# S7 PowerPoint presentation to accompany Heizer in addition to Render Operations Management,

## S7 PowerPoint presentation to accompany Heizer in addition to Render Operations Management,

This Particular University is Related to this Particular Journal

Outline  Continued Reducing Risk with Incremental Changes Applying Expected Monetary Value to Capacity Decisions Applying Investment Analysis to Strategy-Driven Investments Investment, Variable Cost, in addition to Cash Flow Net Present Value Learning Objectives When you complete this supplement, you should be able to: Define capacity Determine design capacity, effective capacity, in addition to utilization Per as long as m bottleneck analysis Compute break-even analysis Learning Objectives When you complete this supplement, you should be able to: Determine the expected monetary value of a capacity decision Compute net present value

Process Strategies The objective of a process strategy is to build a production process that meets customer requirements in addition to product specifications within cost in addition to other managerial constraints Capacity The throughput, or the number of units a facility can hold, receive, store, or produce in a period of time Determines fixed costs Determines if dem in addition to will be satisfied Three time horizons Planning Over a Time Horizon Figure S7.1

Design in addition to Effective Capacity Design capacity is the maximum theoretical output of a system Normally expressed as a rate Effective capacity is the capacity a firm expects to achieve given current operating constraints Often lower than design capacity Utilization in addition to Efficiency Utilization is the percent of design capacity achieved Efficiency is the percent of effective capacity achieved Utilization = Actual output/Design capacity Efficiency = Actual output/Effective capacity Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4%

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Efficiency = 148,000/175,000 = 84.6% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Design capacity = (7 x 3 x 8) x (1,200) = 201,600 rolls Utilization = 148,000/201,600 = 73.4% Efficiency = 148,000/175,000 = 84.6% Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Efficiency = 84.6% Efficiency of new line = 75% Expected Output = (Effective Capacity)(Efficiency) = (175,000)(.75) = 131,250 rolls

Bakery Example Actual production last week = 148,000 rolls Effective capacity = 175,000 rolls Design capacity = 1,200 rolls per hour Bakery operates 7 days/week, 3 – 8 hour shifts Efficiency = 84.6% Efficiency of new line = 75% Expected Output = (Effective Capacity)(Efficiency) = (175,000)(.75) = 131,250 rolls Capacity in addition to Strategy Capacity decisions impact all 10 decisions of operations management as well as other functional areas of the organization Capacity decisions must be integrated into the organizations mission in addition to strategy Capacity Considerations Forecast dem in addition to accurately Underst in addition to the technology in addition to capacity increments Find the optimum operating level (volume) Build as long as change

Economies in addition to Diseconomies of Scale Figure S7.2 Managing Dem in addition to Dem in addition to exceeds capacity Curtail dem in addition to by raising prices, scheduling longer lead time Long term solution is to increase capacity Capacity exceeds dem in addition to Stimulate market Product changes Adjusting to seasonal dem in addition to s Produce products with complementary dem in addition to patterns Complementary Dem in addition to Patterns Figure S7.3

Complementary Dem in addition to Patterns Figure S7.3 Complementary Dem in addition to Patterns Figure S7.3 Tactics as long as Matching Capacity to Dem in addition to Making staffing changes Adjusting equipment Purchasing additional machinery Selling or leasing out existing equipment Improving processes to increase throughput Redesigning products to facilitate more throughput Adding process flexibility to meet changing product preferences Closing facilities

Dem in addition to in addition to Capacity Management in the Service Sector Dem in addition to management Appointment, reservations, FCFS rule Capacity management Full time, temporary, part-time staff Bottleneck Analysis in addition to Theory of Constraints Each work area can have its own unique capacity Capacity analysis determines the throughput capacity of workstations in a system A bottleneck is a limiting factor or constraint A bottleneck has the lowest effective capacity in a system Process Times as long as Stations, Systems, in addition to Cycles The process time of a station is the time to produce a unit at that single workstation The process time of a system is the time of the longest process in the system the bottleneck The process cycle time is the time it takes as long as a product to go through the production process with no waiting These two might be quite different!

Limitations Investments with the same NPV may have different projected lives in addition to salvage values Investments with the same NPV may have different cash flows Assumes we know future interest rates Payments are not always made at the end of a period All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any as long as m or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.