PROCESS MEASUREMENT

Importance of Measuring Processes

Is the basis for good managementIf you

cant measure it, you cant manage it.
Allows a firm to determine if its
strategically important goals and standards
are being met.
Allows for performance comparisons with
 Types of Performance
Measures
Productivity
The operational efficiency with which inputs are
transformed (converted) into outputs.
Partial measures of productivity can be taken
using the various inputs (e.g., labor, energy, and
materials) that are combined to create a
product. Outputs
Productivity
Inputs
Partial Measures of Productivity
Types of Performance Measures
Capacity
Output of a process in a given period of timeunits of
output per unit of time.
Design capacity
The ideal output rate at which the firm would like to
produce under normal circumstances and for which the
system was designed.
Maximum capacity
The maximum potential output rate that could be achieved
when productive resources are used to their maximum.
Types of Performance Measures
Capacity Utilization
Percentage of available capacity actually used.
Design capacity versus maximum capacity

Homogeneous output

Capacity Actual output

Utilization Design capacity

Variable output
Capacity Actual machine hours used

Utilization Total machine hours available
Measures of Capacity
 Types of Performance Measures

Quality
Usually measured by the defect rate of the products produced.
Speed of Delivery
Products lead timeamount of time from when product is
ordered to when it is shipped.
Inventoried versus customized products
Variability/Uncertainty in delivery time
Less uncertainty in delivery times is better.
 Types of Performance Measures

Flexibility
The measure of how readily a firms transformation
process can adjust to changes in customer demand (i.e.,
agile manufacturing).
Flexibility Measures
How quickly a process can convert from producing one
product to another product.
How quickly a process can adjust to changes in volume
(demand).
 Types of Performance Measures
(contd)

Process Velocity (Manufacturing Velocity)

Ratio of total throughput time for a product to
the value-added time.
Throughput timethe time the product
spends in the process.
Value-added timethe time it takes to
complete the product.
Total throughput time
Process velocity =
Value-added time