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59 Cards in this Set

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  • Back
  • 3rd side (hint)
Need for Location Decisions
Marketing Strategy
Cost of Doing Business
Depletion of Resources
Strategic Importance of Location Decisions
Long term commitment/costs
Impact on investments, revenues, and operations
Supply chains
Objectives of Location Decisions
Profit potential
No single location may be better than others
Identify several locations from which to choose
Location Options
Expand existing facilities, Add new facilities, Move
Making Location Decisions
Decide on the criteria
Identify the important factors
Develop location alternatives
Evaluate the alternatives
Evaluate and make selection
Steps to identifying the alternatives
Identify general region
Identify a small number of community alternatives
Identify site alternatives
Regional Factors
Location of raw materials
Location of markets
Labor factors
Climate and taxes
Community Considerations
Quality of life, Services, Attitudes, Taxes, Environmental regulations, Utilities, Developer support
Site Related Factors
Land, Transportation, Environmental, Legal
Cost-Profit-Volume Model
Determine fixed and variable costs associated with each location
Transportation Model
Decision based on movement costs of raw materials or finished goods
Factor Rating
Decision based on quantitative and qualitative inputs
Center of Gravity Method
Decision based on minimum distribution costs
Capacity Planning
Capacity is the upper limit or ceiling on the load that an operating unit can handle
The basic question in capacity handling are:
What kind of capacity is needed?
How much is needed?
When is it needed?
Design Capacity
Maximum output rate or service capacity an operation, process, or facility is designed for
Effective Capacity
Design capacity minus allowances such as personal time, maintenance, and scrap
Actual Output
Rate of output actually achieved—cannot exceed effective capacity
Key Decisions of Capacity Planning
Amount of capacity needed
(capacity cushion (100% - utilization))
Time of changes
Need to maintain balance
Extent of flexibility of facilities
Capacity Cushion
Extra demand intended to offset uncertainty
Steps for Capacity Planning
Estimate future capacity requirements
Evaluate existing capacity
Identify alternatives
Conduct financial analysis
Assess key qualitative issues
Select one alternative
Implement alternative chosen
Monitor results
_____ relates to overall level of capacity such as facility size, trends, and cycles
_____ relates to variations from seasonal, random, and irregular fluctuations in demand
Planning Service Capacity
Need to be near customers
Inability to store services
Degree of volatility of demand
Obtain a good or service from an external provider
In-House or Outsourcing
Available capacity
Quality considerations
Nature of demand
Developing Capacity Alternatives
Design flexibility into systems
Take stage of life cycle into account
Take a “big picture” approach to capacity changes
Prepare to deal with capacity “chunks”
Attempt to smooth out capacity requirements
Identify the optimal operating level
Economies of Scale
If the output rate is less than the optimal level, increasing output rate results in decreasing average unit costs
Diseconomies of Scale
If the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs
Evaluating Alternatives
Cost-Volume Analysis
Financial Analysis
Decision Theory
Waiting-Line Analysis
Cost-Volume Analysis
Break-even point
Financial Analysis
Cash Flow, Present Value
Decision Theory
Helpful tool for financial comparison of alternatives under conditions of risk or uncertainty
Decision Theory Elements
A set of possible future conditions exists that will have a bearing on the results of the decision
A list of alternatives for the manager to choose from
A known payoff for each alternative under each possible future condition
Decision Theory Process
Identify possible future conditions called states of nature
Develop a list of possible alternatives, one of which may be to do nothing
Determine the payoff associated with each alternative for every future condition
If possible, determine the likelihood of each possible future condition
Evaluate alternatives according to some decision criterion and the best alternative
Bounded Rationality
The limitations on decision making caused by costs, human abilities, time, technology, and availability of information
The result of different departments each attempting to reach a solution that is optimum for that department
Choose the alternative with the best of the worst possible payoffs
Choose the alternative with the best possible payoff
Choose the alternative with the best average payoff of any of the alternatives
Minimax Regret
Choose the alternative that has the least of the worst regrets
What is the goal of the theory of constraints?
To make money now, as well as in the future
What are the bottom line measurements?
Net Profit (absolute)
Return on Investment (relative)
Cash Flow (survival)
Local measures include what?
Utilization and Efficiency
Global measures include what?
Profit, ROI, Cash Flow, Throughput, Inventory Expense, and Operating Expense
What is activation?
The employment of a resource or work center to process materials or products.
What is utilization?
Refers to activation of a resource that contributes positively to the performance of a company (throughput).
What is throughput?
The rate at which the system generates money through sales.
Everything we make and sell.
What is inventory expense?
All the money the system invests in purchasing things the system intends to sell or intends to use to make items to sell.
What is operating expense?
All the money the system spends in turning inventory into throughput.
What is a constraint?
Anything that prevents a system from achieving higher performance relative to its goal.
What are types of constraints?
Capacity, Material, Market, Logistics, Managerial, Behavioral
What is a Bottleneck Resource?
Any resource whose capacity is equal to or less than the demand placed on it.
What is a Non-Bottleneck Resource?
Any resource whose capacity is greater than the demand placed on it.
What is the TOC Principle #1?
Do not focus on balancing capacities, focus on synchronizing the flow.
What is the TOC Principle #2?
The marginal value of time at a bottleneck resource is equal to the throughput rate of the products processed by the bottleneck.
What is the TOC Principle #3?
The marginal value of time at a non-bottleneck resource is negligible.
What is the TOC Principle #4?
The level of utilization of a non-bottleneck resource is controlled by other constraints within the system.
What is the TOC process?
1. Identify the system’s constraint(s)
2. Decide how to exploit the system’s constraint(s).
3. Subordinate everything else to the decisions made in Step 2.
4. Elevate the system’s constraint.
5. If a constraint is broken in Step 4, go back to Step 1.