Efficiency and utilization:

1. Efficiency:

Measure of how well a facility or machine is performing when used.

2. Utilizaton:

Measure of actual capacity usage of a facility, work center, or machine.

3. Example:
Design capacity = 50 trucks/day
Effective capacity = 40 trucks/day
Actual output = 36 units/day
Get the Efficiency & Utilization?
Sol.

Example:

A coffee shop makes 150 coffees per hour. How efficent is the
operation as labor input produces 200 coffees per hour?

Efficiency (%) = (Output/Input)*100%

= (150/200)*100%
= 75%
Example:

A company makes 7040 Units Produced and the costs are

reported as follows: Cost of labor of $1,000, Cost of
materialsis$520and Cost of overhead is $2000.

What is the multifactor productivity?

Example:
If productivity increased from 80 to 84, what is the productivity growth rate?
Sol.

Example:
Determine the productivity for the following case:
a) Four workers installed 720 square yards of carpeting in eight hours
b) A machine produced 68 usable pieces in two hours

Sol.

Example:
A company that processes fruits and vegetables is able to produce 400 cases
of canned peaches in one-half hour with four workers.
What is labor productivity?
Sol.

time-series models:
1. Naive Approach:

Assumes demand in next period is the same as demand in most recent

period
If March sales were 73, then April sales will be 73
Sometimes cost effective and efficient
Can be good starting point.
For data with trend, the forecast equal to the last value plus or
minus the difference between the last two points of the series

2. Moving Average Method:

MA is a series of arithmetic means

Used if little or no trend
Used often for smoothing
Provides overall impression of data over time

Example :

3. Weighted Moving Average:

Used when some trend might be present

Older data usually less important
Weights based on experience and intuition

Example:

4. Exponential Smoothing:

Form of weighted moving average

Weights decline exponentially
Most recent data weighted most
Requires smoothing constant ()
Ranges from 0 to 1
Subjectively chosen
Involves little record keeping of past data
New forecast = Last periods forecast + (Last periods actual
demand Last periods forecast).

Example:
Predicted demand (t-1) = 131
Actual demand (t-1) = 142
Smoothing constant = .25
Sol.
New forecast (t) = 131 + 0.25(142 131)
Example:
Predicted demand = 142 Ford Mustangs
Actual demand = 153
Smoothing constant = .20
Sol.
New forecast= 142 + .2(153 - 142)
= 142 + 2.2
= 144.2 ~ 144 cars

Calculating Processing Requirements :

Example:

If the department works one eight hour shift, 250 days a year, calculate
the number of machines that would be needed to handle the required
volume.
Sol.
5800/(250)(8) = 2.9 (3 machines are needed)

Cost-volume Relatonshps

A. BREAK-EVEN POINT (BEP):

The volume of output at which total cost and total revenue are equal.

EOQ:

Where
Q = quantity to be ordered
H= holding cost per unit (carrying cost per unit)
D = annual demand
S = ordering (setup cost) per order

Minimum Total Cost:

Example
A local distributor for a national tire company expects to sell approximately
9600 steel-belted radial tires of a certain size and tread design next year.
Annual carrying cost is $16 per tire, and ordering cost is $75. the distributor
operates 288 days a year.
What is the EOQ?
How many times per year does the store reorder?
What is the length of an order cycle?
What is the total annual cost if the EOQ is ordered?
Sol.
D = 9600 tires per year
H = $16 per unit per year
S = $75 per order

b. Number of order per year:

D/Q0= 9600/300 = 32 order
c. Length of order cycle:
Q0/ D = 300/9600 =1/32 of a year ,

which is 1/32 (288 days a year) = 9 workdays

d. Tc = Carrying cost + Ordering cost
= (Q0/2) H + (D/Q0) S
= (300/2) 16 + (9600/300) 75
= 2400 + 2400
= $4800

Economic Run Size:

Where:
P = production or delivery rate
U = usage rate
The minimum total cost is determined as follows:

Example
A toy manufacturer uses 48000 rubber wheels per year for its popular dump
truck series. The firm makes its own wheels, which it can produce at rate of
800 per day. The toy trucks are assembled uniformly over the entire year.
Carrying cost is $1 per wheel a year. Setup cost for a production run of
wheels is $45. the firm operates 240 days per year.
Determine the
a.Optimal run size

b.Minimum total annual cost for carrying and setup

c.Run time
SOL.
D = 48000 wheels per year
S = $45
H = $1 per wheel per year
P = 800 wheels per day
U = 48000 wheels per 240 days, or 200 wheels per day

The Network Diagram

Network (precedence) diagram
Activity-on-arrow (AOA)
Activity-on-node (AON)
Activities
Events

Path:
Sequence of activities that leads from the starting node to the finishing node
Critical path
The longest path; determines expected project duration
Critical activities
Activities on the critical path
Slack
Allowable slippage for path; the difference the length of path and the length
of critical path

Network Conventions:

Time Estimates
a) Deterministic
Time estimates that are fairly certain
b) Probabilistic
Estimates of times that allow for variation

Probabilistic Time Estimates

a) Optimistic time
Time required under optimal conditions
b) Pessimistic time
Time required under worst conditions
c) Most likely time
Most probable length of time that will be required

d) Expected Time