BA 101 1st Edition Lecture 8 Outline of Last Lecture 1 Practice Rounds 2 Lecture Production Productivity and Performance Outline of Current Lecture I Announcements A Midterm 1 II Lecture Capacity continued Automation Contribution Margin Current Lecture I Announcements Quiz 3 open today contains questions from all the subjects we ve covered up till now use to study for the midterm Practice Round 2 due tonight A Midterm 1 Thursday February 5th in class 50 multiple choice questions should be plenty of time we use the whole class period Study recommendations Quiz 3 Look at missed class questions Review your lecture notes Review the powerpoint slides Review the readings An introduction to Business and the Team Member Guide For the exam Bring your student ID bring a calculator and bring at least two 2 pencils II Growth rates for the next 8 years in each market segment Low Tech High Tech 1 10 20 2 10 20 3 10 20 4 13 24 5 15 25 6 9 16 7 12 22 8 14 25 These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Missed a round deadline Save your decisions as soon as possible let the professor know immediately Adjust your estimates Can the competitors make enough product to satisfy demand If not expect to pick up sales Compare your DCS with your competitors if you re falling behind the average where How can you fix it Consider your decisions and what you think your competitors will do Adjust your estimates accordingly Do you have sufficient capacity to meet your demand If not adjust to the limits of your inventory More about capacity Your total capacity represents what you are capable of producing in your first shift You have a second shift but it is expensive Your true total capacity is double the capacity of your first shift Production limits We only have 1 810 units of inventory to work with I would like to produce 1 942 units but can only produce 1 810 Produce as much as possible and hope that you have at least one unit left Or you could increase your price Labor costs everything is based on how many sensors you want to make now and in the future Capacity How many sensors you can make at regular hours how big your factory is Overtime workers work extra hours at a higher wage Automation the mix between human workers and robots in your factories Capacity how many sensors your factory can make during regular hours during one year Capacity is different than the number of products you are able to produce in one year Automation Automation is the level of automation or non human workers machines your factory has The labor costs are lower with higher automation levels automation level 1 11 20 per unit reduces by 10 with each successive level of automation But the machinery is expensive to buy For example the machinery for 1000 units of capacity at an automation level of 5 will cost you cost 4 times automation 5 times units 1000 or 4 5 1000 20 000 Increasing automation is a good way to increase your contribution margin without losing sales It is recommended to heavily invest in machines for low tech products and much less heavily no more than level 3 for the high tech because the higher level of automation slows down the development of new products Invest in additional capacity It takes 1 year for capacity to come into effect so plan ahead Buy more floor space at 6 unit and the machinery to fill it with the 4 automation level unit formula The formula for the total cost of units of capacity is number of units 6 4 level of automation number of units Example to add a 1000 units of capacity at an automation level of 3 1000 6 4 3 1000 6000 12 000 18 000