Products and Services

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PRODUCTS PLANNING AND PROCESS
SELECTION - II
Prepared by Şevkinaz Gümüşoğlu
using different references about POM&QM


Process selection decisions are related with
products and services planning.
If we want to select efficient process we need
right process strategies.
Thesee strategies effect our facilities layout
decisions.
Copyright 2006 John Wiley & Sons, Inc.

5-2
The objective of a process strategy is to
build a production process that meets
customer requirements and product
specifications within cost and other
managerial constraints
© 2011 Pearson Education,
Inc. publishing as Prentice
Hall
PROCESS STRATEGIES
Frame tube
bending
Frame-building
work cells
Frame
machining
Hot-paint
frame painting
THE ASSEMBLY LINE
TESTING
28 tests
Incoming parts
Air cleaners
Oil tank work cell
Fluids and mufflers
Shocks and forks
Fuel tank work cell
Handlebars
Wheel work cell
Fender work cell
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Inc. publishing as Prentice
Hall
PROCESS FLOW DIAGRAM
Engines and
transmissions
From Milwaukee
on a JIT arrival
schedule
Roller testing
Crating
Copyright 2006 John Wiley & Sons, Inc.
5-5
HOW CAN WE ACHIEVE THESE
STRATEGIES?
Determine some properties about product
& services design
 Determine some inputs about these
properties
 Determine some operations about these
parts, material & work-in-process
 Apply all of these information for our
process.
 Design the best process for our objective

5-6
DESIGN PROCESS

Product design




defines appearance of
product
sets standards for
performance
specifies which
materials are to be used
determines dimensions
and tolerances

Service design


specifies offering the
costumers; what physical
items, sensual benefits,
and psychological benefits
from service
defines environment in
which service will take
place
DESIGN PROCESS

matches product or service characteristics with
customer requirements
 ensures that customer requirements are met in
the simplest and least costly manner
 reduces time required to design a new product or
service
 minimizes revisions necessary to make a design
workable

Copyright 2006 John Wiley & Sons, Inc.
« Effective Design» can provide a competitive
edge
DESIGN PROCESS
Idea
generation
Performance
specifications
Form design
Customers
R&D
Marketing
Competitors
Revising and testing
prototypes
Production
design
Functional
design
New product or
service launch
Final design
& process plans
Design
specifications
Copyright 2006 John Wiley & Sons, Inc.
Suppliers
Product or
service concept
Feasibility
study
Manufacturing
or delivery
specifications
Pilot product
run and
final tests
5-9
© 2011 Pearson Education,
Inc. publishing as Prentice
Hall
PROCESS, VOLUME, AND VARIETY
Volume
Figure 7.1
Low
Volume
High Variety
one or few units
per run,
(allows
customization)
Changes in
Modules
modest runs,
standardized
modules
Changes in
Attributes (such
as grade, quality,
size, thickness,
etc.)
long runs only
Repetitive
Process
Process Focus
projects, job shops
(machine, print,
hospitals, restaurants)
Izmir Kent Hospital
High
Volume
Mass Customization
(difficult to achieve, but
huge rewards)
Dell Computer
Repetitive
(autos, motorcycles,
home appliances)
Harley-Davidson
Poor Strategy
(Both fixed and
variable costs are
high)
Product Focus
(commercial baked
goods, steel, glass,
beer)
Frito-Lay
PROCESSES AND TECHNOLOGY
PROCESS SELECTION REFERS TO STRATEGIC DECISION
FOLLOWS:




AND IT CAN BE CATEGORIZED AS
Converting process: For examples iron core convert the metal sheet.
Fabrication process: Changing raw materials into some specific form. For
example, making sheet metal into a car fender or foming gold into a crown for a
tooth.
Assembly process: assembling a fender to a car,putting toothpaste tubes into
a box , or fastening a dental crown in somebody’s mouth.
Testing process: This is not strictly speaking a fundemental process, but it is
so widely mentioned as a standalone major activity for completeness.
The process flow structure refers how the factory organizes material flow using
one or more of process tecnologies.
Major process flow structures as; (Hayes & Wheelwright)
 Project production flow
one-at-a-time production of a product to customer order
 Batch production flow (job shop)
systems process many different jobs at the same time in groups (or batches)
 Mass production flow (assembly line)
large volumes of a standard product for a mass market
 Continuous production flow
used for very high volume commodity products
TYPES OF PRODUCTION/OPERATIONS PROCESSES
Effective production/operations process is essential to the company’s
continuing success. Not only there are numerous types of production,
there are also many ways of classifying or grouping them for descriptive
purposes. Classifying production/operations processes by their
characteristics can provide valuable insights into how they should be
managed.
In general, the processes by which goods and services are produced can be
categorised in two traditional ways. Firstly, we can identify continuous,
repetitive, intermittent and job shop production process.

Job shop (jumbled flow ,Bath production). A wide variety of
customized products are made by a highly skilled workforce using
general-purpose equipment. These processes are referred to as jumbledflow processes because there are many possible routings through the
process. Examples: Home renovating firm, stereo repair shop, gourmet
restaurant.
Intermittent (batch) flow. A mixture of generalpurpose and special-purpose equipment is used to
produce small to large batches of products.
Examples: clothing and book manufacturers,
winery, caterer.
 Repetitive flow (mass production). The product
or products are processed in lots, each item of
production passing through the same sequence of
operations, i.e. several standardized products follow
a predetermined flow through sequentially
dependent work centers. Workers typically are
assigned to a narrow range of tasks and work with
highly specialised equipment. Examples:
automobile and computer assembly lines, insurance
home office.


Continuous flow (flow shop). Commodity like products flow continuously
through a linear process. This type of process will theoretically run for 24
hrs/day, 7 days/week and 52 weeks/year and, whilst this is often the
objective, it is rarely achieved.
Examples: chemical, oil, and sugar refineries, power and light utilities.
These four categories represent points on continuum of process organisations.
Processes that fall within a particular category share many characteristics that
fundamentally influence how a process should be managed.
The second and similar classification divides production processes into;
Process,Jobbing Mass, Batch Production.

Process Production. Processes that operate continually to produce a very
high volume of a standard product are termed “Processes”. This type of
process involves the continuous production of a commodity , often by chemical
rather than mechanical means, such as oil and gas. Extra examples of a
continuous processes oil refinery, electricity production and steel making.

Jobbing Production (Project Type Production).
Processes that produce high-variety and low-volume
products are termed “jobbing”.Although strictly consisting
of the manufacture of different products in unit quantities
(in practice corresponds to the intermittent process
mentioned above). This type of production assumes a oneof-a-kind production output, such as a new building or
developing a new software application. The equipment are
typically designed for flexibility and often general
purpose, meaning it can be used for many different
production requirements


Mass Production. Is conceptually similar to process
production, except that discrete items such as
motorcars and domestic appliances are usually
involved. A single or a very small range of similar
items is produced in very large numbers. In other
words, processes that produce high-volume and lowvariety products are termed line or mass processes.
Because of the high volumes of product it is costeffective to use specialised labour and equipment.
Batch Production. Processes that produce products
of medium variety and medium volume are termed
“batch processes”. Occurs where the number of
discrete items to be manufactured in a period is
insufficient to enable mass production to be used.
Similar items are manufactured together in batches.
In other words, batch processes cover a relatively wide
range of volume and variety combination. Products
are grouped into batches .
© 2011 Pearson Education,
Inc. publishing as Prentice
Hall
MASS CUSTOMIZATION
Repetitive Focus
Flexible people
and equipment
Figure 7.3
Accommodating
Product and
Process Design
Modular
techniques
Responsive
Supply Chains
Mass Customization
Effective
scheduling
techniques
Rapid
throughput
techniques
Process-Focused
Product-Focused
High variety, low volume
Low utilization (5% to 25%)
General-purpose equipment
Low variety, high volume
High utilization (70% to 90%)
Specialized equipment
Number of Choices Item
1970s
21st Century
Vehicle models
Vehicle types
Bicycle types
Software titles
Web sites
Movie releases per year
New book titles
Houston TV channels
Breakfast cereals
Items in supermarket
LCD TVs
140
18
8
0
0
267
40,530
5
160
14,000
0
286
1,212
211,000
400,000
162,000,000
765
300,000
185
340
150,000
102
Table 7.1
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Inc. publishing as Prentice
Hall
MASS CUSTOMIZATION
Many modules
(high-volume, high-variety)
Dell Computer
Many output versions
(custom PCs and notebooks)
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Inc. publishing as Prentice
Hall
MASS CUSTOMIZATION
Many parts and
component inputs
(chips, hard drives, software,
cases)
PRODUCT-PROCESS MATRIX
Source: Adapted from Robert Hayes and Steven Wheelwright, Restoring the Competitive Edge:
Competing Through Manufacturing (New York: John Wiley & Sons, 1984), p. 209
Continuous Production
A paper manufacturer produces a
continuous sheet paper from wood
pulp slurry, which is mixed, pressed,
dried, and wound onto reels.
Copyright 2006 John Wiley & Sons, Inc.
Mass Production
Here in a clean room a worker performs
quality checks on a computer assembly line.
Batch Production
At Guitars bindings on the guitar frame are installed
by hand and are wrapped with a cloth webbing until
glue is dried. Piano, Tom Ford, Haute-couture, Dior
Project
Construction of the aircraft carrier was a huge project that took
almost 10 years to complete. Spacecraft, bridge, barrage
Variable
costs
Variable
costs
$
Variable
costs
$
$
Fixed costs
Fixed costs
Fixed costs
Repetitive
Process B
Low volume, high variety
Process A
High volume, low variety
Process C
$
400,000
300,000
200,000
Fixed cost
Process A
Figure 7.4
(2,857)
V1
V2
(6,666)
Fixed cost
Process B
Fixed cost
Process C
Volume
© 2011 Pearson Education,
Inc. publishing as Prentice
Hall
CROSSOVER CHARTS
SERVICE STRATEGY:
PROCESSES AND TECHNOLOGY
service
highly customized and very labor intensive
 Service
shop
customized and labor intensive
 Mass
service
less customized and less labor intensive
 Service
Factory
least customized and least labor intensive
Copyright 2006 John Wiley & Sons, Inc.
 Professional
SERVICE-PROCESS MATRIX
Copyright 2006 John Wiley & Sons, Inc.
Source: Adapted from Roger Schmenner, “How Can Service Businesses
Survive and Prosper?” Sloan Management Review 27(3):29
Degree of Customization
High
Low
Mass Service
Professional Service
Traditional
orthodontics
Private
banking
Commercial
banking
High
Degree of Labor
Full-service
stockbroker
Generalpurpose law firms
Digital
orthodontics
Boutiques
Retailing
Law clinics
Service Shop
Specialized
Limited-service
hospitals
stockbroker
Service Factory
Low
Warehouse and
catalog stores
Airlines
No-frills
airlines
Figure 7.9
Fast-food
restaurants
Fine-dining
restaurants
Hospitals
© 2011 Pearson Education,
Inc. publishing as Prentice
Hall
SERVICE PROCESS MATRIX
Service Factory
Mass Service
Copyright 2006 John Wiley & Sons, Inc.
Electricity is a commodity available
continuously to customers.
A retail store provides a standard array of
products from which customers may choose.
Service Shop
Although a lecture may be prepared in advance, its
delivery is affected by students in each class.
YUSEM, TSE, English Akademy, etc.
Professional Service
A doctor provides personal service to each patient based
on extensive training in medicine. Dentist, Consultant, 2-26
Advisor, etc.
Desired service
experience
Service Concept
Service Package
Targeted
customer
Sensual
benefits
Psychological
benefits
Performance Specifications
Customer
requirements
SERVICE
DESIGN
PROCESS
Customer
expectations
Service
Provider
Design Specifications
Customer
Activities
Facility
Provider
skills
Cost and time
estimates
Delivery Specifications
Schedule
Deliverables
Service
Location
Copyright 2006 John Wiley & Sons, Inc.
Physical
items
IDEA GENERATION SOURCES
Company’s own R&D
department
 Customer complaints
or suggestions
 Marketing research
 Suppliers

Salespersons in the field
 Factory workers
 New technological
developments
 Competitors

FEASIBILITY STUDY
Market analysis
 Economic analysis
 Technical/strategic analysis
 Performance specifications

Copyright 2006 John Wiley & Sons, Inc.
FINAL DESIGN AND PROCESS PLANS

Final design
Process plans
workable instructions
necessary equipment and
tooling
 component sourcing
recommendations
 job descriptions and
procedures
 computer programs for
automated machines

Copyright 2006 John Wiley & Sons, Inc.
detailed drawings and
specifications for new
product or service

REDUCING TIME-TO-MARKET
Establish multifunctional design teams
 Make design decisions concurrently rather than
sequentially
 Design for manufacture and assembly
 Use technology in the design process
 Engage in collaborative design

Copyright 2006 John Wiley & Sons, Inc.
DESIGN TEAM AND
CONCURRENT ENGINEERING DESIGN






Improves quality of
early design decisions
Involves suppliers
Incorporates
production process
Uses a price-minus
system
Scheduling and
management can be
complex as tasks are
done in parallel
Copyright 2006 John Wiley & Sons, Inc.
A new approach to
design that involves
simultaneous design
of products and
processes by design
teams
DESIGN FOR MANUFACTURE AND
ASSEMBLY (DFMA)
Design for manufacture
Design for assembly
a set of procedures for:
Copyright 2006 John Wiley & Sons, Inc.
design a product for easy
and economical production

reducing number of parts in an
assembly
 evaluating methods of
assembly
 determining an assembly
sequence

DFM GUIDELINES




Minimize number of parts and subassemblies
Use standard parts when possible and repeatable,
well-understood processes
Design parts for many uses, and modules that can be
combined in different ways
Design for ease of assembly, minimal handling, and
proper presentation
TECHNOLOGY IN THE DESIGN
PROCESS
Computer Aided Design (CAD)
assists in creation, modification, and analysis of a
design
 includes

computer-aided engineering (CAE)
 tests and analyzes designs on computer screen
 computer-aided manufacturing (CAM)
 ultimate design-to-manufacture connection

Copyright 2006 John Wiley & Sons, Inc.

IMPROVING QUALITY OF
DESIGN
designs to prevent
failures and ensure value
 Design for environment
 Measure design quality
 Use quality function deployment
 Design for robustness
Copyright 2006 John Wiley & Sons, Inc.
 Review
DESIGN REVIEW

Failure mode and effects analysis (FMEA)

Fault tree analysis (FTA)


a systematic method of analyzing product failures
a visual method for analyzing interrelationships among
failures
Value analysis (VA)

helps eliminate unnecessary features and functions
Copyright 2006 John Wiley & Sons, Inc.

FMEA for Potato Chips
Failure
Mode
Cause of
Failure
Effect of
Failure
Corrective
Action
low moisture content
expired shelf life
poor packaging
tastes bad
won’t crunch
thrown out
lost sales
add moisture
 cure longer
better package seal
shorter shelf life
Broken
too thin
too brittle
rough handling
rough use
poor packaging
can’t dip
poor display
injures mouth
chocking
perceived as old
lost sales
change recipe
change process
change packaging
Too Salty
outdated receipt
process not in control
uneven distribution of salt
eat less
drink more
health hazard
lost sales
experiment with recipe
experiment with process
introduce low salt version
Copyright 2006 John Wiley & Sons, Inc.
Stale
FAULT TREE ANALYSIS (FTA)
Copyright 2006 John Wiley & Sons, Inc.
VALUE ANALYSIS (VA),
VALUE ENGINEERING




a less costly method?
with less costly tooling?
with less costly material?
Can it be made cheaper, better, or faster
by someone else?
Copyright 2006 John Wiley & Sons, Inc.
VA was invented in 1947 by sales engineer
Lawrence D. Miles in General Electric. It
was used in 1957 in England by USA
Consultant firm. This approaches
analyses;
 Can we do without it?
 Does it do more than is required?
 Does it cost more than it is worth?
 Can something else do a better job?
 Can it be made by
DESIGN FOR ENVIRONMENT

Design for environment





designing a product from material that can be recycled
design from recycled material
design for ease of repair
minimize packaging
minimize material and energy used during manufacture,
consumption and disposal
Extended producer responsibility

holds companies responsible for their product even after its
useful life
Copyright 2006 John Wiley & Sons, Inc.

DESIGN FOR ENVIRONMENT (CONT.)
Copyright 2006 John Wiley & Sons, Inc.
•DESIGN FOR ROBUSTNESS




Robust product
Robust design
Controllable factors
Uncontrollable factors
 Six
sigma
 Taguchi Function
 Lean Production
Copyright 2006 John Wiley & Sons, Inc.
The other advance topics are;
Stanford Design Thinking Process Video
 http://www.youtube.com/watch?v=JZH70qhmEso

Airplane Model Production Process:
 http://www.youtube.com/watch?v=fmcfKl89DcA

Copyright 2006 John Wiley & Sons, Inc.
Aircraft Manufacturing Process:
 http://www.youtube.com/watch?v=puJx6aq5i_w

CAPACITY PLANNING
 Establishes
overall level of productive
resources
 Affects
leadtime responsiveness, cost &
competitiveness
 Determines
when and how much to
increase capacity
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CAPACITY UTILIZATION
 Measures
actual output rate
100%
Utilizatio n 
capacity


Measures effectiveness
Use either effective or design capacity in
denominator
Copyright 2006 John Wiley & Sons, Inc.
how much of the available
capacity is actually being used:
5-46
EXAMPLES OF COMPUTING CAPACITY
UTILIZATION
1. Example:
 A bakery’s design capacity is 30 custom cakes
per day. Currently the bakery is producing 28
cakes per day. What is the bakery’s capacity
utilization relative to both design and effective
capacity?
 Design
capacity:
Maximum output rate under ideal
conditions
 A bakery can make 30 custom cakes per
day when pushed at holiday time

 Effective


capacity:
Maximum output rate under normal
(realistic) conditions
On the average this bakery can make 20
custom cakes per day
SOLUTION:
Utilizatio n effective 
Utilizatio n design 
actual output
28
(100%)  (100%)  140%
effective capacity
20
actual output
28
(100%)  (100%)  93%
design capacity
30
The current utilization is only slightly
below its design capacity and considerably
above its effective capacity
 The bakery can only operate at this level for
a short period of time

2. Example:
Your company has 4 machines which are staffed by
2 eight hours shifts 6 days a week. Lately
information has shown that there are about 20 per
week in which machines are not in use due to
breakdowns. Calculate your companies machine
utilization.
SOLUTION:
Capacity = (# of shifts) x (# of hours a day) x
(# of machines) x (# of days a week)
Utilization = Hours available – hours down
x 100
Hours available
Utilization = Hours worked x 100
Hours available
First step, the company’s machine hour
capacity?
Capacity = (# of shifts) x (# of hours a day) x
(# of machines) x (# of days a week)
Capacity = (2 shifts) x (8 hours a day) x (4
machines) x (6 days a week)
Capacity = 384 machine hours
Second Step:
Utilization = Hours available – hours down x 100
Hours available
Utilization = (384 machine hours) – (20 hours down) x 100
384 machine hours
Utilization = 364 machine hours x 100 = .9479 x 100
384 machine hours
Utilization = 94.79 %
3. EXAMPLE:

During one week of production, a plant
produced 83 units of a product. Its historic
highest or best utilization recorded was 120
units per week. What is this plant’s capacity
utilization rate?
CAPACITY EXPANSION
Volume & certainty of anticipated demand
 Strategic objectives for growth
 Costs of expansion & operation
 Incremental or one-step expansion

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CAPACITY EXPANSION STRATEGIES
Capacity lead strategy
Units
Capacity
Capacity lag strategy
Units
Demand
Capacity
Demand
Time
Time
Average capacity strategy
Units
Incremental vs. one-step expansion
Units
Capacity
One-step
expansion
Demand
Time
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Incremental
expansion
Demand
Time
Average cost per unit
BEST OPERATING LEVELS WITH
ECONOMIES & DISECONOMIES OF
SCALE
250
room
hotel
Best
operating
level
500
room
hotel
1000
room
hotel
Best
operating
level
Best
operating
level
Diseconomies of scale
Economies of scale
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STRATEGIES FOR MEETING DEMAND
1. Use inventory to absorb fluctuations in demand
(level production)
2. Hire and fire workers to match demand (chase
demand)
3. Maintain resources for high demand levels
4. Increase or decrease working hours (over & undertime)
5. Subcontract work to other firms
6. Use part-time workers
7. Provide the service or product at a later time period
(backordering)
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AGGREGATE PRODUCTION PLANNING (APP)
 Matches
market demand to company resources
 Plans production 6 months to 12 months in
advance
 Expresses demand, resources, and capacity in
general terms
 Develops a strategy for economically meeting
demand
 Establishes a companywide game plan for
allocating resources
© 2000 by Prentice-Hall Inc
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INPUTS AND OUTPUTS TO AGGREGATE
PRODUCTION PLANNING
Capacity
Constraints
Demand
Forecasts
Size of
Workforce
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Strategic
Objectives
Aggregate
Production
Planning
Production
per month
(in units or $)
Inventory
Levels
Company
Policies
Financial
Constraints
Units or dollars
subcontracted,
backordered, or
lost
STRATEGY DETAILS
Subcontracting - useful if supplier meets quality
& time requirements
 Part-time workers - feasible for unskilled jobs or
if labor pool exists
 Backordering - only works if customer is willing
to wait for product/services

© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
LEVEL PRODUCTION
Demand
Production
Units
Time
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Russell/Taylor Oper Mgt 3/e
CHASE DEMAND
Demand
Units
Production
Time
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Russell/Taylor Oper Mgt 3/e
CAPACITY FLEXIBILITY

Flexible plants

Flexible processes

Flexible workers
EXAMPLE OF A DECISION TREE
PROBLEM
A glass factory specializing in crystal is experiencing a
substantial backlog, and the firm's management is considering
three courses of action:
A) Arrange for subcontracting,
B) Construct new facilities.
C) Do nothing (no change)
The correct choice depends largely upon demand, which may
be low, medium, or high. By consensus, management
estimates the respective demand probabilities as .10, .50, and
.40.
EXAMPLE OF A DECISION TREE PROBLEM:
THE PAYOFF TABLE
The management also estimates the profits when
choosing from the three alternatives (A, B, and C) under
the differing probable levels of demand. These costs, in
thousands of dollars are presented in the table below:
A
B
C
0.1
Low
10
-120
20
0.5
Medium
50
25
40
0.4
High
90
200
60
EXAMPLE OF A DECISION TREE PROBLEM: STEP
1. WE START BY DRAWING THE THREE
DECISIONS
A
B
C
EXAMPLE OF DECISION TREE PROBLEM: STEP 2.
ADD OUR POSSIBLE STATES OF NATURE,
PROBABILITIES, AND PAYOFFS
High demand (.4)
Medium demand (.5)
Low demand (.1)
A
High demand (.4)
B
Medium demand (.5)
Low demand (.1)
$90k
$50k
$10k
$200k
$25k
-$120k
C
High demand (.4)
Medium demand (.5)
Low demand (.1)
$60k
$40k
$20k
EXAMPLE OF DECISION TREE PROBLEM: STEP
3. DETERMINE THE EXPECTED VALUE OF EACH
DECISION
High demand (.4)
Medium demand (.5)
$62k
Low demand (.1)
A
EVA=.4(90)+.5(50)+.1(10)=$62k
$90k
$50k
$10k
EXAMPLE OF DECISION TREE PROBLEM: STEP 4.
MAKE DECISION
High demand (.4)
Medium demand (.5)
$62k
A
B
$80.5k
Low demand (.1)
High demand (.4)
Medium demand (.5)
Low demand (.1)
$90k
$50k
$10k
$200k
$25k
-$120k
C
High demand (.4)
$46k
Medium demand (.5)
Low demand (.1)
$60k
$40k
$20k
Alternative B generates the greatest expected profit, so our
choice is B or to construct a new facility.
THANKS!!!
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