Exam 2: Ch 5 & 6

Question 1

Productivity

Answer 1

A measure of process performance

Productivity = Outputs / Inputs

Question 2

Single-factor productivity

Answer 2

Measures output levels relative to single input

Batteries produced / Direct Labor hours

Question 3

Multi-factor productivity

Answer 3

measures output levels relative to more than one input

Batteries produced / (machine hours + Direct labor hours)

Question 4

Total productivity

Answer 4

measures output levels relative to all the inputs

Total nightly Sales / Total nightly costs

Question 5

Productivity Growth

Answer 5

100% [ (Current productivity - Previous productivity) / Previous Productivity ]

Question 6

Labor productivity on the ABC line was 40units/hr in 2018. In 2019, labor productivity is 42units/hr. What is the productivity growth from 2018 to 2019?

Answer 6

Productivity Growth = 100%{ (42 - 40) / 40 ]

Question 7

Efficiency

Answer 7

a measure of process performance; the ratio of actual outputs to standard outputs.

E = 100% [ (actual outputs / std. outputs) ]

or

E = 100% [ std. time / actual time) ] for one unit

Question 8

Standard output

Answer 8

an estimate of what should be produced, given a certain level of resources.

Question 9

Cycle Time

Answer 9

the total elapsed time needed to complete a business process

Question 10

Percent Value-added time

Answer 10

the percentage of total cycle time that is spent on activities that actually provide value

%ValueAddedTime = 100% (value-added time) / (total cycle time)

Question 11

Capacity

Answer 11

the capability of a worker, a machine, a workcenter, a plant, or an organization to produce output in a time period.

Question 12

Capacity Decisions

Answer 12

• How much capacity is needed? how is it measure?
• When do we need capacity?
• What form of capacity is needed?

Question 13

Theoretical capacity

Answer 13

the maximum output capability, allowing for no adjustments for preventive maintenance, unplanned downtime, or the like.

Question 14

Rated capacity

Answer 14

the long term expected output capability of a resource or system.

Question 15

Actual output

Answer 15

rate of output actually achieved

Question 16

Measuring System Effectiveness

Theoretical: 50 Trucks/day
Rated: 40 trucks/day
Actual output: 36 trucks/day

Answer 16

Efficiency = Actual output / rated capacity
36 / 40 = 90%

Utilization = actual output / theoretical capacity
36 / 50 = 72%

*measured as percentages

Question 17

Examples of capacity

Answer 17

Law firm: billable hours vs number of lawyers

Textiles factory: spinning hours vs number of machines

car wash: cars per hour: amount of water, reliability, chemicals

Question 18

Controllable factors

Answer 18

of shifts, Number of machines, # of employees, # of facilities, Training level

Question 19

Uncontrollable factors

Answer 19

supplier problems, time of delivery

Question 20

Lead capacity strategy

Answer 20

capacity is added in anticipation of demand

Question 21

lag capacity strategy

Answer 21

capacity is added only after demand has materialized

Question 22

match capacity strategy

Answer 22

balances between lead and lag by avoiding periods of high under or over utilization

Question 23

Fixed costs

Answer 23

expenses an organization incurs regardless of the level of business activity

Question 24

variable costs

Answer 24

expenses directly tied to the level of business activity

Question 25

Total cost formula

Answer 25

TC = FixedCost + VariableCost * X

x = amount of business activity

Question 26

Indifference point

Answer 26

the output level at which the two alternatives generate equal costs
** The low-cost alternative changes at the indifference point

Question 27

Expected value

Answer 27

a calculation that summarizes the expected costs, revenues, or profits, of a capacity alternative, given several demand levels with different probabilities.

Question 28

Break-even analysis

Answer 28

the volume level for a business at which total revenues cover total costs

BEP = FixedCost / (Reveue - VariableCost)

Question 29

Service Capacity Planning

Answer 29

Present a number of challenges related to:

• the need to be near customers
• the need to match the timing of demand
• the inability to match the timing of demand
• the inability to store services
• the degree of demand volatility

Question 30

Theory of constraints

Answer 30

an approach to visualizing and managing capacity which recognizes that nearly all products and services are created through a series of linked processes, and in every case there is at leas one process step that milits throughput for the entire chain.

Question 31

Steps to theory of constraints

Answer 31

• Identify the constraint
• exploit the constraint
• subordinate everything to the constraint
• elevate the constraint (try to increase its capacity)
• find the new constraint

Question 32

Littles Law

Answer 32

a law that holds true for any system that has reached a steady state. the steady state is the point where inventory has had time to build up in the system and the average number of arrivals per period of time equals the average number of departures

Inventory = Rate x Time