Introduction Operations Management tutorial-1.pptx
- 2. Introduction to Operations Management • There are 3 basic business functions in an organization. • Marketing-which generates the demand, or at least takes the order for a product or service (nothing happens until there is a sale). • Production/operations-which creates the product. • Finance/accounting-tracks how well the organization is doing, pays the bills, and collects the money.
- 3. Definitions of Operations and OM • Production is the creation of goods and services. 1. Operations Management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs. 2. Operations Management designs, operates, and improves productive systems-systems for getting work done. 3. Operations is often defined as a transformation process.
- 4. Cont… • A transformation process is defined as a usage of resources to transform inputs into some desired outputs. • Transformational processes can be categorized as follows: Physical—manufacturing Location—transportation Exchange—retailing Storage—warehousing Physiological--health care Informational—telecommunications
- 6. Reasons to study OM • how people organize themselves for productive enterprise • to know how goods and services are produced • to understand what operations managers do • because it is such a costly part of an organization
- 7. Scope of OM Ten critical Decision Issues 1. Design of goods and services What good or service should we offer? How should we design these products and services? 2. Managing quality How do we define quality? Who is responsible for quality? 3. Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes? 4. Location strategy Where should we put the facility? On what criteria should we base the location decision? 5. Layout strategy How should we arrange the facility? How large must the facility be to meet our plan?
- 8. Cont… 6. Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce? 7. Supply chain management Should we make or buy this component? Who are our suppliers and who can integrate into our e-commerce program? 8. Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order? 9. Intermediate and short– term scheduling Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next? 10. Maintenance Who is responsible for maintenance? When do we do maintenance?
- 9. CHAPTER 2 Operations Strategy for Competitive Advantage
- 10. The Role of Operations Strategy • Provide a plan that makes best use of resources which; • Specifies the policies and plans for using organizational resources • Supports Business Strategy as shown on next slide
- 12. Importance of Operations Strategy • Operations strategy ensures all tasks performed are the right tasks • Essential differences between operational efficiency and strategy: • Operational efficiency is performing tasks well, even better than competitors • Strategy is a plan for competing in the marketplace
- 13. To Develop a Business Strategy • Consider these factors in strategic decisions: • What business is the company in (mission) It answers three overriding questions a. What business will the company be in (“selling personal computers”, “operating an Italian restaurant”)? b. Who will the customers be, and what are the expected customer attributes (“homeowners”, “college graduates”)? c. How will the company’s basic beliefs define the business (“gives the highest customer service”, ”stresses family values”)? • Analyze and understand the market (environmental scanning) • Identify the company strengths (core competencies)
- 14. Three Inputs to a Business Strategy
- 15. Key Examples • Mission: Dell Computer- “to be the most successful computer company in the world” • Environmental Scanning: political trends, social trends, economic trends, market place trends, global trends • Core Competencies: strength of workers, modern facilities, market understanding, best technologies, financial know-how, logistics
- 16. Developing an Operations Strategy Operations Strategy: a plan for the design and management of operations functions • is developed after the business strategy • focuses on specific capabilities which give it a competitive edge – competitive priorities
- 17. Developing operation strategies and competitive dimensions
- 18. Competitive dimensions of operations • Cost: “make it cheap” • Quality: “make it good” • Speed of delivery: “make it fast” • Reliability: “provide it when promised” • Coping with change in demand: “change its volume” • Flexibility and new product development: “change it” • Other product-specific criteria: “support it”
- 19. Competitive Priorities- The Edge • Four Key Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? • All of the above? Some? Tradeoffs?
- 21. Competitive advantage • implies the creation of a system that has a unique advantage over competitors. • Firms achieve missions in three conceptual ways: (1) differentiation, (2) cost leadership, and (3) response i.e. operations managers are called on to deliver goods and services that are (1) better, or at least different, (2) cheaper, and (3) more responsive.
- 22. Competing on Differentiation • Differentiation is concerned with providing uniqueness. • A firm's opportunities for creating uniqueness are not located within a particular function or activity but can arise in virtually everything the firm does. • differentiation going beyond both physical characteristics and service attributes to encompass everything about the product or service. • In the service sector, one option for extending product differentiation is through an experience. • Experience differentiation is to engage the customer-to use people's five senses so they become an active participant in the product.
- 23. For example Competing on Quality • Quality is often subjective • Quality is defined differently depending on who is defining it • Two major quality dimensions include • High performance design: • Superior features, high durability, & excellent customer service • Product & service consistency: • Meets design specifications • Close tolerances • Error free delivery • Quality needs to address • Product design quality – product/service meets requirements • Process quality – error free products
- 24. Competing on Cost • Low-cost leadership entails achieving maximum value as defined by your customer. • It requires examining each of the 10 OM decisions in a relentless effort to drive down costs while meeting customer expectations of value. • A low-cost strategy does not imply low value or low quality.
- 25. Cont… • Offering product at a low price relative to competition oTypically high volume products oOften limit product range & offer little customization oMay invest in automation to reduce unit costs oCan use lower skill labor oProbably uses product focused layouts oLow cost does not mean always low quality
- 26. Competing On Response • Flexible response may be thought of as the ability to match changes in a marketplace where design innovations and volumes volumes fluctuate substantially. • The second aspect of response is the reliability of scheduling. • The third aspect of response is quickness.
- 27. Competing on Time • Time/speed is one of the most important competition priorities • First that can deliver often wins the race • Time related issues involve • Rapid delivery: • Focused on shorter time between order placement and delivery • On-time delivery: • Deliver product exactly when needed every time
- 28. Competing on Flexibility • Company environment changes rapidly • Company must accommodate change by being flexible • Product flexibility: • Easily switch production from one item to another • Easily customize product/service to meet specific requirements of a customer • Volume flexibility: • Ability to ramp production up and down to match market demands
- 29. The Need for Trade-offs • Trade-offs: The need to focus more on one competitive priority than on others • Decisions must emphasize priorities that support business strategy • Decisions often required trade offs • Decisions must focus on order qualifiers and order winners • Which priorities are “Order Qualifiers”? • Order qualifiers: Competitive priorities that must be met for a company to qualify as a competitor in the marketplace. Must have excellent quality since everyone expects it • Order winners: Competitive priorities that win orders in the marketplace. Dell competes on all four priorities McDonald’s competes on consistency FedEx competes on speed Southwest Airlines competes on cost
- 30. Operations strategy for two Drug Companies Competitive Advantage Brand Name Drugs, Inc. Generic Drug Corp. Product Differentiation Low Cost Product Selection and Design Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories Low R&D investment; focus on development of generic drugs Quality Major priority, exceed regulatory requirements Meets regulatory requirements on a country by country basis Process Product and modular process; long production runs in specialized facilities; build capacity ahead of demand Process focused; general processes; “job shop” approach, short-run production; focus on high utilization Location Still located in the city where it was founded Recently moved to low-tax, low- labor-cost environment Scheduling Centralized production planning Many short-run products complicate scheduling
- 31. Layout Layout supports automated product- focused production Layout supports process- focused “job shop” practices Human Resources Hire the best; nationwide searches Very experienced top executives; other personnel paid below industry average Supply Chain Long-term supplier relationships Tends to purchase competitively to find bargains Inventory High finished goods inventory to ensure all demands are met Process focus drives up work- in-process inventory; finished goods inventory tends to be low Maintenance Highly trained staff; extensive parts inventory Highly trained staff to meet changing demand
- 32. Chapter THREE Product and Service Design
- 33. 3.1 GOODS AND SERVICES SELECTION • Product decision involves the selection, definition, and design of products. • Product selection is choosing the good or service to provide customers or clients. • The objective of the product decision is to develop and implement a product strategy that meets the demands of the marketplace with a competitive advantage.
- 34. Product Design - defined Product design – the process of defining product characteristics • Product design must support product manufacturability (the ease with which a product can be made) • Product design defines a product’s characteristics of: •appearance, •materials, •dimensions, • tolerances, and •performance standards
- 35. Design of Services versus Goods • The process of establishing all the characteristics of the service, including physical, sensual, and psychological benefits. • Service design is unique in that the service and entire service concept are being designed • must define both the service and concept - Physical elements, aesthetic & psychological benefits e.g. promptness, friendliness, ambiance • Product and service design must match the needs and preferences of the targeted customer group
- 36. The Product Design Process Idea development: all products begin with an idea whether from: Customers, Competitors, Benchmarking- process of studying the practices of companies considered “best-in- class” and comparing your company’s performance against theirs. Reverse engineering: buying a competitor’s product and study its design features Or Suppliers Early supplier involvement (ESI)-involving suppliers in the early stages of product design.
- 37. Product Design Process • Idea developments selection affects • Product quality • Product cost • Customer satisfaction • Overall manufacturability – the ease with which the product can be made
- 39. The Product Design Process Step 1 - Idea Development - Someone thinks of a need and a product/service design to satisfy it: customers, marketing, engineering, R & D, competitors (benchmarking, reverse engineering, conceptual mapping). Step 2 - Product Screening - Every business needs a formal/structured evaluation process: fit with facility and labor skills, size of market, contribution margin, break-even analysis, return on sales Step 3 – Preliminary Design and Testing - Technical specifications are developed, prototypes built, testing starts Step 4 – Final Design - Final design based on test results, facility, equipment, material, & labor skills defined, suppliers identified
- 40. Issues in Product Design Several techniques are important to the design of a product. 1. concurrent design, 2. robust design, 3. modular design, 4. computer-aided design (CAD), 5. computer-aided manufacturing (CAM), 6. value analysis. 7. Design for Environment (DFE)
- 41. 1. Concurrent Design • three types of concurrent designs: form, functional, and production design. • Form design: the physical appearance of a product-its shape, color, size, and style. Aesthetics such as image, market appeal, and personal identification. • functional design must be adjusted to make the product look or feel right • Functional design: concerned with how the product performs. It seeks to meet the performance specifications of fitness for use by the customer. • Three performance characteristics considered during functional phase of design are reliability, maintainability, and usability.
- 42. RELIABILITY • Reliability is the probability that a given part or product will perform its intended function for a specified length of time under normal conditions of use. • A product or system’s reliability is a function of the reliabilities of its component parts and how the parts are arranged. • If all parts must function for the product or system to operate, then the system reliability is the product of the component part reliabilities. • Rs = (R1)(R2) . . . (Rn), where Rn is the reliability of the nth component, Rs- System reliability
- 43. Example • If three component parts are required and has the specified reliability, the reliability of the system is 0.90 * 0.80*0.99 = 0.0713, 71.3%. • Note:-system reliability of 0.713 is considerably less than the component reliabilities. • As the number of serial components increases, system reliability will continue to deteriorate. This makes a good argument for simple designs with fewer components!
- 44. RELIABILITY CONT… • To increase the reliability of individual parts (and thus the system as a whole), redundant parts can be built in to back up a failure. • Consider the following redundant design with R1 representing the reliability of the original component and R2 the reliability of the backup component.
- 45. RELIABILITY CONT… • Reliability can also be expressed as the length of time a product or service is in operation before it fails, called the mean time between failures (MTBF). • In this case, we are concerned with the distribution of failures over time, or the failure rate. The MTBF is the reciprocal of the failure rate (MTBF = 1/failure rate).
- 47. MAINTAINABILITY • the ease and/or cost with which a product or service is maintained or repaired. • Products can be made easier to maintain by assembling them in modules, like computers. • The location of critical parts or parts subject to failure affects the ease of disassembly and, thus, repair. USABILITY • is what makes a product or service easy to use and a good fit for its targeted customer. Ease of learning, ease of use, and ease of remembering how to use, frequency and severity of errors, and user satisfaction with the experience are factors to be considered.
- 48. PRODUCTION DESIGN • concerned with how the product will be made. • Designs those are difficult to make often result in poor-quality products. • Late changes in design are both costly and disruptive. • It should be considered in the preliminary design phase, otherwise that leads to unraveling of the entire product design. • Recommended approaches to production design include simplification, standardization, modularity, and design for manufacture.
- 49. Design simplification • attempts to reduce the number of parts, subassemblies, and options in a product. • It also means avoiding tools, separate fasteners, and adjustments. Standardization It makes possible the interchangeability of parts among products, resulting in higher-volume production and purchasing, lower investment in inventory, easier purchasing and material handling, fewer quality inspections, and fewer difficulties in production.
- 50. Design for Manufacture (DFM) • It is the process of designing a product so that it can be produced easily and economically. • The term was coined in an effort to emphasize the importance of incorporating production design early in the design process. • When successful, DFM not only improves the quality of product design but also reduces both the time and cost of product design and manufacture.
- 51. DFM Cont… • DFM guidelines promote good design practice, such as: • Minimize the number of parts and subassemblies. • Avoid tools, separate fasteners, and adjustments. • Use standard parts when possible and repeatable, well- understood processes. • Design parts for many uses, and modules that can be combined in different ways • Design for ease of assembly, minimal handling, and proper presentation. • Allow for efficient and adequate testing and replacement of parts.
- 52. 2. ROBUST DESIGN • the product is designed so that small variations in production or assembly do not adversely affect the product. 3. MODULAR DESIGN • Parts or components of a product are subdivided into modules that are easily interchanged or replaced. • Modular designs offer • Flexibility to both production and marketing. • product development, production, and subsequent changes easier • Flexibility to the ways customers can be satisfied.
- 53. 4. Computer-Aided Design (CAD) • The use of computers to interactively design products and prepare engineering documentation. • The speed and ease with which sophisticated designs can be manipulated, analyzed, and modified with CAD makes review of numerous options possible before final commitments are made. • Faster development, better products, and accurate flow of information to other departments-all contribute to a tremendous payoff for CAD.
- 54. 5. Computer-Aided Manufacturing (CAM) • The use of specialized computer programs to direct and control manufacturing equipment. • When computer-aided design (CAD) information is translated into instructions for computer-aided manufacturing (CAM), the result of these two technologies is CAD/CAM. • Benefits of CAD/CAM • Product quality: it permits the designer to investigate more alternatives, potential problems, and dangers. • Shorter design time: lowers cost and allows a more rapid response to the market. • Production cost reductions: • Database availability: • New range of capabilities
- 55. 6. Value Analysis • It is also called value engineering. • Aims to eliminate unnecessary features and functions in product designs. • It has reemerged as a technique for use by multifunctional design teams. • The design team defines the essential functions of a component, assembly, or product using a verb and a noun.
- 56. 7. Design for environment (DFE) • It involves many aspects of design • Designing products from recycled material, reducing hazardous chemicals, • using materials or components that can be recycled after use, • Designing a product so that it is easier to repair than discard, and • Minimizing unnecessary packaging.
- 57. Factors Impacting Product Design 1. Must Design for Manufacturing – DFM • Guidelines to produce a product easily and profitably • Simplification - Minimize parts &features • Standardization • Design parts for multiple applications • Use modular design • Simplify operations
- 58. Factors Impacting Product Design 2. Product life cycle – series of changing product demand • Consider product life cycle stages • Introduction • Growth • Maturity • Decline • Facility & process investment depends on life cycle
- 59. Factors Impacting Product Design 3. Concurrent Engineering Old “over-the-wall” sequential design process should not be used • Each function did its work and passed it to the next function Replace with a Concurrent Engineering process • All functions form a design team that develops specifications, involves customers early, solves potential problems, reduces costs, & shortens time to market
- 60. Factors Impacting Product Design 4. Remanufacturing • Uses components of old products in the production of new ones and has: oEnvironmental benefits oCost benefits • Good for: oComputers, televisions, automobiles
- 61. Product and Service Strategy • Type of operation is directly related to product and service strategy • Three basic strategies include 1. Make-to-stock; in anticipation of demand 2. Assemble-to-order; built from standard components on order 3. Make-to-order; produce to customer specification at time of order
- 62. Product and Service Strategy Options
- 63. Designing Services: How do they Differ from Manufacturing? • Services are different from manufacturing as they; • Produce intangible products • Involve a high degree of customer contact • They are not inventorable • But often, we find services and products in an integrated manner.
- 64. SERVICE DESIGN • Designing services is challenging because they often have unique characteristics. • Design specifications may take the form of a contract or a narrative description with photos (such as for cosmetic surgery or a hairstyle). • The customer may be involved in the delivery of a service or in both design and delivery, a situation that maximizes the product design challenge.
- 65. Service package • A grouping of physical, sensual, and psychological benefits that are purchased together as part of the service. • physical -the tangible aspects of the service that we receive, or are in contact with, during service delivery. • sensual benefits- the sights, smell, and sounds of the experience (all the items we experience through our senses) • psychological benefits-the status, comfort, and well-being provided by the experience. • NB. During service design the sensual and psychological benefits must be considered.
- 66. Techniques of Service Design • A number of techniques can both reduce costs and enhance the product. 1. to design the product so that customer is delayed as late in the process as possible. (e.g. Hair salon operation) 2. to modularize the product so that customization takes the form of changing modules. (e.g. college curricula) 3. to divide the service into small parts and identify those parts that lend themselves to automation or reduced customer interaction. 4. to focus design on the so-called moment of truth. The momentum of truth is the moment that exemplifies, enhances, or detracts from the customer's expectations.
- 67. Techniques of Service Design cont… • Get the Customer Involved:-take advantage of the customer’s presence during the delivery of the service and have him or her become an active participant. • it takes a large burden away from the service provider. • empowers customers and gives them a greater sense of control in terms of getting what they want, and increase satisfaction. • High Customer Attention Approach:-providing a high level of customer attention. • customizing the service to the needs unique to each customer and having the customer be the passive and pampered recipient of the service.
- 68. CHAPTER FOUR Process Design And Capacity Planning
- 69. Introduction • A major decision for an operations manager is finding the best way to produce so as not to waste our planet's resources. • A process- • Group of related tasks with specific inputs and outputs. • Exist to create value for the customer, the shareholder, or society. • Process design defines what tasks need to be done and how they are to be coordinated among functions, people, and organizations.
- 70. PROCESS STRATEGIES • A process (or transformation) strategy is an organization's approach to transforming resources into goods and services. • The objective of a process strategy is to build a production process that meets customer requirements and product specifications within cost and other managerial constraints. • The process selected will have a long-term effect on efficiency and flexibility of production, as well as on cost and quality of the goods produced. • Therefore, the limitations of a firm's operations strategy are determined at the time of the process decision. • Virtually every good or service is made by using some variation of one of four process strategies: (1) process focus, (2) repetitive focus,
- 71. 1. Process Focus • Devoted to making low-volume, high-variety products in places called "job shops." • Such facilities are organized around specific activities or processes. • They provide a high degree of product flexibility as products move between processes. • Each process is designed to perform a wide variety of activities and handle frequent changes. • they are also called intermittent processes. • Process-focused facilities have high variable costs with extremely low utilization of facilities, as low as 5%. • This is the case for many restaurants, hospitals, and machine
- 72. 2. Repetitive Focus • A repetitive process falls between the product and process focuses. • Repetitive processes use modules. • Modules are parts or components previously prepared, often in a continuous process. • The repetitive process is the classic assembly line. • Widely used in the assembly of virtually all automobiles and household appliances, it has more structure and consequently less flexibility than a process focused facility. • Fast-food firms are another example of a repetitive process using modules. • This type of production allows more customizing than a product- focused facility; modules (for example, meat, cheese, sauce, tomatoes, onions) are assembled to get a quasi-custom product, a cheeseburger. • In this manner, the firm obtains both the economic advantages of
- 73. 3. Product Focused • High-volume, low-variety processes are product focused. • The facilities are organized around products. • They are also called continuous processes, because they have very long, continuous production runs. • Products such as glass, paper, tin sheets, light bulbs, beer, and potato chips are made via a continuous process. • The specialized nature of the facility requires high fixed cost, but low variable costs reward high facility utilization.
- 74. 4. Mass Customization Focus • Mass customization is the rapid, low-cost production of goods and services that fulfill increasingly unique customer desires. • But mass customization is not just about variety; it is about making precisely what the customer wants when the customer wants it economically. • Mass customization brings us the variety of products traditionally provided by low-volume manufacture (a process focus) at the cost of standardized high-volume (product- focused) production. • However, achieving mass customization is a challenge that requires sophisticated operational capabilities. Building agile processes that rapidly and inexpensively produce
- 75. Comparison of process choices P Pr ro oc ce es ss s F Fo oc cu us s ( (L Lo ow w v vo ol lu um me e, , h hi ig gh h v va ar ri ie et ty y) ) R Re ep pe et ti it ti iv ve e F Fo oc cu us s ( (M Mo od du ul la ar r) ) P Pr ro od du uc ct t F Fo oc cu us s ( (H Hi ig gh h- -v vo ol lu um me e, , l lo ow w v va ar ri ie et ty y) ) M Ma as ss s C Cu us st to om mi iz za at ti io on n ( (H Hi ig gh h- -v vo ol lu um me e, , h hi ig gh h- - v va ar ri ie et ty y) ) S Sm ma al ll l q qu ua an nt ti it ty y, , l la ar rg ge e v va ar ri ie et ty y o of f p pr ro od du uc ct ts s L Lo on ng g r ru un ns s, , s st ta an nd da ar rd di iz ze ed d p pr ro od du uc ct t m ma ad de e f fr ro om m m mo od du ul le es s L La ar rg ge e q qu ua an nt ti it ty y, , s sm ma al ll l v va ar ri ie et ty y o of f p pr ro od du uc ct ts s L La ar rg ge e q qu ua an nt ti it ty y, , l la ar rg ge e v va ar ri ie et ty y o of f p pr ro od du uc ct ts s G Ge en ne er ra al l p pu ur rp po os se e e eq qu ui ip pm me en nt t S Sp pe ec ci ia al l e eq qu ui ip pm me en nt t a ai id ds s i in n u us se e o of f a as ss se em mb bl ly y l li in ne e S Sp pe ec ci ia al l p pu ur rp po os se e e eq qu ui ip pm me en nt t R Ra ap pi id d c ch ha an ng ge eo ov ve er r o on n f fl le ex xi ib bl le e e eq qu ui ip pm me en nt t O Op pe er ra at to or rs s a ar re e b br ro oa ad dl ly y s sk ki il ll le ed d E Em mp pl lo oy ye ee es s a ar re e m mo od de es st tl ly y t tr ra ai in ne ed d O Op pe er ra at to or rs s a ar re e l le es ss s b br ro oa ad dl ly y s sk ki il ll le ed d F Fl le ex xi ib bl le e o op pe er ra at to or rs s a ar re e t tr ra ai in ne ed d f fo or r t th he e n ne ec ce es ss sa ar ry y c cu us st to om mi iz za at ti io on n M Ma an ny y j jo ob b i in ns st tr ru uc ct ti io on ns s a as s e ea ac ch h j jo ob b c ch ha an ng ge es s R Re ep pe et ti it ti io on n r re ed du uc ce es s t tr ra ai in ni in ng g a an nd d c ch ha an ng ge es s i in n j jo ob b i in ns st tr ru uc ct ti io on ns s F Fe ew w w wo or rk k o or rd de er rs s a an nd d j jo ob b i in ns st tr ru uc ct ti io on ns s b be ec ca au us se e j jo ob bs s s st ta an nd da ar rd di iz ze ed d C Cu us st to om m o or rd de er rs s r re eq qu ui ir re e m ma an ny y j jo ob b i in ns st tr ru uc ct ti io on ns s R Ra aw w m ma at te er ri ia al l i in nv ve en nt to or ri ie es s h hi ig gh h J JI IT T p pr ro oc cu ur re em me en nt t t te ec ch hn ni iq qu ue es s u us se ed d R Ra aw w m ma at te er ri ia al l i in nv ve en nt to or ri ie es s a ar re e l lo ow w R Ra aw w m ma at te er ri ia al l i in nv ve en nt to or ri ie es s a ar re e l lo ow w W Wo or rk k- -i in n- -p pr ro oc ce es ss s i is s h hi ig gh h J JI IT T i in nv ve en nt to or ry y t te ec ch hn ni iq qu ue es s u us se ed d W Wo or rk k- -i in n- -p pr ro oc ce es ss s i in nv ve en nt to or ry y i is s l lo ow w W Wo or rk k- -i in n- -p pr ro oc ce es ss s i in nv ve en nt to or ry y d dr ri iv ve en n d do ow wn n b by y J JI IT T, , l le ea an n p pr ro od du uc ct ti io on n
- 76. Crossover Charts Example Kleber Enterprises would like to evaluate three accounting software products (A, B and C) to support changes in its internal accounting processes. The cost of the software for these processes is: Total fixed cost Dollars required per accounting report Software A $ 200,000 $60 Software B $300,000 $25 Software C $400,000 $10 Solve the crossover point for software A and B, and then the crossover point for software B and C.
- 77. PROCESS ANALYSIS AND DESIGN • When analyzing and designing processes, we ask questions such as the following: Is the process designed to achieve competitive advantage in terms of differentiation, response, or low cost? Does the process eliminate steps that do not add value? Does the process maximize customer value as perceived by the customer? Will the process win orders?
- 78. U Un ni it ts s m mo ov ve e s sl lo ow wl ly y t th hr ro ou ug gh h t th he e p pl la an nt t M Mo ov ve em me en nt t i is s m me ea as su ur re ed d i in n h ho ou ur rs s a an nd d d da ay ys s S Sw wi if ft t m mo ov ve em me en nt t o of f u un ni it t t th hr ro ou ug gh h t th he e f fa ac ci il li it ty y i is s t ty yp pi ic ca al l G Go oo od ds s m mo ov ve e s sw wi if ft tl ly y t th hr ro ou ug gh h t th he e f fa ac ci il li it ty y F Fi in ni is sh he ed d g go oo od ds s m ma ad de e t to o o or rd de er r F Fi in ni is sh he ed d g go oo od ds s m ma ad de e t to o f fr re eq qu ue en nt t f fo or re ec ca as st t F Fi in ni is sh he ed d g go oo od ds s m ma ad de e t to o f fo or re ec ca as st t a an nd d s st to or re ed d F Fi in ni is sh he ed d g go oo od ds s o of ft te en n b bu ui il ld d- -t to o- -o or rd de er r ( (B BT TO O) ) S Sc ch he ed du ul li in ng g i is s c co om mp pl le ex x, , t tr ra ad de e- -o of ff fs s b be et tw we ee en n i in nv ve en nt to or ry y, , a av va ai il la ab bi il li it ty y, , c cu us st to om me er r s se er rv vi ic ce e S Sc ch he ed du ul li in ng g b ba as se ed d o on n b bu ui il ld di in ng g v va ar ri io ou us s m m- -o od de el ls s f fr ro om m a a v va ar ri ie et ty y o of f m mo od du ul le es s t to o f fo or re ec ca as st ts s R Re el la at ti iv ve el ly y s si im mp pl le e s sc ch he ed du ul li in ng g, , e es st ta ab bl li is sh hi in ng g o ou ut tp pu ut t r ra at te e t to o m me ee et t f fo or re ec ca as st ts s S So op ph hi is st ti ic ca at te ed d s sc ch he ed du ul li in ng g r re eq qu ui ir re ed d t to o a ac cc co om mm mo od da at te e c cu us st to om m o or rd de er rs s F Fi ix xe ed d c co os st ts s l lo ow w, , v va ar ri ia ab bl le e c co os st ts s h hi ig gh h F Fi ix xe ed d c co os st ts s d de ep pe en nd de en nt t o on n f fl le ex xi ib bi il li it ty y o of f t th he e f fa ac ci il li it ty y F Fi ix xe ed d c co os st ts s h hi ig gh h, , v va ar ri ia ab bl le e c co os st ts s l lo ow w F Fi ix xe ed d c co os st ts s h hi ig gh h, , v va ar ri ia ab bl le e c co os st ts s m mu us st t b be e l lo ow w C Co os st ti in ng g e es st ti im ma at te ed d b be ef fo or re e j jo ob b, , k kn no ow wn n o on nl ly y a af ft te er r t th he e j jo ob b C Co os st ts s u us su ua al ll ly y k kn no ow wn n d du ue e t to o e ex xt te en ns si iv ve e e ex xp pe er ri ie en nc ce e H Hi ig gh h f fi ix xe ed d c co os st ts s m me ea an n c co os st ts s d de ep pe en nd de en nt t o on n u ut ti il li iz za at ti io on n o of f c ca ap pa ac ci it ty y H Hi ig gh h f fi ix xe ed d c co os st ts s a an nd d d dy yn na am mi ic c v va ar ri ia ab bl le e c co os st ts s m ma ak ke e c co os st ti in ng g a a c ch ha al ll le en ng ge e
- 80. Definition • Capacity is the "throughput," or the numbers of units a facility can hold, receive, store, or produce in a given time. • Capacity decisions often determine capital requirements and therefore a large portion of 'fixed cost’. • Capacity also determines whether demand will be satisfied or whether facilities will be idle.
- 81. Capacity planning based on time horizons 1. Long-range capacity • Greater than 1 year • is a function of adding facilities and equipment that have a long lead time. 2. In the intermediate range • 3 to 18 months, • add equipment, personnel, and shifts; we can subcontract; and we can build or use inventory. • This is the "aggregate planning" task. 3. In the short run • Usually up to 3 months • primarily concerned with scheduling jobs and people, as well as allocating machinery.
- 82. Design and Effective Capacity Design capacity The maximum theoretical output of a system in a given period under ideal conditions. Effective capacity The capacity a firm expects to achieve given the current operating constraints.
- 83. Efficiency and Utilization • Utilization • Simply the percent of design capacity actually achieved. Utilization=A.O/D.C • Efficiency • The percent of effective capacity actually achieved. • Depending on how facilities are used and managed, it may be difficult or impossible to reach 100% efficiency. • Operations managers tend to be evaluated on efficiency. Efficiency =A.O/E.C
- 84. Example-1 • Sara James Bakery has a plant for processing deluxe breakfast rolls and wants to better understand its capacity. Last week, the facility produced 148,000 rolls. The effective capacity is 175,000 rolls. The production line operates 7 days per week, with three 8-hour shifts per day. The line was designed to process Deluxe rolls at a rate of 1200 per hour. • Required: Determine the design capacity, utilization, and efficiency for this plant when producing this Deluxe roll. Example-2 • The manager of Sara James Bakery now needs to increase production of deluxe roll. To meet, this demand, she will add a second production line. The manager must determine the expected output of this second line for the sales department. • Effective capacity of this line= 175,000 • Operating efficiency= 75%
- 85. Managing Demand Case 1: Demand Exceeds Capacity • When demand exceeds capacity, the firm may be able to curtail demand simply by Raising prices, Scheduling long lead times (which may be inevitable), and Discouraging marginally profitable business. Case 2: Capacity Exceeds Demand • When capacity exceeds demand, the firm may want to stimulate demand through a. price reductions b. aggressive marketing, or c. Product changes d. Layoffs and plant closings.
- 86. Demand and Capacity Management in the Service Sector • In the service sector, scheduling customers is demand management, and scheduling the workforce is capacity management. Demand Management • When demand and capacity are fairly well matched, demand management can often be handled with • appointments, • Reservations, or • First-come, first-served rule. Capacity Management • When managing demand is not feasible, then managing capacity through changes in • Full-time, • temporary, or