LN 3: Supporting Facility and Process Flow

Terminology

Formula:

Cycle time for an op: Average time it takes to finish an operation in

steady state
Steady State: average i/p = average o/p= constant
Bottleneck: Slowest operation, the one that limits productivity Always
busy
CT for a System: Average time between 2 successive service completions
in steady state
Capacity of an Operation: Operational o/p quantity per unit time during
busy period
Capacity of a system: o/p quantity per unit of time during period
Capacity utilisation: Ratio of actual o/p qty to maximum possible qty as a
period of time
Total direct labour content: Sum of all operation time to serve 1
customer The billable hours
(indirect: management, Maintenance)
Direct labour Utilisation: Percentage of time that workers contribute
value

Capacity = 1/ CT
= capacity of bottleneck

=t1+ t2 + t3

Total direct labor content

System cycle timeNumber
of workers in system

Workload balance: Adjusting process layout to have a balanced system

Process Flow:
Workload balance:
Adding an extra worker by hiring
Add another worker to the
bottleneck
LN 4: Service Quality

System in control: No assignable Cause of variation in the R and X chart

Case 1: when observational data is a rational number
R-Chart
X-Chart
Constructed first then X
Measures, Focuses and
chart
Ensures that process
Shows the difference
mean is in control
between highest and lowest
(LCL) = X A2R
(UCL) = X + A2R
value in sample pool
Mean: Sum of data/ no. of data
Measures, Focuses and
Ensures that process
variability is in control
Formula:
(LCL) = D3R
(UCL) = D4R
Range : Max Min of
observation within sample
set

All range values fall within

LCL and UCL of R-Chart,
Process variability is in
control

Cross median Approach

Sum all the weights first then divide by 2
Threshold would be (1)
Break co-ordinates into N,S,E,W
Add weights till it exceed or equal threshold
Can have multiple location
Median should be the optimal service facility
location

All the sample range fall

within the control limits
If out: Computation stop
here, and take another set
of data

LN 5: Service Facility Location:

1)
2)
3)
4)
5)
6)

Case 2: When data is binary

P-Chart
want to control the
probability of error.
99.7% of the normal
distribution falls
within 3SD of the
mean

1)

P-bar: (Sum of
incidents)/
(observation * No. of
sets)
If ask for comparing
a new value set:
Take that value and
divide by number of
observations see if
within range

Huff Model
1)

Objective profit by locating a RETAIL store that

will be attractive to the consumers
2) Attraction determined by: Price, Size, Quantity
and travel time
Aij=(Sj)/(Tij^); The higher the ^, the more time matters
Pij=(Aij)/Sum of (Aij); Probability that a customer in area I
would travel to use facility j
Eij=Sum of (PijCiBi); Total consumer expenditure at
shopping facility j with population i
Mj=(Ej)/(Sum of CiBi)
If T=0, A= infinity, hence P= 1.0

Revenue Management:
Newsvendor model:
CU=(price cost), Cv=(Cost salvage value) ; Salvage value= Disc P holding & transport cost
Expected additional revenue generated if you overbook: Cu*P(N>= n)
Expected loss if you underbook: Co*P(N < n)
P(N < n): Cu/ (Cu+Co)
Opportunity cost (Cu) while Penalty cost (Co) Another definition
Yield Management
Variable pricing strategy
Understanding, anticipating and influencing consumer behavior in order to maximize the revenue from fixed
and perishable resources
To achieve high fill rate
Discount airfare to generate more demand by Reserve some seats for high-pay customers, and sell the other
seats at discounted prices
How?
1) Increasing Pricing strategy: The closer the departure, the more expensive
2) Concave: As time pass, Price increase first then dip

Staff Scheduling:
Objective:
1)
2)
3)

Minimise total number of employees needed

Meeting svc level constraints
Meet the labour willingness constraint

Information needed: Desired staffing level + schedule of that individual if they can work on tt day