Operations Management

Session 4: Kristine Cookies

Case
 Last Class in Process
Analysis Module
What did we learn?

Throughput rate
Capacity
Whats the difference between capacity and throughput rate?
Bottleneck resource
Utilization rate
Throughput time
WIP
Littles Law:
Throughput Time = (Average) WIP / Throughput Rate

Session 4 Operations Management 2

 Today

Team Presentations

Lecture (Kristens cookies and additional

comments on capacity management)

Session 4 Operations Management 3

 Team Presentations

Session 4 Operations Management 4

 What is it all about?
Process Characteristics
Capacity of a System
How much can you process in a week/day?
Response Time
How quickly can you meet demand?

Session 4 Operations Management 5

 Process Flow

What are the inputs?

What are the outputs?
What are the activities?

Session 4 Operations Management 6

 Process Flow Chart

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY
DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

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Activity

4 8 12 16 20 24 28 32 36
Time
Resource

Operations Management 8
 Activity

PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36

You
Resource

Oven

Tray

Operations Management RM 9
 Kristine Cookies and
Measures
What is the Throughput time?
From the moment an order arrives till it is
finished, it takes 26 min.
Can the throughput time be reduced?

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 Activity

PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36

You
Resource

Oven

Tray

Operations Management RM 11
Activit

PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36

You
Resource

Oven

Tray

Operations Management RM 12
 Kristine Cookies and
Measures
What is the capacity of the system?
What is the slowest resource? (Assume that
the we have enough trays.)

Session 4 Operations Management 13

 Activit

PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36
10
You
Resource

Oven

Tray

Operations Management RM 14
 Bottleneck Analysis

It is clear that the bottleneck is the Oven

It is the only resource that once we start
producing is not idle.
It is the slowest resource: One dozen every 10
min.

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 Capacity
It seems that if they have enough trays they
can produce a dozen of cookies every 10 min.
1.2 cookies per min.
In 4 hours (240 min) you can finish 22 trays:
240 26 = 214
214 / 10 = 21.4 or 21 trays.
Given the bottleneck is the oven, to maximize
capacity we must ensure that the oven runs
continuously: once every 10 min.

Session 4 Operations Management 16

 Process Flow Chart

Order Size (Dozens): 1 Dozens

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 2 1 9 5 2 1

TOTAL TIME

YOU: 6 + 2= 8 minutes MIXER: 6 minutes TRAY: 19 minutes

ROOMIE: 1 + 2 +1 = 4 minutesOVEN: 1+ 9 = 10 minutes

Session 4 Operations Management 17

 Process Flow Chart

Order Size (Dozens): 1 Dozen

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 2 1 9 5 2 1

TOTAL TIME Dozens / Day = 22

YOU: 6 + 2= 8 minutes MIXER: 6 minutes TRAY: 19/2 minutes

ROOMIE: 1 + 2 +1 = 4 minutesOVEN: 1+ 9 = 10 minutes

Session 4 Operations Management 18

 Process Flow Chart
Order Size: 2 Dozens

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 4 2 18 10 4 1

TOTAL TIME

YOU: 6 + 2= 8 minutes MIXER: 6 minutes TRAY:

ROOMIE: 1 + 2 +1 = 4 minutesOVEN: 2+ 18 = 20 minutes

Session 4 Operations Management 19

Activity

PAY

PACK

COOL

BAKE
SET OVEN
LOAD

MIX Time

4 8 12 16 20 24 26 28 32 36
10

You
Resource

Oven

Tray 1

Tray 2
Operations Management 20
RM RM
 How many dozen per
day?
60 minutes x 4 = 240 available minutes each
evening
240-36=204 available minutes after the first two
dozen is finished
204/20=10.2 two dozens finished in the remaining
204 minutes
2x11=22 dozens per day
Does it make sense to give a discount for an order
size of two dozen?

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 Capacity Investment

Should we invest in a second Oven?

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Activity

Two Ovens. Order Size: 1 dozen

PAY

PACK

COOL

BAKE
SET OVEN
LOAD

MIX Time

4 8 12 16 20 24 26 28 32 36
8

You You
Resource

Oven

Tray

Operations Management RM RM 23
 Bottleneck Analysis

Who is the bottleneck now?

The entrepreneur
Why did the bottleneck shift?
Could the numbers (as opposed to the
graph) indicate were the bottleneck is?
Now should we give a discount for ordering
2 dozen?

Session 4 Operations Management 24

 Bottleneck Analysis
Your capacity:
1 dozen cookies / 8 minutes = 0.125 dozen cookies per
minute (or 1 dozen cookies every 8 minutes)
Oven capacity:
1 dozen cookies / 10 minutes
2 ovens x .1 dozen cookies per minute = 0.2 dozen cookies
per minute (or 1 dozen cookies every 5 minutes)
Mixer:
1/6=0.167 dozen cookies per minute
Roommate
=0.25 dozen cookies per minute
What is the slowest resource?
Note: same calculation as made in the previous class in Burgers example.
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 Dozens per day with two
ovens
240-26=214 minutes for the first dozen
214/8=26.75 dozens in the next 214
minutes
27 dozen per day with two ovens.

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 Economic Analysis
Having two ovens increase the capacity from
60/10=6 dozens per hour to 60/8=7.5 dozens
per hour.
What is the value of the additional oven?
(27-22)*300*Profit per dozen =

New capacity # of selling days

Old capacity
Additional profit = $1,500*profit per dozen

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 Economic Analysis
Example
Suppose we sell each dozen cookies for $1.50 per
dozen.
Assume there is no cost on your time.
The profit per dozen is then $1.50-$0.60-
$0.10=$0.80.
Therefore, the additional profit after being open 300
days is: 5x300x$0.80=$1200.
We are willing to buy another oven if it costs less
than $1200 and we have enough demand so that it
will be in use.
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 Activity

Two Ovens
Order Size: 2 Dozens
PAY

PACK

COOL

BAKE
SET OVEN
LOAD

MIX Time

4 8 12 16 20 24 26 28 32 36

You You
Resource

Oven

Tray

Operations Management RM 29
 Process Flow Chart
OVENS = 2 and Order size =2 Dozen

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 4 2 18 10 4 2

TOTAL TIME Dozens / Day = 44 doz / day

YOU: 6+4 = 10 MIXER: TRAY:

ROOMIE: OVEN: (18 +2) /2 = 10

Session 4 Operations Management 30

 Summary

Tools & Techniques

Identification of Bottleneck
System Capacity
Throughput Time
Concepts
Bottleneck & Capacity depend of product mix
In high variety systems bottlenecks shift

Session 4 Operations Management 31