Services, International Journal of Service Industry Management, March, 1999.

Mulligan, Paul, Specification of a Capability-Based IT Classification Framework, Information

and Management, Vol. 39, No. 8, September 2002.

Schmenner, R., How Can Service Businesses Survive and Prosper? Sloan Management Review,
Spring 1986.

Wemmerlov, Urban, A Taxonomy for Service Processes and Its Implications for Systems
Design, International Journal of Service Industry Management, 1:3, 1990, 20-40.

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