Production and operations Management

Lecture 7Production and operations ManagementLecture 7: Module 1 Process AnalysisBuffer or sufferBuffer or sufferIn a system that is not able to buffer the variability, we will suffer a loss of flow rate. By allowing for inventories, we'll actually be able to have a higher flow-rate.Simple Process Flow A Food TruckFood Truck

Every five minutes: You get 0, 1, or 2 orders with equal probability- You have a capacity of 0, 1, or 2 with equal probability- It is not possible to make a sandwich before the order - Customers are not willing to wait

Difference Between Make-to-Order and Make-to-StockMcDonalds1. Make a batch of sandwiches2. Sandwiches wait for customer orders3. Customer orders can filled immediately=> Sandwich waits for customerSubway1. Customer orders2. Customer waits for making of sandwich3. Customer orders can filled with delay=> Customer waits for sandwichWhich approach is better?

Make-to-Stock advantages include:+ Scale economies in production+ Rapid fulfillment (short flow time for customer order)

Make-to-Order advantages include:+ Fresh preparation (flow time for the sandwich)+ Allows for more customization (you cant hold all versions of a sandwich in stock)+ Produce exactly in the quantity demanded

6Five Reasons for InventoryYou will need some minimum inventory because of the flow time >0Littles law. flow rate of one patient per hour and a flow time of l . 5 hours, the average inventory isInventory = l [ patientlhour] X 1.5 [ hours] = 1.5 patients

Pipeline inventorySource: De GrooteSeasonal inventoryDriven by seasonal variation in demand and constant capacityDue to the nature of the harvesting season, Monitor Sugar, a large sugar cooperative in the U.S. Midwest, collects all raw material for their sugar production over a period of six weeks. At the end of the harvesting season, they have accumulated-in the very meaning of the word-a pile of sugar beets, about 1 mill ion tonsCycle inventoryEconomies of scale in productionWhether a truck is dispatched empty or full , the driver is paid a fixed amount and a sizeable portion of the wear and tear on the truck depends on the mileage driven, not on the load carried. Therefore tempted to load the truck completely.

Safety inventory:Buffer against demand. Mc Donalds case.

Decoupling inventory/ buffersBuffers between several internal stepsSuppose the first worker sews the collar onto a shirt and the second sews the buttons. A buffer between them is a pile of shirts with collars but no buttons.

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