Queuing: Variabilitys Impact on
Breakdown of a Service Process/System
average inter-arrival time = a; Customer arrival rate = = 1/a (this is also the
Variability in customer arrival is captured by coefficient of variation of interarriva
Reasons for throughput losses
There is a limited buffer size and demand arriving when this buffer is full is lost.
Flow units are impatient and unwilling or unable to wait for service, which leads
to flow units leaving before being serve
The Newsvendor Model
Optimal order quantity when facing uncertain demand
Ordering too much: unsold items (newspaper)
Ordering too little: lost sales
Key Concepts and Notations
Cu: cost of underage
Co: cost of overage
A simple scenario:
p: the unit
Setup, Production Cycle and
Setup is to prepare a device, machine, process or system for it to be
ready to function or accept a job.
Batch is a collection of flow units.
Capacity given batch size = Batch Size/length of production cycle
C = Capaci
EOQ Model (Economic Order
EOC minimizes the total inventory holding costs and ordering cost.
Tradeoff: holding cost vs. ordering cost (setup cost in production
Demand is known, constant, and independent.
Inventory Turns and Littles Law
Assume Dell's yearly inventory cost is 40 percent to account for the
cost of capital for financing the inventory, the warehouse space, and
the cost of obsolescence. In other words, Dell incurs a cost of $40 for
Process Analysis: Concepts and
Activities/tasks vs. Resources (workers, machines, workstations, etc.)
Resource capacity: the maximum amount that the resource can produce
in a given time unit. For example, 100 cars pe