Production Management

Production and
Operations
Management
Graduate School
NOTRE DAME
UNIVERSITY
Cotabato City
Topics
Introduction
Productivity
Forecasting
Product and Service Design
Capacity Planning
Decision Theory
Process Selection and Facility Layout
Linear Programming
Production and Operations Management Graduate School

Notre Dame University
Topics
Design of Work Systems

Transportation Model
Quality

Introduction
Operations is that part of the

organization that is responsible for
producing goods and/or services.
Physical Items Combination of time,

location, form, etc
Ideally Supply should match the demand

Introduction
Characteristics Goods Services
Customer Contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of
productivity Easy Difficult
Evaluation Easier More difficult

Introduction
Supply Side Operations and Supply

Chain
Demand Side Sales and Marketing
However, Operations function needs the

support and input from other areas of the
organization. (Basic Finance,
Operations and Marketing)
Introduction
Scope of Oper. Mgmt.
Organization
Ranges across the
organization
Finance Operations Marketing

Why study?
OpMan is central to all
Operations
organizations.
Functional areas are
interrelated
Finance Marketing More functions are
affected by OpMan

Introduction
Operations Management
The management of systems or processes
that create goods and/or provide services.
Operation Manager
The key figure in the system
The primary function is to guide the system by decision making.
Certain decisions affect the design of the system, and others affect
the operation of the system.

Introduction
Operations Management and Decision

Making
The chief role of an operations manager is
planning and decision making.
Manager exerts considerable influence to
which the goals and objectives are realized.
(Should be anchored with the Mission-Vision)
Decision making Models, Quantitative
Approaches, Analysis of Trade-offs, System
Approach, Ethics, Legal Issues, etc.
Quiz 1
Quiz 1:
1. What can you do as an Operations

Manager to compete against your
competitors?
2. Is your knowledge of Operations
Management, as an Operations
Manager, important to your
organization?

What does product and service design do?

Translate customer wants and needs into
product and service requirement
Refine existing products and services
Develop new products and/or services
Formulate cost targets
Translate product and service specifications

into process specifications

Reasons for product and service design

It has typically strategic impact in the
success and prosperity of the organization
It has an impact on future activities.
This is some of the most fundamental that

managers must make
The main forces are market opportunities
and threats.


Legal and Ethical Considerations (Product
liability, environment)
Sustainability (Three Rs)
Strategies for Product or Service Life

Strategies urit
y
Mat De
c lin
e
th
r ow
G
du c t i on
Intro


Degree of Standardization
Reliability
Robust Design
Human Factors

Designing for Production

Concurrent engineering (bringing
engineering design and manufacturing
together early in the design phase)
CAD
Production Requirements
Component Commonality

Service Design
refers to an act, something that is done to or
for customer
Includes facilities, processes, and skills
needed to provide the service
Created and delivered simultaneously.
Involves development or refinement of the

overall service package

Service Design
Begins with the choice of strategy, which
determines the nature and focus of he
service, and the target market.

Differences between Service Design and

Product Design
Products are generally tangible; services
are generally intangible
Services are created and delivered at the
same time
Services cannot be inventoried

Reliability is the measure of a product,

service, part, or system to perform its
intended function under a prescribed set
of conditions. (3 Rules)
MTBF = Mean Time Between Failures

P = 1 e(-T/MTBF) (prob. of failure)
Seatwork

Quiz 2:
1. Engr. Molina, a designer of ABC Company, created a product that
consist only two identical components. The design requires that
these components must all function at the same time for the
system to operate. The reliability of the entire system is rated at
94%. Find the probability of each component. Draw a diagram of
the system.
2. After having presented the design to the BOD, Engr. Molina was
asked to improve the products reliability. Assuming that, he
added a back-up with 95% reliability and a switch with 98%
reliability for each component; compute the reliability of the entire
system. Draw a diagram of the new system. Is it a good design,
why?
3. When Engr. Molina presented again to the BOD, he added
features of time element of the product other than its reliability. He
presented that the product has an MTBF of 6 years. Find the
probability of failure of the product between four to seven years.
Make a diagram.

Capacity Planning
Capacity
issues are important for all organizations,
and at all levels of an organization
refers to an upper limit or ceiling on the
load that an operating unit can handle
the operating unit might be a plant,
department, machine, store, or worker
important information for planning

Capacity Planning
Importance of Capacity
Capacity decisions have a real impact on the
ability of the organization to meet future
demands for products and services
Capacity decisions affect operating costs
Capacity is usually a major determinant of initial
cost
Capacity decisions often involve long-term
commitment of resources
Capacity decisions can affect competitiveness
Capacity affects the ease of management

Capacity Planning
Capacity can be refined into two useful

definitions:
Design capacity the maximum output that
can possibly be attained
Effective capacity the maximum possible
output given a product mix, scheduling
difficulties, machine maintenance, quality
factors, and so on.

Cost-Volume Analysis
Profit = Total Revenue Total Cost
Total Revenue = USP * Q

Total Cost = FC + VC
VC = v * Q
At BEP:
Profit = zero (TR=TC)
USP*Q = FC + v *Q
Q = FC / (USP - v)

If Profit is desired: (Units)

Profit = (USP*Q) (FC + v *Q)
Profit = USP*Q FC v *Q
Profit + FC = USP*Q - v *Q
Profit + FC = Q (USP - v)
Q = (Profit + FC) / (USP - v)

Sample: The owner of Old-Fashioned Berry Pies, S.
Simon, is contemplating adding a new line of pies,
which will require leasing new equipment for a
monthly payment of $6,000. Variable costs would be
$2.00 per pie, and pies would retail for $7.00 each.
a. How many pies must be sold in order to break-
even?
b. What would the profit (loss) be if 1,000 pies are
made and sold in a month?
c. How many pies must be sold to realize a profit of
$4,000?
Seatwork

Quiz 3
The manager of company XYZ is confronted with the following options in order to
produce its new product. He is about to choose among the 3 machines with the
corresponding ranges of output and other necessary data.
Annual Fixed Cost Variable Corresponding Range
Machine Selling Price/unit (Php)
(Php) cost/unit of Output (units)
A 9600 10 1 to 300 40
B 10640 14 1 to 500 42
C 15600 16 1 to 750 46
Given the data above, answer the following:
a. Compute for the BEP in units of each machine.
b. At what number of units will the manager be able to realize a profit of
P2,000.00 if he purchased Machine A?
c. If the annual demand for the company would be from 480 to 530 units,
which machine is more favorable for the manager to purchase? Why?
d. Supposing that Machines B and C can produce more than its stated
range of output; at what number of units will the two machines have the
same profit?

Decision Theory
Decision Theory represents a general

approach to decision making.
Decisions that lend themselves to a
decision theory approach tend to be
characterized by these elements:
A set of possible future conditions exists
A list of alternatives to choose from
A known payoff for each alternative

Decision Theory
A decision maker would employ this process
Identify the possible future conditions (called states
of nature)
Develop a list of possible alternatives
Determine or estimate the payoff associated with

each alternative for every possible future condition
If possible, estimate the likelihood of each possible
future condition
Evaluate alternatives according to some decision
criterion

Decision Theory
Decision environments
Certainty relevant parameters are known
Uncertainty it is impossible to assess the
likelihood of various possible future events
Risk - certain parameters have probabilistic
outcomes
Example

Decision Theory
Uncertainty it is impossible to assess the
likelihood of various possible future events
Maximin
Maximax
Laplace
Minimax Regret
Decision Environments

Decision Theory
Risk - certain parameters have probabilistic
outcomes
EMV Expected Monetary Value
Decision Tree
EVPI
Decision Environments

Decision Theory
Example: Apply each decision criterion:
Possible Future Demand
Alternative
Low Moderate High
Small Facility 10 10 10
Medium Facility 7 12 14
Large Facility (4) 2 16

* Value in Million Dollars
Seatwork

Decision Theory
Decision Tree
Is a schematic representation of the
alternatives available to a decision maker
and their possible consequences.

Decision Theory
Decision Tree
Build Small:
Low Demand
(0.4)
$40 Low = (0.4)(40)
$40
Do Nothing High = (o.6)(55)
Build Small
Overtime
High Demand $40
(0.6)
Expand
$55
Do Nothing $10
Low Demand Build Large:
Build Large
(0.4)
Low = (0.4)(50)
Reduce Prices
$50 High = (o.6)(70)
High Demand
(0.6) $70

Decision Theory
Sensitivity Analysis
Provides a range of probabilities over which the
choice of alternatives would remain the same.
Useful when there are two states of nature
Steps:
Construct a graph
Use algebra to determine the range of probabilities
Thus, providing a visual indicator of the range of probability

over which the various alternatives are optional.

Quiz 4
A small building contractor has recently experienced two
successive years in which work opportunities
exceeded the firms capacity. The contractor must
now make a decision on capacity for the next year.
Estimated profits under each of the two possible
states of nature are as shown in the table below.
Which alternative should be selected if the decision
criterion is:
Next Years Demand
a. Maximax Alternative
Low High
b. Maximin
Do Nothing 50 60
c. Laplace
Expand 20 80
d. Minimax Regret
Subcontract 40 70

Quiz 4
Suppose a certain amount of decision, the contractor is
able to subjectively assess the probabilities of low
and high demand: P(low) = 0.3 and P(high) = 0.7.
a. Determine the expected profit of each alternative.

Which alternative is best? Why?
b. Analyze the problem using a decision tree. Show the
expected profit for each alternative on the tree.
c. Compute the expected value of perfect information.
How could the contractor use this knowledge?

Itrefers to the way production of goods or

services is organized.
How an organization approaches process
selection is determined by the organizations
process strategy
Make or buy decision
Capital intensity
Process flexibility
Capital intensity and Process flexibility are major

factors if the organization chooses to make
rather than buy

Process Types:
Job Shop low volume high variety goods or
services
Batch moderate volume of goods or services
Repetitive higher volume, more standardized
Continuous very high volume of high standardized
Project work that is non-routine
Service Process Design Process Flowchart

Layouts configuration of departments,

work centers, and equipment, with
particular emphasis on movement of
work (customers or materials) through
the system
Line Balancing the process of assigning
tasks to workstations.

Line Balancing
Cycle time maximum time allowed at each
workstation
Minimum cycle time longest task time
Maximum cycle time - equal to the sum of the
task times
Task time
Output Capacity = operating time/CT
Desired output rate
Number of Workstations

Line Balancing
Example: time in Task Time (min)
minutes a 0.1
a b b 1
0.1 1.0 c 0.7
d 0.5
c d e e 0.2
0.7 0.5 0.2 Total (t) 2.5
WS = t / CT = 2.5/1 = 2.5 (approx. 3 WS)
To Solve

Time Assign
WS Eligible Will Fit Idle Time
Remaining Task
1 1.0 a, c a, c a (0.1)
0.9 b, c b, c c (0.7)
0.2 0.2
2 1.0 b b b (1.0)
0.0 0
3 1.0 d d d (0.5)
0.5 e e e (0.2)
0.3 0.3
Total 0.5

% Idle Time = [IT / (CT*WS)] * 100

= [0.5/(3*1.0)] * 100
= 16.7%
Effy of the Line = 100 %IT

= 100 16.7
= 83.3%
Seatwork

WS 1 WS 2 WS 3
a b
c d e
Tasks assigned to each workstation

Sample Problem: As part of a major plant renovation project, the industrial

engineering department has been asked to balance a revised assembly
operation to achieve an output of 240 units per eight- hour day. Task times
and precedence relationships are as follows:
Do each of the following: Duration Precedes
a. Draw a precedence diagram. Task
(minutes) Task
b. Determine the maximum cycle time.
c. Determine the minimum number of stations needed. a 0.2 b
d. Assign tasks to workstations on the basis of greatest number of following tasks. Use
longest processing time as a tiebreaker. If tie still exist, assume indifference in choice. b 0.4 c
e. Compute the percentage of idle time for the assignment in part d.
c 0.2 f
d 0.4 e
e 1.2 g
f 1.2 g
g 0.8 end

Sample Problem: Twelve tasks, with times Length Follows

Task
and precedence requirements as shown in the (minutes) Task
following table, are to be assigned to a 0.1 -
workstations using cycle time of 1.5 minutes. b 0.2 a
Two heuristic rules will be tried: (1) greatest c 0.9 b
positional weight, and (2) greatest number of
d 0.6 c
following tasks.
e 0.1 -
In each case, the tiebreaker will be shortest f 0.2 d, e
task time.
g 0.4 f
a. Draw a precedence diagram for this line. h 0.1 g
b. Assign tasks to stations under each of the rules.
i 0.2 h
c. Compute for the percentage of idle time for
each rule. Which line is more favorable j 0.7 i
between the two rules? k 0.3 j
l 0.2 k

Designing Process Layouts

The main issue concerns the relative
positioning of the departments involved.
To develop a good layout: some
combinations will be more desirable than
others.
Layouts can also be influenced by external
factors

The most common Locations

goals in designing
process layouts are A B C
minimization of D E F
transportation costs
or distances Work centers to be assigned:
travelled. 1 4
2 5
3 6

Table 1: Interdepartmental workflow

Example: Assign the three
departments shown in the Department
Fr To
table 1 to locations A, B, 1 2 3
and C, which are 1 - 10 80
separated by the distances 2 20 - 30
shown in table 2, in such a 3 90 70 -
way that transportation
cost is minimized. Use the Table 2: Distances between locations
heuristic: Assign Locations
Fr To
departments with the A B C
greatest interdepartmental A - 20 40
work flow first to locations B 20 - 30
that are closest to each
C 40 30 -
other.

Linear Programming
LP is a powerful quantitative tool used by operations

managers and other managers to obtain optimal
solutions to problems that involve restrictions or
limitations.
Materials, budgets, labor, machine time, etc.
Four components
Objective (maximization or minimization)
Decision Variables (amounts)
Constraints (limitations)
Parameters (numerical values)

Linear Programming
Graphical Linear Programming

Plot the constraints on a
graph and identifies an area
that satisfies all of the
constraints.

Linear Programming
Example
A firm that assembles computers and computer equipment is about to start
production of two new types of microcomputers. Each type will require assembly
time, inspection time, and storage space. The amounts of each of these resources
that can be devoted to the production of the microcomputers is limited. The
manager of the firm would like to determine the quantity of each microcomputer to
produce in order to maximize the profit generated by sales of these
microcomputers.
In order to develop a suitable model of the problem, the manager has met with
design and manufacturing personnel. As a result of those meetings, the manager
has obtained the following information:
Type 1 Type 2
Profit per unit P60 P50
Assembly time per unit 4 hours 10 hours
Inspection time per unit 2 hours 1 hour
Storage space per unit 3 cubic feet 3 cubic feet

Linear Programming
The manager also has acquired information on the availability of company

resources. These (daily) amounts are:
Resource Amount Available

Assembly time 100 hours
Inspection time 22 hours
Storage space 39 cubic feet
The manager met with the firms marketing manager and learned that demand
for the microcomputers was such that whatever combination of these two types
of microcomputers is produced, all of the output can be sold.
To Solve

Linear Programming
Sample Problem: A studio sells photographs and

prints. It cost $20 to purchase each photograph
and it takes 2 hours to frame it. It costs $25 to
purchase each print and it takes 5 hours to
frame it. The store has at most $400 to spend
and at most 60 hours to frame. It makes $30
profit on each photograph and $50 profit on each
print. Find the number of each that the studio
should purchase to maximize profits.

Learning Curves
Learning is usually occurring when humans are involved

Human performance of activities typically shows improvement when the
activities are done on a repetitive basis.
The time required to perform a task decreases with increasing
repetitions.
The basic relationship
between increasing
repetitions and a
decreasing time per
Time per repetition
repetition.
The curve will never
reach zero.
Referred to as an
experience curve, a
progress function, or
an improvement
function.
Number of repetitions

Learning Curves
The learning effect is the result of other factors in addition to actual

worker learning.
Some of the improvements can be traced to preproduction factors
selection of tooling and equipment, product design, methods analysis,
and, in general the amount of effort expended prior to the start of work.
Other factors may involve changes after production has begun
changes in methods, tooling, and design.
Every doubling of repetitions results in a constant percentage
decrease in the time per repetition.
Typical decreases range from 10 percent to 20 percent.
An 80 percent learning curve describes 20 percent

decrease in unit (or average) time with each doubling
of repetitions, and a 90 percent curve denotes a 10
percent improvement rate.
100 percent curve would imply no improvement
at all.

Learning Curves
Example 1: An activity is known to have an 80 percent learning curve. It

has taken a worker 10 hours to produce the first unit. Determine
expected completion times for these units: 2nd, 4th, 8th and 16th (note
successive doubling of units).
Unit Unit Time (Hours)

1 = 10
2 0.8 * 10 = 8
4 0.8 * 8 = 6.4
8 0.8 * 6.4 = 5.12
16 0.8 * 5.12 = 4.096
Each time the cumulative output doubles, the time per

unit decreases by 20 percent.

Learning Curves
Example 1: An activity is known to have an 80 percent learning curve. It

has taken a worker 10 hours to produce the first unit. Determine expected
completion times for these units: 2nd, 4th, 8th and 16th (note successive
doubling of units).
In addition: What is the expected completion times for units: 3rd, 5th, 6th and
7th?
Unit Unit Time (Hours)
3 10 * 3(ln0.8/ln2) =
7.0210
5 10 * 5(ln0.8/ln2) =
5.9564
6 10 * 6(ln0.8/ln2) =
5.6168
7 10 * 7(ln0.8/ln2) =
5.3449
Formula: Tn = T1 Where: Tn = Time for nth unit

* nb T1 = Time for first unit
b = ln learning% / ln 2
To solve the problem, you may also use the table of learning
factor.
Learning Curves
Example 1: An activity is known to have an 80 percent learning curve. It has

taken a worker 10 hours to produce the first unit. Determine expected
completion times for these units: 2nd, 4th, 8th and 16th (note successive
doubling of units).
In addition: What is the total expected time to complete all eight
units and the average time for each unit?
Unit Number Unit Time
1 Refer to table of learning
1.0
factor using 80 percent.
2 0.8
3 0.702
4 Formula: Tn = T1 * Total
0.640
5
time factor
0.596
6
= 10 * 5.346
0.562
7
= 53.46 hours
0.534
8 0.512
Ave. Time = 53.46 / 8
Total 5.346
= 6.682 hours

Learning Curves
Applications of Learning Curves:

Manpower planning and scheduling
Negotiated purchasing
Pricing new products
Budgeting, purchasing, and inventory planning
Capacity planning
Cautions and Criticisms:

Learning rates may differ from organization to organization and by type of work.
Projections based on learning curves should be regarded as approximations of actual
times and treated accordingly.
Because time estimates are based on the time for the first unit, considerable care should
be taken to ensure that the time is valid.
It is possible that at some point the might level off or even tip upward, especially near the
end of a job.
Some of the improvements may be more apparent than real.
In mass production situations, learning curves may be of initial use in predicting how long
it will take before the process stabilizes.
Users of learning curves sometimes fail to include carryover effects.
Shorter product life cycles, flexible manufacturing, and cross-functional workers can affect
the ways in which learning curves may be applied

Learning Curves
Problem 1: An aircraft company has an order to

refurbish the interiors of 18 jet aircraft. The work
has a learning curve percentage of 80. On the
basis of experience with similar jobs, the
industrial engineering department estimates that
the first plane will require 300 hours to refurbish.
Estimate the amount of time needed to complete:
a.The fifth plane

b.The first five planes.
c.All 18 planes.

Learning Curves
Problem 2: Estimate the time it will take to

complete the 4th unit of a 12-unit job involving a
large assembly if the initial unit required
approximately 80 hours for each of these
learning percentages:
a.72 percent
b.87 percent
c.95 percent

Learning Curves
Problem 5: A manager wants to determine an appropriate learning

percentage for a certain activity. Toward the end, times had been
recorded for completion of each of the first six repetitions. They are:
Repetition Time (min.)

1 46
2 39 a. Determine the approximate learning
percentage.
3 35
b. Using your answer from part a, estimate
4 33 the average completion time per
repetition assuming a total of 30
5 32 repetitions are planned.
6 30

The Transportation Model
Why is there a need to do location decisions?
Market Expansion
Depletion of basic inputs
Shift in markets
Transformation models can also be used when a firm is trying to decide where to
locate a new facility. Before opening a new warehouse, factory, or sales office, it is
good practice to consider a number of alternative sites. Good financial decisions
concerning facility location also attempt to minimize total transportation and
production costs for the entire system.
The transportation problem involves finding the lowest cost plan for distributing
stocks of goods or supplies from multiple origins to multiple destinations that demand
the goods.
Demand Side
Branch 1 Customer 1
Supply Side
Branch 2 Customer 2
Branch 3 Customer 3

The shipping (supply) points can be factories, warehouses, departments, or any
other place from which goods are sent.
Destinations can be factories, warehouses, departments, or any other points that

receive goods.
The information needed to use the model consists of the following:

1. The list of the origins and each ones capacity or supply quantity per period.
2. A list of destinations and each ones demand per period.
3. The unit cost of shipping items from each origin to each destination.
Use of the transportation model implies that certain assumptions are satisfied.
The major ones are:
1. The items to be shipped are homogeneous.
2. Shipping cost per unit is the same regardless of the number of units shipped.
3. There is only one route or mode of transportation being used between each
origin and each destination.

Location Decisions:
The transportation model can be used to

compare location alternatives in terms of their
impact on the total distribution costs for a
system.
The procedure involves working through a
separate problem for each location being
considered and then comparing the resulting
costs.

Factories Warehouses
Sample Problem: (Sources) (Destinations)
100 units Branch 1 Customer 1 300 units
Shipping Requirements
Capacities Routes
F T C1 C2 C3
Cost of
B1 $5 $4 $3 shipping 1
unit from a
B2 $8 $4 $3 branch to
customer
B3 $9 $7 $5

Sample Problem:
1. The first step is to develop a transportation table.
F T C1 C2 C3 Capacity
B1 $5 $4 $3 100
B2 $8 $4 $3 300
B3 $9 $7 $5 300
Requirement 300 200 200 700
2. Next is to use the northwest corner rule, that is to start at the upper left-hand cell.
a. Exhaust the supply (capacity) at each row before moving down to the next row.
b. Exhaust the demand (requirements) of each column before moving to the right to the
next column.
c. Check that all supply and demands are met.
3. Compute for the cost. ($4,200)
4. Evaluate to see if it is the optimal. Use either stepping-stone or MODI method.

Sample Problem:
4. .. In using the stepping-stone method, the process has two distinct parts:
Testing the current solution to determine if improvements are possible
Making changes to current solution in order to obtain an improved solution
Note: The number of occupied routes (or squares) must always be equal to one less than the sum
of the number of rows plus the number of columns. (r + c 1 = 5)
B1 100 $5 $4 $3 100
B2 200 $8 100 $4 $3 300

B3 $9 100 $7 200 $5 300
a. Select an unused square to be evaluated.
b. Beginning at this square, trace a close path back to the original square via squares currently used
horizontally and vertically.
c. Begin with a plus (+) sign, then alternately thereafter, that is, -, +, -, +.
d. Calculate the improvement index using the unit cost figures.
e. Repeat the steps until an improvement index has been calculated for all unused squares. If all indices
computed are greater than or equal to zero, an optimal solution has been reached.

Sample Problem:
4. .. In using the stepping-stone method, the process has two distinct parts:
If a negative value is obtained, then, it is possible to improve the current solution and
decrease total shipping cost.
B1 100 $5 $4 $3 100
B2 100 $8 200 $4 $3 300

B3 100 $9 $7 200 $5 300
6. Evaluate the unused squares.

Sample Problem:
7. .. If a negative value is obtained, then, it is possible to improve the current
solution and decrease total shipping cost.
B1 100 $5 $4 $3 100
B2 $8 200 $4 100 $3 300

B3 200 $9 $7 100 $5 300
9. Evaluate the unused squares.

Sample Problem:
4. ..In using the MODI (modified distribution).
B1 100 $5 $4 $3 100
B2 200 $8 100 $4 $3 300

B3 $9 100 $7 200 $5 300
a. Compute the values for each row and column that are currently used.
B1 + C1 = 5 B2 + C2 = 4 B3 + C3 = 5
B2 + C1 = 8 B3 + C2 = 7
b. Set B1 = 0
c. Solve all the values
d. Compute the improvement index for each unused square by:
Improvement Index = Cost X Y; or
Iij = Cij Ri - Kj
e. Select the largest negative index and proceed using the stepping-stone method.

Sample Problem: Unbalanced Transportation Problems

Unbalanced problems can be handled easily by the same procedures if we
first introduce dummy sources or dummy destinations.
F T C1 C2 C3 Dummy Capacity
B1 250 $5 $4 $3 0 250
B2 50 $8 200 $4 50 $3 0 300
B3 $9 $7 150 $5 150 0 300
Degeneracy in the problem. Degeneracy in the problem arises when the number of occupied
squares is less than the number of rows + column 1.

Problem 2: A toy manufacturer wants to open a third warehouse that will

supply three retail outlets. The new warehouse will supply 500 units of
backyard playsets per week. Two locations are being studied, N1 and N2.
Transportation costs for location N1 to stores A, B, and C are $6, $8, and
$7, respectively; for location N2, the costs are $10, $6, and $4,
respectively. The existing system is shown in the following table. Which
location would result in the lower transportation costs for the system?
1 $8 $3 $7 500
2 $5 $10 $9 400
Requirement 400 600 350

Problem 3: A large firm is contemplating construction of a new

manufacturing facility. The two leading locations are Toledo and Cincinnati.
The new factory would have a supply capacity of 160 units per week.
Transportation costs from each potential location and existing locations
are shown in the following table. Determine which location would provide
the lower transportation costs.
From Toledo to Cost per unit From Cincinnati to Cost per unit
A $18 A $7
B 8 B 17
C 13 C 13
To
From A B C Supply (Units/wk)
1 10 14 10 210
2 12 17 20 140
3 11 11 12 150
Demand (Units/wk) 220 220 220

Problem 4: A large retailer is planning to open a new store. Three

locations in California are currently under consideration: South Coast
Plaza (SCP), Fashion Island (FI), and Laguna Hills (LH). Transportation
costs for the locations and costs, demands, and supplies for existing
locations and warehouses (origins), are shown below. Each of the
locations has a demand potential of 300 units per week. Which location
would yield the lowest transportation costs for the system?
To Supply
From A B (Units/wk)
To
1 15 9 660
From
Warehouse SCP FI LH
2 10 7 340
1 $4 $7 $5
3 14 18 200
2 11 6 5
3 5 5 6 Demand
400 500
(Units/wk)

Quiz: Don Yale, president of Hardrock Concrete Company, has plants in three
locations and is currently working on three major construction projects, located at
different sites. The shipping cost per truckload of concrete, plant capacities and
project requirements are provided in the accompanying table.
F T Project A Project B Project C Capacity

Plant 1 $10 $4 $11 70
Plant 2 $12 $5 $8 50
Plant 3 $9 $7 $6 30
Requirement 40 50 60


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Production and

Production and Operations Management Graduate School

Design of Work Systems

Production and Operations Management Graduate School

Operations is that part of the

Physical Items Combination of time,

Ideally Supply should match the demand

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Supply Side Operations and Supply

However, Operations function needs the

Finance Operations Marketing

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Operations Management and Decision

1. What can you do as an Operations

Production and Operations Management Graduate School

What does product and service design do?

Develop new products and/or services

Formulate cost targets

Translate product and service specifications

Production and Operations Management Graduate School

Reasons for product and service design

This is some of the most fundamental that

Production and Operations Management Graduate School

Reasons for product and service design

Strategies for Product or Service Life

Production and Operations Management Graduate School

Reasons for product and service design

Production and Operations Management Graduate School

Designing for Production

Production and Operations Management Graduate School

Involves development or refinement of the

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Differences between Service Design and

Production and Operations Management Graduate School

Reliability is the measure of a product,

MTBF = Mean Time Between Failures

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Capacity can be refined into two useful

Production and Operations Management Graduate School

Profit = Total Revenue Total Cost

Total Revenue = USP * Q

Production and Operations Management Graduate School

If Profit is desired: (Units)

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Decision Theory represents a general

A known payoff for each alternative

Production and Operations Management Graduate School

Determine or estimate the payoff associated with

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Production and Operations Management Graduate School

Large Facility (4) 2 16

Production and Operations Management Graduate School

Production and Operations Management Graduate School

% Idle Time = [IT / (CTWS)] 100