1. Class 28: Review for Final Exam
OPSM301 Spring 2012
Class 28:
Review for Final Exam

2. Logistics
Exam on May 29, Tuesday ,between 9:30-11:30 in SOS Z31 (Sevgi Gönül Amphi)
Please bring a pencil, erasor, calculator (these cannot be shared)
1 page of cheat-sheet is allowed (maximum A4 size, 2 sided, hand-written, no photocopy allowed)
Please be in the exam room at 9:20
Please check your seat number at the door before entering the room

3. Exam Coverage Exam structure similar to the Midterm
Chapters 1,2,3,4,5,6,7.1,7.2, 8, 9,
Lecture notes, class discussions, assignments
Both qualitative and quantitative questions
Practice with exercises at the end of chapters, and additional questions on the course website and F drive (or KUAIS)
Solutions in the F:\COURSES\UGRADS\OPSM301\SHARE folder
Will announce office hours before the exam

4. Overview of Topics Operations Strategy Process Flows Flow Time
Strategic Fit, Trade-off, competitive dimensions,order winner-order qualifier, product-process matrix, process types
Process Flows
Little’s Law, Performance measures R,T,I
Flow Time
Activity times, Critical Path
Capacity (Throughput Rate)
Bottleneck, unit loads of resources, takt time, utilization,Gantt Chart
Linear Programming- EXCLUDED
Product mix, Employee scheduling, investment, transportation problems, binding constraint, shadow prices
Inventory Management
Trade-off between ordering cost vs holding cost, economic order quantity, reorder point, safety stock

5. The impact of variability Flow rate variability
Safety inventory in manufacturing with inventory
Safety capacity in service systems (queueing systems)
Flow time variability
Safety time
Performance variability
Statistical process control
Project Management

6. Expected Areas for Questions
Quantitative:
Process Analysis
Inventory management
Waiting line management
Project management
Quality management
Qualitative
All of the above, and lean operations

7. Inventory Management EOQ Model
Safety Stock as a function of Lead time, desired service level, and demand variability

8. Safety Inventory Using the Newsvendor formula:
P(Demand<= Q) =Cu/(Cu+Co)=MB/(MB+MC)
Marginal Analysis: What is the marginal value of ordering the next (n+1)th item?

9. What happens if I order one more unit (on top of Q = 2000)?
Suppose you placed an order of 2000 units but you are not sure if you should order more.
What happens if I order one more unit (on top of Q = 2000)?
Sell the extra unit with
probability …P(D>2000)
DP = 200 (MB or Cu)
Do not sell the extra unit with probability … P(D≤2000)
DP =-65 (-MC or -Co)
Expected profit from additional unit
E(DP) = P(D>2000) 200-P(D ≤ 2000) 65
So? ... Order more
or less than 2000?

10. Improving Supply Chain Performance:
Improving Supply Chain Performance: The Effect of Pooling/Centralization
Notes:
J.A. Van Mieghem/Operations/Supply Chain Mgt

11. Learning Objectives: Centralization/pooling
Chapter 7
Learning Objectives: Centralization/pooling
Centralization reduces safety stocks (pooling) and cycle stocks (economies of scale)
Can offer better service for the same inventory investment or same service with smaller inventory investment.
Different methods to achieve pooling efficiencies:
Physical centralization, Information centralization, Specialization, Commonality, Postponement/late customization.
Cost savings are proportional to square root of # of locations pooled.
Copyright © 2013 Pearson Education Inc. publishing as Prentice Hall

12. Causes of Delays and Queues
High Unsynchronized Variability in
Interarrival Times
Processing Times
High Capacity Utilization r = Ri / Rp, or Low Safety Capacity Rs = Rp – Ri, due to
High Inflow Rate Ri
Low Processing Rate Rp = c/ Tp (i.e. long service time, or few servers)

13. The Queue Length Formula
Utilization effect
Variability effect x
where  Ri / Rp, where Rp = c / Tp, and
CVi and CVp are the Coefficients of Variation
(Standard Deviation/Mean) of the inter-arrival and processing times (assumed independent)

14. Operational Performance Measures
processing
waiting
() Ri
e.g 10 /hr
R ()
10 /hr
Tw?
10 min, Rp=12/hr
Flow time T = Tw + Tp (waiting+process)
Inventory I = Iw + Ip
Flow Rate R = Min (Ri, Rp)
Stable Process = Ri < Rp,, so that R = Ri
Little’s Law: I = R  T, Iw = R  Tw, Ip = R  Tp
Capacity Utilization = Ri / Rp < 1
Safety Capacity = Rp – Ri
Number of Busy Servers = Ip= c = Ri  Tp

15. Economics of Waiting Line Systems
Total Cost= Waiting Cost + Service Cost
cost of waiting
= # customers in line x cost per unit time per customer = Iw x c
OR, if total time in the system is costly:
= I x c
cost of service
= cost per server per unit time x # of servers

16. Effect of Pooling Pooled service capacity reduces waiting Ri/2
Server 1
Queue 1
Server 2
Queue 2
Ri/2 Ri
Ri/2
Server 1
Pooled service capacity
reduces waiting Ri
Queue
Server 2

17. Key Points: The role of variability
Note there is no buffer between stages:
Capacity/hr:
Capacity/hr:
6/hr
6units/hr
6units/hr
4 or 8/hr
4 or 8/hr
5/hr
2 or 10
2 or 10
4/hr
0 or 12
0 or 12
3/hr
As variability increases, throughput (rate) decreases

18. Dependent Events: Products require more than one step
Statistical Fluctuations: Machine and human variations; errors; raw material quality problems;
Dependent Events + Statistical Fluctuations
Reduced Production
Whenever we have dependent events, their fluctuations don’t average out; they accumulate
Note that this has significant implication for JIT production systems (systems with very small buffers)– what are they?
Need to reduce variability
Still need some buffers.
Idea can be applied to supply chains as well – Stations are like companies.
Actions ?
-Reduce variability
-Increase buffer (inventory)

19. Seven Tools for TQM

20. Lean Operations Paradigm of Lean Operations: Synchronization Tools
Strive for the ideal by eliminating waste
This is a total business management system
Synchronization Tools
Reduced batch sizes
Pull production control systems (vs. push)—JIT & Kanban control
Quality at the source
Resource pooling
Level loading (Heijunka)
Layout: Cellular operations
Set up a System for Continuous Improvement
Reduce variability (standard operating procedures)
Increase visibility (river analogy)
Improve human infrastructure
J.A. Van Mieghem/Operations/Lean Ops

21. Key Principles of Process Management
Identify and improve bottlenecks (flow rate)
Identify and improve critical path (flow time)
Eliminate variability as much as possible
Eliminate resource interference
Use pooling when beneficial: Centralize inventories, use a single line in waiting systems, integrate tasks
Postpone differentiation