KEY EQUATIONS

CHAPTER 1: Operations as a Competitive Weapon

1. Productivity is the ratio of output to input, or

Productivity =

Output Input

SUPPLEMENT A: Decision Making

1. Break-even volume: Q =

F pc

2. Evaluating process, make-or-buy indifference quantity:

Q=

Fm Fb cb c m

CHAPTER 3: Project Management

1. Start and finish times:

ES = max (EF times of all activities immediately preceding activity) EF = ES + t LS = LF t LF = min (LS times of all activities immediately following activity)
2. Activity slack:

S = LS ES or S = LF EF
3. Project costs:

Cost to crash per unit of time =

4. Activity time statistics:

Crash cost Normal cost CC NC = Normal time Crash time NT CT

te =

a + 4m + b (Expected activity time) 6 ba 6

2

2 =
5. z-transformation formula:

(Variance)

z= where

T TE

T = due date for the project TE = (expected activity times on the critical path) = mean of normal distribution

2 = (variances of activities on the critical path)

CHAPTER 6: Process Performance and Quality

1.

Mean: x =

x
i =1

2.

Standard deviation of a sample:

=
3.

(x

x)

n 1

or

( x )2 n i

n 1

Control limits for variable process control charts

a.

R-chart, range of sample:

---------

b.

x-chart, sample mean:

Upper control limit = UCL x = x + A2 R Lower control limit = LCL x = x A2 R

c.

When the standard deviation of the process distribution, , is known:

Upper control limit = UCL x = x + z x Lower control limit = LCL x = x z x

where

x =
4.

Control limits for attribute process control charts

a.

p-chart, proportion defective:

Upper control limit = UCL p = p + z p Lower control limit = LCL p = p z p

where

p =
b.

p (1 p ) n

c-chart, number of defects:

Upper control limit = UCL c = c + z c Lower control limit = LCL c = c z c

5.

Process capability ratio:

Upper specification Lower specification 6 Process capability index:
Cp =

6.

C pk = Minimum of x Lower specification Upper specification x , 3 3

CHAPTER 7: Constraint Management

1.

Utilization, expressed as a percent: Utilization = Average output rate 100% Maximum capacity

2.

Capacity cushion, C, expressed as a percent: 3

C = 100% Utilization rate (%)

3. a.

Capacity requirement for one service or product:

M = Dp N [1 (C 100)]

b.

Capacity requirement for multiple services or products:

{ [ Dp + ( D Q)s]
M=

product 1

+ [ Dp + D Q) s ]product 2

+ " + [ Dp + ( D Q) s ]product n } N [1 (C 100)]

SUPPLEMENT C: Waiting Lines

1.

Customer arrival Poisson distribution: Pn =

( T ) n T e n!

2.

Service-time exponential distribution: P[t T ] = 1 e T

SINGLE-SERVER MODEL

MULTIPLE-SERVER MODEL

FINITE-SOURCE MODEL

Average utilization of the system

s
0<n<s ns

= 1 P0

Probability that n customers are in the system

Pn = (1 ) n

( ) n P0 n! Pn = n ( ) P 0 s! s n s

Probability that zero customers are in the service system

P0 = 1

s 1 ( ) n ( ) s + P0 = s! n = 0 n!

1 1

n N N! P0 = n = 0 ( N n )!

Average number of customers in the service system

L=

L = W

L=N

(1 P0 )

Average number of customers in the waiting line

L q = L

P0 ( ) s Lq = s!(1 ) 2

Lq = N

+ (1 P0 )

Average time spent in the system, including service

W=

W = Wq +

W = L[( N L ) ]

Average waiting time in line

Wq = W

Wq =

Lq

Wq = Lq [( N L) ]

CHAPTER 8: Process Layout

1. 2.

Euclidean distance: d AB = ( x A x B ) 2 + ( y A y B ) 2 Rectilinear distance: d AB = x A x B + y A y B Cycle time: c =

1 r t c

3.

4.

Theoretical minimum number of workstations: TM = Idle time (in seconds): nc t Efficiency (%):
t (100) nc

5.

6.

7.

Balance delay (%): 100 Efficiency

CHAPTER 9: Lean Systems

1.

Number of containers:

Average demand during lead time + Safety stock Number of units per container d ( + )(1 + ) = c

CHAPTER 10: Supply Chain Strategy

1.

Weeks of supply =

Average aggregate inventory value Weekly sales (at cost) Annual sales (at cost) Average aggregate inventory value

2.

Inventory turnover =

CHAPTER 11: Location

1.

Loaddistance score: ld = li d i
i

2.

Center of gravity: x

l x = l
i i i i

and

l y = l
i i i i

CHAPTER 12: Inventory Management

1.

Cycle inventory =

Q 2

2.

Pipeline inventory = dL
Total annual cost = Annual holding cost + Annual ordering or setup cost

3.

C=

Q D ( H ) + (S ) 2 Q

4.

Economic order quantity: EOQ =

2 DS H

5.

Time between orders, expressed in weeks:

TBO EOQ = EOQ (52 weeks/year) D

6.

Inventory position = On-hand inventory + Scheduled receipts Backorders IP = OH + SR BO

7.

Continuous review system:

Reorder point(R) = Average demand during the protection interval + Safety stock = dL + zL Protection interval = Lead time (L)

Standard deviation of demand during the lead time = L

=t L
Order quantity = EOQ Replenishment rule: Order EOQ units when IP R. Total Q system cost: C = Periodic review system: Target inventory level (T) = Average demand during the protection interval + Safety stock = d(P + L) + zP+L Protection interval = Time between orders + Lead time =P+L Review interval = Time between orders = P Standard deviation of demand during the protection interval = P + L = t P + L Order quantity = Target inventory level Inventory position = T IP Replenishment rule: Every P time periods order T IP units. Total P system cost: C =
dP D (H ) + ( S ) + Hz P + L 2 dP Q D ( H ) + ( S ) + Hz L 2 Q

8.

SUPPLEMENT D: Special Inventory Management

1.

Noninstantaneous replenishment: pd Maximum inventory: I max = Q p

Economic production lot size: ELS =

2DS H

p pd

Total annual cost = Annual holding costs + Annual ordering or setup cost

C=

Q pd D ( H ) + (S ) 2 p Q
ELS D

Time between orders, expressed in years: TBO ELS =

2.

Quantity discounts: Total annual cost = Annual holding cost + Annual setup cost + Annual cost of material
C= Q D ( H ) + ( S ) + PD 2 Q

3.

One-period decisions: pQ Payoff matrix : Payoff = pD I (Q D) if Q D if Q > D

CHAPTER 13: Forecasting

1. 2. 3.

Linear regression: Y = a + bX Naive forecasting: Forecast = Dt Simple moving average:

Ft +1 =
4.

Dt + Dt 1 + Dt 2 + " + Dt n +1 n

Weighted moving average: Ft +1 = Weight 1 ( Dt ) + Weight 2 ( Dt 1 ) + Weight 3 ( Dt 2 ) + " + Weight n ( Dt n +1 )

5.

Exponential smoothing:

Ft +1 = Dt + (1 ) Ft

6.

Trend-adjusted exponential smoothing:

At = Dt + (1 )( At 1 + Tt 1 ) Tt = ( At At 1 ) + (1 )Tt 1 Ft +1 = At + Tt
7.

Forecast error:

Et = Dt Ft CFE = E t CFE n E t2 MSE = n E=

=
MAD = MAPE =
8.

( E t E ) 2 n 1 Et n ( E t / Dt )(100%) n

Exponentially smoothed error: MADt = E t + (1 )MADt 1 Tracking signal:

CFE MAD or CFE MAD t

9.

CHAPTER 15: Resource Planning Master Production Scheduling

1. Projected On-Hand Inventory

Projected on - hand On - hand MPS quantity Projected inventory at the end = inventory at the + due at the start requirements end of last week of this week this week of this week
2. Available to promise a. week 1

 Available - to - On - hand Orders booked up MPS quantity promise in = quantity in + in week 1 to week S when the next MPS arrives week 1 week 1

b. week t
Available - to - Orders booked up MPS quantity promise in = in week t to week S when the next MPS arrives week t

CHAPTER 16: Scheduling

1.

Performance measures:
Job flow time = time of completion Time job was available for first processing operation Makespan = Time of completion of last job Starting time of first job Average WIP inventory = Sum of flow times Makespan Sum of time in system Average inventory = Makespan Total inventory = Scheduled receipts for all items + On-hand inventories of all items Productive work time Utilization = Total work time available

2.

Critical ratio:

CR =

Due date Today' s date Total shop time available

3.

Slack per remaining operations: (Due date Today' s date) Total time remaining S RO = Number of operations remaining

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CD-ROM SUPPLEMENTS
SUPPLEMENT G: Learning Curve Analysis

Learning curve: kn = k1 nb log r b = log 2

SUPPLEMENT H: Measuring Output Rates

z 1. Required sample size in a time study: n = p t 2. Normal time for a work element: NT = t ( F )( RF ) 3. Normal time for the cycle: NTC = NT 4. Standard time: ST = NTC(1 + A)

z 2 5. Required sample size in a work sampling study: n = p (1 p ) e

SUPPLEMENT I: Acceptance Sampling

1. Average outgoing quality:

AOQ =

p ( Pa )( N - n) N

SUPPLEMENT J: Financial Analysis

1. Future value of an investment at the end of n periods

F = P ( l + r )n
2. Present value of a future amount

P=

F (1+ r )n

3. Present value of an annuity 11

P=

n A A A j A + + ... + = 1/ (1 + r ) = A ( af ) n 2 (1 +r ) (1+r ) (1+ r ) j =1

4. Straight-line depreciation
D= I S n

12