Cost Volume Profit Analysis:
Lower volumes are best with lower _______Cost
Higher volumes are best wtih lower _________Cost
Methods of Evaluating Locations:
Transportation Model - Decision based on movement costs of raw materials or finished goods
Factor Rating (most popular) - Decision based on quantitative and qualitative inputs
Center of Gravity Method - Decision based on minimum distribution costs
Factor Rating/Weighted Score Model:
Wi = importance of factor i
Si = score of location being evaluated on factor i
i = an index for the factors
Total weighted score = SUMi(Wi)(Si)
Using the Factor Rating Method for Location decisions, the best alternative is the one with?
Higher composite score
Center of Gravity Method of Location Decisions
Used for location of Distribution Center
Locating Pure Service Organizations
Recipient to Facility
-travel distance per citizen
-travel distance per visit
Facility to Reciplient
Factors that affect Process Selection?
2. Products & Service design
3. Technological change
4. Capacity planning
5. Facilities & Equipment
7. Work design
Factors to consider when deciding to make or buy components?
1. Available capacity
3. Quality consideration
4. The nature of demand
Process Selection based on?
Variety - how much
Equipment Flexibilty - what degree
Volume - expected output
List 5 Process types?
1. Job Shops (small runs)
2. Batch Processing
3. Repetitive/Assembly (semicontinuous)
4. Continuous Process
5. Projects (nonroutine jobs)
This process type is low volume, high variety, high flexibility?
This process is moderate volume, moderate variety, moderate flexibility?
This process is High Volume, Low Variety, Low Flexibility?
Repetitive Assembly (Line)
This process is very high volume, very low variety, very low flexibility?
The configuration of departments, work centers, and equipment, with particular emphasis on movement of work (customers or materials) through the system.
Three basic layout types?
1. Product Layouts
2. Process Layouts
Describe Product Layout and which processes use it?
Product Layout uses standardized processing operation to achieve smooth, rapid, high volume flow.
Describe Process Layout and which processes use it?
Process layout can handle varied processing requirements.
Job Shop or Batch (ex: hospital)
Describe Fixed-Position Layout and process that uses it?
Fixed Position is a layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed.
Project Ex: Building or freeway
Importance of Layout Decisions?
1. Requires substantial investments of money and effort
2. Involves long-term commitments
3. Has significant impact on cost and efficiency of short-term operations
Eight things that cause a need for layout decisions?
1. Inefficient operations (ie: hi cost bottlenecks)
2. Changes in the design of products or services
3. The introduction of new products or services
4. Accidents/Safety hazards
5. Changes in environmental or other legal requirements
6. Changes in volume of output or mix of products
7. Changes in methods and equipment
8. Morale problems
1. Group Technology Layout
2. Just-In-Time Layouts
-May be assembly-line or
-Group Technology formats
3. Fixed Position Layout
Cellular Layouts include?
1. Cellular Manufacturing
2. Group Technology
3. Flexible Manufacturing Systems
The advantage of Cellular Layouts?
They retain flexibility in the process and gain economies of scale.
Ex: Lazyboy Case
Explain Cellular Manufacturing?
Layout in which machines are grouped into a cell that can process items that have similar processing requirements.
Explain Group Technology Layout?
The grouping into part families of items with similar design or manufacturing characteristics.
A Flow Line for Production or Service
A U-Shaped Production Line
Adavantages of U-Shaped Production Line?
1. Shorter distance
2. Workers can alternate tasks
3. Shipping & Receiving can be in 1 place
Describe Process Layout?
Departmentalized process where work travels to dedicated process centers
Cellular Manufacturing Layout
Part families are based on Group Technology
-minimizes material movement
-efficient, but still flexible
is the process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements.
is the maximum time allowed at each workstation to complete its set of tasks on a unit.
Determine maximum Output
Determine the minimum number of workstations required: Efficiency
Tool used in line balancing to display elemental tasks and sequence requirements.
Calculation for Percent Idle Time
Line Balancing Rules
Hueuristic (intuitive) Rules
Assign tasks in order of most following tasks
Assign tasks in order of greatest positional weight (positional weight is the sum of each task's time and the stimes of all following tasks)
Design Process Layouts Requirements
List of departments
Projection of work flows
Distance between locations
Amount of money to be invested
List of special considerations
What is Inventory?
A Liability (idle resource held for future use
A Stock Keeping Unit (any entity that a company identifies for the purpose of control)
Types of Inventory (4)
Work in Progress
Functions of Inventory (7)
To meet future demand
To avoid stockouts
To meet demand in case of breakdown of equipment
Hedge against price increases
Decouple production and distribution
Decouple two operations
Decouple Production & Suppliers
Two basic questions of Inventory Management
How much to order
When to order
An item whose demand can be forecasted (estimated)
Demand related to the demand of other items (easier to manage, can be calculated)
This method will allow you to identify the small amount of products that usually account for most of your sales dollars (think 80/20 rule)
Relevant Inventory Costs
Costs increase with inventory...
Inventory Carrying Costs
Examples of Inventory Carrying Costs (6)
Cost of invested funds (interest, dividends)
Cost of Storage Space (rent, heat/cool, etc)
Taxes and Insurance
Quality Costs (defective units)
Coordination Costs (lg lots, diff coord)
Loss of Poor Responsiveness (obsolescence)
Relevant Inventory Costs
Costs decrease with inventory...
Ordering Costs (Cost to place order, receive & inspect) Fixed $ amt/order
Setup Costs (item manufactured in-house)
Cost of missed sales (loss of goodwill, oppty cost)
EOQ Basic Assumptions (6)
Demand is known and constant
Lead time is known and constant
Receipt of inventory is instantaneous
Quantity discounts are not possible
The only variable costs are the cost of setting up or placing an order, and the cost of holding or storing inventory over time.
Stockouts can be completely avoided if orders are placed at the appropriate time.
Formula for EOQ
S=Order Cosst per year
H=Holding Cost $/unit/yr
1) Average inventory =
2) # orders in a year =
3) Total Cost
4) Derrivative EOQ Formula
3) Inventory Carrying Cost + Order Cost
4) 1/2Q*H + D/Q*S
For C-Class items, the quantity is not fixed, the ________is?
period (Fixed Period Review)
Fixed order vs. Fixed period
Other model of inventory
Two Bin System
Reorder point is when first bin is empty
What is Lean Production?
a socioethical production system whose main objective is to eliminate waste by concurrently reducing or minimizing supplier, customer and internal variability.
Toyota Production System (TPS) idea
is to produce the kind of units needed, at the time needed, and in the quantities needed, so that unnecessary intermediate and finished product inventories can be eliminated.
Lean thinking is more than a set of techniques and approaches, it is...
a mindset for all employees and managers that focuses on waste eliminationand variability reduction in all business processes.
Who is credited with developing the original principles behind lean thinking?
Henry Ford wiht the Ford Production System (FPS)
Japanese Manufacturing approaches that drew the attention of US Manufacturers in the 70's during the US Oil Crisis
JIT Lean Production
Just-in-time (JIT) is a characteristic of lean production systems.
JIT is a repetitive production system in which processing and movement of materials and goods occur just as they are needed, usually in small batches.
JIT operates with very little fat.
Three tenets of JIT
1. Eliminate waste
2. Total quality management
3. People involvement
Sources of waste (6)
Inefficient work methods
-Materials and inventory management
-Scheduling services of production
System for moving work where a workstation pulls output from the preceding station as needed (ex: Kanban)
System for moving work where output is pushed to the next station as it is completed.
Kanban Production Control System (4)
Kanban is a card or other device that communicates demand for work or materials from the preceding station.
Japanese word meaning signal or visible record.
Paperless production control system.
Authority to pull, or produce comes from a downstream process.
JIT in Service (describe & 6 points)
GOAL: to provide optimum response to the customer with the highest quality service and lowest possible cost.
-Make system flexible
-Reduce setup and lead times
-Simplify the process
Benefits of JIT Systems (5)
Reduced inventory levels
Reduced lead times
Benefits of JIT continued (5)
Increased equipment utilization
Reduced scrap and rework
Reduced space requirements
Pressure for good vendor relationships
Reduced need for indirect labor
Japanese term that means contiuous improvement
Quality at the Source
a practice in which each employee is responsible for thie quality of his or her own work, therefore each person acts as his or her own quality inspector.
An approach for automated quality monitoring of equipment guided by a human touch.
a process in which multiple units/departments within an organization/supply chain are committed to working interactively to conceive, approve, develop and implement new product development programs that meet predetermined objectives.
Elements of Project Management (3)
What is a project?
What is Project Management?
Role of the Project Manager
What is a Project?
A set of interrelated activities necessary to achieve established goals using a specified amount of time, budget, and resources.
Primary characteristics of a Project? (6)
A well-defined goal or objective
Composed of a set of interrelated activities
A specified beginning and ending time
Specified resource and personnel requirements
A specified budget
Project Applications (4)
Intermediate range projects
Personal life projects
Examples of Operations Management Projects (3)
Developing new product offerings, ex: Wii, etc
Quality Improvement Projects, ex: Six Sigma
Preparation for ISO9000 certification
Project Management is...
Application of the knowledge, skills, tools, and techniques necessary to successfully complete a project.
According to PMI (Proj Mgmt Inst), project management can be divided into 5 categories...
Project Life Cycle (project phases) (4)
Conceptualizing - need
*Planning - activities, sequence, time
Organizing/Scheduling - details
Executing/Control - trade-off: resources vs. time
*most time spent in the planning phase
Project Planning, Work Breakdown Structure (WBS)
Divides total work into major work packages to be accomplished, with the key being to get to the smallest possible detail.
Project Scheduling methods (2)
PERT - Program Evaluation and Review Technique
CPM - Critical Path Method
Used for projects that have never been done before
Optimistic / Most Likely / Pessimistic
EX: Polaris Missile
Critical Path Method is an algorithm for scheduling activities within a project for the fastest and most efficient execution.
Critical Path (within CPM)
the path within a project that takes the longest time to complete.
- Dictates the project completion time
- aka: the bottleneck path or the binding constraint
the project activities making up a critical path
Slack (associated with CPM)
the amount of flexibility in scheduling an activity within a project.
A special type of horizontal bar chart used to display the schedule for an entire project.
Named after Henry Gantt who originated the chart in the 1910s
A Gantt Chart with different color codes can be used to track performance while the project is in progress.
A diagram with arrows and nodes created to display a sequence of activities within a project.
Activity on Node (AON) approach
A network diagram that shows each activity as a circle (or a node) and connects the activities with arrows.
Activity on Arrow (AOA) convention
A network diagram in which each activity is represented by an arrow, and the nodes are used to show the beginning and end points.
Some activities cannot be performed until other activities have been completed.
Determining the Critical Path in a network diagram
Forward pass (ES: Early Start)
Backward pass (LF: Late Finish)
EF= ES + activity time
LS = LF - activity time
Slack = (LS-ES) or (LF-EF)
Slack (Network Diagram)
Amount of time an activity can be delayed beyond its earliest possible starting time without delaying the project completion.
Critical Path (Network Diagram)
A chain of sequential activities beginning at the project's start and ending at its completion with the longest elapsed time.
has a maximum duration compared to other paths in the network
all activities on the critical path have zero slack
Project Scheduling when activity times are known
activity completion times
activity precedence relationships
graphical representation of project
time to complete project
identification of critical path(s) and activities
activity and path slack
earliest start, earliest finish, latest start,a nd latest finish times for each activity
Duration of Critical Path - Path Duration = Path Slack
Program Evaluation and Review Technique (PERT)
A technique for addressing the impact of uncertainties in activity time estimates on the duration of the entire project.
In a project schedule, different estimates for activity times are developed: Optimistic (tO), Pessimistic (tP), Most Likely (tM), Expected (tE)
Project Scheduling when activity times are uncertain
Optimistic (tO), Most Likely (tM), and Pessimistic (tP) time estimate for each activity
Activity precedence relationships
Graphical representation of project
Expected activity and path completion times
Variance of activity and path completion times
Probability that project completed by specified time
Expected Activity Time and Variance of Activity Time formulas
The final exam (Thu, July 1) will be from the following topics:
1. Location Planning slides 11-19; Location Problems ALL slides
2. Process Design n Layout Slides 1-7, 10-36; Layout Problems: ALL slides
3. Inventory Management slides 1-10; Inventory Problems (End of chapter problems 1,4)
4. Lean Enterprise/JIT slides 3-4, 7-10, 18-19, 23, 25-26, 40-41.
5. Project Management slides 1-2, 4-7, 11, 13-19, 26-40.