Module 1: Process analysis

Question 1

Four dimensions of performance

Answer 1

1) Cost: Efficiency
2) Quality: Product & process
3) Variety: Customer heterogeneity
4) Time: Responsiveness to Demand

Question 2

Processes: Three basic measures

Answer 2

1) Flow rate / throughput
2) Flow time
3) Inventory

Question 3

Flow rate / throughput

Answer 3

# of flow units going through the process per unit of time
min(demand rate, process capacity)

Question 4

Flow time

Answer 4

time it takes a flow unit to go from beginning to end of a process

Question 5

Inventory

Answer 5

of flow units in process at a given moment in time

Question 6

Cause of inventory

Answer 6

Supply/demand mismatch

Question 7

Process flow diagram

Question 8

Project management vs. Process management

Answer 8

Project: Completion of one single project
Process: Doing things repeatedly

Question 9

Bottleneck

Answer 9

Process step with lowest capacity

Question 10

Process capacity

Answer 10

Capacity of bottleneck

Question 11

Utilization

Answer 11

flow rate / capacity

Question 12

Capacity

Answer 12

1 / processing time

Question 13

Cycle time

Answer 13

CT = 1 / flow rate

Time between the completion of subsequent units

Question 14

Direct labor content

Answer 14

p1 + p2 + p3 + …

Question 15

Direct idle time

Answer 15

If one worker per resource: (CT - p1) + (CT - p2) + …

Question 16

Avg labor utilization

Answer 16

Labor content / (Labor content + Direct idle time)

Question 17

Cost of direct labor

Answer 17

Total wages per unit of time / Flow rate per unit of time

Question 18

Labor content is overstated or understated on financial statements?

Answer 18

Understated due to use of suppliers

Question 19

Little’s law

Answer 19

In any process,
avg Inventory = avg Flow rate x avg Flow time
I = R * T

Question 20

Inventory turns

Answer 20

COGS / Inventory

Question 21

Per unit inventory costs

Answer 21

Annual inventory costs / Inventory turns

Question 22

Meaning of “Buffer or Suffer”

Answer 22

Inventory helps improve flow rate

Question 23

Pros of “Make to stock”

Answer 23

+ Scale economies in production

+ Rapid fulfillment

Question 24

Pros of “Make to order”

Answer 24

+ Fresh preparation
+ Allows for more customization
+ Quantity produced = quantity demanded

Question 25

Five reasons for inventory

Answer 25

1) Pipeline inventory
2) Seasonal inventory
3) Cycle inventory
4) Safety inventory
5) Decoupling inventory / buffers

Question 26

Processing time

Answer 26

Time worker takes to complete a given task

Question 27

Pipeline inventory

Answer 27

Direct result of Little’s law (I = R*T) since T>0

Question 28

Seasonal inventory

Answer 28

Driven by seasonal variation in demand and constant capacity

Question 29

Cycle inventory

Answer 29

Driven by economies of scale in production (eg. purchasing drinks)

Question 30

Safety inventory

Answer 30

Buffer against demand (eg. McDonald’s hamburgers)

Question 31

Decoupling inventory / buffers

Answer 31

Buffers between internal steps