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MGSC 395 Week 3 of notes

by: Rachel Whitbeck

MGSC 395 Week 3 of notes MGSC 395

Rachel Whitbeck
GPA 4.0

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About this Document

These notes cover what we went over in class from Monday, February 1 through Wednesday, February 3, including process capability and capacity.
Operations Management
Pearse Gaffney
Class Notes
Management Science, Operations Management
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This 3 page Class Notes was uploaded by Rachel Whitbeck on Wednesday February 3, 2016. The Class Notes belongs to MGSC 395 at University of South Carolina taught by Pearse Gaffney in Spring 2016. Since its upload, it has received 30 views. For similar materials see Operations Management in Business, management at University of South Carolina.


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Date Created: 02/03/16
MGSC 395 MW 5:30 Monday, February 1, 2016  x (x double bar) is the average of the averages o The only thing on an “x bar chart” are averages (no actual data points) o When looking at x double bar charts, pay attention to the scale of the chart to determine which is actually more consistent about the average (dotted line in the middle) o But as long as the averages fall within the limits, it’s an “in control” situation and it’s all good in the hood  Process Capability (Cp) o Cp = (USL – LSL) ÷ 6(stdev)  Or, Cp = (upper specification limit minus lower specification limit) ÷ (6 times the standard deviation)  It’s 6 stdevs because that’s how many covers all of the data (remember 99.7% is covered within 3 stdevs on each side)  Cp is a ratio and you want it to be > 1 o Specification limits (for example for the amount of coke in a can) would be 12 ounces plus or minus some amount  When bits of your bell curve fall outside the spec limits, that’s bad because you can’t sell what’s outside the limits- it’s waste.  Cp would be <1  When your bell curve exactly fits within the spec limits, Cp = 1  This exactly meets customer requirements  Except… you don’t know anything about the last .3% not included in the 6 stdevs  So there are at least .3% defects  When bell curve fits within the spec limits and doesn’t even touch them, Cp >1  This means no defects in products, unless something changes  Process Capability Index (Cpk) o Cpk = min {(USL – x) ÷ 3stdev, (x – LSL)÷3stdev} o Critical value: Cpk ≥ 1.33  Better than 1.33 is “gravy”  Less than 1.00 is terrible Wednesday, February 3, 2016  Capacity- the maximum rate of output of a process/system to meet current and future demands o Long term (5+ years) vs short term (now, next 6 months) o Utilization- the degree to which a resource is being used  Utilization rate- should we increase or decrease capacity?  Utilization= [(average output rate)÷ (maximum capacity)]x100% ~= “time” a resource is being used÷ total available resource time  The percentage that you get can be good or bad, depending on whether you’re make a profit return  Aerial view of a stick figure symbolizes the people involved o Capacity cushion- the amount of reserve capacity a process uses to handle sudden increases in demand (or temporary losses of production capacity)  save some capacity for “just in case” scenarios  Cushion= 100% -- average utilization rate o Capacity requirements:  Scenario A: One product processed, time frame is 1 year  Capacity= processing hours required for year’s demand Hours available in year minus desired capacity cushion  M = Dp ÷ N(1—c/100)  M ~ capacity requirements D= annual demand p = processing time (hours per unit) N = Total number available hours in the year C = desired capacity cushion (as a percentage. Do not put a decimal into the formula!!)  The number that you get (and round up) is the number of equipment/people (resources) you need.  If you find that your company needs 16 machines, but your boss only gives you enough for 10, you should increase something else, like shifts or days worked  Scenario B: More than one product processed o M = [Dp + D/Q x S] product1Dp + D/Q x S] product2 N(1—c/100) Q = lot (or batch size) S = setup time (hours per unit)  Economies of scale: the average unit cost can be reduced by increasing its output rate  Diseconomies of scale: average unit cost increases as facility grows  3 strategies: o Expansionist- risk taker; stay ahead of demand; FOMO on sales o Wait and see- lag demand; use short-term strategies o Intermediate- “follows the leader”; stops anyone from gaining competitive advantage


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