• Farida began a cupcake business in 2010. In 2014, Abdullah, her husband, suggested that she should begin recording data to show the costs and revenue of her operations. After having taken a course in Operations Management, Talaat, her father -in-law, suggested that Farida should analyze this data in order to improve the productivity of her business.
• Dr TALAAT suggested for FARIDA and ABDULLAH also himself to attend COURSERA: An Introduction to Operations Management for:
• helping make key decisions and thereby improves the effectiveness of Problem-Solving Process.
• then Increase the Profit.
• The Three decided to make a TEAM.
• When referring to the word "TEAM" or "FAT" then we mean Farida, Abdullah& Talaat as a team work.
• Since the alternative name of TEAM is FAT, a decision has been taken by them to apply LEAN Production to avoid the SEVEN WASTES in FROSTBITE.
AREA UNDER STUDY:
• The TEAM has decided to FOCUS on all the FOUR DIMENTION OPERATIONAL PERFORMANCE.
• TIME, VARIETY, QUALITY & PRICE.
• There for data collection is a must.
• Revising the available data, FARIDA already have a table described:
• Date, Inflow Revenue, Outflow/Cost, Description of the transaction, and Balance.
• A new form of data collection will be established to coop with the PROCESS ANALYSIS requirements.
FRAME WORK:
• In order to well understand the existing system, hence proposed a new efficient system, FROSTBITE, TEAM have decided to follow a Methodology for performing System Study Cycle.
• Beginning with the Problem Definition with its three dimension the Subject, the Scope and the Objective,
• Passing through Interactions between areas being studied (Inputs, Outputs),
• Defining the System Requirement ( SRD ),
• Designing the New System,
• Economic Cost Comparisons,
• Implementation Follow-up & Re-Evaluation.
CONCLUSION:
We are proud to publish our success story of a family TEAM / FAT. We finished our story within only 2-3 months achieving our target via two aspects:
Theoretically and Academically by obtaining maximum grades as well as Statements of Accomplishment.
Performance Improvement as well as Financial Gain: Increasing servers improved profit by 50.0% ,66.7% ,75.0% according to the outsourcing Model.
If you are interested or have questions, you can link via:
http://www.slideshare.net/DrTalaatRefaat/edit_my_uploads
https://www.linkedin.com/in/talaatrefaat
Other links you can find at:
https://about.me/talaatrefaat
2. FROSTBITE
INTRODUCTION
Farida began a cupcake business in 2010. In
2014, Abdullah, her husband, suggested that she
should begin recording data to show the costs and
revenue of her operations. After having taken a
course in Operations Management, Talaat, her
father -in-law, suggested that Farida should
analyze this data in order to improve the
productivity of her business.
Facebook address:
FROSTBITE https://www.facebook.com/groups/310259419152/
2
3. BRAIN STORMING
Dr. TALAAT suggested for FARIDA and ABDULLAH
also himself to attend COURSERA: An Introduction to
Operations Management
https://www.coursera.org/courses
For helping make key decisions and thereby improves
the effectiveness of Problem-Solving Process,
then Increase the Profit.
The three decided to make a TEAM.
When referring to the word "TEAM" or "FAT" then we
mean Farida, Abdullah& Talaat as a team work.
Since the alternative name of TEAM is FAT, a decision
has been taken by them to apply LEAN Production to
avoid the SEVEN WASTES in FROSTBITE.
3
4. AREA UNDER STUDY
The TEAM has decided to FOCUS on all the FOUR
DIMENTION OPERATIONAL PERFORMANCE.
TIME, VARIETY, QUALITY & PRICE.
There for data collection is a must.
Revising the available data, FARIDA already have a
table described:
Date, Inflow Revenue, Outflow/Cost, Description
of the transaction, and Balance.
A new form of data collection will be established to
coop with the PROCESS ANALYSIS requirements.
4
5. FRAME WORK
In order to well understand the existing system, hence
proposed a new efficient system, FROSTBITE, TEAM
have decided to follow a Methodology for performing
System Study Cycle.
Beginning with the Problem Definition with its three
dimension the Subject, the Scope and the Objective,
Passing through Interactions between areas being
studied (Inputs, Outputs),
Defining the System Requirement ( SRD ),
Designing the New System,
Economic Cost Comparisons,
Implementation Follow-up & Re-Evaluation.
5
6. TEAM/FAT ACTION PLAN
Farida, Abdullah & Dr. Talaat (FAT) decided to follow
COURSERA , https://accounts.coursera.org/
Introduction to Operations Management in different
Approaches- there are four alternative ways.
The Coursera Operations Project – An Alternative Way of
Taking the Course:
The reason of this selection for both Farida& Abdullah is
to focus understanding theory while working as a TEAM in
the aim of solving FROSTBITE problems, increasing
efficiency with Dr. Talaat
With Course Project Without Course Project
With HW/Exam With Distinction
Dr. Talaat
Ops Certificate
Farida& Abdullah
Without HW/Exam Ops Certificate Audit 6
7. COP introduction
We had over 80,000 participants enrolled in last course
Over 80% were in business; not students, but running real operations
As a professor, I believe that everyone benefits from the academic content of my course
This is supported by our first offering
But: the needs for somebody running an operation and a student new to the area are different
- different reason to be here in this course
- desire for clean theory vs desire to change a business tomorrow
- Student might be better at math / formulas
- Some of the formulas might not easily fit the world of business
7
9. The Coursera Operations Project – My Vision
Take this to the next level
A project with multiple deliverables that mirror a
true operations improvement project
Peer feed-back along the way
Community level problem solving on some of the
things that emerge as common problems
The reward: we will rewrite the books of
business; almost like a Wikipedia, this will
generate
a library of operations projects across industries
and across the world
9
10. The Coursera Operations Project – Outline
Generic Process – should work across industries
Linked to the course / course material
For each milestone, I will provide you with detailed instructions
Example calculations for two local businesses here in Philadelphia
Problem Solving step Question to be answered Potential tools
Sense the problem broadly What type of operational problems do I have
access to?
Where do I sense a performance gap?
Four dimensions of performance
Efficient frontier
Collect data to analyze the
status quo
What does the process flow look like? Process flow diagram
I, R, T
Define a specific outcome
you want to achieve and
define the performance
gap
What specific outcome measure are you
trying to improve? What does success look
like?
What is the status quo; does this measure
vary over time?
How far are you from the target?
Three system inhibitors; variability lecture
Labor content; Flow time efficiency (% value
add time from customers perspective)
Consider opportunities for
improvement
What are the inhibitors to improvement?
What alternatives are there to the current
process flow?
Where are waste, variability, and inflexibility?
Responsiveness module: service blue print
Staffing to demand / takt time
Make-to-stock
Create flexibility
Understand the benefits of
improvements;
Pick one opportunity and
create a small experiment
What would be the value of an improvement
What can you learn about the most promising
alternative in 1 day and with $100?
KPI tree
Problem solving loop (from problem, to
abstraction, now back to reality)
10
11. The Coursera Operations Project –
An Alternative Way of Taking the Course
With Course Project Without Course
Project
With HW/Exam With Distinction Ops Certificate
Without HW/Exam Ops Certificate Audit
11
12. Course Outline / Grading / Homework
Objective of the course:
Understanding and improving business processes
Performance measures
How-to
Mix of industries: healthcare, restaurants, automotive, computers, call centers, banking, etc
Course Outline
Introduction (0.5 weeks)
1. Process analysis (1.5 weeks)
2. Productivity
3. Product variety
4. Responsiveness
5. Quality
Requirements / Prerequisites:
There are no prerequisites for the course
Some modules require statistical knowledge (standard deviation, normal distribution)
Homework assignments
One large assignment after each module (five assignments); 10% each
Final exam with questions from all modules; 50%
12
13. Text Book
Course book
Cachon, Gerard, Christian Terwiesch, Matching Supply with Demand: An
Introduction to Operations Management, 3rd edition, Irwin - McGraw Hill,
2012 (ISBN 978-0073525204, 507 pages)
13
14. Personal Introduction
MBA core course: Operations Management: Quality and Productivity
Taught ~ 60 times ~ 4000 MBA students
McKinsey Ops Practice ~ 500 new associates
Research:
Operations Management, focus on Healthcare Management
Innovation tournaments and contests
Christian Terwiesch
terwiesch@wharton.upenn.edu
Andrew M. Heller Professor at the Wharton School
Senior Fellow Leonard Davis Institute for Health Economics
573 Jon M. Huntsman Hall
Philadelphia, PA 19104.6366 14
16. Milestone 4 Slide 1:
Action Plan for COP 4 Fulfillment
FROSTBITE is a successful cupcake business but it suffer from Waste,
Mismatching between Supply & Demand and Variability of both
Demand& Supply.
Taken into consideration the output of COP 1,2& 3 regarding
FROSTBITE
I have started to analyze the last output of COP 3, inserted it as Slide 3.
After investigating the Process Improving chances regarding Capacity
Increasing, Dealing with Variability in Demand and the Inflexibility Slides
4& 5 represents Some Improvement Ideas classified into three categories
Capacity, Variability and Flexibility.
16
17. Milestone 4 Slide 2:
Action Plan for COP4 Fulfillment(Cont.)
The TOP FOUR IDEAS& EXPECTED CHANGES are presented in
Milestone 4 Slide 6.
Fruitful Discussion have been held with Farida Owner of FROSTBITE
regarding the best IDEAS to be implemented. Summary of Discussions
is presented in Milestone 4 Slide 7.
A Comparison Table between the TOP IDEAS regarding the
Applicability and the Effect of each Idea have been presented in
Milestone 4 Slide 7.
17
18. SINITIAL S1 S2 S3 S4
Arrivals Arrival Orders Ordes/w 4.0000 3.0000 3.0000 6.0000 6.0000
Interarrival time (a) day 1.7500 2.3333 2.3333 1.1667 1.1667
ST-DEV(a) 1.7500 2.3333 2.3333 1.1667 1.1667
CV(a) 1.0000 1.0000 1.0000 1.0000 1.0000
Service m 1.0000 1.0000 2.0000 2.0000 3.0000
Processing Time (p) day 2.0000 2.0000 2.0000 2.0000 2.0000
ST-DEV(p) 2.0000 2.0000 2.0000 2.0000 2.0000
CV(p) day 1.0000 1.0000 1.0000 1.0000 1.0000
(CV^2+CV^2)/2 1.0000 1.0000 1.0000 1.0000 1.0000
Queue p/m 2.0000 2.0000 1.0000 1.0000 0.6667
Utilization U=P/m*a 1.1429 0.8571 0.4286 0.8571 0.5714
1-U -0.1429 0.1429 0.5714 0.1429 0.4286
2*(m+1) 4.0000 4.0000 6.0000 6.0000 8.0000
SRoot 2.0000 2.0000 2.4495 2.4495 2.8284
(Sroot-1)^ 1.0000 1.0000 1.4495 1.4495 1.8284
U^ 1.1429 0.8571 0.2928 0.7998 0.3594
T(q) (16.0000) 12.0000 0.5125 5.5983 0.5591
Total Time (Tq+p) (14.0000) 14.0000 2.5125 7.5983 2.5591
SINITIAL Initial Data yielding Utilization > 1, hence excluded
S1 Reduction of Arrivals rate from 4 Orders / week to 3, good utilization with long Tq
S2 Outsourcing additional server resulting in m=2, with accepted utilization and great
reducution in Tq and T
S3 Is the response of S2 to doubled Demand yielding three times increase in T
S4 Outsourcing another server on S3 improves total Time to the value of S2
Milestone 4 Slide 3: S C E N A R I O S for Impact of a and m on U and Tq
Comment
These Scenarios
reflect :
“HOW THE
OWNER CAN
HANDLE THE
THREE ENEMIES :
WASTE (Under
Utilization, …)
VARIABILITY
(Fluctuating
Demand, …)
INFLEXIBILITY :
(Ignoring
Outsourcing, …)
18
19. Milestone 4 Slide 4:
SOME IMPROVEMENT IDEAS
CAPACITY:
Line balancing: The main reason for the process unbalance in
FROSTBITE is the severe mismatching between Supply &
Demand. Outsourcing will be very suitable in this context.
Waste Reduction: Some clear waste reduction action can be taken
specially with the OPE of Farida & the OEE of the Oven
(Milestone 3 Slides 4& 5).
Reduce rework& scrap: Adding a Quality Control Node to the
production line will decrease the rework& scrap Cupcakes.
VARIABILITY:
Pre-produce / make to stock: This can be done partially in order
not to loose a wide area of customers that preferred fresh
cupcakes. Good Demand Estimation can help.
19
20. Milestone 4 Slide 5: SOME IMPROVEMENT IDEAS (Cont.)
INFLEXIBILITY:
Outsourcing peak capacity: As mentioned above there is a
severe mismatching between Supply & Demand. Sometimes there
exist a high demand but Farida prefers to Close for yearly vacation
or to stop working to take care of her baby (Adam).
Standardization: Producing a standard PRODUCT LIST that
include the main specification of each product as well as the
available alternatives will help solving the inflexibility problem.
Spreading this LIST with the corresponding PRICE through
FROSTBITE Facebook Site and other media will be good.
20
21. Milestone 4 Slide 6:TOP FOUR IDEAS & EXPECTED CHANGE
Idea #1: Outsourcing peak capacity: Pre-contracted people will work as
parallel production line(s). This would help overcoming the severe mismatching
between Supply & Demand as well as the supply and demand variability. (40%
Improvement)
Idea #2: Offer some pre-made cupcake for “grab-and-go.” Made-to-stock
cupcakes would help reduce product variability and thus reduce the waiting
time Tq for customers who prefer a custom made-to-order cupcake that still go
through the usual process, whereas customers who are in a rush could grab a
pre-made cupcake and skip the usual process.
(15% Improvement and Tq will be decreased by ½ day).
Idea #3: Reduce rework& scrap: Adding a Quality Control Node to
production line will decrease the rework& scrap Cupcakes(10%Improvement)
Idea #4: Waste Reduction: Some clear waste reduction action can be taken
specially with the OPE of Farida & the OEE of the Oven (10% Improvement).
(Milestone 3 Slides 4& 5).
21
22. Milestone 4 Slide 7: DISCUSSIONS SUMMARY
There exist a seasonal high demand from the facebook site customers
of FROSTBITE. There are only ONE production line.
The customers appreciate the quality of cupcakes.
Sometimes there are no demand. But almost the demand is greater
than the supply. In the case of regularly satisfying the supply the
demand can be 10 time greater.
There are major activities Farida the Owner give them higher priority to
the extent that FROSTBITE stop production.
The main customers complaint are rejecting their Orders, then long
waiting time for supply.
22
23. Milestone 4 Slide 8: Comparison table
Ease of
implementation
Likely magnitude of
impact
Outsourcing peak
capacity
Medium: Needs to
build& apply a Best
Candidate Selection
Model then contract.
Too High: overcoming
mismatching between
Supply & Demand and
their variability. 40%
Pre-made cupcake
Medium: Needs
Quantitative Forecasting
Model.
Medium: reduce the
waiting time Tq
15%
Quality Control Node
Easy: Can be done
immediately by same
Operator
Low: decrease rework&
scrap cupcakes . 10%
Waste Reduction
Medium: Needs good
Time Management to
satisfy time constraints
Low:
(10% Improvement).
23
25. Milestone 5 Slide 1:
Summary
FROSTBITE is a successful cupcake business. Pride themselves on
their use of high-quality and all-natural ingredients. All of whom look to
FROSTBITE not only for delicious cupcakes but also for both Performance
& Conformance Quality, committed and speedy service.
FROSTBITE suffers from Waste, Mismatching between Supply &
Demand and Variability of both Demand& Supply. Although Farida - the
Owner and the unique professional – has a high demand she prefers to
close for yearly vacation or to stop working to take care of family especially
her baby Adam.
A severe mismatching between Supply & Demand becomes a fact.
Investigating the Process Improving chances, some Improvement Ideas
classified into three categories: Capacity, Variability and Flexibility were
introduced within COP 4.
TOP four Ideas with the expected changes & Comparison table were the
output of COP 4 (next two Slides). 25
26. Milestone 5 Slide 2:TOP FOUR IDEAS & EXPECTED CHANGE
Idea #1: Outsourcing peak capacity: Pre-contracted people will work as
parallel production line(s). This would help overcoming the severe mismatching
between Supply & Demand as well as the supply and demand variability. (40%
Improvement).
Idea #2: Offer some pre-made cupcake for “grab-and-go.” Made-to-stock
cupcakes would help reduce product variability and thus reduce the waiting
time Tq for customers who prefer a custom made-to-order cupcake that still go
through the usual process, whereas customers who are in a rush could grab a
pre-made cupcake and skip the usual process.
(15% Improvement and Tq will be decreased by ½ day).
Idea #3: Reduce rework& scrap: Adding a Quality Control Node to
production line will decrease the rework& scrap Cupcakes(10%Improvement)
Idea #4: Waste Reduction: Some clear waste reduction action can be taken
specially with the OPE of Farida & the OEE of the Oven (10% Improvement).
(Milestone 3 Slides 4& 5).
26
27. Milestone 5 Slide 3: Comparison table
Ease of
implementation
Likely magnitude of
impact
Outsourcing peak
capacity
Medium: Needs to
build& apply a Best
Candidate Selection
Model then contract.
Too High: overcoming
mismatching between
Supply & Demand and
their variability. 40%
Pre-made cupcake
Medium: Needs
Quantitative Forecasting
Model.
Medium: reduce the
waiting time Tq
15%
Quality Control Node
Easy: Can be done
immediately by same
Operator
Low: decrease rework&
scrap cupcakes . 10%
Waste Reduction
Medium: Needs good
Time Management to
satisfy time constraints
Low:
(10% Improvement).
27
28. Milestone 5 Slide 4: ACTION PLAN
Idea #1: “Outsourcing peak capacity” was the winner to be implemented
within COP 5. This idea will help overcoming the severe Mismatching
between Supply & Demand as well as the supply and demand Variability. Also
will give Farida a Flexibility in taking care of her family, especially Adam and
her successful business FROSTBITE.
Action Plan consists of Seven main steps:
(1) Building The Best Candidates Selection Model to identify to whom will
be the Outsourcing. Analytic Hierarchy Process (AHP) technique was
adopted.
(2) Performing an experiment to produce a specific order concurrently at m
Outsource Stations.
(3) Distributing the order to n favorite customers with an appreciation letter
as well as an evaluation sheet to be collected.
(4) Evaluating phase ended with a list of The Best Candidates.
(5) Applying the results of the experiment to Business Process Model.
(6) Sensitivity Analysis.
(7) Contracting : Contracts have been held with the winners.
Refer to: Thomas L. Saaty “Decision making with the analytic hierarchy process” ; Int. J. Services Sciences,
Vol. 1, No. 1, 2008
28
29. Milestone 5 Slide 5:
Building The Best Candidates Selection Model
The main objective of this model is to allocate candidates that have the
capability to simulate at least Farida’s performance with her favorite customers,
therefore not to loose any of them. Then to expand the business with the same
performance.
Selection Criteria are: Residence, Availability, Commitment, Performance &
Conformance Quality.
Analytic Hierarchy Process AHP technique developed by Thomas L. Saaty
was adopted. Simply AHP:
Provide judgments about relative importance of each criterion, then
Specify a preference on each criterion for each decision alternative.
The output is a prioritized ranking indicating the overall preference for each of
the decision Alternative.
Next Slides shows the results the Model :
The priority vector showing the priority of Alt(j), j=1,m against each
Criteria (Residence, Availability, Commitment& Quality).
Pairwise Comparison for the Four Criteria.
The four criteria in terms of overall goals. 29
30. Milestone 5 Slide 6:
Estimating the Consistency Ratio "CR"
The most powerful feature of the Analytic Hierarchy Process AHP that have
been adopted is Estimating the Consistency Ratio "CR“
Dividing the elements of the vector of weighted sums obtained by
corresponding priority value, Compute the average of the values found (λmax).
Compute Consistency Index: CI= ((λmax)-n)/n-1.
Then Compute Consistency Ratio CR=CI/RI, RI is Random Index.
In our Model we have succeeded to obtain:
All CR Values are Less than or =0.11 (our Accepted Consistency level).
CRITERIA Residence Availability Commitment Quality Criteria's Weight
CR 0.04255 0.00384 0.00154 0.1021 0.01759
30
32. To assess the quality, each of the four outsourcing candidates was
asked to bake samples of 3 different cupcake flavors: Chocolate,
Vanilla, and Red Velvet. These samples were distributed to 3
'special' FROSTBITE customers in order to assess their similarity in
taste to the original FROSTBITE cupcake.
Each candidate baked 6 Chocolate, 6 Vanilla, and 6 Red Velvet
Cupcakes. This totaled 72 cupcakes. The total cost of the sample
was 150LE.
Milestone 5 Slide 8:
Experiment, Distribution& Evaluation
32
33. Milestone 5 Slide 9:
Experiment, Distribution& Evaluation
Each customer received 24 cupcakes of sample. This included 2 of each flavor by each
of the four candidates. The cupcake samples were color coded with the cupcake
wrapper.
They then had to give each sample through a pairwise comparison a score from 1 to 9
based on the following criteria:
Nouran: White wrapper
Rehab: Brown wrapper
Shimaa: Pink wrapper
Mariam: Blue Wrapper
Refer to:
Thomas L. Saaty “Decision making with the analytic hierarchy process” ;
Int. J. Services Sciences, Vol. 1, No. 1, 2008
Intensity Definition
1 Equal Importance
2 Weak or slight
3 Moderate importance
4 Moderate plus
5 Strong importance
6 Strong plus
7 Very strong
8 Very, very strong
9 Extreme importance
33
34. SINITIAL S1 S2 S3 S4
Arrivals Arrival Orders Ordes/w 4.0000 3.0000 3.0000 6.0000 6.0000
Interarrival time (a) day 1.7500 2.3333 2.3333 1.1667 1.1667
ST-DEV(a) 1.7500 2.3333 2.3333 1.1667 1.1667
CV(a) 1.0000 1.0000 1.0000 1.0000 1.0000
Service m 1.0000 1.0000 2.0000 2.0000 3.0000
Processing Time (p) day 2.0000 2.0000 2.0000 2.0000 2.0000
ST-DEV(p) 2.0000 2.0000 2.0000 2.0000 2.0000
CV(p) day 1.0000 1.0000 1.0000 1.0000 1.0000
(CV^2+CV^2)/2 1.0000 1.0000 1.0000 1.0000 1.0000
Queue p/m 2.0000 2.0000 1.0000 1.0000 0.6667
Utilization U=P/m*a 1.1429 0.8571 0.4286 0.8571 0.5714
1-U -0.1429 0.1429 0.5714 0.1429 0.4286
2*(m+1) 4.0000 4.0000 6.0000 6.0000 8.0000
SRoot 2.0000 2.0000 2.4495 2.4495 2.8284
(Sroot-1)^ 1.0000 1.0000 1.4495 1.4495 1.8284
U^ 1.1429 0.8571 0.2928 0.7998 0.3594
T(q) (16.0000) 12.0000 0.5125 5.5983 0.5591
Total Time (Tq+p) (14.0000) 14.0000 2.5125 7.5983 2.5591
SINITIAL Initial Data yielding Utilization > 1, hence excluded
S1 Reduction of Arrivals rate from 4 Orders / week to 3, good utilization with long Tq
S2 Outsourcing additional server resulting in m=2, with accepted utilization and great
reduction in Tq and T
S3 Is the response of S2 to doubled Demand yielding three times increase in T
S4 Outsourcing another server on S3 improves total Time to the value of S2
Milestone 5 Slide 10:
Performance Improvement
Comment
These Scenarios
reflect :
“HOW THE
OWNER CAN
HANDLE THE
THREE ENEMIES :
WASTE (Under
Utilization, …)
VARIABILITY
(Fluctuating
Demand, …)
INFLEXIBILITY :
(Ignoring
Outsourcing, …)
This Slide was introduced within COP 3
34
35. Milestone 5 Slide 11:
Financial Gain of Experiment
m=1 m=2 m=3 m=4 m-5 Units
Avr Revenue/order 644.76 644.76 644.76 644.76 644.76 $/order
Avr Cost/Order 296.48 296.48 296.48 296.48 296.48 $/cust
Wage 5.00 5.00 5.00 5.00 5.00 $/hr
Fixed cost/Server 5.00 5.00 5.00 5.00 5.00 $/hr
Number of Active Servers m 1.00 2.00 3.00 4.00 5.00
Activity time at Bottleneck 16.00 16.00 16.00 16.00 16.00 hr/order
Process Capacity 0.06 0.13 0.19 0.25 0.31 order/hr
Demand Rate 0.25 0.25 0.25 0.25 0.25 order/hr
Flow Rate Min(Demand,Cap) 0.06 0.13 0.19 0.25 0.25 order/hr
Revenue =FR*Avr Rev/order 40.30 80.60 120.89 161.19 161.19 $/hr
Wages 5.00 10.00 15.00 20.00 25.00 $/hr
Fixed cost 5.00 10.00 15.00 20.00 25.00 $/hr
COGS food cost=
FR*cost/order 18.53 37.06 55.59 74.12 74.12
$/hr
Total Cost 28.53 57.06 85.59 114.12 124.12 $/hr
Profit 11.77 23.54 35.30 47.07 37.07 $/hr
Profit Increase Ratio 50.0% 66.7% 75.0% 68.3%
Comments:
Four servers m=4
is the matching point
of demand and
capacity, where we
can fulfill all the
customer’s orders.
Increasing servers
improved profit by
50.0% ,66.7% ,75.0%.
So that the yearly
profit can be
increased by 75%
BUT These high
percentages are
under the condition
that the demand
reaches 0.25
order/hour and
having enough
servers to fulfill all
orders.
35
36. Milestone 5 Slide 12: Conclusion
As stated the main problem is severe Mismatch between Supply &
Demand as well as the supply and demand Variability and Flexibility.
The experiment of how to outsource the peak capacity such that
FROSTBITE can fulfill maxim number of orders without loosing customer
loyalty.
After the experiment we have achieved a drastic change in both:
Performance Improvement: Minimizing the waiting time, maximizing
flexibility (Slide 10).
Financial Gain: Increasing servers improved profit by 50.0% ,66.7%
,75.0% (Slide 11).
So that the yearly profit can be increased by 75% BUT These high percentages
are under the condition that the demand reaches 0.25 order/hour and having
enough servers to fulfill all orders.
The mentioned improvements were achieved though an experiment
characterized by:
CHEAPNESS (Only 150 L.E), FAST (1 Week), FOCUSED (On the best
candidate selection), and INFORMATIVE (Determining the best optimal
operation setup).
36
37. The Change:
Introducing four standby servers that can work with at
least the same efficiency as the main server FROSTBITE.
When the demand becomes greater than the main
server’s capacity the orders will be directed to the other
servers that match the new requirement and so on.
Determining the matching point of demand and capacity,
where we can fulfill all the customer’s orders.
Milestone 5 Slide 13:
Conclusion(Cont.)
37
41. APPRECIATION
To Prof. Christian Terwiesch:
“ My impression as a professional in
the field that the six weeks course:
An Introduction to Operations
Management, taught by Prof.
Christian Terwiesch through
Coursera is the best course I have
ever seen.”
Dr. Talaat Refaat
A Systems, DSS, Operations Management, Lean& IT41
42. CONCLUSION
We are proud to publish our success story of a family
TEAM / FAT. We finished our story within only 2-3 months
achieving our target via two aspects:
Theoretically and Academically by obtaining maximum
grades as well as Statements of Accomplishment.
Performance Improvement as well as Financial Gain:
Increasing servers improved profit by 50.0% ,66.7% ,75.0%
according to the outsourcing Model.
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