AAOM Handbook

PS.08 Model Combined Strategy Effects

Context

The objective of a Production Strategy for a process is to deliver the required process output at the lowest practical cost.

The task assignments completed to up to this point in the process of setting the Production Strategy have identified the performance gap to be addressed, the feasible Production Strategy options for closing the performance gap, and the estimated effects of those strategy choices on independent process output characteristics. Due to the inherent variability in the output characteristics that Production strategies act on, the interactions that occur between parameters, and the random nature of much of the variation, we can only estimate the probable result of any combination of strategy choices by using a statistical model employing Monte Carlo simulation.

Purpose

To produce a forecast of the production output/costs resulting from the choice of a set of Production Strategies.

Quantity

• One set of Capability Histograms of production output and costs for each combination of Production Strategies.

Quality

The model for estimating performance confidence levels shall; • be based on the mathematical relationships that exist between process time, rate, quality, reliability and efficiency/cost characteristics and the production and cost outputs of the processes, and • incorporate Monte Carlo simulation of the outputs based on the estimated performance distributions for the process characteristics.

The performance distribution estimates used for the model shall be those determined in TA PS.07 – Estimate Output Distributions for Strategies.

The output and cost Capability Histograms shall be those predicted by the statistical model, based on the estimated distributions for independent output parameters for the Production Strategy choice. The following data relating to the histogram shall be provided; • a graph of the probability distribution, • the values of the minimum, maximum, mean and mode of the distribution, • the 'shape factor' (i.e. spread of the distribution – e.g. standard deviation), and

© McAlear Management Consultants 2006

Operational Planning: Set Production Strategy

Updated: August 2018

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