Process Capacity

Question 1

Three Measures of the Performance of Any System

Answer 1

Inventory, Flow Time, Throughput (Flow) Rate

The three measures can be manipulated by capital investment expenditures, e.g., more operating expenses to reduce flow tine.

Question 2

Inventory (I)

Answer 2

Goods and materials that a business holds for the ultimate goal of resale, production or utilization.

The number of flow units that are in the process (or in a particular resource).
- Inventory can be expressed in:
1. flow units (e.g., scooters, customers, patients, units of product)
2. days of supply (e.g., three days
of inventory), or
3. monetary units ($1 million of I
inventory)

Question 3

Flow Time (T)

Answer 3

The time a flow unit takes to be brought in and exit the system (time spent in the system/process).

Includes the time it is worked on at various resources and any time it spends in inventory.

Note: Never a rate.

Flow time can be expressed in the:
- Hours
- Minutes
- Seconds’

When a product exits faster (a product that goes viral) has a shorter flow time.

Example: A customer spends a flow time of 30 minutes on the phone in a call center.

Question 4

Throughput Rate (R)

Answer 4

Also referred to as throughput/capacity.

The average number of flow units exiting a process per unit of time.

Measures the number of flow units that move through the process in a given unit of time (the rate at which items are received from suppliers and then sold to consumers).

Since it is a rate, there are two units of measurement, e.g. people served per minute.

Flow rate = Min{Demand, Capacity}.

Rate of generating output/serving customers

Question 5

Little’s Law

Answer 5

The average inventory is equal to the average flow rate times the average flow time (I = R x T).

Describes the relationship between inventory, flow time, and throughput; if you know two, you can solve for the third.

Inventory = Flow time x Inventory

Question 6

Process Utilization and Capacity Utilization (Formulas)

Answer 6

Process Utilization = Throughput Rate / Process Capacity

Utilization of Resource = (Resource) Throughput Rate / Capacity of Resource

Implied Utilization = Capacity Requested by Demand / Available Capacity

Question 7

Flow Unit

Answer 7

When defining a Flow Unit, choose a natural unit (typically a unit of output or input).

Measure other units in terms of the flow unit by converting all units to flow unit.