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CHAPTE~4
CHAPTE~4
CHAPTE~4
07/02/24 1
Introduction
process is any part of an organization that
takes inputs and transforms them into
outputs that, it is hoped, are of greater
value to the organization than the original
inputs.
All processes convert inputs into outputs.
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Cont…
1.Food Process
.
Inputs Process Output
Hospital Surgery
Medical Supplies
Healthy patents
Equipments Monitoring
patients
Laboratories Medication
Therapy
07/02/24 4
Process Selection
Process selection refers to the way an
organization chooses to produce its goods
or provide its services.
Essentially it involves the choice of
technology.
Process Selection has major implications
for:
07/02/24 5
Cont…
capacity planning
layout of facilities
equipment and
design of work systems.
07/02/24 6
Cont…
A good relation has to prevail among:
a) Operations strategy
b) New product development and
c) Process selection
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Importance of Process Selection
Decisions
They are strategic in nature demanding
special coordination among the functional
areas.
They greatly affect the business’s ability
to realize its mission.
They affect it ability to experience a good
competitive advantage.
They affect a firm’s ability to meet
customers’ demand.
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Process Selection cont…
Process decisions are affected by the operations
strategy which addresses the issues of:
1. Make or Buy decision
The make or buy decision is the perquisite for
process selection.
Factors considered in the make or buy decision
are:
Available capacity
Available and required expertise
Quality consideration
The nature of demand
Production and Purchase Cost
2. Process Flexibility and
3. Degree of automation or capital intensity
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Types of Processes
Continuous Processes
Continuous processes are employed
when a highly uniform product or
service is produced or rendered.
Continuous processes are characterized
by:
Perfect product standardization
Very high product volume
Specialized purpose or function
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cont
Expensive process equipments
Logical arrangement of the equipments
Products are continuous rather than
discrete.
Shut-downs and start-ups are costy
High vulnerable to shutdowns
Low personnel skills required
Wide span of supervision
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Semi continuous Processes
Semi-continuous processes also called
repetitive processes are employed to produce
outputs that allow for some variety
products are highly similar but not identical.
Typically, these products are produced in
discrete units.
High volume products
Relatively low skills
Relatively greater product variety
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Intermittent Processes
Processes used to produce a variety of
products with different processing
requirements in lower volumes.
Volume is much lower than in continuous
and semi-continuous systems.
The equipments are general purpose.
Workers are semi skilled and skilled
Span of supervision is narrow
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i. Batch Processes
are intermittent processes that are used
when companies need to produce
moderate volumes of similar products.
Batch manufacturing companies make a
batch of one product, then switch over
(set up) the equipment and make a batch
of another item.
07/02/24 14
ii. Job Shops
are also intermittent processes that are used
to produce small lots, low volume products.
Equipments involved are general purpose,
and the need for skilled workers to operate
and supervise such highly flexible
equipments is tremendously high.
What distinguishes the job shop operation
from batch processing is that the job
requirements often vary considerably from
job to job.
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Project Type
A project is a highly flexible and low volume type
operation.
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Intermittent and Repetitive (continuous and semi-
continuous) Operations
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Underlying Process Relationship between Volume and
Standardization Continuum
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Product-Process Matrix
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Capacity Planning
Defining Capacity
Capacity is the upper limit or ceiling on
the load that an operating unit can handle
during a specified time period.
The capacity of an operating unit is an
important piece of information for
planning purposes
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Example
A department works one eight-hour shift,
250 days a year, and has using one
machine in kind, and detailed information
regarding processing requirements and
demand size for three different products is
presented in the table below:
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The question is to determine the number of machines
(capacity) that the department has to have to meet the
above demand requirements.
Product Annual Standard Processing Time
Demand Processing Time Needed (Hr.)
per Unit (Hr.)
Total 5,800
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Basic Questions in CP
Whatkind of capacity is needed?
How much is needed?
When is it needed?
07/02/24 23
Steps in the Capacity Planning Process
Estimate the capacity of the present facilities
Forecast the long-range future capacity needs
Determine the gap between future capacity
requirement and current production capacity
Identify and analyze sources of capacity to
meet this gap
Select from among the alternative sources of
capacity
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Application of Decision Trees
Decision trees require specifying
alternatives and various states of nature.
For capacity planning situations, the state
of nature usually is future demand or
market favorability.
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Capacity decisions are important in
that capacity:
1. determines a firm’s ability meeting
demand
2. determines a firm’s operating costs
3. Determines a firm’s initial investment
4. Involves long-term commitment of
resources
5. Affects a firm’s competitive advantage
07/02/24 26
Measuring Capacity
Even though defining capacity seems
simple enough, there are subtle difficulties in
actually measuring capacity in certain cases.
07/02/24 27
Types of Capacities
Design Capacity
Effective Capacity
Actual Capacity
These different measures of capacity are
useful in defining two measures of system
effectiveness:
1. efficiency and
2. utilization.
07/02/24 28
Cont…
Efficiency is the ratio of actual output to
effective capacity. Utilization is the ratio
of actual output to design capacity.
ActualCapacity
Efficiency
EffectiveCapacity
07/02/24 31
.
Diseconomies of
Economies of Scale
Scale
07/02/24 33
Assumptions of Cost-Volume Analysis:
07/02/24 34
Cont…
07/02/24 35
Decision Tree Approach
Decision tree is a quantitative technique used for
evaluating alternatives and structures a complex
and multiphase decisions by showing:
The decisions that must be made (the candidate
alternatives available)
The sequence in which the decisions must occur
The interdependence among the decisions
(shows main branches and sub-branches
Example:
07/02/24 36
Decision Tree
Rafi Café is about to build a new restaurant.
An architect has developed three building
designs, each with a different seating capacity.
Rafi estimates that the average number of
customers per hour will be 80, 100, or 120
with respective probabilities of 0.4, 0.2, and
0.4. The payoff table showing the profits for
the three designs is depicted as below:
Design Anticipated Volume of profits for the Average Number of Customers Per Hour
Capacity of: