BUSN 6110 Class 1 - supply chain research
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Transcript BUSN 6110 Class 1 - supply chain research
Operations Management
BUSN 6110/PROC 5820
Syllabus
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Class 1 (Mar 12): Course Introduction
Mar 19 – No Class
Class 2: (Mar 26) chap 1; chap 2, case study, chap 5
Class 3: (Apr 2) Chap 6 ( thru 243), chap 7; chap 9 (Take home exam)
Class 4: (Apr 9)
Class 5: (Apr 16) chap 6 (243-250); chap 12, case study
Class 6: (Apr 23) chap 10, chap 11
Class 7: (Apr 30) chap 6 (243-250); chap 12, case study
Class 8: (May 7) Reverse Logistics – need “The Forklifts Have
Nothing To Do!” Available in the Lewis and Clark Bookstore; chap
14; chap 16; Supply Chain Security
Class 9: (May 14) Chap 13; Chap 3
Other requirement:
→visit Harley-Davidson Plant in Kansas City to see operations
management in practice and write a 3-5 page paper comparing the
class slides and readings to the Harley operations
Grades
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Class Participation – 10%
Mid Term – 35%
Final Exam – 35%
Harley Paper – 10%
Presentation – 10%
Contact Information
• [email protected]
• (760) 447-3651
• Personal background
Class Slides and
Information
• www.supplychainresearch.com
• Slides will be posted/updated week
prior to class – therefore the slides
currently on the website may change
as new materials come available
Chapter 1
Introduction to
Operations
Management
The Operations
Function
Operations as a transformation
process
Operations as a
basic function
Operations as the
technical core
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
OUTPUT
Goods
Services
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
Feedback
OUTPUT
Goods
Services
Transformation
Processes
Physical
Locational
(manufacturing)
(transportation/
warehouse)
Exchange
(retail)
Physiological (health care)
Psychological (entertainment)
Informational (communications)
Operations as the
Technical Core
Finance/Accounting
Suppliers
Budgets
Cost analysis
Capital investments
Stockholder
requirements
Product/Service
Availability
Lead-time estimates
Status of order
Delivery schedules
Operations
Material availability
Quality data
Delivery schedules
Designs
Personnel needs
Skill sets
Performance evaluations
Job design/work
measurement
Hiring/firing
Training
Legal requirements
Union contract negotiations
Human Resources
Sales forecasts
Customer orders
Customer feedback
Promotions
Marketing
Production and
Inventory data
Capital budgeting requests
Capacity expansion and
Orders for materials
Technology plans
Production and delivery
Schedules Quality
Requirements Design/
Performance specs
Impacts on Operations
Management
Industrial Revolution
Scientific Management
Human Relations or the lack thereof
Advent of Management Science
Quality Emphasis
Globalization of Supply Chains
Information Age/Internet Revolution
Key Events
Industrial Revolution
Steam engine
1769 James Watt
Division of labor
1776 Adam Smith
Interchangeable parts 1790 Eli Whitney
Scientific Management
Principles
Frederick W. Taylor 1911
Activity scheduling chart Henry Gantt 1912
Moving assembly line Henry Ford 1913
Key Events
Human Relations
Hawthorne studies
Motivation theories
1930
1940s
1950s
1960s
Elton Mayo
Abraham Maslow
Frederick Hertzberg
Douglas McGregor
Management Science
Linear programming
Digital computer
Simulation, PERT/CPM,
Waiting line theory
MRP
1947 George Dantzig
1951 Remington Rand
1950s Operations research
groups
1960s Joseph Orlicky, IBM
Key Events
Quality Emphasis
JIT
TQM
1970s Taiichi Ohno, Toyota
1980s W. Edwards Deming,
Joseph Juran, et. al.
Strategy and operations
Skinner, Hayes
Reengineering
1990s Hammer, Champy
World Trade Organization 1990s Numerous countries
and companies
Globalization
European Union and
other trade agreements
EDI, EFT, CIM
1970s IBM and others
1980s
Key Events
Information Age/
Internet Revolution
Internet, WWW, ERP
Supply chain
management,
E-commerce
1990s
SAP, i2
Technologies, ORACLE,
PeopleSoft, Amazon,
Yahoo, eBay,
and others
Categories of
E-Commerce
Business
Consumer
Business
B2B
Commerceone.com
B2C
Amazon.com
Consumer
C2B
Priceline.com
C2C
eBay.com
A New Value Chain
(a) Traditional Value Chain
Manufacturer
Wholesaler/
distributor
Retailer
Consumer
A New Value Chain
(a) Traditional Value Chain
Manufacturer
Wholesaler/
distributor
Retailer
Consumer
(b) Intermediaries Eliminated (Deintermediation)
Manufacturer
Wholesaler/
distributor
Retailer
Consumer
A New Value Chain
(a) Traditional Value Chain
Manufacturer
Wholesaler/
distributor
Retailer
Consumer
(b) Intermediaries Eliminated (Deintermediation)
Manufacturer
Wholesaler/
distributor
Retailer
Consumer
(b) New Intermediaries Introduced (Reintermediation)
Manufacturer
Infomediary
E-Retailer
Aggregator
Portal
Consumer
An Integrated
Value Chain
Customer
Manufacturer
Supplier
Flow of information (customer order)
An Integrated
Value Chain
Customer
Manufacturer
Supplier
Flow of information (customer order)
Flow of product (order fulfillment)
Types of B2B Transactions
Buyers
Buyer
Seller
(a) Electronic Storefront
Sellers
Sellers
(b) Seller’s Auction
Buyers
Sellers
Buyer
(c) Buyer’s Auction
(d) Exchange or E-Marketplace
E-Business Promotes:
Better customer relations
More efficient processes
Lower cost of materials
Information technology synergy
Better and faster decision making
E-Business Promotes:
New forms of organizations
Expanded supply chain
Higher customer expectations
New ways of doing business
Globalization
Globalization and
Competitiveness
• Favorable cost
• Access to international
markets
• Response to changes
in demand
• Reliable sources of
supply
• 14 major trade
agreements in 1990s
• Peak: 26% in 2000
Copyright, 2006, John Wiley and Sons
World Trade Compared to World GDP
Source: “Real GDP and Trade Growth of OECD Countries, 2001–03,”
International Trade Statistics 2003, World Trade Organization,
www.wto.org
Globalization and
Competitiveness (cont.)
Germany: $26.18
USA: $21.33
Taiwan: $5.41
Mexico: $2.38
Hourly Wage Rates for Selected Countries
Source: “International Comparisons of Hourly Compensation Costs for Production Workers in
Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003.
Copyright, 2006, John Wiley and Sons
China: $0.50
Multinational Corporations
Company
Nestlé
Nokia
Philips
Bayer
ABB
SAP
Exxon Mobil
Royal Dutch/Shell
IBM
McDonald’s
Country
of Origin
Foreign Sales
as % of Total
Switzerland
Finland
Netherlands
Germany
Germany
Germany
United States
Netherlands
United States
United States
98.2
97.6
94.0
89.8
87.2
80.0
79.6
73.3
62.7
61.5
Competitiveness
The degree to which a nation can
produce goods and services that
meet the test of international
markets while simultaneously
maintaining or expanding the real
incomes of its citizens.
Productivity
Output
Productivity =
Input
Productivity
Output
Productivity =
Input
Productivity improves when firms:
Become more efficient
Downsize
Expand
Retrench
Achieve breakthroughs
Changes in Productivity for
Select Countries
Internet-enabled
productivity
- Dot com bust
- 9/11 terrorist attacks
Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau
of Labor Statistics, U.S. Department of Labor, September 2003. U.S. figures for 2002–2003 from “Major Sector
Productivity and Costs Index,” Bureau of Labor Statistics, U.S. Department of Labor, March 2004
Copyright, 2006, John Wiley and Sons
Measures of
Competitiveness
Productivity
GDP (Gross domestic product) growth
Market capitalization
Technological infrastructure
Quality of education
Efficiency of government
Barriers to Entry
Economies of scale
Capital investment
Access to supply and distribution
channels
Learning curves
Competition Within
Industries Increases When
Firms are relatively equal in size
and resources
Products and services are
standardized
Industry growth is slow or
exponential
Primary Topics in
Operations Management
Strategy
Products and
services
Processes and
technologies
Facilities
Project
management
Managing the supply
chain
Forecasting demand
for products and
services
Production planning
and scheduling
Ensuring quality
Chapter 2
Operations
Strategy
To Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.
Chapter 2
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Vision/Missions
Strategy
METL and Goals/Mission
Competition
Strategy and the Internet
Products and Services
Strategy Deployment
Balanced Scorecard
Decision Making Tools and the MDMP
The Importance of Clearly
Stated Missions/Visions
‘The Grand Duke said “one who is
confused in purpose cannot respond
to his enemy” Sun Tzu, The Art of War
(III.23)
• To know the purpose – there must be a
clearly stated mission and vision.
Clearly Stated Mission???
“When you come to a fork in the
road, take it.”
Example of A Clearly
Understood Mission
COL Rusling on General Grant:
“He made certain his
subordinates knew exactly what
he wanted, and why and when he
wanted it.”
Example of A Clearly
Understood Mission
“We endeavor to go to the moon and
return safely before the end of this
decade.”
- John F. Kennedy
VISION®
• Vital to the Organization
• Integrated throughout the
Organization
• Sustainable and Achievable
• Important from the viewpoint of the
employees
• Organization Goals
• Not necessarily a one size fits all
vision
Velocity Management in Logistics and Distribution, 2005, Walden
Strategy Formulation
• Define a primary task
• Assess core
competencies
• Determine order
winners & order qualifiers
• Positioning the firm
Core Competencies
• Also known as core capabilities
• Skills that differentiate the service or
manufacturing firm from competitors
• Those things that the company does
best
Strategy Formulation
• Define a primary task
• Assess core
competencies
• Determine order
winners & order qualifiers
• Positioning the firm
Competing on Cost
Eliminate all waste
Invest in
Updated facilities & equipment
Streamlining operations
Training & development
Competitive
Priorities: Cost
• Southwest Airlines
– one type of airplane facilitates crew
changes, record-keeping, maintenance,
and inventory costs
– direct flights mean no baggage
transfers
– $30 million annual savings in travel
agent commissions by requiring
customers to contact the airline directly
Copyright, 2006, John Wiley and Sons
Competing on Quality
Please the customer
Understand customer
attitudes toward and
expectations of
quality
Example: Ritz Carlton
Competing on
Flexibility
Produce wide variety of
products
Introduce new products
Modify existing
products quickly
Respond to customer
needs
Competing on Speed
Fast moves
Fast adaptations
Tight linkages
Example: FEDEX, UPS, DHL
Competitive
Priorities: Speed
• Citicorp
– advertises a 15-minute mortgage approval
• L.L. Bean
– ships orders the day they are received
• Wal-Mart
– replenishes its stock twice a week
• General Electric
– reduces time to manufacture circuit-breaker boxes into
three days and dishwashers into 18 hours
• Motorola
– needs less than 30 minutes to build to order pagers
Copyright, 2006, John Wiley and Sons
Operations Role in
Corporate Strategy
Provide support for overall
strategy of a firm
Serve as firm’s distinctive
competence
Must be consistent
Must be consistent with overall
strategy
Operations and Wall
Street
• Comparing operations at a firm with
competitors
• Example
income per employee
revenue per employee
inventory turnover
customer turnover
Operations
Strategy at
Wal-Mart
Mission
Wal-Mart
Provide value for our customers
Competitive
Priority
Low prices, everyday
Operations
Strategy
Low inventory levels
Short flow times
Operations
Structure
Linked communications
between stores
Fast transportation
system
Enabling Process
and Technologies
EDI/satellites
Cross-docking
Focused
locations
Strategy and the
Internet
Create a distinctive
business strategy
Strengthen existing
competitive advantages
Integrate new and
traditional activities
Must provide a unique
value to the customer
Strategic Decisions in
Operations
Products
Services
Capacity
Human
Resources
Facilities
Figure 2.2
Sourcing
Processes and
Technology
Quality
Operating
Systems
Products & Services
Make-to-order
Made to customer specifications
after order received
Make-to-stock
Made in anticipation of demand
Assemble-to-order
Add options according to
customer specification
Processes & Technology
Project
One-time production of product to
customer order
Batch production
Process many jobs at same time in batch
Mass production
Produce large volumes of standard
product for mass market
Continuous production
Very high volume commodity product
Product-Process Matrix
High
Continuous
Production
Volume
Mass
Production
Batch
Production
Projects
Low
Low
Figure 2.3
Standardization
High
Service-Process Matrix
High
Service
Factory
Volume
Mass
Service
Low
Service
Shop
Professional
Service
Low
Figure 2.4
Standardization
High
Capacity & Facilities
How much capacity to provide
Size of capacity changes
Handling excess demand
Hiring/firing
workers
Need for new
facilities
Facilities
Best size for facility?
Large or small facilities
Facility focus
Facility location
Global facility
Human Resources
Skill levels required
Degree of autonomy
Policies
Profit sharing
Individual or team work
Supervision methods
Levels of management
Training
Quality
Target level
Measurement
Employee involvement
Training
Systems needed to ensure quality
Maintaining quality awareness
Evaluating quality efforts
Determining customer perceptions
Sourcing
Degree of vertical integration
Supplier selection
Supplier relationship
Supplier quality
Supplier cooperation
Operating Systems
Execute strategy daily
Information technology
support
Effective planning & control
systems
Alignment of inventory
levels, scheduling
priorities, & reward systems
Strategic Planning
Mission and
Vision
Voice of the
Business
Marketing
Strategy
Figure 2.5
Corporate
Strategy
Operations
Strategy
Voice of the
Customer
Financial
Strategy
Policy Deployment
Focuses employees on common
goals & priorities
Translates strategy into
measurable objectives
Aligns day-to-day decisions with
strategic plan
Balanced Scorecard
Finance — How should we look to our
shareholders?
Customer — How should we look to our
customers?
Processes — At which business
processes must we excel?
Learning and Growing — How will we
sustain our ability to change and
improve?
Issues and Trends
Global markets,
sourcing,
operations
Virtual companies
Greater choice
Emphasis on
service
Speed and
flexibility
Supply chains
Collaboration
Technological
advances
Knowledge
Environment
and social
responsibilities
The Dilbert (Dogbert) Solution –
Change the Name of the Old Program
Decision Analysis
• Payoff Table - craps tables
• Maximax - maximum of maximum payoffs
- optimistic - “hard ways”
• Maximin - maximum of minimum payoffs safe bets or even odds bets
• Minimax regret - minimum of maximum
regrets or opportunity costs
Decision Trees
• Graphical method of analyzing a
decision - similar to Theory of
Constraints
• Payoff table can be translated to a
Decision Tree
Decision Analysis
The Payoff Table
A method of organizing & illustrating
the payoffs from different decisions
given various states of nature
A payoff is the outcome of the
decision – a Craps table pay off chart
is an example of a payoff chart
Payoff Table
States Of Nature
(Alternatives)
Decision
a
b
1
Payoff 1/a
Payoff 1/b
2
Payoff 2/a
Payoff 2/b
Decision Making Criteria
Under Uncertainty
Maximax criterion (optimistic)
Choose decision with the maximum of the
maximum payoffs
Minimin criterion (pessimistic)
Choose decision with the minimum of
the minimum payoffs
Maximin criterion
Choose decision with the maximum of the
minimum payoffs
STATES OF NATURE
DECISION
Expand
Maintain status quo
Sell now
Good Foreign
Poor Foreign
Competitive Conditions
Competitive Conditions
$ 800,000
1,300,000
320,000
$ 500,000
-150,000
320,000
Maximums: 1,300,000; 500,000
Minimums: 500,000; 320,000; -150,000
Decision Tables
Enter the profits in the main body of the data table. Enter probabilities in the first row if you want to compute the expected value.
Data
Profit
Market conditions 1 Market conditions 2 Market conditions 3
Probability
Product A
1
2
0.5
Product B
Product C
0.8
1.2
0.9
0.9
1.7
0.7
MAXIMAX
Product A
2, 1.2, 1.7
MAXIMIN
Product B
.5, .8, .7
Chapter 5
Products and
Services
Product Design
Specifies materials
Determines dimensions &
tolerances
Defines appearance
Sets performance standards
Service Design
Specifies what the customer is to
experience
Physical items
Sensual benefits
Psychological benefits
An Effective Design
Process
Matches product/service
characteristics with customer needs
Meets customer requirements in
simplest, most cost-effective manner
Reduces time to market - haste vs.
speed to market
Minimizes revisions - quality
designed into the product
Stages in the Design Process
Idea Generation — Product Concept - can you
create your own market? What role does the
voice of the customer play in idea generation?
Feasibility Study — Performance Specifications
Preliminary Design — Prototype - testing and
redesign
Final Design — Final Design Specifications
Process Planning — Manufacturing
Specifications - make to order/stock – assembly
line?
The Design Process
Idea
generation
Suppliers
Product or
service concept
Feasibility
study
Performance
specifications
Form design
Customers
R&D
Marketing
Competitors
Revising and testing
prototypes
Production
design
Functional
design
New product or
service launch
Final design
& process plans
Design
specifications
Pilot run
and final tests
Manufacturing
or delivery
specifications
Idea Generation
Suppliers, distributors, salespersons
Trade journals and other published
material
Warranty claims, customer complaints,
failures
Customer surveys, focus groups,
interviews
Field testing, trial users
Research and development
More Idea Generators
Perceptual Maps
Visual comparison of
customer perceptions
Benchmarking
Comparing product/service
against best-in-class
Reverse engineering
Dismantling competitor’s product to improve
your own product
Perceptual Map of
Breakfast Cereals
GOOD
TASTE
LOW
NUTRITION
HIGH
NUTRITION
BAD
TASTE
Perceptual Map of
Breakfast Cereals
GOOD
TASTE
Cocoa Puffs
LOW
NUTRITION
HIGH
NUTRITION
Rice
Krispies
Cheerios
Wheaties
Shredded
Wheat
BAD
TASTE
Feasibility Study
Market Analysis Market Segmentation
Economic Analysis
Technical / Strategic Analysis
Performance Specifications
Not unlike mission analysis or
Intelligence Preparation of the Battlefield
Risk Analysis
1. Identify the Hazards
2.Assess hazards to determine risks.
3.Develop controls and make risk
decisions.
4.Implement controls.
5.Supervise and evaluate.
From FM 100-14
Preliminary Design
How will it look?
Create form & functional design
Build prototype
Test prototype
Revise prototype
Retest
Functional Design
(How the Product Performs)
Reliability
Probability product performs intended
function for specified length of time
Maintainability
Ease and/or cost or
maintaining/repairing product
Computing Reliability
Components in series
0.90
0.90
0.90 x 0.90 = 0.81
Computing Reliability
Components in series
0.90
0.90
0.90 x 0.90 = 0.81
Components in parallel
0.90
R2
0.95 + 0.90(1-0.95) = 0.995
0.95
R1
System Availability
MTBF
System Availability, SA =
MTBF + MTTR
System Availability
MTBF
System Availability, SA =
MTBF + MTTR
PROVIDER
MTBF (HR)
MTTR (HR)
A
B
C
60
36
24
4.0
2.0
1.0
System Availability
MTBF
System Availability, SA =
MTBF + MTTR
PROVIDER
MTBF (HR)
MTTR (HR)
A
B
C
60
36
24
4.0
2.0
1.0
SAA = 60 / (60 + 4) = .9375 or 93.75%
SAB = 36 / (36 + 2) = .9473 or 94.73%
SAC = 24 / (24 + 1) = .96 or 96%
Production Design
Part of the preliminary
design phase
Simplification
Standardization
Modularity
Final Design &
Process Plans
Produce detailed drawings &
specifications
Create workable instructions for
manufacture
Select tooling & equipment
Prepare job descriptions
Determine operation & assembly order
Program automated machines
Improving the Design
Process
Design teams
Concurrent design
Design for manufacture & assembly
Design to prevent failures and ensure value
Design for environment
Measure design quality
Utilize quality function deployment
Design for robustness
Engage in collaborative design
Breaking Down Barriers
to Effective Design
Design Teams
Preferred solution = cross functional teams
Marketing, manufacturing,
engineering
Suppliers, dealers, customers
Lawyers, accountants, insurance
companies
Concurrent Design
Improves quality of early design
decisions
Decentralized - suppliers complete
detailed design
Incorporates production process
Scheduling and management can be
complex as tasks are done in parallel
include the customer in the
process!!
Design for
Manufacture and Assembly
Design a product for easy
& economical production
Incorporate production
design early in the design phase
Improves quality and reduces costs
Shortens time to design and
manufacture
also known as Design for Six Sigma
Design for Six Sigma
• Define – the goals of the design activity
• Measure – customer input to determine what is
critical to quality from the customers’ perspective
– what are customer delighters? What aspects
are critical to quality?
• Analyze – innovative concepts for products and
services to create value for the customer
• Design – new processes, products, and services
to deliver customer value
• Verify – new systems perform as expected
DFM Guidelines
ü Minimize the number of parts, tools,
fasteners, and assemblies
ü Use standard parts and repeatable
processes
ü Modular design
ü Design for ease of assembly, minimal
handling
ü Allow for efficient testing and parts
replacement
Design for Assembly
(DFA)
Procedure for reducing number of
parts
Evaluate methods for assembly
Determine assembly sequence
Design Review
Failure Mode and Effects Analysis
(FMEA)
A systematic approach for analyzing
causes & effects of failures
Prioritizes failures
Attempts to eliminate causes
Value Analysis
(Value Engineering)
Is there value added?
Ratio of value / cost
Assessment of value :
1. Can we do without it?
2. Does it do more than is required?
3. Does it cost more than it is worth?
4. Can something else do a better job
5. Can it be made by less costly method, tools,
material?
6. Can it be made cheaper, better or faster by
someone else? Should we contract it out?
Design for Environment
Design from recycled material
Use materials which can be
recycled
Design for ease of repair
Minimize packaging
Minimize material & energy
used during manufacture,
consumption & disposal
green laws in Europe -
Examples
• Recycling of oil
• carpets in land fills - 4 billion pounds
in land fills annually
• Xerox and Hewlett-Packard - pay for
return of printer cartridges on larger
printers
Quality Function
Deployment (QFD)
Translates the “voice of the
customer” into technical design
requirements
Displays requirements in matrix
diagrams
First matrix called “house of quality”
Series of connected houses
Design for Robustness
Product can fail due to poor design
quality
Products subjected to many conditions
Robust design studies
Controllable factors - under designer’s
control
Uncontrollable factors - from user or
environment
Designs products for consistent
performance
Consistency is Important
Consistent errors are easier to correct
than random errors
Parts within tolerances may yield
assemblies which aren’t
Consumers prefer product
characteristics near their ideal values
Characteristics of Services
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•
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Services are intangible
Service output is variable
Service have higher customer contact
Services are perishable
Service inseparable from delivery
Tend to be decentralized and dispersed
Consumed more often than products
Services can be easily emulated
Call girl principle – value diminishes after
service is rendered
A Well-Designed
Service System is
Consistent with firm’s strategic
focus
Customer friendly
Easy to sustain
Effectively linked between front &
back office
Cost effective
Visible to customer