This Document Contains Chapters 23 to Appendix A CHAPTER 23 THEORY OF CONSTRAINTS Discussion Questions 1. How does Goldratt’s Theory of Constraints (TOC) differ from other current approaches to continuous improvement in organizations? How is it similar? TOC takes a focused approach in improving the process, while the others tend to take a larger systems approach to the process. It looks for areas in the process that are constraining the process or limiting the performance of the system. The logic is that spending time on other parts of the system wastes resources that could be used to more quickly have an operational impact. They are all similar of course in that they aim to improve the processes and therefore overall performance of a system. 2. State the global performance measurements and operational performance measurements and briefly define each of them. How do these differ from traditional accounting measurements? Global performance measurement: • Net profit—measurement in dollars • Return on investment—generally a percent of the investment • Cash flow—the amount of cash available for day to day operations. From an accounting standpoint, deductions such as for depreciation are added back in since depreciation is not really money spent Operational measurement: • Throughput—the actual rate of sales generated by the system • Inventory—all the money invested in things that are intended to be sold. This includes raw materials, equipment, etc., but at the cost price, less any depreciation (which is operating expense). • Operating expense—money spent to convert inventory into throughput. This includes direct and indirect labor, materials, depreciation, administrative costs, etc. Traditional accounting methods work with such things as standard costs, allocation of burdens (which may consist of indirect labor, administrative costs, insurance, taxes, depreciation, etc.), and gross profits, net profits, cost centers, profit centers, all of which may be based on standards and allocations. These may not have any basis in reality. Many examples can be cited where traditional accounting forces wrong decisions. One specific example that one of the authors has confronted is of a V. P. of manufacturing who is terminating a very profitable product line, because on paper this product line is losing money. Why? Because overhead is allocated based on the amount of direct labor and this product line is almost all-direct labor, with very little equipment involved. His allocation of everyone else’s burden creates a paper loss. Under these circumstances he would lose his annual bonus and be rated down in his performance. Other areas of accounting differences: inventory in traditional accounting is carried the same as cost of goods sold, i.e., with all the labor and burdens included. In operational measurement’s terminology, inventory is carried as the cost of the raw materials. 3. Most manufacturing firms try to balance capacity for their production sequences. Some believe that this is an invalid strategy. Explain why balancing capacity does not work. In synchronous manufacturing, balancing all capacities is viewed as a bad decision. If capacity is truly balanced, completion deadlines may not be met due to variability in processing times. A better strategy is to balance the flow of product through the system. 4. Either individually or in a small group, examine your own experiences either working in a company or as a customer of a company. Describe an instance where either TOC was successfully applied to improve a process, or where you saw the potential for TOC to improve the process. This question may work best in a small group and the answers will vary widely. When they discuss it, students should be able to come up with at least one good example, most likely as a customer. Just dealing with a university and its varied services should provide ample examples. Students with work experience may be able to draw on those to enrich the discussion. 5. Discuss why transfer batches and process batches many times may not and should not be equal. Transfer batches may be equal to or smaller in size than process batches. Rather than wait for an entire batch to be finished, it may be preferable to release part of a batch to the next downstream workstation so that smooth product flow can be maintained. This will also result in lower levels of WIP inventory. 6. Discuss process batch and transfer batches. How might you determine what the sizes should be? Process batch size is the total number of units that are scheduled to be processed within the same setup. Larger process batches involve fewer setups and, therefore, have more output. The reverse is true for smaller process batches. Transfer batches refers to the movement of part of the process batch, rather than waiting for the entire job to be completed. A process batch of 1000, for example, can be transferred in ten batches of 100 each. Process batch and transfer batch sizes can be controlled from a bottleneck or capacity constrained resource. 7. Define and explain the cause or causes of a moving bottleneck. Generally, a moving bottleneck is caused by batch sizes that are too large. What happens is that a large batch scheduled on a machine or resource which-on the average has excess capacity-prevents other products from being completed that also need the same resource. This interrupts the flow and starves downstream resources. From their perspective looking upstream, they see that particular resource as the bottleneck. However, days or weeks later, because of the product mix, this apparent bottleneck will disappear. Another large batch size somewhere else in the system will appear which does the same thing, i.e., starves downstream operations. 8. Explain how a non-bottleneck can become a bottleneck. A non-bottleneck can become a bottleneck when it is scheduled with a batch size that is too large. For example, assume that machine 1 provides work to machine 2 and machine 3. Say that machine 1 works 7 hours out of each 8 hours and so is not a bottleneck. Suppose, however, that someone decides to save some setup time by scheduling work on machine 1 in much larger batches-say 20 hours for machine 2 and 15 hours for machine 3 (5 times larger batch sizes). Machine 3 will be starved for work since it will be dealing with a 40 hour cycle rather than an 8 hour cycle, and will have to wait until machine 1 produces the parts which it needs. Thus, from machine 3’s point of view, machine 1 has become a bottleneck. 9. Discuss the concept of “drum-buffer-rope.” The drum is a bottleneck. It is referred to as the drum because it strikes the beat that the rest of the system uses to function. The buffer is inventory that is provided (typically prior to the drum) to make sure that the drum always has something to do. Buffers are also used to make sure that throughput is maintained throughout the production system. The rope is upstream communication from the bottleneck so that prior workstations only produce the materials needed by the drum. This keeps WIP inventories from building up. 10. Compare and contrast JIT, MRP, and synchronized manufacturing, stating their main features, such as where each is or might be used, amounts of raw materials and work-inprocess inventories, production lead times and cycle times, and methods for control. Question JIT MRP Synchronized Manufacturing Where used Continuous flow, make-to-stock Job shop, custom shop Job shop, custom shop WIP Very low Very high low Production cycle time Very short Very long Short Schedule flexibility Level production for min. of 30 days MRP frozen for 30 days, but variable in work centers Can be changed daily as needed Regard for capacity limits High. Tries to balance capacity Terrible. May start off o.k., but quickly becomes inaccurate Is founded on capacity limitations Labor skills Multi-skilled to help out other areas Specialized in own work area Same as MRP 11. Compare the importance and relevance of quality control in JIT, MRP, and synchronous manufacturing. Quality control is extremely important at each workstation in JIT, JIT cannot tolerate poor quality since the result is loss of throughput. Therefore, each worker or workstation is responsible for ensuring that only high quality work passes through. Quality control in MRP is somewhat haphazardly applied. Defects can occur anywhere and full responsibility for quality does not lie within each workstation. Inspection points are placed within the system, generally with the placement decided by the algorithm “when the expected cost of bad quality output exceeds the cost of inspection, we will place an inspection point there.” Quality control in synchronous manufacturing is specifically decided based on importance. First, a bottleneck or CCR is identified as the constraint of the system. This critical resource will then be guaranteed that it will not waste time working on bad parts since inspection will be done on its incoming side. Flow after this bottleneck should not be interrupted or scrapped. Therefore, all parts that join into this product after the bottleneck will have passed inspection. Also, all processing after the bottleneck will be of high quality so that scrap will not be created. In summary, inspect before the BN, and inspect all parts entering the flow after the BN; also perform high quality work at all stations after the BN. 12. Discuss how a production system is scheduled using MRP logic, JIT logic, and synchronous manufacturing logic. In MRP, production is scheduled based on lead time requirements for a particular part of subassembly. Production dates for components are calculated based on lead times offset from delivery due dates. In JIT, production is controlled using a kanban or “visual record.” When work is completed at a downstream station, a move kanban is released and materials are transferred from the upstream station. Daily production schedules are determined based on a daily production quota. Smooth production schedules are sought to minimize disruptions to operations. In synchronous manufacturing, the production flows are controlled by the drum. The drum regulates the flow of materials throughout the entire system. 13. Discuss what is meant by forward loading and backward loading. Forward loading is similar to project scheduling. Tasks are scheduled from some pint into the future. When resources are limited, tasks are assigned until capacity is reached and then carried forward to the next period. Backward loading is the MRP type scheduling, where the finished product or required part is needed. From that future point, a schedule is created back to the present, allowing for processing and lead time requirements at each step of the way. 14. Define process batch and transfer batch and their meaning in each of these applications: MRP, JIT and bottleneck or constrained resource logic. In an assembly line, process batch refers to the batch size associated with a production process. Theoretically, this batch size can be infinite. The transfer batch refers to the number of parts produced in a sequence. This may be as small as one. In MRP, process batch refers to the overall output of production process while transfer batch would be equal to the calculated requirements for a given time bucket. In JIT, the transfer batch size is preferably one. Process batches are infinite, as flexible production lines are capable of producing an entire product family with minimal setups. Process batch might be synonymous with the daily production quotas. In synchronous manufacturing, a process batch is of a size large enough to be processed in a particular length of time. Transfer batches refer to the movement of part of the process batch. This allows parts to be moved to succeeding workstations in the process. A transfer batch can be equal in size to a process batch but not larger. 15. From the standpoint of the scheduling process, how are resource limitations treated in an MRP application and how are they treated in a synchronous manufacturing application? With MRP, requirements are exploded using MRP logic. Planned order release schedules are calculated by the system. Capacity requirements planning (CRP) provides feasibility check of these schedules. CRP matches planned production with actual capacity to ensure that schedules can be met; synchronous manufacturing paces the entire production process by the bottlenecks. Therefore, if additional (less) capacity is needed, capacity is added (restricted) at the bottlenecks. In this way the flow is controlled at each bottleneck or CCR to bring the capacities in line. 16. What are operations people’s primary complaints against the accounting procedures used in most firms? Explain how such procedures can cause poor decisions for the total company. The primary complaints against accounting departments have to do with the fact that accounting systems measure the wrong things, are inflexible and reward counterproductive or dysfunctional behavior. Accounting systems conform to rigid guidelines established by GAAP. As such, accounting data are often not useful for accomplishing the superordinate goals of the firm. An example is machine utilization. Machine utilization measures the proportion of time that a machine is in use. In an accounting sense, high machine utilization is preferable because it means that the investment in the machine is producing a return. From an operations point of view, this behavior results in high WIP inventory. Another example is quality. The generally accepted accounting definition of quality is that of conformance. However, manufacturing may desire to adopt a definition of quality that considers customer needs. Accounting would be unable to accept the latter definition as it is more difficult to quantify. The two alternative definitions of quality will reward different behavior within the firm. 17. As an individual or small group, visit your favorite fast-food restaurant during lunch period someday. As you order, and while you are eating, observe as much of the process as you can. Where are the bottlenecks in the system? What recommendations can you come up with to relieve them? Student answers will vary based on their experiences. Comparing individual/team answers during class should make for some lively discussion. 18. When making decisions about what product(s) to produce in a manufacturing system, why is it not enough to simply consider the selling price and demand for different items? The capacity of the system for each product will vary, as will the profit margins. We may not want to produce much or any of the highest priced items if they consume too many productive resources or the profit margins are relatively small. Ideally we would look at the profit margins for each item, our capacity to produce each item on the shared resources, and the demand for each item before we would decide on a product mix schedule. Objective Questions 1. What is the name of the software Goldratt developed to implement his idea of TOC? Optimized production technology 2. What are the three financial measurements necessary to adequately measure a firm’s performance? Net profit, return on investment, cash flow 3. What is the term which refers to the entire production process working in harmony to achieve the profit goal of the firm? Synchronous manufacturing 4. What classic operational measurement does Goldratt redefine as “all the actions that bring a company closer to its goals?” Productivity 5. The goal of a firm in operational measurements is to increase throughput while reducing inventory and operational expenses. In these cases, the throughputs are limited by the bottleneck. We should avoid the overuse of non-bottleneck resources, resulting in excess inventories. Case I: Market X: (1400 x40)/60 = 933.33 hours, X used 100% Y: (1400x30)/60 = 700 hours, Y used 75% Case II: Market Y: (1400x30)/60 = 700 hours, Y used 75% or work in process will build up. X: (1400 x40)/60 = 933.33 hours, X used 100% Case III: X = 933.33 hour, Y is used 700 hours or 75% or spare parts will accumulate at assembly. Case IV: X is used for 933.33 hours, and Y is used for 700 hours or finished goods inventory will build up for Y. Case Outcome with no restrictions I No problems II Excess WIP for Y III Excess of spare parts for Y IV Excess finished goods for Y 7. Because of the arrangement given in the diagram, the Willard Lock Company plant will exhibit the following characteristics: • Two distinctive process and flows (fabrication and assembly). • Due date performance is very poor; either very early or very late. • Overtime and expediting in fabrication are random and frequent. • A very high commonality of parts exists. • The assignment of parts to orders occurs very late in the production process. • Fabrication is in huge batches. The reasons for the problems are probably as follows: • Improvement in due date performance is attempted through heavy reliance on inventory. • The drive to attain efficiencies and dollar shipped: ▪ Undermines assembly activity objectives of due date performance and assemble to order. ▪ Undermines fabrication activity objective of purchase and fabricate to forecast. ▪ Causes intentional misallocation of parts and cannibalization at assembly and subassembly areas. The core problem in the Willard Lock Case is that due date performance is poor and delivery lead times are quite long. The following actions are recommended: • Control the flow of product through the fabrication portion of the process. • Reduce batch sizes to eliminate wavelike motion. • Stop the stealing of parts and components at subassembly. 9. Market 11. Processing time Setup time Processing time Setup time Idle time Processing time Setup time Idle time Processing time Setup time Idle time Processing time Setup time Idle time Bottleneck Nonbottleneck Nonbottleneck Nonbottleneck CCR 12. a. Product C has the highest selling price; therefore, sell only product C. b. Product Price per unit Cost per unit Gross profit per unit A $50 $40 $10 B $60 $45 $15 C $70 $60 $10 The answer is to sell only B with the highest gross profit of $15. c. Product Limiting work center Processing time (minutes) Output per hour Profit per unit Profit per hour A Y 3 20 $10 $200 B X 6 10 $15 $150 C W 5 12 $10 $120 The answer is to sell only A, with the highest profit per hour. Note: this can be solved as an LP problem. The best solution may very well be a combination of products rather than a single product. 13. How does synchronous manufacturing differ from MRP with respect to scheduling? It uses forward scheduling (MRP uses backwards scheduling) 14. What type of manufacturing environment is JIT limited to? Repetitive manufacturing 15. Cost accounting logic can lead managers to keep their resources busy all the time, increasing productivity with no regard to demand. What is the negative result from this effect? Excessive inventory 16. The solution to coping with natural differences between marketing and production functions is to do what two things? Develop an equitable and common set of measurements, promote strong lines of communication. 17. a. Determine the constraint (bottleneck). The demand on each machine is Machine Calculation of demand Demand Utilization (2,400 minutes per week) A 100 M units at 20 minutes each = 2,000 minutes 2,000 minutes 83% B 100 M units at 15 min. each = 1,500 minutes 50 N units at 30 min. each = 1,500 minutes 3,000 minutes 125% C 100 M units at 15 minutes each = 1,500 minutes 50 N at 15 minutes each = 750 minutes 2,250 minutes 94% Machine B is the constraint b. Determine the product mix. This can best be done by calculating the throughput per minute: Product M Product N Selling price $190 $200 Raw material $100 $ 80 Gross profit $ 90 $120 Processing time-machine B 15 minutes 30 minutes Gross profit per minute $6 per minute $4 per minute Therefore, the best product mix is to make all 100 of product M and as many of product N as possible. To determine the number of N to produce, examine the remaining capacity on Machine B. Available capacity (week) 2,400 minutes 100 units of M at 15 minutes per unit 1,500 minutes Remaining capacity 900 minutes Each N requires 30 minutes per unit of Machine B 900 / 30 = 30 units of N c. Weekly profit of plant: Product M Product N Total Weekly production 100 30 Gross profit per unit $90 $120 Gross Profit $9,000 $3,600 $12,600 Operating expenses $12,000 Net Profit $ 600 Note: This problem could also be solved using linear programming. It will produce the same answer as above. The formulation is as follows: Let: M = weekly production of product M N = weekly production of product N Maximize: 90M + 120N 20M < 2400 Machine A capacity 15M + 30N < 2400 Machine B capacity 15M + 15N < 2400 Machine C capacity M < 100 M Demand limitation N 0 Non-negativity 18. a. What is the maximum output per hour of the steel product? 40 b. By how much would the output be improved if B was increased to 90? No Improvement c. By how much would the output be improved if C was increased to 50? By 10 d. By how much would the output be improved if C was increased to 70? By 20 e. What effect on the system if machine A can only manage an output of 90 in one hour? None f. What effect on the system if machine C can only manage an output of 30 in one hour? We lose 10 products g. What effect on the system if machine B is allowed to drop to an output of 30 in one hour? We lose 10 products CHAPTER 24 HEALTH CARE Discussion Questions 1. Where would you place Shouldice Hospital on the product–process framework (see Chapter 5 case, “Shouldice Hospital—A Cut Above”)? What are the implications of adding a specialty such as cosmetic surgery? Clearly, Shouldice Hospital is a specialty hospital. The focus the hospital is hernias. Using exhibit 24.1, we can see that the Specialty Hospitals offer a more narrow range of services and procedures than a general hospital. If the management of the hospital decided to add a specialty such as cosmetic surgery, Shouldice would still be a specialty hospital. If Shouldice decided it will start performing a wide range of medical care in addition to their current practice then it would move to a different category. 2. Think about your latest trip to a hospital/health care facility. How many different handoffs did you encounter? How would you rate the quality of the service relative to the patient experience and relative to that of the friends and family? Responses will vary based on the students’ experience. 3. Some have argued that for hospitals, both medical schools and nursing schools should be considered part of the supply chain. Do you agree? The opinions of the students will vary. A case can be made for either. 4. Hospitals are major users of poka-yoke (fail-safe) devices. Can you think of any? a. A surgeon marking an “X” on a leg or arm to be operated on. b. Nurse checking the patience wrist band prior to administering drugs c. RFID band placed on a new baby’s leg and the exits of the maternity ward locked if someone attempts to take the infant from the ward. d. Computer systems check for drug interaction conflicts 5. Could a hospital or physician offer a service guarantee? Explain. The physician can offer a service guarantee! The guarantee might not revolve around whether or not a cure will be made. A guarantee can be in the form of time of the appointment and being examined within a certain time frame. It can also be the assurance that a procedure will be done correctly. 6. How does a physician-driven supply chain differ from a typical materials supply chain? The physician-driven supply chain is service centric. A hospital must begin allocating resources to the patient when he/she is admitted. These resources might include, x-ray, surgery, rehabilitation or lab work. The delivery of drugs will be one of the very few occurrences of “material” be delivered within a physician-delivered supply chain. 7. What could a hospital learn from benchmarking a Ritz-Carlton Hotel? Southwest Airlines? Disneyland? From the Ritz, hospitals could learn about room assignment and moving patience from admission to their room. Also room food service and assistance in the room i.e. use of the TV or Phone. From Southwest Airlines could be used to learn how to schedule equipment for use by patience while minimizing their delay. From Disneyland, a hospital could learn how to effectively manage lines. 8. As in manufacturing, productivity and capacity utilization are important performance measures in health care operations. What are the similarities and differences in how these measures might be used in the two different industries? In both industries these are measures of efficiencies that compare the cost of the operation to the output gained from it. Efficiency is critical in both industries because of the effect on profit or accountability to funding sources in a non-profit situation. While it is perceived as generally positive in manufacturing operations to be near 100% capacity utilization, the same might not hold in many health care operations, especially trauma care. The emergency room needs to be able to respond to short-term peaks in demand due to the cost of failure in that process. Conversely, a primary care clinic will typically try to schedule to full capacity for maximum efficiency. Due to the cost of resources in a health care operation, finding the right level of capacity utilization is important. 9. What would you consider to be the most important performance measure in a hospital? Explain. Student answers will vary widely. This would be a good question to use for in-class discussion. 10. As the “baby-boomer” generation ages, the percentage of the U.S. population over age 65 will grow at a faster rate than the size of the workforce paying taxes and health insurance premiums. How do you expect that to impact health care operations and supply chain management? Student answers will vary. We expect students to bring up ideas related to the cost of operations, capacity/availability of appropriate services, advancements in technology and treatment and tax policy. Objective Questions 1. In manufacturing, quality measures are largely based on hard evidence. In health care, quality and service measures are largely based on what? Opinion 2. A general rule of designing hospital layouts is to separate patient/visitor flow from what? Staff flows 3. What is the term used to refer to the flow of work through a hospital? Care chain 4. What inventory-related term is used to refer to points in a health care process where waiting takes place, either before or after treatment takes place? Decoupling points 5. What type of worker constitutes the largest component of the hospital’s workforce? Nurses 6. In hospitals, dashboards are often used to display performance measures on a routine basis. What type of dashboard tracks metrics such as mortality rate, quality improvement, and readmission rates? Clinical dashboard 7. What dashboard would display metrics such as accurate performance of transfusion protocols and code response time? Key process dashboard 8. Remote diagnosis uses electronic devices for diagnosing patients at a distance. What is another term used to refer to this practice? Telemedicine 9. What is the term used to describe arrangements to move clinical information across various information systems while still maintaining the meaning of the information being exchanged? Health information exchanges 10. What is the term used to refer to the application of the scientific method to evaluate alternative treatment methods and create guidelines for similar clinical situations? Evidence-based medicine Case: Venice Family Clinic Managing Patients Waiting Times 1. Draw a process flow diagram for each type of patient. Below are sample flow charts for the two main classes of patients. New and Returning Patients Pharmacy Customers 2. Calculate the capacity and utilization of each resource and identify bottlenecks Utilization formula = (Arrivals X Service Time)/ (Number of servers X Available hours X 60 minutes) Service Available Employees Amount Arrivals Time Time Utilization Security 1 150 2 11 0.454545 Clerks 4 150 8 6 0.833333 Medical Assistants 7 120 6 7 0.244898 Physicians 9 120 20 7 0.634921 Coordinators 3 120 7 7.5 0.622222 Pharmacy Staff 3 90 11 7.5 0.733333 Rooms Vitals 3 120 6 7 0.571429 Physicians 8 120 37 7 1.321429 The room for Physicians is a bottleneck statistically showing over 100% utilization. This means that the rooms are actually used beyond the stated available time, patients wait elsewhere or something else is not captured in the statistics presented since actual utilization cannot be over 100%. 3. Calculate the wait time and time in service for both new and returning patients with appointments and those visiting the pharmacy. Wait Time for a new and returning patient: 10 minutes for security, 24 minutes for registration, 15 minutes for vitals, 25 minutes for physicians, 25 minutes for coordinators, and 50% chance of a 13 minute wait for the pharmacy for a total of 100.5 minutes Service Time for a new patient: 2 minutes for security, 22 minutes for registration, 6 minutes for vitals, 20 minutes for physicians, 7 minutes for coordinators, and 50% chance of a 11 minute service for the pharmacy for a total of 62.5 minutes Service Time for a returning patient: 2 minutes for security, 7 minutes for registration, 6 minutes for vitals, 20 minutes for physicians, 7 minutes for coordinators, and 50% chance of a 11 minute service for the pharmacy for a total 47.5 minutes Wait Time for a pharmacy customer: 10 minutes for security, 24 minutes for registration and a 13 minute wait for the pharmacy for a total of 47 minutes Service Time for a pharmacy customer: 2 minutes for security, 7 minutes for registration, and 11 minutes service for the pharmacy for a total 20 minutes 4. What are your recommendations for improvement? Possible answers include: • Install touch screen registration as presented in the chapter. • Change the process so that Pharmacy customers do not have to register. • Currently the medical assistants have less than 30% utilization so decrease their number. • Change one of the vital rooms into a physician room and have patients wait in the waiting room until physicians are ready to see them. • Have physicians start later since they often do not see the first patient until 9:30. • Find ways to reduce the registration time such as having new patients pre-register on-line or by mail. • Look for fail safes to make sure processes operate correctly, such as color coding X-rays to ensure their delivery on time. CHAPTER 25 OPERATIONS CONSULTING Discussion Questions 1. Check out the web sites of the consulting companies listed in the chapter outlines. Which ones impressed you most as a potential client and as a potential employee? Remember that web sites can change at any time. However, a good web site should be technically sound and contain the appropriate information. Technical aspects include the appearance including the choice of colors and fonts, the ability to find material on the site (organization), ability to find the site (is it linked in the various search engine or on professional organization’s web sites?), ability to load easily, as well as the overall user friendliness of the site. Content should include what the company does, what they could do for your, their experience in the area, and their professional training of employees (e.g., degrees held, certifications, etc.). 2. What does it take to be a good consultant? Is this a career for you? Good consultants generally need good communications skills, good analytical skills plus expertise and experience in the area they wish to consult in. Additionally, in considering a career as a consultant, the student should consider whether they would like to be a consultant. 3. In discussing characteristics of efficient plants, Goodson, developer of “Rapid Plant Assessments”, suggests that numerous forklifts are a sign of poor space utilization. What do you think is behind this observation? Forklifts require wide aisles and are expensive to operate. They also increase pollution, and encourage unnecessary movement of materials. “In the best plants, if materials need to be moved a short distance, employees use hand-propelled roll carts; if the materials are too heavy to move by hand, garden tractors pull the carts in linked trains.” Eugene Goodson, “Read a Plant Fast,” Harvard Business Review, May 2002, p. 109. 4. Think about the registration process at your university. Develop a flow chart to understand it. How would you radically redesign this process? A typical registration process might be: One means of reengineering this process is to implement a telephone or Internet registration system. This could eliminate several steps in the process. 5. Have you driven any car lately? Try not to think of the insurance claims settlement process while you drive! How would you reengineer your insurance company’s claims process? For a simple auto claim not involving injury, the process involves contacting an agent, an adjustor is assigned, the injured party obtains three estimates, the estimates are sent to the adjustor, the job is assigned to a body shop, and the work is eventually performed. Depending upon the situation, the check is either sent to the body shop or the injured part. Any of the steps could be combined, reassigned or eliminated. For example, the adjustor could take the vehicle to a preferred body shop and pay the bill immediately. Objective Questions 1. In what three ways do Treacy and Wiersema suggest that market leadership can be obtained? Product leadership, operational excellence, customer intimacy 2. The process of running a consulting firm is analogous to what type of manufacturing process structure? Job shop 3. What are the 5 Ps of production in which firms typically seek operations consulting? Plant, People, Parts, Processes, Planning and control systems 4. What is the current “hot area” for operations consultants in both manufacturing and services? Lean Six Sigma 5. What methodology is used to assess a client’s performance relative to the expectations of its customers or the performance of its competitors? Gap analysis 6. What type of plant tour is designed to determine the “leanness” of a plant in just 30 minutes? Rapid plant assessment (RPA) 7. What tool is used to reflect the particular needs of each stakeholder group in a performance measurement system? Balanced scorecard 8. What tool is used to ensure that all tasks in a project has the right mix of project team members assigned to it? Responsibility chart 9. There is a potential for continuous improvement. However, the large number of defects demonstrates the need for reengineering. The chapter outlines a set of steps for improving this process. These steps include: stating a case for action, evaluating enablers, studying the current process, creating a new process design and implementing the reengineered process. 10. Is the business reengineering process more gradual, more radical, or about the same as the TQM process? More radical 11. What concept provides guidance and direction for consistent, efficient implementation of BPR projects? Codification of reengineering Advanced Exercise – Rapid Plant Assessment We suggest having teams simply report in class on what they have observed in their plant tour. Goodson notes that he has had teams look at cinema complexes, car dealers, and microbreweries, as well as large and small manufacturing operations. Benefits come even from taking tours during non-business hours. Goodson points out that 30-minute tours of three fire truck manufacturing plants being considered for auction bidding by Oshkosh Truck provided enough information about how costs could be cut that they became high bidders and won. (The surveys indicated that a few million dollars a year could be saved, for example, by eliminating materials handling bottlenecks, consolidating plants, reducing inventories, and running the shop paint shop on one shift instead of three.) APPENDIX A LINEAR PROGRAMMING USING THE EXCEL SOLVER 1. Excel Solution X Y Total Decision 6 0 Profit $3 $1 $18 Resources X Y Used Capacity A 12 14 72 = 10 Graphical solution--the problem requested the Excel solution, but the following graphical solution is provided for classroom use if desired. 3. a. Maximize Z = 20X1 + 6X2 + 8X3 s.t. 8X1 + 2X2 + 3X3 < 800 4X1 + 3X2 < 480 2X1 + X3 < 320 X3 0 b. Excel solution X1 X2 X3 Total Decision 45 100 80 Profit $20 $6 $8 $2,140 Resources X1 X2 X3 Used Capacity Milling 8 2 3 800 <= 800 Lathes 4 3 480 <= 480 Grinders 2 1 170 <= 320 Sales 1 80 <= 80 c. Solution is X1 = 45 S1 = 0 Z = $2140 X2 = 100 S2 = 0 X3 = 80 S3 = 150 S4 = 0 d. S1 = 0 implies milling machines at capacity S2 = 0 implies lathes at capacity S3 = 150 implies grinders not at capacity, with 150 hours available S4 = 0 implies that X3 is at maximum sales capacity e. The shadow price for the milling machine department is $2.25 per hour. Since it only cost $1.50 per hour to work overtime in this department, it is worthwhile to do so. The allowable increase in overtime is 400; however, only 200 hours are available. Therefore, it is recommended that 200 hours of overtime in the milling machine department be used. 4. a. Let A = pounds of food A B = pounds of food B Minimize : z = .75A + .15B s.t. 600A + 900B 1,800 Minimum calories 200A + 700B 400 Minimum protein A < 2 Maximum amount of A 5. Add constraint 100B 3,000 fuel demand A + B 80 b. A B Total Decision 1000 2000 3000 Cost $1.20 $.90 $3,000 Resources A B Used Capacity Min demand 1 1 3000 >= 3000 Max Storage 1 1 3000 <= 4000 Max Fuel A 1 1000 <= 2000 Max Fuel B 1 2000 0 Graphical solution--the problem requested the Excel solution, but the following graphical solution is provided for classroom use if desired. 7. Let: F = dollars spent on food S = dollars spent on shelter E = dollars spent on entertainment Maximize Z = 2F + 3S + 5E s.t. F + S + E < 1500 Total Budget F + S < 1000 Maximum on Food and Shelter S < 700 Maximum on Shelter alone E < 300 Maximum on Entertainment F S E Total Decision 300 700 300 Profit 2 3 5 4,200 Resources X1 X2 X3 Used Capacity total budget 1 1 1 1300 <= 1500 $ on food and shelter 1 1 1000 <= 1000 $ on shelter 1 700 <= 700 $ on entertainment 1 300 <= 300 8. Produce 50 barrels of Expansion Draft and 50 barrels of Burning River. The total revenue will be $1400. Decision Expansion Draft 50 Burning River Total 50 Sales $20 $8 $1400 Resources X1 X2 Used Capacity Corn 8 2 500 = 6 10. She should plant 700 acres in corn and 100 acres in soybeans. Corn Soybeans Wheat Total Decision 700 100 0 800 Profit per acre $2,000 $2,500 $3,000 $1,650,000 Resources Corn Soybeans Wheat Used Capacity Labor (workers) 0.1 0.3 0.2 100 <= 100 Fertilizer (tons) 0.2 0.1 0.4 150 <= 150 Acres Planted 1 1 1 800 <= 900 Solution Manual for Operations and Supply Chain Management F. Robert Jacobs, Richard B. Chase 9780078024023, 9780077824921, 9781260238907, 9780077228934, 9781259666100
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