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.