Professional Documents
Culture Documents
OM-3-6 New
OM-3-6 New
Of The Operations
System
Products and Services
design
Audi’s accelerator
Pedal - Germany
A Perceptual Map
of Breakfast
Cereals
b) Marketing
• What is the potential size of the market for the proposed new product?
• How much effort will be needed to develop a market for the product and
• What is the long-term product potential? through customer surveys, interviews, focus
groups,
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or market tests JJU,CBE,MGMT ASHENAFI D. (MA) 15
c) Finance
• What is the proposed new product’s financial potential, cost, and
return on investment?
• Is the risk or capital investment excessive?
• Unfortunately, there is no magic formula for deciding whether or not
to pursue a particular product idea.
• Managerial skill and experience, however, are key.
• Fortunately, we have decision-making tools to help us evaluate new
product ideas.
• A popular one is break-even analysis – computing the breakeven
point.
• An assessment can then be made as to how difficult or easy it will be
to cover costs and make a profit.
• A product with a break-even quantity that is hard to attain might not
be a good product choice to pursue
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Cont’d….
BEQ=
Fixed cos t
BEQ =
selling price / unit var iable cos t / unit
Reliability: The ability of a product, part, or system to perform its intended function under a
prescribed set of conditions for specified period of time.
• It is used by customers:
to compare alternatives,
impact on repeat sales,
reflection on producer’s image and
legal implication if it is too low
The three dimensions of reliability:
Reliability as probability – if an item has a reliability of say 0.9, this means the probability
that it will function as intended is 90% and that the probability it will fails is 10%.
Failure: Situation in which a product, part, or system does not perform as intended.
• This includes instances in which the item :
i. does not function at all,
ii. it is substandard or
• do not function as intended. E.g.. smoke alert may not detect the smoke at all or an alarm is
too low to give warning or might sound an alarm even though no smoke is present.
Normal operating conditions: The set of conditions under which an item’s reliability is
specified. Failure to regard these conditions leads to premature failure of parts or system
completely.
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Improving reliability
t
y
Cos
• Productivity
• Quality
Productivity
• Products in the introductory stage are not well defined and neither is their
market. Often all the “bugs” have not been worked out and customers are
uncertain about the product.
• In the growth stage, the product takes hold and both product and market
continue to be refined.
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Cont’d….
• The third stage is that of maturity, where demand levels off and there are
usually no design changes: the product is predictable at this stage and so is
its market. Many products, such as toothpaste, can stay in this stage for
many years.
• Finally, there is a decline in demand, because of new technology, better
product design, or market saturation.
• The first two stages of the life cycle can collectively be called the early
stages of the product life cycle because the product is still being improved
and refined, and the market is still in the process of being developed.
• The last two stages of the life cycle can be referred to as the later stages
because here the product and market are both well defined. Understanding
the stages of the product life cycle is important for product design
purposes such as :
knowing at which stage to focus on design changes.
when considering a new product, the expected length of the life cycle is
critical in order to estimate future profitability relative to the initial
investment
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9. Design for Disassembly
Design for disassembly- is the ease with which product’s component parts can be
dismantled or disassembled
Product Documents
Engineering drawing
Shows dimensions, tolerances, and materials
Shows codes for Group Technology
Bill of Material
Lists components, quantities and where used
Shows product structure
Product Documents
Engineering drawing
Shows dimensions, tolerances, and materials
Shows codes for Group Technology
Bill of Material
Lists components, quantities and where used
Shows product structure
Operation
Inspection
Transportation
Delay
Storage
•What is:
i. the system capacity?
ii. The system efficiency?
Solution
a) system capacity = capacity of most limited component in the line
= 360 units/day
b) system efficiency = SE= actual output/ system capacity
= 306/360
= 85%
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• It is quite common for managers to focus exclusively on efficiency, but in most
instances it may be misleading.
• This happens when effective capacity is low compared to design capacity. In
those cases, high efficiency could seem to indicate effective use of resources
when that is not the case.
• The following example will illustrate this point.
Design capacity = 80 trucks/ day
Effective capacity = 40 trucks /day
Actual out put = 36 units/ day
= 90 %
= 45 %
Thus, compared to the effective capacity of 40 per units, 36 units per day looks
pretty good. However, compared to the design capacity of 80 units per day, 36 units
per day is much less impressive although probably more meaningful.
• Note: Because effective capacity acts as a lid on actual output, the real key to
improving capacity utilization is to increase effective capacity.
Facilities Process
Design, Location, Layout, Quantity Capabilities
Environment Quality capacities
Product/service Human factors
Design Job content, Job design
Product/service mix Motivation, Compensation
Operational Absenteeism, turnover, learning rates,
Scheduling training
Materials mgt External factors
Quality assurance Product standards
Maintenance policies Safety regulations
Equipment breakdowns Unions
(Read Stevenson for detail) Pollution control standards
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Economies of Scale
as plant gets larger and volume increases, the average cost per unit of out
put drops.
This is partially due to operating and capital cost declines, because a piece
of equipment with twice the capacity of another piece typically does not
cost twice as much to purchase or operate.
production or operating costs do not increase linearly with output
levels.
Plants also gain efficiencies when they become large enough to fully utilize
dedicated resources for tasks such as material handling, computer
equipment, and administrative support personnel.
• fixed costs can be spread over a larger number of units
• quantity discounts are available for material purchases
• operating efficiency increases as workers gain experience
An important measure is:
Best operating level is the volume of output at which the average unit cost is
minimum.
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e.g. Best Operating Level for a Hotel
• As plants produce more products, they gain experience in the best production
methods, which reduce their costs of production in a predictable manner.
• Every time a plant’s cumulative production doubles, its production costs decline by a
specific percentage depending on the nature of the business.
Cost/time per repetition
Many issues must be considered when adding capacity. The important ones
are maintaining system balance, frequency of capacity additions, and the use
of external capacity.
1. Maintaining System Balance: In a perfectly balanced plant, the output of
stage 1 provides the exact input requirement for stage 2. Stage 2’s output
provides the exact input requirement for stage 3 and so on. In practice,
however, achieving such a “perfect” design is usually both impossible and
undesirable.
• One reason is that the best operating levels for each stage generally differ.
• Another reason is that variability in product demand and the processes
themselves generally lead to imbalance except in automated production lines,
which, in essence, are just one big machine.
Ways of dealing with imbalances:
i) to add capacity to those stages that are the bottlenecks(a stage that limits
the capacity of the process). This can be done by temporary measures
such as scheduling overtime, leasing equipment, or going outside the
system and purchasing additional capacity through subcontracting.
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ii) use of buffer inventories in front of the bottleneck stage to ensure that it always
has something to work on.
Buffer- a storage area b/n stages where the output of a stage is placed prior to
being used in the downstream stage.
iii) duplicating the facilities of one department on which another is dependent.
2. Frequency of Capacity Additions:
There are two types of costs to consider when adding capacity: the cost of
upgrading too frequently and that of upgrading too infrequently.
Upgrading capacity too frequently is expensive. Reasons:
a) there are direct costs, such as removing and replacing old equipment and
training employees on the new equipment.
b)the new equipment must be purchased, often for considerably more than the
selling price of the old.
c) there is the opportunity cost of idling the plant or service site during the
changeover period.
Conversely, upgrading capacity too infrequently is also expensive.
Infrequent expansion means that capacity is purchased in larger chunks. Any
excess capacity that is purchased must be carried as overhead until it is utilized.
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3. External Sources of Capacity:
• In some cases, it may be less expensive to not add capacity at all, but rather
to use some existing external source of capacity.
• Two common strategies used by organizations are subcontracting and
sharing capacity.
• An example of subcontracting is ETV sub contracts small micro finances for
bill collection.
• An example of sharing capacity is two domestic airlines flying different
routes with different seasonal demands exchanging aircraft (suitably
repainted) when one’s routes are heavily used and the others are not.
Capacity Expansion Strategy
• Capacity decisions encompass more than expansion:
• they can also include the closing or downsizing of facilities, the transfer of
existing facilities, and the creation of brand new facilities or prototype
systems.
• Generally speaking, changing levels of demand or a need to become more
competitive motivates all these decisions.
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Based on industry factors and competitive strategy, a company will lean
towards one of the following strategies:
Year
1 2 3 4 5
Bottles 135 185 245 297 348
Plastic bags 300 600 900 1.050 1,180
Bottle Operation
0.3 0.41 0.54 0.66 0.77
Percent capacity utilized 30 41 54 66 77
Machine requirement 0.9 1.23 1.63 1.98 2.32
Labor requirement 1.80 2.47 3.27 3.96 4.64
A positive capacity cushion exists for all five years since the available
capacity for both operations is always in excess of the expected demand.
The XYZ Company can now begin to develop the intermediate range or
aggregate plan for the two production lines, which we discuss later on.
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Chapter 5:
PLANT/FACILITY
LOCATION
WEIGHTED SCORES
Site 1 Site 2 Site 3
24.00 19.50 27.00
20.00 18.20 15.00 Site 3 has the
9.00 14.25 10.80 highest factor
rating
11.25 12.00 12.00
6.50 9.00 9.50
4.25 4.60 3.25
2.50 3.25 4.50
77.50 80.80 82.05
y n n
xiWi yiWi
2 (x2, y2), W2 i=1 i=1
y2 x= n y= n
Wi Wi
1 (x1, y1), W1 i=1 i=1
y1
where,
x, y = coordinates of
3 (x3, y3), W3 new facility at center of
y3 gravity
xi, yi = coordinates of
existing facility i
Wi = annual weight
shipped from facility i
x1 x2 x3 x
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Center-of-Gravity Technique: Example
y A B C D
700 x 200 100 250 500
C y 200 500 600 300
600 (135)
B Wt 75 105 135 60
500 (105)
Miles
400
D
300
A (60)
200 (75)
100
n
xW
i i
i=1 (200)(75) + (100)(105) + (250)(135) + (500)(60)
x= = = 238
n 75 + 105 + 135 + 60
W
i
i=1
n
yW
i i
i=1 (200)(75) + (500)(105) + (600)(135) + (300)(60)
y= n
= = 444
75 + 105 + 135 + 60
W
i
i=1
y A B C D
700 x 200 100 250 500
C y 200 500 600 300
600 (135)
B Wt 75 105 135 60
500 (105)
Center of gravity (238, 444)
Miles
400
D
300
A (60)
200 (75)
100
Fixed-position layouts- are used for projects in which product cannot be moved
• A fixed-position layout is one in which the project remains stationary and
require workers and equipment to come to one work area.
Examples of this of project are a ship, a highway, a bridge, a house, and a
boring oil well.
• The techniques for addressing the fixed-position layout are not well-developed.
• The fixed-position layout is complicated by three factors:
Space is limited at virtually all sites
At different stages in the construction process different materials are needed
therefore, different items become critical as the project develops. This adds
the dynamics of scheduling to the layout problem.
The volume of materials needed is dynamic. For example, the rate of use of
steel panels for the hull of a ship changes as the project progresses.
Because the fixed-position layout is so difficult to solve well at the site, an
alternative strategy is to complete as much of the project as possible off-site.
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Typical fixed position layout
Women’s
lingerie Shoes Housewares
M M D D D D
L L
G G G P
L L
G G G P
L L
Grinding Painting Department
Department
L L
Receiving and A A A
Shipping Assembly
In
Out
480
C = 120
= 4 minutes
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Flow Time vs. Cycle Time
1 2 3
0.2 C = 0.4
B N = 2.5
0.1 A D 0.3
C
0.4
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Line Balancing: Example (cont.)
A, B C D C = 0.4
0.3 0.4 0.3 N = 2.5
minute minute minute
• Cellular layouts
• group dissimilar machines into work centers (called cells) that process
families of parts with similar shapes or processing requirements
1. Identify families of parts with similar flow paths
2. Group machines into cells based on part families
3. Arrange cells so material movement is minimized
4. Locate large shared machines at point of use
• Flexible manufacturing system
• automated machining and material handling systems which can produce
an
enormous variety of items
• Mixed-model assembly line
• processes more than one product model in one line
1. A manger has conducted an analysis of several sites being considered for a new
office complex. The data (100 points maximum) are given in the following table.
Required: If a manger weights the factors accordingly, how would the locations
compared?
Factors Weight A B C
6. Taxes 0.09 50 50 40
7. Transpiration 0.06 60 70 80