ISM 270 Service Engineering and Management Lecture 5: Facility Location, Project Management,...
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- Slide 1
- ISM 270 Service Engineering and Management Lecture 5: Facility
Location, Project Management, Forecasting
- Slide 2
- Announcements SAS Tutorial Today Class Project Vijay Mehrotra
postponed until Feb 21 Next Week: Web Services
- Slide 3
- Class Project: New Service Development Individual Projects,
unless otherwise arranged Choose a new service idea (a) Develop a
prototype or overview (b) Develop the business case as to why idea
is profitable, competitive, etc. Both of these must be included,
but emphasis can be on either (a) or (b) above
- Slide 4
- Project Ideas You may like to incorporate tools from the class
Forecasting demand Forecasting demand SAS mining SAS mining Google
Maps API Google Maps API Data Envelopment Analysis Data Envelopment
Analysis Competitive forces / comparison Competitive forces /
comparison Web Services programming (next week) Web Services
programming (next week) You are welcome (and encouraged) to take a
real idea that applies to your business or studies You may choose
to project a technology that is not available yet, but dont go too
far from reality
- Slide 5
- Project Deliverables Preliminary Proposal (Feb 21) Preliminary
Proposal (Feb 21) Written report (due March 13) Written report (due
March 13) Include both business plan and service descriptionInclude
both business plan and service description Can focus more heavily
on either plan or prototypeCan focus more heavily on either plan or
prototype Presentation on March 13 Presentation on March 13 15
minutes + 5 minutes questions15 minutes + 5 minutes questions
- Slide 6
- Proposal Feb 21 1-page Summary of idea Focus (prototype vs.
business plan) Outline of plan to complete
- Slide 7
- Written Report Think 10-page Professional presentation Make use
of charts, tables Include some estimates of numbers (even if
preliminary) Market size Market size Profit potential Profit
potential
- Slide 8
- Project Presentation 20 minutes 15 min presentation, 5 min
questions Clear presentation of service idea Prototype
demonstration/screenshot/outline Prototype
demonstration/screenshot/outline Differentiate from competition
Differentiate from competition Give market estimation Give market
estimation How many potential customers?How many potential
customers? How will you make money?How will you make money? What
are the risks?What are the risks? Argue why this will lead to
successful service business Argue why this will lead to successful
service business
- Slide 9
- Todays Themes Designing a Service Facility Where Where What
components? What components? What does the process look like to
deliver service? What does the process look like to deliver
service? (loosely taken from the supporting facility and facility
location chapters (loosely taken from the supporting facility and
facility location chapters
- Slide 10
- Process Analysis Terminology Cycle Time is the average time
between completions of successive units. Bottleneck is the factor
that limits production usually the slowest operation. Capacity is a
measure of output per unit time when fully busy. Capacity
Utilization is a measure of how much output is actually achieved.
Throughput Time is the time to complete a process from time of
arrival to time of exit.
- Slide 11
- Process Analysis Terminology (cont.) Rush Order Flow Time is
the time to go through the system without any queue time. Direct
Labor Content is the actual amount of work time consumed. Total
Direct Labor Content is the sum of all the operations times. Direct
Labor Utilization is a measure of the percentage of time that
workers are actually contributing value to the service.
- Slide 12
- Process Flow Diagram of Mortgage Services Property Survey CT=90
min. Credit Report CT=45 min. Title Search CT=30 min. Unapproved
Mortgages Approved Mortgages Completed Applications Mortgage
Applications Final Approval CT=15 min. Yes No. Operation and cycle
time Decision Wait Flow of customers/goods/information
- Slide 13
- Product Layout Work Allocation Problem Automobile Drivers
License Office Review Payment Violations Eye Test Photograph Issue
Review Payment Violations Eye Test Photograph IssueIn 1 240 15 2
120 30 3 60 4 90 40 5 180 20 6 120 30 Activity Number(s) Capacity
per hour Cycle Time in seconds Out Where will bottleneck occur?
What could be done about it?
- Slide 14
- Automobile Drivers License Office (Improved Layout) 1,4 65 55 3
60 3 60 1,4 65 55 6 120 30 5 180 20 2 120 30 In Out
- Slide 15
- Process Layout Relative Location Problem Operations Sequence
Analysis Ocean World Theme Park Daily Flows 10 0 6 60 75 0 6020 43
6 6 1 7 010 15 2 8 3 10 15 8820 630 15030 8104012 6 8 530 10 A B C
D E F A B C D E F A B C D E F Net flow Flow matrix Triangularized
matrix Description of attractions: A=killer whale, B=sea lions,
C=dolphins, D=water skiing, E=aquarium, F=water rides.
- Slide 16
- Ocean World Theme Park (Proposed Layout) (a) Initial layout (b)
Move C close to A Pair Flow distances Pair Flow distances Pair Flow
distances Pair Flow distances AC 30 * 2 = 60 CD 20 * 2 =40 AC 30 *
2 = 60 CD 20 * 2 =40 AF 6 * 2 = 12 CF 8 * 2 =16 AF 6 * 2 = 12 CF 8
* 2 =16 DC 20 * 2 = 40 DF 6 * 2 = 12 DC 20 * 2 = 40 DF 6 * 2 = 12
DF 6 * 2 = 12 AF 6 * 2 = 12 DF 6 * 2 = 12 AF 6 * 2 = 12 Total 124
CE 8 * 2 = 16 Total 124 CE 8 * 2 = 16 Total 96 Total 96 (c )
Exchange A and C (d) Exchange B and E and move F Pair Flow
distances Pair Flow distances Pair Flow distances Pair Flow
distances AE 15 * 2 = 30 AB 15 * 2 =30 AE 15 * 2 = 30 AB 15 * 2 =30
CF 8 * 2 = 16 AD 0 * 2 = 0 CF 8 * 2 = 16 AD 0 * 2 = 0 AF 6 * 2 = 12
FB 8 * 2 = 16 AF 6 * 2 = 12 FB 8 * 2 = 16 AD 0 * 2 = 0 FD 6 * 2 =
12 AD 0 * 2 = 0 FD 6 * 2 = 12 DF 6 * 2 = 12 Total 58 DF 6 * 2 = 12
Total 58 Total 70 Total 70 ABC DEF A C D B EF C A D B FE AF CE
DB
- Slide 17
- Servicescapes Servicescapes Designing Physical Surroundings to
Affect Employee and Customer Behavior Designing Physical
Surroundings to Affect Employee and Customer Behavior Ambient
Conditions: background characteristics such as noise level, music,
lighting, temperature, and scent. Spatial Layout and Functionality:
reception area, circulation paths of employees and customers, and
focal points. Signs, Symbols, and Artifacts: selection,
orientation, location, and size of objects.
- Slide 18
- Typology of Servicescapes
- Slide 19
- Facility Design Considerations Nature and Objectives of Service
Organization Land Availability and Space Requirements Flexibility
Security Aesthetic Factors The Community and Environment
- Slide 20
- Environmental Orientation Considerations Need for spatial cues
to orient visitors Formula facilities draw on previous experience
Entrance atrium allows visitors to gain a quick orientation and
observe others for behavioral cues Orientation aids and signage
such as You Are Here maps reduce anxiety
- Slide 21
- Service Facility Location
- Slide 22
- Service Facility Location Planning Competitive positioning:
prime location can be barrier to entry. Demand management: diverse
set of market generators. Flexibility: plan for future economic
changes and portfolio effect. Expansion strategy: contiguous,
regional followed by fill-in, or concentrated.
- Slide 23
- Geographic Representation Location on a Plane Y Destination j
Yj Euclidean Origin i Metropolitan 0 Xi X j Yi X
- Slide 24
- Effect of Optimization Criteria 1. Maximize Utilization ( City
C: elderly find distance a barrier ) 2. Minimize Distance per
Capita ( City B: centrally located ) 3. Minimize Distance per Visit
( City A: many frequent users ) City A City B City C -10 -5 5 10 15
-15 -10 -5 5 10 15 20 25 3 2 1 * * *
- Slide 25
- Estimation of Geographic Demand Define the Target Market
(Families with income above $60k) Select a Unit of Area (Census
track, ZIP code) Estimate Geographic Demand (Regression analysis)
Map Geographic Demand (3D visual depiction)
- Slide 26
- Single Facility Location Using Cross Median Approach 1 (W 1 =7)
2 (W 2 =1) 3 (W 3 =3) 4 (W 4 =5)
- Slide 27
- Single Facility Location Using Cross Median Approach 1 (W 1 =7)
2 (W 2 =1) 3 (W 3 =3) 4 (W 4 =5) Solution is line segment y=2,
x=2,3
- Slide 28
- Huff Retail Location Model First, a gravity analogy is used to
estimate attractiveness of store j for customers in area i. A ij =
Attraction to store j for customers in area i S j = Size of the
store (e.g. square feet) T ij = Travel time from area i to store j
lambda = Parameter reflecting propensity to travel
- Slide 29
- Huff Retail Location Model Second, to account for competitors
we calculate the probability that customers from area i will visit
a particular store j.
- Slide 30
- Huff Retail Location Model Third, annual customer expenditures
for item k at store j can now be calculated. P ij = Probability
customers from area i travel to store j C i = Number of customers
in area i (e.g. census track) B ik = Annual budget for product k
for customers in area i m = Number of customer areas in the market
region
- Slide 31
- Huff Retail Location Model Fourth, market share of product k
purchased at store j can now be calculated.
- Slide 32
- Site Selection Considerations 1. Access: 4. Parking: Convenient
to freeway exit and Adequate off-street parking entrance ramps 5.
Expansion: Served by public transportation Room for expansion 2.
Visibility: 6. Environment: Set back from street Immediate
surroundings Surrounding clutter should complement the Sign
placement service 3. Traffic: 7. Competition: Traffic volume on
street that may Location of competitors Indicate potential impulse
buying 8. Government: Traffic congestion that could be a Zoning
restrictions hindrance (e.g.., fire stations) Taxes
- Slide 33
- Breaking the Rules Competitive Clustering (Among Competitors)
(e.g. Auto Dealers, Motels) Saturation Marketing (Same Firm) (e.g.
An Bon Pain, Ice Cream Vendors) Marketing Intermediaries (e.g.
Credit Cards, HMO) Substitute Electronic Media for Travel (e.g.
telecommuting, e-Commerce) Impact of the Internet on Service
Location (e.g. Amazon.com, eBay, FedEx)
- Slide 34
- Strategic Location Considerations Front Office Back Office
ExternalCustomer(consumer) Is travel out to customer or customer
travel to site? Can electronic media substitute for physical
travel? Is location a barrier to entry? Is service performed on
person or property? Is co-location necessary? How is communication
accomplished? InternalCustomer(employee) Availability of labor? Are
self-service kiosks an alternative? Are economies of scale
possible? Can employees work from home? Is offshoring an
option?
- Slide 35
- Discussion How do the rules change when service encounter is
offered over web?
- Slide 36
- Managing Service Projects
- Slide 37
- The Nature of Project Management Characteristics of Projects:
purpose, life cycle, interdependencies, uniqueness, and conflict.
Project Management Process: planning (work breakdown structure),
scheduling, and controlling. Selecting the Project Manager:
credibility, sensitivity, ability to handle stress, and leadership.
Building the Project Team: Forming, Storming, Norming, and
Performing. Principles of Effective Project Management: direct
people individually and as a team, reinforce excitement, keep
everyone informed, manage healthy conflict, empower team, encourage
risk taking and creativity. Project Metrics: Cost, Time,
Performance
- Slide 38
- Work Breakdown Structure 1.0 Move the hospital (Project) 1.1
Move patients (Task) 1.1.1 Arrange for ambulance (Subtask) 1.1.1.1
Prepare patients for move 1.1.1.2 Box patients personnel effects
1.2 Move furniture 1.2.1. Contract with moving company 1.1.1.1
Prepare patients for move 1.1.1.2 Box patients personnel effects
1.2 Move furniture 1.2.1. Contract with moving company
- Slide 39
- Project Management Questions What activities are required to
complete a project and in what sequence? When should each activity
be scheduled to begin and end? Which activities are critical to
completing the project on time? What is the probability of meeting
the project completion due date? How should resources be allocated
to activities?
- Slide 40
- Example: Planning a Tennis Tournament What is the earliest /
latest each activity can be begin / be completed? Given the plan,
how likely is it that things will run behind schedule?
- Slide 41
- Tennis Tournament Activities ID Activity Description Network
Immediate Duration Node Predecessor (days) 1 Negotiate for Location
A - 2 2 Contact Seeded Players B - 8 3 Plan Promotion C 1 3 4
Locate Officials D 3 2 5 Send RSVP Invitations E 3 10 6 Sign Player
Contracts F 2,3 4 7 Purchase Balls and Trophies G 4 4 8 Negotiate
Catering H 5,6 1 9 Prepare Location I 5,7 3 10 Tournament J 8,9
2
- Slide 42
- Notation for Critical Path Analysis Item Symbol Definition
Activity duration t The expected duration of an activity Early
start ES The earliest time an activity can begin if all previous
activities are begun at their earliest times Early finish EF The
earliest time an activity can be completed if it is started at its
early start time Late start LS The latest time an activity can
begin without delaying the completion of the project Late finish LF
The latest time an activity can be completed if it is started at
its latest start time Total slack TS The amount of time an activity
can be delayed without delaying the completion of the project
- Slide 43
- Scheduling Formulas ES = EFpredecessor (max) (1) EF = ES + t
(2) LF = LSsuccessor (min) (3) LS = LF - t (4) TS = LF - EF (5) TS
= LS - ES (6) or
- Slide 44
- Tennis Tournament Activity on Node Diagram J2J2 B8B8 START A2A2
C3C3 D2D2 G4G4 E 10 I3I3 F4F4 H1H1 TS ESEF LSLF
- Slide 45
- Early Start Gantt Chart for Tennis Tournament ID Activity Days
Day of Project Schedule 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
18 19 20 A Negotiate for 2 Location B Contact Seeded 8 Players C
Plan Promotion 3 D Locate Officials 2 E Send RSVP 10 Invitations F
Sign Player 4 Contracts G Purchase Balls 4 and Trophies H Negotiate
1 Catering I Prepare Location 3 J Tournament 2 Personnel Required 2
2 2 2 2 3 3 3 3 3 3 2 1 1 1 2 1 1 1 1 Critical Path Activities
Activities with Slack
- Slide 46
- Resource Leveled Schedule for Tennis Tournament ID Activity
Days Day of Project Schedule 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
17 18 19 20 A Negotiate for 2 Location B Contact Seeded 8 Players C
Plan Promotion 3 D Locate Officials 2 E Send RSVP 10 Invitations F
Sign Player 4 Contracts G Purchase Balls 4 and Trophies H Negotiate
1 Catering I Prepare Location 3 J Tournament 2 Personnel Required 2
2 2 2 2 2 2 2 2 2 2 2 2 3 2 2 2 2 1 1 Critical Path Activities
Activities with Slack
- Slide 47
- Incorporating Uncertainty in Activity times A M D B F(D) P(DB)
=.01 optimistic most pessimistic likely TIME
- Slide 48
- Formulas for Beta Distribution of Activity Duration Expected
Duration Variance Note: (B - A )= Range or
- Slide 49
- Activity Means and Variances for Tennis Tournament Activity A M
B D V A 1 2 3 11.111 B 5 8 11 C 2 3 4 D 1 2 3 E 6 9 18 F 2 4 6 G 1
3 11 H 1 1 1 I 2 2 8 J 2 2 2
- Slide 50
- Uncertainly Analysis Assumptions 1. Use of Beta Distribution
and Formulas For D and V 2. Activities Statistically Independent 3.
Central Limit Theorem Applies ( Use student t if less than 30
activities on CP) 4. Use of Critical Path Activities Leading Into
Event Node Result Project Completion Time Distribution is Normal
With: For Critical Path Activities
- Slide 51
- Completion Time Distribution for Tennis Tournament Critical
Path Activities D V A 2 4/36 C 3 4/36 E 10 144/36 I 3 36/36 J 2 0 =
20 188/36 = 5.2 =
- Slide 52
- Question What is the probability of an overrun if a 24 day
completion time is promised? 24 P (Time > 24) =.5 -.4599 =.04 or
4% Days
- Slide 53
- Costs for Hypothetical Project Cost (0,0) Schedule with Minimum
Total Cost Duration of Project Total Cost Indirect Cost Opportunity
Cost Direct Cost
- Slide 54
- Activity Cost-time Tradeoff C C*C* D*D* D Activity Duration
(Days) Normal Crash Slope is cost to expedite per day Cost
Sometimes opportunity is presented to crash a project - Spend lots
of money to get ahead of (back on) schedule
- Slide 55
- Cost-Time Estimates for Tennis Tournament Time Estimate Direct
Cost Expedite Cost Activity Normal Crash Normal Crash Slope A 2 1 5
15 10 B 8 6 22 304 C 3 2 10 13 D 2 1 11 17 E 10 6 20 40 F 4 3 8 15
G 4 3 9 10 H 1 1 10 10 I 3 2 8 10 J 2 1 12 20 Total 115
- Slide 56
- Progressive Crashing Project Activity Direct Indirect
Opportunity Total Duration Crashed Cost Cost Cost Cost 20 Normal
115 45 8 168 19 I* 117 41 6164 18 37 4 17 33 2 16 29 0 15 25 -2 14
21 -4 13 17 -6 12 A*,B* 166 13 -8171 Normal Duration After Crashing
Activity Project Paths Duration A-C-D-G-I-J 16 A-C-E-I-J 20
A-C-E-H-J 18 A-C-F-H-J 12 B-F-H-J 15
- Slide 57
- Applying Theory of Constraints to Project Management Why does
activity safety time exist and is subsequently lost? 1. The student
syndrome procrastination phenomena. 2. Multi-tasking muddles
priorities. 3. Dependencies between activities cause delays to
accumulate. The Critical Chain is the longest sequence of dependent
activities and common (contended) resources. Measure Project
Progress as % of Critical Chain completed. Replacing safety time
with buffers - Feeding buffer (FB) protects the critical chain from
delays. - Project buffer (PB) is a safety time added to the end of
the critical chain to protect the project completion date. -
Resource buffer (RB) ensures that resources (e.g. rental equipment)
are available to perform critical chain activities.
- Slide 58
- Accounting for Resource Contention Using Feeding Buffer J2J2
B8B8 START A2A2 C3C3 D2D2 G4G4 E 10 I3I3 F4F4 H1H1 FB=7 FB=5 NOTE:
E and G cannot be performed simultaneously (same person) Set
feeding buffer (FB) to allow one day total slack Project duration
based on Critical Chain = 24 days
- Slide 59
- Incorporating Project Buffer J2J2 B4B4 START A2A2 C3C3 D2D2
G2G2 E5E5 I3I3 F2F2 H1H1 FB=2 FB=3 NOTE: Reduce by all activity
durations > 3 days to eliminate safety time Redefine Critical
Chain = 17 days Reset feeding buffer (FB) values Project buffer
(PB) = (Original Critical Chain-Redefined Critical Chain) PB=4
- Slide 60
- Sources of Unexpected Problems
- Slide 61
- Earned Value Chart
- Slide 62
- Forecasting Demand for Services
- Slide 63
- Forecasting Models Subjective Models Delphi Methods Causal
Models Regression Models Time Series Models Moving Averages
Exponential Smoothing
- Slide 64
- Delphi Forecasting Question: In what future election will a
woman become president of the united states? Year 1 st Round
Positive Arguments 2 nd Round Negative Arguments 3 rd Round 2008
2012 2016 2020 2024 2028 2032 2036 2040 2044 2048 2052 Never
Total
- Slide 65
- N Period Moving Average Let : MA T = The N period moving
average at the end of period T A T = Actual observation for period
T Then: MA T = (A T + A T-1 + A T-2 + ..+ A T-N+1 )/N
Characteristics: Need N observations to make a forecast Very
inexpensive and easy to understand Gives equal weight to all
observations Does not consider observations older than N
periods
- Slide 66
- Moving Average Example Saturday Occupancy at a 100-room Hotel
Three-period Saturday Period Occupancy Moving Average Forecast Aug.
1 1 79 8 2 84 15 3 8382 22 4 818382 29 5 98 8783 Sept. 5 6 1009387
12 793
- Slide 67
- Exponential Smoothing Let : S T = Smoothed value at end of
period T A T = Actual observation for period T F T+1 = Forecast for
period T+1 Feedback control nature of exponential smoothing New
value (S T ) = Old value (S T-1 ) + [ observed error ] or :
- Slide 68
- Exponential Smoothing Hotel Example Saturday Hotel Occupancy (
=0.5) Actual Smoothed Forecast Period Occupancy Value Forecast
Error Saturday t A t S t F t |A t - F t | Aug. 1 1 7979.00 8 2
8481.50 79 5 15 3 8382.25 82 1 22 4 8181.63 82 1 29 5 9889.81 8216
Sept. 5 6 10094.91 9010 MAD = 6.6 Forecast Error (Mean Absolute
Deviation) = lA t F t l/n
- Slide 69
- Exponential Smoothing Implied Weights Given Past Demand
Substitute for If continued:
- Slide 70
- Exponential Smoothing Weight Distribution Relationship Between
and N (exponential smoothing constant) : 0.05 0.1 0.2 0.3 0.4 0.5
0.67 N (periods in moving average) : 39 19 9 5.7 4 3 2
- Slide 71
- Saturday Hotel Occupancy Effect of Alpha ( =0.1 vs. =0.5)
Actual Forecast
- Slide 72
- Exponential Smoothing With Trend Adjustment Commuter Airline
Load Factor Week Actual load factor Smoothed value Smoothed trend
Forecast Forecast error t A t S t T t F t | A t - F t | 1 31 31.00
0.00 2 40 35.50 1.35 31 9 3 43 39.93 2.27 37 6 4 52 47.10 3.74 42
10 5 49 49.92 3.47 51 2 6 64 58.69 5.06 53 11 7 58 60.88 4.20 64 6
8 68 66.54 4.63 65 3 MAD = 6.7
- Slide 73
- Exponential Smoothing with Seasonal Adjustment Ferry Passengers
taken to a Resort Island Actual Smoothed IndexForecast Error Period
t A t value S t I t F t | A t - F t| 2003 January 1 1651 .. 0.837
.. February 2 1305 .. 0.662 .. March 3 1617 .. 0.820 .. April 4
1721 .. 0.873 .. May 5 2015 .. 1.022 .. June 6 2297 .. 1.165 ..
July 7 2606 .. 1.322 .. August 8 2687 .. 1.363 .. September 9 2292
.. 1.162 .. October 10 1981 .. 1.005 .. November 11 1696 .. 0.860
.. December 12 1794 1794.00 0.910 .. 2004 January 13 1806 1866.74
0.876 - - February 14 1731 2016.35 0.7211236495 March 15 1733
2035.76 0.8291653 80