Operations Management Basics: Finding the bottleneck in processes with attrition loss
A 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 through a four-step process:
- Step A: 300 people apply per mail
- Step B: Out of those, 100 people are invited (100/300)
- Step C: Out of those, 20 people can make an internship (20/100)
- Step D: One of the people doing the internship is hired (1/20)
Unlike the previously analysed processes, not every flow unit makes it to the end of the process (in the example, actually just one flow unit comes through). In this case, it would be misleading to just look at the overall capacity of each resource involved to determine the bottleneck. Instead, the following three steps need to be taken:
- Step 1: Determine the capacity of each resource in the process (m / activity time or units per hour)
- Step 2: Calculate the service demand for each of these resources considering the drop-out of units
- Step 3: Divide the total workload by the available time to calculate the implied utilization
The bottleneck is the resource with the highest implied utilization, which does – again – not need to be the resource with the lowest capacity.
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.