Professional Documents
Culture Documents
Operations
Management
Graduate School
NOTRE DAME
UNIVERSITY
Cotabato City
Topics
Introduction
Productivity
Forecasting
Product and Service Design
Capacity Planning
Decision Theory
Process Selection and Facility Layout
Linear Programming
Operations Management
The management of systems or processes
that create goods and/or provide services.
Operation Manager
The key figure in the system
The primary function is to guide the system by decision making.
Certain decisions affect the design of the system, and others affect
the operation of the system.
th
r ow
G
du c t i on
Intro
Robust Design
Human Factors
Production Requirements
Component Commonality
Service Design
refers to an act, something that is done to or
for customer
Includes facilities, processes, and skills
needed to provide the service
Created and delivered simultaneously.
Service Design
Begins with the choice of strategy, which
determines the nature and focus of he
service, and the target market.
Capacity
issues are important for all organizations,
and at all levels of an organization
refers to an upper limit or ceiling on the
load that an operating unit can handle
the operating unit might be a plant,
department, machine, store, or worker
important information for planning
Importance of Capacity
Capacity decisions have a real impact on the
ability of the organization to meet future
demands for products and services
Capacity decisions affect operating costs
Capacity is usually a major determinant of initial
cost
Capacity decisions often involve long-term
commitment of resources
Capacity decisions can affect competitiveness
Capacity affects the ease of management
At BEP:
Profit = zero (TR=TC)
USP*Q = FC + v *Q
Q = FC / (USP - v)
A 9600 10 1 to 300 40
B 10640 14 1 to 500 42
C 15600 16 1 to 750 46
Given the data above, answer the following:
a. Compute for the BEP in units of each machine.
b. At what number of units will the manager be able to realize a profit of
P2,000.00 if he purchased Machine A?
c. If the annual demand for the company would be from 480 to 530 units,
which machine is more favorable for the manager to purchase? Why?
d. Supposing that Machines B and C can produce more than its stated
range of output; at what number of units will the two machines have the
same profit?
future condition
Evaluate alternatives according to some decision
criterion
Decision environments
Certainty relevant parameters are known
Uncertainty it is impossible to assess the
likelihood of various possible future events
Risk - certain parameters have probabilistic
outcomes
Example
Decision environments
Uncertainty it is impossible to assess the
likelihood of various possible future events
Maximin
Maximax
Laplace
Minimax Regret
Decision Environments
Decision environments
Risk - certain parameters have probabilistic
outcomes
EMV Expected Monetary Value
Decision Tree
EVPI
Decision Environments
Small Facility 10 10 10
Medium Facility 7 12 14
Seatwork
Decision Tree
Is a schematic representation of the
alternatives available to a decision maker
and their possible consequences.
Decision Tree
Build Small:
Low Demand
(0.4)
$40 Low = (0.4)(40)
$40
Do Nothing High = (o.6)(55)
Build Small
Overtime
High Demand $40
(0.6)
Expand
$55
Do Nothing $10
Low Demand Build Large:
Build Large
(0.4)
Low = (0.4)(50)
Reduce Prices
$50 High = (o.6)(70)
High Demand
(0.6) $70
Steps:
Construct a graph
Use algebra to determine the range of probabilities
Process Types:
Job Shop low volume high variety goods or
services
Batch moderate volume of goods or services
Line Balancing
Cycle time maximum time allowed at each
workstation
Minimum cycle time longest task time
Maximum cycle time - equal to the sum of the
task times
Task time
Output Capacity = operating time/CT
Desired output rate
Number of Workstations
Line Balancing
Example: time in Task Time (min)
minutes a 0.1
a b b 1
0.1 1.0 c 0.7
d 0.5
c d e e 0.2
0.7 0.5 0.2 Total (t) 2.5
To Solve
Time Assign
WS Eligible Will Fit Idle Time
Remaining Task
1 1.0 a, c a, c a (0.1)
0.9 b, c b, c c (0.7)
0.2 0.2
2 1.0 b b b (1.0)
0.0 0
3 1.0 d d d (0.5)
0.5 e e e (0.2)
0.3 0.3
Total 0.5
WS 1 WS 2 WS 3
a b
c d e
In order to develop a suitable model of the problem, the manager has met with
design and manufacturing personnel. As a result of those meetings, the manager
has obtained the following information:
Type 1 Type 2
Profit per unit P60 P50
Assembly time per unit 4 hours 10 hours
Inspection time per unit 2 hours 1 hour
Storage space per unit 3 cubic feet 3 cubic feet
The manager met with the firms marketing manager and learned that demand
for the microcomputers was such that whatever combination of these two types
of microcomputers is produced, all of the output can be sold.
To Solve
repetition.
The curve will never
reach zero.
Referred to as an
experience curve, a
progress function, or
an improvement
function.
Number of repetitions
3 10 * 3(ln0.8/ln2) =
7.0210
5 10 * 5(ln0.8/ln2) =
5.9564
6 10 * 6(ln0.8/ln2) =
5.6168
7 10 * 7(ln0.8/ln2) =
5.3449
a.72 percent
b.87 percent
c.95 percent
Demand Side
Branch 1 Customer 1
Supply Side
Branch 2 Customer 2
Branch 3 Customer 3
Use of the transportation model implies that certain assumptions are satisfied.
The major ones are:
1. The items to be shipped are homogeneous.
2. Shipping cost per unit is the same regardless of the number of units shipped.
3. There is only one route or mode of transportation being used between each
origin and each destination.
Location Decisions:
Factories Warehouses
Sample Problem: (Sources) (Destinations)
Shipping Requirements
Capacities Routes
F T C1 C2 C3
Cost of
B1 $5 $4 $3 shipping 1
unit from a
B2 $8 $4 $3 branch to
customer
B3 $9 $7 $5
Sample Problem:
1. The first step is to develop a transportation table.
F T C1 C2 C3 Capacity
B1 $5 $4 $3 100
B2 $8 $4 $3 300
B3 $9 $7 $5 300
Requirement 300 200 200 700
2. Next is to use the northwest corner rule, that is to start at the upper left-hand cell.
a. Exhaust the supply (capacity) at each row before moving down to the next row.
b. Exhaust the demand (requirements) of each column before moving to the right to the
next column.
c. Check that all supply and demands are met.
3. Compute for the cost. ($4,200)
4. Evaluate to see if it is the optimal. Use either stepping-stone or MODI method.
Sample Problem:
4. .. In using the stepping-stone method, the process has two distinct parts:
Testing the current solution to determine if improvements are possible
Making changes to current solution in order to obtain an improved solution
Note: The number of occupied routes (or squares) must always be equal to one less than the sum
of the number of rows plus the number of columns. (r + c 1 = 5)
F T C1 C2 C3 Capacity
B1 100 $5 $4 $3 100
Sample Problem:
4. .. In using the stepping-stone method, the process has two distinct parts:
If a negative value is obtained, then, it is possible to improve the current solution and
decrease total shipping cost.
F T C1 C2 C3 Capacity
B1 100 $5 $4 $3 100
Sample Problem:
7. .. If a negative value is obtained, then, it is possible to improve the current
solution and decrease total shipping cost.
F T C1 C2 C3 Capacity
B1 100 $5 $4 $3 100
Sample Problem:
4. ..In using the MODI (modified distribution).
F T C1 C2 C3 Capacity
B1 100 $5 $4 $3 100
a. Compute the values for each row and column that are currently used.
B1 + C1 = 5 B2 + C2 = 4 B3 + C3 = 5
B2 + C1 = 8 B3 + C2 = 7
b. Set B1 = 0
c. Solve all the values
d. Compute the improvement index for each unused square by:
Improvement Index = Cost X Y; or
Iij = Cij Ri - Kj
e. Select the largest negative index and proceed using the stepping-stone method.
F T C1 C2 C3 Dummy Capacity
B1 250 $5 $4 $3 0 250
B2 50 $8 200 $4 50 $3 0 300
B3 $9 $7 150 $5 150 0 300
Requirement 300 200 200 150
Degeneracy in the problem. Degeneracy in the problem arises when the number of occupied
squares is less than the number of rows + column 1.
F T C1 C2 C3 Capacity
1 $8 $3 $7 500
2 $5 $10 $9 400
Requirement 400 600 350
1 10 14 10 210
2 12 17 20 140
3 11 11 12 150
Demand (Units/wk) 220 220 220
Quiz: Don Yale, president of Hardrock Concrete Company, has plants in three
locations and is currently working on three major construction projects, located at
different sites. The shipping cost per truckload of concrete, plant capacities and
project requirements are provided in the accompanying table.
Plant 2 $12 $5 $8 50
Plant 3 $9 $7 $6 30
Requirement 40 50 60