Operations MGT

direct costs of labor

costs for labor

Flow rate formula

flow rate = flow units divided by time FR = 24 patients/8 hours = 3 patients per hour

labor content

is the sum of processing times involving labor and it measures how much work is required

average labor utilization formula

labor content/ cycle time x number of employees Example: Average labor utilization = 120 seconds/ 46 seconds x 3 = 87.0 %

Bottleneck

process with smallest capacity

utlization

ration between flow rate and process capacity

Target manpower formula

target manpower = labor content/ takt time example: 120 seconds a customer / 36 seconds a customer = 3.333

flow rate

the amount coming in and out of a business

Average labor utilization

the average utilization across employees

Takt Time

the rate of production needed to meet customer demand yet avoid overproduction

Target manpower

the ratio between the labor content and the takt time determines the minimum number of resources required to meet demand

cycle time of a process

time it takes for something to go through a process

idle time formula

total idle time = cycle time x number of employees - labor content Example= 46 seconds a worker x 3 workers -120 seconds =18 seconds.

cost of direct labor formula

wages per unit of time/flow rate example: Cost = 3 x 12 $ an hour/ 78.3 customers per hour = 0.46 $s/customer

idle time

worker time that is not used in the production of the finished product

3 Components of customer utility

§ Consumption utility: which is how much you like a product or service. § Price: which is the total cost of owning a product or receiving a service. § Inconvenience: which is what it takes to obtain a product or receiving the service.

· The three-process metrics (R, T, I)

• A process metric is something we can measure that informs us about the performance and capability of a process. § Inventory: Number of flow units within a process. § Flow rate: rate at which the flow units travel through a process · Example: dollars per week, Kilograms per hour, or people per month. § Flow time is the time a flow unit spends in a process, from start to finish. · Units of measurement: minutes, hours, days, weeks, months, or years.

· Reallocating work to balance a process

• Balancing for a fixed sequence of activities: we must carry out the activities in each order. You first compute takt time then add actives to a resource as long as the resulting processing time stay under the takt time. • Balancing for activities with no fixed sequence: You can reshuffle activities in your process by giving you an extra bit of flexibility, which makes assigning activities to resources in a balances way easier, leads to a higher average labor utilization and lower costs of direct labor.

· Understand basic ideas around process improvements§ Offloading the bottleneck

• Can take multiple forms § Reassign activities to other resources with more capacity, an improvement strategy that we refer to as line balancing § Automating some of the activities consuming time at the bottleneck by using technology § Outsourcing some of the activities consuming time at the bottleneck § We can increase the process capacity by adding more employees.

· Determine capacity for a one-step process

• Capacity: the maximum number of flow units that can be processed by the resource per unit of time.

· Evaluate average flow rate and flow time from arrival and departure data

• Flow time formula: Inventory x Cycle Time • Flow rate formula: Flow Rate = 1/cycle time

· Identify an appropriate flow unit for a process

• Flow unit is the basic unit that moves through a process, generally associated with the outputs of a process. § Example of a natural flow unit is a patient in a hospital § Another would be a rider of a roller coaster.

· Customer utility

• How a customer makes a choice of whether to do business with a certain organization which is based off of utility.

Little's law

• Little Law: Inventory = flow rate x flow time or I=R x T

· Key operational decisions

• Process Analysis and Improvement § How should we produce the products or services we provide to our customers? § How can we improve our processes? • Process Productivity and Quality § How do we improve the productivity of the process? § How do we respond to the heterogeneous preferences of our customers without sacrificing too much productivity? § How can we consistently deliver the products and services? • Anticipate Customer Demand § How much of the products should we produce and how many customers should we serve? § How doe we design a supply chain and distribution system? § How can we predict demand? • Respond to Customer Demand § How can we quickly respond to the customer demand of one customer? § How can we quickly respond the customer demand of many customers? § What products and services best meet the needs of our customers?

· Understand process flow diagrams

• Process analysis opens the black box of the operations and peeks inside by identifying and analyzing all the activates involved in serving one unit of demand. • § Triangles represent are flow units that are waiting in the process without being worked on. Common to call them buffer inventory. § Rectangles represent resources which help the flow units move from being a unit of input to becoming a unit of output. § Arrows: capture the flow unit's journey from input to output.

· The three systems inhibitors

• Waste: which is all the consumption of inputs and resources that don't add value to the customer. • Variability: corresponds to changes in either demand or supply over time. • Inflexibility: is the inability of an operation to quickly and cheaply change in response to new information.

cycle time formula

1/flow rate

Capacity formula

Capacity = 1 divided by processing time.

labor content formula

Labor content = 36 seconds a customer + 46 seconds a customer + 37 seconds a customer = 120 seconds a customer

Takt Time Formula

Takt time = 1/demand rate example: 0.01 hour a customer x 3600 seconds an hour = 36 seconds per customer

utilization formula

Utilization = flow rate/capacity 30/30 = 1

· Explain the pros and cons of work specialization

•Pros: •Reduction in processing times due to elimination of set-ups: The times for the various activities are reduced (and thus the capacity levels be increased) as workers specialize in fewer activities. •Reduction in processing times due to learning: practice makes perfect and this perfection also manifests itself in shorter processing times. •Lower skilled labor: More specialized labor tends to require a shorter training period and often times receives lower wage rates. •Equipment Replication: specialization typically increases the utilization of the equipment and so the amount of equipment that is required to operate the process is less •Cons: •Limited variety of work for motivation •Limited efficiency in capacity maximization