Systems Design

OPERATIONS MANAGEMENT
RECAP
FORECAST “Usually wrong”
Rarely perfect ECONOMIC QUALITATIVE

Jury Executive Opinion
More accurate for GROUPED TECHNOLOGICAL Market Research
Delphi Method
DATA
DEMAND
QUANTITATIVE
More accurate for SHORTER
periods Naïve Model
Simple moving average
Weighted moving average
Exponential smoothing
MBA 623-24
SYSTEM DESIGN
RACELIS, GLOMARIE
ERAZO, MARIA FE
SAZON, EMARIE
YAMBAO, REGINA
GREGORIO, JOCELINE
ERAZO, Maria Fe
PRESENTERS GREGORIO, Joceline
RACELIS, Glomarie
SAZON, Emarie
YAMBAO, Regina
OPERATIONS MANAGEMENT | SYSTEM DESIGN

Product, Service Design, and Reliability
OUTLINE Capacity Planning
Decision Theory
Process Selection and Facility Layout
Location Planning and Analysis

Product and Service Design, and
Reliability

Product and Service Design, and Reliability
Product Service
• Is anything that can be • is an action.
offered to a market. • Anything done for
• Tangible someone.
• Can be sold as finished • Assistance
good
Is there a
demand for Can we do
it? it?
Reasons for Product and Service Design
What level of quality is Does it make sense from an
appropriate and Redesign economic standpoint?
• Economic • Competitive
• Social Demographic • Cost or Availability
• Technological
Manufacturability • Political, Liability, or Legal
Serviceability

Samsung Galaxy Note 7 Recall
• Four months after Samsung first recalled its acclaimed Galaxy Note 7
phone, the electronics giant finally announced what cause Note 7
phones from 2 separate batches to catch fire in the first place: a
design failure in the first battery and a manufacturing defect in the
second.
Important Happenings with Note 7
• Some batteries caught fire.
• Samsung recalled the Note 7 and promised to exchange it for a new
model or give a refund.
• Some replacements burned up, too.
• Samasung completely ended production.
• Retailers stopped selling Note 7
• All airlines banned the Note 7 from all flights.
• Bribed buyers to return the phone
• Samsung's profit suffered of $5 Billion.
Reference: Samsung Galaxy Note 7 recall: Everything you still need to know about what's coming next - CNET

Idea Generation
Main Sources: • Competitors
• Customers
Reverse Engineering
• The Supply Chain

Research and Development
… the Kindle... it's all about reading,

reading, and reading... a tool for a
single job.

Legal and Ethical Considerations
Product Liability
• The responsibilty of a manufacturer for any
injuries or damages caused by a faulty product
Commercial Law
Consumer Act of the Philippines

Human Factors Cultural Factors
Global Product and Service Design

• Operating 24-hour basis.
• Engaging fewer human resources around the world.
• Meetings held through various media platforms.
• Global product means increase in marketability and wide utilization.

Environmental Factors: Sustainability
Cradle-to-Grave Assessment End-of-Life Programs
• Goal: is to choose products and • Goal: reduce dumping products (i.e
services that has least environmental electronic equipments)
impact while still considering • Deals with products that have reached
the economic impact. the end of their useful life.
• The assessment of the
environmental impact of a product 3R's
or service throughout its useful life Value Analysis
• For products, impacts of every phase Recycling
• Examination of the function • Recovering materials for
of product's life cycle must be taken of parts and materials to future use.
into account. reduce cost and/or improve
• For service, energy consumption product performance.
Remanufacturing
• Refurbishing used products by
replacing worn-out or
defective components.

Why Nokia Failed?
Reasons Lessons
1. Nokia did not adapt to change 1. Macro-environmental COnditions
2. Excessive reliance on being a first 2. Competitions
mover in the industry 3. Organizational Structure
3. High competition in the industry 4. Vision
Reference: Why Nokia Failed? - Doers Empire
4. Perception in the consumers
5. Lack of repositioning
6. Lack of strategic plan
7. Excessive growth
8. Lack of Innovation
9. Changing the Organization Structure
10. Internal Rivalries
11. Lack of Vision
12. Complacent Human Resource
13. Overestimation of brand strength
Reference: Why Nokia Failed? - Doers Empire

Introduction Maturity
-> Curiousity Strategies for Product or -> Low cost and high productivity
-> Potential buyer -> Longer life and increased market
-> Initial demand
Service Life Stages size
Growth Decline
-> Obtaining accurate projection of -> Discontinue a product or service
demand growth rate -> Replacing it with new ones
-> Ensuring the length of increasing -> Finding new users
demand
-> Higher reliability and lower cost

Product Life Cycle Management (PLM)
• A systematic approach to managing the series of changes a product goes through, from its conception to its end-of-life.
3 Phases 100% Beginning of Life -> Middle of Life -> End of Life 0%
Degree of Standardization
Advantage Disadvantage
• Identical items are made in large numbers. • Competitive struggles
• Immediately available to customers. • Reduction of variety
• Low cost of production and increase in productivity • Resistance to modification for freezing designs
• Reduce time and lower cost to train employees
Designing for Mass Customization

• Delayed Differentiation -> Postponement Tactics
• Modular Design -> component parts are grouped into modules for replacement and interchanging

Reliability Degree of Newness
• The ability of a product part to • Modifacation of an • Clone of a competitor's
perform its intended function under existing product or service product or service
a prescribed set of conditions. • Expansion of an existing • New product or service
• Impact on repeat sales product line or service
• Reflect on product's image offering
• Considers sustainability
Organization
Low-Level of Newness High-Level of Newness
Robust Design Fairly quick and easy transition Slower and more difficult in
transition
More Costly
• Design that results in products or
services that can function over a
broad range of conditions
Market
Low-Level of Newness High-Level of Newness
Little difficulty with market More difficulty with acceptance
acceptabiltiy
Low profit potential High potential for profits

Quality Function Deployment (QFD)
• An approach that integrates the "voice of the
customers" into both product and service
development.
• Formal way
• Informal way
• Customer's requirements (what)
• Technical requirements (how)
The Kano Model

• Customer Satisfaction
• Performance Quality
• Satisfaction and Dissatsfaction = level of functionality
• Excitement Qulity -> "Wow" Factor

Phases in Product Design and Development
• Feasibilty analysis • Design review
• Product specifications • Market test
• Process specifications • Product Introduction follow-up
• Prototype development evalutation
Designing for Production

Concurrent Engineering Component Commonality
Computer Aided Design (CAD)
Production Requirements
• Design for Manufacturing (DFM)
• Design for Assembly (DFA)
• Manufacturability

Service Design Phases in the Service Design
• Intangible
• Created and delivered at the Service Blueprint
same time
• Cannot be inventoried
• Highly visible
• Low barriers to entry and exit
• Location
• Service System Range
• Damand Variability

Reliability
Quantifying Reliabilty
• The probability that the product or system will function when activated -> focuses on one-point int time
Rule 2: If two events are Rule 3: If two or more

independent and events are involved and
success is defined as the success is defined as the
Rule 1: If two or more probability that at least
probability that at least
events are independent one of them occurs, the
one of the events will
and success is defined as probability of success is
occur, the probability of
the probability that all 1 − p (all fail)
success is equal to the
events occur, then the
probability of either one 1 - [(1 - .90) · (1 - .80) · (1 - .70)]
probability of success is
plus 1.00 minus that = .995
equal to the product of
probability multiplied by
the probabilities
the other probability.
.90 · .80 = .72
.80 + (1 - .80) · .90 = .98

A copier is able to operate for an average

of 200 hours between repairs, and the
mean repair time is two hours.
Determine the availability of the copier.

Production Planning & Control

Production Planning & Control
PRODUCTION PLANNING
RAW
FINISHED
MATERIALS
GOODS
Problems Solutions
Control

IMPORTANCE OF PRODUCTION PLANNING AND CONTROL
I. Improve organization Regular and timely deliver

II. To achieve Better supplier communication Raw Material
III. Reduce investment Inventory Purposes
IV. Reduce production cost Proper estimation & increase efficiency
V. Smooth flow of production Without Interruption
VI. Proper Quality & quantity of equipment, raw materials During
Production
VI. Ensure capacity Utilization is aligned with forecast demand

Function of production planning and Control
1. Forecasting
-Accurate
-Easy to Understand
-Economical
*Important role in Product development in future*

2. Product design
-Designer
-Engineers
-Draughtsman

3. Process Planning
Preparation of detailed Planning
How to Manufactured Most Economical Way
Necessary to plan

4. Routing
Flow of work in the plant
What work need to be done? How to be done? When to be done
RAW MATERIALS SEQUENCE OF OPERATION FINISHED GOODS

PATH

5.Material Control
Material control includes Inventory Control

Cost of production
Planning of materials
Purchase procedure
Transportations

5.Tool Control
Tool control ensures Right tool available at the time of production
Lost time Expensive

Delay of work

6.Loading
Loading can be defined as the study of relationship between load
and capacity of the workplace
Without specifying
Assignment when work need to
be done

7.Scheduling
When and what sequence job will be done
Which order on which machine, department and

which operator

Capacity Planning

Capacity Planning
CAPACITY:
-The upper limit or ceiling on the load that an operation unit can handle.
-the process of determining the company resources needed by an organization to
meet changing demands for its products.
KEY QUESTION: Related Question:
1.WHAT KIND of capacity is needed? -How much will it cost

-What are the potential benefits and risks?
2.HOW MUCH capacity is needed to match demand Are these sustainability issues?
-Should capacity be changed all at once ,or
3. WHEN is it needed? through several smaller changes
-can the supply chain handle necessary Changes

Capacity Planning
Impact the
ability of the Planned due to
organization to their consumption
meet future of financial
demands resource
Affect STRATEGIC DECISION

Operating -Plant Affect the
Cost -Capital ease of
-Machine management
-Labor
Involve long
term More
commitment important
of resources complex due to
globalization
Can affect also
competitiveness

Capacity Planning
Classification:
LONG TERM CAPACITY MEDIUM TERM CAPACITY
PLANNING PLANNING SHORT TERM CAPACITY
PLANNING
* to keep meeting the

demand of your product for a * replace the equipment * Used more daily
long term or more than one operation such as:
year. -MANPOWER
-SUBCONTRACT -personnel and
* IT investment/ capital OPERATION machine scheduling
investment, securing -INCREAS OR USE STOCK -Maintaining proper
necessary Hr, large process -ADD EQUIPMENT inventory
improvement project.
* help us increase the

probabilty of success.
Capacity Planning
Cost
Revenue
1. Measure aggregate
demand and capacity
Working
Capital
AGGREGATE DEMAND
OBJECTIVE OF CAPACITY 2. Identify the alternative

Quality PLANNING AD CONTROL capacity
Speed
"TOTAL"
3. Choose the most

appropriate capacity plan
Dependabilit
y
Flexibility

Capacity Planning
Seasonality
TASTES CHANGING COMPETITOR
Seasonality or
SUBSTITUTES cyclical
DEMAND Products
Government Policy
Economic Change
Changes

Capacity Planning
Seasonality
-is defined as a certain time series with repetitive or predictable patterns of demand due
to re-occurring seasonal events.
How to forecast seasonal demand
1. Identify which product are affected by seasonal demand

2. Understand when the peaks will happen
3.Accurately forecast the relative size of those peaks compares
to normal demand
4.Undestand the level of uncertainty associated with those
forecasted.

Capacity Planning
MEASURING CAPACITY
INPUT
MEASURE OUTPUT
CAPACITY MEASURES
CAPACITY Input capacity
Process Output capacity measure
measure
Number of festival
Music festival Square meters of land
attendees
-it is the most -It is best used Number of guests per
Hotel Rooms available
appropriate for where there is low week
small processes or variety in the Car Manufacturing

Machine capacity Cars produced per month
plant
where capacity is product mix or
Machine hours
relatively or highly limited Milk Bottling Plant
available
Bottles filled per day
Number of seats
customized. customization Lecture theatre
available
Students on courses
Wedding planning
Consultants available Weddings per season
service

Capacity Planning
MEASURING CAPACITY; PROBLEM
A service provider works an eight-hour day, takes two fifteen-minute coffee breaks
and has a half hour lunch break. The time available for work is seven hours per
The Formula for capacity : worker per day.
Capacity=Time available/ Time of task A worker was a fitness instructor, and he spends 70 minutes with each customer (10
minutes for the consultation and booking and 1 hour for the gym session), how many
clients could the instructor process during a five-day week?
The Formula for capacity :
( 7 hours per day x 60 minutes per hour )5

70 minutes per client
30 clients per week

Capacity Planning
Design Capacity
-the maximum output of a system or facility or process and the likes under ideal condition in each period
*Product produce in an hour

or day *# of customers
*# of Beds = Bed Capacity *# of Chairs= Sitting

Capacity

Capacity Planning
Effective Capacity
-the organization's expectation of their capacity considering current

challenges
*Product Mix Schedules downtime
Equipment changeover or
Customer's request
maintenance

Capacity Planning
DESIGN AND EFFECTIVE CAPACITY
Design
Effective Capacity
Capacity
Actual
Output

Capacity Planning
DESIGN AND EFFECTIVE CAPACITY EXAMPLE
Design
Capacity
63 Beds

Capacity Planning
Effective
Capacity Design
20 Beds Capacity
63 Beds

Capacity Planning
Effective
Capacity Design
20 Beds Capacity
63 Beds
Actual
Output
10 Beds

Capacity Planning
Capacity Utilization
- is the percent of design capacity actually achieved.
CAPACITY UTILIZATION= Actual Output/ Design Capacity
Efficiency Rate
- is the percent of the effective capacity actually achieved.
EFICIENCY RATE= Actual output/ Effective Capacity

Capacity Planning
Problem
* After choosing the best location of , Liza Cross must determine between two machines in
which product could be manufactured to ensure that EMV would achieve
*Machine 1 would be able to produce 5 metric tons of product, but due to scheduled
preventive maintenance and holidays, it would be able to prepare 4.5 tons, past demands
suggest 3 metric tons is the safest assumption to avoid fast wear and tear
*Machine 2 would be able to produce 8 metric tons of product, but due to scheduled
preventive maintenance and holidays, it would be able to prepare 7 metric tons, past
demand suggest 5.8 metric tons is the safest assumption to avoid wear and tear.

Capacity Planning
Solutions:
Machine 1 Machine 2
CAPACITY UTILIZATION= Actual output/Design Capacity

Design Capacity 5 8
Effective Capacity 4.5 7
Actual Output 3 5.8

EFICIENCY RATE= Actual output/ Effective Capacity
Capacity utilization 0.60 or 60% 0.73 or 73%
Efficiency Rate 0.67 or 60% 0.83or 83%

Capacity Planning
CAPACITY PLANNING: BREAK EVEN ANALYSIS
• is a tool used in order to determine the the requires

capacity of facility to achieve profit.
• It shows the point where cost equals revenue -
• COuld be in Money Value( peso Sales) or in Volume (
number of Units)
• It also called as Cost Volume analysis

Capacity Planning
Contribution= difference
between selling price and
variable cost. Profit=
Contribution > Total fixed Cost
Selling Price x Volume of units

-
Variable cost+ Fixed Cost per volume of units
Changes depending on the volume of units produced
Does not change, regardless of volume of units produced

Capacity Planning
SINGLE PRODUCT BREAK- EVEN ANALYSIS
Where:
• F= Fixed Cost
• V= Variable Cost
• P= Proce per unit ( After all discount)

Capacity Planning
CAPACITY PLANNING: BREAK EVEN ANALYSIS:
PROBLEM

Given the EMW for location of the business, and the machine to be used in manufacturing
the product, Liza would be determining the minimum amount in Peso Sales and unit Volume
in order to BREAK –EVEN. Because of the market research dine, the following are the
projection available for her -

Capacity Planning
• Fixed Cost= P20,000

• Direct labor= 10/kilo
• Raw Materials= 5/kilo
• Selling Price= 35/kilo

Capacity Planning
• Fixed Cost= P20,000

• Direct labor= 10/kilo
• Raw Materials= 5/kilo
• Selling Price= 35/kilo

Capacity Planning
MULTI-PRODUCT BREAK EVEN ANALYSIS

Capacity Planning

Liza realizes that it is not optimal to offer just offering 1 product in the market
considering that product is Industrial Nails. She then comtemplated on offering 3
different sizes of product in the market in which the details are shown on the table and
FIXED COST I still P 20,000
PRODUCT PRICE VARIABLE COST MONTHLY FORECAST
1'Nail P 20,00 P15.00 P 25,000
3"Nail P 35.00 P15.00 P 100,000
5' Nail P 40.00 P25.00 P 75,000

Capacity Planning
PRODUCT PRICE VARIABLE MONTHLY SALES

COST FORECAST WEIGHTED
(I) (P) (V) V/P 1-(V/P) % OF SALES CONTRIBUTION
1'NAIL P 20,00 P15.00 15/20 1-0.75 P 25,000 25,000/200,000 (0.25)(0.13)
=.13 =0.03
=0.75 =0.25
3'NAIL P 35.00 P15.00 1-0.43 P 100,000 100,000/200,000 (0.57)(0.50)

15/35
=0.43 =0.57 =.50 =0.29
5'NAIL P 40.00 P25.00 25/40 1-0.63 P 75,000 75,000/200,000 (0.37)(0.37)

=0.63 =0.37 =.37 =0.14
P 200,000 100% 0.46

Capacity Planning

Capacity Planning
LEVEL OF CAPACITY AND CHASE DEMAND STRATEGY
• Level Capacity strategy: a constant regular time output rate is maintained while meeting the demand
variations by a different combination of options.
•Chase demand strategy: the capacity is A period's planned quantity of output is equal to that period's
expected demand.A period's planned quantity of output is equal to that period's expected demand.d
demand.

Capacity Planning
LEVEL OF CAPACITY AND CHASE DEMAND STRATEGY OPERATION
•Advantage of the level capacity strategy: •Disadvantage of the level capacity strategy:
• The utilization of operational resources • . If there is any change in the demand of

throughout the year. the customer there is a risk of
obsolescence.
• Efficient level of production can be

• The cost of staffing also increases
maintained.
if they are under-utilised, during
low demand time.
• Decreases the marginal cost.

Capacity Planning

Decision Theory
REGINA NIÑA YAMBAO

Decision Theory
REPRESENT A GENERAL APPROACH TO DECISION MAKING,
SUITABLE FOR A WIDE RANGE OR OPERATIONS MANAGEMENT
DECISIONS. AMONG THEM ARE CAPACITY
PLANNING,PRODUCT,SERVICE DESIGN, EQUIPMENT SELECTION AND
LOCATION PLANNING.

ELEMENTS:
1. SET OF POSSIBLE FUTURE CONDITIONS THAT WILL HAVE A BEARING ON THE RESULTS OF THE
DECISION
2 A LIST OF ALTERNATIVES FOR THE MANAGER TO CHOOSE FROM.
3. A KNOWN PAYOFF FOR EACH ALTERNATIVE UNDER EACH POSSIBLE FUTURE CONDITION.
DECISION MAKER SHOULD EMPLOY THIS PROCESS :

1. IDENTIFY THE POSSIBLE FUTURE CONDITIONS
2. DEVELOP A LIST OF POSSIBLE ALTERNATIVES, ONE OF WHICH MAY BE TO DO NOTHING
3. DETERMINE OR ESTIMATE THE PAYOFF ASSOCIATED WITH EACH ALTERNATIVE FOR EVERY
POSSIBLE FUTURE CONDITION
4. IF POSSIBLE, ESTIMATE THE LIKELIHOOD OF EACH POSSIBLE FUTURE CONDITION
5. EVALUATE ALTERNATIVES ACCOIRDING TO SOME DECISION CRITERION

PAYOFF
OUTCOME OF THE DECISION
CAN BE POSITIVE, NEGATIVE, BIG OR SMALL
CAN BE REWARD OR CAN BE LOSS

THE DECISION PROCESS AND CAUSES OF POOR DECISIONS
STEPS:
1. IDENTIFY THE PROBLEM
2.SPECIFY OBJECTIVES AND CRITERIA FOR A SOLUTION
3. DEVELOP SUITABLE ALTERNATIVES
4. ANALYZE AND COMPARE ALTERNATIVES
5. SELECT THE BEST ALTERNATIVES
6. IMPLEMENT THE SOLUTION
7. MONITOR TO SEE THAT DESIRED RESULT IS ACHIVED.
BOUNDED RATIONALITY -
THE LIMITS IMPOSED ON DECISION MAKING BY COSTS, HUMAN ABILITIES,TIME, TECHNOLOGY, AND
THE AVAILABILITY OF INFORMATION
SUBOPTIMAZATION -
THE RESULT OF DIFFERENT DEPARTMENTS EACH ATTEMPTING TO REACH A SOLUTION THAT IS
OPTINUM FOR THAT DEPARTMENT
DECISION ENVIRONMENTS
CERTAINTY
Relevant parameters such as costs, capacity, and
demand have known values.
Risk
Certain parameters have probalistic outcomes
Uncertainty
Impossible to assess the likelihood of various
possible future events

Decision Making Under Uncertainty
FOUR POSSIBLE DECISION CRITERIA
MAXIMIN
DETERMINE THE WORST POSSIBLE PAYOFF FOR EACH
ALTERNATIVE, AND CHOOSE THE ALTERNATIVE THAT HAS THE
"BEST WORST"
MAXIMAX
DETERMINE THE BEST POSSIBLE PAYOFF, AND CHOOSE THE
ALTERNATIVE WITH THAT PAYOFF
LAPLACE
DETERMINE THE AVERAGE PAYOFF FOR EACH ALTERNATIVE
AND CHOOSE THE ALTERNATIVE WITH THE BEST AVERAGE.
MINIMAX REGRET
DETERMINE THE WORST REGRET FOR EACH ALTERNATIVE,
AND CHOOSE THE ALTERNATIVE WITH THE " BEST WORST"

Regrets (Opportunity loss)
The difference between a given payoff and
the best payoff for a state of nature
EXPECTED MONETARY VALUE (EMV) CRITERION

THE BEST EXPECTED VALUE AMONG THE ALTERNATIVES

Decision Tree
A schematic representation of the
available alternatives and their
possible consequences

https://www.edrawmax.c
om/decision-tree/

EXPECTED VALUE OF
PERFECT INFORMATION
(EVPI)
THE DIFFERENCE BETWEEN THE
EXPECTED PAYOFF WITH
PERFECT INFORMATION AND
THE EXPECTED PAYOFF UNDER
RISK

SENSITIVITY ANALYSIS
DETERMINING THE RANGE OF PROBABILITY FOR

WHICH AN ALTERNATIVE HAS THE BEST
EXPECTED PAYOFF

Topic Overview
▪ Importance of Process Selection & Influence on Organization &
Supply Change
▪ Two factors influence Process Selection
▪ 4 Basic Processing Types
▪ Reasons for redesigning layouts
▪ Product Layouts and Advantages & Disadvantages
▪ Process Layouts and Advantages & Disadvantages
▪ Example of Process Selection & Facility Layout in Organization

PROCESS SELECTION
• refers to deciding on the way

production of goods or services
will be organized
• It affects the entire organization

and its ability to achieve its
mission
• occurs when new products or

services are being planned
• it also occurs periodically due to

technological changes in products
or equipment

PROCESS SELECTION
Operational Implications: Supply Chain Implications:
• equipment and labor • relate to the volume and

requirements variety of inputs and
outputs and the degree of
• operations costs flexibility that is required
• and both the ability to meet

demand and the ability
to respond to variations in
demand.

PROCESS SELECTION

PROCESS SELECTION
- long-term forecasts as well as an organization’s mission and goals are
important in developing a process strategy
Process Strategy is how an organization approaches process selection is

determined
Key aspects include:
• Capital intensity: The mix of equipment and labor that will be used by the
organization
• Process flexibility: the system can be adjusted to changes in processing
requirements (due to changes in product or service design, changes in
volume processed, and changes in technology)

PROCESS SELECTION Two factors influence Process Selection
The two key questions in process selection:
1. How much variety will the process need to be able to handle?

2. How much volume will the process need to be able to handle?
- Volume and variety are inversely related; a higher level of one means a lower
level of the other
- However, the need for flexibility of personnel and equipment is directly related
to the level of variety the process will need to handle:
• the lower the variety, the less the need for flexibility, while
• the higher the variety, the greater the need for flexibility.

PROCESS SELECTION
4 Basic Processing Types
Job Shop Batch Repetitive Continuous

PROCESS SELECTION
Job Shop
• operates on a small scale
• used when low volume of high-variety goods or services will be
needed
• Processing is intermittent; (small jobs)
• High flexibility equipment and skilled workers are important
• Manufacturing example: tool and die shop - produce one-of-a-
kind tools
• Service example: veterinarian’s clinic/office - variety of animals
and variety of injuries and diseases being assessed and cured

PROCESS SELECTION
Batch • used when a moderate volume and moderate variety of products or services
• equipment need not be as flexible; processing is still intermittent
• skill level of workers is moderate - there is less variety in the processed
• Examples: bakeries made bread in batches; movie theaters which show

movies to groups (batches) of people;
• Examples of services: plays, concerts, music videos and public address

announcements (witnessed or heard in batches)

PROCESS SELECTION
Repetitive • Used when higher volumes of more standardized goods or services are
needed
• Standardized output means slight flexibility of equipment needed
• Skill of workers is generally low
• Examples: production lines and assembly (process)

• Familiar products: automobiles, television sets, pencils, and computers
• Example of a service system is an automatic carwash
• Other examples of service: cafeteria lines and ticket collectors at sports
events and concerts.

PROCESS SELECTION
Continuous • highly standardized output
• workers’ skill requirements can range from low to high
• if equipment is highly specialized, worker skills can be lower
• Examples products: petroleum products, steel, sugar, flour, and salt
• Continuous services: air monitoring, supplying electricity to homes

and businesses, and the Internet.

PROCESS SELECTION
- Job Shop, Batch, Repetitive, and Continuous are ongoing operations
- Some situations are not ongoing but instead are of limited duration. The work is often
organized as a project.
• used for work that is nonroutine, with unique set of

objectives to be accomplished in a limited time frame
• Examples: consulting, making a motion picture, launching

a new product or service, publishing a book, building a
dam, and building a bridge
• Equipment flexibility and worker skills can range from low

to high

PROCESS SELECTION

PROCESS SELECTION
VARIETY
V
O
L
U
M
E
For example, if the goal is to be able to process a small volume of jobs that will involve high variety, job shop processing is most appropriate. For less variety
and a higher volume, a batch system would be most appropriate, and so on.

FACILITY LAYOUT REASONS TO REDESIGN OF LAYOUTS
Layout refers to the configuration of departments, work centers, and equipment, with
particular emphasis on movement of work (customers or materials) through the system
The need for layout planning arises both in the process of designing new facilities and
in redesigning existing facilities
Reasons for redesign of layouts:
• inefficient operations (e.g., high cost, bottlenecks),

• accidents or safety hazards
• changes in the design of products or services
• introduction of new products or services
• changes in the volume of output or mix of outputs
• changes in environmental or other legal requirements
• and morale problems (e.g., lack of face-to-face contact)

FACILITY LAYOUT
The basic objective of layout design is to facilitate a smooth flow of work,
material, and information through the system.
1. To facilitate attainment of product or service quality

2. To use workers and space efficiently
3. To avoid bottlenecks
4. To minimize material handling costs
5. To eliminate unnecessary movements of workers or materials
6. To minimize production time or customer service time
7. To design for safety

FACILITY LAYOUT
Types of Layout: PRODUCT LAYOUT
• used to achieve a smooth and rapid flow of large

volumes of goods or customers
• made possible by highly standardized goods or

services that allow highly standardized repetitive
processing
• work is divided into a series of standardized tasks,

permitting specialization of equipment and division
of labor
• This is to arrange workers or machines in the

sequence that operations need to be performed

FACILITY LAYOUT
PRODUCT LAYOUT
In manufacturing environments, the lines are referred to as production lines

or assembly lines, depending on the type of activity involved.

FACILITY LAYOUT
Advantages of Product Layouts:
• high rate of output

• low unit cost due to high volume
• labor specialization: (reduces training costs and time)
• low material-handling cost per unit (material handling - units follow the same
sequence of operation and often automated)
• high utilization of labor and equipment

FACILITY LAYOUT
Disadvantages of Product Layouts:
• intensive division of labor usually creates dull, repetitive jobs
that provide little opportunity for advancement and may lead to
morale problems and to repetitive stress injuries
• Poorly skilled workers may exhibit little interest in maintaining

equipment or in the output
• system is fairly inflexible to changes in product or process design
• system is highly susceptible to shutdowns caused by equipment

breakdowns
• needed preventive maintenance, the capacity for quick repairs,

and spare-parts inventories

FACILITY LAYOUT
Types of Layout: PROCESS LAYOUT
• involve a variety of processing requirements

• variety of jobs requires frequent adjustments
to equipment
• this causes a discontinuous workflow, which is
referred to as intermittent processing
• Examples: hospitals, colleges and universities,

banks, auto repair shops, airlines, and public
libraries
• (Ex. hospitals have departments or other units
that specifically handle surgery, maternity,
pediatrics, psychiatric, emergency, and
geriatric care)

FACILITY LAYOUT
Advantages of Process Layouts:
• systems can handle a variety of processing

requirements
• systems are not particularly vulnerable to

equipment failures
• general-purpose equipment is often less

costly than the specialized equipment
used in product layouts and is easier and
less costly to maintain
• It is possible to use individual incentive

systems
FACILITY LAYOUT
Disadvantages of Process Layouts:
• In-process inventory costs can be high if batch
processing is used
• Equipment utilization rates are low

• Material handling is slow and inefficient
• Job complexities often reduce the span of

supervision and result in higher supervisory costs
• Accounting, inventory control, and purchasing

are much more involved than with product
layouts.

FACILITY LAYOUT
illustrates the departmental arrangement typical of a process layout

Example of Process Selection in Organization
FORECAST- ATM Terminals from MM Area,
Southern Area & Northern Area for servicing
PRODUCT & SERVICES DESIGN – Cash
Replenishment & ATM Loading Process
CASH to Brinks Servicing Hubs ; Persons Involved
OPERATIONS
DEPARTMENT TECHNOLOGICAL CHANGE – Upgrade systems
or equipments used for servicing
CASH CENTER WORK DESIGN – updated report from Brinks (real time
report) for ATM Replensihment & Loading; sending
SOUTH advices to servicing hubs
LAYOUT – scheduled ATM replenishment and ATM
Loading, changing cassets
FACILITIES & EQUIPMENTS – Armored Cars w/ fully
armed escorts, Brinks Servicing Hubs, Cassets w/ Cash

Example of Facility Layout in Organization
CLIENTS/ DBP BRANCHES DBP BRANCHES - deliver

- collect cash & checks COD CC SOUTH - Cash cash requested from br
deposits in Vault (HO) – to its clients
verifying, counting,
sorting
FUND TRANSFER CASH ASSISTANCE
FUND TRANSFER CASH ASSISTANCE
BANGKO SENTRAL NG
PILIPINAS (BSP) - deposit
note bills, coins & cash
withdrawals as per request


LOCATION IS
TO STRATEGY
NEW PRODUCT /
TRENDS DEMAND EXPANSION SERVICE
HOW? /
WHAT? HOW MUCH? WHERE?
WHEN?
PRODUCT PRICE PLACE PROMOTION
STRATEGY / BUSINESS PLAN / MARKETING PLAN
COMPETITIVE
MARKET REVENUE ADVANTAGE

LOCATION IS
TO STRATEGY
NEW PRODUCT /
TRENDS DEMAND EXPANSION SERVICE
HOW? /
WHAT? HOW MUCH? WHERE?
WHEN?
PRODUCT PRICE PLACE PROMOTION
STRATEGY / BUSINESS PLAN / MARKETING PLAN
COMPETITIVE
MARKET REVENUE ADVANTAGE

LOCATION DECISION SCENARIOS
EXPANSION OF FACILITY NEW LOCATIONS
SHUT DOWN NOTHING

LOCATION AND SUPPLY CHAIN
MANUFACTURER WAREHOUSE RETAILER
Near SOURCE of Near Suppliers or CONSUMER

raw materials Markets accessibility

Cost-Profit Volume Analysis ECONOMIC COMPARISON
FIXED & VARIABLE COST
ONLY ONE PRODUCT
LOWEST TOTAL COST FOR

EXPECTED LEVEL OF OUTPUT
LOCATION WITH HIGHEST

PROFIT

COST ANALYSIS 10,000 units per year
VARIABLE
LOCATION FIXED COST
COST/UNIT
A 250,000 11
B 100,000 30
C 150,000 20
D 200,000 35

VARIABLE
LOCATION FIXED COST TOTAL VC TOTAL COST
COST/UNIT
A 250,000 11 110,000 360,000
B 100,000 30 300,000 400,000
C 150,000 20 200,000 350,000
D 200,000 35 350,000 550,000

VARIABLE
LOCATION FIXED COST TOTAL VC TOTAL COST
COST/UNIT
A 250,000 11 110,000 360,000
B 100,000 30 300,000 400,000
C 150,000 20 200,000 350,000
D 200,000 35 350,000 550,000
LOCATION C yields the lowest total cost

PROFIT ANALYSIS Monthly output: 8,800
VARIABLE
LOCATION REVENUE FIXED COST
COST
A 52,800 8,000 44,000
B 52,800 9,400 35,200
Price: 6 / unit
Location A:
VC: 5 / unit
Location B:
VC: 4 / unit

VARIABLE MONTHLY
COST PROFIT
A 52,800 8,000 44,000 800
B 52,800 9,400 35,200 8,200
Price: 6 / unit
Location A:
VC: 5 / unit
Location B:
VC: 4 / unit

VARIABLE MONTHLY
COST PROFIT
A 52,800 8,000 44,000 800
B 52,800 9,400 35,200 8,200
Price: 6 / unit
Location A:
VC: 5 / unit
Location B:
VC: 4 / unit LOCATION B yields the highest monthly profit

Factor Rating WEIGHT / COMPOSITE VALUE
RELEVANT FACTORS
WEIGHT
MINIMUM ACCEPTABLE SCORE
ASSESS & SCORE
COMPARE
DECISION

RELEVANT FACTORS
FACTORS
WEIGHT
Proximity
Volume
MINIMUM ACCEPTABLE SCORE Rental
Size
ASSESS & SCORE Layout
Operating costs
COMPARE
DECISION

RELEVANT FACTORS
FACTORS WEIGHT
WEIGHT
Proximity 10%
Volume 5%
MINIMUM ACCEPTABLE SCORE Rental 40%
Size 10%
ASSESS & SCORE Layout 20%
Operating costs 15%
COMPARE
DECISION

RELEVANT FACTORS At least 75
FACTORS WEIGHT
WEIGHT
Proximity 10%
Volume 5%
MINIMUM ACCEPTABLE SCORE Rental 40%
Size 10%
ASSESS & SCORE Layout 20%
Operating costs 15%
COMPARE
DECISION

RELEVANT FACTORS At least 75 Score out of 100
FACTORS WEIGHT OPT. 1 OPT. 2

WEIGHT
Proximity 10% 100 60
Volume 5% 80 80
MINIMUM ACCEPTABLE SCORE Rental 40% 70 90
Size 10% 86 92
ASSESS & SCORE Layout 20% 40 70
Operating costs 15% 80 90
COMPARE
DECISION

FACTORS WEIGHT OPT. 1 Score 1 OPT. 2 Score 2

WEIGHT
Proximity 10% 100 10 60 6
Volume 5% 80 4 80 4
MINIMUM ACCEPTABLE SCORE Rental 40% 70 28 90 36
Size 10% 86 8.6 92 9.2
ASSESS & SCORE Layout 20% 40 8 70 14
Operating
15% 80 12 90 13.5
costs
COMPARE
70.6 82.7
DECISION

FACTORS WEIGHT OPT. 1 Score 1 OPT. 2 Score 2

WEIGHT
Proximity 10% 100 10 60 6
Volume 5% 80 4 80 4
MINIMUM ACCEPTABLE SCORE Rental 40% 70 28 90 36
Size 10% 86 8.6 92 9.2
ASSESS & SCORE Layout 20% 40 8 70 14
Operating
15% 80 12 90 13.5
costs
COMPARE
70.6 82.7
DECISION OPTION 2 is the acceptable location

The Center of Gravity Method MINIMIZE
EQUAL SHIPMENT There are 4 possible destinations (D1 – D4), Shipment is 4
DESTINATION x y ẋ= 18
D1 2, 2 4
D2 3, 5 = 4.5
D3 5, 4
D4 8, 5 ỷ= 16
18 16 4
= 4

EQUAL SHIPMENT There are 4 possible destinations (D1 – D4), Shipment is 4
DESTINATION x y ẋ= 18
D1 2, 2 4
D2 3, 5 = 4.5
D3 5, 4
D4 8, 5 ỷ= 16
18 16 4
= 4
Center of Gravity is 4.5 , 4

Placing the Center of Gravity near D3

EQUAL SHIPMENT
Center of Gravity is 4.5 , 4


NOT EQUAL SHIPMENT There are 4 possible destinations (D1 – D4)
DESTINATION x y Weekly Qty

D1 2, 2 800
D2 3, 5 900
D3 5, 4 200
D4 8, 5 100
2,000
ẋ= 2(800)+3(900)+5(200)+8(100)
2,000
= 3.05 or 3.0
ỷ= 2(800)+5(900)+4(200)+5(100)
2,000
= 3.7

NOT EQUAL SHIPMENT There are 4 possible destinations (D1 – D4)
DESTINATION x y Weekly Qty

D1 2, 2 800
D2 3, 5 900
D3 5, 4 200
D4 8, 5 100
2,000
Center of Gravity is 3.0 , 3.7


NOT EQUAL SHIPMENT
Center of Gravity is 3.0 , 3.7


SAMPLE (HEALTHCARE SERVICE INDUSTRY)
HEALTHCARE SERVICE
TRENDS PRODUCT FACILITY
DEMAND
PRICE THAT MAY BE
EXPANSION PRICE ACCEPTABLE TO THE
MARKET*
PLACE ?
PROMOTION

SAMPLE (HEALTHCARE SERVICE INDUSTRY) FACTOR RATING

SAMPLE (HEALTHCARE SERVICE INDUSTRY) FACTOR RATING

COST-PROFIT-VOLUME
SAMPLE (HEALTHCARE SERVICE INDUSTRY) ANALYSIS
NEXT STEPS:
1. Market insights
2. Competitor scan
3. Financial projections
/ viability
4. Project Proposal

SUMMARY
Product, Service Design, and Reliability
Capacity Planning
Decision Theory

ANY QUESTIONS?
CLARIFICATIONS?

MBA 623-24
SYSTEM DESIGN
RACELIS, GLOMARIE
ERAZO, MARIA FE
SAZON, EMARIE
YAMBAO, REGINA
GREGORIO, JOCELINE

Systems Design

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Systems Design

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OPERATIONS MANAGEMENT

Rarely perfect ECONOMIC QUALITATIVE

PRESENTERS GREGORIO, Joceline

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OUTLINE Capacity Planning

Process Selection and Facility Layout

Location Planning and Analysis

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

• The Supply Chain

… the Kindle... it's all about reading,

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Global Product and Service Design

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Designing for Mass Customization

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

The Kano Model

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Designing for Production

Computer Aided Design (CAD)

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Rule 2: If two events are Rule 3: If two or more

OPERATIONS MANAGEMENT | SYSTEM DESIGN

A copier is able to operate for an average

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

I. Improve organization Regular and timely deliver

OPERATIONS MANAGEMENT | SYSTEM DESIGN

*Important role in Product development in future*

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Preparation of detailed Planning

How to Manufactured Most Economical Way

OPERATIONS MANAGEMENT | SYSTEM DESIGN

What work need to be done? How to be done? When to be done

RAW MATERIALS SEQUENCE OF OPERATION FINISHED GOODS

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Material control includes Inventory Control

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Tool control ensures Right tool available at the time of production

Lost time Expensive

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Which order on which machine, department and

OPERATIONS MANAGEMENT | SYSTEM DESIGN

OPERATIONS MANAGEMENT | SYSTEM DESIGN

KEY QUESTION: Related Question:

1.WHAT KIND of capacity is needed? -How much will it cost

OPERATIONS MANAGEMENT | SYSTEM DESIGN

Affect STRATEGIC DECISION

OPERATIONS MANAGEMENT | SYSTEM DESIGN

* to keep meeting the

* help us increase the

OBJECTIVE OF CAPACITY 2. Identify the alternative

Important role in Product development in future

# of Beds = Bed Capacity # of Chairs= Sitting