5
5-1. Chapter Compare the strengths and weaknesses of the different process strategies
Batch Production a production facility organized around processes to facilitate lowvolume, high-variety production. Provides a high degree of product flexibility. Is oriented
by activity; is flexible providing variety to the outputs. However, the costs are high, jobs
are more complex, and has a low utilization making the process not very efficient. (Low
Volume and High Variety)
Mass Production is oriented by order of production. Has high volume and low cost per
unit. But is not flexible (I cant make nothing different than the established EX: making a
BMW Z4 four door) and the workers may be bored or lacking of motivation (repetitive
jobs EX: folding back a football) (High Volume and Low (some) Variety)
Continuous Production is oriented by order of production. Has high volume and low
cost per unit. But is not flexible (I cant make nothing different than one product EX: a
paper factory just make the same paper always) also it doesnt allow any type of variety
(I just can make the same product all the time EX: paper, gasoline, steel) (High Volume
and Low Variety)
5-2. Provide examples of the different process strategies
Batch Production Hospitals, Machine, Print, Banks
Mass Production Cars, Motorcycles, Home Appliances
Continuous Production Steel, Refineries, Breweries, Paper Factory
5-3. Define mass customization, including the use of postponement. Provide examples.
Is the rapid, low-cost production (high volume production) of goods and services that
fulfill unique customer desires (customized outputs) (High Volume and High Variety)
Mass customization allows postponement which is delaying the final customization step
until the order is made because it works with modules (EX: tinting paint at Home Depot)
Dell computers, Home Depot paint, Nike shoes
5-4. Distinguish between fixed and variable operations costs. Provide examples.
Fixed cost are costs that dont change with volume (production) (EX: facilities,
buildings rent, equipment depreciation, executives salaries)
Variable cost are costs that change with volume (production) (EX: direct labor, direct
materials)
5-5. Calculate and interpret a crossover analysis for process selection
Homework
5-6. Construct the Service Process Matrix relative to degrees of customization and labor.
Provide an example for each quadrant.
5-7.
Relate value stream mapping and service blueprinting to a process flow
Process flow map out flow of material, products, information, and people
Value stream mapping highlights value and non-value adding steps (improves the
process increasing value of outputs)
blueprint Service is a process flow that highlights the line of visibility to differentiate
the front office and the back office operations (differentiates what is seen by the
customer) (improves the process by improving customer related steps)
Chapter 6
6-1.
6-2.
Define design and effective capacity
Capacity the maximum amount of units that can be produced
Design capacity Theoretical maximum capacity (EX: all 200 hotel rooms from a local
hotel)
Effective capacityRealistic usable capacity (EX: out of the 200 just 195 rooms can be
used due to other rooms maintenance, redesign, etc)
Define and calculate utilization and efficiency
Utilization (actual output) / (design capacity) it means how much of the theoretical
capacity are we using
Efficiency(actual output) / (effective capacity) it means how much of our real capacity
are we using
6-3. Describe outcomes where capacity does not equal demand
(demand greater than capacity) Demand > capacity stock outs, backlogs, lost sales,
overtime, subcontract
(demand lower than capacity) Demand < capacity higher cost per unit
6-4. List and describe ways that OM can manage capacity
Om can control capacity by labor overtime (produces more outputs), controlling
inventory (improves productivity of outputs), subcontracting (produces more outputs),
outsourcing (produces more outputs)
6-5. Recognize reasons why OM may need to adjust the capacity cushion
Capacity cushion (mitigate, reduce) uncertain demand, short product lifecycles,
changing customer preferences, supplier issues, equipment reliability issues
6-6. Differentiate leading vs. lagging demand and one-step vs. incremental approaches to
capacity
Leading builds capacity before demand occurs
Lagging builds capacity after demand occurs
One-step building capacity in one step (EX: a huge parking deck) even though demand
hasnt occur
Incremental building capacity step to step (EX: developing a parking deck floor each
year)
6-7. Conduct a breakeven analysis (single-product case) for capacity
Homework
6-8. Describe why and how net present value is used assessing capacity investments
Net present value converts future value into present value. It is done to determine if the
process is profitable over several years
6-9. Explain the cash-to-cash cycle and the impact of OM on this cycle
Cash-to-cash cycle is the time in between cash-out for payments to cash-in forms of
payments
OM impacts cash cycle because the cash cycle is based on operations processes such as
production, inventories, etc, so by improving the OM management you improve (reduce)
the cash cycle time. The longer the cash cycle is the risky the business.