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ISM 270

ISM 270. Service Engineering and Management Lecture 5: Facility Location, Project Management, Forecasting. Anne Robinson. Director, Information and Data Strategy at Cisco

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ISM 270

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

  2. Anne Robinson • Director, Information and Data Strategy at Cisco • Vice President, Marketing, Communications, & Outreach at INFORMS (Institute for Operations Research and the Management Sciences • PhD (Stanford) in Management Science and Engineering / Industrial Engineering

  3. Announcements • Homework 3 • Class Project

  4. 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

  5. Project Ideas • You may like to incorporate tools from the class • Forecasting demand • Google Maps API • Data Envelopment Analysis • Competitive forces / comparison • Web Services programming • 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 don’t go too far from reality

  6. Project Deliverables • Preliminary Proposal (Feb 17) • Written report (due March9) • Include both business plan and service description • Can focus more heavily on either plan or prototype • Presentation on March9 • 15 minutes + 5 minutes questions

  7. Proposal Feb 17 • 1-page • Summary of idea • Focus (prototype vs. business plan) • Outline of plan to complete

  8. Written Report • Think 10-page • Professional presentation • Make use of charts, tables • Include some estimates of numbers (even if preliminary) • Market size • Profit potential

  9. Project Presentation • 20 minutes – 15 min presentation, 5 min questions • Clear presentation of service idea • Prototype demonstration/screenshot/outline • Differentiate from competition • Give market estimation • How many potential customers? • How will you make money? • What are the risks? • Argue why this will lead to successful service business

  10. Today’s Themes • Designing a Service Facility • Where • What components? • What does the process look like to deliver service? • (loosely taken from ‘the supporting facility’ and ‘facility location’ chapters

  11. 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.

  12. 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.

  13. Process Flow Diagram of Mortgage Services Property Survey CT=90 min. Yes Final Approval CT=15 min. Mortgage Applications Completed Applications Approved Mortgages Credit Report CT=45 min. Title Search CT=30 min. No Unapproved Mortgages Operation and cycle time Decision Wait Flow of customers/goods/information .

  14. Product Layout Work Allocation Problem Automobile Driver’s License Office Review Payment Violations Eye Test Photograph Issue In 2 120 30 4 90 40 1 240 15 3 60 60 5 180 20 6 120 30 Out Activity Number(s) Capacity per hour Cycle Time in seconds Where will bottleneck occur? What could be done about it?

  15. Automobile Driver’s License Office (Improved Layout) 1,4 65 55 3 60 60 • In Out 2 120 30 5 180 20 6 120 30 1,4 65 55 3 60 60 In

  16. Process LayoutRelative Location ProblemOperations Sequence Analysis • Ocean World Theme Park Daily Flows A B C D E F A B C D E F A 7 20 0 5 6 15 30 0 15 6 B 8 6 10 0 2 12 40 10 8 Net flow C 10 6 15 7 8 20 8 8 D 0 30 5 10 3 30 6 E 10 10 1 20 6 10 F 0 6 0 3 4 Flow matrix Triangularized matrix Description of attractions: A=killer whale, B=sea lions, C=dolphins, D=water skiing, E=aquarium, F=water rides.

  17. Ocean World Theme Park (Proposed Layout) (a) Initial layout (b) Move C close to A Pair Flow distances Pair Flow distances AC 30 * 2 = 60 CD 20 * 2 =40 AF 6 * 2 = 12 CF 8 * 2 =16 DC 20 * 2 = 40 DF 6 * 2 = 12 DF 6 * 2 = 12 AF 6 * 2 = 12 Total 124 CE 8 * 2 = 16 Total 96 (c ) Exchange A and C (d) Exchange B and E and move F Pair Flow distances Pair Flow distances AE 15 * 2 = 30 AB 15 * 2 =30 CF 8 * 2 = 16 AD 0 * 2 = 0 AF 6 * 2 = 12 FB 8 * 2 = 16 AD 0 * 2 = 0 FD 6 * 2 = 12 DF 6 * 2 = 12 Total 58 Total 70 C A B C A B D E F D E F A A F C B C E D E F D B

  18. Facility Design Considerations • Nature and Objectives of Service Organization • Land Availability and Space Requirements • Flexibility • Security • Aesthetic Factors • The Community and Environment

  19. 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

  20. Service Facility Location

  21. 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.

  22. Geographic Representation Location on a Plane Y Destination j YjEuclidean Origin i Yi Metropolitan 0 X Xi Xj

  23. 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 3 * 2 -10 -5 5 10 15 * -15 -10 -5 5 10 15 20 25 * City C City B 1

  24. 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)

  25. Single Facility Location Using Cross Median Approach 3 (W3=3) 2 (W2=1) 1 (W1=7) 4 (W4=5)

  26. Single Facility Location Using Cross Median Approach 3 (W3=3) 2 (W2=1) 1 (W1=7) 4 (W4=5) Solution is line segment y=2, x=2,3

  27. Huff Retail Location Model First,a gravity analogy is used to estimate attractiveness of store j for customers in area i. Aij= Attraction to store j for customers in area i Sj = Size of the store (e.g. square feet) Tij= Travel time from area i to store j lambda = Parameter reflecting propensity to travel

  28. Huff Retail Location Model Second, to account for competitors we calculate the probability that customers from area i will visit a particular store j.

  29. Huff Retail Location Model Third, annual customer expendituresfor item kat store j can now be calculated. Pij = Probability customers from area i travel to store j Ci = Number of customers in area i (e.g. census track) Bik = Annual budget for product k for customers in area i m = Number of customer areas in the market region

  30. Huff Retail Location Model Fourth, market share of product k purchased at store j can now be calculated.

  31. 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

  32. 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)

  33. Strategic Location Considerations

  34. Discussion • How do the rules change when service encounter is offered over web?

  35. Managing Service Projects

  36. 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

  37. 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 effects1.2 Move furniture 1.2.1. Contract with moving company • • •

  38. 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?

  39. 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?

  40. 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

  41. 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

  42. 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

  43. Tennis Tournament Activity on Node Diagram TS ES EF LS LF A2 C3 D2 G4 START E10 I3 J2 B8 F4 H1

  44. 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

  45. 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

  46. Incorporating Uncertainty in Activity times P(D<A) = .01 F(D) P(D>B) = .01 TIME A M D B optimistic most pessimistic likely

  47. Formulas for Beta Distribution of Activity Duration Expected Duration Variance Note: (B - A )= Range or

  48. 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

  49. 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 For Critical Path Activities

  50. Completion Time Distribution for Tennis Tournament Critical Path ActivitiesDV A 2 4/36 C 3 4/36 E 10 144/36 I 3 36/36 J 20 = 20 188/36 = 5.2 =

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