Table Of ContentManaging Business Process Flows
This page intentionally left blank
Third Edition
Managing Business Process Flows
PRINCIPLES OF OPERATIONS MANAGEMENT
Ravi Anupindi
University of Michigan
Sunil Chopra
Northwestern University
Sudhakar D. Deshmukh
Northwestern University
Jan A. Van Mieghem
Northwestern University
Eitan Zemel
New York University
Prentice Hall
Boston Columbus Indianapolis New York San Francisco Upper Saddle River
Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto
Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo
Editorial Director:Sally Yagan
Editor in Chief:Eric Svendsen
Senior Acquisitions Editor:Chuck Synovec
Senior Project Manager: Mary Kate Murray
Editorial Assistant: Ashlee Bradbury
Director of Marketing: Patrice Lumumba Jones
Executive Marketing Manager: Anne Fahlgren
Production Project Manager: Clara Bartunek
Creative Art Director: Jayne Conte
Cover Designer: Suzanne Duda
Cover Art: Fotolia
Manager, Rights and Permissions: Hessa Albader
Media Project Manager: John Cassar
Media Product Manager: Sarah Peterson
Full-Service Project Management: Mohinder Singh/Aptara®, Inc.
Printer/Binder: Edwards Brothers Incorporated
Cover Printer: Lehigh-Phoenix Color/Hagerstown
Text Font: Palatino
Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this
textbook appear on appropriate page within text.
Copyright © 2012, 2006, 1999 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street,
Upper Saddle River, New Jersey 07458.All rights reserved. Manufactured in the United States of America.
This publication is protected by Copyright, and permission should be obtained from the publisher prior to
any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means,
electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from
this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake
Street, Upper Saddle River, New Jersey 07458.
Many of the designations by manufacturers and seller to distinguish their products are claimed as
trademarks. Where those designations appear in this book, and the publisher was aware of a trademark
claim, the designations have been printed in initial caps or all caps.
Library of Congress Cataloging-in-Publication Data
Managing business process flows : principles of operations management / Ravi Anupindi . . . [et al.].—3rd ed.
p. cm.
Includes index.
ISBN-13: 978-0-13-603637-1
ISBN-10: 0-13-603637-6
1. Production management. 2. Process control. I. Anupindi, Ravi.
TS155.M33217 2012
658.5—dc23
2011023366
10 9 8 7 6 5 4 3 2 1
ISBN 10: 0-13-603637-6
ISBN 13: 978-0-13-603637-1
BRIEF CONTENTS
Prefacexv
PART I Process Management and Strategy 1
Chapter 1 Products, Processes, and Performance 2
Chapter 2 Operations Strategy and Management 20
PART II Process Flow Metrics 45
Chapter 3 Process Flow Measures 46
Chapter 4 Flow-Time Analysis 80
Chapter 5 Flow Rate and Capacity Analysis 102
Chapter 6 Inventory Analysis 121
PART III Process Flow Variability 151
Chapter 7 Managing Flow Variability: Safety Inventory 152
Chapter 8 Managing Flow Variability: Safety Capacity 188
Chapter 9 Managing Flow Variability: Process Control and Capability 229
PART IV Process Integration 271
Chapter 10 Lean Operations: Process Synchronization and Improvement 272
Appendix I MBPF Checklist 303
Appendix II Probability Background 306
Solutions to Selected Problems 311
Glossary 317
Index 324
v
This page intentionally left blank
CONTENTS
Prefacexv
PART I Process Management and Strategy 1
Chapter 1 Products, Processes, and Performance 2
Introduction 2
1.1 The Process View of Organizations 3
1.2 Performance Measures 7
1.2.1 The Importance of Measurement: Management by Fact 7
1.2.2 Types of Measures: Financial, External, and Internal 7
1.3 Products and Product Attributes 10
1.4 Processes and Process Competencies 13
1.5 Enabling Process Success 14
1.6 Some Basic Process Architectures 15
1.7 The Plan of the Book 17
Summary 18
Key Terms 18
Discussion Questions 18
Selected Bibliography 19
Chapter 2 Operations Strategy and Management 20
Introduction 20
2.1 Strategic Positioning and Operational Effectiveness 21
2.2 The Strategy Hierarchy 23
2.3 Strategic Fit 25
2.4 Focused Operations 27
2.5 Matching Products and Processes 30
2.6 The Operations Frontier and Trade-Offs 31
2.7 The Evolution of Strategy and Operations Management 37
2.8 The Opportunity Today in Service Operations 40
Summary 41
Key Terms 42
Discussion Questions 42
Selected Bibliography 43
PART II Process Flow Metrics 45
Chapter 3 Process Flow Measures 46
Introduction 46
3.1 The Essence of Process Flow 47
3.2 Three Key Process Measures 48
vii
viii Contents
3.3 Flow Time, Flow Rate, and Inventory Dynamics 50
3.4 Throughput in a Stable Process 55
3.5 Little’s Law: Relating Average Flow Time, Throughput, and
Average Inventory 55
3.5.1 Material Flow 57
3.5.2 Customer Flow 57
3.5.3 Job Flow 58
3.5.4 Cash Flow 58
3.5.5 Cash Flow (Accounts Receivable) 58
3.5.6 Service Flow (Financing Applications at Auto-Moto) 59
3.6 Analyzing Financial Flows through Financial Statements 63
3.6.1 Assessing Financial Flow Performance 63
3.6.2 Cash-to-Cash Cycle Performance 67
3.6.3 Targeting Improvement with Detailed Financial
Flow Analysis 67
3.7 Two Related Process Measures: Takt Time and Inventory Turns
(Turnover Ratio) 70
3.7.1 Takt Time 70
3.7.2 Inventory Turns 70
3.8 Linking Operational to Financial Metrics: Valuing
an Improvement 71
3.8.1 Linking Operational Improvements to NPV 71
3.8.2 Linking Operational Improvements to Financial Ratios 73
Summary 75
Key Equations and Symbols 75
Key Terms 76
Discussion Questions 76
Exercises 76
Selected Bibliography 79
Chapter 4 Flow-Time Analysis 80
Introduction 80
4.1 Flow-Time Measurement 81
4.2 The Process Flowchart 83
4.3 Flow Time and Critical Paths 84
4.4 Theoretical Flow Time and the Role of Waiting 86
4.4.1 Flow-Time Efficiency 87
4.5 Levers for Managing Theoretical Flow Time 90
4.5.1 Moving Work Off the Critical Path 91
4.5.2 Reduce Non-Value-Adding Activities 91
4.5.3 Reduce the Amount of Rework 92
4.5.4 Modifying the Product Mix 92
4.4.5 Increase the Speed of Operations 92
4.4.6 Zhang & Associates Revisited 93
Contents ix
Summary 94
Key Equations and Symbols 95
Key Terms 95
Discussion Questions 95
Exercises 96
Selected Bibliography 97
Appendix 4.1 Subprocesses and Cascading 98
Appendix 4.2 The Critical Path Method 99
Appendix 4.3 Rework and Visits 101
Chapter 5 Flow Rate and Capacity Analysis 102
Introduction 102
5.1 Flow Rate Measurements 103
5.2 Resources and Effective Capacity 103
5.2.1 Resources and Resource Pools 103
5.2.2 Effective Capacity 104
5.2.3 Capacity Utilization 105
5.2.4 Extensions: Other Factors Affecting Effective Capacity 106
5.3 Effect of Product Mix on Effective Capacity and Profitability
of a Process 106
5.3.1 Effective Capacity for Product Mix 107
5.3.2 Optimizing Profitability 108
5.4 Capacity Waste and Theoretical Capacity 109
5.4.1 Theoretical Capacity 109
5.4.2 Theoretical Capacity Utilization 110
5.5 Levers for Managing Throughput 110
5.5.1 Throughput Improvement Mapping 111
5.5.2 Increasing Resource Levels 112
5.5.3 Reducing Resource Capacity Waste 112
5.5.4 Shifting Bottlenecks and the Improvement Spiral 113
Summary 114
Key Equations and Symbols 114
Key Terms 114
Discussion Questions 115
Exercises 115
Selected Bibliography 116
Appendix 5.1 Other Factors Affecting Effective Capacity: Load
Batches, Scheduled Availability, and Setups 117
Appendix 5.2 Optimizing Product Mix with Linear
Programming 119
Chapter 6 Inventory Analysis 121
Introduction 121
6.1 Inventory Classification 122
