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?
Inventory Operating Costs
ROI Net Income Market Share
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?
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 _____.
The goal of an organization is to create values for customers. Organizational goals are often measured by the financial and market performance