P501: Managing Operations &

Supply Chain

Lecture – 5
 The 5 Performance Objectives

 Throughput rate

 Throughput time

 Work in process

 Utilization
  Job shop/Jobbing

 Batch

 Mass/Assembly/Repetitive

 Continuous

 Project
 Professional Services

 Service Shops

 Mass Services
ABC company manufactures customized bicycles. Whenever the
sales department receives an order, a member of the sales
department either rejects the order, and the process is finished, or
s/he accepts the order and informs the store and the engineering
department. The store immediately processes the part list of the
order and checks the availability of each part. For each part on the
list, if it is available, it is reserved. If it is unavailable, it is ordered.
In the meantime, engineering prepares everything for assembling
the bicycle. If the store has reserved or ordered every item of the
part list and the preparation has finished, engineering assembles
the bicycle. Afterwards, sales department ships the bicycle to the
customer and completes the process.
 Important for three basic reasons:

 Require substantial investments of money and effort

 Involve long-term commitments, which makes mistakes

difficult to overcome

 Have a significant impact on the cost and efficiency of

operations
  Inherent safety

 Length of flow

 Clarity of flow

 Staff conditions

 Management coordination

 Accessibility

 Use of space

 Long-term flexibility
 A high rate of output

 Low unit cost due to high volume

 Labor specialization

 Low material-handling cost per unit

 High utilization of labor and equipment

 The establishment of routing and scheduling in the initial

design of the system

 Routine accounting, purchasing, and inventory control

 Creates dull, repetitive jobs

 Maintenance and quality issue

 Inflexible system (volume of output or changes in design)

 Susceptible to shutdowns

 Expenses rise for maintenance

 Incentive plans tied to individual output becomes impractical

 Can handle a variety of processing requirements.

 Systems are not vulnerable to equipment failures.

 Equipment is often less costly, easier and less costly to

maintain.

 It is possible to use individual incentive systems.

 In-process inventory costs can be high if batch processing is

used

 Routing and scheduling pose continual challenges.

 Equipment utilization rates are low.

 Material handling is slow and inefficient, and more costly per

unit
 Job complexities often reduce the span of supervision and

result in higher supervisory costs.

 Special attention necessary for each product or customer

 Low volumes result in higher unit costs

 Accounting, inventory control, and purchasing are much more

involved than with product layouts.