Midterm Exam Flashcards
(27 cards)
Define the basic notion of capacity.
Based on finding the max output possible from a process.
Provide some examples of capacity measures in different industries.
Manufacturing Sector: volume of output/time
Service Sector: much more variety, sometimes do not use the best measurements
Design Capacity
Maximum output considered possible from a process with no operating constraints. (rarely achieved)
Effective Capacity
Maximum output considered possible from a process given normal operating constraints. (aka: operating capacity)
Capacity Utilization
(aka: utilization rate) Actual Output/Effective Capacity
Break-Even Capacity Formula
break-even units = [Fixed Cost/price-VC]
Challenges in Capacity Determination
1) Capacity is usually based on forecast demand.
2) Capacity usually must be added in chunks; can’t just add one unit at a time.
3) Lead or lag approach. Capacity rarely matches demand exactly.
4) Lumpy short-term demand: managers must decide to use peak demand or average demand capacity forecasts.
Demand Management
Change the demand pattern using:
- price
- promotion
- reallocate resources toward sales
- sell a complementary product
Flexible Capacity
Reduce lock-in to adjust to demand.
- Favorite tool of service sector (hire/fire). People are a primary productive resource.
Outsource Production
Contract manufacturers to produce products.
(Contract electronic manufacturers - CEM)
Examples: Apple & Foxconn; Kindle Fire, Sony, Wii.
Identify the 5 generic types of operating processes.
1) Continuous —– More Volume
2) Flow (Assembly Line)
3) Cell
4) Job (Batch)
5) Project —– More Variety
Continuous Process
- 24/7 production
- Special purpose equipment
- Non-discrete units of production
(Highest volume, lowest variety)
Examples: Oil refinery, news station, power plant
Flow Process
(aka assembly line)
- repetitive sequential production
- Mass production = high volumes of standardized output
- Discrete units of production
Examples: McDonalds, car manufacturing lines)
Cell Process
- In-between, hybrid process design.
- Subway restaurant model; pit crew model
Job Process
(aka batch productions)
- more variety, but lower volume
- general purpose equipment
- unconnected work flow
Examples: dine-in restaurant, metal processing shop
Project Process
- every unit of production varies (batch size = 1)
- Highly labor intensive
- usually not 24/7
Examples: Ship & building construction; theater production
Types of mass customization
- Collaborative: works with individuals to precise product offering; custom fit jeans
- Adaptive: firms produce a standardized product, but this product is customizable in the hands of the end-user
- Transparent: firms provide individual customers with unique products, without explicitly telling them that the products are customized.
- Cosmetic: firms produce a standardized physical product, but market it to different customers in unique ways
What are the two generic strategies that define how organizations compete in an industry? Provide an industry example of competitive positioning using these strategies.
1) Low-cost: Walmart
2) Differentiation: Target
In what ways can operations support a business strategy?
Low cost: Southwest - cheap fares, festival seating, point-to-point network
Differentiation: FedEx - High prices, fast delivery
Performance Frontier: x = Hi to Lo cost; y = Lo to Hi quality
What general business strategy do we use to compete?
Degree of differentiation versus cost
What will we produce to emphasize the unique characteristics of our strategy?
Service, facilitating goods
What themes or activities must operations emphasize to best support the business strategy?
Quality, cost, dependability, flexibility, speed, innovation, etc
What type of transformation process will best produce our goods and services?
Project, job, cell, flow, or continuous transformation process
How much capacity should each operating process have?
Capacity determination, product variety
