MIS 373: Basic Operations Management 1

WEEK 2 PSA 1C

• Would you say that systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems?

• Another way to put it:

• If system A has a higher efficiency ratio than system B, it is always true that system A has a higher utilization ratio than system B?

MIS 373: Basic Operations Management 2

THE ANSWER IS NO.

• Here is a counterexample: system A has a higher efficiency ratio but a lower utilization ratio than system B

• System A:• Design capacity: 1000 • Effective capacity: 500• Output: 500

• System B:• Design capacity: 1000 • Effective capacity: 900• Output: 600

Efficiency = 500/500 = 1 Utilization = 500/1000 = .5

Efficiency = 600/900 = .67Utilization = 600/1000 = .6