2. Managing Operations c. Process Choice, Capacity considerations

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2. Managing Operationsc. Process Choice,
Capacity considerations work measurement

• Session Overview
• Process Choice
• Work measurement
• Capacity considerations

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A. Process Choice
As we look at improving a process, we also look
at a concept called process choice Making a
choice between different types of processes that
might be applied to the process we are looking
at...
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Process Design3 types of processes

• Job Shop
• many inputs/outputs
• specialized products
• Batch
• assembly line
• many output options
• Continuous Process
• few inputs
• low variety

Lets look at this in a bakery. Video
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The choice of process type is going to
depend on those elements articulated in the
video.
Paramount among these elements are demand
characteristics and cost, contribution
considerations.
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Demand relates to the expected level of
demand and its expected variability
The choice of process also relates to cost vs.
revenue considerations.
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Using break-even analysis
Revenue - cost profit or loss
Revenue
Variable costs

Total costs
Fixed costs dont vary with levels of production
Lots
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Level of production
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Using break-even analysis
Revenue - cost profit or loss
Revenue
Profit is indicated in this area

Variable cost
Total costs
Loss is indicated in this area.
Fixed costs dont vary with levels of production
Lots
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Level of production
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Using break-even analysis
a. Break-even in units Total Fixed
costs Price - Variable cost per unit a.
50,000/ 20- 12 50,000 / 8 6,250 units b.
70,000/ 20-10 70,000 / 10 7,000 units
So, which do I choose, alt A or B?
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Need to consider ranges of best operations for
each process type and select the one that
provides the higher profit.
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Note how this choice goes back to....

• the decision of what sort of process design and
• the importance of the forecast
• variability in expected demand
• and risk factor

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In practice 7-1 Process Choice....
Bogus Foods is trying to decide on the process it
should adopt to help it product a processed
meat-like substance. Demand per day is 1500 lbs.
The revenue per pound is 2.50. With continuous
process, fixed cost 800/day , variable cost
.50 /lb. With batch process, fixed
cost400/day, variable cost 1.00 /lb. With job
shop, fixed costs200 per day with a marginal
contribution of 1.00. 1. Based maximizing
profits, which process should be used. 2. Show
with supporting calculations to demonstrate the
range when each process would be better
than the other. 3. What other factors might be
relevant?
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B. Work Measurement

• Lets start with an example...
• You are starting a bike repair shop
• What factors are important in determining who
  does what?

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What factors are important in deciding who does
what?
Equipment technology employed
work flow
worker
work layout planning
This means the same as demand and
demand characteristics (variability in demand and
variances in demand flows).
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Human Dimensions of Work Measure

• people work in bursts not steady pace
• mental fatigue is as important as physical
• and worker motivation
• skills and physical limitations

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Before linking these components, and slicing up
the tasks that need to be done, we have
to consider two major factors. They are..
Process Capacity
Demand the nature of demand
The ability to meet that demand
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We now move to measure the amount of volume that
a particular job can handle.
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Work Measurement

• Section overview
• Why do it?
• How to do it?
• Once we have the numbers, is that our answer?
• Of course not!

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What is work measurement?
It is the systematic measurement of what on
individual can do in that job looking both over
the volume and quality of performance.
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Work Measurement Why do it?

• for the organization
• work flow and force planning
• job design, how many activities to put together
• infrastructure planning
• for the individual
• clarifies role
• clarifies expected performance levels

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The organization needs to match work force
facilities with demand.....
Now Serving
1
89
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How to measure a task
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Is that all there is to it?

• Of course not.
• But it is a start
• Must consider
• work flow
• the person
• the work layout plan
• the technology equipment employed

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C. Capacity Considerations Once we have some
performance measures - how to use it....

• for example....
• job ele A11.4 min
• job ele B 2.31 min
• job ele C 1.65 min
• total job 15.36 min
• if demand 15K let pr day, how many staff do we
  need?

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Number of employees needed

• if output/emp 8hr x 60min/15.36 min/let
• 31.25 let/person per day
• if demand 15000 letters per day
• then 15,000/31.25 480 employees
• Or is it?
• This is really the unadjusted total. You must
  also consider......

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Other factors

• production process flow
• ability or desire to handle inventory
• time from production to delivery
• equipment capacity for example shrink wrap.

• set up time
• break down time
• human dimensions
• burst not even flow
• mental and physical condition
• attitude and motivation

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In-practice 7-2 3
Groups 1-5
Do the Paradise Guest ranch case. This is a
unstructured problem, hence you will have to
develop a solution.
Groups 6-10
Pick a job. How would you determine how many
people you would need for the task? Estimate the
consequences of not determining correctly? How
might you cost some of this out?
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To me, the initial measures adjusted provide a
baseline

• Where we are at.
• Now we work to make it
• faster
• more reliable
• less effort...........

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We also consider capacity constraints ....thru
parametric programming and sensitivity
analysis
Both of these are similar in that you change a
variable in the process and sees what that does
to the capacity of the rest of the system. For
example......
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flow rate tolerance of delays flow
variability inventory? ease of adjusting the
process
Here is a complex process
B
4 6 2
5 6 4
E
A
C
5
H
G
3
4
D
F
7 slack on A-D-F-G
Number indicates capacity per hour of this
process.
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Summary Capacity considerations work measure.

• 4 factors influence productivity
• Work measure helps for job design planning.
• worker expectations clarified with work
  standards
• Parametric programming sensitivity analysis can
  aid matching demand with capacity