Operations Management - California State University, …€¦ · PPT file · Web...

Operations Management

Session 4: Kristine Cookies Case

Session 4 Operations Management 2

Last Class in Process Analysis Module

What did we learn?

Throughput rate Capacity

What’s the difference between capacity and throughput rate? Bottleneck resource Utilization rate Throughput time WIP Little’s Law:

Throughput Time = (Average) WIP / Throughput Rate


Today

Team Presentations

Lecture (Kristen’s cookies and additional comments on capacity management)


Team Presentations


What is it all about?What is it all about? Process CharacteristicsProcess Characteristics Capacity of a System

How much can you process in a week/day? Response Time

How quickly can you meet demand?


Process Flow

What are the inputs? What are the outputs? What are the activities?


Process Flow Chart

MIX LOADTRAY

SETOVEN BAKE COOL PACK PAY

DOUGH

YOU

MIXER

YOU

TRAY

ROOMIEOVENTRAY

OVENTRAY TRAY

ROOMIE

TRAY

ROOMIE

Operations Management 8

4 8 12 16 20 24 28 32 36

Acti

vity

Reso

urce

Time


4 8 12 16 20 24 28 32 36

MIXLOADSET OVENBAKECOOLPACK

PAY

26

Act i

vit y

Time

You

Oven

Tray

RM

Reso

urce


Kristine Cookies and Measures

What is the Throughput time? From the moment an order arrives till it is

finished, it takes 26 min. Can the throughput time be reduced?


4 8 12 16 20 24 28 32 36


PAY

26

Time

You

Oven

Tray

RM

Act i

vit y

Reso

urce


4 8 12 16 20 24 28 32 36


PAY

26

Act i

vit y

Time

You

Oven

Tray

RM

Reso

urce


Kristine Cookies and Measures

What is the capacity of the system? What is the slowest resource? (Assume that

the we have enough trays.)


4 8 12 16 20 24 28 32 36


PAY

26

Act i

vit y

Time

You

Oven

Tray

RM

10

Reso

urce


Bottleneck Analysis

It is clear that the bottleneck is the Oven It is the only resource that once we start

producing is not idle. It is the slowest resource: One dozen every 10

min.


Capacity It seems that if they have enough trays they

can produce a dozen of cookies every 10 min. 1.2 cookies per min. In 4 hours (240 min) you can finish 22 trays:

240 – 26 = 214 214 / 10 = 21.4 or 21 trays.

Given the bottleneck is the oven, to maximize capacity we must ensure that the oven runs continuously: once every 10 min.


Process Flow Chart

MIX LOADTRAY


DOUGH

TIME:

YOU

MIXER

YOU

TRAY

ROOMIEOVENTRAY

OVENTRAY TRAY

ROOMIE

TRAY

ROOMIE

YOU:

TOTAL TIME

ROOMIE:

MIXER:

OVEN:

TRAY:

6 2 1 9 5 2 1

6 + 2= 8 minutes

1 + 2 +1 = 4 minutes 1+ 9 = 10 minutes

6 minutes 19 minutes

Order Size (Dozens): 1 Dozens


Process Flow Chart

MIX LOADTRAY


DOUGH

TIME:

YOU

MIXER

YOU

TRAY

ROOMIEOVENTRAY

OVENTRAY TRAY

ROOMIE

TRAY

ROOMIE

YOU:

TOTAL TIME

ROOMIE:

MIXER:

OVEN:

TRAY:

6 2 1 9 5 2 1

6 + 2= 8 minutes

1 + 2 +1 = 4 minutes 1+ 9 = 10 minutes

6 minutes 19/2 minutes

Dozens / Day = 22

Order Size (Dozens): 1 Dozen


Process Flow Chart

MIX LOADTRAY


DOUGH

TIME:

YOU

MIXER

YOU

TRAY

ROOMIEOVENTRAY

OVENTRAY TRAY

ROOMIE

TRAY

ROOMIE

TOTAL TIME

6 4 2 18 10 4 1

Order Size: 2 Dozens

YOU:

ROOMIE:

MIXER:

OVEN:

TRAY:6 + 2= 8 minutes

1 + 2 +1 = 4 minutes 2+ 18 = 20 minutes

6 minutes


4 8 12 16 20 24 28 32 36

MIX

LOADSET OVENBAKE

COOL

PACK

PAY

26

Acti

vity

Time

You

Oven

Tray 1

RM

10

RM

Tray 2

Reso

urce


How many dozen per day?

60 minutes x 4 = 240 available minutes each evening

240-36=204 available minutes after the first two dozen is finished

204/20=10.2 two dozens finished in the remaining 204 minutes

2x11=22 dozens per day Does it make sense to give a discount for an order

size of two dozen?


Capacity Investment

Should we invest in a second Oven?


4 8 12 16 20 24 28 32 36

MIX

LOADSET OVENBAKE

COOL

PACK

PAY

26

Acti

vity

Time

You

Oven

Tray

RM

8

Two Ovens. Order Size: 1 dozen

RM

You

Reso

urce


Bottleneck Analysis

Who is the bottleneck now? The entrepreneur

Why did the bottleneck shift? Could the numbers (as opposed to the

graph) indicate were the bottleneck is? Now should we give a discount for ordering

2 dozen?


Bottleneck Analysis Your capacity:

1 dozen cookies / 8 minutes = 0.125 dozen cookies per minute (or 1 dozen cookies every 8 minutes)

Oven capacity: 1 dozen cookies / 10 minutes 2 ovens x .1 dozen cookies per minute = 0.2 dozen cookies

per minute (or 1 dozen cookies every 5 minutes) Mixer:

1/6=0.167 dozen cookies per minute Roommate

¼=0.25 dozen cookies per minuteWhat is the slowest resource?

Note: same calculation as made in the previous class in Burger’s example.


Dozens per day with two ovens

240-26=214 minutes for the first dozen 214/8=26.75 dozens in the next 214

minutes 27 dozen per day with two ovens.


Economic Analysis Having two ovens increase the capacity from

60/10=6 dozens per hour to 60/8=7.5 dozens per hour.

What is the value of the additional oven? (27-22)*300*Profit per dozen =

Additional profit = $1,500*profit per dozen

New capacity # of selling daysOld capacity


Economic Analysis Example

Suppose we sell each dozen cookies for $1.50 per dozen.

Assume there is no cost on your time. The profit per dozen is then $1.50-$0.60-

$0.10=$0.80. Therefore, the additional profit after being open 300

days is: 5x300x$0.80=$1200. We are willing to buy another oven if it costs less

than $1200 and we have enough demand so that it will be in use.


4 8 12 16 20 24 28 32 36

MIX

LOADSET OVENBAKE

COOL

PACK

PAY

26

Acti

vity

Time

You

Oven

Tray

Two OvensOrder Size: 2 Dozens

RM

You

Reso

urce


Process Flow Chart

MIX LOADTRAY


DOUGH

TIME:

YOU

MIXER

YOU

TRAY

ROOMIEOVENTRAY

OVENTRAY TRAY

ROOMIE

TRAY

ROOMIE

YOU: 6+4 = 10

TOTAL TIME

ROOMIE:

MIXER:

OVEN: (18 +2) /2 = 10

TRAY:

6 4 2 18 10 4 2

OVENS = 2 and Order size =2 Dozen

Dozens / Day = 44 doz / day


Summary

Tools & Techniques Identification of Bottleneck System Capacity Throughput Time

Concepts Bottleneck & Capacity depend of product mix In high variety systems bottlenecks shift

Operations Management - California State University, …€¦ · PPT file · Web...

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