“Effective operations

management is like
conducting an
orchestra - it requires
skillful coordination of
all the different players
to create a harmonious
and beautiful
performance”
The fundamental purpose of an organization's mission statement is to:
A) create a good human relations climate in the organization.
B) define the organization's purpose in society.
C) define the operational structure of the organization.
D) generate good public relations for the organization.
E) define the functional areas required by the organization.

B) define the organization's purpose in

society.

2
A strategy is a(n):
A) set of opportunities in the marketplace.
B) broad statement of purpose.
C) simulation used to test various product line options.
D) plan for cost reduction.
E) action plan to achieve the mission.

E) action plan to achieve the mission.

3
Which of the following strategic concepts allow firms to achieve their missions?
A) productivity, efficiency, and quality leadership
B) differentiation, cost leadership, and response
C) distinctive competency, cost leadership, and experience
D) differentiation, distinctive competency, quality leadership, and capacity

B) differentiation, cost leadership, and

response

4
A firm can effectively use its operations function to yield competitive advantage through
all of the following EXCEPT:
A) customization of the product.
B) setting equipment utilization goals below the industry average.
C) speed of delivery.
D) constant innovation of new products.
E) maintaining a variety of product options.

B) setting equipment utilization goals

below the industry average.

5
The ability of an organization to produce services that, by utilizing the consumer's
five senses, have some uniqueness in their characteristics is:
A) sensory response.
B) time-based competition.
C) differentiation.
D) flexible response.
E) experience differentiation.

E) experience differentiation.

6
Capacity (From the News…)

• World on cusp of last big refining boom as India

starts capacity expansion
• MNRE Adds 64 MW of New Solar Module
Capacity to the ALMM
• Inauguration Celebration: Wonder Aluboard's 30
Lacs Square Feet Monthly Production Capacity
• India's renewable energy capacity reaches 188
GW, aims for 50% non-fossil fuel power by 2030:
President Murmu
• Saudi Aramco Halts Plan to Raise Production
Capacity
Capacity Analysis
Process Management: A key aspect of operations management is
process management.
• A process consist of one or more actions that transform inputs
to outputs.

A business organization,
Supplier/s a department, or an Customer/s
operation
Output to one or more
Input from one or customer/s
Fig. Business processes many source Transformation
from a sequence of
suppliers and
customers.
Representation of Process
• Flowcharts
• A schematic or drawing of the movement of material, product,
or people
• Such diagram can help in understanding, analyzing and
improving a process
• Process Mapping/Time-Function Mapping
• Addition of time in the flowcharts
 Managing Transformations
“The Production System”
Input Transformation Output
Process
(Value Adding)
 People
Transformation is
 Plants
enabled by The 5 Ps of OM:
 Parts
 Processes
[A.K.A. The 5 Ms…Man,
Machines, Materials, Methods,  Planning and
And Money] Control
Process Flowcharting
Defined
 Process flowcharting is the use of a
diagram to present the major elements
of a process
 The basic elements can include tasks or
operations, flows of materials or
customers, decision points, and storage
areas or queues.
 It is an ideal methodology by which to
begin analyzing a process.
Flowchart Symbols
Purpose and Examples
Tasks or operations Examples: Giving an
admission ticket to a
customer, installing a
engine in a car, etc.

Decision Points Examples: How much

change should be
given to a customer,
which wrench should
be used, etc.
Flowchart Symbols
Purpose and Examples
Storage areas or Examples: Sheds,
queues lines of people waiting
for a service, etc.

Flows of Examples: Customers

materials or moving to a seat,
customers mechanic getting a
tool, etc.
 A Simplified Process Flow Chart
Case of Shirt Manufacturing
Inventory
of Cloth &
WIP
Other
materials Stitching 1 Inventory

Spreading Cutting
Stitching 2

Pressing &
Assembly
Inspection
Inventory
of Shirts
 Types of Processes

Single-stage Process

Stage 1

Multi-stage Process

Stage 1 Stage 2 Stage 3

Types of Processes (Continued)

A buffer refers to a storage area between

stages where the output of a stage is
placed prior to being used in a
downstream stage
Multi-stage Process with Buffer
Buffer
Stage 1 Stage 2
Example: Flowcharts
▶Paper-making process
Example: Flowcharts
▶Bread-making process
 Managing process to meet demand

• Ideally the capacity of process (to produce quantity) should

meet the demand.
• Too excess capacity can result in high cost. Too little can result
in shortages , dissatisfied customers.

requires then your ability

right capacity accurate forecasts of demand
capacity requirement is
capability
to translate forecast into capacity requirements of process
to meet the expected demand
Four process strategies
Process selection criteria
Capacity
What capacity should be the seating capacity of a concert hall?
How many customers per day should burger king or hard rock
café be able to serve? How large should a Frito-Lay plant be to
produce 75,000 bags of ruffles in an 8-hours shift?
All of the questions are related to capacity of a
process/organization.

After selection of a “production process”, managers need to

determine capacity pertaining to the required demand.

➢Capacity is the “throughput”, or the number of units a facility

can hold, receive, store, or produce in a given time.
• Capacity decisions often determine capital requirements and
therefore a large portion of a fixed cost.
• Capacity also determine whether demand will be satisfied or
whether facilities will be idle.
• If a facility is too large then required, portions of it will sit unused
and add cost to existing production.
• If a facility is too small, customer – and perhaps entire markets –
may be lost.
• Determining facility size, with an objective of achieving high levels
of utilization and a high return on investment, is critical
Fig: Time horizons and capacity options

Options for adjusting capacity

Design new production processes *

Add efficient equipment or selling
Long-range planning
(greater than 3 years) existing long-lead time equipment
Acquire or sell facilities
Acquire competitors

Intermediate-range Subcontract Build or use inventory

planning (aggregate Add or sell equipment More or improved training
planning) – 3 to 36 months Add or reduce shifts Add or reduce personnel
Short-range planning * Schedule jobs
(Scheduling) - up to 3 Schedule personnel
months Allocate machinery
Modify capacity Use capacity

* Difficult to adjust capacity as limited options exists

Considerations for good capacity decisions (supply side)

1. Forecast demand accurately – forecasting is essential to observe your

current capacity and change it accordingly to match the supply and
demand.
2. Find the optimum operating size (volume) to sell/produce – economies
and diseconomies of scale often dictate an optimal size for a facility.
Economies of scale exist when and average cost declines when quantity
(size) increases, whereas a diseconomies of scale occurs when a large
size (quantity) raises the average cost.

Economies Diseconomies
of scale of scale
3. Match technology and volume – technology can improve the
accuracy of capacity by providing managers with the data
they need to make effective decisions. Technology solutions
gather data from internal and external sources, store them in a
data warehouse and provide managers with access via a
network. Collaboration tools enable the managers to work
together to plan operations and make joint decisions.
4. Build for change – managers can build flexibility, agility,
responsiveness in the supply chain to match capacity with
demand.
Managing demand
Even with good forecasting and facilities built to accommodate that forecast, there
may be a poor match between the actual demand that occurs and available capacity.
A poor match may mean demand exceeds capacity or capacity exceeds demand.
However, in both cases firm have options.
1. Demand exceeds capacity – when demand exceeds capacity, the firm
may be able to curtail demand simply by raising prices, scheduling long
lead times (which may be inevitable), and discouraging marginally
profitable business. However, because inadequate facilities reduce
revenue below what is possible, the long-term solution is usually to
increase capacity.
2. Capacity exceeds demand – when capacity exceeds demand, the firm
may want to stimulate demand through price reductions or aggressive
marketing, or it may accommodate market through product changes.
When decreasing customer demand is combined with old and inflexible
processes, layoffs and plant closings may be necessary to bring capacity
in line with demand.
3. Adjusting to seasonal demands – a seasonal or cyclical pattern of demand
is another capacity challenge. In such cases, management may find it
helpful to offers with complementary demand patterns, that is, product for
which the demand is high for one when low for other.

For example, in the given figure, the

firm is adding a line of snowmobile
motors to its line of jet skis to smooth
demand. With appropriate
complementing of products, perhaps
the utilization of facility, equipment and
personnel can be smoothed.
 Making staffing changes

Adjusting equipment

Tactics for
Improving processes to increase throughput –
matching example reducing setup time

demand and Redesigning products to facilitate more throughput

capacity Adding process flexibility to better meet changing

product preferences

Closing facilities
Service-sector demand and
capacity management
In the service sector, scheduling customers is demand
management, and scheduling workforce is capacity
management.
Demand Management – when demand and capacity
are fairly well matched, demand management can
often be handled with appointments, reservations, or a
first-come, first-serve rule.
Reservations systems works well in rental car
agencies, hotels, and some restaurants as a means of
minimizing customer waiting time.
In retail shops, post office, or a fast-food restaurant, a
first-Come, first-served rule for serving customers
may suffice.
Each organization can develop their own strategy to
match supply and demand.
Bottleneck Analysis

As manager seek to match capacity to demand, decisions must be made,

about the size of specific operations or work areas in the larger system. Each
of the interdependent work areas can be expected to have its own capacity.
Capacity analysis involves determining the throughput capacity of
workstations in a system and ultimately the capacity of the entire system.

Bottleneck – the bottleneck is an operation that is the limiting factor or the

constraint. It has the lowest effective capacity, or technically speaking, the
machine/workstation, which takes maximum time to do a job/task is termed
as bottleneck.
• Bottleneck time/ Cycle time– the process time of the slowest workstation/process/machine
(or maximum time taken by a workstation) in the production system. In an assembly line,
it is considered for the entire system not a single workstation or process. Thus, in a
parallel assembly line, the approach to find bottleneck is bit different and discussed in
later slides.
• Throughput time – is the time it takes a unit to go through the production/service from
start to end, with no waiting. It’s the time of the longest path through the system

Station A Station B Station C

2 min/unit 4 min/unit 3 min/unit

Processing
time

Here slowest station is Station B, Thus, it is a bottleneck as it is reducing the time to

produce a unit. So bottleneck time is 4 min.
The throughput time to produce a new completed unit is 9 minutes (2+4+3 =9)
Capacity analysis with parallel processes

First assembly line

Bread Fill Toaster

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich
Order Wrap/deliver
30 sec/sandwich 37.5 sec/sandwich

Bread Fill Toaster

15 sec/sandwich 20 sec/sandwich 40 sec/sandwich

Second assembly line

Howard Kraye’s sandwich shop provides healthy sandwiches for customers. Howard has two identical sandwich
assembly lines. A customer first place and order, which takes 30 sec. The order is then sent to one of the two assembly
lines (because of parallel process, it can handle two orders at same time). Each assembly line has two workers and
three operations (1) assembly worker 1 retrieves and cuts the bread (15 sec/sandwich), (2) assembly worker 2 adds
ingredients and places the sandwich onto the toaster conveyor belt (20 sec/sand), (3) the toaster heats the sandwich
(40sec/sand). Finally another employee wraps the heated sandwich coming out of the toaster and delivers it to the
customer (37.5 sec/sand). Howards wants to determine the bottleneck time and the throughput time.
Clearly the toaster is the single-slowest resource in the five-step process, but is it the
bottleneck? Howard should first determine the bottleneck time of each of the two assembly
line separately, then the bottleneck time of the combined assembly lines, and finally the
bottleneck time of the entire operation. For throughput time, each assembly line is identical,
so Howard should just sum times for all five operations.
Because each of three assembly line operations uses a separate resource (worker or
machine), different partially completed sandwiches can be worked parallelly at each
station. Thus, the bottleneck time of each assembly line is the longest time of each of the
three operations.
In this case, 40-seconds toasting time represents the bottleneck time of each assembly line.
Next, the bottleneck time of combined assembly line operations is 40 seconds per two
sandwiches, or 20 seconds/sandwich.
Therefore, wrapping and delivery with a process time of 37.5 sec/sandwich appears to be bottleneck
time of entire operations.
So capacity of the system in an hour = 3600/37.5 = 96 sandwiches
Throughput time = 30+15+20+40+37.5 = 142.5 seconds.
Capacity analysis with simultaneous processes

Hygienist
cleaning
24 min/unit
Develop Dentist Check out
Check in Takes X-ray
X-ray
2 min/unit 2 min/unit 4 min/unit 8 min/unit 6 min/unit
X-ray
exam
5 min/unit

Dr. Cynthia Knott’s dentistry practice has been cleaning customer’s teeth for decade. The process for a
basic dental cleaning is relatively straightforward: (1) the customer checks in (2 min); (2) a lab technician
takes and develops X-rays (2 and 4 minutes, respectively); (3) the dentist processes and examines X-rays
(5 min) while the hygienist cleans the teeth (24 min); (4) the dentist meets the patient to poke a few teeth,
explain the X-ray results, and tell the patient to floss more often (8 min); and (5) the customer pays and
books her next appointment (6 min). A flowchart of the customer visit is given above. Dr. Knott wants to
determine the bottleneck time and throughput time of this process.
With simultaneous processes, an order or a product is
essentially split into different paths to be rejoined later
on. To find the bottleneck time, each operation is treated
separately, just as though all operations were on a
sequential path. To find the throughput time, the time
over all paths must be computed, and the total time of
the longest path is the throughput time.
The bottleneck in this system is the hygienist cleaning
operations at 24 minutes/patient.
So capacity of the system in an hour = 60/24 = 2.5 patients
There are two paths and their time P1 = 2+2+4+24+8+6 =
46 minutes; P2 = 2+2+4+5+8+6 = 27 minutes.
Thus, throughput time is 46 minutes. Which implies a
patient should be out of the door after 46 minutes.
Practice problems
1. T. Smunt Manufacturing Corp. has the process displayed below. The
drilling operation occurs separately from and simultaneously with the
sawing and sanding operations. The product only needs to go through
one of the three assembly operations (the assembly operations are
parallel.

Assembly
Sawing Sanding 78 min/unit
15 min/unit 15 min/unit
Welding Assembly
8 min/unit
25 min/unit 78 min/unit

Drilling Assembly
27 min/unit 78 min/unit
a) Which operation is the bottleneck?
b) What is the throughput time for
the overall system?
c) If the firm operates 8 hours per
day, 22 days per month, what is
the monthly capacity of the
manufacturing process?
d) Suppose that a second drilling
machine is added, and it takes the
same time as the original drilling
machine, what is the new
bottleneck time and the
throughput time of the system?
Example: Process Mapping
Example
Example: Process Mapping
• What is the throughput time for this
manufacturing process?

• Identify the bottleneck for this process?

• What is the cycle time for this process?

• What is the productive capacity of the

process?

• What are the assumptions behind this

computation?