Chapter 2

Inventory/WIP The number of flow units contained within the process is called the inventory (in a production setting, it is referred to as work in process, WIP). Flow Time The time it takes a flow unit to get through the process is called the flow time. Flow Rate/Throughput Rate & Capacity The rate at which the process is delivering output (measured in [flow units/unit of time], e.g., units per day) is called the flow rate or the throughput rate. The maximum rate with which the process can generate supply is called the capacity of the process. In retail, flow rate can also be measured using COGS. Littles Law Average inventory = Average flow rate Average flow time (Little's Law) Inventory Turns Inventory Turns = 1/Flow Time = COGS/Inventory (from Littles Law) Per-Unit Inventory Cost Per-Unit Inventory Cost = Average Inventory Costs/Average Inventory Turns

Chapter 3
As the completion of a flow unit requires the flow unit to visit every one of the resources in the process, the overall process capacity is determined by the resource with the smallest capacity. We refer to that resource as the bottleneck. It provides the weakest link in the overall process chain, and, as we know, a chain is only as strong as its weakest link. More formally, we can write the process capacity as Process capacity = Minimum {Capacity of Resource 1, , Capacity of Resource n} where there are a total of n resources. How much the process actually does produce will depend not only on its capability to create supply (process capacity), but also on the demand for its output as well as the availability of its input. Thus, the flow rate or throughput of the process is determined as Flow rate = Minimum {Available Input, Demand, Process Capacity} Time required to fulfill/produce X Units = X/Flow Rate Process Utilization = Flow Rate/Process Capacity Resource Utilization = Flow Rate/Capacity of Resource (bottleneck will have the highest resource utilization) Implied Utilization = Capacity Requested by Demand/Available Capacity (bottleneck will have the highest implied utilization) STEPS FOR BASIC PROCESS ANALYSIS WITH MULTIPLE TYPES OF FLOW UNITS 1. For each resource, compute the number of minutes that the resource can produce; this is 60 [min./hour] Number of resources within the resource pool. 2. Create a process flow diagram, indicating how the flow units go through the process; use multiple colors to indicate the flow of the different flow units. 3. Create a table indicating how much workload each flow unit is consuming at each resource: The rows of the table correspond to the resources in the process. The columns of the table correspond to the different types of flow units. Each cell of the table should contain one of the following: If flow unit does not visit the corresponding resource, ; Otherwise, demand per hour of the corresponding flow unit activity time. 4. Add up the workload of each resource across all flow units. 5. Compute the implied utilization of each resource as Implied Utilization = Result of Step 3/Result of Step 1 The resource with the highest implied utilization is the bottleneck.

Chapter 6
Capacity given batch size = Batch Size/ (Setup Time + Batch Size*Time per Unit) Recommended Batch Size = Flow Rate*Setup Time/ (1- Flow Rate*Time per Unit) EOQ Model Average Inventory = Order Quantity / 2 Inventory Costs (per unit of time) = Order Quantity * h = Q*h Setup Costs (per unit of time) = Setup Cost / Length of Order Cycle = K/(Q/R) = K*R/Q where K = Setup Cost, R= Flow Rate Per Unit Time Cost C(Q) = Setup Costs + Inventory Costs = K*R/Q+ * h*Q Economic Order Quantity Q* = (2*Setup Cost*Flow Rate/Holding Cost) = (2*K*R / h) C(Q*) = KxR/Q* + * hxQ* = 2*K*R*h Cost per Unit = (2*K*h/R) where Q= Order Quantity, h= Inventory Cost