Operations Management-Week 2 Handout

Introduction to Operations Management - I
B Mahadevan
Week 2
Capacity Issues in Operations

Section 2, Sub-section 2.1
All Rights Reserved, Indian Institute of Management Bangalore
Module 1 Highlights

B Mahadevan
Week 2
Three broad flow patterns in the overall configuration of manufacturing

& service organizations
Streamlined flow
Intermittent flow
Jumbled flow
Complexity of Operations Management varies on account of these

differences
It is important to choose appropriate measures for operations so that
we can increase the propensity to succeed in the market
Options for Improving Operations

B Mahadevan
Week 2
Improving the operations requires addressing some of the core aspects of

operations.
Capacity in the system
Productivity Initiatives
Supply Chain choices that we need to make
Quality Assurance in Operations

B Mahadevan
Week 2
The Notion of Capacity in organizations

Some examples of capacity in organizations

B Mahadevan
Week 2
Associated Cements Corporation (ACC) has an installed capacity of 17.65

million tons.
Bharat Petroleum Corporation Limited (BPCL) has a refining capacity of
260,000 barrels of crude every day.
Recently Tata Consultancy Services (TCS), India's leading software firm
announced that it will double its capacity at its largest delivery center,
Hyderabad, with an addition of 28,000 employees over a period of three
to four years.
Importance of Capacity

B Mahadevan
Week 2
Capacity and its relationship to competitiveness of business firms.

In the Executive health check-up unit in a multi-specialty hospital
many people wait in the system for their turn and some may choose to
post-pone or abandon the idea.
Firms find it difficult to deliver products and services on the promised
date simply because of a huge backlog in customer orders.
In a manufacturing shop floor components pile up in front of some
machines while some other machines downstream starve for want of
components for processing.
Importance of Capacity (cont.)

B Mahadevan
Week 2
When capacity choices have not been made appropriately it can result
in:
Market share loss
Loss of goodwill
Customer dissatisfaction etc.
Definition of Capacity

B Mahadevan
Week 2
Capacity directly relates to the quantum of these resources that an operating

system has:
In the case of a garment manufacturer the number of cutting and sewing
machines, the number of people employed in the shop for production,
quality assurance etc. will all determine the capacity of the system.
In a restaurant the number of dining spaces, the capacity of various
machines used for cooking, the number of servers and chefs, availability of
utensils, plates, cups etc. will all determine the capacity in the system.
It also denotes the maximum output of products and services one can
achieve using these resources.
Measuring Capacity

B Mahadevan
Week 2
Capacity is measured in two ways in any organization:

On the basis of output: An automobile manufacturer such as Toyota will
measure capacity on the basis of daily production of vehicles, say
20,000 vehicles per day.
In terms of input resources: A software service provider or a
management consulting firm can measure capacity in terms of the
number of professionals that they have.

B Mahadevan
Week 2
Process Design & Capacity Analysis

Capacity Planning Issues

B Mahadevan
Week 2
What is of interest to us are the following:

How do these multiple resources in an operating system eventually
determine the capacity of the system?
How do they affect the outcomes and customer oriented measures such
as output, and delivery promises?
How to make an assessment of the capacity in my organization?
What kind of data are required in order to estimate the capacity in an
organization?

B Mahadevan
Week 2
Capacity Planning Issues

A Healthcare example
Issues affecting capacity in a typical hospital:
Doctors, para-medical staff who are involved in the treatment of the patients.
The hospital uses certain equipments, diagnostic gadgets such as scanners.
The hospital may also have a certain number of waiting spaces, operating
theaters etc.
Given a certain number of each of these resources,

How it will affect the outcome in terms patient waiting, residence time in the
hospital?
These are determined by the design of the process deployed to deliver health
care.
Process Analysis

B Mahadevan
Week 2
Process Analysis is a method by which:

We can incorporate details pertaining to resources and other process
related data.
Use some logic to analyze these aspects pertaining to the capacity in the
system.
Process Analysis

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Week 2
Building Blocks
1. Activities: These are the building blocks that make up a process let us
look at one manufacturing and one service example to understand this.
2. Technological & Logical Constraints: Dictates the order in which the
steps are carried out. This is important because only then we will know
the flow of activities.

B Mahadevan
Week 2
Activities & Process Constraints:

The Case of Shirt Manufacturing
Cut
Collar
Attach Co
Cuff
Sleeve
Attach S
Front
Back
Sew
Inspect
Shoulder
Hem
Iron
Fold & Pack

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Week 2
Activities & Process Constraints:

The Case of Insurance Services
Review
Request
Under
Writing
Rating
Policy
Writing
Process Analysis

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Week 2
Building Blocks
3. Process time for each activity: This is going to give us an idea of the
extent to which resources are consumed in each activity.
4. Resources available: May include the skills of labor, types of
machines, special storages, fixtures, other tools, computers etc.
Process Times & Resource Availability:

B Mahadevan
Week 2
The Case of Shirt Manufacturing

No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Operation
Cutting
Make collar
Make cuffs
Make Sleeves
Make front
Make back
Join Shoulders
Attach collar
Attach Sleeves
Sew side seam
Hem Bottom
Inspect
Iron
Fold, Package
Process time/shirt (min)

1.25
1.48
0.50
2.30
1.41
2.45
0.33
1.45
1.38
1.45
1.42
2.35
0.48
1.45
For example, we may have 3 cutting

machines, 12 sewing machines, 7 labor in
each stage of stitching the shirt, 6
inspector and so on
Process Times & Resource Availability:

B Mahadevan
Week 2
The Case of Insurance Services

Number of people
for under writing
(4)
Review
Request
(2)
Under
Writing
35 mins
26 mins
(6)
Rating
70 mins
(5)
Policy
Writing
45 mins
Process Analysis Fundamentals

B Mahadevan
Week 2
Summary
The basic information required for process and capacity analysis:
Activities that make up a process
Technological & Logical Constraints
Process Times
Resources available at each stage of processing
Process Analysis

B Mahadevan
Week 2
Toy Manufacturing Example

A toy manufacturer receives crafted toys from local carpenters and performs
the final operations before stocking it for sale. The process consists of five
steps.
Step 1: Arrange a set of four toys in a pallet (8 minutes).
Step 2: The pallet moves to the next station where the toys are pre-treated (12
Minutes).
Step 3: Send it to the spray-painting chamber, where it is painted as per the
specifications (there is one spray-painting machine) (20 minutes).
Step 4: It is left in an open area for drying (10 minutes).
Step 5: The toys are inspected and packed (5 minutes).
Source: Mahadevan , B. (2015), Operations Management: Theory & Practice, Pearson Education, 3rd Edition, pp 186 189.

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Process Flow Diagram)
Prepare
8 mins
Pre-treat
12 mins
Paint
20 mins
Dry
10 mins
Inspect &
Pack
5 mins
55 minutes
Source: Mahadevan, B. (2015), Operations Management: Theory & Practice, Pearson Education, 3rd Edition, pp 186.
Process Analysis

B Mahadevan
Week 2
Throughput or Lead Time

The measure 55 minutes is the throughput time or manufacturing lead
time for the process.
There is no way we will be able to roll out a batch of toys before 55
minutes from the time we started.
This is the response time for a rush order assuming we have nothing in
stock.
organizations need to know this number so that they can make
meaningful promise to the customer as to how soon an emergency
requirement could be met.

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (A graphical representation)
Prepare
8 mins
Pre-treat
12 mins
Paint
20 mins
Dry
10 mins
Inspect & Pack

5 mins
20-28
0-8
40-48
8-20
48-60
28-40
20
40 40
60 60
40-50
80
60-70
50-55
80-90
70-75
90-95
Every pallet of toys come out exactly in an interval of 20 minutes, which is the cycle time for the process.

B Mahadevan
Week 2
Process Analysis
Cycle Time & Bottleneck
The measure 20 minutes is known as cycle time.
If we manufacture these toys continuously, we will notice that a batch of

toys will come out of the system every 20 minutes.
The stage of processing which determines the cycle time controls the
output from the system.
In our example, the painting station dictates the output from the system.
This is known as the bottleneck in the system.

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Summary of key measures)
Prepare
8 mins
Pre-treat
12 mins
Paint
20 mins
Dry
10 mins
Inspect &
Pack
5 mins
The throughput time for the process is 55 minutes.

Cycle time is 20 minutes. The implication of this is that when the process operates in a
continuous manner, a pallet of finished toys come out every 20 minutes.
The spray painting is the bottleneck in the process.
Process Analysis

B Mahadevan
Week 2
Some more measures of Interest

What is the daily output of this toy manufacturing process if they have 8
hours working schedule?
What is the utilization of each work station?
What is the idle time in each work station?

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Station Output)
Prepare
8 mins
7.5 pallets/hr
Pre-treat
12 mins
Paint
20 mins
Dry
10 mins
Inspect &
Pack
5 mins
5 pallets/hr
3 pallets/hr
Not relevant
12 pallets/hr
The capacity calculation at Dry is not meaningful.

This is called a non-capacity constrained resource.

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Process Utilizations)
Prepare
8 mins
Pre-treat
12 mins
Paint
20 mins
Dry
10 mins
Inspect &
Pack
5 mins
7.5 pallets/hour
5 pallets/hour
3 pallets/hour
Not relevant
12 pallets/hour
Station
Station Output per

hour
Line Output per

hour
Prepare
7.5
3.0
3.0/7.5 = 40%
Pre-Treat
5.0
3.0
3.0/5.0 = 60%
Paint
3.0
3.0
3.0/3.0 = 100%
Dry
Inspect & Pack
Utilization
Not Relevant
12.0
3.0
3.0/12.0 = 25%

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Station Idle Times)
Prepare
8 mins
Pre-treat
12 mins
Paint
20 mins
Dry
10 mins
Inspect &
Pack
5 mins
7.5 pallets/hour
5 pallets/hour
3 pallets/hour
Not relevant
12 pallets/hour
Station
Cycle Time (min)
Station Process
Time (min)
Idle Time
(min)
Prepare
20
12
Pre-Treat
20
12
Paint
20
20
Dry
Inspect & Pack
Not Relevant
20
15

B Mahadevan
Week 2
Capacity Estimation & Debottlenecking


B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Additional Information)
Let us include some more information pertaining to our toy manufacturing

example.
The Preparation stage has two parts to it:
Part 1 is to set up the pallets, which takes 4 minutes.
Part 2 is arranging a set of four toys into each pallet, which takes 4 minutes
per pallet.
Further, the painting booth can hold up to 3 pallets at a time.
Process Analysis

B Mahadevan
Week 2
Toy Manufacturing Example (Options for Increasing the output)

There are two choices to improve the output from the system:
Adding more units of capacity at the stations to increase the output.
Increasing the number of pallets processed at a time from one up to a
maximum of three (because the paint booth can accommodate that
many).

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Impact of 2 painting booths)
Existing Scenario: Batch Size of the Process = 1 pallet, 1 painting booth
Prepare
Pre-treat
Paint
(8 mins)
7.5 pallets/hour
(12 mins)
5 pallets/hour
(20 mins)
3 pallets/hour
Inspect & Pack

Dry
(5 mins)
12 pallets/hour
Scenario 1: Batch Size of the Process = 1 pallet, 2 painting units
Paint
Prepare
Pre-treat
(8 mins)
7.5 pallets/hour
(12 mins)
5 pallets/hour
(20 mins)
3 pallets/hour
Inspect & Pack

Dry
Paint
(5 mins)
12 pallets/hour
(20 mins)
3 pallets/hour
Process Analysis

B Mahadevan
Week 2
Impact of Debottlenecking option

The output did not double when we added the second painting booth. In
fact the line output went up from 3 to 5 only.
Bottleneck shifted out of Painting. Pre-treatment now becomes the
bottleneck. This is known as wandering bottleneck.
This has important implication in investment justification when new
capacity is added at a bottleneck station.
We may not be able to calculate the net increase in production unless
we locate where the new bottleneck is.

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Impact of Policy Changes)
It is also important to know that certain operating policies can help us

alter the output from the system.
In our example, it is possible to accommodate up to 3 batches of pallets
in the paint booth.
Therefore, we shall increase the pallets processed at the painting booth
and see its impact on output.

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Impact of Policy Changes)
Existing Scenario: Batch Size of the Process = 1 pallet
Prepare
Pre-treat
Paint
(8 mins)
7.5 pallets/hour
(12 mins)
5 pallets/hour
(20 mins)
3 pallets/hour
Inspect & Pack

Dry
(5 mins)
12 pallets/hour
Scenario 1: Batch Size of the Process = 2 pallets
Prepare
(4+ (2*4) =
12 mins)
10 pallets/hour
Pre-treat
Paint
(12 mins)
5 pallets/hour
(20 mins)
6 pallets/hour
Inspect & Pack

Dry
(5 mins)
12 pallets/hour
Scenario 2: Batch Size of the Process = 3 pallets
Prepare
(4+ (3*4) =
16 mins)
11.25 pallets/hour
Pre-treat
Paint
(12 mins)
5 pallets/hour
(20 mins)
9 pallets/hour
Inspect & Pack

Dry
(5 mins)
12 pallets/hour
Process Analysis

B Mahadevan
Week 2
Impact of Policy Change Option

The bottleneck shifted out of Painting. Pre-treatment now becomes the
bottleneck.
By changing the operating policy at the process, we have been able to
increase the output from the line from 3 pallets per hour to 5 pallets
per hour.
Process Analysis

B Mahadevan
Week 2
Toy Manufacturing Example (Hybrid Option)

Hybrid Option: We can simultaneously implement operational policy
change and capacity addition alternatives
We shall add one more pre-treatment unit and,
Also implement a policy of processing three pallets at a time

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Hybrid Option)
Existing Scenario: Batch Size of the Process = 1 pallet, 1 painting booth
Prepare
Pre-treat
Paint
(8 mins)
7.5 pallets/hour
(12 mins)
5 pallets/hour
(20 mins)
3 pallets/hour
Inspect & Pack
Dry
(5 mins)
12 pallets/hour
Scenario 1: Batch Size of the Process = 3 pallets, 2 pre-treatment units
Pre-treat
Prepare
(4+ (3*4) =
16 mins)
11.25 pallets/hour
(12 mins)
5 pallets/hour
Inspect & Pack
Paint
Pre-treat
(20 mins)
9 pallets/hour
Dry
(5 mins)
12 pallets/hour
(12 mins)
5 pallets/hour
Source: Mahadevan, B. (2015), Operations Management: Theory & Practice, Pearson Education, 3rd Edition, pp 189. All Rights Reserved, Indian Institute of Management Bangalore

B Mahadevan
Week 2
Process Analysis
Toy Manufacturing Example (Summary of Findings)
When we added one more painting booth, the capacity went up from 3
pallets per hour to 5 pallets per hour.
We could have achieved the same increase in output by avoiding the
capacity investment and instead changing the operating policy.
When we used a combination of both of these, the output could indeed
go up to 9 pallets per hour.
Process Analysis

B Mahadevan
Week 2
Toy Manufacturing Example (Key Inferences)

The above examples point to us certain important issues related to
capacity improvement & addressing bottlenecks.
Capacity is not increased merely by adding more units at the
bottleneck stage.
Process choices can also contribute to improving the output.
A judicious combination can provide innovative options for
organizations to increase their output at least cost of capacity addition.

B Mahadevan
Week 2
Capacity Estimation (Multiple Jobs)

Process Analysis in the case of Multiple Jobs

B Mahadevan
Week 2
A Health Diagnostics Example (cont.)

Suppose there is a health diagnostic center which provides services to the
arriving patients.
Three types of patients arrive and they undergo a preliminary investigation before
further tests are done.
There are dedicated preliminary investigation facilities available for each of the
three types of customers.
Patient Type 1 compulsorily have to undergo tests in the Coronary Unit and the
Radiology departments in the diagnostics center in that order.
Patient Type 2 generally require some tests in the Radiology Department. After
Preliminary Investigation, 20% of them will be asked to go the Coronary Unit first for
some tests and from there they will proceed to the Radiology Department.
Patient Type 3 undergo Gynecology related tests.

B Mahadevan
Week 2
A Health Diagnostics Example

After all tests are done, all the three types of patients visit a common facility
in which a pool of doctors is available.
One of the doctors meets with the patient, reviews the reports and provides
further advice wherever required.
Irrespective of the patient type, they meet any of the available doctor for this
final review.
Based on some historical trends, the diagnostic center expects the potential
daily arrivals of the three patient types as follows:
Patient Type 1: 100
Patient Type 2: 200
Patient Type 3: 220

B Mahadevan
Week 2
A Health Diagnostics Example (Process Details)

Department
Preliminary Investigation
(Patient Type 1)
(Patient Type 2)
(Patient Type 3)
Coronary Unit
Radiology Department
Gynecology Department
Final Review
(Minutes)
No. of Resources
Available
20
15
10
30
10
20
10
5
6
8
10
Process Time

B Mahadevan
Week 2

A Health Diagnostics Example (Process Flow Diagram)
Preliminary
Investigation (P1)
Coronary
Unit
Radiology
Unit
Final
Review
20%
80%
Preliminary
Investigation (P2)
Preliminary
Investigation (P3)
Gynecology
Unit
Patient (Type 1)
Patient (Type 2)
Patient (Type 3)

B Mahadevan
Week 2
A Health Diagnostics Example (Capacity Calculations)

Process Step
(P1)
(P2)
(P3)
Capacity
Process
per hour
Time (min) per available
resource
Number of
Resources
Available
Potential
Demand
Daily
at the
Station
Station
Output
Actual
Station
Output
20
120
100
100
15
192
200
192
10
240
220
220
Coronary Unit
30
80
138.4
80
10
288
233.6
233.6
20
192
220
192
Final Review
10
10
480
425.6
425.6

A Health Diagnostics Example (Inferences)

B Mahadevan
Week 2
Even though 520 patients can potentially make use of the diagnostic
center services, the center can handle only 425.60 patients every day.
There is a foregone opportunity on account of bottlenecks in the
system.
Coronary Unit is a bottleneck in the system as it controls the output of type 1 and
type 2 patients coming into the system.
Therefore, efforts to improve the system output will invariably need some
capacity additions in this stage of the processing.
The gynecology department constraints the flow of type 3 patients in the system
as it is the bottleneck in the current state of the process.

B Mahadevan
Week 2
A Health Diagnostics Example (Output 6 Coronary Units)

Process Step
(P1)
(P2)
(P3)
Capacity
Process
per hour
resource
Number of
Resources
Available
Potential
Demand
Daily
at the
Station
Station
Output
Actual
Station
Output
20
120
100
100
15
192
200
192
10
240
220
220
Coronary Unit
30
96
138.4
96
10
288
249.6
249.6
20
192
220
Final Review
10
10
480
441.60
192
441.60

B Mahadevan
Week 2
A Health Diagnostics Example (Output 9 Coronary Units)

Process Step
(P1)
(P2)
(P3)
Capacity
Process
per hour
resource
Number of
Resources
Available
Potential
Demand
Daily
at the
Station
Station
Output
Actual
Station
Output
20
120
100
100
15
192
200
192
10
240
220
220
Coronary Unit
30
144
138.4
138.4
10
288
292
288.0
20
192
220
192
Final Review
10
10
480
480.00
480.00

B Mahadevan
Week 2
A Health Diagnostics Example (Inferences)

As more number of units are added to the coronary unit the wandering
bottleneck phenomenon sets in.
At a capacity of 9 in the coronary units, the bottleneck shifts to
radiology department for the type 1 and type 2 patients.
The output at the coronary unit can be increased not merely by adding
more units.
There may be other process choices and improvement opportunities
which may bring down the process time and thereby increase the
capacity.

B Mahadevan
Week 2
Capacity Estimation (Worker Paced Systems)


B Mahadevan
Week 2
Several situations in real life where the capacity decisions are made on
the basis of certain targeted output from the operating system.
Such systems are predominantly worker paced.
Typically involve final assembly, finishing operations and delivery of the
product or service to the customer.

B Mahadevan
Week 2
Examples
Maruti Suzuki Limited, Indias largest manufacturer of passenger cars produces
about 1.35 million cars a year.
Suppose Maruti works for 15 hours a day and 25 days a month.
This would mean that every 12 seconds one car must roll out of its final assembly shop.
Consider a fast food joint such as McDonalds or Hotel Saravana Bhavan.

During peak hours, the number of customers that they need to serve is say 40 per hour.
This would translate into a per customer serving time of 90 seconds.
In both the above examples the operations must be aligned to this aspect.
The number of workers required & the process design are determined on the
basis of the targeted output from the system.

B Mahadevan
Week 2
Fast Food Joint Example

The food delivery section of a fast food joint needs to be designed for a
targeted daily service rate of 320 customer orders.
The restaurant works for 8 hours. Irrespective of variations in the customer
order, the delivery of the food as per customer order follows a standardized
process.
With this information we need to design the process and address capacity
related issues for meeting the targeted daily requirement of 320 customer
orders.

B Mahadevan
Week 2
Fast Food Joint Example (Activities & Process Times)

It consists of 8 steps, the details and process times are as follows:
1. Deconstruct the order and identify the ingredients for the order 70 seconds.
2. Prepare the main dish as per the order 80 seconds.
3. Prepare the topping/additives for the main dish 40 seconds.
4. Obtain Delivery tray 20 seconds.
5. Prepare the beverages as per the order 40 seconds.
6. Microwave the main dish along with toppings 30 seconds.
7. Dish out side dishes for the menu 50 seconds.
8. Verify and Assemble the order and handover 50 seconds.

B Mahadevan
Week 2
Fast Food Joint Example (Precedence Constraints)

Prepare
Main Dish
Micro-wave
Main Dish
Topping/
Additives
Identify
Ingredients
Delivery
Tray
Add
Side Dishes
Assemble
Verify
Deliver
Prepare
Beverages

B Mahadevan
Week 2
Fast Food Joint Example (Targeted Cycle Time)

B Mahadevan
Week 2
Fast Food Joint Example (Minimum No. of workstations required)

B Mahadevan
Week 2
Fast Food Joint Example (Design of Workstations)

Prepare
Main
Dish
70
Station
Additives & Delivery

Toppings
Tray
80
40
20
Beverage
Microwave
40
Side
Dishes
30
50
Deliver
50
Prepare
Main Dish
Additives &
Toppings,
Micro-wave
Beverage,
Side Dishes
Delivery
Tray, Deliver
Process
Time
70
80
40 + 30 =
70
40 + 50 =
90
20 + 50 =
70
Idle Time
20
10
20
20
Utilization
70/90 =
77.78%
80/90 =
88.89%
77.78%
100%
77.78%
Tasks

B Mahadevan
Week 2
Fast Food Joint Example (Inferences)

The most important requirement is that the cycle time of the station
should not exceed 90 seconds.
As long as we are able to accommodate precedence constraints, we can
group the activities in any fashion.
We may want to use practical considerations for grouping the tasks.
This will have implications for skill level, training, the extent of
imbalance across stations etc.

B Mahadevan
Week 2
Fast Food Joint Example (Impact of increased Demand)

Suppose if the daily demand is likely to increase to 400 from the current
level of 320.
8 60 60
=
= 72
400
380
. =
= 5.27 6
72

B Mahadevan
Week 2
Fast Food Joint Example (Impact of increased Demand)

It is not possible to meet the demand with 5 work stations.
We need to add a sixth workstation and accordingly redistribute the
tasks among the six work stations.
Main dish has a process time of 80 seconds. The only way to bring down
this process time below 72 is to duplicate one more unit at this
workstation.
All these changes will reduce the average resource utilization but we will
be able to meet the targeted daily demand of 400.

B Mahadevan
Week 2
Other Issues in Capacity Planning

Capacity Planning under uncertainty

B Mahadevan
Week 2
Use of Queueing Theory

In all the examples that we have seen so far demand and process
times were assumed to be known and deterministic.
However, in reality, both these information tend to be varying and
quite uncertain. The question of interest is how will this impact the
capacity?
One way to address this is to incorporate these idiosyncrasies into our
analysis and then compute measures such a delays, waiting times,
utilization etc.
Queueing Theory or Waiting Line Models provide a structured
approach to address capacity issues under such conditions.

B Mahadevan
Week 2

Components of a Queueing System
Population
Arrivals
Waiting Line
Server
Served
customers
This is a single server queue.


B Mahadevan
Week 2

Relevant Measures in Queueing Systems
Mean Arrival rate

Mean Service rate
Utilization of the Server
Lq
Average number of customers in the waiting line

(Length of the Queue)
Single server Queue L =
(Exponential service time) q

B Mahadevan
Week 2
Some Managerial Implications

The formula for the length of the queue implies the following:
As the difference between the service rate and arrival rate narrows
down, the queue can build longer and longer.
Since utilization is a ratio of these two numbers, at higher utilization the
queue gets longer.
When the service rate and the arrival rate are the same, the utilization is
100% and the queue length becomes infinite.
This means that when we deal with uncertainties in demand and service
times we should not design a process for 100% utilization of resources.

B Mahadevan
Week 2

Effect of reducing uncertainty
Suppose we were able to automate the step in the process and reduce
the variability in service time to zero.
The mean remains at , but the standard deviation is zero.
Single server Queue

Lq =
Deterministic service time
The queue length has halved compared to the earlier case. This greatly
motivates us to put efforts in process variability.
Automation, better training, unambiguous policies, clear authorization,
availability of right information and well-designed processes are ways
by which we can reduce variability.

B Mahadevan
Week 2
Some Managerial Implications

In real life situations involving complex network of queues, the following
two results are invariable:
Higher utilization leads to delays and huge pile ups.
It pays to invest in reducing process time variability.

B Mahadevan
Week 2

Flexibility/Utilization Trade-off
Operational Performance
Measures
High utilization
Low cost of operation
Poor service
Low utilization
High cost of operation
Good service
Utilization
100%

B Mahadevan
Week 2
Expected costs
Cost of the service
Total cost
Service
cost
Waiting Costs
Level of service
Other Alternatives for increasing the capacity

B Mahadevan
Week 2
Let us consider a service system such as a restaurant:

Peak Demand: Between 7.30 am and 9.30 am
Non-Peak Demand: Between 3.00 pm and 5.00 pm
Most service systems have peak hour and non-peak hour zones of
demand.
How do we address capacity requirements during peak hours?

B Mahadevan
Week 2
Increasing the capacity in the system

Other alternatives (Product Portfolio Choices)
Narrow the service portfolio offered to the customers
If we offer too many varieties, we lose capacity in changing over from one
variety to the other, setting up the system for a new variety etc.
Shift the excess demand from the peak zone to a non-peak zone.
Introduce capacity reservation system & prior appointments such as
table reservations and doctor appointments.
Use pricing strategies to address capacity problems.
Offering discounts will help shift the demand from peak to non-peak.
Offering premium pricing for the peak hour capacity will also adjust the
demand.

B Mahadevan
Week 2

Other alternatives (Multi-skilling)
Have multi-skilling of the work force so that one can utilize a

flexible work force in various stages of the service delivery to
address the demand.
During the peak hour time, the order taking personnel can also
double up as severs by addressing certain service requirements.
In the kitchen area multi-skilled flexible workforce can address the
surge in demand more effectively.
One can also hire temporary workers to increase capacity.

This will be limited to semi-skilled and unskilled trade.

B Mahadevan
Week 2
Other alternatives
Use alternative planning premises to address capacity issues during
peak-hour.
There are three planning premises normally used in businesses.
Made-to-Order (MTO)
Made-to-Stock (MTS)
Assemble-to-Order (ATO)
In the case of MTS the requirement is fulfilled using what is already

available in inventory as semi-configured.

B Mahadevan
Week 2
Other alternatives (Planning Modifications)

In most cases, services cannot be inventoried. Therefore MTS has a
limited use in service businesses.
However, services make use of ATO.
A planning premise in which part of the service is pre-processed.
The preparatory work is done during the non-peak zone that precedes the
peak hour.
Capacity required for delivering service during peak hour is minimized.
As soon as the customer arrives in the system, the balance work is done
and service is delivered faster.

B Mahadevan
Week 2
Other alternatives (Planning Modifications)

During non-peak hours a service system can resort to other process
choices and offerings. These include:
MTO method of handling service requests
specialized work force
Wide service portfolio

Operations Management-Week 2 Handout

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Introduction to Operations Management - I

Capacity Issues in Operations

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Introduction to Operations Management - I

Three broad flow patterns in the overall configuration of manufacturing

Complexity of Operations Management varies on account of these

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Options for Improving Operations

Introduction to Operations Management - I

Improving the operations requires addressing some of the core aspects of

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Introduction to Operations Management - I

The Notion of Capacity in organizations

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Some examples of capacity in organizations

Introduction to Operations Management - I

Associated Cements Corporation (ACC) has an installed capacity of 17.65

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Introduction to Operations Management - I

Capacity and its relationship to competitiveness of business firms.

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Importance of Capacity (cont.)

Introduction to Operations Management - I

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Introduction to Operations Management - I

Capacity directly relates to the quantum of these resources that an operating

Introduction to Operations Management - I

Capacity is measured in two ways in any organization:

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Introduction to Operations Management - I

Process Design & Capacity Analysis

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Capacity Planning Issues

Introduction to Operations Management - I

What is of interest to us are the following:

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Introduction to Operations Management - I

Capacity Planning Issues

Given a certain number of each of these resources,

Introduction to Operations Management - I

Process Analysis is a method by which:

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Introduction to Operations Management - I

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Introduction to Operations Management - I

Activities & Process Constraints:

Fold & Pack

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Introduction to Operations Management - I

Activities & Process Constraints:

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Introduction to Operations Management - I

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Process Times & Resource Availability:

Introduction to Operations Management - I

The Case of Shirt Manufacturing

Process time/shirt (min)

For example, we may have 3 cutting

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Process Times & Resource Availability:

Introduction to Operations Management - I

The Case of Insurance Services

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