Management CH 5,6,7,8

revolutionary

new in both content and delivery method

new service development process

design, analysis, development, full launch

Service line extensions

new services that augment current services: new major at the College

window dressing

not significantly different from other services, delivered in similar fashion

scheduling

need to communicate your anticipated production schedule to your suppliers so they can schedule the delivery of raw materials to the production process.

Operating Expenses

electricity, water, community contributions

Make-to-Order (MTO)

A production environment where a good or service can be made after the receipt of a customer order. The final product is usually a combination of standard items and items that are custom-designed to meet the specific needs of the customer.

Assemble-to-Order (ATO)

A production environment where a good or service is assembled after receipt of the customer's order. The key components used in the production of the finished good or service are stocked in anticipation of demand and then used to build the product or service to the customers specifications. Receipt of an order initiates assembly.

Make-to-Stock (MTS)

A production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks. This are your typical items on the shelf of a store.

Process

A system of structured activities that use resources to change inputs (energy, material, information, labor, knowledge) into value outputs

waste

Any activity that does not add value from the customers perspective

variability

Any deviation from the optimum process that delivers perfect product on time, every time

Globalization enablers

Communication technologies, Transportation, Infrastructure improvements, Financial controls, Falling trade barriers

JIT Partnership Requirements

Eliminate unnecessary activities Reduce In plant inventory Reduce in transit inventory Eliminate poor suppliers

Economies of scale limitations

Equipment capacity, Time, Nature of product or service

elements of JIT

Have only the required inventory when needed: Reduces the need for inventory which reduces costs. Need zero defects cause you only produce/supply exactly what's needed. Reduce set-up time by performing as many activities in preparation for turnover while the machines are running.

Line Flow Process (Product Focus)

High volume low variety Assembly Line, Continuous Process

Theory of Constraint

Identify the constraint (the resource or policy that prevents the organization from obtaining more of the goal) Decide how to exploit the constraint (get the most capacity out of the constrained process) Subordinate all other processes to above decision (align the whole system or organization to support the decision made above) Elevate the constraint (make other major changes needed to break the constraint) If, as a result of these steps, the constraint has moved, return to Step 1. Do not let inertia become the constraint.

layout

JIT layouts reduce the waste associated with the movement of materials and people.

intermittent

Low volume high variety Job Shop/Batch Shop

Disadvantages of cross-docking

Potential partners don't have necessary storage capacities, Need for an adequate transport fleet to operate, Need for a computerized logistics system, Additional freight handling can lead to product damage

Capacity Strategies

Proactive, Neutral, Reactive

Cross-docking

Products get to the distributor and consequently to the customer faster, Reduces, or eliminates warehousing costs, May increase available retail sales space.

JIT inventory

Reduce Inventory, Reduced Variability, Reduced Lot Size, Reduced Setup costs, Scheduling (upstream)

Reduced Space and Inventory

Since JIT layouts reduce travel distance, they also remove space for storing inventory. Since there is little extra space, inventory must be moved in small lots.

Taxes, Tariffs, Quotas, Restrictions

Some communities will grant tax holidays to companies that are able to guarantee employment for large numbers of local workers. If you are exporting to your home country or other countries, you need to be aware of the export limitations of sensitive products such as clothing and food. You might face restrictions on importing the necessary raw materials to run your operations and be forced to purchase more expensive local products.

5s/7s

Sort , Set, Shine, Standardization, Sustain, Safety, Skills

Cross-docking Advantages

Streamlines the supply chain from point of origin to point of sale, Reduces labor costs through less inventory handling, Reduces inventory holding costs through reduced storage times and potentially eliminating the need to retain safety stock

Capacity

The limit on the amount of output per period of time that a process can generate or store given a level of inputs and resources available.

Yield

The percentage of units successfully produced as a percentage of inputs

tangible factors

Transportation Costs , Operating Expenses (facility costs) , Labor Costs, Taxes, Tariffs, Quotas, Restrictions, Exchange Rates, Product Content Requirements

intangible factors

Worker Education and Skills, Community Attitudes, Local/State/National Laws, Unionism, Environmental Regulations, Quality of Life

Job Shop

You produce only a specific quantity of a product that is customized to meet the design specifications of the customer.

Product Focus

a facility organized around a product or a product family. High-volume, low variety output. Lot size is large and output varies in size, shape and packaging.

JIT ( just in time)

a manufacturing philosophy based on the planned elimination of all waste and on continuous improvement of productivity through problem solving

Time-function mapping

a process flowchart diagram with time added on the x-axis

Value stream mapping

a process that helps managers understand how to add value to the flow of material, customers, patients, clients, and information through the entire process. The mapping also identifies non-value adding activities - WASTE.

Project Process

a single and unique, usually fixed site product. It is also called a fixed position layout

waste

all elements of production that only increase cost without adding value that the customer is willing to purchase.

Capacity Flexibility

allows you to react quickly to changes in the marketplace. Also called agile manufacturing. Flexibility is achieved through flexible plants, processes, workers and strategies that use the capacity of other organizations (use of external capacity).

New services for current markets

are new service offerings that are provided to existing customers of an organization: bank kiosk in a supermarket

Service improvements

are new services in which the features have changed relative to existing services: e-ticketing, order kiosk at a fast food restaurant

Major innovations

are new services that address markets that are not fully defined. Driven by information based technology. Internet banking.

Style changes

are visible changes that impact the customers perceptions, emotions and attitudes: restaurant renovation and "Grand Reopening"

analysis

considering the financial implications of the new service; examining supply chain issues for delivery of service

channel development

delivery of same/existing service through a different/new channel

Labor Costs

direct labor, support staff and management. Management is a critical issue in international location decisions. You need to be able to develop local talent as a way to avoid cultural differences or if you want to maximize your penetration of the market. This requires training of locals for future management positions and can be budgeted.

Impact on Employees

employees are cross-trained so they can bring flexibility and efficiency to the work cell. Employees can easily move to new work areas or contact surrounding work areas when a production problem occurs

design

formulating the objectives and strategy of the new service

External Factors Affecting Capacity

government regulations (working hours, safety, pollution), union agreements (affects overtime and job functions), supplier capabilities and capacities

Flexible workers

have multiple skills and the ability to rapidly switch tasks. They require extensive education as to how the system is expected to perform and training in their new tasks. Flexible workers are required for both flexible plants and flexible processes.

Local/State/National Laws

incentives provided such as worker training, infrastructure improvements. A key issue here is how easy the local government makes it to do business. The greater the number of rules and regulations, the less desirable the location is to do business.

Use of external capacity

includes subcontracting and sharing capacity. Subcontracting is the sending of production work outside to another manufacturer. Nike subcontracts all their shoe production. Capacity sharing occurs when firms share resources such as boarding gates at an airport or through a joint venture to purchase a manufacturing plant.

Process Focus

low volume but high variety. The end product is customized to meet customer specifications which means that many inputs can be transformed into a variety of outputs. Scheduling of jobs is critical.

Radical Services

major innovations, start-up services, new services for current markets

Neutral

management adds capacity after demand has exceeded capacity. Balance between excess capacity and lost sales

Reactive

management adds capacity only when they are sure the additional output from a capacity expansion can be sold. Capacity shortage results in lost sales. Use subcontracting to meet the shortfall. Best strategy for continuous process operations that require a high fixed cost in the form of plant and equipment.

Proactive

management anticipates future demand growth and adds the required capacity to meet that demand before the demand occurs. Excess capacity but no lost sales. Best strategy for labor intensive operations and intermittent processes where capacity can be added in smaller increments as needed.

Worker Education and Skills

manufacturing and service operations increasingly use technology as a way to reduce lead time and therefore speed up the process. An educated workforce can be trained in new skills such as quality control techniques or how modern manufacturing techniques such as Just-in-Time work.

seven wastes

overproduction, inventory, waiting, motion, transportation, defects/errors, extra processing, confusion

Human Resources

people skills are usually a must so training is essential. Cross-trained employees increase the flexibility of the service operations since employees can be shifted to high need areas when necessary.

Community Attitudes

people want clean, safe businesses that have a low impact on the community and provide quality jobs that pay well. Given a choice would you rather have a steel mill or a computer factory in your community.

Internal Factors Affecting Capacity

product and service design, personnel and jobs (worker training, motivation, learning, job content and methods), plant layout and process flow (intermittent or continuous), equipment capabilities and maintenance requirements, materials management, quality control systems, product mix decisions, management capabilities

process structures

project process, Intermittent Process (Process Focus) , Line Flow Process (Product Focus)

Start-up services

provide new services to existing markets that are already served by existing services: auto repairs at your home, windshield repair

Throughput

rate of production for a process over a specific amount of time

Distance Reduction

reduce the distance between machines used in the production process by having the machines next to each other. For a job shop operation you want to create a work cell of various machines used in making a product

Reduce Lot Size

reduction in lot sizes results in reducing inventory levels and increases manufacturing throughput (the reduction of manufacturing cycle time).

lean management

the compression of time by eliminating waste and thus continually improving the process.

Economies of scale

refer to economic efficiencies that result from carrying out a process on a larger scale. Scale effects are possible because in most production operations fixed and variable costs are involved; the fixed costs are not related to production volume; variable costs are. Large production runs therefore "absorb" more of the fixed costs.

full launch

releasing the service to the market place

Reduce Setup Costs

separate setup into preparation and actual setup, doing as much as possible while the machine is still running. Use standard tooling and a one-touch calibration system. Look for ways to continuously improve the setup process.

Incremental Services

service line extensions, service improvements, style changes

breadth of offering

significant design change in content of service, delivered in similar fashion

development

testing the service design, training personnel, conducting pilot runs

Best Operating Level

the capacity (production volume) for which the average unit cost of output is at a minimum. The optimum production volume will depend on the above factors that affect capacity.

Mass Customization

the creation of a high-volume, low-cost production process that produces a product that has a high variety of outputs according to customer specification. An example is ordering a computer on-line according to available components.

Reduce Inventory

the first step towards a JIT system is the removal of inventory so that problems are exposed

Economies of Scale

the output range in which average unit costs decrease as unit production volume increases. This decrease occurs until the Best Operating Level is reached. Economies of Scale occur for several reasons. Fixed costs are spread out over a greater number of units, thereby reducing the amount of overhead allocated to each unit. Quantity discounts in purchasing occur as volumes increase, thereby lowing material costs.

Diseconomies of Scale

the output range in which unit costs increase as unit production volume increases due to the added costs incurred at operating levels exceeding the Best Operation Level. Diseconomies of Scale occur due to overtime, inefficient scheduling of workers and jobs, and poorly coordinated material flows.

Utilization

the percent of process capacity that is actually used.

Assembly Line

the process is dedicated to a single product or a small family of similar products. Cumulative volume is large and is typically a make-to-stock strategy

push system

the production of items at the specified times required in a given schedule that has been planned in advance. Materials are released according to the scheduled start of the job and the units are produced and then moved along as WIP or FG inventory. Upstream operations "push" RM and WIP to downstream workstations regardless of their timeliness or availability of resources to perform the work.

pull system

the production of items only as demanded for use or to replace those taken for use. Materials (RM or WIP) are withdrawn from an upstream stocking point when a signal from a downstream operation is received. The location where the materials were taken from will then replenish the depleted inventory, if required. Downstream operations "pull" materials from upstream operations. JIT is a PULL SYSTEM!!

Continuous Process

the production process is dedicated to a single, high volume product where the materials are easily moved from one stage to the next

Unionism

this is why foreign auto makers are located in the Southern United States

project process

unique, one of a kind, fixed location

Repetitive Focus

use of modules in a repetitive production processes. Modules allow some customization while the repetitiveness gives efficiencies

High-Level Process Map

used to diagram major business process. Based on SIPOC: Supplier, Input, Process, Output, Customer

Flowchart

used to show the details of a process including tasks and procedures, alternate paths, decision points, rework loops, queues and storage points.

process chart

uses symbols, time and distance to analyze the movement of people or material

Flexible processes

utilize equipment with low set-up times that can produce a variety of products

Flexible plants

utilize moveable equipment with low set-up times that can produce a variety of products and easily accessible and re-routable utilities. Allows the plant to change configurations and product mixes quickly and at low cost.

Reduce Variability

variability in the system is hidden by inventory. The more inventory you have the harder it is to detect problems that can be corrected, thereby leading to more efficient production.

Transportation Costs

will vary according to the infrastructure, method (rail, trucking, air, shipping) and number of firms in the area offering transportation services. Transportation costs are also affected by the distance to customers and from suppliers. The longer the distance the higher the cost.

categories of new services

window dressing, breadth of offering, revolutionary, and channel development

Increased Flexibility

work cells can be easily re-arranged to adapt to changes in volume, product design or production volumes. By having a flexible layout you can rapidly adjust to the changes that result from product and process improvements.

Technology

you can automate some of your processes (and reduce direct labor costs) by letting the customer perform some of the activities. Order on-line instead of by toll free number (catalog companies) or automatic teller machines for banking.

Batch Shop

you produce multiple units of similar or standard products where repeat orders are common