operations management ba-339 r.m.zahrowski operations and productivity chapter 1

Operations ManagementBA-339

R.M.ZahrowskiOperations and Productivity

Chapter 1

What Is Operations Management?

Production is the creation of goods and services

Operations management is the set of activities that creates value in the form of goods and services by transforming

inputs into outputs

Organizational Functions

• Marketing– Gets customers

• Operations– creates product or service

• Finance/Accounting– Obtains funds– Tracks money

© 1995 Corel Corp.

Organizational ChartsCommercial Bank

OperationsTeller SchedulingCheck ClearingTransactions processingFacilities design/layoutVault operationsMaintenanceSecurity

FinanceInvestmentsSecurityReal Estate

Accounting

Auditing

MarketingLoans Commercial Industrial Financial Personal Mortgage

Trust Department

What Operations Managers Do

Plan - Organize - Staff - Lead - Control

Ten Critical Decisions• Service, product design……………..• Quality management…………………• Process, capacity design…………..• Location …………….

…………………• Layout design ………………………..• Human resources, job design……..• Supply-chain management…………• Inventory management …………….• Scheduling

……………………………• Maintenance

………………………….

Ch. 5Ch. 6, 6SCh. 7, 7SCh. 8Ch. 9Ch. 10, 10SCh. 11,11sCh. 12, 14, 16Ch. 3, 13, 15Ch. 17

Why Study OM?• OM is one of three major functions

(marketing, finance, and operations) of any organization.

• We want (and need) to know how goods and services are produced.

• We want to understand what operations managers do.

• OM is such a costly part of an organization.

Why Study OM?• OM is one of three major functions

(marketing, finance, and operations) of any organization.

• We want (and need) to know how goods and services are produced.

• We want to understand what operations managers do.

• OM is such a costly part of an organization.

Operations Management

R.M.ZahrowskiOperations Strategy in a Global

EnvironmentChapter 2

The Role of

• Maquiladoras

• World Trade Organization (WTC)

• North American Free Trade Agreement (NAFTA)

• European Union (EU)

Supply-Chain Management

• Sourcing

• Vertical integration

• Make-or-buy decisions

• Partnering

Location Decisions

• Country-related issues

• Product-related issues

• Government policy/political risk

• Organizational issues

Materials Management

• Flow of materials

• Transportation options and speed

• Inventory levels

• Packaging

• Storage

Mission

• Mission - where are you going?– Organization’s purpose for

being

– Provides boundaries & focus

– Answers ‘What do we provide society?’

© 1995 Corel Corp.

Mission/Strategy

• Mission - where you are going

• Strategy - how you are going to get there; an action plan

Strategy

• Action plan to achieve mission

• Shows how mission will be achieved

• Company has a business strategy

• Functional areas have strategies © 1995 Corel Corp.

Process Design

Low Moderate HighVolume

High

Moderate

Low

Varie

ty o

f Pro

duct

s

Process-focusedJob Shops

(Print shop, emergencyroom , machine shop,

fine diningRepetitive (modular)

focusAssembly line

(Cars, appliances, TVs, fast-food restaurants) Product-focused

Continuous(steel, beer, paper, bread, institutional

kitchen)

Mass Customization

Customization at high Volume

(Dell Computer’s PC)

SWOT Analysis Process

• Environmental Analysis

• Determine Corporate Mission

• Form a Strategy

Operations Management

Supply-Chain ManagementChapter 11

• Planning, organizing, directing, & controlling flows of materials – Begins with raw materials

– Continues through internal operations

– Ends with distribution of finished goods

• Involves everyone in supply-chain– Example: Your supplier’s supplier

• Objective: Maximize value & lower waste

Supply-Chain Management

Make/Buy Considerations

1. Maintain core competencies and protect personnel from layoff

2. Lower production cost

3. Unsuitable suppliers

4. Assure adequate supply

5. Utilize surplus labor and make a marginal contribution

1. Frees management to deal with its primary business

2. Lower acquisition cost3. Preserve supplier

commitment4. Obtain technical or

management ability5. Inadequate capacity

Reasons for Making Reasons for Buying

• Plans to help achieve company mission

• Affect long-term competitive position

• Strategic options– Many suppliers– Few suppliers– Keiretsu network– Vertical integration– Virtual company

Plan

Supply-Chain Strategies

Supply-Chain Strategies• Negotiate with many suppliers; play one supplier against

another• Develop long-term “partnering” arrangements with a few

suppliers who will work with you to satisfy the end customer

• Vertically integrate; buy the actual supplier• Keiretsu - have your suppliers become part of a company

coalition• Create a virtual company that uses suppliers on an as-

needed basis.

Operations Management

Inventory ManagementChapter 12

• Stock of materials

• Stored capacity

• Examples

What is Inventory?

1 Run time: Job is at machine and being worked on2 Setup time: Job is at the work station, and the work station is

being "setup."3 Queue time: Job is where it should be, but is not being

processed because other work precedes it.4 Move time: The time a job spends in transit5 Wait time: When one process is finished, but the job is

waiting to be moved to the next work area.6 Other: "Just-in-case" inventory.

The Material Flow Cycle

Other WaitTime

MoveTime

QueueTime

SetupTime

RunTimeInput

Cycle Time

Output

• Divides on-hand inventory into 3 classes– A class, B class, C class

• Basis is usually annual $ volume– $ volume = Annual demand x Unit cost

• Policies based on ABC analysis– Develop class A suppliers more– Give tighter physical control of A items– Forecast A items more carefully

ABC Analysis

Advantages of Cycle Counting• Eliminates shutdown and interruption of

production necessary for annual physical inventories

• Eliminates annual inventory adjustments• Provides trained personnel to audit the accuracy of

inventory• Allows the cause of errors to be identified and

remedial action to be taken• Maintains accurate inventory records

Operations Management

Aggregate Planning = Aggregate Scheduling Chapter 13

Aggregate Planning Requires

• Logical overall unit for measuring sales and outputs

• Forecast of demand for intermediate planning period in these aggregate units

• Method for determining costs

• Model that combines forecasts and costs so that planning decisions can be made

• Setting goals & objectives– Example: Meet demand within the limits

of available resources at the least cost

• Determining steps to achieve goals– Example: Hire more workers

• Setting start & completion dates– Example: Begin hiring in Jan.; finish, Mar.

• Assigning responsibility

Planning

Planning Tasks and Responsibilities

Operations Management

Material Requirements Planning (MRP) & ERP

Chapter 14

Inputs to the Production Plan

Aggregate Production Plan

MarketingCustomerDemand

EngineeringDesign

Completion

ManagementReturn on

InvestmentCapital

HumanResourcesManpowerPlanning

ProcurementSupplier

Performance

FinanceCash Flow

ProductionCapacityInventory

1 2 3 4 5

Gross Requirements 2 20 25 15

Scheduled Receipts 5 30

Available 25 23 33 33 8

Net Requirements 7

Planned Order Receipts 7

Planned Order Releases 7

1 2 3 4 5

Gross Requirements 2 20 25 15

Scheduled Receipts 5 30

Available 25 23 33 33 8

Net Requirements 7

Planned Order Receipts 7

Planned Order Releases 7

• Manufacturing computer information system

• Determines quantity & timing of dependent demand items

© 1995 Corel Corp.

Material Requirements Planning (MRP)

• Computer system

• Mainly discrete products

• Accurate bill-of-material

• Accurate inventory status– 99% inventory accuracy

• Stable lead times (calculated)© 1984-1994 T/Maker Co.

MRP Requirements

Structure of the MRP System

Master ProductionScheduleBOM

Lead Times

(Item Master File)

Inventory Data

Purchasing data

MRP planning programs

(computer and software)

MRP by Period Report

MRP by date report

Planned order report

Purchase advice

Exception report

Exception report

MRP in Services

• Can be used when demand for service or service items is directly related to or derived from demand for other services– restaurant - rolls required for each meal– hospitals - implements for surgery– etc.

Operations Management

Short-Term SchedulingChapter 15

Forward and Backward Scheduling

• Forward scheduling: begins the schedule as soon as the requirements are known– jobs performed to customer order

– schedule can be accomplished even if due date is missed

– often causes buildup of WIP

• Backward scheduling: begins with the due date of the final operation; schedules jobs in reverse order– used in many manufacturing environments, catering,

scheduling surgery

The Goals of Short-Term Scheduling

• Minimize completion time

• Maximize utilization (make effective use of personnel and equipment)

• Minimize WIP inventory (keep inventory levels low)

• Minimize customer wait time

Priority Rules for Dispatching Jobs First come, first served The first job to arrive at a work center is processed first Earliest due date The job with the earliest due date is processed first

Shortest processing time The job with the shortest processing time is processed first

Longest processing time The job with the longest processing time is processed first Critical ratio The ratio of time remaining to required work time remaining is calculated,

and jobs are scheduled in order of increasing ratio.

FCFS

EDD

SPT

LPT

CR

Theory of ConstraintsA Five Step Process

Identify the constraintsDevelop a plan for overcoming the identified

constraintsFocus resources on accomplishing the constraints

identified in step 2Reduce the effects of the constraints by off-

loading work or by expanding capabilityOnce one set of constraints is overcome, return to

the first step and identify new constraints

• Bottleneck work centers have less capacity than prior or following work centers

• They limit production output

© 1995 Corel Corp.

Bottleneck Work Centers

Techniques for Dealing With Bottlenecks

1. Increase the capacity of the constraint2. Ensure well-trained and cross-trained employees are

available to operate and maintain the work center causing the constraint

3. Develop alternate routings, processing procedures, or subcontractors

4. Move inspections and tests to a position just before the constraint

5. Schedule throughput to match the capacity of the bottleneck

Operations Management

Just-in-Time and Lean Production Systems

Chapter 16

• Management philosophy of continuous and forced problem solving

• Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed.

What is Just-in-Time?

Lean Production

• Lean Production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement.

• Overproduction

• Waiting

• Transportation

• Inefficient processing

• Inventory

• Unnecessary motion

• Product defects

Types of Waste

Suppliers

Preventive Maintenance

Layout

Inventory

Scheduling

Quality

Employee Empowerment

JIT

Just-in-TimeSuccess Factors

• Get employees involved in product & process improvements– Employees know job best!

• JIT requires– Empowerment

– Cross-training

– Training support

– Few job classifications

© 1995 Corel Corp.

Employee Empowerment

Operations Management

Maintenance and ReliabilityChapter 17

• All activities involved in keeping a system’s equipment working

• Objective: Maintain system capability & minimize total costs

© 1995 Corel Corp.

Maintenance Management

Lower operating

costs

Continuous improvement

Faster, more dependable throughput

Higher productivity

Improved quality

Improved capacity

Reduced inventory

Maintenance

Maintenance Benefits

Preventive Breakdown

Routine inspection & servicing

Prevents failures Bases for doing

Time: Every day Usage: Every 300 pieces Inspection: Control chart

deviations

• Non-routine inspection & servicing

• Remedial

• Basis for doing– Equipment failure

Types of Maintenance

A Computerized Maintenance System

A Key To Success

High utilization of facilities, tight scheduling, low inventory and consistent quality demand reliability - total preventive maintenance is the key to reliability.

Best wishes on your final!More than that – I wish you

success in your careers!

• Chapters– 1&2

– 11-17

• Be sure to bring!– Blue Book

– Scan-tron• Short form