Operations Management

Session 4: Kristine Cookies Case

 Last Class in Process Analysis
Module
 What did we learn?

 Throughput rate
 Capacity
 What’s the difference between capacity and throughput rate?
 Bottleneck resource
 Utilization rate
 Throughput time
 WIP
 Little’s Law:
 Throughput Time = (Average) WIP / Throughput Rate

Session 4 Operations Management 2

 Today

 Team Presentations

 Lecture (Kristen’s cookies and additional

comments on capacity management)

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 Team Presentations

Session 4 Operations Management 4

 What is it all about?

 Process Characteristics
 Capacity of a System
 How much can you process in a week/day?
 Response Time
 How quickly can you meet demand?

Session 4 Operations Management 5

 Process Flow

 What are the inputs?

 What are the outputs?
 What are the activities?

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 Process Flow Chart

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY
DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

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 4 8 12 16 20 24 28 32 36
Time
Resource

Operations Management 8
PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36

You
Resource

Oven
Tray

Operations Management RM 9
 Kristine Cookies and
Measures
 What is the Throughput time?
 From the moment an order arrives till it is finished, it
takes 26 min.
 Can the throughput time be reduced?

Session 4 Operations Management 10

PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36

You
Resource

Oven
Tray

Operations Management RM 11
PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36

You
Resource

Oven
Tray

Operations Management RM 12
 Kristine Cookies and
Measures
 What is the capacity of the system?
 What is the slowest resource? (Assume that the
we have enough trays.)

Session 4 Operations Management 13

PAY

PACK
COOL
BAKE
SET OVEN
LOAD
MIX Time

4 8 12 16 20 24 26 28 32 36
10
You
Resource

Oven
Tray

Operations Management RM 14
 Bottleneck Analysis

 It is clear that the bottleneck is the Oven

 It is the only resource that once we start producing is
not idle.
 It is the slowest resource: One dozen every 10 min.

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 Capacity
 It seems that if they have enough trays they can
produce a dozen of cookies every 10 min.
 1.2 cookies per min.
 In 4 hours (240 min) you can finish 22 trays:
 240 – 26 = 214
 214 / 10 = 21.4 or 21 trays.
 Given the bottleneck is the oven, to maximize
capacity we must ensure that the oven runs
continuously: once every 10 min.

Session 4 Operations Management 16

 Process Flow Chart

Order Size (Dozens): 1 Dozens

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 2 1 9 5 2 1

TOTAL TIME

YOU: 6 + 2= 8 minutes MIXER: 6 minutes TRAY: 19 minutes

ROOMIE: 1 + 2 +1 = 4 minutes OVEN: 1+ 9 = 10 minutes

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 Process Flow Chart

Order Size (Dozens): 1 Dozen

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 2 1 9 5 2 1

TOTAL TIME Dozens / Day = 22

YOU: 6 + 2= 8 minutes MIXER: 6 minutes TRAY: 19/2 minutes

ROOMIE: 1 + 2 +1 = 4 minutes OVEN: 1+ 9 = 10 minutes

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 Process Flow Chart
Order Size: 2 Dozens

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 4 2 18 10 4 1

TOTAL TIME

YOU: 6 + 2= 8 minutes MIXER: 6 minutes TRAY:

ROOMIE: 1 + 2 +1 = 4 minutes OVEN: 2+ 18 = 20 minutes

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PAY

PACK

COOL

BAKE
SET OVEN
LOAD

MIX Time

4 8 12 16 20 24 26 28 32 36
10

You
Resource

Oven

Tray 1

Tray 2
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RM RM
 How many dozen per day?

 60 minutes x 4 = 240 available minutes each evening

 240-36=204 available minutes after the first two dozen is
finished
 204/20=10.2 two dozens finished in the remaining 204
minutes
 2x11=22 dozens per day
 Does it make sense to give a discount for an order size of
two dozen?

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 Capacity Investment

 Should we invest in a second Oven?

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 Two Ovens. Order Size: 1 dozen
PAY

PACK

COOL

BAKE
SET OVEN
LOAD

MIX Time

4 8 12 16 20 24 26 28 32 36
8

You You
Resource

Oven

Tray

Operations Management RM RM 23
 Bottleneck Analysis

 Who is the bottleneck now?

 The entrepreneur
 Why did the bottleneck shift?
 Could the numbers (as opposed to the graph)
indicate were the bottleneck is?
 Now should we give a discount for ordering 2
dozen?

Session 4 Operations Management 24

 Bottleneck Analysis
 Your capacity:
 1 dozen cookies / 8 minutes = 0.125 dozen cookies per minute (or 1
dozen cookies every 8 minutes)
 Oven capacity:
 1 dozen cookies / 10 minutes
 2 ovens x .1 dozen cookies per minute = 0.2 dozen cookies per
minute (or 1 dozen cookies every 5 minutes)
 Mixer:
 1/6=0.167 dozen cookies per minute
 Roommate
 ¼=0.25 dozen cookies per minute
What is the slowest resource?
Note: same calculation as made in the previous class in Burger’s example.
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 Dozens per day with two ovens

 240-26=214 minutes for the first dozen

 214/8=26.75 dozens in the next 214 minutes
 27 dozen per day with two ovens.

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 Economic Analysis

 Having two ovens increase the capacity from

60/10=6 dozens per hour to 60/8=7.5 dozens per
hour.
 What is the value of the additional oven?
 (27-22)*300*Profit per dozen =

New capacity # of selling days

Old capacity

 Additional profit = $1,500*profit per dozen

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 Economic Analysis Example

 Suppose we sell each dozen cookies for $1.50 per dozen.

 Assume there is no cost on your time.
 The profit per dozen is then $1.50-$0.60-$0.10=$0.80.
 Therefore, the additional profit after being open 300
days is: 5x300x$0.80=$1200.
 We are willing to buy another oven if it costs less than
$1200 and we have enough demand so that it will be in
use.

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 Two Ovens
Order Size: 2 Dozens
PAY

PACK

COOL

BAKE
SET OVEN
LOAD

MIX Time

4 8 12 16 20 24 26 28 32 36

You You
Resource

Oven

Tray

Operations Management RM 29
 Process Flow Chart
OVENS = 2 and Order size =2 Dozen

YOU YOU ROOMIE ROOMIE ROOMIE

OVEN OVEN
MIXER TRAY TRAY TRAY TRAY TRAY

DOUGH
LOAD SET
MIX BAKE COOL PACK PAY
TRAY OVEN

TIME: 6 4 2 18 4 2
10

TOTAL TIME Dozens / Day = 44 doz / day

YOU: 6+4 = 10 MIXER: TRAY:

ROOMIE: OVEN: (18 +2) /2 = 10

Session 4 Operations Management 30

 Summary

 Tools & Techniques

 Identification of Bottleneck
 System Capacity
 Throughput Time
 Concepts
 Bottleneck & Capacity depend of product mix
 In high variety systems bottlenecks shift

Session 4 Operations Management 31