OMIS 4300 Test 2

OMIS 4300 Test 2 John Woosley Production and Operations Management SELU Fall 2025

Capacity planning definition

the goal of achieving a match between the long-term supply capabilities of an organization and the predicted level of long-term demand.

Capacity needs include:

Equipment, Space, and Employee skills.

Strategic Capacity Planning definition

Answering key questions like: What kind of capacity is needed? How much is needed to match demand? When is it needed?

Types of Capacity

Design, Effective, and Actual

Design Capacity definition

Maximum output rate or service capacity an operation, process, or facility is designed for.

Effective capacity definition

Design capacity minus allowances such as personal time, maintenance, and scrap.

Actual output definition

the rate of output actually achieved, which cannot exceed effective capacity.

Determinants of Capacity:

Facilities, Product & Service Factors, Process Factors, Human Factors, Policy Factors, Operational Factors, Supply Chain Factors, and External Factors.

Service capacity planning can present challenges related to:

The need to be near customers (convenience), The inability to store services for later consumption, and The degree of demand volatility (Volume & timing of demand and Time required to service individual customers).

Outsourcing definition

Having a good or service produced/provided by an outside organization rather than producing it yourself (in-house).

Bottleneck definition

an operation in a sequence of operations whose capacity is lower than that of the other operations.

Economies of Scale definition

occurs if the output rate is less than the optimal level, where increasing the output rate results in decreasing average per unit costs.

Reasons for Economies of Scale:

Spreading fixed costs over more units, Increasing construction costs at a decreasing rate, and Decreasing processing costs due to standardization.

Diseconomies of Scale definition

Occurs if the output rate is more than the optimal level, where increasing the output rate results in increasing average per unit costs.

Reasons for Diseconomies of Scale:

Reasons include increasing distribution costs, Complexity increasing costs, Inflexibility, and Additional levels of bureaucracy.

Cost-Volume analysis definition

Focuses on the relationship between cost, revenue, and volume of output.

Process Strategy definition

Capital Intensity definition

The mix of equipment and labor.

Process flexibility definition

The degree to which the system can be adjusted to changes in processing requirements due to: Product/service design changes, Volume changes, or Technology changes.

Key aspects of Process Strategy:

Capital Intensity and Process Flexibility

Process choice is driven by:

Demand factors

Demand factors:

Variety (how much) and Volume (expected output).

Technology definition

Application of scientific discoveries to the development & improvement of products & services and/or The processes that produce or provide them.

Tech. Innovation definition

Discovery and development of new or improved products, services, or processes for producing or providing them.

Automation definition

Machinery that has sensing and control devices that enable it to operate automatically.

Process Selection definition

Factors that influence this choice (i.e. product variety, flexibility, and volume).

Product /Service Profiling

Linking key product or service requirements (such as range of products/services, expected order sizes, pricing strategies, frequency of schedule changes, and order-winning requirements) to process capabilities.

Facilities Layout definition

Facilities Layout types:

Product Layouts, Process Layouts, and Fixed-Position Layouts.

Product Layouts definition

Uses standardized processing operations to achieve smooth, rapid, high-volume flow. Used for repetitive or continuous processing.

Product Layouts Advantages:

High rate of output, Low unit cost, Labor specialization, Low material handling cost per unit, High utilization of labor & equipment, Established routing & scheduling, and Routine accounting/purchasing/inventory control.

Product Layouts Disadvantages:

Creates dull/repetitive jobs, Poorly skilled workers may neglect maintenance/quality, Fairly inflexible to changes in volume or product/process design, Highly susceptible to shutdowns, and Individual incentive plans are impractical.

Process Layouts definition

Can handle varied processing requirements. Used for intermittent processing (Job Shop or Batch).

Process Layouts Advantages:

Can handle a variety of processing requirements, Not particularly vulnerable to equipment failures, General-purpose equipment is often less costly & easier to maintain, and Individual incentive systems are possible.

Process Layouts Disadvantages:

In-process inventories can be high, Routing & scheduling are challenging, Equipment utilization rates are low, Material handling is slow & inefficient, Reduced spans of supervision, Special attention for each product/customer is necessary, and Accounting/inventory control/purchasing are more involved.

Fixed-Position Layouts definition

The product or project remains stationary, and workers, materials, and equipment are moved as needed.

Project definition

Unique, one-time operation designed to accomplish a specific set of objectives in a limited time frame.

Project Management definition

Managing the work, the human resources, communications, quality, time, and costs for the project.

Work Breakdown Structure (WBS) definition

Hierarchical listing of what must be done during a project. It establishes a logical framework for identifying the required activities for the project.

WBS

Work Breakdown Structure

Network Planning Models:

Critical Path Method and Time-Cost Model

Critical Path Method (CPM) definition

Technique used to manage large-scale projects. It provides: A graphical display of project activities, Estimate of how long the project will take, Indication of which activities are most critical to timely project completion, and Indication of how long any activity can be delayed without delaying the project.

CPM

Critical Path Method

Time-Cost Model (Crashing) definition

Shortening activity durations (crashing) to reduce the project duration, typically by injecting additional resources and increasing direct expenses, while realizing savings in indirect project costs.

Network diagram definition

Diagram of project activities that shows sequential relationships using arrows and nodes.

Activity On Arrow (AOA) definition

Convention where arrows designate activities.

AOA

Activity On Arrow

Activity On Node (AON) definition

Convention where nodes designate activities.

AON

Activity On Node

Activities definition

Project steps that consume resources and/or time

Planning Service Capacity definition

Considerations for planning for the maximum load that a service unit can handle.

Process Types:

Job Shop, Batch, Repetitive/Assembly, and Continuous.

Job Shop definition:

Customized goods or services.

Batch definition:

Semi-standardized goods or services.

Repetitive/Assembly definition:

Standardized goods or services.

Continuous Flow definition:

Highly standardized goods or services.

Product-Process Matrix definition:

Relates volume/flexibility to process type.

Job Shop qualities:

Low or very low volume; High variety/flexibility

Batch qualities:

Moderate volume; Moderate variety/flexibility

Repetitive/Assembly quality:

High volume; Low variety/flexibility

Continuous Flow quality:

Very low variety/flexibility

Job Shop example:

Repair Shop or Emergency Room

Continuous Flow example:

Petroleum Refining or Water Treatment

Repetitive/Assembly example:

Assembly Line or Automatic Car Wash

Batch example:

Commercial Bakery or Classroom Lecture

Total Cost (TC) is the sum of two types of costs:

Fixed Costs (FC) and Variable Costs (VC)

Fixed Costs (FC) definition:

Costs that stay the same no matter how much you produce or sell (like rent or the initial purchase price of a machine).

Variable Costs (VC) definition:

Costs that change directly with the amount you produce (like raw materials or hourly wages per unit).

Total Revenue (TR) definition:

The total money earned from sales, calculated by multiplying the price per unit by the quantity sold.

Cost-Volume Analysis Assumptions:

You're only dealing with one product or service at a time.

You can sell everything you produce.

The cost to produce each unit is constant.

Major fixed costs remain stable.

The selling price is constant.

Every unit you sell makes at least a little bit of money toward covering fixed costs.