Page 279 - DMGT522_SERVICES MANAGEMENT

Services Management

Notes Throughput rate (also known as flow rate ): The average rate at which units flow past a
specific point in the process. The maximum throughput rate is the process capacity.
Flow time (also known as throughput time or lead time): The average time that a unit
requires to flow through the process from the entry point to the exit point. The flow time
is the length of the longest path through the process. Flow time includes both processing
time and any time the unit spends between steps.

Cycle time: The time between successive units as they are output from the process. Cycle
time for the process is equal to the inverse of the throughput rate. Cycle time can be thought
of as the time required for a task to repeat itself. Each series task in a process must have a
cycle time less than or equal to the cycle time for the process. Put another way, the cycle time
of the process is equal to the longest task cycle time. The process is said to be in balance if the
cycle times are equal for each activity in the process. Such balance rarely is achieved.

Process time: The average time that a unit is worked on. Process time is flow time less idle
time.

Idle time: Time when no activity is being performed, for example, when an activity is
waiting for work to arrive from the previous activity. The term can be used to describe
both machine idle time and worker idle time.

Work In process: The amount of inventory in the process.
Set-up time: The time required to prepare the equipment to perform an activity on a batch
of units. Set-up time usually does not depend strongly on the batch size and therefore can
be reduced on a per unit basis by increasing the batch size.

Direct labour content: The amount of labour (in units of time) actually contained in the
product. Excludes idle time when workers are not working directly on the product. Also
excludes time spent maintaining machines, transporting materials, etc.

Direct labor utilization: The fraction of labor capacity that actually is utilised as direct
labour.

Little’s Law

The inventory in the process is related to the throughput rate and throughput time by the
following equation:

W.I.P. Inventory = Throughput Rate x Flow Time
This relation is known as Little’s Law, named after John D.C. Little who proved it mathematically
in 1961. Since the throughput rate is equal to 1 / cycle time, Little’s Law can be written as:

Flow Time = W.I.P. Inventory x Cycle Time
The Process Bottleneck

The process capacity is determined by the slowest series task in the process; that is, having the
slowest throughput rate or longest cycle time. This slowest task is known as the bottleneck.
Identification of the bottleneck is a critical aspect of process analysis since it not only determines
the process capacity, but also provides the opportunity to increase that capacity.
Saving time in the bottleneck activity saves time for the entire process. Saving time in a non-
bottleneck activity does not help the process since the throughput rate is limited by the bottleneck.
It is only when the bottleneck is eliminated that another activity will become the new bottleneck
and present a new opportunity to improve the process.

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