Midterm Exam

Question 1

Define the basic notion of capacity.

Answer 1

Based on finding the max output possible from a process.

Question 2

Provide some examples of capacity measures in different industries.

Answer 2

Manufacturing Sector: volume of output/time

Service Sector: much more variety, sometimes do not use the best measurements

Question 3

Design Capacity

Answer 3

Maximum output considered possible from a process with no operating constraints. (rarely achieved)

Question 4

Effective Capacity

Answer 4

Maximum output considered possible from a process given normal operating constraints. (aka: operating capacity)

Question 5

Capacity Utilization

Answer 5

(aka: utilization rate) Actual Output/Effective Capacity

Question 6

Break-Even Capacity Formula

Answer 6

break-even units = [Fixed Cost/price-VC]

Question 7

Challenges in Capacity Determination

Answer 7

1) Capacity is usually based on forecast demand.
2) Capacity usually must be added in chunks; can’t just add one unit at a time.
3) Lead or lag approach. Capacity rarely matches demand exactly.
4) Lumpy short-term demand: managers must decide to use peak demand or average demand capacity forecasts.

Question 8

Demand Management

Answer 8

Change the demand pattern using:

• price
• promotion
• reallocate resources toward sales
• sell a complementary product

Question 9

Flexible Capacity

Answer 9

Reduce lock-in to adjust to demand.

- Favorite tool of service sector (hire/fire). People are a primary productive resource.

Question 10

Outsource Production

Answer 10

Contract manufacturers to produce products.
(Contract electronic manufacturers - CEM)
Examples: Apple & Foxconn; Kindle Fire, Sony, Wii.

Question 11

Identify the 5 generic types of operating processes.

Answer 11

1) Continuous —– More Volume
2) Flow (Assembly Line)
3) Cell
4) Job (Batch)
5) Project —– More Variety

Question 12

Continuous Process

Answer 12

• 24/7 production
• Special purpose equipment
• Non-discrete units of production
  (Highest volume, lowest variety)

Examples: Oil refinery, news station, power plant

Question 13

Flow Process

Answer 13

(aka assembly line)

• repetitive sequential production
• Mass production = high volumes of standardized output
• Discrete units of production

Examples: McDonalds, car manufacturing lines)

Question 14

Cell Process

Answer 14

• In-between, hybrid process design.

- Subway restaurant model; pit crew model

Question 15

Job Process

Answer 15

(aka batch productions)

• more variety, but lower volume
• general purpose equipment
• unconnected work flow

Examples: dine-in restaurant, metal processing shop

Question 16

Project Process

Answer 16

• every unit of production varies (batch size = 1)
• Highly labor intensive
• usually not 24/7

Examples: Ship & building construction; theater production

Question 17

Types of mass customization

Answer 17

• Collaborative: works with individuals to precise product offering; custom fit jeans
• Adaptive: firms produce a standardized product, but this product is customizable in the hands of the end-user
• Transparent: firms provide individual customers with unique products, without explicitly telling them that the products are customized.
• Cosmetic: firms produce a standardized physical product, but market it to different customers in unique ways

Question 18

What are the two generic strategies that define how organizations compete in an industry? Provide an industry example of competitive positioning using these strategies.

Answer 18

1) Low-cost: Walmart

2) Differentiation: Target

Question 19

In what ways can operations support a business strategy?

Answer 19

Low cost: Southwest - cheap fares, festival seating, point-to-point network
Differentiation: FedEx - High prices, fast delivery

Performance Frontier: x = Hi to Lo cost; y = Lo to Hi quality

Question 20

What general business strategy do we use to compete?

Answer 20

Degree of differentiation versus cost

Question 21

What will we produce to emphasize the unique characteristics of our strategy?

Answer 21

Service, facilitating goods

Question 22

What themes or activities must operations emphasize to best support the business strategy?

Answer 22

Quality, cost, dependability, flexibility, speed, innovation, etc

Question 23

What type of transformation process will best produce our goods and services?

Answer 23

Project, job, cell, flow, or continuous transformation process

Question 24

How much capacity should each operating process have?

Answer 24

Capacity determination, product variety

Question 25

Where should we locate the operating process, and what should the layout be?

Answer 25

Center of gravity determination, priority diagrams, line balancing

Question 26

How do we improve operations to enhance support of the business strategy?

Answer 26

Quality management, just-in-time (JIT), supply chain management

Question 27

Key OM Decisions

Answer 27

1) Business Level
- strategy, production
2) Operations Level
- themes or activities: quality, cost dependability, etc.
3) OM Long Range Decisions
- process, capacity, location
4) OM Short Range Decisions
- layout, work design, plan, schedule, inventory
5) Management Systems
- improvements