How to Improve a Process that has Excess Capacity in Operations Management - dummies

How to Improve a Process that has Excess Capacity in Operations Management

By Mary Ann Anderson, MSE, Edward J. Anderson, Geoffrey Parker

Though every operation manager’s dream is to have unlimited demand for her product or service, many businesses have more than enough capacity; customer demand is the actual bottleneck. In this case, an internal bottleneck no longer exists. Until you can increase the demand, there are some concrete things you can do to reduce your process expenses. These savings can then be used on activities to increase demand.

Line balancing can reduce resource requirements. By combining operations until each new resulting station has a processing time as close to the bottleneck as possible, the process can be staffed with fewer employees or completed with less equipment.

Line balancing process.

With one employee assigned to each operation, the system capacity is 60 customers per hour; the new process requires only four employees. The flow time for any customer remains 225 seconds, and our average utilization is 93.75% if demand is equal to the capacity.

Implementing a flexible process with four employees enables you to increase system capacity to 64 customers per hour (4 customers every 225 seconds).

The key to minimizing expenses is to design process so that the maximum cycle time is as close to demand as possible. In this case, with just one full-time employee, the process capacity would be 16 customers per hours. As you add employees and maintain a flexible configuration, you increase capacity by 16 per hour with each employee.

Of course you can always add part-time employees if you know your demand patterns over the course of the day so you can schedule the resources to work when needed.

Keep in mind that variability in the real world — variability in processing time, customer arrival rates, equipment breakdowns, and other types of unpredictable fluctuations in a given process — affects the clean calculations of this example and the different configurations described.