Transcript Operations Management Class 2

Chapter 3
Decision Making
Strategic Decisions in
Operations
Products
Services
Capacity
Human
Resources
Facilities
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
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
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; 500,000
Minimums: 500,000; 320,000; -150,000
decision/State of
Nature
good
economy
fair
economy
poor
economy
EMV
sell condo
295000
126000
19500
178550
sell beach house
175000
76000
37500
113950
sell office bldg
275000
95000
78000
179900
0.5
0.2
0.3
EVPI
VPI
183950
4050
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
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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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•
•
•
•
•
•
•
•
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
Processes and
Technologies
Process Strategy
Overall approach to producing
goods and services
Defines:
 Capital intensity
 Process flexibility
 Vertical integration
 Customer involvement
Types of Processes
Projects
Batch production
Mass production
Continuous production
Process Planning
 Make-or-buy decisions
 Process selection
 Specific equipment selection
 Process plans
 Process analysis
Make-or-Buy Decisions
1.
2.
3.
4.
5.
6.
Cost
Capacity
Quality
Speed
Reliability
Expertise
What about
Proprietary Information?
Barrier to Make-or-Buy?
Rationale for Off Shore to Low Country Source
100.00%
94.00%
90.00%
80.00%
70.00%
60.00%
50.00%
37.00%
40.00%
27.00%
30.00%
23.00%
22.00%
21.00%
20.00%
20.00%
10.00%
0.00%
$ Savings procured
goods
Penetration to new
market
inventory redux
inc customer service
access new
technology
Source: Aberdeen Research,
“Low-Cost Country Sourcing Success Strategies: Maximizing and
Sustaining the Next Big Supply Savings Opportunity,” Jun 2005
reduced cycle time
log cost reductions
Specific Equipment
Selection
1. Purchase cost
2. Operating cost
3. Annual savings
4. Revenue enhancement
5. Replacement analysis
6. Risk and uncertainty
7. Piecemeal analysis – “one piece at
a time”
Process Plans
 Blueprints
 Bill of material Flat or multiple
layers - part or assembly
 Assembly chart /
product structure diagram
 Operations process chart - list of
operations involved in assembly
 Routing sheet - sequence of events
Operations Process Chart
Part name
Crevice Tool
Part No.
52074
Usage
Hand-Vac
Assembly No. 520
Oper. No. Description
Dept.
Machine/Tools
Time
10
Pour in plastic bits
041
Injection molding
2 min
20
Insert mold
041
#076
2 min
30
Check settings
& start machine
041
113, 67, 650
20 min
40
Collect parts & lay flat
051
Plastics finishing
10 min
50
Remove & clean mold
042
Parts washer
15 min
60
Break off rough edges
051
Plastics finishing
10 min
Process Analysis
 The systematic examination of all aspects
of a process to improve its operation
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Faster
More efficient
Less costly
More responsive
 Basic tools
 Process flowchart
 Process diagrams
 Process maps
Process Flowchart Symbols
Operations
Inspection
Transportation
Delay
Storage
Process Flowchart
Description
of
process
1
Unload apples from truck
2
Move to inspection station
3
Weigh, inspect, sort
4
Move to storage
5
Wait until needed
6
Move to peeler
7
Apples peeled and cored
15
8
Soak in water until needed
20
9
Place in conveyor
5
10
Move to mixing area
11
Weigh, inspect, sort
Page 1 0f 3
Total
Distance
(feet)
Location: Graves Mountain
Process: Apple Sauce
Time
(min)
Operation
Transport
Inspect
Delay
Storage
Step
Date: 9-30-02
Analyst: TLR
20
100 ft
30
50 ft
360
20 ft
20 ft
30
480
190 ft
Process Diagram
UPS
Active
Bins
Receiving
Reserve
Storage
Picking
Packing
Monogramming
Embroidering
Quality
Assurance
Back to
Vendor
Hemming
Gift
Boxing
Shipping
Parcel
Post
Next-Day
UPS
Process Map
Customer
Waiter
Place order
Is order
complete?
Salad Chef
Dinner Chef
N
Y
Give soup or salad order to chef
Prepare soup or
salad order
Prepare dinner
order
Give dinner order to chef
Drink
Get drinks for customer
Eat salad or
soup
Deliver salad or soup order to customer
Eat dinner
Deliver dinner to customer
Receives check
Deliver check to customer
Gives payment
to waiter
Receive payment for meal
Cash or
Credit?
Credit
Cash
Collect change,
leave tip
Bring change to customer
Run credit card through
Fill in tip
amount
Return credit slip to customer
Collect tip
Give order
to waiter
Give order
to waiter
Principles for
Redesigning Processes
•
•
•
•
Remove waste, simplify,
consolidate
Link processes to create value
Let the swiftest and most capable
execute
Capture information digitally and
propagate
Principles for
Redesigning Processes
•
•
•
•
•
Provide visibility through
information about process status
Fit the process with sensors and
feedback loops
Add analytic capabilities
Connect, collect and create
knowledge around the process
Personalize the process
Other ways to redesign the
process
• Define
• Measure
• Improve
Velocity Management
Methodology
•
•
•
•
•
Define
Measure
Analyze
Improve
Control
General Electric’s
Six Sigma Methodology
Techniques for Generating
Innovative Ideas
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Vary entry point to a problem
Draw analogies
Change your perspective
Use attribute brainstorming
Information Technology
 Management Information Systems
(MIS)
 Move large amounts of data
 Decision Support Systems (DSS)
 Add decision making support
 Expert System
 Recommend decision based on
expert knowledge
Artificial Intelligence
 Neural networks
Emulate interconnections in
brain
 Genetic algorithms
Based on adaptive capabilities in
nature
 Fuzzy logic
Simulate human ability to deal
with ambiguity
Enterprise Software
Collect, analyze, and make decisions
based on data
ERP - Enterprise Resource Planning
Managing wide range of processes
Human resources, materials management,
supply chains, accounting, finance,
manufacturing, sales force automation,
customer service, customer order entry
Finding hidden patterns through data
mining
ERP
• SAP – 42% of market; forecast to
43% in 2006
• Oracle – 20%; forecast to 23% 2006
• Sage Group – 6%
• Microsoft – 4%
• Horror Stories – Hershey’s, Dell
Advanced Communications
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Electronic data interchange (EDI)
Internet, extranets
Wireless communications
Teleconferencing &
telecommuting
 Bar coding, Radio Frequency Identification
 Virtual reality
Distance Learning?
RFID
•
•
•
•
Active Tags
Always on
Battery powered
Can be read from
up to 300 ft
• US Army
• Savi Tags
•
•
•
•
•
•
•
Passive Tags
Small
Must be activated
May be turned off
England
California
Rolex
Automated Material
Handling
 Conveyors
 Automated guided vehicle (AGV)
 Automated storage & retrieval
system (ASRS) Grainger/Defense
Distribution Center, San Joaquin
Flexible Manufacturing
Systems (FMS)
 Programmable machine tools
 Controlled by common computer
network
 Combines flexibility with efficiency
 Reduces setup & queue times
 cellular layout - more on design next
week
Robotics
 Programmable manipulators
 Follow specified path
 Better than humans with respect to
 Hostile environments
 Long hours
 Consistency
 Adoption has been slowed by ineffective
integration and adaptation of systems
 Welding at Harley Davidson Plant
Next Week
• Next Class Jun 17: Facility Planning,
Project Management
• Take home exam – passed out