Transcript BUSN 6110 Class 1 - supply chain research

Operations Management
BUSN 6110
FA2, 2011
Syllabus
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Class 1 (Oct 19): chap 1; chap 2, case study (Introduction, Strategy, Decision
Making)
Class 2: (Oct 26):Chap 5, Chap 4, Chap 6, (Quality, Product and Service
Design)
Class 3: (Nov 2): Chap 8 , chap 10, chap 11, (Take home exam) (Processes
and Technologies , Facility Planning)
Class 4: (Nov 9): Chap 17, Chap 9, Chap 12, (Project Management, Capacity
and Aggregate Planning, Inventory Management)
Class 5: (Nov 16): Chap 7 (Forecasting), Chap 15, Reverse Logistics – need
“The Forklifts Have Nothing To Do!” Available in the Lewis and Clark
Bookstore
Nov 23: No class
Class 6: (Nov 30): Chap 13, Supply Chain Security, The Beer Game
Class 7: (Dec 7): Chap 16, Just in Time/TOC
Class 8: (Dec 14): Group Presentations, Final Exam (take home)
Other requirements:
→visit Harley-Davidson Plant in Kansas City, or Boulevard Brewery in
Kansas City, or The Roasterie Coffee Company in Kansas City or other
operation activity and present as small groups to the class on Dec 14.
Additional Text
The # 2 Selling
Warehousing
and Distribution Book
and #1Non-text book
Warehousing Book
Book on Oct 15, 2011
Grades
•
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Group Presentation – 10%
Case Studies – 10%
Mid Term – 40%
Final Exam – 40%
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)
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
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
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
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
Chapter 2
Operations
Strategy
To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.
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
• 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
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
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
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
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
Intro to Decision
Making
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
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
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; 800,000, 320,000
Minimums: 500,000; 320,000; -150,000
decision/State of Nature
sell condo
sell beach house
sell office bldg
EVPI
VPI
good economy
295000
175000
275000
295000
0.5
196100
16200
poor
fair economy economy
126000
76000
95000
126000
0.2
19500
37500
78000
78000
0.3
EMV
178550
113950
179900
179900
Supply Chain
Management
Supply Chain
Management
• First appearance – Financial Times
• Importance → Inventory ~ 14% of GDP
→ GDP ~ $12 trillion
→ Warehousing/Trans ~ 9% of GDP
→ Rule of Thumb - $12 increase in sales to = $1 savings in
Supply Chain
• 1982 Peter Drucker – last frontier
• Supply Chain problems can cause ≤ 11% drop in stock
price
• Customer perception of company
SCOR
Reference: www.supply-chain.org
End-to-End Supply
Chain
Plan
Plan
Deliver
Source
Return
Return
Suppliers’
Supplier
Make
Deliver
Return
Supplier
Source
Make
Deliver
Return
Return
Plan
Source
Return
Your Company
Internal or External
Make
Deliver
Source
Return
Return
Customer
Internal or External
Customers’
Customer
SCOR reference model
•
Whether from Cow to Cone or from Rock to Ring SCOR is not
limited by organizational boundaries
Copyright © Supply Chain Council, 2008. All rights reserved
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End-to-End Supply
Chain
Components
Source
Make
Sub assemblies
Deliver
Supplier’s Supplier
Source
Make
Supplier
Deliver
Manufacturer
Source
Make
Deliver
MP3 Company
Retailer
Source
Deliver
Customer
Consumer
Source
Customer’s Customer
Process, arrow indicates material flow direction
Copyright © Supply Chain Council, 2008. All rights reserved
70
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Supply Chain
“The global network used to deliver
products and services from raw
materials to end customers through
an engineered flow of information,
physical distribution, and cash.”
APICS Dictionary
Supply Chain Uncertainty
 Forecasting, lead times, batch
ordering, price fluctuations, and
inflated orders contribute to
variability
 Inventory is a form of insurance
 Distorted information is one of the
main causes of uncertainty Bullwhip
effect
Information in the
Supply Chain
 Centralized coordination of information
flows
 Integration of transportation, distribution,
ordering, and production
 Direct access to domestic and global
transportation and distribution channels
 Locating and tracking the movement of
every item in the supply chain - RFID
Bar Codes
 Computer readable codes attached to
items flowing through the supply chain
 Generates point-of-sale data which is
useful for determining sales trends,
ordering, production scheduling, and
deliver plans
1234
5678
IT Issues
 Increased benefits and sophistication
come with increased costs
 Efficient web sites do not necessarily
mean the rest of the supply chain will be
as efficient
 Security problems are very real – camera
phones, cell phones, thumb drives
 Collaboration and trust are important
elements that may be new to business
relationships
Suppliers
 Purchased materials account for about
half of manufacturing costs
 Materials, parts, and service must be
delivered on time, of high quality, and low
cost
 Suppliers should be integrated into their
customers’ supply chains
 Partnerships should be established
 On-demand delivery (JIT) is a frequent
requirement - what is JIT and does it
work?
Sourcing
 Relationship between customers and
suppliers focuses on collaboration and
cooperation
 Outsourcing has become a long-term
strategic decision
 Organizations focus on core competencies
 Single-sourcing is
How does
increasingly a part
single source
of supplier relations
differ from sole
source?
Distribution
 The actual movement of products and
materials between locations
 Handling of materials and products at
receiving docks, storing products,
packaging, and shipping
 Often called logistics
 Driving force today
is speed
Distribution Centers
and Warehousing
 DCs are some of the largest business
facilities in the United States
 Trend is for more frequent orders in
smaller quantities
 Flow-through facilities and automated
material handling
 Final assembly and product configuration
(postponement) may be done at the DC
Vendor-Managed Inventory
 Not a new concept – same process used
by bread deliveries to stores for decades
 Reduces need for warehousing
 Increased speed, reduced errors, and
improved service
 Onus is on the supplier to keep the
shelves full or assembly lines running
 variation of JIT
 Proctor&Gamble - Wal-Mart
 Home Depot
Transportation
Railroads
 95,000 - 150,000 miles in US
 Low cost, high-volume
 Improving flexibility
 intermodal service
 double stacking
Complaints: slow, inflexible, large loads
Advantages: large/bulky loads, intermodal
Trucking
 Most used mode in US -75% of total
freight (volume not total weight)
 Flexible, small loads
 Consolidation,
Internet load match sites
 Truck load (TL) vs. Less Than Truck
Load (LTL)
Air
 Lightweight, small items
 Quick, reliable, expensive (relatively
expensive depending on costs of not
getting item there)
 Major airlines and US Postal Service,
UPS, FedEx
Package Carriers
 UPS, US Postal Service, FedEx Ground
 Significant growth driven by
e-businesses and the move to smaller
shipments and consumer desire to have it
NOW
 Use several modes of transportation
 Innovative use of technologies in some
cases
 Online tracking – some better than others
Intermodal
 Combination of several modes of
transportation
 Most common are truck/rail/truck and
truck/water/rail/truck
 Enabled by the use of containers –
the development of the 20 and 40 foot
containers significantly changed the
face of shipping
Switching
Milk Cans
from a
Farmer’s
Buggy to a
Truck on a
Rural Road in
North
Carolina,
1929
Early form of intermodal transport and cross docking
Water
 One of oldest means of transport
 Low-cost, high-volume, slow (relative)
 Security - sheer volume - millions of
containers annually
 Bulky, heavy and/or large items
 Standardized shipping containers
improve service
 The most common form of international
shipping
Pipelines
 Primarily for oil & refined oil
products
 Slurry lines carry coal or kaolin
 High initial capital investment
 Low operating costs
 Can cross difficult terrain
Global Supply Chain
 Free trade & global opportunities
 Nations form trading groups
 No tariffs or duties
 Freely transport
goods across borders
 Security!!
Homework
• Motel 6 case study – one page
analysis