Question

Operations Management

1. Determine the utilization and the efficiency for each of these situations:
a. A loan processing operation that processes an average of 7 loans per day. The operation has a design capacity of 10 loans per day and an effective capacity of 8 loans per day.
b. A furnace repair team that services an average of four furnaces a day if the design capacity is six furnaces a day and the effective capacity is five furnaces a day.
c. Would you say that systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems? Explain.

Please write it step by step in order for us to learn.

Answer 1

C. It is not necessarily true those systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems. This can be explained with the help of an example. Suppose, there are 2 systems say, system A and system B. Data for System A:

• Design capacity: 1000

• Effective capacity: 500

• Output: 500 Data for System B:

• Design capacity: 1000

• Effective capacity: 900

• Output: 600

For system A,

For system B

Here, system A has a higher efficiency ratio but a lower utilization ratio than system B, and design capacity for both systems is same. Thus, utilization could be low even though the efficiency is high