3. Strategic Capacity Management 4. Manufacturing Processes 5. Services Processes 6. Six-Sigma Quality
The second section of Operations and Supply Management: The Core is centered on the design and analysis of business processes. Maybe becoming an efficiency expert is not your dream, but it is important to learn the fundamentals. Have you ever wondered why you always have to wait in line at one store but another one seems to be on top of the crowds? The key to serving customers well, whether with products or with services, is having a great process. We use processes to do most things. You probably have a regular process that you use every morning. What are the tasks associated with your process? Do you brush your teeth, take a shower, dress, make coffee, and read the paper? Have you ever thought about how the tasks should be ordered or what the best way to execute each task is? In making these decisions you are allocating your own personal capacity.* This section is about designing efficient processes and allocating capacity for all types of businesses. Companies also need to develop a quality philosophy and integrate it into their processes. Actually, quality and process efficiency are closely related. Have you ever done something but then had to do it again because it was not done properly the first time? This section considers these subjects in both manufacturing and service industries.
*The original version of the movie “Cheaper by the Dozen” made in the 1950s was based upon the life of Frank Gilbreth who invented motion study in the 1900s. Gilbreth was so concerned with personal efficiency that he did a study of whether it was faster and more accurate to button one’s seven button vest from the bottom up or the top down. (Answer: bottom up!)
STRATEGIC CAPACITY MANAGEMENT
After reading the chapter you will: 1. Know what the concept of capacity is and how important it is to “manage” capacity over time. 2. Understand the impact of economies of scale on the capacity of a ﬁrm. 3. Understand what a learning curve is and how to analyze one. 4. Understand how to use decision trees to analyze alternatives when faced with the problem of adding capacity. 5. Understand the differences in planning capacity between manufacturing ﬁrms and service ﬁrms.
Shouldice Hospital: Hernia Surgery Innovation Capacity Management in Operations Capacity defined Strategic capacity planning defined
Capacity Planning Concepts
Economies and Diseconomies of Scale Capacity Focus Capacity Flexibility Best operating level defined Capacity utilization rate defined Capacity Focus defined Economies of scope defined
The Learning Curve
Plotting Learning Curves Logarithmic Analysis Learning Curve Tables Learning curve defined
Considerations in Adding Capacity Capacity cushion defined Determining Capacity Requirements Using Decision Trees to Evaluate Capacity Alternatives
Planning Service Capacity
Capacity Planning in Service versus Manufacturing Capacity Utilization and Service Quality
Summary Case: Shouldice Hospital—A Cut Above
S H O U L D I C E H O S P I TA L : H E R N I A S U R G E RY I N N O VAT I O N During World War II, Dr. Edward Earle Shouldice, a major in the army, found that many young men willing to serve their country had to be denied enlistment because they needed surgical treatment to repair hernias before they could be pronounced physically fit for military training. In 1940, hospital space and doctors were scarce, especially for a nonemergency surgery that normally took three weeks of hospitalization. So, Dr. Shouldice resolved to do what he could to alleviate the problem. Contributing his services at no fee, he performed an innovative method of surgery on 70 of those men, speeding their induction into the army. The recruits made their success stories known, and by the war’s end, more than 200 civilians had...
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