Class 3a

1
Operations Management Performance Modeling

• 1 Operations Strategy
• 2 Process Analysis
• Class 2a 2b Process Flow Analysis
• Class 3a Capacity Investment
• The Product Mix problem
• National Cranberry Coop.
• 3 Lean Operations
• 4 Supply Chain Management
• 5 Capacity Management in Services
• 6 Total Quality Management
• 7 Business Process Reengineering

2
Product Mix Decisions Kristen Cookies offers 2
products

• Sale Price of Chocolate Chip Cookies 5.00/dozen
• Cost of Materials 2.50/dozen
• Sale Price of Oatmeal Raisin Cookies 5.50/dozen
• Cost of Materials 2.40/dozen
• Maximum weekly demand of
• Chocolate Chip Cookies 100 dozen
• Maximum weekly demand of
• Oatmeal Raisin Cookies 50 dozen
• Total weekly operating expense 270

3
Product Mix Decisions
Total time available in week 20 hrs
4
Product Mix Decisions

• Margin per dozen Chocolate Chip cookies 2.50
• Margin per dozen Oatmeal Raisin cookies 3.10
• Margin per oven minute from Chocolate Chip
  cookies 2.50 / 10 0.250
• Margin per oven minute from Oatmeal Raisin
  cookies 3.10 / 15 0.207

5
LP for Optimal Product Mix Selection

• xcc Dozens of chocolate chip cookies sold.
• xor Dozens of oatmeal raisin cookies sold.
• Max 2.5 xcc 3.1 xor
• subject to
• 8 xcc 5 xor lt 1200
• 10 xcc 15 xor lt 1200
• 4 xcc 4 xor lt 1200
• xcc lt 100
• xor lt 50

Technology Constraints
Market Constraints
6
National Cranberry Cooperative
7
National Cranberry Cooperative
x bbls/hr
Truck arrivals
8
Class 3a Learning Objectives

• Effect of product mix decisions on process
  capacity
• marginal contribution per unit of bottleneck
  capacity used
• Process flow charts with multiple products
• Backups may not occur in front of a bottleneck
• Bottleneck may shift on adding capacity
• diminishing returns to capacity investment