BE1401 Week 1 – 4 Notes (Quiz 1) 1
BE1401 Biz Ops - Formula Sheet:
Introduction to Operations Management and Processes(W1):
Goal of operations management: To match supply and demand efficiently and effectively
4 dimensions of performance trade-off: Cost, Quality, Speed Time, Variety
Pareto Dominated: When a firm’s product or service is inferior
to one or multiple competitors on all dimensions of the customer
utility function.
- When there are competitors on your top right
Efficient frontier: Set of firms that are not pareto dominated
Input: Things a business purchases
Resources: Things in a business that helps transform input into
output -> Help provide supply for customer demand
3 system inhibitors:
1. Waste – Consumption of inputs and resources that do not
add value to resources
2. Variability – Predictable or unpredictable changes in demand or supply process
3. Inflexibility – Inability to adjust to either changes in supply process or change in
customer demand
Process: A set of activities that take a collection of inputs, perform some work or activities
with those inputs and then yield a set of output
Process flow diagram:
1. Resource: A group of people and/or equipment that transforms input into output
2. Flow unit: Basic unit that moves through a process
a. Generally associated with outputs of process
b. Choose flow unit that corresponds with what you want to track and measure
à Stick with flow unit you define
c. Choose flow unit that can be used to measure and describe all activities
within process
3 performance measures:
1. Average Inventory (I): Average number of flow units in a process over an interval of
time
2. Average Flow time (T): Average time spent within a process per flow unit
3. Average Flow rate (R): Average number of flow units that flow through a process per
unit time
Little’s Law: I = R * T
Pictures and information from Prof Chen Shao Xiang’s Slides
, BE1401 Week 1 – 4 Notes (Quiz 1) 2
Process Analysis & Process Improvement(W2):
Process flow diagram: A visual chart that represents steps of a process.
1. Activities: Carried out by resources
2. Arrows: Indicates flow of flow unit
3. Inventory/Buffers
Processing time: Time it takes resource to complete 1 flow unit.
Process capacity: Maximum no. of flow units that a process can produce per
unit of time
- Measures how much process can produce not how much it actually does produce
Resource capacity: Maximum no. of flow units that can flow through that resource per unit of time
Capacity = 1/Processing time
Demand rate > Process capacity = Capacity constrained
*Unless stated, always
Demand rate < Process capacity = Demand constrained
think of process as
Flow rate = Minimum{Demand rate, Process capacity}
ongoing, not new process!
or Number of flow units/Time
Utilization = Flow rate/Capacity, when there are no set ups
Cycle time = 1/Flow rate = 1/R à The time between completing 2 consecutive flow units
Lead time = Flow time (T) à Time between when order is placed and when it is received
According to Little’s Law, I * Cycle time = Flow Time
Bottleneck: The resource with the smallest capacity
- Process capacity = Bottleneck capacity
Worker-paced: Process line in which each resource is free to work at its own pace
Machine-paced: Process in which all steps must work at the same pace; regardless of individual capacity
Time for X units = Time through empty process (first unit) + [(X - 1) * Cycle time]
- Process is a new process
Profit = Flow rate * (Average price - Average cost)
Cost of direct labor = (Wages per unit of time)/Flow rate = Labor wage/Flow unit
- Labor cost associated with serving 1 customer
Labor content = 𝚺(Processing times involving labor)
- High is less desirable than low
Idle time = Cycle time - Processing time
Total idle time = 𝚺(Idle time across resources)
- Amount of time per flow unit for which resource is paid but not actually working
Average labor utilization = (Labor content)/(Labor content + Idle time)
or (Labor content/No. of employees)/Cycle time
- Measure of efficiency; should be as high as possible
Takt time = 1/Demand rate = Available time/Required quantity
- Minimum time which process has to serve 1 customer in order to meet required demand (Required
cycle time)
Target manpower = Labor content/Takt time
- Determines the minimum number of resources required to meet demand
- ↑ Demand = ↓ Takt Time
Demand levelling: Set an expected demand rate for a given period of time
Specialization
Pros Cons
1. Reduction in processing time due to elimination 1. Increased idle time
of set ups 2. Worker boredom
2. Reduction in processing time due to learning
3. Lower skilled labor
4. Reduce equipment replication
Pictures and information from Prof Chen Shao Xiang’s Slides
BE1401 Biz Ops - Formula Sheet:
Introduction to Operations Management and Processes(W1):
Goal of operations management: To match supply and demand efficiently and effectively
4 dimensions of performance trade-off: Cost, Quality, Speed Time, Variety
Pareto Dominated: When a firm’s product or service is inferior
to one or multiple competitors on all dimensions of the customer
utility function.
- When there are competitors on your top right
Efficient frontier: Set of firms that are not pareto dominated
Input: Things a business purchases
Resources: Things in a business that helps transform input into
output -> Help provide supply for customer demand
3 system inhibitors:
1. Waste – Consumption of inputs and resources that do not
add value to resources
2. Variability – Predictable or unpredictable changes in demand or supply process
3. Inflexibility – Inability to adjust to either changes in supply process or change in
customer demand
Process: A set of activities that take a collection of inputs, perform some work or activities
with those inputs and then yield a set of output
Process flow diagram:
1. Resource: A group of people and/or equipment that transforms input into output
2. Flow unit: Basic unit that moves through a process
a. Generally associated with outputs of process
b. Choose flow unit that corresponds with what you want to track and measure
à Stick with flow unit you define
c. Choose flow unit that can be used to measure and describe all activities
within process
3 performance measures:
1. Average Inventory (I): Average number of flow units in a process over an interval of
time
2. Average Flow time (T): Average time spent within a process per flow unit
3. Average Flow rate (R): Average number of flow units that flow through a process per
unit time
Little’s Law: I = R * T
Pictures and information from Prof Chen Shao Xiang’s Slides
, BE1401 Week 1 – 4 Notes (Quiz 1) 2
Process Analysis & Process Improvement(W2):
Process flow diagram: A visual chart that represents steps of a process.
1. Activities: Carried out by resources
2. Arrows: Indicates flow of flow unit
3. Inventory/Buffers
Processing time: Time it takes resource to complete 1 flow unit.
Process capacity: Maximum no. of flow units that a process can produce per
unit of time
- Measures how much process can produce not how much it actually does produce
Resource capacity: Maximum no. of flow units that can flow through that resource per unit of time
Capacity = 1/Processing time
Demand rate > Process capacity = Capacity constrained
*Unless stated, always
Demand rate < Process capacity = Demand constrained
think of process as
Flow rate = Minimum{Demand rate, Process capacity}
ongoing, not new process!
or Number of flow units/Time
Utilization = Flow rate/Capacity, when there are no set ups
Cycle time = 1/Flow rate = 1/R à The time between completing 2 consecutive flow units
Lead time = Flow time (T) à Time between when order is placed and when it is received
According to Little’s Law, I * Cycle time = Flow Time
Bottleneck: The resource with the smallest capacity
- Process capacity = Bottleneck capacity
Worker-paced: Process line in which each resource is free to work at its own pace
Machine-paced: Process in which all steps must work at the same pace; regardless of individual capacity
Time for X units = Time through empty process (first unit) + [(X - 1) * Cycle time]
- Process is a new process
Profit = Flow rate * (Average price - Average cost)
Cost of direct labor = (Wages per unit of time)/Flow rate = Labor wage/Flow unit
- Labor cost associated with serving 1 customer
Labor content = 𝚺(Processing times involving labor)
- High is less desirable than low
Idle time = Cycle time - Processing time
Total idle time = 𝚺(Idle time across resources)
- Amount of time per flow unit for which resource is paid but not actually working
Average labor utilization = (Labor content)/(Labor content + Idle time)
or (Labor content/No. of employees)/Cycle time
- Measure of efficiency; should be as high as possible
Takt time = 1/Demand rate = Available time/Required quantity
- Minimum time which process has to serve 1 customer in order to meet required demand (Required
cycle time)
Target manpower = Labor content/Takt time
- Determines the minimum number of resources required to meet demand
- ↑ Demand = ↓ Takt Time
Demand levelling: Set an expected demand rate for a given period of time
Specialization
Pros Cons
1. Reduction in processing time due to elimination 1. Increased idle time
of set ups 2. Worker boredom
2. Reduction in processing time due to learning
3. Lower skilled labor
4. Reduce equipment replication
Pictures and information from Prof Chen Shao Xiang’s Slides
