Lecture 1 – Intro to OTM Lecture 3 – Process Flow Analytics (Cont’d) Lecture 6 – Inventory Management 1
OM is business function that is responsible for designing, managing & improving the ABC Analysis:
activities involved in the creation & delivery of products & services through the Class A – 15-20% of Total Inventory Items & rep. 70-80% of total $ usage
transformation of inputs into outputs. (High annual dollar value- Tobacco)
Objectives in OM – Cost, Quality, Speed, Flexibility Class B – 30% of total inventory items & rep. 15-25 of total $ usage
Productivity = Output/Input (medium annual dollar value)
If inputs increase by X% & outputs increase by Y%, Class C – 50-55% of total inventory items & rep. 5% of total $ usage (low
1+𝑌% annual dollar value- Drinks)
% Productivity Change = −1
1+𝑋%
𝑂𝑢𝑡𝑝𝑢𝑡
Multifactor Productivity = Measures Production Basic EOQ Model
𝐿𝑎𝑏𝑜𝑢𝑟+𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙+𝐸𝑛𝑒𝑟𝑔𝑦+𝐶𝑎𝑝𝑖𝑡𝑎𝑙+𝑀𝑖𝑠𝑐.
Efficiency Total Cost = Purchase + Ordering + Holding + Shortage
𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑊𝑎𝑔𝑒 𝑅𝑎𝑡𝑒(𝑊) 𝐻𝑜𝑚𝑒 𝑃𝑟𝑜𝑑.(𝐻)
Relative Wage Rates = × TC = 𝐷𝑃 + 𝑇𝐼𝐶 TIC = √2𝐷𝑆𝐻
𝐸𝑥𝑐ℎ𝑎𝑛𝑔𝑒 𝑅𝑎𝑡𝑒 (𝑋) 𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 (𝐹) Demand > Process Capacity, production will be at full speed (Process Constrained)
2𝐷𝑆 𝐷
Demand < Process Capacity, production will be at speed of demand (Demand Constrained) Q=√ No.Of Optimal Orders, N =
𝐻 𝑄∗
Lecture 2 – Ops Process & Tech. Steady State – Not affected by startup, changeover, shut down activities 𝑄∗ 1
Process Selection – Deciding on the way production of goods or services will be organized 1 Time between Optimal Orders, T = 𝑜𝑟
Cycle Time – Time between completion of successive flow units CT = 𝐷 𝑁
𝐹𝑙𝑜𝑤 𝑅𝑎𝑡𝑒 TC for Ordering Q*, TC = 𝐷𝑃 + √2𝐷𝑆𝐻
Flow Time – Time a flow unit spends in process, includes the time it is worked on at various resources as
D : Demand
well as any time it spends in the work in process inventory
Q : Order Qty & Q* : Annual Order Qty
How to work out Flow times in presence of blockages? Consider blockages up to the first blockage then sum
P : Purchase Cost
up the activity times
S : Ordering or Setup Cost
Gantt Chart – illustrate durations of activities (When the process time are the same, there are no gaps in the
H : Holding Cost per unit/Carrying Costs
chart. Only when the previous unit is completed, the next unit can come in. So the completion time of the
previous unit is the entering time for the next unit.)
Economic Production Qty (EPQ)
P : Production rate per time period
U : Usage Rate per time period
𝑄
Cycle Time (Time between setups of consecutive runs), 𝑡𝑐 =
𝑢
𝑄
Job Shop – Process Focused (Layout that can handle varied processing requirements) Run Time (length of production run), 𝑡𝑝 =
𝑝
Repetitive – Product Focused (Layout that uses standardized processing operations to Pure Consumption Time = 𝑡𝑐 − 𝑡𝑝
achieve smooth, rapid flow) 𝐷𝑆 𝑄𝑝 𝑢
TC = 𝐷𝑃 + + (1 − ) 𝐻
Project - Used for work that is nonroutine, with a unique set of objectives to be 𝑄𝑝 2 𝑝
accomplished in a limited time frame (Tools : Critical Path Method, Program Evaluation 𝐻 𝑢 𝐷𝑆
Determine Optimal Production Qty = (1 − ) −
2 𝑝 𝑄𝑝2
Review Technique)
Fixed Automation – Least flexible, uses high-cost, specialized equipment for a fixed
sequence of operations
- Low Cost & High Volume
- Minimal variety & high cost of making major changes in process or products
Capacity Utilization – Extent to which a resource/process uses its capacity when supporting a given flow
Programmable Automation – High cost, general purpose equipment controlled by a
rate
computer program that provides both sequence of operations & specific details about each 𝐹𝑙𝑜𝑤 𝑅𝑎𝑡𝑒 𝐿𝑎𝑏𝑜𝑢𝑟 𝐶𝑜𝑛𝑡𝑒𝑛𝑡
operation Process Capacity Utilization = Labour Utilization =
𝑃𝑟𝑜𝑐𝑒𝑠𝑠 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝐿𝑎𝑏𝑜𝑢𝑟 𝐶𝑜𝑛𝑡𝑒𝑛𝑡+𝑇𝑜𝑡𝑎𝑙 𝐼𝑑𝑙𝑒 𝑇𝑖𝑚𝑒
- Wide variety of low-volume products in small batches be produced 𝐹𝑙𝑜𝑤 𝑅𝑎𝑡𝑒
Resource Capacity Utilization = Lecture 7 – Inventory Management 2
Flexible Automation – Equipment that is customized than of programmable automation 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
- Lesser changeover timer relative to programmable Reorder Point : Under Certainty
Lecture 4/5 – Aggregate Planning
ROP = d x LT
Lecture 3 – Process Flow Analytics Agg. Planning – Intermediate-range capacity planning, usually covering atleast 1 cycle of aggregate
D : Demand Rate
Flow Unit – Basic unit of analysis considered in process analysis demands
Purpose – Specify combination of Prod Rate, Employment Level & Inventory in Hand to meet varying LT : Lead Time
Activity Process Time – Amount of time spent on the activity/process including changeover
& runtime aggregate demand pattern over a cycle
Objectives – minimize cost, maintain service level, minimize workforce fluctuations Reorder Point : Under Uncertainty
Process Capacity – the maximum number of units that move through the process in a given ROP = Expected Demand during Lead Time + Safety Stock (𝑍𝜎𝑑𝐿𝑇 )
unit of time Strategies:
Z : Number of Standard Deviations
Resource Capacity – Number of units that move through each stage in a given time - Level Capacity (Maintaining a level steady output rate)
Bottleneck – Resource with the lowest capacity & limits capacity of process o Use inventory to absorb variations in demand : Standard Deviation of Lead Time Demand
Starving – Occurs when activities in a resource must stop because no work - Chase Demand (Match demand period by period & hiring + firing as necessary) 1)Using Normal Deviation Formula
Blocking – Occurs when activities in a resource must stop because there is no place to o Use when inventory carrying costs are high & changing capacity is low 2)Safety Stock = Service Level x Standard Deviation
deposit when item just completed - Mixed
Flow Rate (Throughput) – No. of flow units that move through the process in a given unit Trial & Error using Graphs & Spreadsheets (mainly)
of time
AY2021/2022 - DAO2703 - Operations and Tech Mgmt
OM is business function that is responsible for designing, managing & improving the ABC Analysis:
activities involved in the creation & delivery of products & services through the Class A – 15-20% of Total Inventory Items & rep. 70-80% of total $ usage
transformation of inputs into outputs. (High annual dollar value- Tobacco)
Objectives in OM – Cost, Quality, Speed, Flexibility Class B – 30% of total inventory items & rep. 15-25 of total $ usage
Productivity = Output/Input (medium annual dollar value)
If inputs increase by X% & outputs increase by Y%, Class C – 50-55% of total inventory items & rep. 5% of total $ usage (low
1+𝑌% annual dollar value- Drinks)
% Productivity Change = −1
1+𝑋%
𝑂𝑢𝑡𝑝𝑢𝑡
Multifactor Productivity = Measures Production Basic EOQ Model
𝐿𝑎𝑏𝑜𝑢𝑟+𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙+𝐸𝑛𝑒𝑟𝑔𝑦+𝐶𝑎𝑝𝑖𝑡𝑎𝑙+𝑀𝑖𝑠𝑐.
Efficiency Total Cost = Purchase + Ordering + Holding + Shortage
𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑊𝑎𝑔𝑒 𝑅𝑎𝑡𝑒(𝑊) 𝐻𝑜𝑚𝑒 𝑃𝑟𝑜𝑑.(𝐻)
Relative Wage Rates = × TC = 𝐷𝑃 + 𝑇𝐼𝐶 TIC = √2𝐷𝑆𝐻
𝐸𝑥𝑐ℎ𝑎𝑛𝑔𝑒 𝑅𝑎𝑡𝑒 (𝑋) 𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 (𝐹) Demand > Process Capacity, production will be at full speed (Process Constrained)
2𝐷𝑆 𝐷
Demand < Process Capacity, production will be at speed of demand (Demand Constrained) Q=√ No.Of Optimal Orders, N =
𝐻 𝑄∗
Lecture 2 – Ops Process & Tech. Steady State – Not affected by startup, changeover, shut down activities 𝑄∗ 1
Process Selection – Deciding on the way production of goods or services will be organized 1 Time between Optimal Orders, T = 𝑜𝑟
Cycle Time – Time between completion of successive flow units CT = 𝐷 𝑁
𝐹𝑙𝑜𝑤 𝑅𝑎𝑡𝑒 TC for Ordering Q*, TC = 𝐷𝑃 + √2𝐷𝑆𝐻
Flow Time – Time a flow unit spends in process, includes the time it is worked on at various resources as
D : Demand
well as any time it spends in the work in process inventory
Q : Order Qty & Q* : Annual Order Qty
How to work out Flow times in presence of blockages? Consider blockages up to the first blockage then sum
P : Purchase Cost
up the activity times
S : Ordering or Setup Cost
Gantt Chart – illustrate durations of activities (When the process time are the same, there are no gaps in the
H : Holding Cost per unit/Carrying Costs
chart. Only when the previous unit is completed, the next unit can come in. So the completion time of the
previous unit is the entering time for the next unit.)
Economic Production Qty (EPQ)
P : Production rate per time period
U : Usage Rate per time period
𝑄
Cycle Time (Time between setups of consecutive runs), 𝑡𝑐 =
𝑢
𝑄
Job Shop – Process Focused (Layout that can handle varied processing requirements) Run Time (length of production run), 𝑡𝑝 =
𝑝
Repetitive – Product Focused (Layout that uses standardized processing operations to Pure Consumption Time = 𝑡𝑐 − 𝑡𝑝
achieve smooth, rapid flow) 𝐷𝑆 𝑄𝑝 𝑢
TC = 𝐷𝑃 + + (1 − ) 𝐻
Project - Used for work that is nonroutine, with a unique set of objectives to be 𝑄𝑝 2 𝑝
accomplished in a limited time frame (Tools : Critical Path Method, Program Evaluation 𝐻 𝑢 𝐷𝑆
Determine Optimal Production Qty = (1 − ) −
2 𝑝 𝑄𝑝2
Review Technique)
Fixed Automation – Least flexible, uses high-cost, specialized equipment for a fixed
sequence of operations
- Low Cost & High Volume
- Minimal variety & high cost of making major changes in process or products
Capacity Utilization – Extent to which a resource/process uses its capacity when supporting a given flow
Programmable Automation – High cost, general purpose equipment controlled by a
rate
computer program that provides both sequence of operations & specific details about each 𝐹𝑙𝑜𝑤 𝑅𝑎𝑡𝑒 𝐿𝑎𝑏𝑜𝑢𝑟 𝐶𝑜𝑛𝑡𝑒𝑛𝑡
operation Process Capacity Utilization = Labour Utilization =
𝑃𝑟𝑜𝑐𝑒𝑠𝑠 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝐿𝑎𝑏𝑜𝑢𝑟 𝐶𝑜𝑛𝑡𝑒𝑛𝑡+𝑇𝑜𝑡𝑎𝑙 𝐼𝑑𝑙𝑒 𝑇𝑖𝑚𝑒
- Wide variety of low-volume products in small batches be produced 𝐹𝑙𝑜𝑤 𝑅𝑎𝑡𝑒
Resource Capacity Utilization = Lecture 7 – Inventory Management 2
Flexible Automation – Equipment that is customized than of programmable automation 𝑅𝑒𝑠𝑜𝑢𝑟𝑐𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
- Lesser changeover timer relative to programmable Reorder Point : Under Certainty
Lecture 4/5 – Aggregate Planning
ROP = d x LT
Lecture 3 – Process Flow Analytics Agg. Planning – Intermediate-range capacity planning, usually covering atleast 1 cycle of aggregate
D : Demand Rate
Flow Unit – Basic unit of analysis considered in process analysis demands
Purpose – Specify combination of Prod Rate, Employment Level & Inventory in Hand to meet varying LT : Lead Time
Activity Process Time – Amount of time spent on the activity/process including changeover
& runtime aggregate demand pattern over a cycle
Objectives – minimize cost, maintain service level, minimize workforce fluctuations Reorder Point : Under Uncertainty
Process Capacity – the maximum number of units that move through the process in a given ROP = Expected Demand during Lead Time + Safety Stock (𝑍𝜎𝑑𝐿𝑇 )
unit of time Strategies:
Z : Number of Standard Deviations
Resource Capacity – Number of units that move through each stage in a given time - Level Capacity (Maintaining a level steady output rate)
Bottleneck – Resource with the lowest capacity & limits capacity of process o Use inventory to absorb variations in demand : Standard Deviation of Lead Time Demand
Starving – Occurs when activities in a resource must stop because no work - Chase Demand (Match demand period by period & hiring + firing as necessary) 1)Using Normal Deviation Formula
Blocking – Occurs when activities in a resource must stop because there is no place to o Use when inventory carrying costs are high & changing capacity is low 2)Safety Stock = Service Level x Standard Deviation
deposit when item just completed - Mixed
Flow Rate (Throughput) – No. of flow units that move through the process in a given unit Trial & Error using Graphs & Spreadsheets (mainly)
of time
AY2021/2022 - DAO2703 - Operations and Tech Mgmt
