MSCG6206 WK1

1
MGSC6206: Management of Service and Manufacturing Operations

Note: This is the text-only version of this weeks lecture.
All media (i.e. videos, flash presentations, and PowerPoints) and learning activities
(i.e. assigned readings, assignments, and discussions) are accessible only through the
online course.
Week 1: Operations Management
Overview
Video
Log in to the course to view video.
After completing this lesson, you will be able to:
Define productivity.
Understand the impact of productivity on the economy.
Understand the history of developments in Operations Management.
Understand the role Operations Management plays in increasing productivity and
improving the standard of living.
Course Introduction
In this lesson, we will discuss productivity and review the history of Operations Management,
the improvements in operations methods and the development of techniques for improving the
performance of operations in both manufacturing and services.

2


Learning Activities Table

Learning
Activity
Description Due Date Points
% of Final
Grade
Lesson 1
Introduction to
Operations
Management
Complete by end
of Day 2
~
Lesson 2
Operations
Systems
Complete by end
of Day 3
~
Week 1 Reading
1
Kristen's
Cookie
Co. (A)
Harvard
Case No.
9-686-093
Complete by end
of Day 4
~
Week 1 Quiz
The quiz will be
released on
Day 4 from
8:00AM E.T. to
11:00 PM E.T.
Complete by end
of Day 4
100 5%
Lesson 3
Case Study
Kristen's Cookie
Company
Complete by end
of Day 4
~
Week 1
Assignment 1
Kristen's
Cookies
Individual Written
Assignment
Submit by end of
Day 6
100 8%

3

Week 1
Discussion 1
Kristen's
Cookies
Group
Assignment and
Discussion
Post by Day 5
Respond by Day
7
100 6%

Lesson 1: Introduction to Operations Management
Productivity (1 of 6)
Operations Management is concerned with managing the production and delivery of goods and
services. Its activities are at the core of all business organizations. The principal objective of this
course is to introduce you to the various problems and issues encountered by the operations
manager in designing and managing an organization for the production of goods and/or
services. The emphasis will be on the concepts and techniques used in Operations
Management, and the managerial issues. One of the main issues in Operations Management is
productivity: Operations Management aims to improve the productivity of all operations.
Productivity:
Is defined as the ratio of output to input.
Is an indicator of how efficient an operation is.
Can be measured in different ways depending on the input one chooses to use for the
measure.

Thus, in relation to the last point above, the different types of productivity include:
Labor Productivity: The measure of how much output is produced by one labor hour.
Capital Productivity: The measure of output per unit of capital employed.
Multi-factor Productivity (also known as Total Productivity): A measure of the output
produced by all the inputs needed to produce that amount of output. (This is considered
a general measure of productivity.)
Labor Productivity

4


Labor Productivity is the measure used to compare firms, industries and countries. Higher labor
productivity in firms leads to lower costs and higher profits. Higher labor productivity in
industries shows the strength of the industry. Increasing productivity leads to higher standards
of living. Developed countries have generally higher labor productivity. Of the developed
countries, the US has the highest labor productivity overall.
A simple measure of productivity is commonly known as the Big Mac index. This index
measures the time an average worker has to work to earn enough to buy a Big Mac hamburger.
Workers in developing countries need to work many more minutes to earn the price of a Big
Mac (over 50 minutes in Mexico), while in the USA one needs to work about 10 - 14 minutes. In
J apan and most Western European countries it is around 11 18 minutes. It takes less human
effort than in developing countries to earn more with higher productivity in these countries.
For your interest, click the following link below to read article that appeared in The Economist
regarding the Big Mac Index.
McCurrencies (April 24, 2003 from the Economist print edition)
Higher rates of productivity in the western world are the result of the application of capital (in the
form of labor saving equipment) and technology. Here is a brief list of some the factors that help
in increasing productivity:
1. Increasing the skill level of the workers
2. Infusion of capital in:
a. Equipment
b. Processes
c. Technology
d. Facilities
3. Technological Innovations
4. Changes in labor processes
5. Improvement in quality
In addition there are a few general factors that the infrastructure provides:
1. Changes in business practices J IT, logistics etc.
2. Changes in Trade Patterns
3. Social environment
4. Geographical factors.

5

To raise the standard of living, labor productivity should increase consistently. Over the
years, the productivity in the US has been increasing at an annual rate of about 2.5%. Of
course, some sectors of the economy have higher rates compared to others. For example,
manufacturing productivity is generally higher than productivity in the service sector.
Without a constant increase in productivity, living standards will decline and other
undesirable effects, such as higher unemployment and inflation, will increase.
In the chart below, productivity growth closely correlates with gains in the per capita income,
which directly influences the standard of living. The period between 1974 and 1979
experienced the lowest productivity gains resulting in slow growth in GDP. The slowing rate
of growth of GDP results in higher unemployment rates and possibly higher rates of inflation.
This was a period when the inflation was running at an annual rate of over 12% and the
unemployment level was over 10%. Times were very hard and the misery index
(unemployment rate +inflation rate) was very high. There was a general malaise in the
country (President Carter).

Calculating Productivity (1 of 3)
Labor Productivity
Recall that:

6


Video
Log in to the course to view video.
However, as output can be of many kinds, it is better to express the output in some
commonmeasure. The dollar ($) value is usually the accepted common measure for output.
Thus, if a team of 5 workers put together 100 chairs in a eight hour shift, the labor productivity of
this team is:

100
=2.5 chairs/worker/hour
(5 X 8)
Alternate Version
But in terms of a dollar value, if a chair costs $30, the productivity of this team is:

2.5 X $30 =$75/hour/worker
Alternate Version

Capital Productivity
In the previous example, the team used machinery and equipment that cost $5000. The
equipment is depreciated over a period of five years. Cost per year is, therefore, $1000. If the

7

equipment is used for 8 hours a day and 250 days a year, then the cost per hour is $0.50. As
the output is 12.5 (100/8) chairs per hour:

Capital Productivity =
12.5
=
25 chairs
0.50 $ of capital/hour
Alternate Version
Though this is one of the measures of productivity it is not used much.
Multi-factor Productivity
If the chair production team in the above example uses $5 of material per chair, the wages are
$10/hour of labor, and the labor overhead (which includes supplies, supervision, depreciation on
the equipment and utilities) is 200% of the direct labor cost, then the multifactor productivity is
given by:

100
=
100
=
0.0588 chairs
(5 X 8 X 10 +100 X 5 +2 X 5 X 8 X 10) 1700 $ of input
Alternate Version
The goal of Operations Management is to constantly strive to increase productivity by designing
better operations systems and managing them better.
Interactive Media
Log in to the course to access interactive course content.
A Brief History of Operations Management (1 of 6)
Operations Management has been evolving over a number of years. It has moved from
craftsman production to highly efficient mass production, making many goods and services
within reach of millions of people. How did this change come about? To understand the
immense changes that have taken place in operations, it is necessary to know how it evolved

8

and the different significant steps taken by this field. It is also important to know the pioneers in
this field and their work to understand the changes - changes that we take for granted today -
which needed innovators to invent them and implement for the benefit of all of us.
Labor during the Middle Ages

Up to the Middle Ages (15th Century AD) from prehistoric times, most goods were produced by
craftsmen. Each item was individually made by a craftsman who had been trained in the trade
for a number of years working as an apprentice. Labor involved in the production of any item
was considerable and therefore very expensive. Consequently, only few people could afford
things that we consider today as necessities. For example, in the Middle Ages, only the very rich
could afford fancy clothes; the common people had to make do with some home sewn clothes.
The rich could travel in horse-drawn carriages, while the common people had to walk
everywhere. Few had any furniture in their homes. We can't even imagine how people braved
the harsh weather without the heating and air conditioning that we are so used to nowadays. All
labor was from humans or animals.
There is a limit to how much one person could produce, resulting in very limited quantities of
output of any item. The limited output would make the price of any item beyond the reach of the
common man. However, the seeds of change were being planted towards the end of the Middle
Ages. The industrial revolution started which gradually increased the use of machines to
supplant human labor. It also helped in producing more of anything with less labor.
Division of Labor

9


In 1776 AD, a very influential book published in England, The Wealth of Nations by Adam
Smith, demonstrated how work could be made easier and better by dividing the labor involved.
This is called Division of Labor. The concept of division of labor is that a complex job could be
broken down into smaller tasks and different workers could be trained in these tasks. These
workers specialize in the tasks and can do a better job, while requiring far less training. This
concept has been widely implemented, especially in mass-production manufacturing. The
modern assembly line for cars epitomizes this concept. In an automobile assembly line, the
complex task of assembling a car is broken down into tasks that last no more than one minute.
Workers are trained to perform the one-minute tasks well. A huge advantage of this division of
work is that workers need very little time to get trained to do the one-minute tasks.
Click the following link and read the first paragraph of Chapter 1 of Book 1 from The Wealth of
Nations. This paragraph describes how division of labor was applied to pin-making.
The Wealth of Nations

10

However, there are some disadvantages too. Since the task one person does is very short in
duration, and practically repetitive, it tends to bore the worker after some time. The job becomes
monotonous. This is a serious problem in assembly lines where the workers repeatedly perform
very short duration tasks (some lasting no more than 30 seconds) which results in these
workers getting bored easily. Management should be aware of this problem and introduce
creative solutions to reduce the monotony. One solution is to rotate the jobs on a regular basis
so that a worker has to learn new tasks. Another solution is to design the task such that the
worker has to pay attention to perform the task and not just do it mindlessly.
Another problem is on the design of the task through division of labor. How short should the task
be? Making it too short is not feasible. Over the years some rules of thumb have been
established for determining the duration of tasks - larger products with large production volumes
(cars for example) have one minute duration tasks, while smaller products (TV sets) have 15 -
30 second tasks.

Interchangeable (Standardized) Parts

11


The next major innovation in manufacturing was the standardization of parts. Up to this point,
most products were made specifically for a customer. Consequently, each part had to be made
specific to that one customer, and the parts needed plenty of adjustments to fit well with one
another. If an item failed, for example if a gun was jammed, a craftsman had to replace the
damaged part by making a customized part that fitted the failed product. This level of
customization took plenty of skill and considerable time.
When Eli Whitney (of cotton gin fame) came on the scene he wanted to enable unskilled
laborers to make complex products. He managed this by designing products (his test case was
rifles) with standardized interchangeable parts. These parts were cut and shaped by machines
and each machine performed one precise function over and over again. The workers would
merely put each machine through its motions. The interchangeable parts and division of labor
reinvented American manufacturing as a whole, through mass production.
If you would like to find out more about Eli Whitney and his inventions, click the following
recommended links.
http://www.eliwhitney.org/new/museum/about-eli-whitney/inventor
http://web.mit.edu/Invent/iow/whitney.html
Scientific Management (1 of 2)

12


Around the beginning of the 20
th
century, a very dynamic engineer appeared on the
management scene in America. He was Frederick W. Taylor, sometimes called the Father of
Scientific Management. According to him, the way work is done by a worker could be
improved by time and motion study conducted by an engineer and the worker could be
trained to work in that way.
Taylor believed that any work could be improved by a systematic study of how it is
performed, and then analyzing the various steps in detail to determine wasted and
unnecessary motions. Eliminating the wasted and unnecessary steps would reduce the time
required to do the job, thereby improving productivity. The worker would be trained to do the
job using the improved method. This approach is known as motion study.
After developing the improved method of doing the job and training the worker to do the job
using the improved method, the time needed to do the job in the right way would be
measured (usually using a stop watch). The observed time would be adjusted to normalize
for the worker's skill as well as for the necessary physical and other needs of the worker to
function effectively. This aspect is called time study. Motion study and time study are
together known as work study.
The time estimated as described above can be used to determine how many units a worker
should produce in a given time (standard output).
Scientific Management (2 of 2)

13


A worker could be motivated to produce more by giving monetary incentives based on the
standard amount of work. Taylor used the example of Schmidt (an uneducated immigrant
laborer) at the Bethlehem Steel Company to test his theories. Schmidt was trained to unload
pig iron from trucks and stack them on the ground. This study improved the work rate of
Schmidt from 12.5 tons to 47.5 tons per day demonstrating the value of scientific
management. Taylor had a number of followers who became consultants and efficiency
experts to help the American industry become more productive.
A basic tenet of Scientific Management was that employees were not highly educated and
thus were unable to perform any task but only the simplest tasks. Modern thought is that all
employees have intimate knowledge of job conditions and are therefore able to make useful
contributions. Critics of Taylor's methods have claimed that Scientific Management
dehumanizes work and breaks the work down into smaller and smaller units to maximize
efficiency without giving thought to the job satisfaction of performing the work.

Assembly Lines and Mass Production
All the above ideas gelled into the assembly line. Usually Henry Ford is credited with making
the assembly line a practical way to manufacture cars by the thousands. He introduced the
moving assembly line to American manufacturing around 1908. In an assembly line, the
product moves on a conveyor while workers (or robots) add parts and components. Each
worker carries out only a small amount of work on each car. Typically the work takes around
one minute for each worker. At the end of the line the product is fully assembled.
Here is a YouTube clip of a modern assembly line:
Modern Assembly Line
You may also want to watch a clip of an early auto assembly line:
Early Auto Assembly Line

14

The assembly line uses interchangeable, standardized parts. The job of assembling a car is
divided into many small tasks, each taking one minute or less to complete. Each task was
designed using the principles of time and motion study.
Motivation and Behavioral Issues

The efficiency experts following Taylor had thought that the worker is incapable of doing
anything without the guidance of the engineers and managers. The workers needed to be told
what to do and how to do it; they could be motivated to perform better either with changes in
their working conditions introduced through a study of the work and its environment or only with
money. These ideas were firmly rooted in management thinking at that time.
However, skeptics believed that there were other ways of motivating workers aside from
monetary rewards or changes to the work condition. To test this idea, a group of researchers
performed a series of experiments at the Hawthorne Plant of Westinghouse Electric Co. (known
subsequently as the Hawthorne Experiment). They chose a section of a department assembling
electric meters for this study. They introduced changes in the work conditions according to
known theories that produced an increase in productivity such as increased lighting, better
temperature control, and longer rest periods. As expected, the productivity measured by weekly
output increased, thus confirming the theory. Every change in the working conditions had the
effect of increasing productivity, regardless of the nature of the change. However, when they
went back to the original conditions, the productivity remained at the new level or even
increased a little. Now the researchers had to come up with an explanation for this increase in
productivity.
The researchers finally concluded that the increase in productivity was due to the attention this
group received from the researchers and managers. The workers were not pushed around.
They developed and increased sense of responsibility leading to an increase in productivity.

15

This phenomenon is called the Hawthorne Effect. This was a significant finding and has become
the bedrock of all motivational approaches to management.
There have been some suggestions that the experiments were flawed. There were other
confounding variables that the researchers either ignored or were unaware of. However, the
Hawthorne Effect and its myth continue.
The conclusion was: Money alone does not buy productivity; concern and attention to the
worker produces results as well.
Since the Hawthorne Experiment, management theorists and practitioners have been giving
greater emphasis on motivation and behavioral issues of employees.
Recent Developments in Operations Management (1 of 4)
Operations Research
Operations Research was developed during the Second World War by British scientists as a
way to attack complex war problems using various disciplines such as mathematics,
psychology, sociology and economics. After the war, the same techniques developed during the
war seemed adequate to solve some complex business problems. The techniques were
adapted and new techniques were developed. These techniques are taught in many Business
Schools and Engineering schools.
A widely used technique in business is Linear Programming. This technique develops the best
allocation of resources in large situations. For example, in airline companies, the best way of
scheduling airplanes, the crew and the related personnel is handled by elaborate linear
programming techniques. Another technique is queuing. Complex queuing problems are
analyzed using complex mathematical models. These techniques are used in scheduling jobs in
manufacturing, managing inventory, logistics, distribution, designing assembly lines and many
other applications.
Computers and Information Technology
With the advent of cheaper computing power, computers have become ubiquitous in
businesses.
Click each of the three areas where computers play a big role in business for further
information.
Interactive Media

Computer Aided Design Manufacturing & Measurement Integration
Just-In-Time and Logistics

16


J ust-in-Time (J IT) and Logistics have taken on more important roles with the recent
globalization phenomenon. As the supply chains and distribution lines get extended over vast
physical distances, it becomes important to control the amount of physical inventories.
Controlling of physical inventory is helped greatly with good logistics and incorporating J IT
systems wherever feasible.
Toyota is credited with developing the J IT philosophy in the 1980s. In this system, materials are
delivered to the place they are needed only when they are needed. The delivery interval, in
some cases, may be as short as one hour. A big advantage with this system is the plant
operates with very little inventory (maybe one hour's worth), thus cutting down on the
investment locked up in inventories. Of course, to run this system well, the firm has to attend to
a number of things so that it can manage with low inventories. A necessary condition for
implementing J IT is a very high level of quality in all the parts used in the manufacture, as well
as in the assembly operation.
J IT is typically used in repetitive manufacturing of such items as cars and TV sets. Nowadays,
most major manufacturers employ J IT in their manufacturing operations. A modification of this
system is termed Lean Manufacturing.
Logistics is the science of managing material movement for a firm, starting from the vendors
through to the manufacturing facility and ending with the customer. In this long pipeline (which
sometimes can be as long as 10,000 miles) there can be a lot of inventory that has to be moved
as fast as possible to lessen the amount of capital locked up in it. Logistics examines the
different modes of transport, the scheduling of the movements and the systems to control all
these such that the material moves through the system at the lowest cost possible without
reducing the availability of materials.
FedEx is a leader in logistics. It helps companies coordinate and organize the movement of
materials (raw material, parts and components and finished goods) for a number of firms using
some of the techniques developed with the help of operations research.

Flexible Manufacturing Systems

17


Flexible Manufacturing Systems (FMS) are designed to produce a wide variety of products from
the same machines, unlike an assembly line which can only produce one product or a limited
variety of products.
FMS is flexible enough to react to changes (either predictable or random) in the product
configuration or volume requirements. It is similar to an assembly line but the parts do not have
to go through a rigid sequence as in the assembly line. The routing and the process can be
changed at will depending on the requirements of the specific part. Thus FMS combines the
efficiencies of an assembly line with the flexibility of a job shop. Typically an FMS is controlled
by a central computer.
Click the following link to access more information about FMS.
Flexible Manufacturing System
Mass Customization
Mass Customization is the production and delivery of custom products at or near mass
production costs. The trend towards customization has increased with growing affluence -
customers want to be different in the clothes they wear, in the cars they drive and other
personal things. New techniques have been developed to produce custom products in assembly
line type factories. DELL Computers has long been manufacturing computers to meet the needs
of vastly differing requirements.
This trend has become prominent in the clothing and shoe industry. For example, Nike iD - a
division of Nike shoes - has been selling custom sneakers which anyone can design online.
Similarly, Levis Strauss has been selling custom jeans for women.
Click the links below to access websites that allow users to design their own pair of shoes or
jeans.
Nike iD
IC3D J eans
This trend of customization will only increase. People generally want to be different from one
another; they want to show off their special items, instead of having the same one as many
others have. Though mass production has made it possible to produce customized goods at
very low costs, the products, by and large, look alike. As a matter of fact, there is a quote
attributed to Henry Ford: "The customer can have any color car he wants as long as it is black."

18

This was in the time of the earlier assembly lines. The modern assembly line can produce a
wide variety of cars.
Mass customization requires the manufacturing facility to be agile. It should be able to switch
from one product configuration to another with very little delay. Operations managers should
become good at managing such agile and flexible systems that can change in a short time from
producing one product to another. A familiar example of mass customization is the Burger King
approach that claims "Have it your way," unlike MacDonald's which produces a product with
very little variation.
However, there are problems with mass customization too. Most of us get confused when we
have to make choices from a large number of alternatives. We would rather have a limited
choice from which we can make a selection. Enlarging the number of choices available can
make the decision very confusing for the consumer. However, in certain goods, people prefer to
have a customized product. Look at the high fashion goods industry. The issue facing the future
operations managers is exemplified from the following question: Can we produce high fashion
Versace type dresses individually styled for each customer at off the rack prices?
Synthesizing Parts
The technology for synthesizing parts is currently available, though the cost of producing parts
using this technology is very high and limited to plastic. It is used for special applications such
as building artificial knee joints and hips, which have to be made to fit the individual exactly.
Another application is the building of prototypes before a product is released for mass
production. Making a prototype using conventional methods of manufacturing takes a long time.
This method of manufacturing is sometimes called rapid prototyping. With improvements in this
technology, it is not inconceivable that in the not too distant future, many parts and products will
be made using this approach.
There are firms that sell table top synthesizing machines for about $ 1500 or less that can
produce any part up to a certain size. The technique of producing such parts is called 3-D
printing, where the part is built up layer by layer.

Visit the following web site to see the machine and learn more about it.
3D printing machine

You can actually see how 3-D printing works in the following video:
3D printing

It is conceivably not far off when you can have a machine on your kitchen counter in your home
and order the code for any product from a vendor and make the product in your own home.
Summary
This is a brief review of the developments that have taken place in
Operations Management and some that are still being developed. It is a
vibrant field and the focus of this area is always to try and discover ways
that businesses can be more productive. The techniques developed in this

19

field are applicable not only in manufacturing but also in other systems where any work is done
such as in services and how they are delivered.
This lesson introduced operations management. It discussed productivity and its impact on the
general economy and on the standard of living. The lesson then traced the development of
operations management over the centuries starting from craft type work to produce things to the
current mass production operations. Many contributors have added to the knowledge of
managing operations over the past couple of centuries.
You have now completed Week 1 Lesson 1. Click the link below to access a PowerPoint
presentation to review what you have just learned.
Lesson 2: Operations Systems

Introduction
In this lesson, we will explore a typical operations system and its components. We will discuss
the interactions between different components of the system, the information flow among them,
and the mechanisms available to the manager for controlling the outputs of the system. This
lesson will further discuss the capacity of an operations system, and the factors that contribute
to limiting the capacity. Utilization and efficiency of an operations system are also discussed.
Learning Objectives

After completing this lesson, you will be able to:
Understand the components of an operations system.
Understand how different systems can be represented as operations systems.
Understand the effects of different factors on the performance of an operations system.
Understand how to manage an operations system by examining the different factors
influencing their management.

The Components of an Operations System (1 of 6)
An operations system takes in the right inputs, processes them through the transformation
process and produces outputs of goods and services desired by the society.
Click each of the three parts that make up an operations system for further information.
Interactive Media

20

Click Play to see an example of how all the parts of the operations systems fit together.
Interactive Media
Material and Information Flow within an Operations System (1 of 3)
From the input stage, the materials flow to the process stage where they are processed, and
finally they are pushed through to the output stage. From the output stage, they reach the
customers.
While materials flow in the forward direction, there are a number of information flows that travel
through the system in both forward and opposite directions. Information about the quantity and
quality of output is a feedback step and it flows from the output stage to the process stage and
also to the input stage. For example, if the quality of output is not up to the specifications, that
information comes to the process stage where corrective steps can be taken and also to the
input stage where the incoming materials can be thoroughly checked.
Click Play to see an example of how feedback fits into an operations system.
Interactive Media
Similarly there are other information flows that affect the operation. For example, information
about the external factors such as weather, economy, and market trends, flow to all three
stages, as they affect all three. For instance, weather may dictate the product mix and the
economy might suggest slowing down the rate of production in the process, which in turn affects
the input rate.
Click Play to see an example of how external influences fit into an operations system.
Interactive Media
The operations manager's job is to maintain the process in the presence of all these factors to
produce the output needed by the market and be profitable.
In service operations, the input is usually the customer himself. For example, in a restaurant, we
can think of the hungry patron as the input to the restaurant system, while a satisfied customer

21

is the output. The services provided by the restaurant such as food preparation (chef), order
processing and customer service (wait staff) and clean up (busboys), are part of the
transformation process.
Click Play to see an example of what was just described.
Interactive Media
The external influences operating on a restaurant are usually things such as weather, restaurant
reviews and advertisements. The number of meals served in a day as well as the satisfaction of
customers after eating at the restaurant, is a measure of the output.
Operations Management

Though the operations manager manages these three stages (inputs, transformation process
and outputs), the emphasis is on the transformation process. Thus, an operations manager in a
manufacturing operation is responsible for the transformation of raw materials and purchased
parts into finished goods to be sold in the market. He/she has to see that the operations run
smoothly, the output schedules are met and the products are of the right quality.
In a service operation such as a hotel, the manager is responsible for the satisfaction of the
customers through the services provided by the hotel and its employees. He/she has to see that
the employees are performing their job well to the satisfaction of the customers, that the
restaurant is serving quality food consistent with the hotel's reputation, and that customer
requests and complaints are met with appropriate courtesy and promptness.
The operations manager manages the transformation stage after evaluating how the process is
performing in terms of the output quantity and its quality. If the output deviates from the desired
or planned output, the process must be adjusted to bring it into line. The deviation could be
because of quantity problems thus reducing the output. The manager must take corrective
action to improve the quality by examining the process or the incoming material. If the output's
quality deviates from the desired quality level, then again he should examine the process and
incoming materials to correct the problem.
There are other situations when an operations manager has to take corrective action for events
that occur which he/she has no control over such as weather conditions or the state of the
economy. These events have an effect on the output quantities and input materials and the
operations manager has to take corrective action to compensate for these changes.

22

Process Capacity and Bottleneck (1 of 4)
In any process, material moves through the different steps (or machines) in the process. In this
passage, the material gets worked upon, and finally when the material reaches the end of the
process, the operation is complete and the output can be released to the outside world or the
next department. The rate of output from the process is called the capacity of the process. The
process capacity is usually expressed as a rate: units/hour. For example, the process capacity
of an automobile assembly line is 60 cars/hour.

The capacity of a process is dependent on the individual capacities of the machines or steps
that make up the process. Each step or machine feeds into other steps or machines. The
capacity of the process is not the sum of the individual machines, but is controlled by the step
or machine with the least capacity.

Click Play to see an example of a typical process.
Interactive Media
The animation on the previous page was a replication of what might occur in an actual process;
however, for analytical purposes, a process flow diagram is used. The process flow diagram
for the process above is shown below. In this representation, each step or machine where
something is done to the material or information is represented as a block and the details of the
step (processing time or capacity) are shown below the corresponding block. The sequence of
steps is represented by the arrows connecting the steps.

23


Alternate Version
In this process, machine 3 (or step 3) has the smallest capacity (or the longest processing time).
It can only process 25 pieces/hour while all the other machines can process more than that.
Such a machine or step (one with the smallest capacity) is called a bottleneck. The bottleneck
step determines the maximum output of the process. Thus in the above process, we can never
produce more than 25 pieces per hour. The capacity of the whole process is 25 per hour even
though individual machines or steps can produce more than that. We can, therefore conclude
the following:

Since bottlenecks determine the maximum output from a process, identifying the bottleneck step
becomes very important. Though other machines in the process can produce more in a given
time, the final output cannot be more than what the bottleneck produces. Therefore, to increase
the output of a process, one has to increase the capacity of the bottleneck step. In our example,
we can increase the output of the process by increasing the capacity of machine 3.
But how much can we increase machine 3's capacity? If we add another machine 3, the
capacity of this step increases to 50 pieces per hour (25 from each). Has the capacity of the
process increased to 50 pieces per hour? No, because, now machine 1 becomes the new
bottleneck with a capacity of 30. The new output capacity of the process will now be only 30 per
hour, even though we doubled the capacity of the earlier bottleneck machine.
Therefore, increasing the capacity of the bottleneck will increase the output of the system;
however, we can only increase the capacity of the bottleneck until some other machine
becomes the bottleneck.

24


The bottleneck is a very important concept in determining the capacities of plants, factories, or
departments. Many wrong decisions of capacity increase can be avoided if we identify the
correct bottleneck step or machine.
Analyzing the capacities of individual steps or machines in a process is a key step in the
evaluation of a process.
Not every process has this sequential arrangement where the output of one step or machine
enters the net step. In many situations, the flow is relatively jumbled, where there are many
flows in different directions depending on the process requirements. Even in such cases, it is
the bottleneck step that determines the capacity of the system.
How does one identify a bottleneck step if one does not have all the process details? From the
above description of a process, we see that the output from the steps preceding the bottleneck
step will be at a faster rate than that of the bottleneck. Therefore, work will be piling up before
the bottleneck step and will be waiting for their turn at the bottleneck step.

Thruput Time or Flow Time

25


In the example discussed earlier about the process involving four machines, the production of a
piece will take 7.1 minutes (2 +1.5 +2.4 +1.2 =7.1) to pass through the entire process if it did
not have to wait at any of the steps. This time is called the total processing time. If we include
the wait times at some of the steps (due to the unavailability of a machine when a piece arrives)
the total time a piece spends in the process will be longer. The total time a piece spends in the
process (from the time step 1 starts processing till the time step 4 completes the work on the
piece including waiting) is called the thruput time (flow time). Because there is inevitable
waiting at many machines or steps, the thruput time is generally longer than the total process
time.
To reduce thruput time, one needs to reduce the wait times before different steps. We can
accomplish this by making the processing time at each step approximately the same, and
moving the items from step to step in a constant flow. With such an arrangement, the thruput
time will be almost equal to the total processing time. There will still be some waiting at some
steps that could be avoided by letting the faster steps remain idle for part of the time so that
they produce at the same rate as the bottleneck step. This concept is often applied to assembly
lines, where the time for each step is made very close to the bottleneck time. This bottleneck
time is usually called cycle time in assembly lines. In the previous example, step 3 is the
bottleneck and its time is the cycle time (2.4 minutes) for this process.
Gantt Charts (1 of 2)
The Gantt chart is a visual representation of the activities in a process and identifies when they
take place on a time scale. Such charts are very useful for representing project activities
especially when many different activities are scheduled. The chart helps to plan activities before
some required preceding activity is completed. It also shows whether a resource is being called
into use by more than one task. This chart represents the activities of different resources (labor,
machines etc.) as bars along a timeline. The length of the bar corresponds to the length of time
of the activity. There are many commercial software programs to help a planner develop Gantt
charts for any project such as Microsoft Project. One can also use an Excel spreadsheet to
draw a Gantt chart.
Let us revisit the admitting procedure in a hospital consisting of the following steps with
additional information about who performs the task:

26

Step
Time needed to
Complete the Step
Resource
1. Check-in with receptionist 5 minutes / patient Clerk
2. Filling out forms 8 minutes / patient Patient
3. Interview with doctor 10 minutes / patient Doctor, Patient
4. Other administrative chores 6 minutes / patient 2
nd
Clerk
These activities can be represented in a Gantt chart as shown below. From the example Gantt
chart, we see that the first patient does not have to wait anywhere. However, the second patient
has to wait for 5 minutes for the doctor to finish with the first patient. On the other hand, the
second clerk finishes with first patient, and then has to wait for the second patient to come from
the doctor, resulting in an idle time of 4 minutes for this clerk. This process will repeat for every
patient (as long as the patients are arriving in a constant stream). Thus for every patient, the
second clerk is idle for 4 minutes, while the patient has to wait for at least 5 minutes (It will be
more as the number of patients arriving increases) for the doctor.

Gantt Charts (2 of 2)
Question: Assuming the patients are arriving constantly, determine how long the fourth patient
has to wait for the doctor.
Type your answer in the space provided and then click Compare to view your instructor's
answer.

27

Interactive Media
Utilization
Because of imbalances in process capacities and waiting between steps, the process will not
produce as much as it could under ideal circumstances. The actual output will usually be less
than what the process can produce. The ratio of actual output to the capacity is called
utilization.

Thus, in the previous process, if the actual output was 20/hour, the utilization of this process
would be 20/25 =80%. The lower output (compared to what the process could produce) may
result from inefficiencies in the system such as waiting, bad quality, and other factors that
reduce output.
Additional Notes about Capacity
Some of the terms used in this lecture have a more precise meaning. Capacity refers to two
different things: design capacity and effective capacity.
Design capacity is the amount that the designers planned to have when they designed
the process. This assumes that everything in the process goes smoothly, and there are
no delays and holdups.
Effective capacity is what one gets because of inefficiencies in the process such as
machine breakdowns, bad quality, poor planning, change of product mix and such other
factors.
For our purposes, we will refer to effective capacity as simply capacity.
Actual output is what one gets from the process.
With these terms, we can define two measures for the effectiveness of a process: efficiency
and utilization.
Efficiency of a process =Actual Output/Effective Capacity
Utilization =Actual Output/Design Capacity

28

Summary
This lesson discussed the operations system and the processes employed
in such systems. It described the capacities of operations systems and
how to determine a system's capacity. It introduces specific terms used in
this context bottleneck, thruput time and capacity utilization.
In the next lesson we will discuss a case, Kristen's Cookies, and analyze
the process of baking cookies.
You have now completed Week 1 Lesson 2. Click the link below to access a PowerPoint
presentation to review what you have just learned.
End of Lesson 2

Lesson 3: Case Study - Kristen's Cookie Company
Introduction

In Lesson 3, you are required to focus on the case study, Kristen's Cookie Co. The purpose of
studying this case is to illustrate the use of the vocabulary you learned in the first two lessons.
Week 1 Reading 1: Kristens Cookie Company
Due: End of Day 4

Summary
This lesson introduced the case (Kristen Cookies) of a simple processmaking cookies. It
illustrated a line flow process and thereby the concepts discussed in Lesson 2. It allowed you to
actually compute the operations numbers for this situation, including thruput time, bottleneck
operation, capacity of the process, idle time of the workers, labor costs, and product pricing.
This is a good introductory case for understanding the basic concepts of process analysis in
operations management.
End of Week 1
Important: Quiz/Exam Advisory
Java Notice
To ensure your exam functions properly, you must download and install the latest J ava plugin to
your operating system. Older versions of J ava may cause timeouts, issues submitting answers,
and navigation problems. To download the latest version of J ava, click the link below:
J ava Download

29

Exam Timeouts
If there is no network activity on Blackboard (clicking buttons, navigating by clicking links, or
using menus, etc.) for more than three (3) hours, you will receive a timeout error and lose all
information from your session. Be mindful of this limitation when completing exams that have a
four (4) hour time window.
Browser Compatibility
If you are using the Microsoft Internet Explorer 8 or 9 browser, you will need to change your
browser settings to "Compatibility View" before taking your exam/quiz.
Click the link below for instructions on how to change compatibility view.
Internet Explorer 8 Compatibility View
Alternatively, you can use the Mozilla Firefox browser to take your exam/quiz. Click the link
below to download Mozilla Firefox.
http://www.mozilla.com/en-US/firefox/ie.html
If you require further assistance, please contact the Help Desk: 1-866-291-8058
Week 1 Quiz Preview
Value: 5%
This quiz assesses the degree to which you comprehend the content for this weeks lessons 1
and 2. The quiz is comprised of twenty multiple-choice questions, worth 5% of the final grade.
The quiz will be released on Day 4 of Week 1, from 8:00 AM EST to 11:00 PM EST. You must
complete the quiz within the allotted time specified.
You can take this quiz only once.
You have thirty minutes within which to complete this quiz.

Week 1 Assignment 1
Individual Written Assignment
Due: Submit by Day 6 of Week 1 at 11:55 pm ET
Value: 8%
Answer the following questions:
1. How long will you take to fill a rush order?
2. How many orders can you fill in a night, assuming you are open four hours each night?

30

3. How much of your own and your roommate's valuable time will it take to fill each order?
4. For Kristen Cookies, develop a Gantt chart of the activities and the resources (Kristen,
Roommate, and Oven). Determine the amount of idle time Kristen and Roommate has
for each dozen cookies produced. What is the time for Kristen and Roommate if the
orders are for two-dozen cookies (of the same type) or three-dozen?
5. If the cost of the dough used for cookies is $1, the wages that Kristen and Roommate
make is $12 per hour, and the overhead rate is 100% of direct labor, what is the cost of
one dozen cookies?
Submit your answers in MS Word format using the drop box below by no later than 11:55
PM EST on Day 6.

Week 1 Discussion 1: Kristens Cookies
Due: Post by Day 5, Respond by Day 7
Value: 100

MSCG6206 WK1

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MSCG6206 WK1

Uploaded by

Copyright:

Available Formats

1

MGSC6206: Management of Service and Manufacturing Operations

You might also like