Free Essay

Production & Operation Management

In: Business and Management

Submitted By ckgini
Words 1195
Pages 5
Production & Operations
Management
Session 3-2
More on Processes

1

Outline
 Multi-product, multi-flow process analysis
– So far: 1 product, 1 flow
– Differing process times, yield issues, machine breakdown

 Big Takeaway:
– Product-mix becomes critical in multiple flows
– Implications in capital investment, scaling business, and risk management  Calculating capacity when you have
– Multiple flows
• With the same processing time at each resource
• With different processing times at a single resource

– Yield issues
– Machine Breakdown
2

Measure: Implied Utilization
 Implied Utilization captures the mismatch between the capacity requested from a resource by demand and the capacity currently available at the resource

Capacity requsted by demand
Implied utilization =
Available capacity

3

Ex. 1 : Furniture Factory (I)
Chair
Assembly Line

PC
SC

Paint Shop

Inspection

Table
Assembly Line

PT
ST



Stain Shop

Four Products
– Painted Chairs (PC), Stained Chairs (SC), Painted Tables (PT), Stained Tables (ST)



Suppose



Chair Assembly Line : 2 min / chair
Table Assembly Line : 6 min / table
Paint Shop : 4 min / unit
Stain Shop : 3 min / unit
Inspection : 1 min / unit

Product

Demand
(units/hr)

% of Demand

PC

8

26.67%

SC

11

36.67%

PT

6

20.00%

ST







5

16.67%

What is capacity/implied utilization of each resource?
4

Capacity/Utilization (Furniture I)
 Chair Assembly
• Capacity =(1/2) unit/min*60 mins/hr=30 units/hr
• Implied Utilization =Demand/Capacity=(8+11)/30=0.63 < 1

 Table Assembly
• Capacity=(1/6) unit/min*60 mins/hr=10 units/hr
• Implied Utilization=Demand/Capacity=(6+5)/10=1.1 which is >1

 Paint Shop
• Capacity=(1/4) unit/min*60 mins/hr=15 units/hr
• Implied Utilization=Demand/Capacity=(8+6)/15=0.93 < 1

 Stain Shop
• Capacity=(1/3) unit/min*60 mins/hr=20 units/hr
• Implied Utilization=Demand/Capacity=(11+5)/20=0.80 < 1

 Inspection
• Capacity=1 unit/min*60 mins/hr=60 units/hr
• Implied Utilization=Demand/Capacity=(8+11+6+5)/60=30/60=0.5 < 1
5

Furniture Factory (I)
 Utilization cannot be larger than 100%!
• Factory cannot meet all the demand (capacity constrained) • How many can it serve (supposing product mix is constant)?  Factory capacity
• Let F be the factory capacity in units/hr
• The Table Assembly Line accounts for (5+6)=11 units out of a total of 30 units of demand, i.e., (11/30) of demand
• Its capacity is 10 units/hr and is the bottleneck
• So, (11/30)*F=10 units/hr
• F=27.27 units/hr
6

Calculating capacity
 Step 1. Find the bottleneck.

Need to know demand!!!

Single Flow

Multiple Flows

Bottleneck is resource with lowest capacity

Bottleneck is resource with highest utilization

For a single flow, the lowest capacity resource is the same as highest utilization resource

 Step 2. Bottleneck governs the process capacity.
Single Flow

Multiple Flows

Process capacity equals the bottleneck resource capacity

Depends on the bottleneck resource AND the demand mix 7

Your Turn: Change in Demand Mix
 Suppose overall demand remains the same, but the demand-mix changes
Product

Demand (units/hr)

% of Demand

PC

11

36.67%

SC

10

33.33%

PT

7

23.33%

ST

2

6.67%

 Which resource is the bottleneck?
 What is the capacity of the factory in units/hr?

8

A fortunate coincidence
PC
SC

Chair
Assembly Line

Paint Shop

Inspection

PT
ST

Table
Assembly Line

Stain Shop

 Furniture example was special
– Even though two different products at Paint Shop (chairs/tables), both take same time to paint
– Same with Stain shop

 Generally, this won’t be the case
– Different processing times
9

Recall: capacity with one processing time
 Workstation with a single product. Processing time: 10 min / unit

10 mins

10 mins

10 mins

10 mins

10 mins

 Flow Time (FT) = processing time= 10 mins for all units
 Workstation capacity = Flow Rate
= (1/10) units/min*60 mins/hr = 6 units/hr
10

Ex. 2: Capacity with two processing times
 Workstation makes two products
– Product 1 processing time 10 min / unit
– Product 2 processing time 12 min / unit

10 mins

10 mins

10 mins

12 mins

 Product mix is 3:1, i.e. (3/4)th of the output is Product 1 and
(1/4)th of the output is Product 2
 What is the capacity of the workstation?
11

Ex. 2: Capacity with two processing times
 PT1=10 mins/unit
 PT2=12 mins/unit
 Think of a “typical” unit:
– Weighted average of FT1 and FT2
= (3/4)*10+(1/4)12=10.5 mins/unit
– NOTE THIS RELIES ON DEMAND MIX

 Capacity of Resource
= (1/10.5)*60min/hr = 5.71 units/hr
Same as capacity of process because only one resource
12

Ex. 2 (Alternate way)
 An alternate method is to consider time to make a cycle, i.e. 3 units of product 1 and one unit of product
2
– Total Processing Time for a cycle = 3*10 + 1*12 = 42 mins
(see picture on previous slide)
– average processing time per unit = 42/4 = 10.5 mins/unit

 Workstation capacity
= (1/10.5)units/min*60 min/hr
= 5.71 units/hr
13

Your Turn: Capacity single product with breakdowns  Single product processing time:10 min/unit

10 mins

10 mins

10 mins

10 mins

10 mins

 Workstation breaks down every 5 hrs (on average). Repair time is 1 hr.
 What is the process capacity?
– Hint: Think about this as if it were two different products: the toy, and repair 14

Ex. 4 Capacity when there are yield issues
 Littlefield Labs is a specialized laboratory that performs low volume chemical tests for pharmaceutical companies.
For one of their products, there is a two-stage process.
– In the first stage (Centrifuge) chemicals are mixed into 125 vials and placed into a centrifuge. For each vial, it takes a technician about one minute to do the mixing and loading. Once all of the vials are in the centrifuge, it is operated for 10 minutes.
– The second stage (Testing) tests the vials for purity. This testing equipment requires 75 minutes to calibrate, and then a technician can test two vials per minute, for the next 125 vials.
Currently, 40% of the vials on average fail this test; i.e, the yield is
60%. Failures are discarded.
– What is the capacity of the process in ”good vials”/hour?

15

Finding capacity when there are yield issues-2  Centrifuge
• Total Processing Time
= 125*1 + 10 =135 mins for 125 vials

 Testing
• Total Processing Time
= 75 + 125*0.5 = 137.5 mins for 125 vials
• 40% fail  yield=60%  only 0.6*125=75 “good vials” are produced in 137.5 mins (50 vials are discarded)
 Capacity of Testing = (75/137.5)*60
= 32.73 “good vials”/hr
16

Finding capacity when there are yield issues-3  Note that this implies that the Cetrifuge produces only 75 “good vials” in 135 mins
 FR of Centrifuge in “good vials”/hr
= (75/135)*60 = 33.33 “good vials”/hr
 Testing is the bottleneck (MIN(33.33, 32.73))
 System capacity = 32.73 “good vials”/hr

17

Wrap-up
 We saw how to calculate process capacity in multiflow systems with different processing times
 Business implications
– Change in demand, risks?
– Capital investment?
– Revenue stream?

18

Similar Documents

Premium Essay

Production & Operation Management

...he becomes part of the problem’. Please elaborate on what this statement means to you. Operations of an Organisation deal with the overall functioning of business effectively so as to obtain determined results within a specific period. Operations is mostly related to production/manufacturing where it helps to oversee, design, decide and implement actions accordingly. It is the same for the non-manufacturing based industries too. Operational problems may lead to disturbance in stability of business and may affect the growth of business. The operations of a Company are monitored not only by the designated team and the operations manager but also by the higher level employees of an organisation who overlook the entire scenario, anticipate the threats and opportunities and implement the same for progress of business. The operations of any business run on certain principles which form the reason of its existence, performance and growth. These may be termed as the pillars of the business operations and they are: 1. Vision and mission of the Company 2. Policies, structure and system 3. Investment, infrastructure and resources 4. Management and strategies Operational problems for example can be like wastage of resources, non-fulfilment of services within stipulated time, sudden breakdown of machinery in a manufacturing unit, lack of modern business strategies and ignorant management. An example of operational problem related to the hospitality industry would be the......

Words: 1247 - Pages: 5

Premium Essay

Production and Operation Management

...Production and Operation Management Cheng Guoping Chapter 1 Introduction 1. Production System 2. Production and operations in the organization 3. Function and jobs of POM 4. Decision Making in POM 5. The emergence of production and operation management 1. Production System Production and operation management (POM) is the management of an organization's production system, which converts input into the organization 's products and services. 1.1 Production system model Inputs conversions subsystem output Feedback Feedback Figure 1 A production System Model 2. Common ground and differences between manufacturing and services 1.2.1 Common Ground: • Entail customer satisfaction as a key measure of effectiveness • Require demand forecasting • Require design of both the product and the process • Involve purchase of materials, supplies, and services • Require equipment, tools, buildings, and skills, etc. 1.2.2 Differences: • Customer contact Service involves a much higher degree of customer contact than manufacturing does. The performance of a service typically occurs at the point of consumption. Manufacturing allows a separation between production and consumption. • Uniformity of input Service operations are subject to more variability of inputs than manufacturing operations are. Each patient, each lawn, each TV presents a......

Words: 846 - Pages: 4

Premium Essay

Production and Operations Management

...PRODUCTION AND OPERATIONS MANAGEMENT Key Performance Indicators or Measurement provides an objective basis for making decisions. Good measures provide a “scorecard” of performance, help identify performance gaps, and make accomplishments visible to the work force and the management. The following are the major categories of performance measures used at the organizational and operational levels of a business. Discuss the contribution of production and operations management in each aspect: Financial Market Share Safety Quality Innovations Answer: Performance Measure gives information on (1) How well the organization operates, (2) If the organization meet their goals or targets, (3) If procedures of the organization are in statistical control, (4) If their customers are satisfied, and (5) If there are required improvements on the organization itself. Financial - Financial Aspect measures the increasing of funds of an organization from its different sources, it also includes the reductions of cost and risks, and enhanced use of assets. It means that the organization has an effective and efficient Production and Operating Systems when scorecard reflects good performance. Market Share - Customer Perspective / Market Share contributes a great success in an organizational goal. To determine what customers want and then directing efforts toward meeting and exceeding customer’s expectations will be a good impact to KPI of an organization. Operations...

Words: 333 - Pages: 2

Premium Essay

Production and Operation Management

...According to the case study, Blackwood café is having a strategic physical business location. However, sometimes having such location will bring many problems too. Discuss and suggest some solutions for the problems. Based on the geographic location of the Blackwood cafe ,we can totally assumes that Blackwood cafe competitor is quite lots. Competition is a factor which places a business at risk for losing customers to the competitors. Competition can create stress to the managers and making managers making hard to choosing the “menu of the days” .For an example, Blackwood cafe changing their menu due one to two week to keeping up their operation to sustainable. This making Blackwood cafe hard to survive because maybe some of their customer prefer last week of the menu and causing them can’t get the promotion due to the menu has changed, this will causes they lost the favourite customer and loses their sales .In addition, competitors also making those small company hard to survive compare to big company .we can conclude that mostly competitors will cut their price beyond their edge due to secure their sales. Furthermore, competitor those who have better reputation which is franchisee will be well known to people making them easily to grab sales such as Secret Recipe, Marybrown, Fairy which was located nearby the Blackwood cafe. Besides that ,a highly competitive competitors will making workers to have stress. Stressful person can be cause by if the person always hit the sale...

Words: 494 - Pages: 2

Premium Essay

Syllabus of Production and Operations Management

...UNIVERSITY BAGUIO CITY DEPARTMENT OF MANAGEMENT, MARKETING, AND ENTREPRENEURSHIP SYLLABUS MANAGEMENT 6 PRODUCTION AND OPERATIONS MANAGEMENT I. TITLE OF THE COURSE: Management 6 II. COURSE DESCRIPTIVE TITLE: Production and Operations Management III. COURSE CREDIT: Three (3) units IV. PRE-REQUISITE: Mgmt 1 and Math 4C V. COURSE DESCRIPTION: As a primary business function, along with marketing and finance, the production operations function plays a vital role in achieving the organization’s basic purpose for existence – to satisfy customer needs – by transforming resources into goods and services. Production operations management is important for two reasons: (1) it is the operations function that is primarily concerned with the production of goods and the provision of services, and (2) the operations function typically involves the greatest portion of the organization’s human resources and is responsible for a large portion of the firm’s capital assets. This course introduces the strategic and tactical decisions involved in production operations management. It focuses on the concepts and tools that are used in making decisions as well as trends and global best practices related to the planning and design, operation, and control of production operations systems. VI. COURSE OBJECTIVES: 1. To enable the students to develop a comprehensive understanding of the production/operations function and to appreciate......

Words: 613 - Pages: 3

Premium Essay

Assignment 3: Using Teams in Production and Operations Management

...Using Teams in Production and Operation Management Brystal Stanfield Ransom Dr. Calvin Fogle BUS 508 Contemporary Business May 17, 2012 Using Teams in Production and Operations Management The Retail industry is a driving force in today’s local and global economy. Retail sales are so important because the sales are an important economic indicator. Consumer spending drives mush of our economy. When consumers are spending money, the economy thrives positively. The retail stores cannot keep inventory on the shelves and new merchandise is ordered causing production facilities to make more products and order more raw materials. If consumers don’t feel as secure about their finances, they spend less money and the economy slows down. This example shows how important retail business is to the economy. The Sherwin Williams Company is a major global retailer that will be discussed. This essay will analyze Sherwin William’s production and operations management system, evaluate the use of teams in its production and operations management system, and also discuss Sherwin William’s ability to adjust when the economy faces a downturn. Describe a major global corporation Sherwin Williams was founded in 1866, just one year after the Civil War ended. The founders of Sherwin Williams were Henry Sherwin and Edward Williams. Sherwin Williams is the largest paint and coating producing company in the United States. This company is also among the largest producers in the world. ......

Words: 1321 - Pages: 6

Premium Essay

Management of Productions and Operations

...Competiveness, Strategy & Productivity Nicholas Deters Professor Ardy Management of Productions and Operations BSAB 420 11 December 2012 Abstract In our current society technological advancements, competitiveness, strategy and production are paramount in business relationships since technology advancements continue to gain momentum every day. Competition is what continues to enhance business strategy and production as companies strive to produce the latest technologically advanced product on the market while providing the best service for customer satisfaction at the lowest cost at with a high production rate. In the past few decades computer technology has been responsible for improved customer satisfaction and enhanced business production, spiking the level customer needs and competition between many businesses such as Ford vs. General Motors, Macintosh vs. Microsoft, UPS vs. FedEx, Import vs. Export as the list goes on forever. Whether the competition lie between an automotive industry or the computer industry, any company with a competitive advantage gains the ability to outperform its rivals, providing the ability for company growth and increased revenue. In the business aspect, competition continues to drive the market primarily by producing high quality products at a high output rate by using productivity and strategic road maps to aim for high goals and provide for further organizational achievements. Competitiveness, Strategy, & Productivity ...

Words: 2663 - Pages: 11

Premium Essay

Production & Operations Management

...Using Teams in Production and Operations Management Marquita Jackson Dr. Laura Pogue Contemporary Business BUS 508 November 13, 2011 “Production and operations managers oversee the work of people and machinery to convert inputs into finished goods and services” (Boone 357). They must consider many factors such as taxes, employee needs, labor force skills and size, and economical transportations for materials and supplies, and the amount of energy services. These managers are responsible for planning the production process, selecting the most appropriate layout, implementing the production plan, and controlling the production process. Managers are also responsible for maintaining quality control and ensuring that goods or services that they provide meet the customers expectations (Boone 2011). General Electric is a major household brand that revamped and reformed their production and operations management. In 1890, Thomas Edison established the Edison General Electric Company to be able to bring together his various businesses. During that same period, a competitor company, Thomson-Houston Company, became a dominant innovation company. As both businesses expanded and grew it became more difficult for both companies to produce complete electrical installations relying solely on their own patents and technologies. In 1892, the two companies merged together and created a new organization called the General Electric Company. The first General Electric Appliance was an electric......

Words: 1794 - Pages: 8

Premium Essay

Production and Operations Management

...Production and Operations Management The Business Enterprise-BUS508 Dr. John Woodard Tammy English Strayer University August 11, 2011 Marathon is an integrated international energy company engaged in exploration and production; oil sand mining; integrated gas; and refining, marketing, and transportation operation. Marathon is among the top five crude oil refineries in the United States, so surely there is a way to reduce the time involved in the production process. The major crude oil refineries in the United States are located in the hurricane region of the gulf coast. One possible option that Marathon could take to reduce the time involved in the production process would be to create new petroleum refineries in different regions allowing operators to shift process and production responsibilities in the event of a natural disaster or scheduled outage. There may be one feasible alternative as to why Marathon would want to reduce the time in the production of the petroleum products. In order to produce gasoline, the crude oil must go through the refinery and transportation processes. In those processes sometime could be saved either by increasing the speed of separation in the crude oil refinery process or by increasing the speed in the transportation process. Crude Oil, like any other product, is traded on the world market. In recent times, crude oil prices have been rocketing, driven by rising global demand and political instability in several oil...

Words: 1013 - Pages: 5

Free Essay

Production and Operations Management

...Brief History of the Production and operations Management function by V S Rama Rao on January 24, 2009 At the turn of the 20th century, the economic structure in most of the developed countries of today was fast changing from a feudalistic economy to that of an industrial or capitalistic economy. The nature of the industrial workers was changing and methods of exercising control over the workers, to get the desired output, had also to be changed. This changed economic climate produced the new techniques and concepts. Individual Efficiency: Fredric W Taylor studied the simple output to time relationship for manual labor such as brick-laying. This formed the precursor of the present day ‘time study’. Around the same time, Frank Gilberth and his leaned wife Lillian Gilberth examined the motions of the limbs of the workers (such as the hands, legs, eyes etc) in performing the jobs and tried to standardize these motions into certain categories and utilize the classification to arrive at standards for time required to perform a given job. This was the precursor to the present day ‘motion study’. Although to this day Gilberth’s classification of movements is used extensively, there have been various modifications and newer classifications. Collective Efficiency: So far focus was on controlling the work output of the manual laborer or the machine operator. The primary objective of production management was that of efficiency – efficiency of the individual operator. The......

Words: 745 - Pages: 3

Premium Essay

Production Operation Management

...LETTER OF TRANSMISSION July 19, 2012 Moon Senior Lecturer School of Business, UIU Sub: Submission of the Report on “Supply Chain Management of a Retail Business” Dear Madam, We are very much glad to present the “Report” as a requirement for the course named Production Operation Management. We have given our sincere effort to complete the Report and we want to declare that this Report is wholly & attentively prepared by us. We will be always available to answer any question if needed regarding this Report. So, we will be highly obliged if you kindly accept our Report and help with your opinions and suggestions for its further progress and enrichment in the future.  With best regards, B.M.Sun On behalf of the group ACKNOWLEDGMENT We would like to give my first thanks to our instructor, Mimnun Sultana, Senior lecturer of United International University. Our special thanks to Mr. Rashedul Hoque (Manager) of Anjan’s prepared this work with our best effort and we think this work will be very helpful in our future working life. We think it will help us to be a good supply chain agent. At last we are willing to give thanks to Mr. Md. Shaheen Ahmed (Director) of Anjan’s who gave us best support to prepare this report. We gratefully acknowledge the inspiration, encouragement and valuable suggestion received from the well wishers during the preparation of this report. We also gratefully acknowledge the inspiration, encouragement and valuable suggestion......

Words: 2747 - Pages: 11

Premium Essay

Production and Operations Management

...Production and Operations Management Marathon Oil Corporation (Marathon Oil) is an integrated international energy company. It is engaged in the exploration and production of crude oil and natural gas, as well as in the domestic refining, marketing and transporting of petroleum products, integrated gas business and oil sands mining. The company’s principal operating subsidiaries include Marathon Oil Company (exploration and production) and Marathon Petroleum Company LLC (refining, marketing and transportation). Its principal operating locations include the US, Equatorial Guinea, Libya, the North Sea, Angola, Indonesia and Canada. The company headquarter is in Houston (Texas), the United States of America. The first part of this assignment will thoroughly discuss the Deepwater Droshky Project implemented by Marathon Oil. The next paragraphs will discuss how the prices of crude oil and retail gasoline relate to each other, as well as the nature of this relationship. Afterwards, the assignment will discuss the methods Marathon uses to keep its pump price in equilibrium, even when crude price rises. This assignment ends with a discussion on President’ Obama’s deepwater drilling moratorium, and how oil companies can overcome the prohibition of deepwater drilling and stay competitive. Marathon Oil - Deepwater Droshky Project Marathon Oil Corporation (2010) had announced its Droshky development in the deepwater Gulf of Mexico to have begun operations on time and under......

Words: 1233 - Pages: 5

Premium Essay

Production and Operations Management

...“PRODUCTION AND OPERATIONS MANAGEMENT” Chris Connell June 10, 2012 ABSTRACT In this paper, I will analyze Marathon’s product processes; I will determine which part of those processes is open to the greatest number of efficiency improvements, and I will explain further. In addition, I will discuss the relationship between the retail price of gasoline and the world demand for crude oil. I will try to discuss how Marathon could keep the price at the pump the same without losing any profits – even if global crude production has decreased by 10%. Finally, I will discuss President Obama’s June 2010 deep-water drilling moratorium. It was originally for six months; I will try to determine the impact of a continued moratorium on deep-water drilling for retail gas prices in the U.S. WHICH OF MARATHON’S PROCESSES CAN BE IMPROVED THE MOST? A business needs to be at least as efficient as its main competitors, in order to be able to compete and survive in the long-term. A more efficient business will produce goods at a lower cost than competitors can supply. A more efficient business can generate more profit, possibly at lower prices. (Tutu2u.net) In analyzing Marathon’s product processes, there are areas that are open to a large number of efficiency improvements. Particularly, the world will run out of oil sometime in the distant or near future. Both Marathon as a company (and the United States in general) has to explore and find oil more efficiently so that the use of oil......

Words: 2262 - Pages: 10

Premium Essay

Production and Operation Management

...Enterprise: 508 Strayer University Assignment # 3 Production and Operation Management Presented to Dr. Terry Dowdy By Calvin J. Gaiter August 7, 2011 Explain one possible option that Marathon could take to reduce the time involved in the production process. One likely option that Marathon could take to reduce the time involved in the production process is to restructure how the production and operations managers manage the every day work of the people and machinery. Marathon uses an analytic production system, which reduces raw material to its component parts in order to come up with one or more marketable products (Boone & Kurtz, 2010). Petroleum refining breaks down crude oil into a number of profitable products that includes gasoline, heating oil, and aviation fuel. Marathon delivers more than 111 million gallons of crude oil and petroleum products each day through its pipelines. The company already uses high-speed computers, continuously evolving technology and satellite communications allow the company to supervise and manage its many pipelines throughout the U.S. from a centralized control center (http://www.marathonpetroleum.com). However, as a result of computerizing other aspects of its operations they could get better operations by standardizing and automating other tasks, which will make the process quicker and more efficient. This is computer-integrated manufacturing, or CIM, production technologies in which computers aid......

Words: 1095 - Pages: 5

Premium Essay

Production and Operation Management

...Prdctn & Oprtns Mgt Production and Operations Management Laretha Moss Strayer University Dr. John Theodore November 14, 2010 Abstract Building more ports and pipelines to transport and distribute crude oil could reduce the time involve in the production process. Gasoline is refined from crude oil. . In general OPEC sets most of the price of crude oil and therefore the price of gas. The Organization of the Petroleum Exporting Countries (OPEC) makes the decisions concerning crude oil, therefore, if crude oil prices increase there is a possibility that gas prices will increase. Unless the oil companies can find another way to extract the oil without drilling there is no way to remain competitive. Production and Operations Management Explain one possible option that Marathon could take to reduce the time involved in the production process. Presently Marathon Oil has the Louisiana Offshore Oil Port (LOOP), located in the Gulf of Mexico, which transports more than one million barrels of crude oil daily – 10 percent of U.S. imports-to-shore through a 48 inch pipe. Additional ports and pipelines can be added to transport and distribute the crude oil (Marathon, 2009). The projected increases in worldwide oil demand in 2030 would require daily crude oil production of 15 million barrels more than current production. The world is looking to the Organization of Petroleum Exporting Countries (OPEC) to supply much of the necessary increased production. The......

Words: 953 - Pages: 4