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Capacity, bottleneck, process capacity, flow rate and utilization


In order to perform the following calculations, processing time has to be defined as the time that is spent on a certain task (e.g. one station in a sandwich restaurant). We will also need the previously introduced definitions of flow rate and flow time.

Capacity: The capacity can be calculated for every station in a business process. It is always m / processing time with m being the number of resources (e.g. workers) being devoted to the station. If, for example, one worker needs 40 seconds to put together a sandwich, the capacity of this station is 1/40 per second or 1,5 sandwiches per minute. If there are two workers on the same station, the capacity increases to 2/40 per second or 3 sandwiches per minute.

Bottleneck: The bottleneck is defined as the process step (station) in the flow diagram with the lowest capacity (the “weakest link”). Although the bottleneck is often the process step with the longest processing time, it is important to always look at the capacities for making a judgement.

Process capacity: The process capacity is always equivalent to the capacity of the bottleneck. It is useful, to calculate a comprehensible number, such as customers per hour or parts per day (instead of a hard to comprehend number such as 1/40 customer per second or 1/345 part per second).

Flow rate: Even though the flow rate was previously defined, the definition needs to be augmented as the flow rate being the minimum of demand and process capacity. While the flow rate logically can never be higher than the capacity of the bottleneck, it can very well be lower, if the demand is insufficient.

Utilization: The utilization tells us, how well a resource is being used. It is calculated as flow rate divided by capacity (e.g. 1/40 / 1/25). The utilization always lies between 0% and 100%.

These lecture notes were taken during 2013 installment of the MOOC “An Introduction to Operations Management” taught by Prof. Dr. Christian Terwiesch of the Wharton Business School of the University of Pennsylvania at Coursera.org.
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16 Comments

  1. […] be finished in order to collect on the customer. If the demand is maxed out, the idle time at the bottleneck is always […]

  2. […] the American professor John Little (1950s). It defines the relationship between the inventory, the flow rate and the flow time, who have all been already defined […]

  3. […] Since many flow units (e.g. customers in a shop, patients in a hospital) do not at all need the very same treatment or service, business processes have to serve different needs. Processing times thus might be quite different for each flow unit as well, even the path of flow units through the process diagram might differ. For such processes with so-called multiple flow units, we need new tools to figure out which process step can bee seen as the bottleneck. […]

  4. […] process with multiple steps might have an attrition loss (of flow units) on every step. Take, for example, a process in which 300 people apply for a job opening and go […]

  5. […] general, idle time is the time during which a resource is not fully used because of low demand or bottleneck restraints, which, in turn, reduces productivity. Idle time is, however, not the only (and not even […]

  6. […] for every business executive. This is especially the case when operations are constrained by the bottleneck (and not by low demand). In those cases, even minimal operational improvements at the bottleneck […]

  7. […] a lot of idle time, maybe it can take over some of the workload from the workstation at the bottleneck. The basic line balancing procedure consists of four […]

  8. […] often have a significant effect on the performance of a process and can even determine a process bottleneck. The most important definition here is that of the batch: A batch is the number of flow units, […]

  9. […] are chosen, is called a mixed-model strategy. Since smaller batch sizes have a negative impact on capacity because of the set-up time, reducing the set-up time is an important enabler for running a […]

  10. […] so small, that the process step with the set-up time (assuming, that there is only one) becomes the bottleneck of the process, the process looses on overall efficiency. Thus, the batch size needs to be chosen […]

  11. […] for solving waiting time problems can include increasing the capacity of the resource at the bottleneck as well as increasing process flexibility in order to ensure, that capacity is available at the […]

  12. […] value. This so-called waiting time formula can only be used if the demand is lower than the capacity. If the demand is higher than the capacity, the waiting time will ultimately not be driven by […]

  13. […] (one machine, one worker, one physician) doing all the work (m = 1). But what happens if the capacity is determined by more than one resource? Calculating waiting times with multiple resources involved […]

  14. […] to answer that question it has to be noted, that reworking defects can turn a process step into a bottleneck, which has not been the bottleneck before. Reworking defects (and thus, defects themselves) can […]

  15. […] step, we have to forfeit the value of an entire flow unit (including profit). The location of the bottleneck is especially important here. This is because defective flow units that are produced before the […]

  16. […] over time and (b) cause higher monetary losses once the defective flow units get through to the process bottleneck. Both problems provide huge incentives for figuring out how to detect defects as soon as possible. […]

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