operations management
the systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external, customers
OM= managing business processes
Processes can be linked together to form a supply chain- interrelated
across the organization
material and service inputs
sales revenue
product and service outputs
marketing, finance, and operations
:support functions- accounting, information systems, human resources, engineering
a process view
external environment
info on performance
outputs, goods, services
internal and external customers
inputs, workers, managers, equipment, facilities, materials, land, energy
MANUFACTURING VS SERVICE
manufacturing
physical, durable output
output can be inventoried
low customer contact
long response time
capital intensive
quality easily measured
service
intangible, perishable output
output cannot be inventoried
high customer contact
short response time
labor intensive
quality not easily measured
support processes
-external suppliers
-supplier relationship process
-new service/product development
-order fulfillment process
-customer relationship management
-external customers
components of supply chain
purchasing
RD and product management
production and packaging
retailing and marketing
transportation and warehousing
corporate strategy
provides an overall direction that serves as the framework for carrying out all the organization's functions
operations strategy
specifies the means by which operations implements corporate strategy and helps build a customer driven firm
competitive priorities and competitive capabilities
critical operational dimensions a process or supply chain must possess to satisfy customer needs
-cost
-quality
-time
-flexibility
competitive capabilities: actual capabilities a process or supply chain possess along the different operational dimensions
a measure of competitiveness: productivity
partial measures: output/single input
multi-factor measures: output/multiple inputs
total measure: output/total inputs
PRODUCTIVITY= OUTPUTS/INPUTS
partial measures
output/labor
output/machine
output/capital
output/energy
multifactor measures
output/ labor+machine
output/ labor+capital+energy
aka (units x price)/((hours x wage)+capital + energy)
total measure
value of goods or services produced/ value of all inputs used to produce them
productivity measurements
-can be calculated for a specific product, for an employee, for a department, for the organization, for the industry, or even for the nation
-should be monitored and improved continuously
-are more difficult to calculate in service organizations than in m
four basic process decisions
1) process structure: customer-contact position (services)
product-process position (manufacturing)
layout
2) resource flexibility (specialized and enlarged)
3) capital intensity (low automation, high automation) = STRATEGY FOR CHANGE (process reengineeri
process characteristics: front office
high interaction with customers, highly customized service
flexible flows with individual process
process characteristics: hybrid office
some interaction with customers, standard, services with some options
flexible flows with some dominant paths, with some exceptions to how work performed
process characteristics: back office
low interaction with customers, standardized services
line flows, routine work same with all customers
process characteristics: job process
low volume products, made to customer order
customized process with highly flexible and unique sequence of tasks
little to no automation
easy to expand/ capacity change
ex: custom cake line
process characteristics: small batch process and large batch process
multiple products with more specialized tools with low to moderate volume- high volume
disconnected line flows, moderately complex work, more skilled workers
more hands-on than line process
ex: King Soopers bakery line
-moderate flexibility and customizat
process characteristics: line process
few major products, commodity products
-high volume, low flexibility/customizability
-highly automated
expensive and difficult capacity change
connected line, highly repetitive work
ex: King Soopers bread line
process characteristics: continuous process
continuous flows
high volume, high standardization
which of the following are REASONS why King Soopers chose a job process for the Custom Cake Line
highly skilled workers THERE BUT NOT AVAILABLE
high customizability
low volume
high flexible
none/no automation
capacity changes
easy/inexpensive to expand
but not low cost in general
variable demand-
customer contact in service: high
physical presence
people processed
active, visible contact intensity
personal attention
face-to-face method of delivery
customer contact in service: low
absent physical presence
possessions or information processed
passive, out of sight contact intensity
impersonal personal attention
regular mail or e-mail method of delivery
resource flexibility
-flexible workforce
-flexible (general purpose) equipment
-pros: more reliable customer service, helps absorb changes in workloads
-flexible resources (bother workforce and equipment) tends to be more costly
-break-even analysis can be used to determine a
break-even analysis
(total cost= VC
Q+FC) intersects with (total revenue = R
Q)
total variable cost (VC*Q)
fixed cost remains flat
to make profit, we need TR>TC
aka Q= FC/(R-VC)= Qbreakeven
we want to add a new line of product. the annual lease for the equipment is 9,000. we estimate the production cost to be 3/unit and we plan to sell for 6/unit. how many units should we produce to sell to break even
FC= 9000
VC= 3
R= 6
Qbreakeven= FC/(R-VC)= 9000/(6-3)= 3000units/year
*if our forecast annual demand is 2,500 units, we should NOT invest in the new line
BBC is deciding whether to weld bicycle frames manually or to purchase a welding robot. if welded manually, investment costs for equipment are only 10,000. the per-unit cost of manually welding a bicycle frame is 50 per frame
on the other hand, a robot ca
FC make: 10,000
VC make: 50
FC buy: 400,000
VC buy: 20
FC+VC
Q=FC+VC
Q
Q= (Fb-Fm)/(Vm-Vb)=
400,000-10,000/ 50-20 = 13,000 units to compete with the robot
*anything higher is robot territory, anything lower is manual
break even problem with step costs
multiple possible break points
aka FC+VC=TC for each unit
calculate BEP for each interval: FC/(R-VC)
assumptions of break-even analysis
-one product is produced
-the variable cost per unit is constant, regardless of volume
-revenue per unit is constant, regardless of volume
-fixed cost is either constant or step function
capital intensity: automating manufacturing process
automation is one way to address the mix of capital and labor
-automated manufacturing processes substitute capital equipment for labor
-typically require high volumes and costs are high
-automation might not align with a company's competitive priorities
capital intensity: automating service process
-capital equipment may be used to automate service processes
-investment can be justified by cost reduction and increased task divergence through expanded customer choice
-may impact customer contact
-may be used in both front and back-office operations
strategic fit in process choice
-make choices that fit the situation and that make sense together, that have a chose strategic fit
-the process chosen should reflect the desired competitive priorities
-the process structure has a major impact on customer involvement, resource flexibilit
front office
top quality, delivery speed, customization
high customer involvement
high resource flexibility
capital intensity depends
back office
low-cost operations
consistent quality
on-time delivery
low customer involvement
low resource flexibility
capital intensity depends
decision patterns for manufacturing
-processes can be adjusted for the degree of customization and volume
-process flows can be made more or less linear
-competitive priorities must be considered when choosing processes
links with process choice
competitive priorities: top, quality, on-time delivery, and flexibility
low-cost operations, consistent quality, and delivery speed
process choice: job process or small batch process
large bath, line, or continuous flow process
links with production and inventory strategy
competitive priorities: top quality, on time delivery, and flexibility
delivery speed and variety
low cost operation and delivery speed
production and inventory strategy:
make to order
assemble to order
make to stock
strategies for change
process reengineering
fundamental rethinking and radical redesign of a process to improve performance
*can be successful but it is not simple or easy
* the people who are involved with the process each day are the best source of ideas on how to improve it
how many machines should we invest in if annual demand is 700 units when less than 600 units is two machines and over 600 is three machines?
2 machines, because 600
40-15000-600
10
(R-FC-VC)= 3000
3 machines satisfies demand BUT 700
40-20000-700
10= 1000
so profit is higher when you don't meet demand with 2 machines
process analysis
processes may be the least understood and managed aspect of a business
-a firm can not gain a competitive advantage with faulty processes
-processes can be analyzed and improved using certain tools and techniques
-process analysis can be accomplished usin
systematic approach
1) identify opportunity
2) define scope
3) document process
4) evaluate performance
5) redesign process
6) implement changes
-estimate future capacity requirements
-identify gaps by comparing requirements with available capacity
-develop alternative plans
documenting the process
process flowcharts (process flow diagram)
-note that there are many variants
swim lane flowcharts
-groups functional areas responsible for different subprocesses into lanes
service blueprints
-flowcharts that shows which steps have high customer contacts
process flowchart
graphical representation of the network structure of a process
- square is activities
- arrow represents precedence relationship
- diamond represents yes or no decisions
- oval represents events (beginning, end)
-triangle represents inventory buffer
sub process of client agreement and service delivery
1) verbal ok from client
2) form completed by sales or consulting
3) project manager assigned
4) letter of agreement signed
5) 50% involved by accounting, sales, or consulting
6) delivery of service by consulting
7) final invoice created by accounting, sa
more structured way to create process flow diagram
-determine the inputs and outputs
-determine the tasks and their sequence
-determine resources used in each task
-determine where inventory is kept
ordering process at (american furniture warehouse)
process:
-customer lists items to purchase
-customer makes payment at the cashers'
-items are retrieved from warehouse
-customer waits and receives ordered items
benefits:
-save space of exhibited items
-inventory information is better managed (transparen
determine inputs, outputs, and flow units
inputs= orders
outputs= finished orders
determine tasks and their sequence
determine resources used in each task
determine where inventory is kept
orders, payment=cashier, retrieve from warehouse= mover
reception= receptionist, finished order
evaluating performance
-data analysis tools
-capacity management
-constraint management
-linear programming
-waiting lines
data analysis tools
-checklists
-histograms and bar charts
-pareto charts
redesigning the process
-after a process is documented, metrics are collected, and disconnects are identified, the process analyst determines what changes should be made
-people directly involved in the process are brought in to get their ideas and inputs
generating ideas
ideas can be uncovered by asking six questions
-what is being done
-when is it being done
-who is doing it
-where is it being done
-how is it being done
-how well does it do on the various metrics of importance
brainstorming
involves a group of people knowledgeable about the process proposing ideas for change by saying whatever comes to mind
-after brainstorming the design team evaluates ideas and identifies those with the highest payoff
benchmarking
systematic procedure that measures a firm's processes, services, and products against another firm
-competitive benchmarking is based on comparisons with a direct competitor
-functional benchmarking compares areas with those of outstanding firms in any in
pitfalls and criticisms
how can an organization be superior if it does not innovate to get ahead
-not a substitute for innovation
not a strategy or business philosophy; it is merely an improvement tool
-it is a source of ideas from outside
can be time-consuming and costly
focusi
four basic steps to benchmarking
1- planning
2- analysis
3- integration
4- action
collecting data can be a challenge
some corporations and government organizations have agreed to share data
benchmarking- order fulfillment process
-value of plant shipments per employee
-finished goods inventory turnover
-reject rate as percentage of total orders processed
-percentage of order returned by customers due to quality problems
-standard customer lead time from order entry to shipment
-pe
planning capacity
capacity is the maximum rate of output of a process or system
-accounting, finance, marketing, operations, purchasing, and human resources all need capacity information to make decisions
-capacity planning is done in the long-term and the short-term
-ques
capacity planning (long-term)
-economies and diseconomies of scale
-capacity timing and sizing strategies
-systematic approach to capacity decisions
constraint management (short-term)
-theory of constraints
-identification and management of bottlenecks
-product mix decisions using bottlenecks
-managing constraints in a line process
measures of capacity
output measures of capacity
ex: cars produced per day
input measures of capacity
ex: number of workers
input measures may be used when
-product variety and process divergence is high
- the product or service mix is changing
-productivity rates are expecte
utilization
average output rate/ maximum capacity x 100
36 trucks made per day/ 50 car capacity x100
capacity timing and sizing
sizing capacity cushion
capacity cushions are the amount of reserve capacity a process uses to handle sudden changes
CAPACITY CUSHION= 100%- AVERAGE UTILIZATION RATE %
-expansionist strategies
-wait-and-see strategies
-combination of strategies
expansionist strategy
large, infrequent jumps
stays ahead of demand
aggressive and preemptive
risk of over expansion
wait and see strategy
small, frequent jumps
lags behind demand
conservative and reactive
risk of losing demand
determining capacity requirement
for one service or product processed at one operation with a one year time period, the capacity requirement M is
= processing hours required for year's demand/ hours available from a single capacity unit (such as an employee or machine) per year, after de
capacity requirements: center operates 250 days per year with 8 hour shift. capacity cushion of 15%. three copy machines
annual demand X: 2000 Y:6000
process time X: .5 Y: .7
avg lot size X: 20 Y:30
standard setup time X: .25 Y:. 40
(2000
.5+(2000/20)
.25+(6000
.7)+(6000/30
.4)/// (250day/year)(1shift/day)(8hour/shift)(1-15/100)
=5305/1700
=3.12
=up to four machines as a requirement
Grandma example:: evaluating alternatives: 80,000 meals forecasted, 100%, capacity of 105,000, 90,000, 100,000, 110,000, 120,000, 130,000 and so on. bring capacities up to 130,000 eventually, investment of 200,000 made on year 0
each meal=10$
before tax p
year 0: -200,000
year 1= 90,000; cash flow (90,000-80,000)(2)=20,000
year 2= 100,000; (100,000-80,000)2=40,000
year 3=110,000; (110,000-80,000)2=60,000
year 4=120,000; (120,000-80,000)2=80,000
year 5=130,000; (130,000-80,000)2=100,000
NPV at a discount ra
present value analysis (NPV)
present value: the sum, in current value, of all future cash flows of an investment proposal. the present value is calculated for a given interest rate (discount rate)
P= cash flow received n periods later in the future/ (1+interest rate per period)^net p
process reengineering
radical redesign of the design, not incremental changes (process improvement)
competitive benchmarking
not the most preferred benchmarking method
it is the most popular
the capacity of a process
maximum output of the process
diseconomy of scale
phenomenon where the average unit cost increases as the total output increases
managing constraints
constraints are factors that limit performance
three types of constraints
-physical
-market
-managerial
a bottleneck is any resource whose capacity limits the organization's ability to meet volume, mix, or fluctuating demand requirements
theory of constraints
systematic management approach that focuses on actively managing those constraints that impede a firm's progress toward its goal of maximizing profits and effectively using its resources
-it outlines a deliberate process for identifying and overcoming con
inventory
TOC view: all the money invested in a system in purchasing things that it intends to sell
financial measures: a decrease in I leads to an increase in net profit, ROI, and cash flow
throughput
TOC view: rate at which a system generates money through sales
financial: an increase in T leads to an increase in net profit, ROI, and cash flows
operating expense
TOC: all the money a system spends to turn inventory into throughput
financial: a decrease in OE leads to an increase in net profit, ROI, and cash flows
utilization
TOC: the degree to which equipment, space, or workforce is currently being used, and it is measured as the ratio of average output rate to maximum capacity expressed as a percentage
financial: an increase in U at the bottleneck leads to an increase in net
seven key principles of the theory of constraints
1- the focus should be on balancing flow, no on balancing capacity
2- maximizing the output and efficiently of every resource may not maximize the throughput of the entire system
3- an hour lost at a bottleneck or a constrained resource is an hour lost fo
identifying the bottleneck
- if it has the highest total time per unit processed
-if it has the highest average utilization and total workload
throughput time: total elapsed time from the start to the finish of a job or a customer being processed at one or more work center
capacity of the process and throughput time
throughput time is the whole process time added together
capacity process is the full hour divided by the time in the bottleneck
Gantt chart
graphical representation of the duration of tasks and resource utilization against the progression of time
determining product mix
improve profitability of their firm by accepting the right set of orders?
allocation by contribution margin: decisions are made to accept as much of the highest contribution margin product as possible (up to the limit of its demand) followed by the next h
drum-buffer rope systems
-the bottleneck schedule is the drum because it sets the beat or the production rate for the entire plant and is linked to market demand
-the buffer is the time buffer that plans early flows into the bottleneck and thus protects it from disruption
-the ro
managing a line process
line balancing: assignment of work to stations in a line so as to achieve the desired output rate with the smallest number of workstations
-achieving the goal is similar to the theory of constraints but it differs in how it addresses bottlenecks
precedenc
diagramming the network
network diagrams use nodes and arcs to depict the relationships between activities
-benefits of using networks include
1- networks force project teams to identify and organize data to identify interrelationships between activities
2- networks enable the e
diagramming the network continued
precedent relationships determine the sequence for undertaking activities
activity times must be estimated using historical information, statistical analysis, learning curves, or informed estimates
in the activity-on-node approach, nodes represent activit
a line process
the desired output rate is matched to the staffing or production plan
-cycle time is the max time allowed for work at each station is
c= 1/r
c=cycle time in hours
r= desired output rate
the theoretical minimum number of stations is
TM= sigma t/ c
sigma t
green grass's plant manager just received marketing's latest forecasts of the Big Broadcaster sales for the next year. She wants its production line to be designed to make 2,400 spreaders per week for at least the next 3 months. The plant will operate 40
lines cycle time:
smallest number of workstations that she could hope for in designing the line for this cycle time?
suppose that she finds a solution that requires only five stations. what would be the line's efficiency?
c=1/r= 1/60 (hr/unit)=1 minute/un
finding a solution for constraint management
the goal is to cluster the work elements into workstations so that
1- the number of workstations required is minimized
2- the precedence and cycle-time requirements are not violated
the work content for each station is equal (or nearly so, but less than)
heuristic decision rules in assigning the next work element to a workstation being created
create one station at a time. for the station now being created, identify the unassigned work elements that qualify for assignment. they are candidates if
1- all of their predecessors have been assigned to this station or stations already created
2- addin
decision rule and logic
longest work element- picking the candidate with the longest time to complete is an effort to fit in the most difficult elements first, leaving the ones with short time to fill out the station
shortest work element- rule is the opposite of the longest wor
managerical considerations for constraint management
-pacing is the movement of product from one station to the next
-behavioral factors such as absenteeism, turnover, and grievances can increase after installing production lines
-the number of models produced complicates scheduling and necessities good com
machine A is 4 min/hour and machine B is 6 min/hour
what is the capacity of the process
capacity process is the bottleneck time, aka 6 min/hour. Every 6 minutes, 1 unit is made. So for every hour 10 units are made. The capacity process is 10 units/hour and the capacity system is 6mins/hour.
the theory of constraints relates a firm's operational measures to it's financial measures. which of the following statement is incorrect according to TOC?
a firm's financial measures improve as utilization increases
-you only want it to increase in one place, which is the bottleneck
How to improve a process
improve the capacity of the bottleneck resource
-add more bottleneck resource (one oven or two ovens)
-pool bottleneck resource and some non-bottleneck resources of the same type
-change batch size
-eliminate some non-bottleneck resources
bottleneck characteristics
bottleneck is constantly busy (fully utilized) while other resources are not
bottleneck determines the throughput rate of the system
bottleneck can change when resources are added
(double bottleneck capacity doesn't equal doubled system capacity)
Kristen's cookie summary
engineering" the product mix is an effective way of maximizing the operations capabilities (it requires close cooperation and mutual understanding between the marketing and operations function)
-shortening non-bottleneck activit�s such as cooling, packin
decision theory
general approach to decision making when the outcomes associated with alternatives are in doubt
a manager makes choices using the following process:
1- list a reasonable number of feasible alternative
2- list the events (states of nature)
3- calculate the
decisions under certainty: pick the alternative with the best payoff for the known event
a manager is deciding whether to build a small or large facility
much depends on the future demand
demand may be small or large
payoffs for each alternative are known with certainty
small facility would be best if future demand is low
decisions making under uncertainty
best=greatest
can list the possible events but can not estimate the probabilities
maximin: the best of the worst, a pessimistic approach
maximax: the best of the best, an optimistic approach
laplace: the alternative with the best weighted payoff assuming equal probabil
decisions under risk
the manager can list the possible events and estimate their probabilities
the manager has less information than decision making under certainty, but more information than with decision making under uncertainty
the expected value rule is widely used
this r
decision trees
are schematic models of available alternatives and possible consequences
are useful with probabilistic events and sequential decisions
square nodes represent decisions
circular nodes represent events
events leaving a chance node are collectively exhaustiv
decision tree process
after drawing a decision tree, we solve it by working from right to left calculating the expected payoff for each of its possible paths
-for an event node, we multiply the payoff of each event branch by the event's probability and add these products to ge
projects
interrelated set of activities with a definite starting ending point, which results in a unique outcome from a specific allocation of resources
-the three main goals are to
complete the project on time
not exceed the budget
meet the specifications to the
project management
systemized, phased approach to defining, organizing, planning, monitoring, and controlling projects
project management not just for OM
marketing: new product introduction
accounting/finance: auditing
information systems: software development
HR: workshops/training program
why most projects finish late
project time estimate is inaccurate
student's syndrome/procrastination
parkinson's law
-work expands to fill the time available for it
integration requirements
-a task may require the output from multiple paths
-80% on-time completion for each path--> a t
critical path
-the sequence of activities between a project start and finish is a path
-the critical path is the path that task the longest time to complete
project schedule
-the earliest start time (ES) for an activity is the latest earliest finish time of any preceding activities
-the earliest finish time (EF) is the earliest start time plus estimated duration
EF=ES+t
-the latest finish time (LF) for an activity is the late
activity slack
maximum length of time an activity can be delayed without delaying the entire project
activities on the critical path have zero slack
activity slack can be calculated in two ways
S=LS-ES or S=LF-EF
assessing risk
risk is the measure of the probability and consequence of not reaching a defined project goal
when uncertainty is present, simulation can be used to estimate the project completion time
statistical analysis requires three reasonable estimates of activity
statistical analysis
the mean of the beta distribution can be estimated by
te= a+4m+b / 6
the variance of the beta distribution for each activity
standard deviation^2= (b-a / 6)^2
calculating means and variances
a- calculate the expected time and variance for activity B
b- calculate the expected time and variance for the other activities in the project
suppose that the project team has arrived at the following time estimates for activity B (site selection and survey) of the St. John's Hospital project
a=7 weeks, m=8 weeks b= 15 weeks
a- te= 7+4(8)+15 / 6 = 9 weeks
standard deviation^2= (15-7 / 6)^2 = 1.
analyzing probabilities
because the central limit theorem can be applied, the mean of the distribution is the earliest expected finish time for the project
te= sigma( expected activity times on the critical path)= mean of normal distribution
because the activity times are indepe
calculating the probability
calculate the probability that St. John's hospital will become operational in 72 weeks using a- critical path and b- path ACGJK
a- the critical path BDHJK has a length of 69 weeks, the variance of path BDHJK: standard dev= 1.78+1.78+2.78+5.44+.11
z value
quality
ability of a product or service to consistently meet or exceed customer expectations
-consumers view certain aspects more important --> associate these with quality
costs of quality
Internal failure costs:
-costs incurred to fix problems that are detected before delivery to the consumer
External failure costs:
-costs incurred to fix problems that are detected after delivery to the customer
Appraisal costs:
-all product and/or service
statistical process control (SPC) methodology
-control on average/mean: x_bar-chart
ex: average grade of students in each semester
-control on fluctuation/variance: R-chart
ex: highest minus lowest grade of students in each semester
-control on the proportion of nonconforming item p-chart
ex: proport
causes of variation
common causes:
-random, unavoidable sources of variation
-location
-spread
-shape
assignable causes:
-can be identified and eliminated
-change in the mean, spread, or shape
-used after a process is in statistical control
control
-two types of error are possible with control charts
-a type 1 error occurs when a process is thought to be out of control when in fact it is not-> rejecting good quality
-a type II error occurs when a process is thought to be in control when it is actual
SPC Methods: Control charts for variables
Rchart:
UCLr=D4R and LCLr=D3R
R=average of several past R values and the central line of the control chart
D3D4= constants that provide three standard deviation (three-sigma) limits for the given sample size
X-chart:
UCLx=x+A2R and LCLx=x-A2R
x= central l
SPC methods: an alternate form
if the standard deviation of the process distribution is known, another form of the x-chart may be used:
UCLx=x+zsigmax and LCLx= x-zsigmax
where
sigmax=sigma sqrt(n)
sigma= standard deviation of the process distribution
n= sample size
x= central line of
control charts for attributes
-p-charts are used to control the proportion defective
-sampling involves yes/no decisions so the underlying distribution is the binomial distribution
-standard deviation is
sigmap= sqrt(p(1-p)/n
p= the center line on the chart
and
UCLp= p+zsigmap and
LCL
using p-charts
-periodically a random sample of size n is taken
-the number of defectives is counted
-the proportion defective p is calculated
-if the proportion defective falls outside the UCL, it is assumed the process has changed and assignable causes are identified
control charts for attributes: c-charts
-c-charts count the number of defects per unit of service encounter
-the underlying distribution is the Poisson distribution
-the mean of the distribution is c and the standard deviation is sort(c)
UCLc=c+zsqrt(c)
and LCLc=c-zsqrt(c)
who was the quality management expert that contributed significantly to statistical process control
edward deming
giants in quality management
edwards deming
joseph juran (founder of Juran institute)
philip crosby
deming
common causes vs. special causes (assignable causes)
-common causes are systematic and shared among operators, machines, or products
ex: poor product design, machines out of order, etc
-management is responsible for common causes
-special causes are nonra
Juran
Quality is fitness for use, which has five major dimensions
-quality of design
-quality of conformance
-availability
-safety
-field use
Life-cycle quality management
Cost of quality accounting system
-quality costs are costs associated sole with defective products
-internal failure costs
:costs incurred to fix problems that are detected before delivery to the customer
-external failure costs
:costs incurred to fix problems that are detected after deli
quality programs
the goal is to keep improving quality until there is no longer a positive economic return
crosby
-quality is conformance to requirements
:it is not appropriate to say good or bad quality as quality cannot be measured but conformance can be
-quality is free
-the goal of quality improvement is zero defects, to be achieved through prevention rather than
comparison of deming juran and crosby
*all three emphasize
1- the role of management
2-prevention rather than inspection
Deming: quality= zero defects or reduced variations, cost= lower costs, improved productivity, methodology= SPC, objective = zero defects, weakness= his approach does not i
matching the expert to companies
Deming: extremely popular in Japan, respect for production works, focuses on high-volume manufacturing and assembly
Juran: also popular in Japan, only second to Deming, his approach is intense and multi-faceted
Crosby: focuses on motivation and lacks tech
model classification
Linear optimization or linear programming
-objective and all constraints are linear functions of the decisions variables
Nonlinear optimization or nonlinear programming
-either objective or a constraint (or both) are nonlinear functions of the decision va
the partial taxonomy of optimization problems
Linear optimization:
objective and constraints are linear expressions
:Integer optimization- variables are restricted to discrete values
:mixed integer optimization- some variables are continuous, some are discrete
Nonlinear optimization:
objective and/or
Gemstone tool company
-GTC is a privately-held firm that competes in the consumer and industrial market for construction tools. In addition to its main manufacturing facility in Seattle, Washington, GTC operates several other plants located in the US, Canada, and Mexico
-Suppo
a fundamental point
if an optimal solution exists, there is always a corner point optimal solution
-and we can extend all this to more variables (the observations)
about shadow prices
Associated with each constraint is its shadow price
The shadow price is the change in the objective value per unit change in the right hand side of the constraint, given all other data remain the same
General principles governing shadow prices
1- there is a shadow price for each regular constraint in a linear optimization model
2- the unit of the shadow price is the unit of the objective function divided by the unit of the constraint
3- the shadow price for a given constraint is a mathematicall
what about the shadow prices for the non-negativity conditions
The shadow price for the non-negativity condition of a decision variable is called the reduced cost of the decision variable
The reduced cost of a decision variable is the change in the optimal objective function if we require that the variable becomes po
observations on the graphical method
1- the set of feasible plans is called the feasible set or the feasible region. it is always polygonal
2- a constraint is said to be binding or active if it is satisfied at equality at the optimal solution
3- every equality (=) constraint is binding (by d
waiting lines
supermarkets
banks
public transportation
theme parks
why waiting lines form?
-temporary imbalance between demand and capacity
-can develop even if processing time is constant
Waiting line theory (queueing theory)
-applies to many service or manufacturing situations
-relating arrival and service-system processing characteristics to
basic element of waiting line problems
customer population - waiting line- priority rule - service facilities - served customers (middle three are all in the service system)
1- an input, or customer population, that generates potential customers
2- a waiting line of customers
3- the service fa
basic element of waiting line problems continued
customer population
-finite vs. infinite
-patient vs. impatient
waiting lines
-single line vs. multi-line
service facility
priority rules
-first come, first served, used by most service system
-earliest due date
-shortest processing time
psychology of waiting
unfair waits are longer than equitable waits
unoccupied times feels longer than occupied time
pre-process waits feels longer than in process waits
anxiety makes waits seem longer
uncertain waits are longer than known, finite waits
unexplained waits are lo
sources of variation in waiting lines
Random arrivals
-poisson distribution with rate lambda (# of arrivals per unit time)
-probability of n arrivals in T time periods
Pn= (lambdaT)^n/n! e^-lambdaT
for n= 0,1,2
Variation of service times
-service time distribution can be described by an expon
probability of customer arrivals
management is redesigning the customer service process in a large department store
customers arrive at the desk at a rate of two customers per hour
what is the probability that four customers will arrive during any hour?
T= 1 hour and n= 4 customers
the p
service time probability
the clerk at the customer service desk can serve an average of three customers per hour. what is the probability that a customer will require less than 10 minutes of service?
we must have all the data in the same time units. because u=3 customers per hour
single server model
Single server, single line of customers, and only one phase
assumptions are
1- customer population in infinite and patient
2- customer arrive according to a poisson distribution, with a mean arrival rate of lambda
3- service distribution is exponential wi
single-server model factors
p= average utilization of the system = lambda/u
Pn= probability that n customers are in the system = (1-p)p^n
L= average number of customers in the service system = lambda/ u-lambda
Lq= average number of customers in the waiting line= pL
W= average time s
multiple server model
service system has only one phase, multiple channels
Assumption (in addition to single server model)
-there are s identical servers
-the service distribution for each server is exponential
-the mean service time is 1/u
-su should always exceed lambda
multiple server model factors
p= average utilization of the system = lambda/su
Po= probability that zero customers are in the system ( no required on exam)
Pn= probability that n customers are in the system (not required on exam)
Lq= average number of customer in the waiting line
Wq=
limitations of waiting line models
Mathematical analysis becomes very complicated or intractable for more complex waiting lines. some examples
-non-poisson arrivals
-non-exponential service times
-complex customer behavior (customers switching between lines, or leaving after some time)
-mu