The Goal Debrief
What is The Goal?
What is the goal of organization?
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
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?
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
If the bottleneck capacity = the demands, how much WIP inventory will be in the process?
If the bottleneck capacity < the demands, how much WIP?
2
Operations Management:
How to reduce WIP inventories?
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 _____.
3
Take-away
The goal of an organization is to create values for customers. Organizational goals are often measured by the financial and market performance
What is the goal of organization?
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
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?
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
If the bottleneck capacity = the demands, how much WIP inventory will be in the process?
If the bottleneck capacity < the demands, how much WIP?
2
Operations Management:
How to reduce WIP inventories?
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 _____.
3
Take-away
The goal of an organization is to create values for customers. Organizational goals are often measured by the financial and market performance