Homework
Autor: ashishpamula • May 12, 2016 • Course Note • 1,359 Words (6 Pages) • 611 Views
Page 1 of 6
- Critical Questions
- Is there demand for it? Conduct primary research, in person or on phone
- Is my design a “vitamin” or a “pain killer”? AKA is it actually good for you or just nice to have?
- Can we build it?
- What level of product quality is appropriate?
- Does it make economic sense?
- Design Considerations
- Reasons for product design/redesign?
- Economic – Reduced demand from recessionary economy
- Social/demographic – Products for aging population, home design
- Political – Low income apts in NY high-rises
- Competitive
- Cost/availability of raw material
- Technological – Speed, footwear, cars
- Value Analysis – An examination of the functions of parts and materials in an effort to reduce cost or improve performance of a product (don’t memorize)
- Could a cheaper part or material be used? Say no if it reduces quality, or safety
- Is the function necessary?
- Can the function of two or more parts be performed by a single part for a lower cost?
- Can a part be simplified?
- Can product specifications be relaxed?
- Objectives of product/service design
- Primary focus
- Customer satisfaction
- Understanding what the customer wants
- Secondary focus
- Function
- Cost
- Quality
- Appearance
- Ease of production
- Ease of maintenance
- Legal, ethical, environmental
- Legal (FDA or Product Liability)
- Ethical – Releasing products with defects/potential hazards
- Time constraints
- Environmental – Emission of vehicles
- Other issues
- Product life cycle
- Short: Phones (1-2 years), Fashion (Seasonal)
- Long: Soda and candy
- How much standardization?
- Capacity – Upper limit on load that an operating unit can handle
- Equipment – More equipment or more sophisticated
- Space – Leasing vs. Buying
- Employee skills
- Questions:
- What kind of capacity is needed? Production, financial, etc.
- How much is needed?
- When is it needed?
- How much will it cost?
- How will it be funded? Loan, donations, investors, grants, vendor financed
- Return on investment? Cost of capital
- What are the potential benefits and risks? Degree of business certainty? Rate of change of demand?
- Profits and time forfeited to implement capacity changes? AKA opportunity costs
- Capacity Decisions
- Capacity decisions affect:
- Ability to meet future demand
- Operating costs – Excess capacity can mean higher unit costs because overhead and fixed costs are spread over a smaller amount of production
- Competitiveness – Excess capacity can be a competitive advantage because they have the % capacity to make a product quicker than others
- Ease of management excess – Excess capacity operation is easier to manage
- Globalization adds complexity – Time becomes more of an issue
- Define and Measure
- Design capacity – Max output rate than an operation or facility is designed for; very general approach to developing a project
- Effective capacity: Design capacity – Allowances for personal time, scrap, and maintenance
- Actual output – Rate actually achieved in units/day, month, or year
- Effective Capacity
- Determinants
- Facility size and layout
- Product design
- Process factors – batch processing
- Human skills and experience
- Company policy factors, whether overtime allowed, holidays
- Operational factors – Differences in equipment type, inventory stocking decisions, quality control
- External factors – Environmental regulations
- Efficiency and Utilization
- Efficiency = Actual output/Effective capacity
- Answer is expressed as a percentage
- Utilization = Actual output/Design capacity
- Answer also expressed as a percentage
- Steps for Capacity Planning
- Forecast capacity requirements
- Long term – Overall level of capacity and factors in cycles, seasonality, trends
- Short term – Variations from seasonal, random, irregular fluctuations in demand
- Seasonal demand:
- Yearly – Halloween
- Monthly – State paychecks, social security
- Weekly – Restaurants
- Daily – Public transportation.
- Calculating processing requirements. 1 machine operates 8 hours a day and 252 days/year
Product | Annual demand in units | Processing time/unit | Process time needed (calculate it) |
1 | 500 | 7 hours | 3500 hours |
2 | 100 | 9 hours | 900 hours |
3 | 900 | 3 hours | 2700 hours |
- Calculating process time needed = 3500 + 900 + 700 = 7100 hours
- Divide process time by 1 machine’s capacity: 1 machine can do 8 hours x 252 days = 2016 hours. 7100/2016 = 3.5 = 4 (Round up to 4 because you can’t buy half a machine)
- Service Capacity
- Capacity Alternatives
- In house aka in your facility
- Outsource aka obtain goods/service from external supplier
- How to make that choice?
- Available capacity
- Expertise
- Quality Considerations
- Nature of demand – Wide fluctuation, smaller orders outsourced
- Cost
- Risk
- Capacity Strategy
- Calculations
- Manager has the option to buy 1, 2, or 3 machines. Variable costs are $17/unit, revenue is $74/unit. Projected annual demand is 670-750 units. How many machines should he buy?
# of machines | Annual fixed costs | Annual output |
1 | $10,200 | 0-400 |
2 | $17,000 | 401-700 |
3 | $20,000 | 701-1100 |
- QBEP = 10,200/74-17 = 179 units
- QBEP = 17,000/74-17 = 299 units
- QBEP = 20,000/74-17 = 351 units
- Is projected annual output greater than the breakeven point? Yes for all.
- What is minimum # of machines to meet demand? Only 3 machines meets that requirement.
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