Operations Management & Performance Modeling
1
Operations Strategy
2 Process Analysis
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–
Class 2a + 2b: Process Flow Analysis
Class 3a: Capacity Investment
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5
6
7
OM&PM/Class 3a
The Product Mix problem
National Cranberry Coop.
Lean Operations
Supply Chain Management
Capacity Management in Services
Total Quality Management
Business Process Reengineering
1
Product Mix Decisions:
Kristen Cookies offers 2 products
Sale Price of Chocolate Chip Cookies:
Cost of Materials:
$5.00/dozen
$2.50/dozen
Sale Price of Oatmeal Raisin Cookies:
Cost of Materials:
$5.50/dozen
$2.40/dozen
Maximum weekly demand of
Chocolate Chip Cookies:
Maximum weekly demand of
Oatmeal Raisin Cookies:
Total weekly operating expense
OM&PM/Class 3a
100 dozen
50 dozen
$270
2
Product Mix Decisions
Total time available in week:
20 hrs
Processing
Times
Mix &
Dish
Chocolate
Chip
8 mins.
(6+2/tray)
1
9
Oatmeal
Raisin
5 mins.
(3+2/tray)
1
14
Resource
You
RM+Oven
Oven
OM&PM/Class 3a
Load Oven Bake Cool
& Set
Pack
Receive
Total
5
2/tray
1
26
2
2/tray
1
25
RM
RM
3
Product Mix Decisions
Margin per dozen Chocolate Chip cookies = $2.50
Margin per dozen Oatmeal Raisin cookies = $3.10
Margin per oven minute from Chocolate Chip cookies =
$2.50 / 10 = $ 0.250
Margin per oven minute from Oatmeal Raisin cookies =
$3.10 / 15 = $ 0.207
OM&PM/Class 3a
4
LP for Optimal Product Mix Selection
xcc:
xor:
Dozens of chocolate chip cookies sold.
Dozens of oatmeal raisin cookies sold.
Max
2.5 xcc + 3.1 xor
subject to
8 xcc +
5 xor <
10 xcc +
15 xor <
4 xcc +
4 xor <
xcc
xor
OM&PM/Class 3a
<
<
1200
1200
1200
Technology
Constraints
100
50
Market
Constraints

5
National Cranberry Cooperative
OM&PM/Class 3a
6
National Cranberry Cooperative
Weigh
Color Grade
2 Samples
x bbls/hr Truck
arrivals
Truck
Queue
Dry
30%
Kiwanee
Dumpers
4000bbls
16@250bbls
Bin
1-16
2000bbls
8@250bbls
Bin
17-24
1200bbls
70%
2250 bbls/ hr
= 5 dumpers
Wet
average 75 bbls/truck
10 min/truck,dumper
(= 450 bbls/hr,dumper)
OM&PM/Class 3a
Bin 3@400bbls
25-27
4500bbls/hr
3@1500bbls/hr
4500bbls/hr
3@1500bbls/hr
600bbls/hr
3@200bbls/hr
1200bbls/hr
3@400bbls/hr
Destoning
Jumbo
Separator
Dechaffing
Drying
7
Class 3a Learning Objectives

Effect of product mix decisions on process capacity
– marginal contribution per unit of bottleneck capacity used

Process flow charts with multiple products

Backups may not occur in front of a bottleneck

Bottleneck may shift on adding capacity
 diminishing returns to capacity investment
OM&PM/Class 3a
8