Operations Management

Session 4: Kristine Cookies

Case

Last Class in Process

Analysis Module
What did we learn?
Throughput rate
Capacity

Whats the difference between capacity and throughput rate?

Bottleneck resource
Utilization rate
Throughput time
WIP
Littles Law:

Throughput Time = (Average) WIP / Throughput Rate

Session 4

Operations Management

Today
Team Presentations
Lecture (Kristens cookies and additional
comments on capacity management)

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Team Presentations

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Operations Management

What is it all about?

Process Characteristics
Capacity of a System

How much can you process in a week/day?

Response Time

How quickly can you meet demand?

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Operations Management

Process Flow
What are the inputs?
What are the outputs?
What are the activities?

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Operations Management

Process Flow Chart

YOU

YOU

MIXER

TRAY

ROOMIE
OVEN
OVEN
TRAY
TRAY

MIX

LOAD
TRAY

SET
OVEN

ROOMIE
TRAY

ROOMIE

TRAY

DOUGH

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BAKE

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COOL

PACK

PAY

Activity

12

16

20

Resource

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28

32

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Time

Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
Time

MIX

Resource

12

16

20

24 26 28

32

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You
Oven
Tray
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Kristine Cookies and

Measures
What is the Throughput time?

From the moment an order arrives till it is

finished, it takes 26 min.

Can the throughput time be reduced?

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Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
Time

MIX

Resource

12

16

20

24 26 28

32

36

You
Oven
Tray
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RM

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Activit

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
Time

MIX

Resource

12

16

20

24 26 28

32

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You
Oven
Tray
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Kristine Cookies and

Measures
What is the capacity of the system?
What is the slowest resource? (Assume that
the we have enough trays.)

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Activit

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
Time

MIX

Resource

12

16

20

24 26 28

32
10

36

You
Oven
Tray
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Bottleneck Analysis
It is clear that the bottleneck is the Oven

It is the only resource that once we start

producing is not idle.

It is the slowest resource: One dozen every 10

min.

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Capacity
It seems that if they have enough trays they
can produce a dozen of cookies every 10 min.

1.2 cookies per min.

In 4 hours (240 min) you can finish 22 trays:

240 26 = 214

214 / 10 = 21.4 or 21 trays.

Given the bottleneck is the oven, to maximize

capacity we must ensure that the oven runs
continuously: once every 10 min.

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Process Flow Chart

Order Size (Dozens): 1 Dozens
YOU

YOU

MIXER

TRAY

ROOMIE
OVEN
TRAY

MIX

LOAD
TRAY

SET
OVEN

ROOMIE
OVEN
TRAY

TRAY

ROOMIE

TRAY

DOUGH

TIME:

BAKE

COOL

MIXER:

6 minutes

PACK

PAY

TOTAL TIME
YOU:

6 + 2= 8 minutes

ROOMIE:
Session 4

1 + 2 +1 = 4 minutesOVEN:

TRAY:

19 minutes

1+ 9 = 10 minutes

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Process Flow Chart

Order Size (Dozens): 1 Dozen
YOU

YOU

MIXER

TRAY

ROOMIE
OVEN
TRAY

MIX

LOAD
TRAY

SET
OVEN

ROOMIE
OVEN
TRAY

TRAY

ROOMIE

TRAY

DOUGH

TIME:

TOTAL TIME
YOU:
ROOMIE:
Session 4

6 + 2= 8 minutes

BAKE

COOL

PACK

PAY

TRAY:

19/2 minutes

Dozens / Day = 22
MIXER:

1 + 2 +1 = 4 minutesOVEN:

6 minutes

1+ 9 = 10 minutes

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Process Flow Chart

Order Size: 2 Dozens
YOU

YOU

MIXER

TRAY

ROOMIE
OVEN
TRAY

MIX

LOAD
TRAY

SET
OVEN

ROOMIE
OVEN
TRAY

TRAY

ROOMIE

TRAY

DOUGH

TIME:

BAKE

COOL

18

10

PACK

PAY

TOTAL TIME
YOU:
ROOMIE:

6 + 2= 8 minutes

MIXER:

1 + 2 +1 = 4 minutesOVEN:

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6 minutes

TRAY:

2+ 18 = 20 minutes

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Activity

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
MIX

Time

12

16

20

24 26

28

32

36

Resource

10
You
Oven
Tray 1
Tray 2
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RM

How many dozen per

day?
60 minutes x 4 = 240 available minutes each
evening
240-36=204 available minutes after the first two
dozen is finished
204/20=10.2 two dozens finished in the remaining
204 minutes
2x11=22 dozens per day
Does it make sense to give a discount for an order
size of two dozen?
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Capacity Investment
Should we invest in a second Oven?

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Activity

Two Ovens. Order Size: 1 dozen

PAY
PACK
COOL

BAKE
SET OVEN

LOAD
MIX

Time

12

16

20

24 26

28

32

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Resource

8
You

You
Oven
Tray
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Bottleneck Analysis
Who is the bottleneck now?

The entrepreneur

Why did the bottleneck shift?

Could the numbers (as opposed to the
graph) indicate were the bottleneck is?
Now should we give a discount for ordering
2 dozen?

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Bottleneck Analysis
Your capacity:

1 dozen cookies / 8 minutes = 0.125 dozen cookies per

minute (or 1 dozen cookies every 8 minutes)

Oven capacity:

1 dozen cookies / 10 minutes

2 ovens x .1 dozen cookies per minute = 0.2 dozen cookies
per minute (or 1 dozen cookies every 5 minutes)

Mixer:

1/6=0.167 dozen cookies per minute

Roommate

=0.25 dozen cookies per minute

What is the slowest resource?

Note: same calculation as made in the previous class in Burgers example.

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Dozens per day with two

ovens
240-26=214 minutes for the first dozen
214/8=26.75 dozens in the next 214
minutes
27 dozen per day with two ovens.

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Economic Analysis
Having two ovens increase the capacity from
60/10=6 dozens per hour to 60/8=7.5 dozens
per hour.
What is the value of the additional oven?
(27-22)*300*Profit per dozen =
New capacity

# of selling days
Old capacity

Additional profit = $1,500*profit per dozen

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Economic Analysis
Example
Suppose we sell each dozen cookies for $1.50 per
dozen.
Assume there is no cost on your time.
The profit per dozen is then $1.50-$0.60$0.10=$0.80.
Therefore, the additional profit after being open 300
days is: 5x300x$0.80=$1200.
We are willing to buy another oven if it costs less
than $1200 and we have enough demand so that it
will be in use.
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Activity

Two Ovens
Order Size: 2 Dozens

PAY
PACK
COOL
BAKE
SET OVEN
LOAD
MIX

Time

Resource

You

12

16

20

24 26

28

32

36

You
Oven
Tray
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Process Flow Chart

OVENS = 2 and Order size =2 Dozen
YOU

YOU

MIXER

TRAY

ROOMIE
OVEN
TRAY

MIX

LOAD
TRAY

SET
OVEN

ROOMIE
OVEN
TRAY

TRAY

ROOMIE

TRAY

DOUGH

TIME:

TOTAL TIME
YOU:

6+4 = 10

ROOMIE:

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BAKE

COOL

18

10

PACK

PAY

Dozens / Day = 44 doz / day

MIXER:

TRAY:

OVEN: (18 +2) /2 = 10

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Summary
Tools & Techniques

Identification of Bottleneck

System Capacity

Throughput Time

Concepts

Bottleneck & Capacity depend of product mix

In high variety systems bottlenecks shift

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