Process analysis at arnold palmer hospital flowchart

Se

Operation Analysis

Techniques: Process Design

,Lean Operations, JIT

Seminar 11

Process Strategy 7

Outline - Continued

Ø Production Technology Ø Technology in Services Ø Process Redesign

Harley-Davidson

▶ The only major U.S. motorcycle company

▶ Emphasizes quality and lean manufacturing

▶ Materials as Needed (MAN) system ▶ Many variations possible ▶ Tightly scheduled repetitive production

Process Flow Diagram

THE ASSEMBLY LINE TESTING 28 tests

Oil tank work cell

Shocks and forks

Handlebars

Fender work cell

Air cleaners

Fluids and mufflers

Fuel tank work cell

Wheel work cell Roller testing

Incoming parts

Arrive on a JIT schedule from a 10-station work cell in Milwaukee

Engines and transmissions

Frame tube bending

Frame-building work cells

Frame machining

Hot-paint frame painting

Crating

Learning Objectives When you complete this section of the seminar you should be able to:

7.1 Describe four process strategies 7.2 Compute crossover points for different

processes 7.3 Use the tools of process analysis 7.4 Describe customer interaction in service

processes 7.5 Identify recent advances in production

technology

Process Strategy

The objective is to create a process to produce offerings that meet

customer requirements within cost and other managerial constraints

Process Strategies

Ø How to produce a product or provide a service that

§ Meets or exceeds customer requirements § Meets cost and managerial goals

Ø Has long term effects on § Efficiency and production flexibility § Costs and quality

Process, Volume, and Variety

Process Focus projects, job shops

(machine, print, hospitals,

restaurants) Arnold Palmer

Hospital

Repetitive (autos, motorcycles, home appliances) Harley-Davidson

Product Focus (commercial baked goods,

steel, glass, beer) Frito-Lay

High Variety one or few units per run, (allows customization)

Changes in Modules modest runs, standardized modules

Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only

Mass Customization (difficult to achieve, but

huge rewards) Dell Computer

Poor Strategy (Both fixed and variable costs

are high)

Low Volume

Repetitive Process

High Volume

VolumeFigure 7.1

Va rie

ty (fl

ex ib

ilit y)

Process Strategies

Four basic strategies

1. Process focus 2. Repetitive focus 3. Product focus 4. Mass customization

Within these basic strategies there are many ways they may be implemented

Process Focus Ø Facilities are organized around specific

activities or processes Ø General purpose equipment and skilled

personnel Ø High degree of product flexibility Ø Typically high costs and low equipment

utilization Ø Product flows may vary considerably making

planning and scheduling a challenge

Process Focus Many inputs(surgeries, sick patients, baby deliveries, emergencies)

Many different outputs (uniquely treated patients)

Many departments and many routings

Figure 7.2(a)

(low-volume, high-variety, intermittent processes) Arnold Palmer Hospital

Repetitive Focus

Ø Facilities often organized as assembly lines Ø Characterized by modules with parts and

assemblies made previously Ø Modules may be combined for many output

options Ø Less flexibility than process-focused facilities

but more efficient

Repetitive Focus

Raw materials and module inputs

Modules combined for many Output options

(many combinations of motorcycles)

Few modules

(multiple engine models, wheel modules)

Figure 7.2(b)

(modular) Harley Davidson

Product Focus

Ø Facilities are organized by product Ø High volume but low variety of products Ø Long, continuous production runs enable

efficient processes Ø Typically high fixed cost but low variable cost Ø Generally less skilled labor

Product Focus Few inputs(corn, potatoes, water, seasoning)

Output variations in size, shape, and packaging

(3-oz, 5-oz, 24-oz package labeled for each material)

Figure 7.2(c)

(high-volume, low-variety, continuous process)

Frito-Lay

Mass Customization

Ø The rapid, low-cost production of goods and service to satisfy increasingly unique customer desires

Ø Combines the flexibility of a process focus with the efficiency of a product focus

Mass Customization

Figure 7.2(b)

(high-volume, high-variety) Dell Computer

Many parts and component inputs

Many output versions (custom PCs and notebooks)

(chips, hard drives, software, cases)

Many modules

Mass Customization

TABLE 7.1 Mass Customization Provides More Choices Than Ever NUMBER OF CHOICES

ITEM 1970s 21ST CENTURY Vehicle styles 18 1,212 Bicycle types 8 211,000 iPhone mobile game apps 0 1,200,000 Web sites 0 634,000,000 Movie releases per year 267 1551 New book titles 40,530 300,000+ Houston TV channels 5 185 Breakfast cereals 160 340 Items (SKUs) in supermarkets 14,000 150,000 High-definition TVs 0 102

Mass Customization

Ø Imaginative product design Ø Flexible process design Ø Tightly controlled inventory management Ø Tight schedules Ø Responsive partners in the supply-chain

Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY

ARNOLD PALMER HOSPITAL)

REPETITIVE FOCUS

(MODULAR HARLEY-

DAVIDSON)

PRODUCT FOCUS

(HIGH-VOLUME, LOW-VARIETY

FRITO-LAY)

MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY

DELL COMPUTER)

1. Small quantity and large variety of products

1. Long runs, a standardized product from modules

1. Large quantity and small variety of products

1. Large quantity and large variety of products

2. Broadly skilled operators

2. Moderately trained employees

2. Less broadly skilled operators

2. Flexible operators

Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY

ARNOLD PALMER HOSPITAL)

REPETITIVE FOCUS

(MODULAR HARLEY-

DAVIDSON)

PRODUCT FOCUS

(HIGH-VOLUME, LOW-VARIETY

FRITO-LAY)

MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY

DELL COMPUTER)

3. Instructions for each job

3. Few changes in the instructions

3. Standardized job instructions

3. Custom orders requiring many job instructions

4. High inventory

4. Low inventory 4. Low inventory

4. Low inventory relative to the value of the product

Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY

ARNOLD PALMER HOSPITAL)

REPETITIVE FOCUS

(MODULAR HARLEY-

DAVIDSON)

PRODUCT FOCUS

(HIGH-VOLUME, LOW-VARIETY

FRITO-LAY)

MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY

DELL COMPUTER)

5. Finished goods are made to order and not stored

5. Finished goods are made to frequent forecasts

5. Finished goods are made to a forecast and stored

5. Finished goods are build-to- order (BTO)

6. Scheduling is complex

6. Scheduling is routine

6. Scheduling is routine

6. Sophisticated scheduling accommodates custom orders

Comparison of Processes

TABLE 7.2 Comparison of the Characteristics of Four Types of Processes

PROCESS FOCUS (LOW-VOLUME, HIGH-VARIETY

ARNOLD PALMER HOSPITAL)

REPETITIVE FOCUS

(MODULAR HARLEY-

DAVIDSON)

PRODUCT FOCUS

(HIGH-VOLUME, LOW-VARIETY

FRITO-LAY)

MASS CUSTOMIZATION (HIGH-VOLUME, HIGH-VARIETY

DELL COMPUTER)

7. Fixed costs are low and variable costs high

7. Fixed costs are dependent on flexibility of the facility

7. Fixed costs are high and variable costs low

7. Fixed costs tend to be high and variable costs low

Crossover Chart Example

▶ Evaluate three different accounting software products

▶ Calculate crossover points between software A and B and between software B and C

TOTAL FIXED COST DOLLARS REQUIRED PER

ACCOUNTING REPORT Software A $200,000 $60

Software B $300,000 $25

Software C $400,000 $10

Crossover Chart Example

200,000+ 60( )V1 = 300,000+ 25( )V1 35V1 =100,000 V1 = 2,857

▶ Software A is most economical from 0 to 2,857 reports

300,000+ 25( )V2 = 400,000+ 10( )V2 15V2 =100,000 V2 = 6,666

▶ Software B is most economical from 2,857 to 6,666 reports

Crossover Charts

Fixed costs

Variable costs$

High volume, low variety Process C

Fixed costs

Variable costs$

Repetitive Process B

Fixed costs

Variable costs$

Low volume, high variety Process A

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

To tal

pr oc

es s A

co sts

Tot al p

roc ess

B c ost

s

Total proce

ss C costs

V1(2,857) V2 (6,666)

400,000 300,000 200,000

Volume

$

Figure 7.3

Focused Processes

Ø Focus brings efficiency Ø Focus on depth of product line rather

than breadth Ø Focus can be

§ Customers § Products § Service § Technology

Selection of Equipment

Ø Decisions can be complex as alternate methods may be available

Ø Important factors may be

§ Cost § Cash flow § Market stability

§ Quality § Capacity § Flexibility

Flexibility

Ø Flexibility is the ability to respond with little penalty in time, cost, or customer value

Ø May be a competitive advantage Ø May be difficult and expensive Ø Without it, change may mean starting over

Process Analysis and Design

Ø Is the process designed to achieve a competitive advantage?

Ø Does the process eliminate steps that do not add value?

Ø Does the process maximize customer value?

Ø Will the process win orders?

Process Analysis and Design

Ø Flowchart § Shows the movement of materials § Harley-Davidson flowchart

Ø Time-Function Mapping § Shows flows and time frame

"Baseline" Time-Function Map Customer

Sales

Production control

Plant A

Warehouse

Plant B

Transport

12 days 13 days 1 day 4 days 1 day 10 days 1 day 9 day 1 day 52 daysFigure 7.4(a)

Move

Receive product

Pr od

uc t

Pr od

uc t

Extrude

Wait

W IP

Pr od

uc t

Move

Wait W

IP W IP

Print

Wait

O rd

er

W IP

Order product

Process order

Wait

O rd

er

"Target" Time-Function Map Customer

Sales

Production control

Plant

Warehouse

Transport

1 day 2 days 1 day 1 day 1 day 6 days

Figure 7.4(b)

Move

Receive product

Pr od

uc t

Pr od

uc t

Extrude

Wait

PrintOr de

r WIP

Pr od

uc t

Order product

Process order

Wait

O rd

er

Process Chart

Figure 7.5

Process Analysis and Design

▶ Value-Stream Mapping (VSM) § Where value is added in the entire production

process, including the supply chain § Extends from the customer back to the

suppliers

Value-Stream Mapping

1. Begin with symbols for customer, supplier, and production to ensure the big picture

2. Enter customer order requirements 3. Calculate the daily production

requirements 4. Enter the outbound shipping requirements

and delivery frequency 5. Determine inbound shipping method and

delivery frequency

Value-Stream Mapping

6. Add the process steps (i.e., machine, assemble) in sequence, left to right

7. Add communication methods, add their frequency, and show the direction with arrows

8. Add inventory quantities between every step of the entire flow

9. Determine total working time (value-added time) and delay (non-value-added time)

I

Value-Stream Mapping

Figure 7.6

Service Blueprinting

Ø Focuses on the customer and provider interaction

Ø Defines three levels of interaction Ø Each level has different management issues Ø Identifies potential failure points

Service Blueprint Personal Greeting Service Diagnosis Perform Service Friendly Close

Level #3

Level #1

Level #2

Figure 7.7

No

Notify customer

and recommend an alternative

provider. (7 min)

Customer arrives for service.

(3 min)

Warm greeting and obtain

service request. (10 sec)

F

Direct customer to waiting room.

F

Notify customer the car is ready.

(3 min)

Customer departs

Customer pays bill. (4 min)

F

F

Perform required work.

(varies) Prepare invoice.

(3 min)F

F Yes F

Yes F

Standard request. (3 min)

Determine specifics. (5 min)

No

Can service be

done and does customer approve? (5 min)

Special Considerations for Service Process Design

Ø Some interaction with customer is necessary, but this often affects performance adversely

Ø The better these interactions are accommodated in the process design, the more efficient and effective the process

Ø Find the right combination of cost and customer interaction

Service Factory Service Shop

Degree of Customization Low High

D eg

re e

of L

ab or

Low

High

Mass Service Professional Service

Service Process Matrix

Commercial banking

Private banking

General- purpose law firms

Law clinics Specialized

hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing Boutiques

Warehouse and catalog stores

Fast-food restaurants

Fine-dining restaurants

Airlines

No-frills airlines

Figure 7.8

Digitized orthodontics

Traditional orthodontics

Service Process Matrix

Ø Labor involvement is high Ø Focus on human resources Ø Selection and training highly

important Ø Personalized services

Mass Service and Professional Service

Service Factory Service Shop

Degree of Customization Low High

D eg

re e

of L

ab or

Low

High

Mass Service Professional Service

Commercial banking

Private banking

General- purpose law

firms

Law clinics

Specialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores Fast-food restaurants Fine-dining restaurants

Airlines

No-frills airlines

Digital orthodontics

Traditional orthodontics

Service Process Matrix

Service Factory and Service Shop § Automation of standardized services § Restricted offerings § Low labor intensity responds well to

process technology and scheduling

§ Tight control required to maintain standards

Service Factory Service Shop

Degree of Customization Low High

D eg

re e

of L

ab or

Low

High

Mass Service Professional Service

Commercial banking

Private banking

General- purpose law

firms

Law clinics

Specialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores Fast-food restaurants Fine-dining restaurants

Airlines

No-frills airlines

Digital orthodontics

Traditional orthodontics

Improving Service Productivity

TABLE 7.3 Techniques for Improving Service Productivity STRATEGY TECHNIQUE EXAMPLE Separation Structuring service so

customers must go where the service is offered

Bank customers go to a manager to open a new account, to loan officers for loans, and to tellers for deposits

Self-service Self-service so customers examine, compare, and evaluate at their own pace

Supermarkets and department stores Internet ordering

Postponement Customizing at delivery Customizing vans at delivery rather than at production

Focus Restricting the offerings Limited-menu restaurant

Improving Service Productivity

TABLE 7.3 Techniques for Improving Service Productivity STRATEGY TECHNIQUE EXAMPLE Modules Modular selection of

service Modular production

Investment and insurance selection Prepackaged food modules in restaurants

Automation Separating services that may lend themselves to some type of automation

Automatic teller machines

Scheduling Precise personnel scheduling

Scheduling ticket counter personnel at 15-minute intervals at airlines

Training Clarifying the service options Explaining how to avoid problems

Investment counselor, funeral directors After-sale maintenance personnel

Production Technology

1. Machine technology 2. Automatic identification systems (AISs) 3. Process control 4. Vision systems 5. Robots 6. Automated storage and retrieval systems (ASRSs) 7. Automated guided vehicles (AGVs) 8. Flexible manufacturing systems (FMSs) 9. Computer-integrated manufacturing (CIM)

Machine Technology Ø Increased precision,

productivity, and flexibility

Ø Reduced environmental impact Ø Additive manufacturing produces products

by adding material, not removing it Ø Supports innovative product design,

minimal custom tooling required, minimal assembly time, low inventory, and reduced time to market

Computer numerical control (CNC)

Automatic Identification Systems (AISs) and RFID

Ø Improved data acquisition Ø Reduced data entry errors Ø Increased speed Ø Increased scope

of process automation

Bar codes and RFID

Process Control Ø Real-time monitoring and control of processes

§ Sensors collect data § Devices read data

on periodic basis § Measurements translated into digital signals then

sent to a computer § Computer programs analyze the data § Resulting output may take numerous forms

Vision Systems

Ø Particular aid to inspection Ø Consistently accurate Ø Never bored Ø Modest cost Ø Superior to individuals performing the same

tasks

Robots

Ø Perform monotonous or dangerous tasks Ø Perform tasks

requiring significant strength or endurance

Ø Generally enhanced consistency and accuracy

Automated Storage and Retrieval Systems (ASRSs)

Ø Automated placement and withdrawal of parts and products

Ø Reduced errors and labor

Ø Particularly useful in inventory and test areas of manufacturing firms

Automated Guided Vehicle (AGVs)

Ø Electronically guided and controlled carts

Ø Used for movement of products and/or individuals

Flexible Manufacturing Systems (FMSs)

Ø Computer controls both the workstation and the material handling equipment

Ø Enhance flexibility and reduced waste Ø Can economically produce low volume but

high variety Ø Reduced changeover time and increased

utilization Ø Stringent communication requirement between

components

Computer-Integrated Manufacturing (CIM)

Ø Extend flexible manufacturing § Backward to engineering and inventory control § Forward into warehousing and shipping § Can also include financial and customer service

areas § Reducing the distinction between low-

volume/high-variety, and high-volume/low-variety production

Computer- Integrated

Manufacturing (CIM)

Figure 7.9

Technology in Services TABLE 7.4 Examples of Technology's Impact on Services SERVICE INDUSTRY EXAMPLE Financial Services Debit cards, electronic funds transfer, ATMs,

Internet stock trading, online banking via cell phone

Education Online newspapers and journals, interactive assignments via WebCT, Blackboard, and smartphones

Utilities and government Automated one-person garbage trucks, optical mail scanners, flood-warning systems, meters that allow homeowners to control energy usage and costs

Restaurants and foods Wireless orders from waiters to kitchen, robot butchering, transponders on cars that track sales at drive-throughs

Communications Interactive TV, e-books via Kindle

Capacity and Constraint Management 7

SU PPLEM

EN T

Outline

Ø Capacity Ø Bottleneck Analysis and the Theory of

Constraints Ø Break-Even Analysis Ø Reducing Risk with Incremental Changes

Outline - Continued

Ø Applying Expected Monetary Value (EMV) to Capacity Decisions

Ø Applying Investment Analysis to Strategy- Driven Investments

Learning Objectives

When you complete this supplement you should be able to:

S7.1 Define capacity S7.2 Determine design capacity,

effective capacity, and utilization S7.3 Perform bottleneck analysis S7.4 Compute break-even

Learning Objectives

When you complete this supplement you should be able to:

S7.5 Determine the expected monetary value of a capacity decision

S7.6 Compute net present value

Capacity

Ø The throughput, or the number of units a facility can hold, receive, store, or produce in a period of time

Ø Determines fixed costs

Ø Determines if demand will be satisfied

Ø Three time horizons

Planning Over a Time Horizon Figure S7.1

Modify capacity Use capacity

Intermediate- range planning (aggregate planning)

Subcontract Build or use inventory Add or sell equipment More or improved training Add or reduce shifts Add or reduce personnel

Short-range planning (scheduling)

Schedule jobs Schedule personnel Allocate machinery*

Long-range planning

Design new production processes Add (or sell existing)

long-lead-time equipment Acquire or sell facilities Acquire competitors

*

* Difficult to adjust capacity as limited options exist

Options for Adjusting Capacity Time Horizon

Design and Effective Capacity

Ø Design capacity is the maximum theoretical output of a system

§ Normally expressed as a rate Ø Effective capacity is the capacity a firm expects

to achieve given current operating constraints § Often lower than design capacity

Design and Effective Capacity TABLE S7.1 Capacity Measurements MEASURE DEFINITION EXAMPLE

Design capacity Ideal conditions exist during the time that the system is available

Machines at Frito-Lay are designed to produce 1,000 bags of chips/hr., and the plant operates 16 hrs./day. Design Capacity = 1,000 bags/hr. × 16 hrs.

= 16,000 bags/day

Design and Effective Capacity TABLE S7.1 Capacity Measurements MEASURE DEFINITION EXAMPLE

Effective capacity Design capacity minus lost output because of planned resource unavailability (e.g., preventive maintenance, machine setups/changeovers, changes in product mix, scheduled breaks)

Frito-Lay loses 3 hours of output per day (= 0.5 hrs./day on preventive maintenance, 1 hr./day on employee breaks, and 1.5 hrs./day setting up machines for different products). Effective Capacity = 16,000 bags/day

– (1,000 bags/hr.) (3 hrs./day)

= 16,000 bags/day – 3,000 bags/day

= 13,000 bags/day

Design and Effective Capacity TABLE S7.1 Capacity Measurements MEASURE DEFINITION EXAMPLE

Actual output Effective capacity minus lost output during unplanned resource idleness (e.g., absenteeism, machine breakdowns, unavailable parts, quality problems)

On average, machines at Frito-Lay are not running 1 hr./day due to late parts and machine breakdowns. Actual Output = 13,000 bags/day

– (1,000 bags/hr.) (1 hr./day)

= 13,000 bags/day – 1,000 bags/day

= 12,000 bags/day

Utilization and Efficiency

Utilization is the percent of design capacity actually achieved

Efficiency is the percent of effective capacity actually achieved

Utilization = Actual output/Design capacity

Efficiency = Actual output/Effective capacity

Bakery Example

Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Design Capacity

Bakery Example

Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

Utilization

Bakery Example

Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 - 8 hour shifts

Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Utilization = 148,000/201,600 = 73.4%

Efficiency = 148,000/175,000 = 84.6%

Efficiency

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 201,600 rolls per line Efficiency = 84.6%

Design capacity = 201,600 x 2 = 403,200 rolls

Expected output of new line = 130,000 rolls

Design Capacity

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 201,600 rolls per line Efficiency = 84.6%

Design capacity = 201,600 x 2 = 403,200 rolls

Expected output of new line = 130,000 rolls

Effective capacity = 175,000 x 2 = 350,000 rolls

Effective Capacity

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 201,600 rolls per line Efficiency = 84.6%

Design capacity = 201,600 x 2 = 403,200 rolls

Effective capacity = 175,000 x 2 = 350,000 rolls

Expected output of new line = 130,000 rolls

Actual output = 148,000 + 130,000 = 278,000 rolls

Actual Output

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 201,600 rolls per line Efficiency = 84.6%

Design capacity = 201,600 x 2 = 403,200 rolls

Effective capacity = 175,000 x 2 = 350,000 rolls

Actual output = 148,000 + 130,000 = 278,000 rolls Utilization = 278,000/403,200 = 68.95% Efficiency = 278,000/350,000 = 79.43%

Expected output of new line = 130,000 rolls

Utilization Efficiency

Capacity and Strategy

Ø Capacity decisions impact all 10 decisions of operations management as well as other functional areas of the organization

Ø Capacity decisions must be integrated into the organization’s mission and strategy

Capacity Considerations

1. Forecast demand accurately 2. Match technology increments and

sales volume 3. Find the optimum operating size

(volume) 4. Build for change

Economies and Diseconomies of Scale

Economies of scale

Diseconomies of scale

1,300 sq ft store 2,600 sq ft

store

8,000 sq ft store

Number of square feet in store 1,300 2,600 8,000

Av er

ag e

un it

co st

(s al

es p

er s

qu ar

e fo

ot )

Figure S7.2

Copyright © 2017 Pearson Education, Ltd. S7 - 81

Managing Demand

Ø Demand exceeds capacity ▶ Curtail demand by raising prices, scheduling

longer lead times ▶ Long-term solution is to increase capacity

Ø Capacity exceeds demand ▶ Stimulate market ▶ Product changes

Ø Adjusting to seasonal demands ▶ Produce products with complementary

demand patterns

Complementary Demand Patterns

4,000 –

3,000 –

2,000 –

1,000 –

J F M A M J J A S O N D J F M A M J J A S O N D J

Sa le

s in

u ni

ts

Time (months)

Combining the two demand patterns reduces the variation

Snowmobile motor sales

Jet ski engine sales

Figure S7.3

Tactics for Matching Capacity to Demand

1. Making staffing changes 2. Adjusting equipment

▶ Purchasing additional machinery ▶ Selling or leasing out existing equipment

3. Improving processes to increase throughput 4. Redesigning products to facilitate more throughput 5. Adding process flexibility to meet changing product

preferences 6. Closing facilities

Service-Sector Demand and Capacity Management

Ø Demand management ▶ Appointment, reservations, FCFS rule

Ø Capacity management

▶ Full time, temporary, part-time staff

Bottleneck Analysis and the Theory of Constraints

Ø Each work area can have its own unique capacity

Ø Capacity analysis determines the throughput capacity of workstations in a system

Ø A bottleneck is a limiting factor or constraint Ø A bottleneck has the lowest effective capacity

in a system Ø The time to produce a unit or a specified

batch size is the process time

Bottleneck Analysis and the Theory of Constraints

Ø The bottleneck time is the time of the slowest workstation (the one that takes the longest) in a production system

Ø The throughput time is the time it takes a unit to go through production from start to end, with no waiting

2 min/unit 4 min/unit 3 min/unit

A B C

Figure S7.4

Capacity Analysis

Ø Two identical sandwich lines Ø Lines have two workers and three operations Ø All completed sandwiches are wrapped

Wrap/ Deliver

37.5 sec/sandwich

Order

30 sec/sandwich

Bread Fill

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

Bread Fill Toaster

15 sec/sandwich 20 sec/sandwich

Toaster

40 sec/sandwich

First assembly line

Second assembly line

Capacity Analysis

Ø The two lines are identical, so parallel processing can occur

Ø At 40 seconds, the toaster has the longest processing time and is the bottleneck for each line

Ø At 40 seconds for two sandwiches, the bottleneck time of the combined lines = 20 seconds

Ø At 37.5 seconds, wrapping and delivery is the bottleneck for the entire operation

Wrap

37.5 sec

Order

30 sec

Bread Fill

15 sec 20 sec

40 sec

Bread Fill

Toaster

15 sec 20 sec

Toaster

40 sec

Capacity Analysis

Ø Capacity per hour is 3,600 seconds/37.5 seconds/sandwich = 96 sandwiches per hour

Ø Throughput time is 30 + 15 + 20 + 40 + 37.5 = 142.5 seconds