Littlefield - Cranberry Case

Operations Management:
Process Analysis and Applications Module



Changing Sources of Competitive Advantage
Targeting Improvement: Operational Measures - Time T, Inventory I,
Throughput rate R
» Link through Little’s Law
» Link to Financial Measures
» Targeting improvement: CRU Computer Rentals



Capacity and Flow Time Analysis
» Pizza Pazza
» Levers for Improvement



Multi-product Capacity Management and Investment
» Joint Marketing & Production Decisions
» Optimal Capacity Investment
» National Cranberry Cooperative

S. Chopra/Operations/Process Analysis & Apps

1

How can operations help a company compete?
The changing sources of competitive advantage


Low Cost & Scale Economies (< 1960s)
– You can have any color you want as long as it is black



Focused Factories (mid 1960s)



Flexible Factories and Product variety (1970s)
– A car for every taste and purse.



Quality (1980s)
– Quality is free.



Time (late 1980s-1990s)
– We love your product but where is it?
– Don’t sell what you produce. produce what sells.

S. Chopra/Operations/Process Analysis & Apps

2

What is Improvement?
Operational Performance Measures
 Flow

time
 Throughput
 Inventory
 Process Cost
 Quality

S. Chopra/Operations/Process Analysis & Apps

3

The business imperative: creating economic value
Improvement levers
1.
2.

Increase price
Increase throughput

Costs

Material
+
Labor
+
Energy
+
Overhead

3.
4.

Reduce costs
Improve quality

Capital invested PP&E
+
Inventory
+
Other

5.
6.

Reduce capital intensity
Reduce inventory

Revenues

Profit

Economic value added
(EVA)

-

-

Opportunity cost Financial metrics
S. Chopra/Operations/Process Analysis & Apps

x
Weighted average cost of capital

Price x Quantity

Reduce time
Operational metrics
4

Relating operational measures (flow time T, throughput R & inventory I) with