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1 Operations Strategy 2 Process Analysis Class 2a + 2b: Process Flow Analysis Class 3a: Capacity Investment The Product

Operations Management & Performance Modeling. 1 Operations Strategy 2 Process Analysis Class 2a + 2b: Process Flow Analysis Class 3a: Capacity Investment The Product Mix problem National Cranberry Coop. 3 Lean Operations 4 Supply Chain Management 5 Capacity Management in Services

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1 Operations Strategy 2 Process Analysis Class 2a + 2b: Process Flow Analysis Class 3a: Capacity Investment The Product

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  1. Operations Management & Performance Modeling 1 OperationsStrategy 2 Process Analysis • Class 2a + 2b: Process Flow Analysis • Class 3a: Capacity Investment • The Product Mix problem • National Cranberry Coop. 3 Lean Operations 4 Supply Chain Management 5 Capacity Management in Services 6 Total Quality Management 7 Business Process Reengineering OM&PM/Class 3a

  2. Product Mix Decisions: Kristen Cookies offers 2 products Sale Price of Chocolate Chip Cookies: $5.00/dozen Cost of Materials: $2.50/dozen Sale Price of Oatmeal Raisin Cookies: $5.50/dozen Cost of Materials: $2.40/dozen Maximum weekly demand of Chocolate Chip Cookies: 100 dozen Maximum weekly demand of Oatmeal Raisin Cookies: 50 dozen Total weekly operating expense $270 OM&PM/Class 3a

  3. Product Mix Decisions Total time available in week: 20 hrs OM&PM/Class 3a

  4. Product Mix Decisions Margin per dozen Chocolate Chip cookies = $2.50 Margin per dozen Oatmeal Raisin cookies = $3.10 Margin per oven minute from Chocolate Chip cookies = $2.50 / 10 = $ 0.250 Margin per oven minute from Oatmeal Raisin cookies = $3.10 / 15 = $ 0.207 OM&PM/Class 3a

  5. LP for Optimal Product Mix Selection xcc: Dozens of chocolate chip cookies sold. xor: Dozens of oatmeal raisin cookies sold. Max 2.5 xcc + 3.1 xor subject to 8 xcc + 5 xor < 1200 10 xcc + 15 xor < 1200 4 xcc + 4 xor < 1200 xcc < 100 xor < 50 TechnologyConstraints Market Constraints OM&PM/Class 3a

  6. National Cranberry Cooperative OM&PM/Class 3a

  7. National Cranberry Cooperative x bbls/hr Truck arrivals OM&PM/Class 3a

  8. Class 3a Learning Objectives • Effect of product mix decisions on process capacity • marginal contribution per unit of bottleneck capacity used • Process flow charts with multiple products • Backups may not occur in front of a bottleneck • Bottleneck may shift on adding capacity • diminishing returns to capacity investment OM&PM/Class 3a

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