ISM 270 Service Engineering and Management Lecture 5: Facility Location, Project Management,...
73
ISM 270 ISM 270 Service Engineering and Service Engineering and Management Management Lecture 5: Facility Location, Lecture 5: Facility Location, Project Management, Project Management, Forecasting Forecasting
ISM 270 Service Engineering and Management Lecture 5: Facility Location, Project Management, Forecasting
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?
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
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
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