operations management for mbas fourth edition
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OPERATIONS MANAGEMENT for MBAs Fourth Edition. Meredith and Shafer. John Wiley and Sons, Inc. Topic 2: Capacity Planning & Forecasting. Outline. Capacity Planning Overview Utilization & Efficiency Effectively Utilizing Capacity / Resource Planning & Scheduling Production Planning - PowerPoint PPT PresentationTRANSCRIPT
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENTfor MBAs for MBAs FourthFourth Edition Edition
1
Meredith and Shafer
John Wiley and Sons, Inc.
Chapters 8 & 8S : Capacity, Forecasting
Topic 2: Capacity Planning & Forecasting
OutlineOutline
2
•Capacity Planning Overview
•Utilization & Efficiency
•Effectively Utilizing Capacity / Resource Planning & SchedulingProduction Planning
Aggregate PlanMaster Production Schedule
•The Learning Curve
• Forecasting
• Homework
Capacity Planning Capacity Planning DecisionsDecisions
3
Demand EstimatesForecast
MarketCorporate StrategySkillsSuppliers & Customers
CapacityCapacity
4
Maximum rate outputs can be produced or services delivered.
Maximum amount of availability for a product or service.
Capacity TimingCapacity Timing
5
Planned unused capacity
Time
Cap
acit
y
Forecast of capacity required
Time between increments
Capacity increment
(a) Preceding Demand or Expansionist strategy
Capacity TimingCapacity Timing
6
Time
Cap
acit
y
(b) Following Demand or Wait-and-see strategy
Planned use of short-term options
Time between increments
Capacity increment
Forecast of capacity required
Location Planning Location Planning StrategiesStrategies
7
Possible Factors affecting location decisions
Breakeven Location ModelBreakeven Location Model
8
Location FC VCA 150000 62B 300000 38C 500000 24D 600000 30
Breakeven Location ModelBreakeven Location Model
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Q (thousands of units)
0
200
400
600
800
1000
1200
1400
1600
2 4 6 8 10 12 14 16 18 20 22
A best B best C best
Break-even point
6.25 14.3
A
DBC
(20, 1390)
(20, 1200)
(20, 1060)
(20, 980)
An
nu
al c
ost
(th
ou
san
ds
of
do
llars
)
Break-even point
Weighted Score Location Weighted Score Location MethodMethod
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Factor Wt A B C DTax environment 20 5 1 4 3Employee preference 20 2 2 2 3Accessibility 5 1 3 2 3Community 25 3 3 1 3Costs 30 5 1 4 3 370 180 275 300
UtilizationUtilization
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Time Busy / Time Available
Actual output / capacity
Average output rate / capacity
Occupied (in use) / amount available
EfficiencyEfficiency
12
total task time / (N X cycle time)
15 units/hr 6 units/hr20 units/hr 30 units/hrCapacity or Output Rates:
Utilization: 100% 75% 100% 20%
Efficiency = 19 / (4 X 10) = .475 = average utilization based on cycles
cycle time time at which every workstation can pass its completed part to the next station
Utilization: 40% 30% 100% 20%
Littlefield
EfficiencyEfficiency
13
total task time / (N X cycle time)
15 units/hr 12 units/hr20 units/hr 30 units/hrCapacity or Output Rates:
Efficiency = 19 / (5 X 5) = .76 = average utilization based on cycles
cycle time time at which every workstation can pass its completed part to the next station
Utilization: 80% 60% 100% 40%
5
100%
BottlenecksBottlenecks
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BottlenecksBottlenecks
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Operation 120/hr.
Operation 210/hr.
Operation 315/hr.
Bottleneck
Maximum output ratelimited by bottleneck
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The following diagram describes a process that consists of eight separate The following diagram describes a process that consists of eight separate operations, with sequential relationships and capacities (units per hour) as operations, with sequential relationships and capacities (units per hour) as shown.shown.
a. What is the current capacity of the entire process?a. What is the current capacity of the entire process?b. If you could increase the capacity of only two operations through process improvement b. If you could increase the capacity of only two operations through process improvement efforts, which two operations would you select, how much additional capacity would you efforts, which two operations would you select, how much additional capacity would you strive for in each of those operations, and what would the resulting capacity of the entire strive for in each of those operations, and what would the resulting capacity of the entire process be?process be?
15/hr. 10/hr. 20/hr.
5/hr. 8/hr. 12/hr.
34/hr. 30/hr.
CushionCushion
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High Cushion
Low Cushion
Resource PlanningResource Planning
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Chase Plan Level Plan
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Resource PlanningResource Planning
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Resource PlanningResource Planning
MPS gets further broken down in the MRP.
Resource PlanningResource Planning
At the heart of any organizationStarts with sales and operations plans
(or aggregate plan) and plans the input requirements
A process relative to the firm’s competitive priorities and an important part of managing supply chains
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Resource PlanningResource Planning
Aggregate Plan
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Materials Requirements Materials Requirements Planning Planning
An information system that translates master schedule requirements for end items into time-phased requirements for subassemblies, components, and raw materials.
Aids in managing dependent demand inventory.
Primary Inputs:Master Production ScheduleBill of MaterialsInventory Records
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Inventorytransactions
Inventoryrecords
Bills ofmaterials
Engineeringand process
designs
Othersources
of demand
Authorizedmaster production
schedule
Materialrequirements
plan
MRPexplosion
MRP InputsMRP Inputs
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Master Production Master Production ScheduleSchedule
Aggregate Plan
MPS for a singleend item
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A record of all components of an item Shows the parent-component relationship The usage quantities are derived from
engineering and process design
Bill of MaterialsBill of Materials
Five common terms End items Intermediate items Subassemblies Purchased items
Part commonality (sometimes called standardization of parts or modularity)
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Seat cushion
Seat-frame boards
Front legs A
Ladder-back chair
Back legs
Leg supports
Back slats
Bill of MaterialsBill of Materials
BOM for a Ladder-Back Chair
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J (4)Seat-frame
boards
Bill of MaterialsBill of Materials
G (4)Back slats
F (2)Back legs
I (1)Seat cushion
H (1)Seat frame
C (1)Seat
subassembly
D (2)Front legs
B (1)Ladder-backsubassembly
E (4)Leg
supports
ALadder-back
chair
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Bill of MaterialsBill of MaterialsIf 50 units of of end item A are to be assembled, how many additional units of D are needed? Of E?
Item A B C D E F G
LT (wks) 1 2 3 3 6 1 3
Amt. OH 0 10 15 10 100 5 5
A
B(3) C(1)
G(1)
E(2) F(1)D(1) D(1)
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Inventory RecordInventory Record Inventory transactions are the basic building
blocks of up-to-date recordsTransactions include releasing new orders,
receiving scheduled receipts, adjusting due dates for scheduled receipts, withdrawing inventory, canceling orders, correcting inventory errors, rejecting shipments, and verifying losses and stock returns
Inventory records divide the future into time periods called time buckets
Keep track of inventory levels and component replenishment needs
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Inventory RecordInventory RecordThe time-phase information contained in the
inventory record consists of:◦ Gross requirements◦ Scheduled receipts ◦ Projected on-hand inventory◦ Planned receipts ◦ Planned order releases
= + –Projected on-handinventory balanceat end of week t
Inventory onhand at end of
week t–1
Scheduledor plannedreceipts in
week t
Grossrequirements
in week t
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Lot-sizing rulesFixed order quantity (FOQ) rule
maintains the same order quantity each time an order is issued
Lot for lot (L4L), order what is necessaryPeriodic order quantity (POQ), order
what is necessary to handle P periods
Planning FactorsPlanning Factors
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MRP Example, Given MPS, Inv Records, BOMMRP Example, Given MPS, Inv Records, BOM
MPS for End Item A, LT=1, Beg Inv=0Week 0 1 2 3 4 5 6 7 8 9 10MPS 0 100 200 120 80 60
A
B(1) C(2)
D(1)
BOM
Item A B C D
LT 1 1 2 3
Sch Rec 200 wk 1, 100 wk 6
Amt OH 0 20 0 425
Rule L4L, min 120 L4L Lot Size, Q=500
Inventory Records
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MRP Example, SolutionMRP Example, SolutionA (LT=1) Beg. Inv. 1 2 3 4 5 6 7 8 9 10Gross requirements 100 200 120 180 60Schd. ReceiptsProj. OH Net requirements 100 200 120 180 60Planned-order receipts 100 200 120 180 60Planned-order releases 100 200 120 180 60
B (LT=1, L4L, min=120) Beg. Inv. 1 2 3 4 5 6 7 8 9 10Gross requirements 100 200 120 180 60Schd. ReceiptsProj. OH 20 20 20 20 40 40 0 0 0 0 60Net requirements 80 160 120 180 60Planned-order receipts 120 160 120 180 120Planned-order releases 120 160 120 180 120
C (LT=2, L4L) Beg. Inv. 1 2 3 4 5 6 7 8 9 10Gross requirements 200 400 240 360 120Schd. Receipts 200 100Proj. OH 200 200 200 0 0 0 100 0 0Net requirements 0 400 140 360 120Planned-order receipts 400 140 360 120Planned-order releases 400 140 360 120
D (LT=3, Lot Size Q=500) Beg. Inv. 1 2 3 4 5 6 7 8 9 10Gross requirements 400 140 360 120Schd. ReceiptsProj. OH 425 425 425 425 25 25 385 25 405 405 405Net requirements 115 95Planned-order receipts 500 500Planned-order releases 500 500
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The Learning CurveThe Learning Curve
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•The ability to increase productive capacity through “learning.”
•Each time the output doubles, the labor hours decrease by a fixed percentage of their previous value.
•Common LC values are 70 to 95 percent.
Units Hours (.9) Hours (.8)1 100 1002 90 804 81 648 72.9 51.2
16 65.61 40.9632 59.049 32.768
LC ApplicationLC Application
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A customer support center has a 90 (or 0.90) percent learning curve rate for handling customer issues. A new rep has just begun work. Her first support call required 2000 seconds.a)Estimate the time needed to complete her first 5 calls.b)Estimate the time needed to complete her 5th call.c)Estimate the time needed to complete calls 21 through 25.
€
Tn = T1(nln 0.8
ln 2 )
where, Tn = time for the nth unit
1 2000.002 1800.003 1692.414 1620.005 1565.97
Using the Tables
2000 X 4.339 = 8,678
2000 X 0.783 = 1,566
21 1259.0722 1250.1923 1241.7824 1233.7725 1226.14
Using the Tables
2000 X 17.71 = 35,420 (length of first 25 calls)2000 X 14.61 = 29,220 (length of first 20 calls) 6,200
0.9
LC ApplicationLC Application
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Call Number Length Cumulative1 2000.00 2000.00 2000.00 2000.002 1800.00 3800.00 1800.00 1800.003 1692.41 5492.41 1692.41 1692.414 1620.00 7112.41 1620.00 1620.005 1565.97 8678.39 1565.97 1565.976 1523.17 10201.56 1523.17 1523.177 1487.90 11689.45 1487.90 1487.908 1458.00 13147.45 1458.00 1458.009 1432.13 14579.58 1432.13 1432.1310 1409.38 15988.96 1409.38 1409.3811 1389.11 17378.06 1389.11 1389.1112 1370.85 18748.92 1370.85 1370.8513 1354.28 20103.19 1354.28 1354.2814 1339.11 21442.30 1339.11 1339.1115 1325.14 22767.43 1325.14 1325.1416 1312.20 24079.63 1312.20 1312.2017 1300.16 25379.80 1300.16 1300.1618 1288.92 26668.71 1288.92 1288.9219 1278.37 27947.08 1278.37 1278.3720 1268.44 29215.52 1268.44 1268.4421 1259.07 30474.59 1259.07 1259.0722 1250.19 31724.78 1250.19 1250.1923 1241.78 32966.56 1241.78 1241.7824 1233.77 34200.32 1233.77 1233.7725 1226.14 35426.46 1226.14 1226.14
LC ApplicationLC Application
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A manager wants to estimate an appropriate LC rate for a new type of work his firm will undertake. He has obtained the following completion times for the initial 8 repetitions of a job of this type. What learning curve rate is appropriate? Estimate the duration to complete job unit 45.
Unit Time (hrs)1 15.902 12.003 10.104 9.105 8.406 7.507 7.408 6.90
Factors that may affect the LC Factors that may affect the LC raterate
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•Complexity of the task•Human component