Operations Management- 1St Exam

Front 1

flow unit

Back 1

what is transformed from an input to an output
- some processes have several types of flow units

Front 2

activities or tasks

Back 2

add value to the flow unit

Front 3

processes in parallel

Back 3

If some resources are performing the same activity and flow units go through only one of them indifferently. Same activity being performed, but by different resources

Front 4

Capacity analysis

Back 4

Analyzing how well the process can perform in the best scenario possible. How many flow units can be served at most per hour? compute process capacity, capacity of resource, rush order flow time

Front 5

Flow analysis

Back 5

Analyzing how well the process is performing at some point in time, given what the demand is.
Think yesterday from 3pm to 4pm, 10 customers came, how many quesadillas were served? Be able to compute flow rate, flow time, inventory etc.

Front 6

Activity Time

Back 6

the average time it takes one resource to perform all the tasks it does per flow unit (in units of time)

Front 7

Capacity of the resource = 1/ Activity time

Back 7

Maximum rate at which the resource(s) can be delivering output = maximum number of flow units the resource(s) can produce in a given time unit (in number of flow units per unit of time)

Front 8

Capacity of resources in parallel = number of resources in parallel/ Activity time

Back 8

Number of resources in parallel = number of flow units that can be processed simultaneously

Front 9

seconds-->minutes-->hours

Back 9

divide by 60 because there are more seconds than minutes, and more minutes than hours. To then find process capacity, flip it.

Front 10

Process capacity = Minimum of {capacity of first (set of) resource(s),  … ,capacity of last (set of) resource(s)}

Back 10

Process capacity is maximum rate at which the process could be delivering output (in number of flow units per unit of time).
Process capacity is the minimum of all the resource capacities:

Front 11

Process capacity = capacity of the bottleneck(s)

Back 11

The (set of) resource(s) with the smallest capacity is called the bottleneck(s)

Front 12

Bottleneck

Back 12

The bottleneck(s) is (are) the resource(s) which determine the capacity of the whole process
The process cannot produce output faster than its bottleneck(s) which is (are) the “slowest” resource(s)

Front 13

make-to-stock

Back 13

if the flow units are processed according to a production schedule and outputs are put in a finished good inventory

Front 14

make-to-order

Back 14

if the flow units are processed only once an order has been placed

Front 15

Flow unit

Back 15

One order

Front 16

Rush Order Flow Time

Back 16

A rush order is an order that starts being processed as soon as it is placed and is processed as fast as possible.
Rush order flow time is the time a rush order takes to go through the process (in units of time) measured from
MTO: the moment the order is placed
MTS (with no setup): the moment the production starts

Front 17

Gantt chart drawing: “as early as possible” or “push”

Back 17

the resources are producing flow units as soon as they are available for production

Front 18

Gantt chart drawing: “as late as possible” or “bottleneck pacing” or "pull"

Back 18

the resources produce flow units as late as possible so that flow time is not affected
the bottleneck is “pulling” work from the upstream tasks
Note: unless otherwise stated, we’ll always assume bottleneck pacing when drawing Gantt charts.

Front 19

Flow rate

Back 19

or throughput rate, rate at which the process is delivering output at some point in time (in number of flow units per unit of time)
Flow rate = minimum of {demand rate, process capacity, available input}

Front 20

Flow time

Back 20

time it takes for a flow unit to get through the process from beginning to end (in units of time)
Includes time spent waiting in buffers

Front 21

Inventory

Back 21

number of flow units currently in the process (in number of flow units)
Includes the flow units in buffers
“take a picture and count”

Front 22

Flow rate vs Process capacity

Back 22

Flow rate is the rate at which the process is delivering output at some point in time.
Process capacity is the maximum rate at which the process could be delivering output.
It is the maximum possible value for flow rate.
flow rate ≤ process capacity

Front 23

Demand Rate

Back 23

The demand rate is the rate at which flow units are “arriving” to the process (in number of flow units per unit of time)
Make-to-order=number of customers
Make-to-stock=production schedule

Front 24

Flow rate = minimum of {demand rate, process capacity, available input}

Back 24

If demand rate < process capacity
The process is demand-constrained
If demand rate > process capacity
The process is supply-constrained
If demand rate = process capacity
The process is demand- & supply-constrained

Front 25

If demand rate < process capacity

Back 25

The process is demand-constrained

Front 26

If demand rate > process capacity

Back 26

The process is supply-constrained

Front 27

If demand rate = process capacity

Back 27

The process is demand- & supply-constrained

Front 28

Flow time is greater than or equal to rush order flow time

Back 28

Little's Law?

Front 29

Average inventory = Average flow rate X Average flow time

Back 29

Flow time, Flow rate & Inventory can vary greatly, therefore we are generally more interested in averages.
#unit/time X #time/unit= #timeX#unit= inventory
We take averages assuming that the process has been running for a while (i.e., is past the “starting period”) and will keep going forever. These three measures are connected through this

Front 30

hours-->minutes-->seconds

Back 30

substitute 60minutes for 1hour 60 seconds for 1minute. Multiply number (24 hours) times the appropriate numerator or denominator 1day/unit or unit/1day

Front 31

For a supply constrained process average flow time and thus average inventory=

Back 31

infinity because of Little's Law

Front 32

Cycle time = 1/ flow rate

Back 32

average time between when two successive flow units are produced (in units of time)

Front 33

Process utilization = Flow rate / Process capacity

Back 33

Process utilization measures the extend of the mismatch (in %-age):
We saw that flow rate ≤ process capacity

Front 34

For a (set of) resource(s) (in parallel): Utilization of (set of) resource(s) =Flow rate/Capacity of (set of) resource(s)

Back 34

It measures the percentage of the time each resource is busy producing flow units (assuming bottleneck-pacing)

Front 35

Implied utilization = Demand rate / Process capacity

Back 35

We saw that demand rate >, = or &lt; capacity
Implied utilization measures the extend of the mismatch (in %-age):

Front 36

Implied utilization of (set of) resource(s) =Demand rate/ Capacity of (set of) resource(s)

Back 36

For a (set of) resource(s

Front 37

Labor

Back 37

A type of resource
Productive time: time spent working on flow units
Idle time: time spent waiting for flow units

Front 38

Labor content = sum of activity times with labor per flow unit

Back 38

Labor content (in units of time) measures the total productive time spent ON ONE FLOW UNIT by workers:

Front 39

Idle time per flow unit of single worker = Cycle time – Activity time

Back 39

cycle time- activity time

Front 40

Idle time per flow unit of worker(s) performing same activities in parallel = (Cycle time X number of workers in parallel) – Activity time

Back 40

for parallel

Front 41

Total idle time per flow unit = sum of Idle time per flow unit of all workers

Back 41

makes sense...

Front 42

Average labor utilization = Labor content/{Labor content + total idle time per flow unit}

Back 42

Remember utilization of a worker measures the percentage of time the worker is busy (assuming bottleneck pacing)
Average labor utilization (in %-age
or: {utilization of first worker + … + utilization of last worker }/ number or workers

Front 43

Cost of direct labor=(Labor content + total idle time per flow unit) X wages per unit of time
also = {wages per unit of time x number of workers}/ flow rate

Back 43

Workers are paid for both their productive time and their idle time.
The cost of direct labor (in $) for one given flow unit is:

Front 44

Line balancing: tricks

Back 44

See if you can achieve the same flow rate with fewer workers

See if you can increase flow rate with the same number of workers by reallocating tasks from bottleneck resources to non-bottleneck resources or allocating more workers to the bottleneck task(s)

See if you can reduce rush hour flow time by having different tasks performed at the same time, whenever possible

Front 45

Batch Process

Back 45

a process which produces multiple types of flow units in successive groups, or batches
The equipment is usually highly flexible but often requires setups when switching production from type of flow unit to another

Front 46

Setups

Back 46

Setups are down times, i.e. times during which no flow units can be worked on by the resource because the machine is being set up
(more general) : Setups are activities for which the duration is independent of the number of flow units

Front 47

Production Batch

Back 47

a set of flow units that are processed before the resource needs to go through another setup

Front 48

Production Cycle

Back 48

composed of a set of tasks (processing and setups) performed by the same resource on one batch

Front 49

Batch Assumptions

Back 49

Every batch has the same size
Each unit requires the same amount of time on a given machine
The setups that precede a given task always take a fixed amount of time, which is independent of which batch is produced next
The worker who does the setup cannot do anything else during that time
Unless otherwise stated, a flow unit = a production unit

Front 50

Capacity of resource with a batch size=Batch size/[Setup time + (Batch size x time per unit)]

Back 50

Just impose a batch size in the numerator, the bottom is just simply trying to deduce time
For a resource with a positive setup time*
*this formula assumes that at most one flow unit can be processed simultaneously by the resource

Front 51

capacity of a set of resources with a batch size=[Batch Size x number of resources in parallel]/[Setup time+ (Batch Size x Time per unit)]

Back 51

the numerator determines parallelism like in the simple formula, and the denominator is just trying to figure out time, also like the simple formula

Front 52

batch size increases

Back 52

The capacity of the resources that do setups increases
The capacity of the resources that do not do setups remains the same
Process capacity may increase
Depending on whether or not the bottleneck(s) have setups
Flow rate may increase
Depending on whether or not process capacity increased and depending on the demand rate
The rush order flow time may increase
The average flow time and average inventory may increase

Front 53

Choosing the batch size: there is a tradeoff between flow rate on one hand, and average inventory and average flow time on the other hand.

Back 53

Decision rule :
Our first priority is flow rate, which we should try to maximize
Our second concern is average inventory and average flow time, which we want to minimize for a fixed value of flow rate.
So we want to find the smallest batch size which achieves the largest possible flow rate.

Front 54

Target flow rate =
Min {demand rate, lowest capacity among the resources that do not do setups }

Back 54

It is never possible to have a flow rate which is higher than
The demand rate
The capacity of the resources that do not have setups
So the flow rate we want to achieve† by changing the batch size, called the target flow rate, is given by:

Front 55

fixed costs (the costs that do not depend on the quantity ordered)

Back 55

Order processing costs: when an order is placed to the supplier, it has to be processed by an employee
Delivery fees: the supplier charges a fixed cost for delivering the units
Transportation costs: when independent of the quantity delivered

Front 56

cost of holding inventory- they are proportional to the number of flow units that are in inventory

Back 56

Obsolescence costs: cost of getting rid of obsolete products (especially for perishables and for high-tech products)
Shrinkage costs: cost of stolen, damaged or lost inventory
Cost of capital: the money spent on the inventory cannot be used for other purposes and in particular it cannot earn interests for the company (cost of opportunity)

Front 57

The Economic Order Quantity (EOQ) model is used to determine the best order quantity under the following assumptions:

Back 57

The flow rate of the process is constant (no uncertainty)
All prices are constant
No quantity discount is offered by the supplier
When an order is placed to the supplier, the units are delivered instantly

Front 58

The inventory holding costs are virtually zero and the setup costs are very high

Back 58

Case 1: a very large order quantity and orders are placed very infrequently

Front 59

The setup costs are virtually zero and the inventory holding costs are very high

Back 59

What can you say about the order quantity and the frequency of placing orders?

Front 60

Q,R,K,h,P

Back 60

Q: order quantity (units)
R: flow rate (units per unit of time)
K: setup cost ($)
h: inventory holding cost ($ per unit per unit of time)
P: purchase cost ($ per unit)