1

Learning Outcome:
1. Explain the concept of productivity, competitiveness, and strategy
2. Distinguish the significance of productivity, competitiveness and strategy to Operations Management
3. Measure productivity improvements and quality improvement

PRODUCTIVITY, COMPETITIVENESS & STRATEGY

COMPETITIVENESS

How effectively an organization meets the wants and needs of customers relative to others that offer similar
goods or services
Organizations compete through some combination of their marketing and operations functions
What do customers want?
How can these customers need best be satisfied?

STRATEGY

Mission
The reason for an organizations existence
Goals
Provide detail and the scope of the mission
Goals can be viewed as organizational destinations
Strategy
A plan for achieving organizational goals
Serves as a roadmap for reaching the organizational destinations
Tactics
The methods and actions taken to accomplish strategies
The how to part of the process
Operations
The actual doing part of the process

Strategy Formulation
Effective strategy formulation requires taking into account:
Core competencies
Environmental scanning
SWOT
Successful strategy formulation also requires taking into account:
Order qualifiers
Order winners

Operations strategy
The approach, consistent with organization strategy, that is used to guide the operations function.
Decision Area

What the Decisions Affect

Product and service design

Costs, quality, liability, and environmental issues

Capacity

Cost, structure, flexibility

Process selection and layout

Costs, flexibility, skill level needed, capacity

Work design

Quality of work life, employee safety, productivity

Location

Costs, visibility

Quality

Ability to meet or exceed customer expectations

Inventory

Costs, shortages

Maintenance

Costs, equipment reliability, productivity

Scheduling

Flexibility, efficiency

Supply chains

Costs, quality, agility, shortages, vendor relations

Projects

Costs, new products, services, or operating systems

Time-based strategies
Strategies that focus on the reduction of time needed to accomplish tasks
It is believed that by reducing time, costs are lower, quality is higher, productivity is higher, time-tomarket is faster, and customer service is improved
Quality-based strategy
Strategy that focuses on quality in all phases of an organization
Pursuit of such a strategy is rooted in a number of factors:
Trying to overcome a poor quality reputation

Desire to maintain a quality image

A part of a cost reduction strategy

Agile operations
A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and
prosper in an environment of change
Involves the blending of several core competencies:
Cost
Quality
Reliability
Flexibility

The Balanced Scorecard Approach

A top-down management system that organizations can use to clarify their vision and strategy and
transform them into action
Develop objectives
Develop metrics and targets for each objective
Develop initiatives to achieve objectives
Identify links among the various perspectives
Finance
Customer
Internal business processes
Learning and growth
Monitor results
PRODUCTIVITY
Relates to how effective an organization is in the use of its resources.
An index that measures output (goods and services) relative to the input (labor, materials, energy, and
other resources) used to produce them.

Productivity

Output
Input

Productivity
A measure of the effective use of resources, usually expressed as the ratio of output to input
Productivity measures are useful for
Tracking an operating units performance over time
Judging the performance of an entire industry or country

Productivity Measures
Productivity Measures
1. Partial measures

Based on:
Single input

Examples
Output Output Output Output
Labor Machine Capital Energy

2. Multifactor
measures

3. Total measures

More than one input

Output

Output

Labor Machine Labor Machine Energy

All inputs

Goods or Services
All inputs used to produce them

Examples of Partial Productivity Measures

Labor productivity
Units of output per labor hour
Units of output per shift
Peso value of output per labor hour

Machine productivity
Units of output per machine hour
Peso value of output per machine hour

Capital productivity
Units of output per peso input
Peso value of output per peso input

Energy productivity
Units of output per kilowatt-hour
Peso value of output per kilowatt-hour

Note: Calculations of multifactor productivity measure inputs and outputs using a common unit of
measurement, such as cost or value. For instance,
Quantity of productionat standard price
Labor cost M aterialcost Overhead

Sample Calculations
1. Determine the partial productivity for these cases:

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a) A machine that produced 68 usable pieces in two hours.
Usable pieces
68 pieces
M achine productivity

34 pieces/hour
Production time
2 hours
b) Four workers who installed 720 square yards of carpeting in 8 hours.
Yards of carpet installed
720 square yards
Labor productivity

22.5 yards/hour
Labour hours worked
4 workers x 8 hours/work er

2. Determine the multifactor productivity for the combined input of labor and machine time using the
following data:
Output: 16,000 units
Input:
Labor
= 13 workers working 5 hours
Machine = 3 machines running 5 hours

Multifactor productivity

Output
Labor Machine

16,000

(13 w orkersx 5

16,000units
(65 hours 15 hours)

hours

hours
) (3 machines x 5
)
w orker
machine

200 units/hour

Importance of Productivity Measures

1. Used to track performance of a department or an organization over time.
Allow managers to judge performance and to decide where improvements are needed.
2. Used to judge the performance of an entire industry or of a country as a whole.
3. Used as scorecards of the effective use of resources.
4. Used as an indicator of an organizations competitiveness.
Sample Calculations

3. Determine the partial productivity for these cases:

a) A machine that produced 68 usable pieces in two hours.

Machine productivity

Usable pieces
68 pieces

34 pieces/hour
Production time
2 hours

b) Four workers who installed 720 square yards of carpeting in 8 hours.

Labor productivity

Yards of carpet installed

720 square yards

22.5 yards/hour
Labour hours w orked
4 w orkers x 8 hours/w orker

4. Determine the multifactor productivity for the combined input of labor and machine time using the
following data:
Output: 16,000 units

Input: Labor
= 13 workers working 5 hours
Machine = 3 machines running 5 hours

Improving Productivity
1.
2.
3.
4.
5.
6.

Develop productivity measures for all operations

Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish reasonable goals
Make it clear that management supports and encourages productivity improvement
Measure and publicize improvements
Dont confuse productivity with efficiency

Applied Measures for Productivity Improvement

1. Functional Productivity
Example Problem 1: Nokia Company
Leon is the operations analyst at Nokia and wants to determine the best alternative on the proposal of the
departments of the company to improve performance. At present, the company sells 450 units per month
for $70 per unit at a cost of $45 per unit. The financial cost is $7,580 per month and the income tax rate is
20%*. The proposal of marketing department is to increase the price per unit by 15%. Finance department
wants to reduce the financial cost by 15% and operations department prefers to cut the product cost per
unit by 15%. Which of the options is the best alternative for productivity improvement based on income
after tax? How much is increase? (* for illustrations, however current income tax is presented on your
taxation courses)

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Solution:
Calculated effects of the options:
Item

Current

Units sold
Price per unit ($)
Product cost per unit ($)
Finance charge ($)
Tax rate (%)
(value of option) = (current figure)

450
70
45
7,580
20

Alternative course of actions

Marketing Finance Operations
450
450
450
81
70
70
38
45
45
6,443
7,580
7,580
20
20
20

[1 + (proposed percentage of change)]

Item

Current

Sales
$ 31,500
Product cost
20,250
Gross margin
11,250
Finance charge
7,580
Income before tax
3,670
Tax due
734
Income after tax
2,936
Change from current ($)
Change from current (%)
Best option (maximum)

Alternative course of actions

Marketing Finance Operations
$ 36,225
$ 31,500
$ 31,500
17,213
20,250
20,250
15,975
11,250
14,288
6,443
7,580
7,580
8,395
4,807
6,708
1,679
961
1,342
6,716
3,846
5,366
3,780
910
2,430
129
31
83
yes
no
no

The best option is the proposal of marketing department to increase the price per unit by 15%.
There will be an increase of $3,780 or 129% from the current income after tax.
2. Productivity Options
Example Problem 2: Hewlett-Packard Development Company
Bernadette is the plant manager at HP Development and wants to determine the best option proposed by
the supervisors to increase the productivity performance of the company. Currently, the plant has 50 staff
members working eight hours per day at a rate of $15 per hour. There are two machines and each
consume 200 kilowatt-hour (kwh) of power per day at a cost of $1 per kwh. The plant produces 20 units per
day and the material cost per unit is $6. Option A is to reduce the number of staff members by 22% and the
payroll cost per hour by 20% but raise the power cost per kwh by 100%. Option B is to reduce the number of
staff members by 20% and the material cost per unit by 50% but raise the number of machines by 150%.
Option C is to raise the working hours per day by 25%, kwh used per machine by 10%, and units produced
per day by 70%. Which of the options can provide the highest productivity in terms f labor only, power only,
and both factor? How much is the increase?
Solution:
Computed effect of each option on the current situation:
Item
Number of staff
Working hours per day
Payroll cost per hour
Number of machines
Kwh used per machine
Power cost per kwh
Units produced per day
Material cost per unit

Current

A
39
8
12
2
200
2
20
6

50
8
15
2
200
1
20
6

Options
B
40
8
15
5
200
1
20
3

C
50
10
15
2
220
1
34
6

Labor productivity:
Options
B
C
Labor-hours per day
400
312
320
500
Unit per labor-hour
0.05
0.064
0.0625
0.068
Change from current (units)
0.0141
0.0125
0.0180
Change from current (%)
28
25
36
Best option (maximum)
no
no
yes
The best choice is Option C with an increase of 0.018 units per labor-hour or 36% from the current units per
labor-hour.
Item

Current

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Power productivity:
Options
B
C
Kwh used per day
400
400
1,000
440
Unit per kwh
0.05
0.05
0.02
0.0773
Change from current (units)
0.00
-0.03
0.0273
Change from current (%)
0
-60
55
Best option (maximum)
no
no
yes
The best choice is Option C with an increase of 0.0273 in units per kwh or 55% from the current units per kwh.
Item

Current

Multifactor productivity per day

Options
A
B
C
Labor cost per day
$ 6,000
$ 3,744
$ 4,800
$ 7,500
Power cost per day
400
800
1,000
440
Material cost per day
120
120
60
204
Total cost per day
6,520
4,664
5,860
8,144
Units per dollar
0.0031
0.0043
0.0034
0.0042
Change from current (units)
0.0012
0.0003
0.0011
Change from current (%)
40
11
36
Best option (maximum)
yes
no
no
The best choice is Option A which is to reduce the number of staff members by 22% and the payroll cost
per hour by 20% but raise the power cost per kwh by 100%. There will be an increase of 0.0012 units per
dollar or 40% from the current units per dollar.
Item

Current

3. Yield Management
Example Problem 3: Intercontinental Hotel Group
Caesar is the revenue planner of Intercontinental Hotel Group and he wants to determine the number of
rooms that the hotel should overbook per night to maximize occupancy revenue. Currently, the hotel does
not have an overbooking policy but based on past experience, some hotel guests who made advance
reservations do not show up on their reserved schedules. At any given day, the probability that all room
reserved in advance are occupied by the listed guests is only 27%. The probability that the number of rooms
which do not occupied by the listed guest is 34% for one room, 21% for two rooms, and 18% for three room.
The hotel charges $125 per room per night and the cost of maintaining a room is $36 per night. If the
number of overbooked rooms is more than the number of actual vacant rooms due to no-shows, the hotel
will have to shoulder the cost of booking the bumped-off guests to a nearby hotel. This overflow cost of $85
per room includes the booking and communication fee, transportation expense, and other charges made
in moving the guest to the nearby hotel so that the guest will not feel too inconvenienced. How many
rooms should the hotel overbooked to minimize lost revenue due to no-shows? How much will be the
savings with the new overbooking policy?
Solution:
Data summary per Night
Number of noshows (rooms)
0
1
2
3

Probability

Amount per room per night ($)

Price
Variable cost Overflow cost

0.27
0.34
0.21
0.18

125

36

85

Maximum Optimal Probability

Number of
no-shows
Probability
(rooms)
0
0.27
1
0.34
2
0.21
3
0.18
Total
1.00
Expected cost per night ($)

Product
0.00
0.34
0.42
0.54
1.30
115.70

Maximum Optimal Probability

Profit per
Profit +
Maximum
room
Overflow
Probability

89

174

Optimal overbooking
Number of NoProbability
P (n < x)
shows (room)
0
0.27
0.00
1
0.34
0.27
2
0.21
0.61
3
0.18
0.82
Optimal overbooking (rooms)

P (n < x)
Maximum?
Yes
Yes
No
No
1

0.511

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The last P (n < x) which is maximum probability of 0.511 is 0.27 which corresponds to the overbooking of
one (1) room.
Net Savings per night
Overflow Customers
Number of noshows (rooms)

Probability

0
0.27
1
0.34
2
0.21
3
0.18
Total
1.00
Cost per unit & Total cost ($)

Net No-shows

Room

Product

Room

Product

1
0
0
0
1
85

0.27
0.00
0.00
0.00
0.27
22.95

0
0
1
2
3
89

0.00
0.00
0.21
0.36
0.57
50.73

Amount with Overbooking ($)

No
With
Net
Overboo Overboo
Savings
k
k

115.70

73.68

42.02

With an overbooking policy of 1 room per night, the hotel will be able to reduce the expected lost revenue
due to no-shows by $42.02 per night.
MEASURING PRODUCT YIELD AND PRODUCTIVITY
Product yield is a measure of output used as an indicator of productivity.
1. It can be computed for the entire production process (or for one stage in the process).
2. May include in product manufacturing cost
3. Product quality would be monitored throughout the production process at various stages.
PRODUCT YIELD AND PRODUCTIVITY
Yield =

Product cost =

(total input) (% good units) + (total input) (1 - % good units) (% reworked)

(direct manufacturing cost per unit) (input) + (rework cost per unit)
(reworked units)
yield

Yield =

input (good quality, work-in-process product at stage i)

Yield =

(I) (%g1) (%g2) (%g3) (%gn)

THE QUALITY-PRODUCTIVITY RATIO (QPR)

THE QUALITY-PRODUCTIVITY RATIO (QPR)
QPR =

good-quality units
(input) (processing cost) +
(defective units) (rework cost)

100

This measure the effect of quality on productivity combines

the concept of quality index number and product yield. It is
a quality index number that includes productivity and
quality costs. QPR increase if either processing cost or
rework costs or both decreases. It increases if more goodquality units are produced relative to total product input.

Sample Problems
1. The NBJ motor company starts production for a particular type of motor with a steel motor housing. The
production process begins with 100 motors each day. The percentage of motors produced each day
average 80% and the percentage of poor-quality motors that can be reworked is 50%. The company wants
to know the daily product yield and the effect on productivity if the daily percentage of good-quality
motors is increase to 90%. (90 motors, 95 motors, a 10 percentage-point increase results in a 5.5% increase in
productivity output.)
2. The NBJ motor company has direct manufacturing cost per unit of $30, and motors that are of inferior
quality can be reworked for $12 per unit. From example item #1. 100 motors are produced daily, 80 % (on
average) are good quality and 20% are defective. Of the defective motors, half can be reworked to yield
good-quality products. Through its quality-management program, the company has discovered a problem
in it production process that, when corrected (at a minimum cost), will increase the good-quality products
to 90%. The company wants to assess the impact on the direct cost per unit of improvement in product
quality. ($34.67 per motor, $32.21 per motor, The improvement in the production process as a result of the
quality-management program will result in a decrease of $2.46 per unit, or 7.1%, in direct manufacturing
cost per unit as well as a 5.5% increase in product yield with a minimal investment in labor, plant, or
equipment)

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3. At the NBJ motor company, motors are produced in four-process. Motors are inspected following each
stage, with percentage yield (on average) of good-quality, work-in-process units as follows.
Average
Percentage
Stage
Good-Quality
1
0.93
2
0.95
3
0.97
4
0.92
The company wants to know the daily product yield for product input of 100 units per day. Furthermore, it
would like to know how many input units it would have to start with each day to result in a final daily yield of
100 good-quality unit.(78.8 motors, to achieve output of 100 good-quality motors, the production process
must start with approximately 127 motor.)
4. The NBJ motor company produces small motors at a processing cost of $30 per unit. Defective motors can
be reworked at a cost of $12 each. The company produces 100 motors per day and average 80% goodquality motors, resulting in 20% defects, 50% of which can be reworked prior to shipping to customers. The
company wants to examine the effects of (1) increasing the production rate to 200 motors per day; (2)
reducing the process cost to $26 and rework cost to $10; (3) increasing, through quality improvement, the
product yield of good-quality products to 95%; and (4) the combination of 2 and 3. (2.89; 1. Increase input
to production capacity of 200 units has no effect; 2. Reduce processing cost to $26 and rework cost to $10,
increase by 3.33; 3. Increase initial good-quality units to 95%, increase by 3.22; 4. Decrease costs and
increase initial good-quality units, increase by 3.71)
Experiential Learning Exercise:
1. Select two stores that you shop at regularly. What competitive advantages do those stores have over
their competitors that cause you to shop there rather than at the competitors?
2. Using the Internet, obtain the mission statements of three businesses. Compare and contrast the three.
Are there certain elements of each that you like or dont like? Which one do you prefer? Explain.
3. Develop your personal mission statement, with supporting goals.
4. Interview a manager or the chief operating officer of a company about the companys main strategy.
5. Dorian Grey is the operations manager of Samsung Electronics and she wants to determine the best
alternative proposed by the four branches of the company to improve performance. At present, the
company sells 730 units per month for $65 per unit at a cost of $50 per unit. The financial cost is $5,670
per month and the income tax rate is 25%. The proposal of marketing department is to increase the
price per unit by 10% while sales department wants to raise the units sold by 10%. Finance department
wants to reduce the financial cost by 10% and operations department prefers to cut the product cost
per unit by 10%. Which of the four branches can provide the best productivity improvement option
based on income after tax? How much is the increase?
6. The Oriental Heritage Furniture Company manufactures four-drawer oak
filling cabinets in six stages. In the first state, the boards forming the wall of
the cabinet are cut; in the second stage, the front drawer panels are
woodworked; in the third stage, the boards are sanded and finished; in the
fourth stage, the boards are cleaned. Stained, and painted with a clear
finish; in the fifth stage, the hardware for pulls, runners, and fitting is installed;
and in the final stage, the cabinets are assembled. Inspection occurs at
each stage of the process, and the average percentage of good-quality
units are as follows.

Stage
1
2
3
4
5
6

Average
Percentage
Good
Quality
87%
91%
94%
93%
93%
96%

The cabinets are produced in weekly production runs with a product input for 300 units.
1. Determine the weekly product yield of good-quality cabinets.
2. What would weekly product input have to be in order to achieve a final weekly product yield of
300 cabinets?
7. In problem item #6, the Oriental Heritage Furniture Company
has investigated the manufacturing process to identify
potential improvements that would improve the quality. The
company has identified four alternatives, each costing to
P750, 000, as follows.

Alternative
1
2
3
4

Quality Improvement
Stage 1: 93%
Stage 2: 96%, Stage 4: 97%
Stage 5: 97%, Stage 6: 98%
Stage 2: 97%

1. Which alternative would result in the greatest increase in product yield?

2. Which alternative would be the most cost effective?

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Learning Objectives:
1.
2.
3.
4.

Understand the concept of reliability and MTBF

Compute probability of success and failure
Relate the concept of mean time before failure to industry setting
Appreciate the importance of maintenance and availability of resources
RELIABILITY, MEAN TIME BEFORE FAILURES & AVAILABILITY

RELIABILITY
It is the measure of the ability of a product, part, or system to perform its
intended function under a prescribed set of conditions (e.g., repeat sale, product
image and legal implication).

Module on RELIABILITY
Introduction
Quantifying Reliability
Availability
Improving Reliability

Introduction
Important aspect of reliability

1. Reliability as a probability
Probability is the percentage of chance that product may fail as it was intended to function.

2. Definition of failure
Failure is used to describe a situation in which an item does not perform as intended.

3. Prescribed operating condition

Normal operating conditions is the set of conditions under which an items reliability is specified. These
include load, temperature, and humidity ranges as well as operating procedures and maintenance
schedules

Quantifying Reliability
Probability is used in two ways:
1. The probability that the product or system will function on any given unit.
2. The probability that the product or system will function for a given length of time.
The probability that the product or system will function on any given unit.
Independent events or components are events whose occurrence or non-occurrence does not influence each
other.
Rule 1: If two or more events are independent and success is defined as the probability that all of the events
occur, then the probability of success is equal to the product of the probabilities of the events.
Example. Suppose a room has two lamps, but to have adequate both lamps must work (success) when turned
on. One lamp has a probability of working of .90, and the other has a probability of working of .80. The
probability that both will work is .90 x .80 = .72.
Lamp 1
Lamp 2
.90

.80

Redundancy involves the use of backup components to increase reliability.

Rule 2: If two events are independent and success is defined as the probability that at least one of the events
will occur, the probability of success is equal to the probability of either one plus 1.00 minus that probability
multiplied by the other probability.
Example. There are two lamps in a room. One has a probability of lightning when turned on of .90 and the
other has a probability of lighting when turned on of .80. Only single lamp is needed to light for success. If
one fails to light when turned on, the other lamp is turned on. Hence, one of the lamps is a backup in case the
other one fails. Either lamp can be treated as the backup; the probability of success will be the same. The
probability of success is .90 + (1 - .90) x .80 = .98. It the .80 light first, the computation would be .80 + (1 .80) + .90 = .98.
.80

.90

Lamp 2 (backup)
Lamp 1

Rule 3: If three events are involved and success is defined as the probability that at least one of them occurs,
the probability of success is equal to the probability that the first one (any of the events), plus the product of
1.00 minus that probability and the probability of the second event (any of the remaining events), plus the
product of 1.00 minus each of the first two probabilities and the probability the third event, and so on.

Example. Three lamps have probabilities of .90, .80, and .70 of lighting when turned on. Only one lighted
lamp is need for success; hence two of the lamps are considered to be backups.
The probability of success is .90 + (1 - .90) x .80 + (1 - .90) x (1 - .80) x 70 = .994
.70

Lamp 3 (backup)

.80

Lamp 2 (backup)

.90

Lamp 1
Determine the reliability of the system shown below.

.98

.90

.92

.90

.95

The system can be reduced to a series of three components

.90 + .90(1 - .90)

.98

.95 + .92(1 - .95)

The system reliability is then the product of this 0.98 x 0.99 x 0.996 = 0.966
The basic unit to measure for reliability is the product failure rate (FR). Firms producing high technology
equipment often provide failure rare data on their products. The failure rate measures the percentage of
failure among the total number of product tested, FR ( %), or a number of failures during a period of time,
FR(N)
FR (%) =

Number of failures
Number of unit tested

FR (N) =

Number of failures
Number of unit-hours of operating time

100

Perhaps the most common term in reliability analysis is the mean time between failures (MTBF) which is
reciprocal of FR (N):
1
number of failures during a period of time

MTBF =

Example: Twenty air-conditioning systems designed for use by astronauts in space shuttles were operated for
1,000 hours at test facility. Two of the system failed during the testone after 200 hours and the other after
600 hours. To compute the percentage of failures, we use the following equation.
FR (%) =

Number of failures
Number of unit tested

100

2
20

100

= 10%

Next we compute the number of failures per operating hours:

FR (N) =

Number of failures
Operating time

2
20,000

1,200

2
18,800

= 0.000106 failure/unit hour

where
Total time = (1,000 hr)(20 units)
Non-operating time = 800 hr for 1st failure + 400 hr for 2nd failure
Operating time = Total time Non-operating time
and because

= 20,000 unit-hour
= 1,200 unit- hour

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MTBF =

1
FR (N)

1
0.000106

9,434 hours

If the typical space shuttle trip lasts for 60 day, company may be interested in the failure rate per trip.
Failure rate = (failures/unit-hr)(24 hr/day)(60 days/trip)
= (0.000106)(24)(60)
= 0.152 failures/trip
Because the failure rate recorded is probably too high, company will have to either increase the reliability of
individual components, and thus of the system, or else install several back-up air-conditioning units on each
space shuttle. Back-up units provide redundancy.

The probability that the product or system will function for a given length of time.
Probabilities are determined relative to a specified length of time. This approach is commonly used in product
warranties, which pertain to a given period of time after purchase of a product.
Mean of Time Between Failures (MTBF) is the average length of time between failures of a product or
component.
P(no failure before T) = e T/MTBF
where: e = Natural logarithm, 2.7183 ;
T = Length of service before failure; and
MTBF = Mean time between failure
The probability that failure will occur before time T is 1.00 minus that amount;

Failure rate

Failure rate

P(failure before T) = 1 - e T/MTBF

Few (random)
Failure due to
failures
wear-out
Time, T
Failure rate is a function of time (T)

Reliability
e T/MTBF
1e

Infant mortality

T/MTBF

0
Time, T
An exponential distribution

Product life can sometimes be modeled by a normal distribution. The table provides areas under a normal
curve from (essentially) the left end of the curve to a specified point z, where z is a standardized value
computed using the formula:1
z=

T Mean wear-out time

Standard deviation of wear-out time

AVAILABILITY is the fraction of time a piece of equipment is expected to be available for operation.
Availability =

Mean time between failure (MTBF)

Mean time between failure (MTBF) + Mean time to repair
(MTR)

A copier is expected to be able to operate for 200 hours between repairs, and the mean repair time is
expected to be two hours. Determine the availability of the copier. Given that MTBF = 200 hours, and MTR =
2 hours
Availability =

200 hours
200 hours + 2 hours

= .99

Implications for design are revealed by the availability formula:

1. Availability increases as the mean time between failures increases.
2. Availability increases as the mean repair time decreases.
1

Refer to the attach standard deviation (z) table.

11
STANDARD NORMAL PROBABILITY TABLE
The table shows the area to the left of a z-score:
z
.00
.01
.02
-3.4
.0003
.0003
.0003
-3.3
.0005
.0005
.0005
-3.2
.0007
.0007
.0006
-3.1
.0010
.0009
.0009
-3.0
.0013
.0013
.0013
-2.9
.0019
.0018
.0018
-2.8
.0026
.0025
.0024
-2.7
.0035
.0034
.0033
-2.6
.0047
.0045
.0044
-2.5
.0062
.0060
.0059
-2.4
.0082
.0080
.0078
-2.3
.0107
.0104
.0102
-2.2
.0139
.0136
.0132
-2.1
.0179
.0174
.0170
-2.0
.0228
.0222
.0217
-1.9
.0287
.0281
.0274
-1.8
.0359
.0351
.0344
-1.7
.0446
.0436
.0427
-1.6
.0548
.0537
.0526
-1.5
.0668
.0655
.0643
-1.4
.0808
.0793
.0778
-1.3
.0968
.0951
.0934
-1.2
.1151
.1131
.1112
-1.1
.1357
.1335
.1314
-1.0
.1587
.1562
.1539
-0.9
.1841
.1814
.1788
-0.8
.2119
.2090
.2061
-0.7
.2420
.2389
.2358
-0.6
.2743
.2709
.2676
-0.5
.3085
.3050
.3015
-0.4
.3446
.3409
.3372
-0.3
.3821
.3783
.3745
-0.2
.4207
.4168
.4129
-0.1
.4602
.4562
.4522
0.0
.5000
.4960
.4920
z
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4

.00
.5000
.5398
.5793
.6179
.6554
.6915
.7257
.7580
.7881
.8159
.8413
.8643
.8849
.9032
.9192
.9332
.9452
.9554
.9641
.9713
.9772
.9821
.9861
.9893
.9918
.9938
.9953
.9965
.9974
.9981
.9987
.9990
.9993
.9995
.9997

.01
.5040
.5438
.5832
.6217
.6591
.6950
.7291
.7611
.7910
.8186
.8438
.8665
.8869
.9049
.9207
.9345
.9463
.9564
.9649
.9719
.9778
.9826
.9864
.9896
.9920
.9940
.9955
.9966
.9975
.9982
.9987
.9991
.9993
.9995
.9997

.02
.5080
.5478
.5871
.6255
.6628
.6985
.7324
.7642
.7939
.8212
.8461
.8686
.8888
.9066
.9222
.9357
.9474
.9573
.9656
.9726
.9783
.9830
.9868
.9898
.9922
.9941
.9956
.9967
.9976
.9982
.9987
.9991
.9994
.9995
.9997

.03
.0003
.0004
.0006
.0009
.0012
.0017
.0023
.0032
.0043
.0057
.0075
.0099
.0129
.0166
.0212
.0268
.0336
.0418
.0516
.0630
.0764
.0918
.1093
.1292
.1515
.1762
.2033
.2327
.2643
.2s981
.3336
.3707
.4090
.4483
.4880

.04
.0003
.0004
.0006
.0008
.0012
.0016
.0023
.0031
.0041
.0055
.0073
.0096
.0125
.0162
.0207
.0262
.0329
.0409
.0505
.0618
.0749
.0901
.1075
.1271
.1492
.1736
.2005
.2296
.2611
.2946
.3300
.3669
.4052
.4443
.4840

.05
.0003
.0004
.0006
.0008
.0011
.0016
.0022
.0030
.0040
.0054
.0071
.0094
.0122
.0158
.0202
.0256
.0322
.0401
.0495
.0606
.0735
.0885
.1056
.1251
.1469
.1711
.1977
.2266
.2578
.2912
.3264
.3632
.4013
.4404
.4801

.06
.0003
.0004
.0006
.0008
.0011
.0015
.0021
.0029
.0039
.0052
.0069
.0091
.0119
.0154
.0197
.0250
.0314
.0392
.0485
.0594
.0721
.0869
.1038
.1230
.1446
.1685
.1949
.2236
.2546
.2877
.3228
.3594
.3974
.4364
.4761

.07
.0003
.0004
.0005
.0008
.0011
.0015
.0021
.0028
.0038
.0051
.0068
.0089
.0116
.0150
.0192
.0244
.0307
.0384
.0475
.0582
.0708
.0853
.1020
.1210
.1423
.1660
.1922
.2206
.2514
.2843
.3192
.3557
.3936
.4325
.4721

.08
.0003
.0004
.0005
.0007
.0010
.0014
.0020
.0027
.0037
.0049
.0066
.0087
.0113
.0146
.0188
.0239
.0301
.0375
.0465
.0571
.0694
.0838
.1003
.1190
.1401
.1635
.1894
.2177
.2483
.2810
.3156
.3520
.3897
.4286
.4681

.09
.0002
.0003
.0005
.0007
.0010
.0014
.0019
.0026
.0036
.0048
.0064
.0084
.0110
.0143
.0183
.0233
.0294
.0367
.0455
.0559
.0681
.0823
.0985
.1170
.1379
.1611
.1867
.2148
.2451
.2776
.3121
.3483
.3859
.4247
.4641

.03
.5120
.5517
.5910
.6293
.6664
.7019
.7357
.7673
.7967
.8238
.8485
.8708
.8907
.9082
.9236
.9370
.9484
.9582
.9664
.9732
.9788
.9834
.9871
.9901
.9925
.9943
.9957
.9968
.9977
.9983
.9988
.9991
.9994
.9996
.9997

.04
.5160
.5557
.5948
.6331
.6700
.7054
.7389
.7704
.7995
.8264
.8508
.8729
.8925
.9099
.9251
.9382
.9495
.9591
.9671
.9738
.9793
.9838
.9875
.9904
.9927
.9945
.9959
.9969
.9977
.9984
.9988
.9992
.9994
.9996
.9997

.05
.5199
.5596
.5987
.6368
.6736
.7088
.7422
.7734
.8023
.8289
.8531
.8749
.8944
.9115
.9265
.9394
.9505
.9599
.9678
.9744
.9798
.9842
.9878
.9906
.9929
.9946
.9960
.9970
.9978
.9984
.9989
.9992
.9994
.9996
.9997

.06
.5239
.5636
.6026
.6406
.6772
.7123
.7454
.7764
.8051
.8315
.8554
.8770
.8962
.9131
.9279
.9406
.9515
.9608
.9686
.9750
.9803
.9846
.9881
.9909
.9931
.9948
.9961
.9971
.9979
.9985
.9989
.9992
.9994
.9996
.9997

.07
.5279
.5675
.6064
.6443
.6808
.7157
.7486
.7794
.8078
.8340
.8577
.8790
.8980
.9147
.9292
.9418
.9525
.9616
.9693
.9756
.9808
.9850
.9884
.9911
.9932
.9949
.9962
.9972
.9979
.9985
.9989
.9992
.9995
.9996
.9997

.08
.5319
.5714
.6103
.6480
.6844
.7190
.7517
.7823
.8106
.8365
.8599
.8810
.8997
.9162
.9306
.9429
.9535
.9625
.9699
.9761
.9812
.9854
.9887
.9913
.9934
.9951
.9963
.9973
.9980
.9986
.9990
.9993
.9995
.9996
.9997

.09
.5359
.5753
.6141
.6517
.6879
.7224
.7549
.7852
.8133
.8389
.8621
.8830
.9015
.9177
.9319
.9441
.9545
.9633
.9706
.9767
.9817
.9857
.9890
.9916
.9936
.9952
.9964
.9974
.9981
.9986
.9990
.9993
.9995
.9997
.9998

12

Name:
Course & Year:

Date:
Schedule:
Problem Set on Reliability

1. A product design engineer must decide if a redundant component is cost-justified in a certain system. The
system in question has a critical component with a probability of 0.98 of operating. System failure would
involve a cost of P800, 000. For a cost of P4, 000, a switch could be added that would automatically
transfer the system to the backup component in the event of a failure. Should the backup be added if the
backup is also 0.98?

2. Due to extreme cost of interrupting production, a firm has two standby machines available in case of a
particular machine breakdown. The machine in use has a reliability of 0.94, and the backups have
reliability of 0.90 and 0.80. In the event of a failure, either backup can be pressed into service. If one fails,
the other backup can be used. Compute for the reliability.

3. A hospital has three independent fire alarm systems, with reliability of 0.95, 0.97, and 0.99. In the event
of fire, what is the probability that a warning would be given?

4. A weather satellite has an expected life of 10 years from the time it is placed into earth orbit. Determine
its probability of no wear-out before each of the following lengths of service. Assume the exponential
distribution is appropriate: a) 5 years, b) 12 years, c) 20 years, and d) 30 years.

5. What is the probability that the satellite describe in the problem item 4 will fail between 5 years and 12
years after being placed into the earth orbit?

6. Jack E. Bag-baga Manufacturing, a medical equipment manufacturer, has subjected 100 heart
pacemakers to 5,000 hours of testing. Halfway through testing, 5 pacemakers failed. What was the failure
rate in terms of the following?
a. Percent of failures?
b. Number of failures per unit-hour?
c. Number of failure per unit-year?
d. If 1,100 people receive pacemaker implants, how many units can we expect to fail during the
following 1 year?

7. One line of radial tires produced by a large company has a wear-out life that can be made using a normal
distribution with a mean of 25,000 miles and a standard deviation of 2,000 miles. Determine each of the
following: a) the percentage of tires that can be expected to wear out within 2,000 miles of the average
(i.e., between 23,000 miles and 27,000 miles), b) the percentage of tires that can be expected to fail
between 26,000 miles and 29,000 miles, and c) for what tire life would you expect 4 percent of the tires
to have worn out? Note: (1) miles are analogous to time and are handled in exactly the same way; (2) the
term percentage refers to a probability.

13
Learning Resources:
Loma, Edwin J., Operations Management Models: A Problem Solving Approach, Anvil Publishing, Inc., Manila,
2012.
T/MBTF

e - T/MBTF

0.10
.9048
0.20
.8187
0.30
.7408
0.40
.6703
0.50
.6065
0.60
.5488
0.70
.4966
0.80
.4493
0.90
.4066
1.00
.3679
1.10
.3329
1.20
.3012
1.30
.2725
1.40
.2466
1.50
.2231
1.60
.2019
1.70
.1827
1.80
.1653
1.90
.1496
2.00
.1353
T/MTBF
Values of e

T/MBTF

e - T/MBTF

T/MBTF

e - T/MBTF

2.10
2.20
2.30
2.40
2.50
2.60
2.70
2.80
2.90
3.00
3.10
3.20
3.30
3.40
3.50
3.60
3.70
3.80
3.90
4.00

.1255
.1108
.1003
.0907
.0821
.0743
.0672
.0608
.0550
.0498
.0450
.0408
.0369
.0334
.0302
.0273
.0247
.0224
.0202
.0183

4.10
4.20
4.30
4.40
4.50
4.60
4.70
4.80
4.90
5.00
5.10
5.20
5.30
5.40
5.50
5.60
5.70
5.80
5.90
6.00

.0166
.0150
.0136
.0123
.0111
.0101
.0091
.0082
.0074
.0067
.0061
.0056
.0045
.0041
.0037
.0033
.0030
.0027
.0025
.0022