SCMG 332 MIDTERM
Pareto dominated
A firm that performs equally or worse on all attributes of the customer's utility function than another firm
process flow diagram
A graphical way to describe the process. It uses boxes to depict resources, arrows to depict flows, and triangles to depict inventory location.
production cycle
A repeating sequence of produced units that can include: setup time, production time idle time
process analysis
A rigorous framework for understanding the detailed operations of a business
setup
A series of activities (i) that are required to produce units but (ii) for which the time to complete these activities does not depend directly on the number of units produced.
process
A set of activities that take a collection of inputs, perform some work or activities with those inputs, and then yield a set of output
market segments
A set of customers who have similar utility functions
changeover time
A setup time to change production from one type of product to another
demand matrix
Determines how many flow units of each type are flowing through each resource. rows=resource column= flow unit type
Little's Law
I=R x T
The Goal: Inventory
Inventory is all the money that the system has invested in purchasing things which it intends to sell
The Goal: Operational Expense
Operational expense is all the money the system spends in order to turn inventory into throughput.
variability
Predictable or unpredictable changes in the demand or the supply process
capacity constrained
The case in which demand exceeds supply and the flow rate is equal to process capacity.
demand constrained
The case in which process capacity exceeds demand and thus the flow rate is equal to the demand rate.
waste
The consumption of inputs and resources that do not add value to the customer
capabilities
The dimensions of the customer's utility function a firm is able to satisfy. Allow a company to do well on some but not all components for customer utility.
Inefficient
The gap between a firm and the efficient frontier
utilization
The ratio between the flow rate (how fast the process is currently operating) and the process capacity (capturing how fast the process could be operating if there was sufficient demand) = flow rate of process / capacity of resource
batch
a collection of units
product mix
a combination of different flow unit types moving through a process.
process flow diagram
a graphical way to describe a process
line balancing
a process by allocating the activities that need to be carried out in the process across the process resource as evenly as possible
resources
group of people/equipment that transforms inputs into outputs
utilization
how busy the resources of the process are
process capacity simple
how many flow units can be processed per unit of time.
fit
how much a service matches to a unique consumable
organizations want to
best match supply with demand
switchover time
can be used in same context with changeover time. It is the time needed to change over, or switch, production from one type of part to the other
3 components of utility
consumption utility- how much you like a service price- total cost of owning a product inconvenience- reduction in utility that results from the effort to obtain it
four dimensions of operational performance: trade-offs
cost quality variety time
boxes
depict a resource
arrows
depict flow
triangles
depict inventory location
batch size formula (desired capacity)=
desired capacity * setup time / 1 -(desired capacity * processing time)
workload matrix
each cell is multiplied by the appropriate processing time
profit=
flow rate x (average price - average costs)
how many in a batch: yes there is a bottleneck
increase batch size by solving equation for a batch size given a desired flow rate (rate of next slowest step)
managerial questions
is the process performing well? how can we make the process better?
components of inconvenience
location timing
basic idea
make batch as small as possible without slowing the process
flow rate is the
minimum between DEMAND AND PROCESS CAPACITY
by adding product variety
more time is spent on setup
time through an empty machine paced for the 1st unit
number of stations x cycle time
efficiency
obtaining high output at low costs A process is efficient if it is able to achieve a high flow rate with few resources. *firms should not set this as their only goal
scrapping
occurs when defective flow units are eliminated from the process
yield
of a resource measures the percentage of good units that are processed at this resource
components of consumption utility
performance fit
the primary goal for most organizations
profit!
performance
service attributes we all agree on
process metric
something we can measure that informs us about the performance and capability of a process.
time through an empty worker paced process for the first unit
sum of all the processing times
location
the further you have to travel
in the spirit of matching supply with demand
the goal is to have cycle time as close to takt time as possible
3 system inhibitors
waste variability inflexibility
flow unit
what is tracked through the process and generally defines the process output of interest. The basic unit that moves through a process.
3 common sources of variability in demand
•Customer arrivals - customers can come at very different times of the day •Customer requests - Not all customers want the same food •Customer behavior - It may take you less time to pay the cashier for your meal than it does me
advantages of a single work cell
•It may be easier to add/remove capacity -raise or lower staffing level and don't have to worry about reconfiguring the line. •Everyone is working at 100% utilization (assuming not demand constrained).
off-loading the bottleneck
•Reassigning activities to other resources with more capacity •Automating some of the activities consuming time at the bottleneck •Outsourcing some of the activities consuming time at the bottleneck
pros of specialization
•Reduction in processing time due to elimination of setup •Reduction in processing time due to learning •Lower-skilled labor •Equipment replication
disadvantages of a single work cell
•The more tasks workers are asked to do, the less they can specialize in each task which can impact their speed and the quality of their work (less learning). •More task assignments may also necessitate more training. •Having work cells requires having copies of each work station for each worker, which may take up too much physical space and/or isn't amenable to introducing automation or other technology (as you'd need to buy a machine for each worker).
efficient frontier
•The set of firms that are not Pareto dominated.
3 common sources of variability in supply
•Time to serve a customer - different employees perform the same task at different speeds •Disruptions - people get sick, weather is bad... •Defects - sometimes we make mistakes and work will have to be redone
process capacity
•how much input can be changed into an output in a given unit of time. The process capacity determines the maximum flow rate a process can provide per unit of time. It thus determines the maximum supply of the process
target manpower
The ratio between the labor content and the takt time determines the minimum number of resources required to meet demand. This minimum doe not have to be an integer number and it assumes all resources are perfectly utilized. = labor content / takt time *More demand means a shorter takt time - shorter takt time requires more employees to handle the same amount of labor content.
takt time
The ratio between the time available and the quantity that has to be produced to serve demand = Available time / Required quantity =1 / demand rate driven by demand rate!
cycle time
The time between completing two consecutive flow units = 1 / flow rate
lead time
The time between when an order is placed and when it is received. Process lead time is frequently used as an alternative term for flow time.
processing time
The time it takes a resource to complete one unit.
strategic trade-offs
When selecting inputs and resources, the firm must choose between a set that excels in one direction of customer utility or another, but no single set of inputs and resources can excel in all dimensions.
FUNDAMENTAL IDEA
You cannot manage what you cannot measure If you do not know how to measure a process, then it is difficult to know how to improve a process.
what drives customer demand?
utility: a measure of the customer preference of a product or service.
The Goal: Theory of Constraints
"A bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. A non-bottleneck is any resource whose capacity is greater than the demand placed on it." Jonah carefully explains that Alex must NOT try to balance capacity with demand, but instead balance the flow of product through the plant.
inventory
# of units within a process
how many in a batch: there is no bottleneck
-then capacity is "free" => don't worry about it. If anything, consider reducing batch sizes
reasons for utilization being less than 100%
1. A non bottleneck resource has, by definition, some extra capacity relative to the bottleneck. 2. In the case of a demand-constrained process, even the bottleneck would not be working at 100 percent.
rules to define the flow unit
1. Choose flow unit that corresponds to what you want to track and measure (with respect to the process). 2. Stick with the flow unit you define. 3. Choose a flow unit that can be used to measure and describe all the activities within the process.
5 steps for finding the bottleneck and flow rates of a process with multiple flow units:
1. compute demand matrix 2. compute total demand at each resource 3. compute the capacity level at each resource 4. compute the implied utilization 5. complete the flow rate for each unit type
2 types of costs
1. costs for inputs 2. cost for resources
steps to process mapping
1.Define the process boundaries 2.List the steps 3.Sequence the steps 4.Complete the map using appropriate symbols to describe the actions, flow, and waiting
larger batch size
= more inventory = slower process
throughput
A SYNONYM FOR FLOW RATE
batch process
A type of production in which units are produced in batches
leveling the demand
Setting an expected demand rate for a given period of time so that one can look for an appropriate staffing plan for that time period.
total idle time
The amount of idle time per flow unit added up across all resources.
idle time
The amount of time per flow unit for which a resource is paid but is not actually working. •An unutilized worker creates unnecessary expense. •Idle time (Resource i) = Cycle time - Process time (Resource i) •Measures how long the resource is idle for each flow unit it serves. •Idle time is expressed in units of time.
labor content
The amount of work that goes into serving one customer (generally one flow unit) which is the sum of the processing times involving labor. * a high number is less desirable than a low number
average labor utilization
The average utilization across resources should be as high as possible * 3 formulas for this one
inflexibility
The inability to adjust to either changes in the supply process or changes in customer demand
cost of direct labor
The labor cost associated with serving one customer = wages per unit of time / flow rate
capacity
The maximum number of flow units that can flow through that resource per unit of time = 1 / processing time x # of resources
trade-offs
The need to sacrifice one capability in order to increase another one.
demand rate
The number of flow units that customers want per unit of time.
upstream
The parts of the process that are at the beginning of the process flow.
downstream
The parts of the process that are at the end of the process flow.
rework
The repetition of activities or an extra set of activities that have to be completed by a defective flow unit in order to be restored to a good flow unit. The term rework originated in manufacturing •If rework is able to turn a defective unit into a good unit, the process yield returns to 100%. •Means that a resource needs to process more flow units. Means that the demand rate for aparticular resourceis higher relative to a situation not involving rework
process scope
The set of activities and processes included in the process
The Goal: Three terms
Throughput is money coming in. Inventory is the money currently inside the system. And operational expense is the money we have to pay out to make throughput happen
The Goal: Throughput
Throughput is the rate at which the system generates money through sales
attrition loss
all flow units start at the same resource but then some drop out of the process (or actively removed from the process) at different points
The Goal: Dice game realization
any balanced plant faced with "statistical fluctuations" and "dependent events" will see throughput going down and inventory going up
external
activities that can only be done when the machine is running
internal
activities that can only be done when the machine is stopped
timing
the longer you have to wait
flow rate
the rate at which flow units travel in/out of a process.
implied utilization
the ratio of demand to capacity = total demand of the resource / capacity for the resource * captures the mismatch between what could flow through the resource (demand) and what the resource can provide (capacity). Implied utilization can exceed 100%. Any excess over 100% reflects that a resource does not have the capacity available to meet demand.
bottleneck
the resource with the lowest capacity in the process
flow time
the time a flow unit spends in a process, from start to finish.