MGMT 339 Ch. 5

• Facilities- Design, Location, Environment, Layout
• Operational- Scheduling, materials, maintenance
• Process- Quality, Quantity
• Human- Skill, Compensation, Motivation, Training, Labor turnover
• Policy- Mgmt can increase by using overtime, 2nd & 3rd shifts
• Supply Chain- Distributor, transportation, warehouse
• External- Environmental Policy, Unions (Cap on work hrs)
• Products- Design --> Standardized = more quantity

• Leading, Following & Tracking
• Growth rate & demand variability
• Competition Behavior
• Direction of Technology
• Cost of Building- property tax, electricity
• Availability of capital & Inputs

Slide 9

• How much capacity needed? Capacity cushion, offset demand uncertainty
• Flexibility of facilities
• Timing of Changes - availability of capital
• Balance the changes to rest of system

Slide 10

• forecast future capacity
• Evaluate current capacity for gaps
• Alternatives (Identify)
• financial analysis
• Assess key qualitative issues for each choice - picking up new equipment-> layoff some workers = current workers moral hurt
• Choose best one
• Implement
• Monitor Results

Slide 11

• Long term vs. Short Term
• Long- overall level of capacity. facility size, trends & cycles
• Short- Seasonal, Irregular (oil shortage, storms, equipment breakdown, health hazards), random

Pg. 192 slide 12

Year



Beer sales, toy sales, airline traffic, vacation, tourism, , power usage, gas consumption, sports and recreation, education





Month



Welfare and social security checks, bank transactions





Week



Retail sales, restaurant meals, automobile traffic, automotive rentals, hotel registrations





Day



Telephone calls, power usage, automobile traffic, public transportation, classroom utilization, retail sales, restaurant meals



pg. 193 slide 12

Total processing time (hrs)/ capacity of machine (hrs) = how many machines of the type is needed.

• Need to be near customer - convenience
• Can't store services- Timing demand. Ex: Airline, bus tickets. Speed of delivery
• Volatility of Demand- Major peaks due to weather, social or cultural. Ex: fix; add more workers during peak hrs.

pg. 194 slide 14

• Available capacity
• Expertise (e.g. Dell’s printers and monitors)
• Quality considerations- firms that specialize can provide better quality.
• Nature of demand- if high & steady do inhouse. small or wide fluctuation = out.
• Cost: cheaper to outsource?- fixed costs, transportation.
• Risk: e.g. loss of operational control, knowledge sharing, info. liability--> customer--> damage--> reputation

pg. 195 slide 15

• Design flexibility into systems- adding water lines in advance
• life cycle- Intro, Growth, Maturity, Decline
• Big Picture- Links. Ex: adding more hotel rooms--> More parking, food, housekeeping?
• Prepare to deal with capacity “chunks”- not smooth. do u under/over capacity to match demand?
• Attempt to smooth out capacity requirements- find patterns and offset. ex: snow skis & water skis.
• Identify optimal operating level- Economies of scale/ diseconomies of scale

pg. 198 slide 16

If output is less than the optimal level, increasing output = decreasing average unit costs

• why does output increase = decrease cost?
• fixed costs are spread out over more units
• processing costs less cuz more customization
• Construction costs increase at a decreasing rate

pg. 200 slide 22

If the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs

• Distribution & Complexity- shipping frm one location, control & communication
• Inflexibility
• additional levels of bureaucracy = slow decision making

pg. 200 slide 22

• An operation in a sequence of operations whose capacity is lower than that of the other operations.
• The whole system is limited to that bottle neck output

pg. 196 slide 17

Ex: Theme Parks & Fast food

Analysis of amount of ppl in line to facilitate efficient amount of workers

TR = TC

Q = P+FC / R-V

• Q = Quantity
• P = Total Profit NOT PRICE!
• FC = Fixed Costs
• V = Variable
• R = Revenue