LECTURE 3 Management lecture notes PDF

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DSME 2030Operations ManagementLecture 3 Strategic Capacity ManagementXiangyu Gao             Use forecasting to predict sales for individual productsCalculate labor and equipment requirements to meet forecastsProject labor and equipment availability over the planning horizo...

Description

DSME 2030 Operations Management

Lecture 3 Strategic Capacity Management Xiangyu Gao

Long range • Greater than one year Intermediate range • Monthly or quarterly plans covering the next 6 to 18 months Short range • Less than one month

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Use forecasting to predict sales for individual products

Calculate labor and equipment requirements to meet forecasts

Project labor and equipment availability over the planning horizon

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Step 1: Use forecasting to predict sales for individual products

Bottles (000s) Paul’s

Plastic bags (000s) Bottles (000s)

Newman’s

Plastic bags (000s)

Year 1

2

3

4

5

60

100

150

200

250

100

200

300

400

500

75

85

95

97

98

200

400

600

650

680

Step 2: Calculate equipment and labor requirements

Year 1

2

3

4

5

Bottles (000s)

135

185

245

297

348

Plastic bags (000s)

300

600

900

1050

1180

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Capac Capacity: ity: 450,0 450,000 00 Mach Machin in ines: es: 3 Opera Operator tor tors: s: 6 Year 1  Perc ercent ent entage age capac capacity ity uti utillize ized d =135/45 =135/450=0 0=0 0=0.3 .3  Mach Machin in ine e require requireme me ment= nt= nt=0.3*3= 0.3*3= 0.3*3=0.9 0.9  Labor requir requireme eme ement=0 nt=0 nt=0.3*6= .3*6= .3*6=1.8 1.8

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Capac Capacity: ity: 1,250 1,250,000 ,000 Mach Machin in ines: es: 5 Opera Operator tor tors: s: 15 Year 1  Perce Percenta nta ntage ge capa capacity city utiliz utilized ed =300/12 =300/1250= 50= 50=0.24 0.24  Mach Machin in ine e require requireme me ment= nt= nt=0.24 0.24 0.24*5=1. *5=1. *5=1.2 2  Labor requir requireme eme ement=0 nt=0 nt=0.24*15 .24*15 .24*15=3 =3 =3.6 .6

Step 3: Project equipment and labor availabilities

Year 1

2

3

4

5

Percentage capacity utilized

30

41

54

66

77

Machine requirement

0.9

1.23

1.62

1.98

2.31

Labor requirement

1.8

2.46

3.24

3.96

4.62

Percentage capacity utilized

24

48

72

84

94

Plastic Bag Machine requirement

1.2

2.4

3.6

4.2

4.7

3.6

7.2

10.8

12.6

14.1

Bottle Operation

Labor requirement

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Success 50%

$ 20K

Failure 50%

$ -12K

Investment

$0 Do nothing

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Events

Decision

Decision

$765,000 $365,000 $863,000 $413,000 $843,000 $850,000 $525,000

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$765,000 $365,000 $660,500

$863,000 $413,000

Do nothing = $703,750 Do nothing has higher value than expand or move, so choose to do nothing

$843,000 Do nothing = $850,000 $850,000

$703,750

$525,000

Do nothing has higher value than expand, so choose to do nothing

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A company is trying to decide whether to bid for a certain contract or not. They estimate that merely preparing the bid will cost $10,000. If their company bid then they estimate that there is a 50% chance that their bid will be put on the "short-list", otherwise their bid will be rejected. Once "short-listed" the company will have to supply further detailed information (entailing costs estimated at $5,000). After this stage their bid will either be accepted or rejected.

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The company estimate that the labour and material costs associated with the contract are $127,000. They are considering three possible bid prices, namely $155,000, $170,000 and $190,000. They estimate that the probability of these bids being accepted (once they have been short-listed) is 0.90, 0.75 and 0.35 respectively.

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What should the company do and what is the expected monetary value of your suggested course of action?

Success 50% $ 20K

$ 4K Investment $ 4K

$ -12K Failure 50% Do nothing

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$0

Investment $ 20K

$ 20K

Success 50% $ 10K

$0 Do nothing

$0

Investment

$ -12K

Failure 50%

Do nothing

$0

Manufacturing Capacity

Service Capacity

Goods can be stored for later use.

Capacity must be available when service is needed – cannot be stored.

Goods can be shipped to other locations.

Service must be available at customer demand point.

Volatility of demand is relatively low.

Much higher volatility is typical.

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Arrivals exceed services – many customers are never served

Service quality declines – disruptions or high arrival levels lead to long wait times

Sufficient capacity to provide quality service...