1 Introduction to Operations Management Chapter 1.

1

Introduction to Operations Management

Chapter 1

2

Generic Conversion Process

3

OPERATIONSFINANCE

MARKETING

3 Functions of a Firm

4

Goods & Services

• Differences in creation & management

• Compensation

• Sector growth & future

5

20th Century US Employment

1900 200019501925 1975

50%

25%

75%

6

• Eli Whitney

• Taylor, Gilbreths & Ford

• Hawthorne Experiments

• Walter Shewhart & Ed Deming

• George Dantzig

• Shingo & Ohno

Operations Heritage

7

Trends in P/OM

• E-business• Agility• Ethics• SCM• Mgt of technology• Outsourcing• Globalization

8

Competitiveness, Strategy and Productivity

Chapter 2

9

Mission Accomplished!

• Missions• Strategies

– Quality– Cost– Flexibility– Social responsibility– Deliverability

10

Strategy Development & Implementation

• SWOT analysis• Critical success factors• Staffing• Integration of OM w/other activities

11

Strategic FitOrganization

Env

ironm

ent

Strengths Weaknesses

Opp

ortu

nitie

s

T

hrea

ts

12

Productivity

• Mathematical & intuitive definitions• Number of inputs• Usefulness• Factors affecting

13

Compute the multifactor productivity measure for each of the weeks shown. What do the productivity figures suggest? Assume 40-hour weeks and an hourly wage of $12. Overhead is 1.5 times weekly labor cost. Material is $6 per pound.

Week Output (units) Workers Material (lbs)

1 30,000 6 450

2 33,600 7 470

3 32,200 7 460

4 35,400 8 480

14

Strategic OM Decisions

1. Product & service design2. Capacity3. Process selection & layout4. Work design5. Location6. Quality7. Inventory8. Maintenance9. Scheduling10. Supply chains11. Projects

15

Forecasting

Chapter 3

16

Time Horizons• Short, medium, long-range horizons• Differences in horizons

– Plan the system– Plan the use of the system

3 yearsNow

Location, new products

Production & sales planning

Scheduling Our focus

3 months

17

Forecasting Approaches

• Economic• Technological• Demand

– Qualitative– Quantitative

18

How to Forecast

1. Use subject matter knowledge2. Use graphical methods3. Select model(s)4. Gather data5. Forecast6. Validate

19

Features of Forecasts

• Accuracy– Horizon– Aggregate

• Paradigm

20

Qualitative/Judgment Forecasts

• Why use one?– Data, time, arena

• Techniques– Jury of executive opinion– Salesforce Opinion– Consumer Survey– Delphi Method– Nominal Group Technique

21

Time Series

0

50

100

150

200

250

300

350

400

450

Jan-

04

Apr-0

4

Jul-0

4

Oct-04

Jan-

05

Apr-0

5

Jul-0

5

Oct-05

Jan-

06

Apr-0

6

Jul-0

6

Oct-06

Jan-

07

Apr-0

7

Jul-0

7

Oct-07

Jan-

08

Apr-0

8

Jul-0

8

Oct-08

22

Notes on Notation

• F = Forecast• A = Actual (known demand)• t+1 = next period, t = current period• A bar over something means “average” e.g. • ∑ = repeated addition (summation)

X

23

Time Series Techniques

• Naïve Method– Note discrepancy from text

• Moving Average

• Exponential Smoothing

tt AF 1

n

AF

n

ii

t

11

)(1 tttt FAFF

24

More Time Series Equations

• Exponential Smoothing (alternate version)

• Linear Trend

ttt AFF )1(1

n

tbya

ttn

yttynb

btayt

22

25

Depends, Inc. sells adult diapers. Monthly sales for a seven month period were as follows.

Month Sales (000 units)

Feb 19

Mar 18

Apr 15

May 20

Jun 18

Jul 22

Aug 20

Plot the data

Forecast sales for September using linear trend; 5 month moving average; exponential smoothing with alpha=0.2 assuming a July forecast of 19; naïve approach; weighted average of .60 for Aug, .30 for July, and .10 for June.

26

Seasonal Data

Deseasonalizing alternativesA tourist center is open on weekends. The manager hopes to improve scheduling of part-time employees by developing a forecasting model. He assigns you this task but will ultimately take credit for your model.

1 2 3 4 5 6

Friday 149 154 152 150 159 163

Saturday 250 255 260 268 273 276

Sunday 166 162 171 173 176 183

27

Associative Forecasting

• One item’s value depends on another item’s value

• Linear regression

n

xbya

xxn

yxxynb

bxay

22

28

The following data were collected during a study of consumer buying patterns.

Observation X Y Observation X Y

1 15 74 8 18 78

2 25 80 9 14 70

3 40 84 10 15 72

4 32 81 11 22 85

5 51 96 12 24 88

6 47 95 13 33 90

7 30 83

Plot the data.

Obtain a regression line. How much variance is explained?

Predict Y when X=41.

29

ObservationX Y SUMMARY OUTPUT1 15 70 Excel Output2 25 80 Regression Statistics3 40 84 Multiple R 0.8684 32 81 R Square 0.7545 51 96 Adjusted R Square0.7326 47 95 Standard Error4.4497 30 83 Observations 138 18 789 14 70 ANOVA

10 15 72 df SS MS F Significance F11 22 85 Regression 1 667.4841 667.4841 33.71957 0.00011812 24 88 Residual 11 217.7467 19.7951513 33 90 Total 12 885.2308

CoefficientsStandard Error t Stat P-value Lower 95%Upper 95%Intercept 65.190 3.220076 20.24501 4.69E-10 58.10313 72.27782X 0.613 0.105643 5.806856 0.000118 0.380934 0.845972

30

Accuracy & Control

• MAD = Mean Absolute Deviation

• Tracking Signal =

• MSE = Mean squared error

n

FAMAD

n

ttt

1

MAD

FA

MAD

RSFE

n

ttt

1

2

1

1

n

t tt

A FMSE

n

31

Doug Moodie is the president of Garden Products Limited. Over the last 5 years, he has asked his vice president of marketing and his vice president of operations to provide sales forecasts. The actual sales and the forecasts are given here. Which vice president is better at forecasting?

Year Sales VP Mkt VP Ops

1 167,325 170,000 160,000

2 175,362 170,000 165,000

3 172,536 180,000 170,000

4 156,732 180,000 175,000

5 176,325 165,000 165,000

32

Product & Service Design

Chapter 4

33

Product Life Cycle

Introduction Growth Maturity Decline

Vol

ume

time

Production method, run length & capacityProduct designProcess reliability

34

• Dis-integrated design processes• Standardization & modular design• Manufacturability & value engineering• Green manufacturing• R&D versus benchmarking

# Id

eas

Proposed ProducedMkt. TestPrototype

Product Development

35

Computer Aided Design

• Used for– drafting– simulation– testing

• Integration w/CAM

36

“GOALPOST” QUALITY

Target

37

Service Blueprinting

Physical Evidence

Customer

Onstage Service

Backstage Service

Support

Line of Interaction

Line of Visibility

38

A structured and disciplined process that provides a means to identify and carry the voice of the customer through each stage of product or service development and implementation

QFD is:• Communication• Documentation• Analysis• Prioritization

breakthroughs

Quality Function Deployment

39

Japanese QFD Results

• Design time reduced by ¼ to ½• Problems with initial quality decreased• Comparison and analysis of competitive

products became possible• Communication between divisions

improved

40

oldsystem

newsystem

productdefinition

design redesign

Product Design Time Line

41

Quality Function Deployment (in 75 minutes or less)

Smylie Cellphone is a one-product company founded in 2004. Its product is a cell phone. The company’s annual sales last year were $18 million all in the United States. The company is located in Edmond in its own 400 square foot manufacturing plant and has 4 employees.

The company recently completed a five-year business plan with a goal of expanding from a one-product to a multi-product line. The plan is to expand sales by attracting new customers and penetrating foreign markets. The company wants to develop a new cell phone that will appeal to adults in both the United States and foreign markets.

Smylie Cellphone has selected your team to provide quality function deployment consulting services to help develop the new product. Your team has agreed as a first phase to develop chart A-1 detailing the following:

1.Voice of the customer

2. Degree of importance

3. Company now and competitive comparison

4. Company plan

5. Improvement ratio

6. Sales point

7. Importance weight

8. Relative weight

9. Graphical competitive comparison

10. Quality characteristics

11. Relationships

12. Importance weight

13. Relative weight

14. Technical comparison

15. Special requirements

16. Correlation matrix

The study must be painstaking in detail, unerring in accuracy, and completed in one hour. To show its commitment the company has agreed to have a representative available throughout the period for clarification and consultation.

1

10

11 2 3 4 5 6 7 8 9

12131415

16

42

1. Voice of the custom

er - Identify all customer groups and collect accurate inform

ation about their w

ants and needs (restrict yourself to 10 needs given our time constraint)

2. Degree of im

portance - Identify the relative priority of each customer requirem

ent using customer

input to determine the values w

herever possible. Use a scale of one to ten w

ith ten indicating very im

portant items.

3. Com

pany now and com

petitive comparison - R

ate your current product (use the worst looking

wallet in your group - in the event of a dispute as to w

hose wallet looks the w

orst, the company

representative’s decision is final) and two com

petitors products on a scale of one to five with five

being the best.

4. Com

pany plan - Determ

ine what level you plan to achieve for each custom

er requirement. Since

WW

W’s resources are finite, m

ake your improvem

ent decisions based on steps 2 and 3. That is,

choose the most im

portant items w

here you can gain a clear advantage over your competitors.

Use a scale of one to five w

ith five being best.

5. Improvem

ent ratio - Quantify the im

provement planned for each custom

er requirement by

dividing the value of the planned level by the current company rating.

6. Sales point - Identify major and m

inor points (front-of-the-brochure claims) by using inform

ation in colum

ns 2 and 4. Restrict yourself to only a few

sales points (perhaps two m

ajor and a minor

point since we have only ten custom

er demands). Indicate the m

ajor points with this sym

bol

and the minor points w

ith this symbol

. The m

ajor points are worth 1.5 and m

inor points are w

orth 1.2.

7. Importance w

eight - Quantify the im

portance of each customer requirem

ent to your company w

ith the follow

ing equation: Importance w

eight = (colum

n 2) x (column 5) x (colum

n 6).

8. Relative w

eight - Find the relative importance of each item

in column 7 by sum

ming colum

n 7 and dividing each entry by the total. E

xpress this as a percentage.

9. Graphical com

petitive comparison - Plot the inform

ation in column 3 using a different sym

bol for the com

pany and two com

petitors. This provides a com

parison at a glance between the

competitors rather than forcing the analyst to hunt for inform

ation in the matrix.

10. Quality characteristics - D

evelop this list internally by looking at features of your current product, e.g., the stitching, type of leather, etc.

11. Relationships - Identify all relationships that quality characteristics (colum

n 10) have on voice of the custom

er items (colum

n 1). Evaluate each pair by asking if the quality characteristic in any

way affects the custom

er demanded quality item

. Indicate the strengths of relationships by using the sym

bols ,

, and for strong (9), moderate (3), and w

eak (1) relationships respectively. Do

not expect to find relationships between every pair of requirem

ents.

12. Importance w

eight - Quantify the im

portance of each technical requirement by m

ultiplying the value of any relationships show

n in the column of the technical requirem

ent times the relative

weight of the custom

er requirement.

13. Relative w

eight - Similar to colum

n 8 except you total the importance w

eights from row

12 and divide the w

eight of each item by the total. E

xpress this as a percentage.

14. Technical comparison - Identify how

well you and your com

petitors fulfill each of the technical requirem

ents using the same sym

bols and scale as in column 9.

15. Special requirements - Identify any com

ponents governed by external sources, such as FDA

, UL

, etc. rules.

16. Correlation m

atrix - Com

pare quality characteristics against each other to identify complem

entary or conflicting relationships early in the design process. U

se the symbols

and for strong and

some positive correlation and x and for som

e and strong negative correlation respectively.

43

Voice of the Customer (1)

Importance 2

Now 3

Competitor A

Competitor B

Company plan 4

Ratio 5

Sales point 6

Weight 7

Relative wt 8 1 2 3 4 5

Importance wt (12)Relative wt (13)

Tech comparison (14)

Special req (15)

Qua

lity

Cha

ract

eris

tics

(10)

Graph

Correlation Matrix (16)

44

Reliability

Chapter 4S

45

Reliability

• Probability• Failure• Normal operating conditions (remember Taguchi)

• Redundancy

46

Failure Rates

Product failure rate (FR) expressed in terms of time FR(N) or fraction of items tested FR(%)

number of failures(%) 100%

number of units testedFR

number of failures( )

number of unit-hours of operating timeFR N

1

( )MTBF

FR N

47

Physio-Control burns-in their defibrillators for 24 hours after they are assembled. Over the past week they have produced 300 LifePak 12s. One unit failed on the first charge discharge cycle. Compute the failure rates and mean time between failures.

48

Two items that both must work for the system to perform are said to be in series

Reliability Calculations

=0.95 0.90

49

Backups (Redundancy)

These two components form a parallel subsystem that improves reliability

0.80

0.70

0.95 =

50

One of the industrial robots designed by a leading producer of servomechanisms has four major components. Components’ reliabilities are .98, .95, .94, and .90. All components must function in order for the robot to operate effectively.

What is the robot’s reliability?

If one backup can be added, where should it be?

If one 0.92 backup can be added, where should it be?

51

MTBF/TF & the Bathtub

Product failure is described as f(t)=λe-λt and when the slope of this cumulative failure curve is plotted, we get a bathtub shaped curve.

Time

Failure Rate

52

Mean Time Between Failure Calculations

• P(no failure before T) = e -(T/MTBF)

• where:• e is 2.71825 (and a calculator button)• T is a specified length of time• MTBF is the mean time between failures as determined by

historical data• Probabilities working the way they do, what’s the

probability of failure before T?

53

• FOX intends to launch a satellite that will enhance reception of television programs everywhere and complete Rupert Murdoch’s plan for world domination. According to FOX engineers, the satellite will have a useful life of eight years (four times as long as a typical sitcom). Determine the probability that the satellite will:

a. Last more than nine years

b. Last less than twelve years

c. Fail between years nine and twelve

54

Availability

“Complete” picture of reliability

MTBFAvailability

MTBF MTR

55

Capacity Planning

Chapter 5

56

CAPACITY

• Importance– Demand, $, Management

• Measurement– Design = Maximum attainable– Utilization = Actual/Design– Efficiency = Actual/Effective

57

A work center operates 2 shifts per day 5 days per week (8 hours per shift) and has 4 machines of equal capability. This is the effective capacity. If the work center has a system efficiency of 95%, what is the expected output in hours per week?

58

Adjusting Capacity

• Long Term

• Short TermOVER UNDER

59

Break-Even Analysis$

VOLUME (x)00

TC = Total CostF = Fixed CostV = Variable Cost

assumptions??

P = Selling PriceTR = Revenue

60

You are considering opening a copy service in the University Center. You estimate your fixed cost at $15,000 and the variable cost of each copy sold at $0.01. You plan to sell at $0.05.

a) What is the break-even point in dollars?

b) What is the break-even point in units?

61

Decision Theory

Chapter 5S

62

Decision Making

• Alternatives• States of nature• Likelihood • Payoffs• Criterion

63

Decision Making Under Certainty

The most unexciting of the decision environments...Next year’s demand

Alternative Low High

Do nothing $50* $60

Expand 20 70

Subcontract 40 80*profit in thousands

64

Decision Making Under Risk

Likelihoods of the states of nature can be assigned a probability of occurrence and the payoff for each outcome can be estimated.

Expected Monetary Value (EMV) Criterioni i

i

EMV PV

P probability

V value

65

Clay Whybark, a soft drink vendor at Hard Rock Café’s annual Rockfest, created a table of conditional values for the various stocking sizes and crowd sizes. With the probabilities of the crowd sizes as indicated, what’s the best stock size for Clay to get rich?

Crowd SizeAlternative Big Average Small

Large Stock $22* 12 -2Average Stock 14 10 6Small Stock 9 8 4

Probability .30 .50 .20*additional profit in thousands

66

Decision Tree Analysis

1

1

3

2

a

b

c

$22

$12

-$2$14

$10

$69

$8

$4

Squares represent decision points

Circles show states of nature

These lines represent alternatives

67

• An entrepreneur must decide on the size of a latte stand to construct. The manager has narrowed the choice down to two: large or small. If he builds large and experiences low demand he could grin and bear it ($200), lower prices ($225), or hire street performers to attract attention ($175). If he builds small and experiences high demand he could do nothing ($175), stay open longer hours ($225), improve processes ($250), or raise prices ($200). Building large for large demand has an expected payoff of $250 and building small for small demand has an expected payoff of $175. There is a 0.7 probability of high demand and 0.3 probability of low demand. What size stand should be constructed to slake the unquenchable thirst of caffeine addicts?

68

DMUR

Expected payoff under certainty

Expected value of perfect information

EVPI = EPUC - EMV

max

max

ii

EPUC PV

P probability

V highest payoff value

69

Four alternative manufacturing methods are being considered for a new product. Profitability, which depends on method of manufacture and level of consumer acceptance, is anticipated as shown here:

Profit ($ Thousands from Product)

Projected Acceptance

Method Low Med High Very High

1 100 200 300 600

2 175 300 400 500

3 250 300 350 425

4 100 300 400 450

Probability 0.25 0.35 0.20 0.20

Which method is best?

What’s the most the company should invest in analyzing the situation?

70

Decision Making Under Uncertainty

Characterized by a complete lack of knowledge regarding the likelihood of occurrence for each state of nature

– Maximax– Maximin– Minimax regret– Laplace/equally likely

71

Given the following conditional value table, determine the appropriate decision under uncertainty using:

Maximax

Maximin

Minimax

Laplace

Very Favorable Average Unfavorable

Build new plant $350,000 $240,000 -$300,000

Subcontract $90,000 $180,000 -$20,000

Overtime $110,000 -$10,000 $60,000

Do nothing $0 $0 $0

72

A firm produces a perishable food product at a cost of $10/case and sells it for $15. The firm considers possible demands of 100, 200, and 300 cases. If demand is less than production, the excess is discarded but if demand is more than production the firm will produce the shortfall at $18/case. If P(100)=.2, P(200)=.2 and P(300)=.6, how much should be produced?

73

A decision maker faced with four alternatives and four states of nature develops this payoff table.

If the decision maker knows nothing about the chances of occurrence of each state of nature, what would reasonable decisions be?

How do your conclusions change if these values represent costs instead of revenues?

s1 s2 s3 s4

d1 14 9 10 5

d2 11 10 8 7

d3 9 10 10 11

d4 8 10 11 13

74

Process Selection & Facility Layout

Chapter 6

75

Determinants

• Degree of customization– Make-to-order– Assemble-to-order– Make-to-stock

• Volume

76

Process Types

• Project

• Job shop

• Batch

• Repetitive

• Continuous (flow)

• (Don’t)

77

Pro

duct

Var

iety

Output Volume

Product-Process Matrix

78

Layouts

Product

Process

Fixed-position

Combination

Cellular

Office

Retail

Warehouse

79

Group Technology

• Part families

• Setup time, transportation, congestion

• Service applications

80

Layout Considerations

• Material handling• Information flows• Environment/aesthetics• Capacity• Costs

1 1

total # centers

, individual departments

# loads from i to j

cost to move 1 load between i and j

n n

ij iji j

Min Cost X C

n

i j

Xij

Cij

81

Assembly-line Balancing

Cycle Time (CT)

Operating Time

Output

Output =

Minimum # Stations = Task Times

Cycle Time

82

Line Balancing Rules

• Obey precedence requirements• Obey scheduling rule(s)• Fill up as much time as possible at each

station• Compute efficiency & balance delay

(idle time) since you’ll probably have to defend your balance

83

Use this table to balance the line for an output of 320 units in an 8 hour work day. Create a precedence diagram and balance the line using the largest-process-time rule and the smallest-process-time rule. Work times are in seconds.

Task Time PredZ 30 --Y 42 --X 12 Z, YW 6 ZV 48 XU 24 WT 24 WS 36 T, VR 30 U, S

84

The Mach 10 is a one-person sailboat designed to be used in the ocean. 200 minutes are available each day to manufacture the Mach 10. The daily demand is 60 boats.

Task (minutes) Follows a 1 - b 1 a c 2 a d 1 c e 3 c f 1 c g 1 d, e, f h 2 b I 1 g, h

a) Draw the precedence diagram.b) Determine the percentage of idle time.

85

An assembly line with 30 activities is to be balanced. The total amount of time to complete all 30 activities is 42 minutes. The longest activity takes 2.4 minutes and the shortest takes 0.3 minutes. The line will operate for 450 minutes per day.

What are the maximum and minimum cycle times?

What output rate will be achieved by each of those cycle times?

Suppose this line is balanced using ten workstations and a finished product can be produced every 4.2 minutes.

What is the production rate in units/day?

What is the assembly line efficiency?

86

Office Layouts

Requirements

Good (not great) answers

Minimizing transportation costs

Muther grids

87

Registration at UCO has always been a time of emotion, commotion, and lines as students move among four stations as shown here. 450 students moved from paperwork station A to advising B, and 550 went directly from A to picking up class cards C. Graduate students proceeded from A to the Bursar D. Adjacent stations are 30’ apart.

a) What is the load x distance of the layout shown?b) Provide an improved layout and compute its cost.

A B C D

A -- 450 550 50

B 350 -- 200 0

C 0 0 -- 750

D 0 0 0 --

A B C D

88

Use the information in the grid to assign departments to a 3x3 office space.Department

1

2

3

4

5

6

7

8

X

X

X

OO

O

O

A

AA AA A

AA

AAA

EE

E

E

89

Linear Programming

Chapter 6S

90

Linear Programming

Used when scarce resources are used by competing products.

Objective

Decision variables

Constraints

Parameters

91

• I make two different kinds of moonshine to supplement my meager wages. Rotgut sells for $8 per jug and White Lightning, the premium brand, sells for $12/jug. Below is a list of ingredients for a batch of each type:

Rotgut White Lightning

Corn 1 2Sugar 3 2Jugs 2 2Hours 2 3

I have on hand the following:40 bushels corn, 70 pounds sugar, 50 jugs, and 72 hours (before the revenoors come to bust up my still)

How much of each flavor should I make?

92

Assumptions

• Linearity• Divisibility• Certainty• Nonnegativity

93

Model formulation

• Identify decision variables• Write an objective function• Identify all constraints• Write constraints with all decision variables

on the left side of an inequality• Solve it graphically, using Excel, or simplex

94

Graphical Solutions

Work with only two decision variables

Sketch axes

Plot each constraint (pick (0,y) and (x,0))

Identify feasible region

Find vertices of feasible region

Evaluate objective function

95

Solve the following problem graphically:

Maximize Z = 4X + 6Y

Subject to X + 2Y ≤ 8

5X + 4Y ≤ 20

X,Y ≥ 0

96

The grand Valley Company, run by the J Motwani family, produces two products, bed mattresses and box springs. A prior contract requires that the firm produce at least 30 mattresses or box springs, in any combination per week. In addition, labor union agreements demand that stitching machines be kept running at least 40 hours per week, which is one production period. Each box spring takes 2 hours of stitching time, while each mattress takes one hour on a machine. Each mattress produced costs $20; each box spring costs $24.

a) Write the objective function and constraints in canonical form.

b) Solve graphically.

97

Linear Programming in ExcelOne of Excel’s useful features is the ability to

solve linear programming problems (especially those beyond our graphical abilities).

The feature is invoked by creating a spreadsheet containing the objective function and constraints, selecting Tools from the main menu, and Solver from the submenu

98

Here is an Excel version of the moonshine problem

The top view shows formulas and the bottom view shows initial calculations.

  B C D E F G3   16 24      

4   Rotgut White Lightning      5   2 2 =D5*D3+C5*C3 Profit  6            7 Corn 1 2 =D7*$D$5+C7*$C$5 <= 408 Sugar 3 2 =D8*$D$5+C8*$C$5 <= 709 Jugs 2 2 =D9*$D$5+C9*$C$5 <= 50

10 Hours 2 3=D10*$D$5+C10*$C

$5 <= 72

  B C D E F G3   $16.00 $24.00      

4   Rotgut White Lightning      5   2 2 $ 80.00 Profit  6            7 Corn 1 2 6 <= 408 Sugar 3 2 10 <= 709 Jugs 2 2 8 <= 50

10 Hours 2 3 10 <= 72

99

Once the basic set of equations has been entered, launch Solver and fill in the dialog boxes with references to your sheet.

Target cell - The objective function value (E52)Equal to - Choose max or min based on the problemBy changing cells - The decision variables (C52:D52)Subject to the constraints - Add all constraints one at a time

by referencing their function values (e.g., the amount of corn used, E47 must be less than the amount of corn on hand, G47)

Once all constraints have been entered, choose Options and check the boxes for Assume Linear Model and Assume Non-Negative.

Finally, choose Solve and wait for Excel to work its magic

100

Solver Output Reports

• Answer Report - contains the basic answer to the problem and reveals which constraints had an impact on your situation.

• Sensitivity Report - tells you reduced costs and shadow prices

• Limits Report - don’t bother asking for this one. We won’t use its information.

101

The value of the objective function at the optimal solution

The optimal values of the decision variables

If a constraint is not binding, then we have some left over (slack) when we implement the optimal solution. We have 10 pounds of sugar and 7 hours to spare.

A binding constraint is one that limits the value our objective function can assume. We use up all of our corn and jugs (we have no slack).

Microsoft Excel 11.0 Answer Report

Worksheet: [Moonshine.xls]Formulation

Report Created: 10/2/2006 1:09:33 PM

Target Cell (Max)

Cell Name Original Value Final Value

$E$5   $ 520.00 $ 520.00

Adjustable Cells

Cell Name Original Value Final Value

$C$5 Rotgut 10 10

$D$5 White Lightning 15 15

Constraints

Cell Name Cell Value Formula Status Slack

$E$10 Hours 65$E$10<=$G$10 Not Binding 7

$E$7 Corn 40$E$7<=$G$7 Binding 0

$E$8 Sugar 60$E$8<=$G$8 Not Binding 10

$E$9 Jugs 50$E$9<=$G$9 Binding 0

102

A one unit in(de)crease in the original amount of corn available will in(de)crease our profit by this amount

Increases or decreases within these ranges will result in the same product mix (but a different objective function value).

Extra amount of resource needed for a binding constraint to become non-binding. Note that this doesn’t apply to non-binding constraints, hence the huge amounts indicated.

Amount of resource to be taken away for a non-binding constraint to become binding, or a binding constraint to become more so.

Microsoft Excel 11.0 Sensitivity Report

Worksheet: [Moonshine.xls]Formulation

Report Created: 10/2/2006 1:09:33 PM

Adjustable Cells

    Final Reduced Objective Allowable Allowable

Cell Name Value Cost Coefficient Increase Decrease

$C$5 Rotgut 10 0 16 8 4

$D$5 White Lightning 15 0 24 8 8

Constraints

    Final Shadow Constraint Allowable Allowable

Cell Name Value Price R.H. Side Increase Decrease

$E$10 Hours 65 0 72 1E+30 7

$E$7 Corn 40 8 40 7 10

$E$8 Sugar 60 0 70 1E+30 10

$E$9 Jugs 50 4 50 5 10

103

Design of Work Systems

Chapter 7

104

Labor as an Input

• Flexible & inflexible• Quality of life• Job classification & work rules

105

BEHAVIORAL APPROACHES TO JOB DESIGN

• Specialization• Job Rotation• Job Enrichment• Job Enlargement• Teaming

106

TECHNICAL APPROACHES

CHARTING TECHNIQUES– Flow Chart

– Activity Chart– Gang Chart– Operations Chart

107

Visual Workplace

• Big picture

• Performance

• Housekeeping

108

TECHNICAL APPROACHES• Ergonomics• Work Measurement

– ignorance– historical data– direct time study– predetermined time study– work sampling

109

Direct Time Study Method

• Define tasks

• Determine sample size

• Take measurements

• Rate performance

22

2

2

2

zn

En sample size

z normal distribution value

= standard deviation

E = sampling error

110

What sample size should be used:

a) if there should be a .95 probability that the value of the sample mean is within 2 minutes, given that the standard deviation is 4 minutes?

b) there should be a 90% chance that the sample mean has an error of 0.10 minutes or less when the variance is estimated as 0.50 minutes?

111

Direct Time Study• Observed Cycle Time (OT) = average observed time• Normal Time (NT) = OT x Performance Rating

– < 100% is slow– > 100% is fast

• Standard Time (ST) = NT/(1- Allowance Factor)– breaks– fatigue– downtime

112

Work Sampling

• Percentage of time on a task

• Define task

• Spy randomly

2

2

2

2

(1 )

z p pn

En sample size

z normal distribution value

p = estimate of proportion

E = sampling error

workingp

total observations

113

If a worker has times of 8.4, 8.6, 8.3, 8.5, 8.7, 8.5, a performance rating of 90%, what is the normal time? If the allowance factor is 15%, what is the standard time for this operation?

114

A part-time employee who rolls out dough balls at a pizza restaurant was observed over a 40 hour period for a work sampling study. During that time, she prepared 550 pieces of pizza dough. The analyst made 50 observations and found this employee not working four times. The overall performance rating was 1.10. The allowance for the job is 15%. Based on these data, what is the standard time for preparing pizza dough?

115

Labor Standards

Labor Efficiency Variance measures the difference between expected and actual costs.

Standard Cost-Actual CostLEV

Actual Cost=Actual Usage×Labor Rate

Standard Cost=Standard Usage×Labor Rate

116

A trucking company’s labor standard is 320 miles/8 hour shift. Drivers logged 31,525 miles and recorded 822 hours of work. If drivers are compensated $15/hour, what is the labor efficiency variance? If the standard is lowered 10% what is the labor efficiency variance?

117

A farming conglomerate expects a four person hay crew to place 1,750 bales in the barn per day. The labor cost is $600 per day for a crew of four. In the past four days 8,100 bales have been harvested. Should the conglomerate be pleased with this level of output?

118

COMPENSATION• TIME-BASED• OUTPUT (Group & Individual)• STANDARDS

119

Learning Curves

Chapter 7S

120

Learning Curves

• Relationship between repetition & speed• Conventions

– doubling output– constant percentage decrease– expressed as the complement

121

Learning Curve Equations

1

1 unit time for first unit

learning curve rate

number of times T is doubled

nnT T L

T

L

n

1

1

st nd rd

unit time for first unit

unit produced eg., 1 , 2 , 3 , ...

log(learningrate)/log(2)

bnT T N

T

N

b

122

Professor Geoff Willis takes 15 minutes to grade the first exam and follows an 80% learning curve. How long will it take him

a) To grade the 25th exam?

b) To grade the first 10 exams?

123

Location Planning & Analysis

Chapter 8

124

Location Decisions

• CRITICALITY– BIG $$– NATURE OF BUSINESS

• PROMPTED BY• OPTIONS

125

Service Location

• Purchasing power• Service & image compatibility• Competition• Quality• Uniqueness• Facility physical quality• Operating policy• Management quality

126

LOCATION FACTORS

• Proximity• Costs• Culture• Politics

127

ANALYSES• Locational cost volume (semi- breakeven)

– minimizes total costs in desired output range

• Factor rating method– creates scores for sites based on factors &

importance

$

VOLUME

SITE Q

SITE XSITE W

128

Fixed and variable costs for four potential plant sites are below:

Enumclaw $100K $30Renton $150K $20Kent $200K $35Snoqualmie $250K $11

Over what range of output is each alternative superior? If the anticipated output is 8,000 units per year, which location is best?

Fixed VariableLocation Per Year Per Unit

129

FACTOR RATING METHOD EXAMPLE

130

ANALYSES

• Transportation Model– minimizes transportation costs using LP

• Center of gravity & simple median models– minimizes transportation costs using

geometry

ix ii

ii

d Qx coordinate

Q

iy ii

ii

d Qy coordinate

Q

131

A chain of insurance firms in OK needs to locate a central office from which to conduct internal audits and other periodic reviews of its facilities. Each site, except for Players, will be visited three times a year by Carroll Fisher, who will drive from the central office. Players will be visited five times a year. What coordinates represent the distance-minimizing central location for this office? What other factors should be considered?

City X Y

Hugo 9.2 3.5

Durant 7.3 2.5

Players 7.8 1.4

Blackwell 5.0 8.4

Waurika 2.8 6.5

Velma 5.5 2.4

Ardmore 5.0 3.6

Hooker 3.8 8.5

132

Management of Quality

Chapter 9

133

Dimensions of Quality

• Performance• Aesthetics• Special features• Conformance• Safety• Reliability• Durability• Perceived quality• Service after sale

134

Cost of Quality

• Internal– Prevention– Appraisal

• External

135

GURUS

• DEMING• JURAN• CROSBY• ISHIKAWA

136

QUALITY PROGRAMS & AWARDS

• Total Quality Management• JIT/TPS• BALDRIGE AWARD• DEMING PRIZE• ISO 9000/QS 9000/ISO 14000• Six Sigma• Benchmarking

137

PDSA CYCLE

138

7 Basic ToolsÄ Flow ChartÄ Check SheetÄ HistogramÄ Pareto ChartÄ Scatter DiagramÄ Cause & Effect DiagramÄ Statistical Process Control

139

Flow Charts are used to...

• document a process• improve understanding• reveal differences in methods• uncover non-value added activities

140

Flow Charting Symbols

Operation

Decision

Transportation

Inspection or check

Delay

Storage

141

Flow Chart Example: Self-Serve Gas Before Improvement

Drive in check price self serve? to pumpshut offengine

walk to paystation

yes

no

check card transmit approved?turn onpump

yesno

backto car

pumpgas

walk tobooth

wait

employeetotalscharges

checkaccuracy

preparereceipt

signcopy

copy tofile

copy towallet

return to car

on the roadagain

142

Flow Chart Example: Self-Serve Gas After Improvement

Drive incheckprice self-serve?

no

yes

go topump

shut offengine insert

cardin pump

checkcredit card

wait

approved?

no

yes

wait forreceipt

store in system

copy towallet

on the roadagainpump gas

143

CHECK SHEETS

• Data collection

• Preliminary analysis

144

Either a Tally Sheet

• Contents mixed• Poor taste• Low temperature• Utensils dirty• Price issue• Other

145

Or a Location Plot

X

XX

X XXX

X

X

146

A histogram is a...

• descriptive statistical technique

• graphical summary

Bell-Shaped

Uniform

Bimodal

147

Pareto Charts

• Just like a histogram, except categories are arrayed greatest to least left to right

• Based upon the Pareto principle...

148

Pareto Diagram

Hard Tests Workload/Material

Funny Grading Pacing Do not take0

1

2

3

4

5

6

7

8

9

10

149

Also a Pareto diagram

Hard Te

sts

Workl

oad/M

ateria

l

Funny

Grading

Pacing

Do not tak

e0

1

2

3

4

5

6

7

8

9

10

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Count Pct

150

Scatter Diagram

• Measures relationships between numerical variables

• Visual correlation (or regression) analysis

151

Scatter DiagramE

xam

Sco

re

Homework Problems

Class 1

Class 2

152

Cause & Effect Diagrams

• Also known as fishbone diagrams or Ishikawa diagrams, after their creator Kaoru Ishikawa

• In general, used to find and cure causes (NOT symptoms) of problems

153

Basic Cause Effect Diagram

Main Cause

Main Cause

Main Cause

Level 1 cause

Level 1 cause

Level 1 cause

Level 2 cause

Level 2 cause

Level 1 cause

Level 1 cause

Level 1 cause

Problem to beResolved(effect)

154

Cause & Effect Example

LATE PIZZADELIVERYFRIDAY & SATURDAY

MANPOWERMETHODS

MATERIALSMACHINES

Drivers lost

Chef late

Lack ofingredients

Smallovens

Largeordersnafus

Badcars

Poordispatching

155

Project Management

Chapter 17

156

Project Management

Project Vs. Process

A good project manager

Quality Money

Time

157

Project Life Cycles and Their Effects

Conceptualization Planning Execution Termination

Uncertainty

Client Interest

Project Stake

Creativity

Resources

158

Work Breakdown StructureLevels of detail

Project

Major tasks

Subtasks

Activities

159

Scheduling in Gantt Format

160

Arc

Node

Activity

Critical Path

Dummy activity

AOA

AON

PERT/CPM Format

161

BT Corp. would like to determine ES, EF, LS, LF and slack for each activity. The total project completion time and the critical path should also be determined. Activity times and predecessors are:

Act Pred Time Act Pred Time

A -- 6 E B 4B -- 7 F B 6C A 3 G C, E 10D A 2 H D, F 7

162

Project Scheduling

• Activity starting & ending times– ES rule– EF rule– LS rule– LF rule

• Total & Free Slack

163

Probabilistic Pert

• 3 Time Estimates– Optimistic– Pessimistic– Most likely

• Mean• Standard deviation & variance• Z-score

164

Probabilistic PERT

Given the sequence of activities with optimistic, most likely, and pessimistic times, determine the expected completion time of the project and the variance.

What is the probability the project can be completed in 24 days or less?

What deadline yields a 90% probability of finishing on time?

4, 7, 10 6, 9, 13 7, 10, 13

165

The estimated times and immediate predecessors for the activities in a project at Caesar Douglas’s retinal scanning company are given in the table below. Assume that the activity times are independent.

Activity Pred a m b

A -- 9 10 11

B -- 4 10 16

C A 9 10 11

D B 5 8 11

1. Calculate the expected time and variance for each activity2. What is the expected completion time of each path?3. What is the variance of each path?4. If the time to complete AC is normally distributed, what is the

probability it will be finished in 22 weeks or less?5. If the time to complete BD is normally distributed, what is the

probability it will be finished in 22 weeks or less?6. Why is the probability that the critical path will be finished in 22

weeks not necessarily the probability that the project will be finished in 22 weeks?

166

Project Crashing

• Crashing a project involves paying more money to complete a project more quickly.

• Since the critical path determines the length of a project, it makes sense to reduce the length of activities on the critical path.

• CP activities should be reduced until the project is reduced to the desired length or you are paying more per day than you save.

• If you have multiple CPs, they should be shortened simultaneously.

167

Crashing (Time/Cost Tradeoffs)

Given the project specifications shown, how fast can the project be finished and how much will it cost?

Act. Time Minimum $Cost/day Predecessor

A 10 6 50 --

B 6 3 30 --

C 2 2 -- B

D 4 2 40 C

E 6 4 80 A

F 8 5 100 D, E

168

Determine the cheapest completion time and cost for this project if it has a fixed cost of $1000 per day.

ACTIVITY REQ TIME MIN TIME $/DAY

1 -- 10 5 800

2 1 20 15 650

3 2 25 15 400

4 2 20 15 700

5 3,4 15 13 900

6 5 15 10 1050

7 1 60 45 300

8 6,7 5 4 850