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Operations Management Finals Cheat Sheet

by: Alicia Tan

Operations Management Finals Cheat Sheet DSC2006

Marketplace > National University of Singapore > Business Administration > DSC2006 > Operations Management Finals Cheat Sheet
Alicia Tan
GPA 4.1
Operations Management
Qi Mei

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About this Document

This is the cheat sheet I used for my finals, filled with definitions and equations needed for Operations Management.
Operations Management
Qi Mei
75 ?




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This 4 page Bundle was uploaded by Alicia Tan on Tuesday August 18, 2015. The Bundle belongs to DSC2006 at National University of Singapore taught by Qi Mei in Fall 2014. Since its upload, it has received 291 views. For similar materials see Operations Management in Business Administration at National University of Singapore.


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Date Created: 08/18/15
Lecture 7 l EOQ Part II amp EPO Total cost Ordering Carrying cost Ushaped curve EOQ is usually used as an approximate quantity To look at relationship between Q and Q to see how good is EOQ at minimizing cost Qamp 2 Qlt3 was D Q 6 c TICZ TICltQgt 6 Compare if Q 2Q and if Q XQ Flatter TIC curve more robust Unit purchasing cost does not affect EOQ Q D Total cost HES PD Purchasing Cost price x demand Quantity Discounts draw graph of each TC curve TC 310 f TC a 31 TC dz 5 Inventory cast a l I a c I Carrying cost I Ordering ODsI I I Oldul100 00m QEd2120Q Order quantity FIGURE 121 Quantity Discounts with Constant Carrying Coat may or may not be good to aim for the discount as price may be higher due to the additional units to be ordered When calculating TC at EOQ always calculate ALL lower cost ranges to be sure Only one price curve will have its EOQ in the feasible range Optimal lot size will be either the EOQ or discounted Q depending on TC ASSUMPTIONS Only 1 product Demand is known Demand is even through the year Lead time does not vary Each order Q is received in a single delivery amp Only one product is produced Demand usage requirements are known Usage rate is constant Usage occurs continuously but nrndurfinn nrrlirq nerindirallv Lecture 8 l Analytical Models EOQ with quantity discounts objective to choose an ordering quantity Q so to minimize the TC while meeting demand D EPO Model Economic Production Quantity Q Objective to meet demand with minimum total inventory costs H Holding Cost S setup cost Objective to choose a production quantity to minimize the TlC while meeting Demand D pproduction rate uusage rate D Production frequency N E u 117161sz p P laverage lmax2 Production cycle time Qu Run time Qp Setup is known and constant QZ 2DS p H p u NEWSBOY MODEL Assumptions Only one product ordered Demand is random with known probability distribution Product is salvaged after selling period perishable Each order is received after lead time in a single delivery before selling period Relevant Cost Excess costs per unit inventory perishing cost Ce Shortage costs inventory Cs Newsboy sets average marginal bene t average marginal cost Marginal bene t Cs X 1FQ Marginal Cost Ce X FQ After nding FQ nd respective value on normal distributionpoison distribution table to get respective 2 value Normal distribution Add row and per un column value Q p 20 wherezFQ Poisson distribution search respective value from given mean 1 CS Q 6F ltCSC6gt 39 LJ IdIIUUIIlI uCIlIIdIIU WILII Illcdll IA dIIU dellUdllU UCVIdLIl o and probability distribution FL w unit wholesale price gt p unit retail price r v markdown price salvage value for leftovers C5 pw Lecture 9 l A New Newsbov Problem What if demand unpredictably Forward Planning lntermediaterange capacitysupply planning Typicaly covers a time horizon of 2 to 12 months Concept of Aggregation Focuses on units of measurement that can be understood by everyone in the company Aggregate units of output per month Aggregate Planning Achieve a production plan that will effectively utilize the organizations resources to satisfy demand Aows companies to better predict future demand Should be periodically updated Sales and Operations Planning SOP Best way to satisfy aggregated intermediate future demand demand quantity amp the timing of demand STRATEGY Proactive alter demand to match capacity using pricing promotion back orders Reactive alter capacity to match demand overtime etc ullan L44 Lclll yuu LUII Exa m p e A up with a better strategy lslslm39 uctuates Period1l2l3l4567 F oooo asts 190 230 260 280 210 17D 160 260 180 19 39rodluctiorl Outputs of suclh a strategy Regular 210 210 210 210 210 210 210 Temporary 10 10 1t 1t 10 2 10 210 Forecast 30 10 40 50 and lbackordlers 0 30 20 i 0 en ory 30 20 0 i 20 15 25 10 O O 10 0 O 20 U Baclkorder General procedure 1 Determine demand for each penod 2 Determine capacities for each penod 3 Identify company policies that are pertinent Determine unit costs Develop alternative plans and costs 6 Select best plan Disaggregating having a master schedule requirements for end items into timephased requirements Material Requirements Planning MRP derive demand for individual materials Bill of Materials BOM List of all raw materials product structure tree Example of a Planned Order Report U P I lhnm 91m 11111 CLIWJYIR CD w v I On lhand 100 Lead Time 2 weeks Lecture 10 I Marqinal Analysis and RM Overview of MRP A computer based information system that translates master schedule requirements for end items into timephased requirements for subassemblies components and raw materials Master Schedule is the result of disaggregating an aggregate plan It shows quantity and timing of speci c end items for a scheduled horizon MRP inputs inventory Inventory records information on the status of each item by timee period gross requirements scheduled receipts amount on hand changes due to stock receipts and withdrawals lead time lot size safety stock canceled orders and similar events MRP Computer Program translates master schedule requirements for end items into timephased requirements for subassemblies components and raw materials MRP Outputs Primary Outputs planned order amount and timing of future orders order releases authorizing the execution of planned orders changes revisions MRP Lot Sizing Rules Lotfor lot L4L ordering Fixed Quantity Ordering MRP Requirements To implement an effective MRP system requires a computer and necessary software to handle computations and maintain records accurate and uptodate master schedulesbill of materialsinventory records integrity of data les Updating the system an MRP is not a static document as time passes some orders get completed other orders are nearing completion new orders will have been entered existing orders will have been altered quantity changes delays missed deliveries MRP Bene ts Enables managers to determine quantities off each component for a given order to know when to release orders to be alerteed when items need attention Low levels of inprocess inventories ability to track material requirements and evaluate capacity requirements Lecture 11 I Lean Operations Lean Operations is a exible system of operations that strives to use considerably less resources and yet to achieve greater productivity shorter cycle times higher quality lower costs Ultimate goal is to have a balanced systemprocess that can achieve smooth and rapid ow of materials parts products to match supply and demand Waste is viewed as anything that interfered With or did not add value to the process of producing automobiles Lean systems have 3 basic elements focus on waste reduction especially excess inventory demand driven making svstem exible Culture dedicated to excellence and continuous improvement WASTE Represents unproductive resources waste in lean system includes 1 Inventory 2 Overproduction 3 Waiting Time 4 Unnecessary transporting 5 Processing Waste 6 Inef cient Work Methods 7 Product Defects Four elements of product design that are important to lean systems standard parts modular design highly capable processes with quality built in concurrent engineering Aspects of process design that are important for lean systems Small lot sizes idealv 1 setup time reduction manufacturino cells ouaitv improvement production exibilitv a balanced svstem little in ventorv storaoe failsafe methods Bene ts of small lot size reduced inprocess inventory lower H less storage space inspection and rework costs are less less inventory to work off before implementing product improvements increased visibility of problems permits greater exibility in scheduling increased ease of balancing operations Setup time reduction requires improvement efforts Singleminute exchange of die SMED rou technolooy capitalizing on similarities in recurring operations Manufacturing cells grouping products by type improving manufacturing techniques Bene ts include reduced changeover times high equipment utilization ease of crosstraining workers Quality Improvement Quality in lecture 5 as quality defects during the process can disrupt operations Autonomation Automatic detection of defects during production 2 mechanisms detect defects stop production to correct Production Flexibility Reduce downtime due to changeover and use preventive maintenance to I h L Lecture 13 Su I Chain Management amp Sustainable 0M Each player in the supply chain should add value nonvalue adding players would be eliminated due to competition Supply chain the sequence of organizations that are involved in producing and delivering productsservice SCM Issues Globalization Global supply chains product designs often use inputs from around the world some manufacturing and service activities are outsourced to countries where labour andor materials costs are lower Products are sold globally Complexties language and cultural differences currency uctuations political instability increasing transportation costs and lead times increased need for trust amongst supply chain partners SCM issues Supplier management Choosing suppliers Supplier audits supplier certi cation eg ISOQOOO supplier relationship management supplier partnerships CPFR Collaborative Planning Forecasting and Replenishment AND Strategic Planning Vendor Managed Inventory VM SCM issues Procurement to develop and implement purchasing plans for products and services that support operations strategies Purchasing function is responsible for obtaining the materials parts and supplies and services needed to produce a product or provide a service Identify sources of supply negotiate contracts maintaining a database of suppliers obtaining goods and service managing supplies SCM issues Inventory inventory location the bullwhip effect inventory oscillations that become increasingly large looking backward through the supply chain inventory velocity the speed at which goods move through supply chain SCM issues logistics Movement of materials services cash and information in a supply chain Containers cargos 3PL 4PL 7PL YCH SCM issues Technology radio frequency identi cation device RFID a technology that uses radio waves to identify objects such as goods in supply chains Similar to barcodes but are able to convey much more information They do not require line of sight for reading do not need to be read one at a time 2 types active and passive SCM issues Ebusinesses use of electronic technology to facilitate business transactions have global presence SCM issues Sustainability Forward supply chain and reverse supply chain Why remanufacturing Sustainability Refurbish used products by replacing wornout or defective LECTURE 1 INTRODUCTION Process stepsoperations Collection of that together perform some de ned function to produce goods or services Operations Management designing managing and improving activities involved in creating products and services and delivering them to customers Products Services Tangible Intangible Productivity Productivity measured not measured easily easily Quality Not easy to Evaluation amp evaluate Correction Low customer involvement High customer involvement Product De nition de nition inconsistent consistent lnventoried Can t be inventoried Patentable uncommon Role of OM Valueadd creating difference between cost of inputs and price of output giving feedbacks by measuring performance and taking corrective actions Measuring Productivity OutputInput Pro ts depend on of r different types productivity Lecture 2 cont Capacity Planning is to achieve a match between long term supply capabilities of an organization and the predicted level of long term demand Overcapacity gt costs Undercapacity resources Capacity plannin change It takes time an build capacity High operating gt Strained g to advocate d resources to To enhance capacity design exibility take stage of live cycle into account smooth capacity requirements dealing lIA nknln LaIIInN IAIN nlnLA LECTURE 2 LITTLE S LAW Key Design Issues life cycle of product standardization mass customization product durability reliability aesthetics newness of product global design sustainability Challenges in service design Low BTE focus on more intangible factors factors in Lecture 1 Design for operations taking into account the capabilities of the organization s operations function Tradeoff between responsiveness and customization The ow unit is what is tracked through he process and generally de nes the process of output of interest eg person D Activities A BuffersInventory gt ow Activity Time spends on task Resource Capacity No of units made per unit time Bottle neck step with lowest resource capacity Process capacity capacity of bottleneck Flow Time time taken for 1 unit to go through process Flow Rate Output per unit time rate lnventory turns 1 ow time lnventory average of ow units in the process Time worker resource Little s Law lnventory Flow Rate X Flow Time Condition System is in steady state with suf cient demand and unlimited supply Components of OM sustainable 1 Product Design use of life cycle assessment to reduce environmental impact 2 Process Design cleaner more resource ef cient process technology By product management or product life extension and on n39Fi39Fo rornuon Resource Utilization utilization of ONE activity Flow RateResource Capacity Process Utilization Flow RateProcess Capacity For processes with multiple tracks process capacity 1A 1B 6 dimensions for products that are tradeoffs Time Quality Cost Location Flexibility Services Step 1 lt Step 2 with buffer buffer unknown cannot calculate inventory as inventory builds up unsteady state Output is affected by supply LECTURE 3 FACILITY LAYOUT w Layout the con guration of departments work centres and equipment with particular emphasis on movement of work through the systemprocess Decisions arise when designing new facilities and redesigning existing facilities Layout Objective Facilitate a smooth ow of work material and information throughout the process by utilizing resources ef ciently and effectively 2 Types of layout process layout and product layout Normally process layouts are not arranged according to a particular production sequence and can handle varied processing requirements It can also process jobs of the same requirements in batches ln batch production setup time time needed to prepare a process for it to be ready is often required to switch between batches ofjobs Activity time setup time run time Presence of setup time impacts process capacity and choosing the right batch size is very important Batch 2 2 Setup Time Batch 2 Run Resource Capacity 2 Z Good batch size is when resource capacity at step which requires setup time is equal to resource capacity at steep in which no set up is required Product Lavout Are arranged according to a particular production sequence It uses standardized processing operations to achieve smooth rapid highvolume ow Cycle time 1process capacity Line Balancing The process of assigning tasks to workstations in such a way whereby the workstations have approximately equal time requirements for ef ciency and fairness Tcapacity through replicating the line selectively adding workers further specializing tasks Process DesignSelection the deciding on the way production of MPC 7 elements of Manufacturing Planning amp Control are particularly important for a In n lrInm Level Loading achieving level daily mix schedules constant across period Pull Systems demand triggers request for resupply push system production would be pushed through to meet forecast Lecture 4 I OUEUE O variability O queue Process Utilization gt100 queue build up lt100 inef ciency Flow Time Waiting Time Service Time Inventory Queue Length Customers in service Flow Rate Customer arrival rate For a system to be stable log run steady state average service rate must be faster than arrival rate Assumptions and Notations There is 1 server ie m1 All arrivals are treated the same Queue discipline is 1st come 1St serve Mean service time 1p Mean service rate p Standard deviation of service time 01 Coef cient of variation for service time CV1H p X 01L1 Arr val process Arrivals are independent of each other and one arrival per unit time Mean inter arrival time 1 the rest same as service rate time etc as above Process utilization pp Customers in service p Little s Law Customers in queue Lqqu Customers in service Lsst LS Lqp Variability and high utilization causes a queue As p1 Amp Good to reduce variability as much as you can Reduce utilizationgt Tmean service rate Imean arrival rate Increase capacityservice adding servers Priority Rules First Come First Serve Shortest processing time rst Poo ng More ef cient no servers would be idle Adding Servers Utilization of each server reduced to pmp minimum plt1 mgtp Waiting time for mgt1 2 px2m1 1 CVL gtlt lt gt gtltlt 2 rate by 1 my Wz q 1 A 1 p 2 Capable or not 4 Process is capable if sz g OR 93H Cka Problems withle justintime cultural resource lack of management understanding or commitment Ops Strategy brightness turned up on choosing real assets resources Lecture 5 I QUALITY MGMT Design Quality is embedded in the design speci cations of the product or service Conformance Quality depends on the production and delivery processes Why defects occur Random variation Due to common causes natural variation in the process with minor factors Process in controlquot Assignable variation Special Causes variation which cause can be identi ed can be a good thing process quotout of controlquot Statistical Process Control SPC statistical evaluation of the outputs of a process SPC involves periodically taking samples out of the process output and computing sample statistics 1 n Sample Mean XZZ xi i1 Sample Range Maximum Minimum Sample statistics are used to judge the randomness of the process variation and it helps us to decide if the process is in or out of control It can be observed through Sample Distribution Central Limit Theorem Sample distribution tends to be normally distributed regardless of the typeshape of the population process distribution N p 02 Process Mean p Standard deviation 0 Control Charts A time ordered plot of representative sample statistics obtained from an ongoing process that can be used to distinguish between random and nonrandom variability UCL Cente r LCL In control All data points randomly fall between UCL and LCL Out of Control Stop the process and correct it Typically LCL p 30 UCL p 30 Mean control chart xbar chart monitors the central tendency of process Control charts allow managers to identify points that are out of the normal range of variability so that corrective actions can be taken Signs that a process has gone out of control A point outside the limits near the limits a constant increase or decrease cycles or nonrandom patterns 2 out of 3 points in a row outside of the 20 limits 4 out of 5 points in a row outside 10 limits Type 1 error Concluding process not in control when it is Type 2 error Concluding process in control when it isn t Once a process has been determined to be stable it is important to determine whether process is capable To improve capability Lecture 6 I INVENTORY Types WIP raw materials nished goods supplies goods in transit Functions of Inventory Manage Production to permit operations Little s Law to smooth production requirements seasonality to decouple operations to eliminate sources of disruptions I Meet Demand anticipate and protect stock outs 3 Control Costs take advantage of orderproduction cycle hedge against price increases take advantage of quantity discounts Reasons not to hold inventory Expenses Costs Obsolescence Delayed responsiveness mask underlying problems too many inventory to identify problems Inventory vs Liabilities Tradeoffs of Inventorv Too Many Excess Cost from Salvage or Perish Ce Losses Holding Costs H or h Others Slow responsiveness hide problems To Little Shortage Costs from Lost Production Lost Opportunity backlog lost sales Lost Customers Inventorv Manaqement OM can add value by giving reasonable estimates and forecasting Record 7 Actual Inventory Inventory counting systems Periodic System Perpetual Inventory System Inventory Counting Technologies UPC barcodes RFID tags ABC Classi cation System Use usage x price to see importance A to C most accuracy to less accuracy A20 volume 80 EOQ Optimal Economic Order Quantity Q Objective meet demand with min Total Inventory Cost TIC Assumptions one product known constant demand demand evenly consumed throughout the period lead time doesn t vary each order in lot size 0 Holding costs is H per unit ordering costs S is independent of order quantity It is important to identify volume of orders Objective Choose an ordering quantity Q so to minimize the sum of annual ordering and holding costs while meeting customer annual demand Order lot size is Q units Holding Inventory Costs 2 g H D Ordering Inventory Costs 5 S TICQHBS 2 Q To nd Q equate Holding costs to Ordering costs or set derivatives of TIC l towards Q to zero Then Q 39 II hI rUl LI EL I ROP


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