COMMERCE 2OC3 Class Notes

Operations Management - 2OC3




Equations & Annotations

Performance Measure
Productivity = Output / Input

Single Factor Productivity
Single Factor Productivity = Output / Single Factor Input

Example:
1,000 cups of coffee were sold using 20 hours of labour, what’s the labour productivity of the
firm?

Labour Productivity = 1, = 50 cups/hr

Multi Factor Productivity
If we look at n kinds of input

,Multi Factor Productivity = Output / Input1 + Input2 + … Inputn

Example:
- 7040 cups of coffee sold
- Cost of labour $1,000
- Cost of materials $520
- Cost of overhead $2,000

1. What’s multi factor productivity?

MFP = 7040 / (1,000 + 520 + 2,000) = 2 cups per dollar invested


Preparation for Critical Path Method
Will store the 4 pieces of info & the activity duration on the node




Earliest Start Time (ES) - Earliest time at which an activity can start
Earliest Finish Time (EF) - Earliest time at which an activity can be finished
Latest Start Time (LS) - Latest time at which an activity can start so as not to delay the
completion time of the entire project
Latest Finish Time (LF) - Latest time at which an activity can be finishes so as not to delay the
completion time of the entire project

Crash Cost Per Time Period

, - $160 = (1,980 - 1,500) / (10 - 7)
- And so on

Labour Productivity
Labour Productivity = Output (# of customers served) / Input (# of hours)

Capacity
Maximum amount that something can contain

Capacity of a process is
- Max # of units a process can output in a given period of time
- Usually a rate (# of units per unit of time)
- Eg. Car manufacturer: 2000 cars/week
- Eg. CIBC branch: 200 customers/day
- Eg. Restaurant: 1000 servings/day

Process Time
Shortest time between 2 outputs
- Process time of a single stage is the time to process a unit
- For a serial process, its process time is equal to the process time of the bottleneck

Capacity can be calculated from a process time

Capacity = 1 / Process Time
System Capacity = Bottleneck Capacity = 1 / Process Time of Bottleneck




Process time will be the bottleneck

Throughput/Output Rate
Rate at which the process is delivering output at some point in a unit of time (# of flow units per
unit of time)

How is capacity different from throughput rate?
- Capacity ≥ Throughput (output) Rate

, Throughput rate depends on
- Demand (input) rate
- Process capacity

Output Rate = Min {Input Rate, Capacity}

Example
If customers arrive at checkout every 4 mins, what is the output rate?

Capacity = 20 customers/hr
Input Rate = ¼ customers/min or 15 customers/hr

Output Rate = Min {20,15} = 15 customers/hr

Utilization
% of time the station/operator is busy

Utilization = Output Rate / Capacity

Using the same example
- Utilization = 15/20 = 0.75 or 75%

Note: Highest utilization is the bottleneck

Process Cycle (Flow) Time
Time for a unit to go through the entire empty system

Process Capacity
Maximum rate at which the process could be delivering output (in # of flow units per unit of
time)

Process Capacity = Min {Capacity of first set of stations, … ,capacity of last set of stations}

The set of stations with the smallest capacity is called the bottleneck

Process Capacity = Capacity of the bottlenecks

Arrival & Service