1. 1ISM - © 2010 Houman Younessi Lecture 4 Convener: Houman Younessi 1-860-548-7880 youneh@rpi.edu Information Systems Spring 2011

2. 2ISM - © 2010 Houman Younessi Lecture 4 ElementConceptInformation CategoryInformation System CostProductionProcess capability Technology Forecasting Estimating Optimization Control

3. 3ISM - © 2010 Houman Younessi Lecture 4 Production Function: Production function is the specification of the (usually minimum) input requirements needed to produce designated quantities of output, given a certain production technology.

4. 4ISM - © 2010 Houman Younessi Lecture 4 Isoquant:Isocost: A function that shows all possible quantities of inputs that result in the same level of output with a given production function. All combinations of inputs (e.g. labor and capital) into the production function that can be obtained for a fixed outlay.

5. 5ISM - © 2010 Houman Younessi Lecture 4 Objective One: Minimization of cost for a given output Short run Long run

6. 6ISM - © 2010 Houman Younessi Lecture 4 Understand: Definition of cost Time frames Nature of change of cost over time Cost time and output time matching Relationship of cost to output Production Control Technology Impact Economies of scope

7. 7ISM - © 2010 Houman Younessi Lecture 4 Sources of Data: Historical -Time series Cross-sectional - Others in the sector or industry Model-based or Predictive - Based on scientific observation

8. 8ISM - © 2010 Houman Younessi Lecture 4 Relationship of cost to output: Production Control (to be discussed later) Technology Impact Production Technology Change - Innovation Process Technology Change - Process Maturity Process Improvement Common Cause Special Cause

9. 9ISM - © 2010 Houman Younessi Lecture 4 Production Control: Eliminating Waste The six wastes: Over-production Inventory Motion Time (wait-time) Processing Rework Objective Two: Minimization of cost for total output

10. 10ISM - © 2010 Houman Younessi Lecture 4 Some Examples: Lot size optimization – interplay between set-up cost and inventory carrying costs Return to scale – Form of the relationship between input and output - Sub-linear - Linear - Super-linear Output Elasticity

11. 11ISM - © 2010 Houman Younessi Lecture 4 Various Key terms: Lean Six Sigma Kaizan TQM CMMI ISO 9000 BPR

12. 12ISM - © 2010 Houman Younessi Lecture 4 Design: Principles of Good Design Specific characteristics for each artifact would be different but they need to be identified and measured. Example: CMM/CMMI

13. 13ISM - © 2010 Houman Younessi Lecture 4 Over-production

14. 14ISM - © 2010 Houman Younessi Lecture 4 Inventory:

15. 15ISM - © 2010 Houman Younessi Lecture 4 Motion:

16. 16ISM - © 2010 Houman Younessi Lecture 4 Time:

17. 17ISM - © 2010 Houman Younessi Lecture 4 Processing:

18. 18ISM - © 2010 Houman Younessi Lecture 4 Rework: