Chapter 1:

Units produced
Productivity = Input used

Units produced
Labor Productivity = Labor−hours used (preferrably in $/hour)

One resource input → single-factor productivity

Multiple resource inputs → multi-factor productivity
Output
Multi − Factor Productivity = Labor+Material+Energy+Capital+Miscellaneous

Multi − Factor Productivity also known as total factor productivity

Output and inputs are often expressed in dollars

Chapter 7:
Four Process Strategies:
- Process Focus:
o Low volume, High variety
o Facilities are organized around specific activities or processes
o General purpose equipment and skilled personnel
o High degree of product flexibility
o Typically high costs and low equipment utilization
o Low fixed costs and high variable costs
o Product flows may vary considerably making planning and scheduling a
challenge
- Repetitive Focus:
o Moderate volume, Moderate variety
o Facilities often organized as assembly lines
o Characterized by modules with parts and assemblies made previously
o Modules may be combined for many output options
o Less flexibility than process-focused facilities but more efficient
o Moderate fixed and high costs
- Product Focus:
o High volume, Low variety
o Facilities are organized by product
o Long, continuous production runs enable efficient processes
o High fixed cost but low variable cost
o Generally less skilled labor
o Output variations in size, shape, and packaging
- Mass Customization Focus:
o High volume, High variety
o Combines the flexibility of a process focus with the efficiency of a product focus
o Imaginative and fast product design
o Rapid process design
o Tightly controlled inventory management
o Tight schedules
o Responsive supply chain partners
The objective of a process strategy is to build a production process that meets customer
requirements and product specifications within cost and other managerial constraint
- Flow Charts - Shows the movement of materials, provide a view of the big picture
- Time-Function Mapping - Shows flows and time frame, it adds rigor and a time element

- Value-Stream Mapping - Shows flows and time and value added beyond the immediate
organization, it extends to customers and suppliers

- Process Charts - Uses symbols to show key activities (details)

- Service Blueprinting
o Focuses on the customer and provider interaction
o Defines three levels of interaction
o Each level has different management issues
o Identifies potential failure points
o Level 1 (customer level), Level 2 (customer + provider level), Level 3 (provider
level)
 Chapter 7s:
- Capacity: The throughput, or the number of units a facility can hold, receive, store, or
produce in a period of time
- Design capacity is the maximum theoretical output of a system.
- Effective capacity is the capacity a firm expects to achieve given current operating
constraints. Often lower than design capacity
- Utilization: percent of design capacity achieved
Actual Output
Utilization = Design Capacity

- Efficiency: the percent of effective capacity achieved

Actual Output
Efficiency = Effective Capacity

Bottleneck Analysis:
A bottleneck is a limiting factor or constraint
o Process time of a station: the time to produce a unit at that single workstation
o Process time of a system: the bottleneck (we could have more than one in a
system), it is the time of the longest process in the system …
The system process time is the process time of the bottleneck after dividing by
the number of parallel identical operations
o Process cycle time (or throughput of the system): the time it takes for a product
to go through the production process with no waiting. It is the total time through
the longest path in the system.
o The system capacity is the inverse of the system process time
Increasing the capacity of a non-bottleneck station is a mirage

Break-Even Analysis:
Objective is to find the point in dollars and units at which cost equals revenue
- Contribution C = P − V, where P is the selling price and V is the variable cost

F
- TR = TC → Px = Vx + F → x = BEPx = P−V
- Profit = TR − TC = (P − V)x − F
F
- BEP$ = BEPx x P = V
1−
P
 Multiproduct Case:
F
- BEP$ = V , where:
∑[(1− i ) x (wi )]
Pi

o w = percent each product is of total dollar sales

V
o (1 − i ) x wi : is called the weighted contribution margin
Pi

If TR > BEP$ → Positive Profit, and

Profit = (TR - BEP$) x total contribution (denominator of BEP$)