Operations Management 3130 Final Review 04 21 2014 Chapter 5 Strategic Capacity Management What is Capacity and how do you measure it Definition the ability to hold receive store or accommodate o Most frequently viewed as the amount of output that a system is capable of achieving over a specific period of time Capacity utilization Rate how close a firm is to its best operating level o Capacity utilization rate capacity used best operating level Economies Diseconomy of scale Economies of scale o Definition as a plant gets larger and volume increases the average cost per unit of output drops o Partially due to lower operating and capital cost A piece of equipment with twice the capacity of another piece of equipment generally does not cost twice as much Diseconomies of Scale o Definition When the size of a plant becomes too large and the cost per unit begins to increase o Maintaining the demand required to keep the large facility busy may require significant discounting of the product o Minimizing equipment downtime is essential in US automobile manufacturers to stay away from creating diseconomies of scale What is Utilization Definition the primary method by which asset performance is measured and business success determined Measure of actually revenue earned by assets against the potential revenue they could have earned Utilization actual usage time best operating level How to estimate capacity requirements strategies 1 Use forecasting techniques to predict sales for individual products within each product line 2 Calculate equipment and labor requirements to meet product line 3 Project labor and equipment availabilities over the planning forecasts horizon Time How do you plan for Capacity o Long Range greater than one year where productive resources take a long time to acquire or dispose of long range capacity planning require top management participation and approval o Intermediate Range Monthly or quarterly plans for the next 6 to 18 months Capacity may be varied by hiring layoffs New tools minor equipment purchases and subcontracting o Short range less than one month Tied into the daily or weekly scheduling process Location o Capacity to deliver the service must first be distributed to the customer then the service can be produced Volatility of Demand o Higher on a service delivery system than on a manufacturing production system for three reasons 1 services cannot be stored 2 customers interact indirectly with the production system 3 directly affect by consumer behavior Capacity Cushion o Capacity in excess of expected demand Chapter 4 Project Management What is a Project Definition An individual or collaborative enterprise that is carefully planned and designed to achieve a particular goal Characteristics o 1 Objective each has a specific goal to reach o 2 Schedule point in time in which they must be o 3 Complexity does the technology exist to achieve the accomplished project objectives o 4 Size and nature of task step by step plan of action o 5 Resources labor personnel equipment materials facilities o 6 Organizational structure the meshing of project requirements into the existing organizations o 7 Information and control systems these must be structured to handle problems through typical lines of authority Tools used in project management 1 Identify the specific activities and milestones 2 Determine the proper sequence of activities 3 Construct a network diagram using the activity sequence information 4 Estimate the time required for each activity 5 Determine the critical path 6 Update the PERT chart as the project progresses 7 Gantt chart shows in a graphic manner the amount of time involved and the sequence in which activities can be performed often referred to as a bar chart What is CPM page 80 in text Definition Critical Path Method the sequence of activities that form the longest chain in terms of their time to complete o If anyone of the activities in the critical path is delayed then the entire project is delayed 1 Identify the activity to be done in the project and estimate how long it will take to complete each activity 2 Determine the required sequence of activities and construct a network reflecting the precedence relationships 3 Determine the critical path 4 Determine the early start finish and late start finish schedule o Slack time the time that an activity can be delayed without delaying the entire project the difference between the late and early start times of an activity What is meant by crashing a project and how do we do it the compression or shortening of the time to complete Definition the project o It cost money to expedite an activity on the other hand it costs money to sustain or lengthen the project Costs associated with sustaining a project o Overhead o Facilities o Resource opportunity costs o Penalty costs o Lost incentive payments How to do this o 1 Start with your normal schedule o 2 then find the critical path o 3 reduce the path by one day using the lowest cost activity o 4 recomputed and find the new critical path o 5 Reduce it by one days also o 6 Repeats until the time of completion is satisfactory Different types of project organization structures Pure Project a self contained team works full time on the project o Pros o Cons shared The project manager has full authority over the project Team member report to one boss Lines of communication are shortened Team pride motivation and commitment are high Duplication of resources Equipment and people are not Organizational goals and policies are ignored The organization falls behind in it knowledge of new technology due to weakened functional divisions Members worry about life after project and project termination is delayed Housing the project within a functional division A team member can work on several projects Technical expertise is maintained within the functional are even if individuals leave the project or organization The functional area is a home after the project is completed A critical mass of specialized functional are experts create synergistic solutions to projects technical Functional Project o Pros problems o Cons Aspects of the project that are not directly related to the functional are get shortchanged Motivation of team members is often weak Needs of the client are secondary and are responded to Matrix Project attempts to blend properties of functional and pure slowly projects o Pros Communication between functional division is enhanced An project manger is held