Operations Tutorial for MBA

7/18/2019 Operations Tutorial for MBA

http://slidepdf.com/reader/full/operations-tutorial-for-mba 1/26



Bare minimum requirements (for thetest)

• +eision Tree A!!roah

• ittle-s la. / A!!liation in ueuing theory

• ritial 'ath Method 'M3 'rogramme&"aluation and *e"ie. Tehniue '&*T3 $Project Management

• Basi Mathematis / Bell ur"e alulations,&5!eted 6alues, inear 'rogramming, &t al#



ONE SITUATION

A manufacturer of air conditioner compressors in concerned that too muchmoney is tied up in its value chain.

Average raw material and work in process inventory is $ 50 million.

Sales are $20 million per week and finished goods inventory average $30million.

The average outstanding accounts receivale is $ !0 million. "roductiontakes on average# week to produce a compressor and the typical sales flowtime is 2 weeks. Assume 50 weeks in year.



MOST BASIC !UEUIN"

T#EO$%



What is the queue size?

What is the capacity utilization?

C u s t o m e r N

u m b e r

Customer

Number

Arrival

Time

Departure

Time

Time in

System

0 10 20 30 4050

Time

1 0 5 5

2 4 10 6

3 8 15 7

4 12 20 85 16 25

6 20 30 10

7 24 35 11

8 28 40 12

32 45 13

10 36 50 14



is the queue size?

is the capacity utilization?

C u s t o m e r N u m b e r

Customer Arrival Departure Time in

Number Time Time System

1 0 5 5

2 6 11 5

3 12 17 5

4 18 23 5

5 24 2 5

6 30 35 5

7 36 41 5

8 42 47 5

48 53 5

10 54 5 5

0 10 20 30 40 5060

Time



Time

Number Time Time System

What isWhat is

the queue size?

the capacity

N u m b e r

C u s t o m e r

Customer Arrival !ro"essin# Time in

1 0 7 7

2 10 1 1

3 20 7 7

4 22 2 7

5 32 8 8

6 33 7 14

7 36 4 15

8 43 8 16

52 5 12

10 54 1 11

0 10 20 30 40 50 60 70

$ueue %lu"tuation

4

3

2

1

0

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64Time



Multi!leser"ers,

single

stage

8o#of ustomers

9eingser"ed

'roess

*ate

:Arri"al

*ate

;

Ser"ers<ueue ength, Lq

8o# of ustomers in thesystem,

Ls



Se!e utilisationλ

µ λ

ρ = "assu#in$ % & 1'(n the case o) sin$le se!e*

ρ(n the case o) #ultiple se!es*

Waitin$ +i#e usin$ Little,s La-

=S µ

.!ea$e ti#e custo#e spen/s in syste#

LsWs λ

Lq

.!ea$e ti#e custo#e spen/s in queue

Wq λ

λ .!ea$e nu#e o) custo#es in syste#

Ls Lq µ

&erforman'eMetri's



&$OUCTION &ANNIN"



Detailed Scheduling

Short range

Shop Floor Control

Medium range Master Production Schedule

Materials Capacity

Requirement Requirement Plan

Plan

Business PlanLong range

Marketing Plan Financial Plan

Aggregate Production Planning

(rough cut capacity)

#ierar'hi'a* approa'h top*anning



In level strategy, the emphasis is not to disturb the existing

production rate

In chase strategy, no inentory is carried !rom one period toanother" the supply # demand mismatch is addressed during eachperiod $y employing a ariety o! capacity related alternaties

the peio/s a/etostoc

to anothe a/etoo/e an/ poect

"a' Sucontactutsouce

A!! Strate#y A!! alternatives appli"able &ey 'eatures

(evel Strate#y

)nventory base* alternatives

"a' :uil/ (n!entoy

"' :aclo$:aco/eShota$e

(n!entoy as the citical lin et-een

en!ion#ents ;o/ucts -ith lo- iss

o) osolescence

C+ase Strate#y

Capa"ity a*,ustment alternatives

"a' !e +i#e<n/e +i#e

"' =ay no> o) shi)ts

"c' ieLayo)) -oes

@o in!entoy caie/ )o# one peio/

en!ion#ents Se!eal se!icesyste#sCapa"ity au#mentation alternatives

"' Aeottlenec

Aggregate &ro+u'tp*anning



IN,ENTO$%



In-entor. Management

Ty!es of in"entories$

• Seasonal$ onsumer dura9les during festi"eseason

• +eou!ling$ Multi stage !roesses% & ' ( ) * + - %.

%

&'

( )

*+

-

%.

Stage / Stage 0 Stage 1

Decoupling Inventory

Production System without any decoupling inventory



In-entor. Management

ontd#

• yli$ Syringes at hos!itals

• 'i!eline$ ead Time = +emand !er

unit time• Safety Stok$ )edging against

unertainties

/ u a n t i t y

Sa!ety stock

Cyclic Stock

Pipeline inentory

0

1ime



In-entor. Asso'iate+ Costs an+ EO!

Or+ering Costs

#o*+ingCosts

Or+er !uantit. (!)

COS

T

Tota* Cost

EO!



EO! 2ormu*ae an+ Short'omings

%ost&oldingAnnual

'utflow(al%ost()AnnuSetupor2)'rder*

&

2S+ *,-

&2

, ,

+S*T%

'ro9lems lie in the assum!tions made$1#+emand is ertain and ontinuous

o"er time2#Instantaneous re!lenishment>#8o order uantity related issues e5ist4#All in"entory soured e5ternally



The 'on'ept of safet. sto'3

Q

Time t

ROP

/

/

order order order

mean demand during

supply lead time

safety stock

1nventory on hand



$e*ating to C.'*e Ser-i'e e-e*

ean +emand

over /ead Time

eorder "oint )'"(

.0)desired cycle service level(

eorder "oint * ean +emand over /ead Time Safety Stock

+esired cycle service level



Continuous $e-ie4 (!) Mo+e*

!

$

(T T)-.

)N/.NT012

!

t1

!

r*er

!la"e*

r*er

e"eive*

r*er

!la"e*

Ima5

Imin

Stochastic Ae#an/ "/'B

Constant Lea/ +i#e "L+'



&erio+i' $e-ie4 (&) Mo+e*

TI

(T T)-.

)N/.NT012

Tr*er

!la"e*

r*er

e"eive*

r*er

!la"e*

Ima5

Imin

!0

!0

!/

!/

(T

r*er

e"eive*

!1

(T

r*er

e"eive*

!1

r*er

!la"e*

T

Stochastic Ae#an/ "/'B

Constant Lea/ +i#e "L+'



2ormu*ae

LT z SS

LT SS ROP

H

DS EOQ

r σ

µ

=

+=

=2! S.stem

& S.stem

LT RP z SS

LT RP SS TIL EOQ RP

r +=

++==

σ

µ

µ

()4



&*ease rea+ up some 6its on

• Bull .hi! e?et in Su!!ly hains

• Mihael )ammer-s !a!er on @Theright su!!ly hain- and @Business'roess *eengineering-

• Single !eriod in"entory orderingrules

D osts assoiated .ith o"erstoking andunder stoking, related !ro9a9ilities



Than3s7

Operations Tutorial for MBA

Documents

Transcript of Operations Tutorial for MBA