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Operations Management. Session 4: Kristine Cookies Case. Last Class in Process Analysis Module. What did we learn? Throughput rate Capacity What’s the difference between capacity and throughput rate? Bottleneck resource Utilization rate Throughput time WIP Little’s Law:

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Operations management

Operations Management

Session 4: Kristine Cookies Case


Last class in process analysis module
Last Class in Process Analysis Module

  • What did we learn?

  • Throughput rate

  • Capacity

    • What’s the difference between capacity and throughput rate?

  • Bottleneck resource

  • Utilization rate

  • Throughput time

  • WIP

  • Little’s Law:

    • Throughput Time = (Average) WIP / Throughput Rate

Operations Management


Today
Today

  • Team Presentations

  • Lecture (Kristen’s cookies and additional comments on capacity management)

Operations Management


Team presentations
Team Presentations

Operations Management


What is it all about
What is it all about?

  • Process Characteristics

  • Capacity of a System

    • How much can you process in a week/day?

  • Response Time

    • How quickly can you meet demand?

Operations Management


Process flow
Process Flow

  • What are the inputs?

  • What are the outputs?

  • What are the activities?

Operations Management


Process flow chart

YOU

MIXER

YOU

TRAY

ROOMIE

OVEN

TRAY

OVEN

TRAY

TRAY

ROOMIE

TRAY

ROOMIE

DOUGH

MIX

LOAD

TRAY

SET

OVEN

BAKE

COOL

PACK

PAY

Process Flow Chart

Operations Management


4

8

12

16

20

24

28

32

36

Activity

Time

Resource

Operations Management


Activity

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

4

8

12

16

20

24

28

32

36

26

You

Oven

Resource

Tray

RM

Operations Management


Kristine cookies and measures
Kristine Cookies and Measures

  • What is the Throughput time?

    • From the moment an order arrives till it is finished, it takes 26 min.

  • Can the throughput time be reduced?

Operations Management


Activity

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

4

8

12

16

20

24

28

32

36

26

You

Oven

Resource

Tray

RM

Operations Management


Activity

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

4

8

12

16

20

24

28

32

36

26

You

Oven

Resource

Tray

RM

Operations Management


Kristine cookies and measures1
Kristine Cookies and Measures

  • What is the capacity of the system?

  • What is the slowest resource? (Assume that the we have enough trays.)

Operations Management


Activity

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

26

4

8

12

16

20

24

28

32

36

10

You

Oven

Resource

Tray

RM

Operations Management


Bottleneck analysis
Bottleneck Analysis

  • It is clear that the bottleneck is the Oven

    • It is the only resource that once we start producing is not idle.

    • It is the slowest resource: One dozen every 10 min.

Operations Management


Capacity
Capacity

  • It seems that if they have enough trays they can produce a dozen of cookies every 10 min.

    • 1.2 cookies per min.

    • In 4 hours (240 min) you can finish 22 trays:

      • 240 – 26 = 214

      • 214 / 10 = 21.4 or 21 trays.

  • Given the bottleneck is the oven, to maximize capacity we must ensure that the oven runs continuously: once every 10 min.

Operations Management


Process flow chart1
Process Flow Chart

Order Size (Dozens): 1 Dozens

YOU

MIXER

YOU

TRAY

ROOMIE

OVEN

TRAY

OVEN

TRAY

TRAY

ROOMIE

TRAY

ROOMIE

DOUGH

MIX

LOAD

TRAY

SET

OVEN

BAKE

COOL

PACK

PAY

TIME:

6

2

1

9

2

1

5

TOTAL TIME

YOU:

6 + 2= 8 minutes

MIXER:

6 minutes

TRAY:

19 minutes

ROOMIE:

1 + 2 +1 = 4 minutes

OVEN:

1+ 9 = 10 minutes

Operations Management


Process flow chart2
Process Flow Chart

Order Size (Dozens): 1 Dozen

YOU

MIXER

YOU

TRAY

ROOMIE

OVEN

TRAY

OVEN

TRAY

TRAY

ROOMIE

TRAY

ROOMIE

DOUGH

MIX

LOAD

TRAY

SET

OVEN

BAKE

COOL

PACK

PAY

TIME:

6

2

1

9

2

1

5

Dozens / Day = 22

TOTAL TIME

YOU:

6 + 2= 8 minutes

MIXER:

6 minutes

TRAY:

19/2 minutes

ROOMIE:

1 + 2 +1 = 4 minutes

OVEN:

1+ 9 = 10 minutes

Operations Management


Process flow chart3
Process Flow Chart

Order Size: 2 Dozens

YOU

MIXER

YOU

TRAY

ROOMIE

OVEN

TRAY

OVEN

TRAY

TRAY

ROOMIE

TRAY

ROOMIE

DOUGH

MIX

LOAD

TRAY

SET

OVEN

BAKE

COOL

PACK

PAY

TIME:

6

4

2

18

10

4

1

TOTAL TIME

YOU:

6 + 2= 8 minutes

MIXER:

6 minutes

TRAY:

ROOMIE:

1 + 2 +1 = 4 minutes

OVEN:

2+ 18 = 20 minutes

Operations Management


Activity

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

26

4

8

12

16

20

24

28

32

36

10

You

Oven

Resource

Tray 1

Tray 2

Operations Management

RM

RM


How many dozen per day
How many dozen per day?

  • 60 minutes x 4 = 240 available minutes each evening

  • 240-36=204 available minutes after the first two dozen is finished

  • 204/20=10.2 two dozens finished in the remaining 204 minutes

  • 2x11=22 dozens per day

  • Does it make sense to give a discount for an order size of two dozen?

Operations Management


Capacity investment
Capacity Investment

  • Should we invest in a second Oven?

Operations Management


Activity

Two Ovens. Order Size: 1 dozen

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

26

4

8

12

16

20

24

28

32

36

8

You

You

Oven

Resource

Tray

RM

RM

Operations Management


Bottleneck analysis1
Bottleneck Analysis

  • Who is the bottleneck now?

    • The entrepreneur

  • Why did the bottleneck shift?

  • Could the numbers (as opposed to the graph) indicate were the bottleneck is?

  • Now should we give a discount for ordering 2 dozen?

Operations Management


Bottleneck analysis2
Bottleneck Analysis

  • Your capacity:

    • 1 dozen cookies / 8 minutes = 0.125 dozen cookies per minute (or 1 dozen cookies every 8 minutes)

  • Oven capacity:

    • 1 dozen cookies / 10 minutes

    • 2 ovens x .1 dozen cookies per minute = 0.2 dozen cookies per minute (or 1 dozen cookies every 5 minutes)

  • Mixer:

    • 1/6=0.167 dozen cookies per minute

  • Roommate

    • ¼=0.25 dozen cookies per minute

What is the slowest resource?

Note: same calculation as made in the previous class in Burger’s example.

Operations Management


Dozens per day with two ovens
Dozens per day with two ovens

  • 240-26=214 minutes for the first dozen

  • 214/8=26.75 dozens in the next 214 minutes

  • 27 dozen per day with two ovens.

Operations Management


Economic analysis
Economic Analysis

  • Having two ovens increase the capacity from 60/10=6 dozens per hour to 60/8=7.5 dozens per hour.

  • What is the value of the additional oven?

  • (27-22)*300*Profit per dozen =

  • Additional profit = $1,500*profit per dozen

# of selling days

New capacity

Old capacity

Operations Management


Economic analysis example
Economic Analysis Example

  • Suppose we sell each dozen cookies for $1.50 per dozen.

  • Assume there is no cost on your time.

  • The profit per dozen is then $1.50-$0.60-$0.10=$0.80.

  • Therefore, the additional profit after being open 300 days is: 5x300x$0.80=$1200.

  • We are willing to buy another oven if it costs less than $1200 and we have enough demand so that it will be in use.

Operations Management


Activity

Two Ovens

Order Size: 2 Dozens

PAY

PACK

COOL

BAKE

SET OVEN

LOAD

MIX

Time

26

4

8

12

16

20

24

28

32

36

You

You

Oven

Resource

Tray

RM

Operations Management


Process flow chart4
Process Flow Chart

OVENS = 2 and Order size =2 Dozen

YOU

MIXER

YOU

TRAY

ROOMIE

OVEN

TRAY

OVEN

TRAY

TRAY

ROOMIE

TRAY

ROOMIE

DOUGH

MIX

LOAD

TRAY

SET

OVEN

BAKE

COOL

PACK

PAY

TIME:

6

4

2

18

10

4

2

Dozens / Day = 44 doz / day

TOTAL TIME

YOU: 6+4 = 10

MIXER:

TRAY:

ROOMIE:

OVEN: (18 +2) /2 = 10

Operations Management


Summary
Summary

  • Tools & Techniques

    • Identification of Bottleneck

    • System Capacity

    • Throughput Time

  • Concepts

    • Bottleneck & Capacity depend of product mix

    • In high variety systems bottlenecks shift

Operations Management


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