MGT 302 EXAM 2

Queueing system factors

-Length (how much waiting room is available?) -# of lines (how many servers are working?) -Queue discipline (how do new arrivals enter the line? how do you decide which customer to serve next?)

Aggregate operations plans

-> Specifies the optimal combination of (main purpose of the aggregate plan): -Production rate (# of units completed per unit of time - EX: per hour or per day) -Workforce level (# of workers needed in a period) -Inventory on hand (unused inventory carried from previous demand) -> The aggregate operations plan is concerned w/ setting production rates by product group or other broad categories for the intermediate term

Single channel, multiphase

-A car wash is an illustration b/c a series of services (vacuuming, wetting, washing, rinsing, drying, window cleaning, and parking) is performed in a fairly uniform sequence -EX: car wash, single line but the person(s) does multiple things

Waiting line problems (queues)

-A central problem in many service settings is the management of waiting time (reducing waiting time costs money, but raises customer satisfaction and throughput) -When people waiting are employes, it is easy to value their time -When people waiting are customers, it is more difficult to value their time (lost sales is one value)

Cycle counting

-A physical inventory management technique to more efficiently control inventory accuracy

Queueing system factors (queue discipline)

-A priority rule or set of rules that determine the order of service for customers who are waiting in line -The rules selected can affect the # of customers in line, the average waiting time, the range of variability in waiting time, etc.

Queueing system factors (# of lines)

-A single line or single file is one line only -Multiple lines refers to the single lines that form in front of 2 or more services or to single lines that converge at some central redistribution point -DISADVANTAGES of multiple lines in a busy facility is that arrivals often shift lines if several previous services have been of short duration or if those customers currently in other lines appear to require a shorter service time

Forecasting

-Always wrong by some amount -More accurate for groups/families (or if we aggregate the demand)

Queueing system factors (length)

-An INFINITE line is simply one that is very long in terms of the capacity of the service system -Examples of infinite length are a line of vehicles backed up for miles and customers who must form a line around the block as they wait to purchase tickets at a theater -LIMITED line capacity is caused by legal restrictions or physical space characteristics; the arrival denied entry b/c of lack of space may rejoin the population for a later try or may seek service elsewhere -Examples of limited line capacity are gas stations, loading docks, and parking lots

What type of business most benefits from MRP?

-Assemble-to-stock -Assemble-to-order -Manufacture-to-order

Establishing safety stock (using the probability approach)

-Assume demand is normally distributed -Assume we know mean and standard deviation -To determine probability, we plot a normal distribution for expected demand and note where the amount we have lies on the curve

Degree of patience

-Balking - members of the first class arrive, survey both the service facility and the length of the line, and then decide to leave -Reneging - those arrive, view the situation, join the waiting line, and then after some period of time, depart

Relevant costs (relevant to the aggregate production plan)

-Basic production costs (fixed and variable costs incurred in producing a given product type in a given time period) -Costs associated w/ changes in the production rate (costs include hiring, training, and laying off personnel) -Inventory holding costs (capital/money tied up in inventory, storing, insurance, taxes, spoilage, and obsolescence) -Backorder costs (very hard to measure and include costs of expediting/make happen quicker, loss of customer goodwill, and loss of sales revenue resulting from backordering)

Bill of Materials

-Contains the complete product description, listing the materials, parts, and components along w/ the sequence in which the product is created -If you buy a specific part, the BOM stops there

Negative aspects of inventory

-Costs associated w/ managing and tracking -Hide operational problems -Hindrance to flexibility of the organization (locked into one type of inventory) -Lost opportunity to invest $ elsewhere -Risk of deterioration (loss, pilferage, damage, etc.) -Product could go obsolete

Exiting the queuing system

-Customers who have been served have 2 possible futures: -Low probability of re-service (appendectomy patients rarely return for a repeat operation but doctor maintains reputation) -High probability of re-service/return to service population (a machine that is prone to breakdowns may require new service immediately after leaving the service center; McDonalds)

Master production schedule (MPS)

-Deals w/ independent demand items and is a major input to the MRP process -All production systems have limited capacity and limited resources -MPS must specify exactly what is to be produced -To determine an acceptable feasible schedule to be released to the shop, trial master production schedules are tested using the MRP program

Yield management success factors (can be most effective when):

-Demand can be segmented by customer -Inventory is perishable/goes bad -Product can be sold in advance -Demand is highly variable -Fixed costs are high and variable costs are low

Manufacturing Cell

-Dissimilar machines together to make a product, quick -Less efficient (not all of the same type of machine in one place) -Use if forecast is close -Used to make products requiring similar production sequences and steps (dedicated area where a group of similar products are produced) -Products are manufactured in batches -A firm may have many diff cells in a production area, each set up to produce a single product or a similar group of products efficiently but typically at lower volume levels -Produce as needed in response to current customer demand -Spans a large area of product-process matrix and can thus be used for a wide range of applications and becomes a popular layout structure used by manufacturing engineers -EX: manufacturing cells are used in metal fabricating, computer chip manufacturing, and assembly work

Service system matrix (the different entities within the matrix)

-Face-to-face total customization refers to service encounters whose specifications must be developed through some interaction b/w the customer and server -Face-to-face loose specs refers to situations where the service process is generally understood but there are options in how it will be performed or the physical goods that are part of it -Face-to-face tight specs require procedural skills in particular, b/c the worker must follow the routine in conducting a generally standardized, high-volume process (little variation in the service process - neither the customer nor server has much discretion in creating the service) -Phone contact - customers have little interaction w/ the system -Internet and on-site technology -Mail contact - customers have little interaction w/ the system

"Hard" benefits of S&OP (FML SH R)

-Faster and more controlled new product introductions -More stable production/service rates -Lower finished goods inventories -Shorter customer lead times -Higher customer service -Reduced obsolescence

1.) Chase strategy

-Follow the demand pattern -Match the production rate to the order rate by hiring and laying off employees as the order rate varies -The success of this strategy depends on having a pool of easily trained applicants to draw on as order volume increases

Assembly line

-High volume items -A single path through the process -All products follow the same path -Workflow is sometimes paced w/ a conveyor or belt -EX: toys, appliances, automobiles

Inventory costs

-Holding (or carrying) costs - costs for storage, handling, insurance, etc.; high holding costs tend to favor low inventory levels and frequent replenishment -Ordering costs - costs of placing an order -Setup (or production change) costs - costs for arranging specific equipment setups, etc. -Shortage costs - costs of running out

Subcontracting

-In addition to these strategies, managers may also choose to subcontract some portion of production -Similar to chase, but hiring and firing become subcontracting and not subcontracting -Some level of subcontracting can be desirable to accommodate demand fluctuations -However, unless the relationship w/ the supplier is strong, a manufacturer can lose some control over schedule and quality

Demand types

-Independent demand (the demands for various items are dependent upon other items in our control) -Dependent demand (the need for any item is a direct result of the need for some other item - usually a higher-level item of which it is part)

Inventory can be difficult to convert back into cash

-It is a good idea to try to minimize inventory -It costs money to have inventory - the average cost of inventory in the US is 30 to 35 percent of its value (this means -> that savings from reduced inventory result in increased profit)

Yield management (SABRE)

-It's widespread scientific application began w/ American Airlines' computerized reservation system (SABRE) -This system allowed the airline to change ticket prices on any routes instantaneously as a function of forecast demand -This system enabled hour-by-hour updating on competing routes so that American could match or better prices wherever the competitor was flying

Requirements are "time-phased"

-Items need to be available per the schedule, but no sooner -Therefore, items are planned to arrive exactly at the time needed -Since not all parts are needed at the same time in the production/assembly process, they are "time-phased" to arrive only when needed for the execution of the plan -Don't spend money earlier than you need it

3.) Level strategy

-Maintain a stable workforce working at a constant output rate -Demand changes (shortages and surpluses) are absorbed by fluctuating inventory levels, order backlogs, and lost sales -Employees benefit from stable work hours at the cost of ->Potentially decreasing customer service levels ->Increasing inventory costs ->The possibility of inventories products become obsolete

Why companies use S&OP

-Many companies have difficulty in establishing a valid game plan for sales, production, procurement, and inventory levels -- and then trying them to day-to-day scheduling and execution -> as a result, performance suffers (customer service is poor, production and procurement are inefficient, inventories are too high/too low, or all of the above) -THUS S&OP has emerged as an essential management tool in this age of rapid changes, increasingly demanding customers, and supply chains that extend half a world away; S&OP has been called "top management's handle on business"

Workcenter

-More efficient or highly utilized (all of the same type of machines are in one area), takes too much time -Workcenters are focused on a particular type of operation -Place workcenters w/ a high degree of inter-departmental traffic close to one another

Single Period Model Applications

-Overbooking of airline flights (the cost of underestimating the # of cancellations is the revenue lost due to an empty seat on a plane but the cost of overestimating cancellations is the awards, such as free flights or cash payments that are given to customers unable to board the flight) -Ordering of clothing and other fashion items (a problem for a retailer selling fashion items is that only a single order can be placed for the entire season; this is often caused by long lead times and limited life of merchandise; the cost of underestimating demand is the lost profit due to sales not made; the cost of overestimating demand is the cost that results when it is discounted) -One-time order for events (i.e. t-shirts for a concert that become obsolete after a certain period of time)

Production planning strategies

-Plans for meeting demand -Tradeoffs include workers employed, work hours, inventory, and shortages -3 kinds of strategies

Queueing system analysis

-Population is INFINITE (large enough in relation to the service system so that the population size caused by subtractions/additions to the population (a customer needing service or a serviced customer returning to the population) does not significantly affect the system probabilities -Arrivals are RANDOM

Fixed-order quantity models - assumptions to choose this option (PLAIDO)

-Price per unit of product is constant -Lead time (time from ordering to receipt) is constant -All demand for the product will be satisfied -Inventory holding cost is based on average inventory -Demand for the product is constant and uniform throughout the period -Ordering or setup costs are constant

Inventory models w/ price breaks

-Price varies w/ order size -To find the lowest-cost, calculate the order quantity for each price and see if the quantity is feasible 1.) Sort prices from lowest to highest and calculate the order quantity for each price until a feasible order quantity is found 2.) If the first feasible order quantity is the lowest price, this is best, otherwise, calculate the TC for the first feasibly quantity and calculate the TC at each price lower than the first feasibly order quantity

Yield management systems (# of issues)

-Pricing structures must appear logical to the customer and justify the different prices -Must handle variability in arrival or starting times, duration, and time b/w customers -Must be able to handle the service process (scheduling additional personnel to meet peak demand, increasing customer coproduction, utilizing idle capacity for complimentary services, and cross-training employees) -Must train employees to work in an environment where overbooking and price changes are standard occurrences that directly impact the customer -The essence of yield management is the ability to manage demand

Inventory accuracy

-Refers to how well the inventory records agree w/ physical count (what is actually in inventory)

Inventory control logic

-Reorder point/equal order period (record keeping) -Material requirements planning (MRP) - low transaction costs (little automation and integration incorporated into the system, low risk/obsolete inventory, and dependent demand)

Establishing safety stock

-Safety stock - amount of inventory carried in addition to expected demand; safety stock can be determined based on many different criteria: -> A common approach is to simply keep a certain # of weeks supply -> A better approach is to use probability

ABC inventory classification

-Scheme divides inventory items into 3 groupings: A (high dollar volume), B (moderate dollar volume), and C (low dollar volume) -A items (manage them closely, very concerned about, asset control and tracking required) -B items (normal inventory control procedures) -C items (minimal control procedures) -Stratify inventory based on what you have on the shelf (most items - A items; i.e. 80% of the dollar but doesn't mean it's 80% of your inventory - top $ volume on shelf) and look at demand (highest demand - i.e. A items - represent 80% of demand) -EX: class A items (gasoline) would be replenished/ordered daily or weekly, class B items (tires, batteries, oil, grease, and transmission fluid) would be ordered every 2-4 weeks, and class C items (windshield wiper blades, hoses, car wax) would be ordered every 2 to 3 months

Managing queues

-Segment the customers (if a group of customers need something that can be done very quickly, give them a special line so that they don't have to wait for the slower customers - EX: a grocery store "12 items or less") -Train your servers to be friendly (greeting your customer by name or another form of special attention to overcome the negative feeling of a long wait) -Inform your customers of what to expect (this is especially important when the waiting line will be longer than normal - tell them why the waiting time is longer than usual and what you're doing to alleviate the wait) -Try to divert the customer's attention when waiting (provide music, a video, or some other form of entertainment may help distract the customers from the fact that they're waiting) -Encourage customers to come during slack periods (inform customers of times when they usually would have to wait, also tell them when the peak periods are - this may help smooth the load)

Aggregate planning in service environments

-Services cannot be inventoried so sufficient supply must be available at the times demand occurs -So in services, planning sufficient capacity is the key to satisfying customer demand -However, benefits of customer satisfaction must be weighed against risks/costs of excess capacity

Service organization design

-Services cannot be stored in inventory -In services, capacity becomes the dominant issue (too much capacity leads to excessive costs AND insufficient capacity leads to lost customers) -Waiting line models provide a powerful mathematical tool for analyzing many common service situations

Lot-for-lot

-Sets planned orders to exactly match the net requirements -Produces exactly what is needed each week w/ none carried over into future periods -Minimizes carrying cost -Does not take into account setup costs or capacity limitations

Single channel, single phase

-Simplest type of waiting line structure, and straightforward formulas are available to solve the problem for standard distribution patterns of arrival and service -EX: one-person barbershop -EX: in line for a bank teller and they do 1 thing

Line structure

-Single channel, single phase -Single channel, multiphase

Computer simulation of waiting lines

-Some waiting line problems are complex (servers w/ different capabilities or multiple customer types) -Equations assume that waiting lines are independent (when one service is the input to the next, we can no longer use the simple formulas) -Some problems have conditions that do not meet the requirements of the equations (finite populations or specific arrival/service distributions)

Product demand sources

-Specific orders placed by either external or internal customers -THEREFORE, the same product can be both independent and dependent demand -EX: Shock absorbers are dependent demand to the assembly of automobiles, but are also forecasted for spare parts

How can you improve the cycle time?

-Split the task -Share the task (so an adjacent workstation does part of the work) -Use parallel workstations (assign the task to 2 workstations) -Use a more skilled worker -Work overtime -Redesign (may be possible to redesign the product to reduce the task time slightly)

Practical view of waiting lines (waiting line factors)

-The # of arrivals over the hours that the service system is open -Customers demand varying amounts of service, often exceeding normal capacity -We can't control arrivals (short lines, specific hours for specific customers, specials) -We can affect service time by using faster or slower services

Fixed-time period model

-The item is ordered at certain intervals of time -Time triggered (i.e. monthly sales call by sales representative) -Ending inventory varies and reorder quantity varies (depending upon ending inventory level), beginning inventory is always the same -Counting takes place only at the end of the review period -Has a larger average inventory -Favors less expensive items -Is sufficient for less-important items -Requires less time to maintain -Is less expensive to implement REFER TO DESKTOP FOR IMAGE

Service system design matrix

-The left side of the matrix (sales opportunity) -> the greater amount of contact, the greater the sales opportunity at the time when the service is delivered -The right side (production efficiency) -> shows the impact on production efficiency as the customer exerts more influence on the operation; production efficiency decreases as the customer has more contact (and therefore more influence) on the system (to offset this, the face-to-face contact provides high sales opp to sell additional products) -low contact (such as mail) allows the system to work more efficiently b/c the customer is unable to significantly affect/disrupt the system (but there is little opp for additional product sales) -The entities within the matrix list the ways in which the service can be delivered

Material requirements planning (MRP)

-The logic used in determining the # of parts, components, and materials needed to produce a product to the master production schedule provided -MRP is used to manage the dependent demand -EX: tires, wheels, and engines are dependent demand items based on the demand for automobiles

Yield management

-The process of allocating the right type of capacity to the right type of customer at the right price and time to maximize revenue or yield -Can be a powerful approach to making demand more predictable -Has existed as long as there has been limited capacity for serving customers

Single-period models

-Used when we are making a one-time purchase of an item (one time purchasing decision) -EX: a vendor selling t-shirts at a football game -Seeks to balance the cost of inventory overstock and under stock (identify costs w/ overstocking and under stocking and pick the best option)

Fixed-order quantity model

-Used when we want to maintain an item "in-stock" and when we restock, a certain # of units must be ordered -Always order Q units when inventory reaches reorder point (R); inventory arrives after lead time (L); inventory is raised to maximum level (Q) -Event-triggered (i.e. running out of stock) -Inventory remaining must be continually monitored (perpetual system; every time a withdrawal from inventory or an addition to inventory is made, records must be updated to reflect whether the reorder point has been reached) -Has a smaller average inventory -Favors more expensive items -Is more appropriate for important items -Requires more time to maintain - but is visually more automated -Is more expensive to implement REFER TO DESKTOP FOR IMAGE

2.) Stable workforce

-Vary the # of hours worked through flexible schedules or overtime -By varying the # of work hours, you can match production quantities to orders -This strategy provides workplace continuity/flow and avoids many of the emotional and tangible costs of hiring and firing associated w/ the chase strategy

Continuous process

-Very few product types and high volume -Individual products can not be distinguished until packaging -Production follows a predetermined sequence of steps, but flow is continuous -EX: petroleum chemicals, drugs, liquid gas or powder

80/20 Rule

-Virtual few and the trivial many -Related to inventory (80% of the inventory value is in 20% of the items) -Most of our decisions are relatively unimportant but a few shape our future

Applications of poka-yokes to services

-Warning methods (i.e. steps that lead to mistakes trigger a reminder) -Physical/visual contact methods (i.e. parts can only fit together in the correct way)

Tactical planning (S&OP) (months out) - intermediate planning updated monthly

-Workforce, inventory, subcontracting, and logistics decisions -Planning numbers somewhat "aggregated" (month by month) -Moderate risk

MRP inputs (3 of them)

1.) Bill of Materials 2.) The Master Schedule 3.) Inventory Records File

Purposes of inventory (positive aspects)

1.) To allow flexibility to production scheduling (a stock of inventory relieves the pressure on the production system to get the goods out) 2.) Take advantage of economic order size/frequency (the larger the order is, the fewer the orders that need to be written) 3.) Hedge against inflation, or perceived disruption in supply (depending on the situation, inventory may need to be carried; EX: inventory that is bought in anticipation of price changes) 4.) To maintain independence of operations 5.) To meet variation to product demand, including seasonality (a safety or buffer stock must be maintained to absorb variation) 6.) To provide a safeguard for variation in other parts of the system (when material is ordered from a vendor, delays can occur for a variety of reasons - a normal variation in shipping time, a shortage of material at the vendor's plant causing backlogs, etc.)

Enterprise resource planning (ERP)

A computer system that integrates internal and external management info across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity w/ an integrated software application (SAP, Oracle, JDE) Manufacturing knows about new orders as soon as they're entered into the system, sales knows the exact status of a customer order, purchasing knows what manufacturing needs to the minute, and the accounting system is updated as all relevant transactions occur Potential benefits of ERP are huge

Workstation cycle time

A uniform time interval in which a moving conveyor passes a series of workstations (also the time b/w successive units coming off the line)

Example of price breaks

Annual demand (D) = 10,000 Ordering cost (S) = $20 per order Interest/carrying cost (i) = 20% Cost per unit (C) -> 1-499 ($5.00) -> 500-999 ($4.50) -> 1,000 or more ($3.90) Q1-499= sqrt (2 x 10,000 x 20)/(.2 x 5.00) = 633 units (not within 1-499 range) Q500-999= sqrt (2 x 10,000 x 20)/(.2 x 4.50) = 667 units Q1,000+= sqrt (2 x 10,000 x 20)/(.2 x 3.90) = 716 units (optimal solution) ***HINT - multiple 10,000 x 20 THEN divide by 667 for the ordering costs TC = (10,000 x 4.50) + (10,000/667) x 20+ (667/2) x (.20 x 4.50) = $45,600 TC = (10,000 x 3.90)+ (10,000/716) x 20+ (716/2)x(.20 x 3.90) = $39,589 - BEST CHOICE

Assembly line balancing

Assigning tasks to a series of workstations so that the required cycle time is met and idle time is minimized When you minimize idle time, you will have fewer workers

EOQ ad ROP Example

Average daily demand (d w/ a line over it) = 60 Average demand (D) = 60(365) = 21,900 Standard deviation of demand during lead time = 7 Ordering cost (S) = $10 per order Holding cost (H) = $.50 per unit per year Lead time (L) = 6 days Qopt = sqrt (2 x 21,900 x 10)/(.50) = 936 units Standard deviation = sqrt L x (standard deviation^2) = sqrt 6(7^2) = 17.15 R = dL + z x standard deviation = (60 x 6) + 1.64 x 17.15 = 388 units -> For 95% probability, z = 1.64

EOQ and ROP/reorder point example

Average demand (D) = 1,000 units Average daily demand (d w/ a line over it) = 1,000/365 = 2.74 units Ordering cost (S) = $5 per order Holding cost (H) = $1.25 per unit per year Lead time (L) = 5 days Cost per unit (C) = $12.50 Qopt = sqrt (2 x 1,000 x 5)/(1.25) = 89.44 R = dL = 2.74(5) = 13.7 TC = DC + (D/Q) x S + (Q/2) x H TC = (1,000 x 12.50) + (1,000/89) x 5 + (89/2) x 1.25 = 12,611.81

EXAMPLE of assembly line balancing: The Model J Wagon is to be assembled on a conveyor belt. 500 wagons are required per day; production time is 420 minutes; fifth step

Calculate efficiency Efficiency = sum of task times/(N*C) Efficiency = 195/(50.4 x 4) = .9673 or 96.73% So workers are idle (1-.9673) = .0327 or 3.27%

Cycle counting vs. periodic inventories

Cycle counting -Continuous inventory verification process -Items selected at random, based upon some general rules (i.e. A items every 3 months, B every 6 months, and C annually) -Conducted by inventory control specialists -No requirement for any production shutdown -Incremental adjustments to inventory records (adjustments on only a months worth of mistakes at a time) -Recommendations by most auditors/auditing firms -All ERP software packages support cycle counting

EXAMPLE of assembly line balancing: The Model J Wagon is to be assembled on a conveyor belt. 500 wagons are required per day; production time is 420 minutes; third step

Determine the theoretical minimum # of workstations (N) N = sum of task times (T)/cycle time (C) N = 195 seconds/50.4 seconds = 3.87 -> ALWAYS round up -> 4

EXAMPLE of assembly line balancing: The Model J Wagon is to be assembled on a conveyor belt. 500 wagons are required per day; production time is 420 minutes; second step

Determine the workstation cycle time C = production time per day/units per day C = 420/500 = .84 minutes per wagon OR C = 60 seconds*420/500 = 50.4 seconds per wagon

Inputs to the production planning system

EXTERNAL to firm: -Competitors' behavior -Raw material availability -External capacity (i.e. subcontractors) -Economic conditions -Market demand INTERNAL: -Current physical capacity -Current workforce -Inventory levels -Activities required for production

Assemble-to-order firms

Firms that combine a # of preassembled modules to meet a customer's specifications ADV: make more specialized products and give the customer exactly what you want A primary task is to define a customer's order in terms of alternative components since these are carried in inventory (EX: the way Dell Computer makes their desktop computers -> the # of combinations that can be made is infinite) One capability required is a design that enables much flexibility as possible in combining components into finished products There are significant advantages from moving the customer order decoupling point from finished goods to components

Make-to-order firms

Firms that make the customer's product from raw materials, parts, and components EX: Chipotle (when you tell them what you want, they will make it) Boeing's process for making commercial aircraft is an example of make-to-order Customer order decoupling point could be in either raw materials at the manufacturing site or the supplier inventory

Make-to-stock firms

Firms that serve customers from finished goods inventory ADV: quicker Short lead time; high decoupling point (EX: if a product is stocked at a retailer and a customer pulls a product off the shelf, the manufacturer will never see the customer order); larger inventory investment EX of products: televisions, clothing, and packaged food products Essential issue in satisfying customers - to balance the level of inventory against the level of customer service (easy w/ unlimited inventory but inventory costs money); this tradeoff can be improved by better estimates (knowledge) of customer demand, more rapid transportation alternatives, by speedier production, and by more flexible manufacturing Many make-to-stock firms invest in LEAN MANUFACTURING programs in order to achieve higher service levels w/ a minimum level of inventory investment

Engineer-to-order firm

Firms that will work w/ the customer to design and then make the product Long lead time; low customer decoupling point (inventory investment) Haven't bought anything when the customer made the order Customer order decoupling point could be in either raw materials at the manufacturing site or the supplier inventory

EX of single-period models

Hotel reservations: Mean = 5 Standard deviation = 3 Room rate = $80 (this is the cost if cancellations are more than over-bookings - Cu) Penalty for overbooking is $200 (this is the cost if over-bookings are more than cancellations - Co) P ≤ (Cu)/(Co+Cu) = 80/(200+80) = .2857 = probability Look at Z-table for z-value and get = .55 We should overbook = 5 + (.55)*3 = 3.32 -> 3 reservations (best financial decision)

U-shape cells

Increase flexibility

Method of estimating demand

Independent demand - forecast & booked customer orders Dependent demand - calculated

Throughput rate

Long term average rate of flow through the process

Focus of the master production schedule (MPS)

Make-to-order (process focus) - choose to do the MPS at the raw material level; EX: print shop, machine shop, fine dining restaurant Assemble-to-order forecast (repetitive) - choose to do the MPS at the subassembly level; EX: motorcycles, autos, TVs, fast-food restaurants Stock-to-forecast (product focus) - schedule finished product; EX: steel, beer, bread, light bulbs, paper REFER TO DESKTOP FOR IMAGES

Project

Making just 1 or a few of a large project Project is usually stationary Product remains in a fixed location; areas on the site will be designated for various purposes; manufacturing equipment, labor, and materials are moved to the product rather than vice versa

Inventory (work in progress inventory)

Materials held by the firm for future use

Inventory Turns

Not particularly useful for evaluating the performance of a process Inventory turns can also be defined as the # of times inventory is cycled through over time - a measure of how efficiently inventory is used Inventory turn = costs of goods sold (D)/ average inventory value(Q/2 + SS) EX: cost of goods sold on its income statement of $1,000,000; the beginning inventory of the company was $3,000,000 and the ending inventory was $4,000,000; it's turnover is 1,000,000/((3,000,000+4,000,000)/2) = 1,000,000/3,500,000 = .29 times

Periodic inventories vs. cycle counting

Periodic inventories -Frequency determined by organization/auditors -No less frequent than annual -Requires a complete inventory to validate assets (raw materials, WIP, finished goods, inventory in transit still owned by organization) -Usually requires a shutdown to the operation -Requires most individuals in organization to participate (including those not directly involved in the inv. mgmt. function) -Necessary inventory adjustments for all items required before resuming production/shipping activities

Poka-Yoke

Procedures that block the inevitable mistake from becoming a service defect ("avoid mistakes") Common in factories EX: 1.) Failure: customer forgets the need for service Poka-Yoke: send automatic reminders w/ a 5% discount 2.) Failure: customer had difficult communicating problem Poka-Yoke: service adviser repeats his/her understanding of the problem for confirmation or elaboration by the customer 3.) Failure: customer arrival unnoticed Poka-Yoke: use a bell chain to signal arrivals 4.) Failure: incorrect diagnosis of the problem Poka-Yoke: high-tech checklists, such as expert systems and diagnostic equipment

Production layout strategy

Product volume (high vs. low) Product standardization (low, one-of-a-kind vs. high. standardized commodity product which require similar manufacturing processes, materials, geometrics, etc.) REFER TO DESKTOP FOR IMAGE

Positioning inventory in the supply chain (order)

REFER TO DESKTOP FOR IMAGE

Average utilization rate (p)

Remember it's p=arrival rate/service rate

EXAMPLE of assembly line balancing: The Model J Wagon is to be assembled on a conveyor belt. 500 wagons are required per day; production time is 420 minutes; fourth step

Select assignment rule In this case it was: 1.) Prioritize tasks in order of largest # of following tasks 2.) Break ties w/ a secondary rule (longest task time)

How are service organizations classified?

Service organizations are classified according to the customers they service and the service (financial, health, transportation, etc.) they provide to those customers

Positioning inventory in the supply chain

Source step - where parts are procured/obtained from 1 or more suppliers Make step - where the manufacturing takes place Deliver step - where the product is shipped to the customer

EXAMPLE of assembly line balancing: The Model J Wagon is to be assembled on a conveyor belt. 500 wagons are required per day; production time is 420 minutes; first step

Specify the sequential relationships among tasks (draw precedence graph) EX: A->B->C->F and G->J->K

Variations of operations strategies

Strategy and compatible competitive priorities -Peak demand strategy (delivery speed, conformance quality, and flexibility) -Level production strategy (delivery speed, design quality, and low cost) -Chace demand strategy (delivery speed, design quality, and flexibility)

Assembly line balancing - example 3

Task 1 = 3 seconds Task 2 = 5 seconds Task 3 = 1 second Task 4 = 3 seconds Task 5 = 2 seconds ASSIGN TASKS TO 3 WORKERS SO THAT THE WORKER IDLE TIME IS MINIMIZED Worker A (task 1 and 2); cycle time = 8 sec Worker B (task 3 and 4); cycle time = 4 sec Worker C (task 5); cycle time = 2 sec -One plane comes out every 8 seconds so: Idle time = (8-4) + (8-2) = 10 seconds

Production layout strategy

The choice of manufacturing processes depends mostly on a firm's target market (sales volume and variety of products) B/w 5 basic structures: project, workcenter, manufacturing cell, assembly line, and continuous process

Aggregate production plan

The firm's strategy for meeting demand in the future, implemented through the master production schedule (MPS) Provides the general range of operation

Little's Law

The flow of items through a production process can be described using Little's Law The fundamental long-term relationship between Work-In-Process, throughput and flow time of a production system in steady state is: ->Inventory =Throughput × Flow Time EX: suppose that a voting facility processes an average of 50 people per hour and that, on average, it takes 10 minutes; what is the average # of voters in the process? ->SOLUTION: throughput = 50 people/hour and flow time = 10 minutes/60 minutes = 1/6 hour SO inventory (work-in-process) = 50 people/hour * 1/6 hour = 8.33 people (hours cancel)

Precedence relationship

The order in which tasks must be performed in an assembly line

Lot sizes

The part quantities issued in the planned order receipt and planned order release sections of an MRP schedule

Customer contact

The physical presence of the customer in system Service systems w/ a high degree of customer contact are more difficult to control

Inventory system

The set of policies and controls that manages and monitors the inventory investment EX: determines what levels should be maintained, when stock should be replenished, and how large orders should be

Inventory

The stock of any item or resource used in an organization Includes raw materials, finished products, component parts, supplies, and work-in-process Can be visualized as stacks of money sitting on forklifts, on shelves, in manufacturing plants and in trucks and planes while in transit For many businesses, inventory is the largest asset on the balance sheet at any given time

Lead time

The time needed to respond to a customer order

Creation of the service

The work process involved in providing the service itself

Time fences

Time fences - periods of time having some specified level of opportunity for the customer to make changes Frozen - changes to production plan are NOT allowed Frozen until week 8 - so you can't change MPS for 8 weeks

Flow time

Time for a single unit to traverse/travel the entire process

The objective of sales and operations planning

To reach consensus on a single operating plan that allocates the critical resources of people, capacity, materials, time, and money to most effectively meet the market place in a profitable way

Customer order decoupling point

Where inventory is positioned to allow entities in the supply chain to operate independently

Assembly line balancing examples

Workstation 1 = task 1 (10 seconds), task 2 (10 seconds) Workstation 2 = task 3 (10 seconds), task 4 (10 seconds) Assuming no variability in the process, how often does a car come off the line? -An item comes off the line every 20 seconds; 0 seconds of idle time

Assembly line balancing - another example

Workstation 1 = task 1 (10 seconds), task 2 (10 seconds) Workstation 2 = task 3 (10 seconds), task 4 (20 seconds) -An item comes off the line every 30 seconds; 10 seconds of idle time