Operations Management Class 2
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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
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
•
•
•
•
•
•
•
•
•
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
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
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
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