customer flow rate varies throughout B u s i n e s s F i n a n c e
Part 1 – Conceptual understanding of processes and the process improvement template (35 Points)
- (5 points) Draw a process flow diagram of some process that you know. This process could be from your personal life, that you observed somewhere, or that you were a part of in some job, coop, or internship. Your chosen process should have at least three activities. The same person or machine should not do sequential activities in the process (for example, cooking dinner by yourself will not count, but a team making a burger at a fast-food shop is fine). Explain what the flow unit in the process (i.e., what is flowing through the process) is, the inputs and outputs of the process, and the activities.
- (10 points) Choose two activities in your process, and for each of them, complete the following steps:
- Outline the resources and information needed to perform the activity;
- Describe what decisions are made when transforming inputs into outputs;
- Explain how this activity influences throughput, operating expenses, and assets;
- Propose potential metrics for evaluating the impact of the activity on throughput, operating expenses, and assets (inventory);
- Identify at least one incentive alignment or information risk associated with this activity.
- (10 points) For two connections/interfaces between activities in your process, complete the following steps:
- Describe what assets, data, and other information are exchanged in this interface;
- Outline what triggers the exchange and what are exchange rules and dynamics;
- Explain the operating expenses and assets associated with this connection;
- Identify at least one risk associated with this connection.
- (5 points) If you could choose the capacity of each step of this process, where would you place the bottleneck? Why? Make sure to consider the operating expenses and assets associated with your process’s activities and interfaces when choosing your bottleneck placement.
- (5 points) What are two potential problems or risks that you think might emerge in this process that would ultimately reduce throughout, increase operating expenses, or increase assets? What is a possible solution to deal with each of these problems or risks? How would you test these solutions?
Part 2- Beleza Natural Institute Case Study (35 Points)
Figure 1: Banner from Beleza Natural’s Facebook page. Translation: “My hair has power!”
After graduating from Georgia Tech, you join a consulting firm that works with innovative business models in developing countries. You are hired as a consultant by the Beleza Natural Institute (BNI), a hair salon network in Brazil with yearly revenues of $40 million (website: https:// (Links to an external site.) ). BNI seeks to empower, celebrate, and promote the natural beauty of low-income Brazilian women with African heritage (their slogan is “It’s beautiful to be you!”). After learning more about the company, you were excited to work with them since this was a great example of “focus” (more about BNI and their founders Leila Velez and Zica Assishttps://youtu.be/v37BS0El3fU (Links to an external site.)and here: https:// (Links to an external site.) ).
The institute’s main hairdressing service is the Super-Relaxant (SR) treatment. This exclusive treatment uses a patented product applied from the roots to the ends of a client’s hair to make it shinier and softer, form smooth waves and curls, reduce volume, and create greater hair movement.
In contrast to classic hair salons, BNI specializes in one service and has low costs. Also, the service is organized similarly to a production line. You visit a BNI store to understand their process better and find potential process improvements.
Figure 2: BNI Store in Rio de Janeiro
In the store you visit, customers arrive at a constant rate to the institute during the day. The process includes three stages:
- Stage 1: Upon arrival, customers take a ticket with a number and make a payment. It takes 2 min for one worker to process the payment and give further instructions to the customer.
- Stage 2: Then, customers go through the division process – their hair is separated into small triangular sections. It takes a worker 12.5 min to process a single client.
- Stage 3: Finally, the client is given the SR treatment itself. This stage takes 40 min for one worker to apply the treatment to one client.
Currently, each worker works on one activity only. The store hired and trained 2 workers for Stage 1, 8 workers for Stage 2, and 18 workers for Stage 3. Assume that the time that each stage takes is deterministic and has no variability.
Due to rapid growth in the number of stores, BNI hopes that the improvements you suggest can be rolled out to all their network.
Question 1 (5 points)
Draw a diagram of the process, showing the process stages, the time needed to accomplish a task by one worker, and the number of workers assigned to each stage.
Question 2 (5 points)
Where is the bottleneck in the process, and what is the system capacity? Analyze the capacity of each step of the process.
Question 3 (5 points)
Suppose that customer demand depends on the day of the week. On Fridays, the store receives 396 customer requests for appointments; on other working days, there are 288 customers per day requesting an appointment. Assume that there is no variability and that customers arrive uniformly spaced during the day. The store is closed on Saturday and Sunday. Assume that the store is open for 12 hours per working day.
What is the maximum number of customers that the institute can handle per day? What is the utilization of each step in the process in this case? Also, is the system capacity enough to cover the customer requests on all days of the week?
Question 4 (5 points)
Given the data in Question 3, compute the direct labor costs incurred for processing one customer. Suppose that each worker costs $500 per week. Hint: Take into account that the customer flow rate varies throughout the week.
Question 5 (5 points)
Consider a more complicated process, where Stage 1 is the same as before: an incoming customer takes a ticket and makes the payment for a visit. It takes 2 min for a worker to process the payment and give further instructions to the client. However, at Stage 2, customers are examined to find whether they are suitable for the Super-Relaxant treatment. It takes 5 min for the examination of one client by one worker. Three specialists are assigned to this stage of the process. It turns out that, on average, 20% of clients are not suitable for the treatment. Those who are suitable go through (Stage 3) Division and (Stage 4) SR treatment. Here everything is the same as above.
The Division process (Stage 3) takes 12.5 min for one worker to complete for a single client. The SR treatment in Stage 4 takes 40 min to be administered by one worker. Assume 8 workers are assigned to Stage 3 and 18 workers to Stage 4.
For all customers, whether they are suitable for the treatment or not, the Beleza Natural Institute offers (Stage 5) Hydration and Hairstyle service, abbreviated with HH. A worker needs 10 min to administer HH to a client, and the store assigned 4 workers to this task. It turns out that clients treated with SR also take the HH service in 95% of the cases, but those who are not suitable for the SR treatment take the HH service in 50% of the cases.
Draw a diagram of the process, showing the stages of the process, the time needed to accomplish a task by one worker, the number of workers assigned to each stage, and the percentages of clients going through each step.
Question 6 (10 points)
For the setup in Question 5, assume that there is always enough demand. For this new process, where is the bottleneck, and what is the system capacity? Analyze the utilization of each step of the process if the bottleneck is fully utilized.
Part 3- Manufacturing Shampoo (30 Points + 10 Bonus Points)
After graduating from Georgia Tech, Georgina Burdell (granddaughter of Tech’s most famous alumni) took a job helping manage a new P&G shampoo factory in West Virginia. During her first month at P&G, she focused on improving processes at the factory. She quickly learned that shampoo manufacturing is a three-step process. In the first stage, dilution of concentrated surfactant (the main shampoo ingredient) and results in a diluted solution. In this stage, 10% of the material is wasted. In the second stage, the diluted solution is mixed with other ingredients such as color and fragrance. These ingredients are added in a specific proportion (10% of the diluted solution). In the third stage, the solution (which is now shampoo) is cooled and packed into different bottles. During cooling, 5% of the total solution weight is lost due to evaporation. The process is illustrated in the figure below.
Figure 3: The Shampoo Manufacturing Process
Georgina learns that dilution of 1000kg in the dilution stage takes 30 minutes. The mixing stage takes 1 hour to mix 1000kg of total materials (i.e., 900kg of diluted solution + 100kg of other ingredients). In the cooling stage, it takes 30 minutes to cool 1000kg of shampoo. Note that the capacity of the plant refers to the final amount of shampoo produced after cooling.
Question 1 (10 points)
According to the information Georgina has, which process is the bottleneck? What is the capacity of the plant per hour? How much diluted solution (i.e., the dilution stage’s output) is required per hour to run the plant at maximum capacity?
Question 2 (15 points)
While talking to her cousin George Burdel III, a sustainability consultant, Georgina realizes that she can use the waste from the first stage to make “Car Wash,” a car cleaning product. With the new requirement that there should now be zero wastage from the first Dilution stage (i.e., all wastage must be converted into Car Wash), Georgina installs a Car Wash production unit that can process 50kg of waste from the dilution stage in 1 hour. The revised process is depicted below.
Figure 4: The shampoo manufacturing process after the installation of the Car Wash unit
After installation of the Car Wash unit, which process is the bottleneck? How much shampoo can the plant now produce per hour? Explain qualitatively (using the language of throughput, operating expenses, and inventory) the pros and cons of adding the Car Wash unit.
Question 3 (10 points)
What is the minimum capacity that the Car Wash unit requires to ensure that shampoo production’s output is the same as in Question 1?
Question 4 (Bonus – 10 points)
Due to the pandemic, demand for the Car Wash product is lower than expected, while the demand for shampoo, surprisingly, has increased. As a result, P&G’s top management decided to shut down Car Wash production and increase shampoo production. Still concerned about waste, Georgina tests a new waste recovery technology (developed at Georgia Tech!) that can recover 90% of the surfactant wasted during the first Dilution stage. This requires the installation of a Re-Processing unit. The Re-Processing unit can process 100kg of waste in 1 hour. The modified process is displayed in the figure below. Note that any residual wastage left over after going through the Re-Processing unit can still produce Car Wash.
Figure 5: The shampoo manufacturing process after the installation of the Re-Processing Unit
How much shampoo per hour can the plant produce, assuming the Car Wash unit’s capacity remains 50kg/hour? What is the maximum amount of Car Wash that can be produced if the Re-Processing unit’s capacity is increased to 120kg/hr, without changing the capacities of the other processes (dilution, mixing, and cooling)?