The Goal Debrief

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What is The Goal?
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What is the goal of organization?
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The goals -> create values for customers -> generate profits. Profits can increase by increases in unit margin and/or sales volume. Metrics of profits:      

Net Profit ( or Net Income) = Sales Revenue – Operating Costs ROI = (Gains from Inv. – Cost of Inv.)/ Cost of Investment Cash Flow

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How operational decisions link to financial & market performance? Cash Flow

Throughput Time 

Inventory Operating Costs

ROI Net Income Market Share

Delivery Time

Sales

Operations Management:

How to level the capacity of the process?
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Level the capacity of each operation to a bottleneck capacity (e.g., Herbie). Bottleneck is an activity with the lowest effective capacity. Alternatively, an activity with capacity utilization (CU) >100% is a bottleneck. Throughput rate of a process is determined by a bottleneck capacity.  

If a bottleneck capacity < 100%, a process ___ the demands. WIP = 1 WIP > 1

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If the bottleneck capacity = the demands, how much WIP inventory will be in the process?  

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If the bottleneck capacity < the demands, how much WIP?
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Operations Management:

How to reduce WIP inventories?
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Batch size reduction can shorten throughput time to a certain degree. Throughput time = processing time + waiting time + moving time + set-up time The ______ batch size, the _____ processing time. The ______ batch size, the _____ waiting time. The ______ batch size, the _____ moving time. The ______ batch size, the _____ set-up time.        

The ______ batch size, the _____ number of set-ups. As the number of set ups _____, set-up time ______. As set-up time _____, throughput time ______. As throughput time _____, WIP _____.

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Take-away
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The goal of an organization is to create values for customers. Organizational goals are often measured by the financial and market performance...
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