Operations Administration: Process Evaluation and Applications Module • Changing Options for Competitive Benefit • Functional Measures: Time T, Products on hand I, Throughput rate Ur • • • • Link through Little's Law Link to Monetary Measures Redressers for Improvement CRU Laptop Rentals
S i9000. Chopra/Process Moves
How do operations help a company compete? The changing sources of competitive advantage • Low Cost & Scale Financial systems (< 1960s) – You can have any color you want as long as it can be black Targeted Factories (mid 1960s) Adaptable Factories and Product selection (1970s) – A car for every taste and purse. Top quality (1980s) – Quality is free. Period (late 1980s-1990s) – We love the product nevertheless where can it be? – Don't sell what you produce. Develop what markets. S. Chopra/Process Flows
Operational Efficiency Measures
• • • • • Flow time Throughput Inventory Process Expense Quality
H. Chopra/Process Moves
The organization imperative: creating economic worth
Improvement levers Revenues Price x Amount Material + Labor + Energy & Overhead PP& E + Inventory & Other 1 ) 2 . Maximize price Boost throughput
Costs Economic value added (EVA) -
1 ) 2 .
Reduce costs Improve quality
Capital put in Opportunity price x Measured average expense of capital
1 ) 2 .
Reduce capital depth Reduce inventory
Operational metrics 4
Economic metrics S i9000. Chopra/Process Runs
Relating operational measures (flow time T, throughput L & inventory I) with Little's Legislation.........
Stream rate/Throughput 3rd there�s r
Flow Time Capital t [hrs]
• Inventory sama dengan Throughput by Flow Period I = RxT • Turnover sama dengan Throughput as well as Inventory = 1/ To S. Chopra/Process Flows 5
Customer Stream: Taco Bells processes typically 1, 500 customers daily (15 hours). On average you will find 75 customers in the cafe (waiting to put the buy, waiting for the order to turn up, eating etc . ). How long does a normal customer dedicate at Palabrota Bell and what is the average customer yield? Job Stream: The Travellers Insurance Company operations 10, 1000 claims each year. The average finalizing time is definitely 3 weeks. Supposing 50 several weeks in a year, precisely what is the average quantity of claims " in process”. Material Stream: Wendy's techniques an average of a few, 000 lb .. of burgers per week. The normal inventory of raw meat is a couple of, 500 lb. What is the regular hamburger's circuit time and Wendy's turnover? T. Chopra/Process Moves 6
Procedure Flow Examples
Process Flow Examples
Income: Motorola offers $300 , 000, 000 worth of cellular tools per year. The typical accounts receivable in the cellular group is $45 million. What is the standard billing to collection procedure cycle period? Question: A general manager in Baxter declares that her inventory becomes three times 12 months. She also declares that everything that Baxter acquires gets prepared and leaves the docks within 6 weeks. Are these statements consistent?
S i9000. Chopra/Process Goes
MBPF Inc.: Consolidated Statement
Net Sales Costs and bills Cost of Products Sold Offering, general and administrative bills Interest charge Depreciation Different (income) expenditures TOTAL COSTS AND EXPENSES INCOME BEFORE INCOME TAXES PROVISION FOR INCOME TAXES NET INCOME RETAINED EARNINGS, STARTING OF 12 MONTHS LESS CASH DIVIDENDS DECLARED RETAINED EARNINGS FOR END OF YEAR NET INCOME PER COMMON SHARE DIVIDEND PER COMMON SHARE 250. 0 175. 8 47. 2 four. 0 5. 6 installment payments on your 1 234. 7 12-15. 3 several. 0 almost eight. 3 23. 0 2 . 1 37. 2 0. 83 0. 21
S i9000. Chopra/Process Goes
MBPF Inc.: "balance sheet"
CURRENT ASSETS Cash Short-term investments at cost (approximate mkt. ) Receivables, fewer allowances of $0. six mil Inventories Other current assets TOTAL CURRENT POSSESSIONS PROPERTY, FLOWER AND EQUIPMENT (at cost) Land Buildings Machinery and equipment Building in progress Subtotal Less accrued depreciation NET PROPERTY, HERB AND PRODUCTS Investments Prepay expenses and also other deferred expenses Other resources TOTAL RESOURCES S....