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Operations Management

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

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  1. Operations Management Session 4: Kristine Cookies Case

  2. 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

  3. Today • Team Presentations • Lecture (Kristen’s cookies and additional comments on capacity management) Operations Management

  4. Team Presentations Operations Management

  5. 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

  6. Process Flow • What are the inputs? • What are the outputs? • What are the activities? Operations Management

  7. 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

  8. 4 8 12 16 20 24 28 32 36 Activity Time Resource Operations Management

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. 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

  20. 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

  21. 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

  22. Capacity Investment • Should we invest in a second Oven? Operations Management

  23. 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

  24. 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

  25. 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

  26. 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

  27. 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

  28. 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

  29. 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

  30. 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

  31. 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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