Now, I have redrawn this process flow diagram here in PowerPoint to get rid of

my ugly handwriting. Just to iterate the symbols, the triangle

stands for floor units waiting. Arrows capture the floor unit and boxes

capture the resources that are carrying out the activities and the process flow.

Now, let me, at this point, refer you to an important difference between project

management and process management. Process management, the topic of this

course, is all about doing things repeatedly we want to serve hundreds and

hundreds of customers over the day and at this point are primarily interested in

computing the flow of customers through the process.

It turns out that for the flow of customers through the process, it doesn't

matter whether the work stations one, two, or three sequentially or in parallel.

If all you have to do is make one sandwich, it would be lovely to, for

example, bring out the customer, at station three, in parallel to actually

making the sandwich at station one and two.

But, at the end of the day, every customer here on the floor has to go through

station one, two and three. And so, we are not going to serve any more

customers by working in parallel. Now , we are ready for some definitions.

We have already seen the concept of the processing time which captures how long a

resource takes to serve a floor unit. For example, station two in our previous

setting had a processing time of 46 seconds per customer.

Next, we define the capacity of some resource as one over the processing time.

In our case, one over 46. And now, careful with the units, that is

customers per second. Now, in casual English, you will typically

not say that a worker has a capacity of serving a 46th of a customer per second.

If you want to make this something easier to imagine, just multiply this with the

3,600 seconds that there are in an hour. And you see that the worker here at

station two is able to serve roughly some 78 customers per hour.

Now, this is a case where we have just one person working as a resource.

If there are a multiple persons or multiple machines carrying out the same

work, we define the capacity as M, the number of parallel resources M divided by

the processing time. Now, the chain is only as strong as it's

weakest link and if we ask ourselves how much capacity the entire restaurant has,

we're going to look for the capacity of each individual step and we will then pick

the lowest capacity. This is the idea behind the concept of a

bottleneck. The bottleneck is a step with the lowest

capacity. Next, we want to figure out the flow rate.

We already defined the flow rate as the number of customers going through the

process per unit of time. Well, there can never, by definition, be

more flow through the process than we have capacity at the bottleneck.

However, there might be a situation, when even the bottleneck has some excess

capacity. Those are situations where we have

insufficient demand. In off hours, late at night, early

morning, we might just not have the demand rate to keep the bottleneck busy, and so

the flow rate is defined as the minimum between demand and process capacity.

We can then compute the utilization of a resource as a ratio between the flow rate

and the capacity. Now, remember, the flow rate captures the

flow, meaning it captures how much work a resource is currently doing, versus a

capacity, which really measures how much work the resource could be doing if it

worked all out. Just to reiterate, we already have defined

in a previous session , the flow time, the time it takes a flow unit to go through

the process. And the inventory, the number of flow

units in the system. Now, let's jump to Excel and practice our

new definitions. Let's start with the processing times.

Station one has a processing time of 37 seconds, Station two have 46, Station

three have 37 seconds. And all of this is expressed in seconds

per unit. We then saw that the capacity is defined

as one over the processing time. And this is now expressed in units per

second. If you want to get to the capacity per

hour, we simply multiply he previous numbers with three, 600.

And this is now expressed in units per hour.

Next, we define the process capacity as the minimum of these capacities above,

which in this case, is driven here by 78.26.

Now, the flow rate is a minimum between demand and capacity.

Let's say, for sake of argument, that we have a demand through the process of 50

units per hour. There's 50 customers per hour.

We can then compute a utilization, off, remember the definition, we're dividing

the flow rate, in this case, it would be demand, flow rate divided by the capacity,

which gives us a utilization of 51 percent at the first station.

You notice that the utilization is higher at the second station, the bottleneck,

with 63 percent and then again, it's 51 percent at the last station.

If there is more demand coming our way, so if we improve here the, the demand rate

from 50 to 60, the utilization goes up. Notice that according to our definition

though, the utilization can never exceed a 100%, because a flow rate is a minimum

between demand and capacity. In this session, I threw a lot of

vocabulary. We saw how resources and workers have

processing times. How we can use the processing times to

compute capacity levels. And how the resource with the lowest

capacity in the process is called the bottleneck.

We also introduced the measure of utilization.

Together these calculations help us to determine the flow rate of the process

without actually observing the process in action.

In the last sessions, we just sat there at subway and counted customers to computer

the customer serve for hours. Now, we're actually able to just predict

the flow rate by simply knowing the processing times, the staffing level, and

the demand rate.