mgt final exam prep
The new computer controlled NCX machine has replaced 3 older machines. Before the replacement, each part required two minutes of processing on the first machine, then eight minutes of processing on the second machine, and finally four minutes on the third. (Each of these machines had a dedicated, independent operator.) The new NCX machine can do all 3 steps in 10 minutes per part. As a result of the introduction of the NCX: (4 points)
(i) flow time per part for this process has: increased decreased (From 2+8+4 =14 to 10) not changed (ii) capacity rate for this process has: increased decreased (From 60/8 = 7.5 units/hour to 60/10 = 6 units/hour) not changed
Theoretical Capacity
-Can be defined as the maximum rate at which a production system can convert inputs into outputs -Typically measured in output per unit time (e.g. cars per day) -Does not tell you how long that rate can be sustained
Decision trees
-Helps us evaluate capacity alternatives -Consists of decision nodes, chance nodes and branches -How to solve? §Work from the end of the tree backward and calculate the expected value for each of the possible decisions §Eliminate from each decision node the alternatives that do NOT yield the highest expected value §Continue the process until the first decision point -Applied it to a Capacity Investment Problem
Flexibility:
-How easily can production respond to different environments?
Best Operating Level (or Nominal Capacity or Design Capacity)
-Is the rate at which the system was designed to produce -Characterizes the level of capacity for which the average unit cost is at a minimum
two pass method: backward pass (Late start schedule)
-Latest Finish Time of any activity = Min {Latest Start time of all the immediate successors} -Latest Start Time of any activity = Latest Finish Time for that activity - Duration for that activity
Capacity
-The maximum rate that the factory can convert inputs to outputs (example: cars per day)
Best operating level
-The rate at which the system is designed to operate. (the average unit cost is minimum)
Experience curve:
-The required time to produce one unit decreases with the cumulative number of products
project
-a well-defined collection of jobs or activities that need to be performed in a specified sequence to achieve a common goal.
Project Management
-planning, directing, and controlling resources (people, equipment, budget) to meet the technical, cost, and time constraints of the project.
I.Qualitative methods
. Grass roots: 1)Derives the forecast by compiling the input from those at the end of the hierarchy §Assumption: the person closest to the consumer knows its future demand best §Forecasts from the bottom level are summed up and given to the next level (district warehouse) §This data is then fed to the next level (regional warehouse) §Procedure continues until the top level (input to prod. system) b. Market Research (customers): 1)Data is collected using surveys and interviews §Typically used for new products c. Panel Consensus (internal experts): 1)Developed through open meetings with free exchange of ideas from all levels §Idea: Two heads are better than one §Drawback: Lower level may be intimidated (a salesperson would not refute the vice president of marketing) §Delphi Method was developed to overcome this drawback d. Delphi Method: 1): The name derives from the Oracle of Delphi. Conceals the identity of participant §To prevent the views of the upper management from having more weight or intimidating the lower management §A moderator creates a questionnaire §Responses collected (everybody has the same weight) §Responses are summed up and given back with new questions §Usually three rounds achieve satisfactory results •Primarily used when data are scarce •Subjective and judgmental in nature used when data is scarce
I.Time-series methods
. Simple Moving Averages, b. Weighted Moving Averages c. Exponential Smoothing •Based on the idea that data relating to past demand can be used to predict future demand •Used when •Several year's data for a product are available and •Relationships and trends are both clear and relatively stable
) How many orders can you fill in a night? Assume you work for 4 hours
1-oven Process capacity =6 dz/hr output =6 *4 =24 dz
different measures of productivity
1. partial (SFP) =output/(single input). ex. =output(labor) or =output/(energy) 2. multi-factor (MFP)= output/(multiple inputs). ex. =output/(labor + capital + energy) or =output/(labor + capital + materials) 3. Total measure (TFP): output/(total inputs). ex. Goods and services produced/(all resources used).
Process Selection
1.According to Customer Interface 2.According to Process Layout
Steps of the Time Cost Method
1.Determine the required sequence of activities and construct a network reflecting the precedence relationships 2.Determine the critical path 3.Shorten the critical path at the least cost (same as cpm) 4.Minimize the total project cost (new)
enumeration method
1.Identify each activity to be done in the project and estimate how long it will take to complete each step (deterministic) 2.Determine the required sequence of activities and construct a network reflecting the precedence relationships 3.Determine the critical path a)Identify all paths that originate from the start node to the end node. b)For each path, add the task times for all tasks on that path. c)Find the maximum path time critical path 4.This is the time that is required to finish the project.
The Design Process: Six Phases
1.Planning 2.Concept Development 3.System-Level Design 4.Detail Design 5.Testing and Refinement Pilot Production/Ramp-up
Queuing system
1.The way people arrive at the system 2.The servicing system 3.The condition of the people exiting the system
adding a second oven.
2-oven Process capacity =7.5 dz/hr output = 7.5 * 4= 30dz 1-oven Process capacity =6 dz/hr output =6 *4 =24 dz worth it
Variability, Buffers, and Inventory
2. What are the effects of variability on: •Flow time •Inventory •Throughput rate (and effective capacity rate)? How does variability have these effects?
duration
200 days they want 175
Forecasting
A perfect forecast is usually impossible because too many factors in the business world cannot be predicted with certainty. uLike a hole in one in golf: ugreat to get but we should be satisfied just to get close to the cup. Create the best forecast that you reasonably can and then hedge by maintaining flexibility to account for the inevitable forecast error. 3rd is casual methods.
Flexibility
A system is flexible when it adapts easily to a wide range of possible environments..
Time-Cost Trade-Off
Activities can be accelerated (or "crashed") at a cost "Crash time" is the minimum possible time to complete an activity "Crash cost" is the cost associated with the crash time. Assume Linear: Slope = crash cost per unit of time
extending CPM: time-card models
Activity direct costs (Cost to expedite) goes down if project duration increases and project indirect cost (cost to sustain a project go up. Goal: Determine the optimum point in time-cost tradeoffs
Example 1: Insurance Company
An insurance company processes 10,000 claims per year. The average processing time is 3 weeks. How many claims are in the system on average? (Assuming 50 weeks in a year) R= 200 claims / week, T = 3 Weeks, I = R x T = 600 claims Now, the company reduces its processing time by 80%. How many claims are in the system on average? R= 200 claims / week, T = 0.6 Weeks, I = R x T =120 claims
Sources of variability in a queuing system:
Arrival rate maybe uncertain Service rate maybe uncertain Number of servers maybe uncertain (server failure)
more bottleneck
Bottleneck is constantly busy (fully utilized) while other resources are not. Bottleneck determines the capacity rate of the system.
Sam Walton's formula:
Buy cheap, sell for less than the other guy, and make your profit on high volume and fast turnover.
Capacity Utilization
Capacity used is the rate of output actually achieved Best operating level is the capacity for which the process was designed.
OM Triangle & PK Formula
Capacity, inventory and information (variability reduction) are substitute ways to meet demand.
order winners (or competitive dimensions)
Criteria that differentiate the products or services of one firm from another. Order Winners drive a customer to buy this firm's products rather than others'.
Economic Order Quantity (EOQ) Model
Data: D = Demand rate (units / yr) C = Cost of purchasing or producing a unit ($ / unit) S = Setup cost or per order or per production run ($) H = Annual holding cost per unit of inventory ($ / (unit•yr)) H is often taken as a percentage of the unit cost: H = i C, where i is annual percentage holding cost Decision: Q = Quantity of an order (units) Objective: To minimize the total cost Let's see how to compute the total cost ...
Inventory
Definition: The stock of any item or resource used in an organization •Previously, we also referred to customers waiting as inventory •Today and next a few classes, our subject of interest is physical products In the forms of • Raw materials & component parts • Work in process • Finished products • Replacement parts, tools, & supplies • Goods-in-transit to warehouses or customers
What is Quality
Design quality: Inherent value of the product in the marketplace: A strategic decision for the firm •Dimensions: Performance, Features, Reliability/durability, Serviceability, Aesthetics •Good quality does not mean luxury. A firm designs a product or service to address the need of a particular market. • Conformance quality: Degree to which the product or service design specifications are met
bottleneck
Determines the process capacity To increase the process capacity, focus on the bottleneck Bottleneck may shift when adding resources to bottleneck
Fashion retailers, in particular, need to have plenty of inventory on hand because demand is so unpredictable.
False (what's in style will change fast, you don't need a lot of inventory because it will just go on side)
uses of forecasting
Finance and Accounting •Basis for budgetary planning and cost control Marketing •Relies on sales forecasting to plan new product introductions and also to compensate sales personnel •Bonus determined by the sales relative to the forecast Production •Uses forecasts to make periodic decisions •Process selection, capacity planning, and facility layout •Uses forecasts to make continual decisions •Production planning, scheduling, and inventory
Revenue Management: Common Features
Fixed amount of resource or product to sell •Number of seats on a plane are fixed in the next two-month period Finite selling season beyond which value of the product drops •I can't sell tickets to a flight that has already departed Fixed costs are sunk, marginal costs are small, hence, the name "revenue" management •The plane will take off even with a single person. •The cost of having one more person on the plane is small, the cost of peanuts and soda Demand is uncertain •Plane is sometimes full, sometimes empty Customers are heterogeneous in their •willingness to pay, time preferences, and level of individual uncertainty Typically more valuable customers arrive later •How much capacity to reserve for more lucrative customers? •Reverse is true in the fashion goods pricing
Incorporating Demand Variability
Fixed-order quantity model •Continuous review system (Event-triggered restocking) •An order of a fixed quantity Q is placed every time the inventory reaches a reorder point ROP Fixed-time period model •Periodic review system (Time-triggered restocking) •A quantity that depends on the current inventory on hand is ordered
two pass method: forward pass (early start schedule)
Forward Pass (Early start schedule) -Earliest Start Time of any activity = Max{Earliest finish time of all the immediate predecessors} -Earliest Finish Time of any activity = Earliest Start Time for that activity + Duration for that activity.
Adding some more terminology
Gross Requirements: How many of an item you need by a certain date Inventory On-hand: How many units you have at hand Net requirements : Gross requirements - Inventory at hand Planned order receipt: Using the net requirement, calculate when the orders should be received Planned order release : Offset the Planned order receipt by the leadtime. This is the time you should start working on the item. Start from the end item and move down the list.
A product structure tree can do which of the following?
Help to compute component usage
mmary of Fixed-Order Quantity Model
How much to order? QOPT = EOQ When to order? When inventory hits Re-Order Point: ROP = d L + SS Safety Stock is determined based on •Service level •Demand variability •Lead time
Comparison: Normal and Discrete Demand
In both cases: ROP = d L + SS With normal demand SS = z sL With discrete demand •Find ROP directly based on the distribution of the lead time demand, then SS = ROP - d L
littles law
Inventory = Throughput Rate × Flow Time
Volume Flexibility
It is the ability to operate at different overall output levels cost effectively.
Manufacturing Lead Time (Flow Time
It refers to the length of time that a unit spends in the system
Process Flexibility
It relates to the set of part types that the system can produce without major setups.
Why Not to Hold Too Much Inventory?
It's costly •Physical storage costs •Cost of spoilage •Opportunity cost of capital •Insurance cost It's risky •Risk of product obsolescence •Risk of over supply It can be substituted •By Information or capacity It hides problems •Sea of inventory
Price Variations
It's estimated that about 80% of transactions between manufacturers and distributors in the grocery industry are made in a "forward buy!! Contributing factors •Promotions •Quantity discounts Retailers buy only when price drops. The retailer's buying pattern does not reflect its consumption pattern Counter Measures •Everyday low price •No discount to retailers uCurrent Practice: P&G: •Slashed prices 12-24% from 1991-4 •Direct discounts to consumers through coupons, no discounts to retailer
Which of the following forecasting methodologies is considered a causal forecasting technique?
Linear regression
Master Production Schedule (MPS)
MPS is one of three primary inputs in MRP MPS states •which end items are to be produced, •when these are needed, and •in what quantities
Material Requirements Planning (MRP)
MRP is a computer based system MRP "explodes" Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS MRP answers the following two questions: •How much of an item is needed? •When is an item needed to be completed? Nets against current orders and inventories to develop production and purchased material ordering schedules Dependent demand drives MRP
What is Material Requirements Planning (MRP) ?
MRP is the logic for determining the number of parts, components ,and materials needed to produce a product. MRP is a system installed almost universally in every manufacturing firm. MRP also provides the schedule specifying when each of the material, parts ,and components should be ordered and produced The "theme" of MRP is getting the right materials to the right place at the right time
Evolution of Resource Planning Systems
MRP: Material Requirements Planning MRP II: Manufacturing Resource Planning ERP: Enterprise Resource Planning SCM: Supply Chain Management GCI: Global Customer Integration
DFMA Guidelines
Minimize number of parts •Easier assembly Use standard materials, parts and procedures •Economies in purchasing and inventory Avoid separate fasteners •Cost of driving a screw much higher than screw itself •Reduced complexity of assembly Minimize number of assembly directions and make assembly foolproof
Theoretical flow time
Minimum flow time if no wait
lessons
Must match product / process position to competitive and marketing strategy Must match process to product attributes throughout the product's life cycle
Should you give any discount to people who order two dozen cookies, three dozen cookies? If so, how much?
No, if you pay workers for full time. It takes the same time to fulfill one two-dozen order as two one-dozen orders. Yes, if you pay for time actually worked. It takes more labor time/dozen to fulfill a two-dozen order than a one-dozen order. The discount would be equal to the savings in time worked (e.g., 7 minutes for two dozens * labor rate).
Upstream consideration of the organization's manufacturing capabilities when designing a product.
Objective: Ease of fabrication and/or assembly which is important for: •Cost •Productivity •Quality Consult manufacturing engineers during design process •Resulting teamwork avoids many difficulties to arise
Which of the following is considered a primary report in an MRP system?
Planned order schedules
MRP Outputs
Planned orders - schedule indicating the amount and timing of future orders. Order releases - Authorization for the execution of planned orders. Changes - revisions of due dates or order quantities, or cancellations of orders
throughput rate
R <_ C
Benefits of Design for Manufacturability
Reduced complexity of the product Additional standardization of components Improved job design Improved job safety Improved maintainability of the product Robust design to small variations in production or assembly
How long will it take to fill a rush order
Refers to the theoretical flow time. takes 26 minutes to fill rush order for 1 dozen of cookies. It takes 36 minutes to fill rush order for 2 dozen of cookies
Inventory Buildup and Throughput Rate
Scenario 1: Demand rate < Capacity, and no inventory •Inventory does not build up •Throughput rate = Demand rate • Scenario 2: Demand rate > Capacity •Inventory builds up at rate: Demand rate - Capacity •Throughput rate = Capacity rate • Scenario 3: Demand Rate < Capacity, inventory exists •Inventory depletes at rate: Capacity - Demand rate •Throughput rate = Capacity rate
Queueing Models
Single server (single channel) models •PK formula applies to this setting •More explicit formulas are available under the assumptions that inter-arrival times and service times are exponentially distributed Multi-server (multi-channel) models •Multi-server PK formula •More explicit formulas are available under the assumptions that inter-arrival times and service times are exponentially distributed
critical path and slack
Slack=(7-4)=(9-6)= 3 Wks
The Product Development Imperatives
Speed - To be fast and responsive to the changing needs of the customers Efficiency - To have high development productivity Quality - To be able to produce products with distinction and integrity.
Capacity Planning DecisionsTime Dimension of Capacity
Strategic Level: •Long Range: > one year •E.g.: buildings, equipment, facilities Tactical Level •Intermediate Range: monthly or quarterly plans for the next 6 to 18 months •E.g.: minor equipment purchases, hiring workers, layoffs, subcontracting Operational Level •Short Range: < 1 month (daily or weekly scheduling process) •E.g.: overtimes, personnel transfers, alternate production routings
Supply Chain Management: Learning Objectives
Supply-Chain Management Measuring Supply-Chain Performance Bullwhip Effect What is the Right Supply Chain? Strategic Global Sourcing
Total Quality Management (TQM)
TQM - Managing the entire organization so that it excels on all dimensions of products and services that are important as perceived by the customer Two fundamental operational goals of TQM •Careful design of product/service •Capability to consistently produce the design
Operational Activities
Tailored for strategic fit.
kristins cookie timining
Taking orders: Negligible Washing the bowl and mixing ingredients (you): 6 min •Regardless of how many dozens of cookies mixed Dishing up the cookies (you): 2 min/tray Put the cookies in the oven (roommate): 1 min/tray Total baking: 10 min (including the loading phase) Take the tray of cookies out of the oven: Negligible Cooling (tray): 5 min Packing (roommate): 2 min/dozen Receiving payment (roommate): 1 min/order
Economies of scale:
The notion that greater production volumes display lower unit costs
Economies of scope:
The notion that increased variety lowers unit costs. flexibility
Flow time efficiency
Theoretical flow time / Actual flow time
Fixed-Time Period Model
Time-triggered restocking: •Orders are placed every T days (review period) •Order up to a Target Inventory Position •Order setup cost is sunk • Objective: Minimize inventory with service level guarantee Decision: How much to order every time? But first, average order size = d T (assuming backorder)
Why Hold Inventory?
To meet predictable variability in demand or supply (seasonal inventories). -To provide a safeguard for unpredictable variability in demand or supply (safety stock) -To reduce the inter-dependence of various operations in production or service (decoupling/buffer inventory) -To take advantage of economies of scale (cycle stocks) -Economy of scale in production -Economy of scale in logistics -To form the process flow (pipeline inventory)
"Operations Management" refers to manufacturing and service processes used to transform resources employed by a firm into products desired by customers.
True
An example of an assemble-to-order firm is Dell Computer.
True
Long-range capacity planning requires top management participation.
True
Productivity is a relative measure
True
Productivity is a relative measure.
True
Simulating waiting lines:
Waiting lines that occur in series and parallel (such as in in assembly lines and job shops) cannot be solved mathematically, but can be easily simulated on a computer
What is Revenue Management?
What is Revenue Management? •Technique to maximize revenue by tactically matching fixed supply with uncertain demand •Tries to influence demand (as opposed to forecasting) •Two important dimensions •Price discrimination •Capacity control Examples •Airlines •Hotels •Concert tickets
Quick Response vs. VMI
What's the difference? Who chooses the order quantity? •VMI: Supplier •QR: Retailer Who chooses when to order? •VMI: Supplier •QR: Retailer Sales information passed back to the supplier. Bullwhip effect is reduced.
Safety Stock (SS)
When demand has unpredictable variability, safety stock is held to cushion against uncertainties ROP = Average demand during lead time + SS With SS, will shortage still occur? Yes, if actual demand during lead time > ROP What determines SS? •Service level •Demand variability •Lead time
Which of the following is a partial measure of productivity? a. Output/Materials b. Output/(Labor + Capital + Energy) c. Output/Inputs d. Output/All resources used e. All of the above
a. Output/Materials
OM structures the processes...
and manages resources to develop the appropriate capabilities to convert inputs to outputs.
which of the following basic types of process structures is one which similar equipment or functions are grouped together? a. Project b. Workcenter c. Manufacturing cell d. Assembly line e. Continuous process
b. Workcenter
example with double the download
bottleneck is the lower number of capacity rate. time does not increase. 1/60*60=1min. flow time is the samebc the customer still waits 2 minutes. we didnt increase the download time we just added anotherdownload machine. capacity rate is now 40 bc 40 is the bottleneck.
Economies of Scale
buying in bulk for discounts. -Notion that greater production volumes display lower unit costs than do lesser volumes. -Scale economies arise because of »fixed cost inputs »specialized equipment »price breaks for inputs (volume discounts)
Operational capabilities and structures have to be compatible with
corporate strategy or 4 dementions
input
customer per hour (units/hr)
example of caculating flow time and cycle time
cycle time is inverse of capacity rate so 1/40 * 60 = 1.5 for validate order and 1/30*60= 2 min for 2 sucsessful download. flow time is 1.5+2min = 3.5 for the whole process. bottleneck is slowest actvivity or lowest number so capacity rate is 30/hr of whole process. and cycle time for whole is 2 min bc download is the bottleneck.
the ability to rapidly and inexpensively switch production from one product to another enables what are sometimes referred to as? a. Economies of scale b. Economies of size c. Economies of shape d. Economies of scope e. Economies of shipping
d. Economies of scope
When deciding to add capacity to a factory which of the following need not be considered? a. Maintaining system balance b. The frequency of capacity additions c. Use of external capacity d. Immediate product demand e. Availability of raw materials
d. Immediate product demand
Which of the following is not a major strategic operational competitive dimension that forms a company's competitive position?b. Delivery speed c. Delivery reliability d. Management acumen e. Coping with changes in demand a. Cost or price
d. Management acumen
Pure Project
dedicated cross-functional team. 3 workers from 3 different departments working 3 days on a new project only. •Dedicated cross-functional team •Project manager as sole boss •Pros: •Decision made quickly, •High motivation, •Authority •Cons: •Duplication of resources
over the wall approach
designer and manufactures know more about each others jobs now.
Now compute multi-factor labor and capital productivity figures.
do hours labor + capital
two pass method example pt. 2 determine early starts and early finishes
ef=es and then ef is added to es from the duration. d and e have to be done so you take the maximum number which is 9.
flow shop
efficncy resource (e.g., X-ray dept, billing. products dont share resources
According to Little's Law, if flow time is reduced, inventory always drops
false
Market research is a quantitative method of forecasting.
false
There is not much that a firm can do to influence independent demand.
false
Trend lines are usually the last things considered when developing a forecast.
false
inventory builds up in a process, it first builds up right in front of the bottleneck of the process
false
•Fashion retailers, in particular, need to have plenty of inventory on hand because demand is so unpredictable.
false
job shop
flexible. easier to deal with and higher variety. require layout change often. intro
Actual flow time
flow time including waiting
capacity rate and bottleneck
flow time is the time bewtween but cycle time is the compared time. Capacity rate: the rate units flow through a system (= inverse of cycle time).
two pass method
for more complex network we use two pass method to identify critical path. 1.Determine the required sequence of activities and construct a network reflecting the precedence relationships ● 2.For each activity 1.Determine the Earliest Start and Finish Times 2.Determine the Latest Start and Finish Times ● 3.For activities not on the critical path, there is a slack time between when that activity is finished and when the immediate successor is started. 1.Slack = Earliest Start Time (ES) - Latest Start Time (LS) - 0 slack means it is critical.
Demand Management vs. Forecasting
forecasting: Try to infer future demand Demand Management: Ways to influence future demand The firm can increase demand through •Motivating its sales force •Heavy advertisement •Cutting its prices The firm can decrease demand through •Price increases •Reducing sales and promotional efforts •Reduced availability
ganntt
helpful for project managers to see full process.
process example
hospital i: patients process: diag and treatment ou: healthy individual university: students transmit knowledge well educated graduates
basic process measures
input rate: [units/hr] demand rate inventory: [units] aka flow time [hr] output rate: [units/hr]
Cycle time
inverse of capacity) is the average time between completion of successive units. cycle time does not equal flow time. average time between suscessful units. : the average time between completion of successive units.
a process
is a transformation of inputs into outputs through a network of activities and buffers, utilizing resources, IT and mgt
capacity
is defined as the maximum possible output rate. how much you can produce. yield rate is not cpapcity rate
Operations Management
is the study and practice of making things better, faster, cheaper.
Which of the following forecasting methodologies is considered a qualitative forecasting technique?
market research
productivity
measure of how well the resources are used. = output/input. productivity is a relative measure. -compare to other firms within the same industry. compare the same opterations over time.
Capacity Utilization Rate
measures the extent to which the firm uses its design capacity
companies compete on
order winners (price, quality, time, flexibility)
customer interface
product Standardized Product Predictable Customer Expectations=Make-to-Stock (effciency) Customer's Expectations are Different= Make-to-Order (flexibility higher variety and prfit margin) (op structure)
Economies of Scope
related to flexibility. -Efficiencies arise through added variety -Refers to the efficiencies arising from the demand side -Scope economies arise when there exist shareable inputs that can be allotted over different products
backwards completed
slide 31
Which of the following is most closely related to the reason a firm might implement MRP?
so they can order the right parts
two pass method ex pt. 3 determining late starts and late finish times.
start from the back. right to left
critical path
the sequence of activities that form the longest chain in terms of time to complete. Two ways to determine: enumeration and two pass method. Determines the project duration To shorten the project duration, focus on the critical path Critical path may change when adding resources to critical activities
flow time (hrs)
time between when a customer enters a system and leaves a system.
ex forward pass complete
time:20:00
A BOM file is often called a product structure file or product tree because it shows how a product is put together.
true
A master production schedule is an input to a material requirements planning (MRP) system.
true
the bottleneck of a process may shift when the product mix changes.
true
•"Operations Management" refers to manufacturing and service processes used to transform resources employed by a firm into products desired by customers.
true
measuring Performance of a Process
uCapacity: Rate of output from the process uEfficiency: Relates amount or value of output to amount or value of inputs -Profit = value of output - value of inputs -Utilization of labor and/or machines -Productivity: ratio of output to inputs uFlexibility: Time to switch from one type of product to another or to respond to changes in the environment uQuality: Product and process quality
Project Management: Four Phases
uConceptualization -Description of goals and specifications of the final outcome of the project. -Look at alternate ways to perform and select the best way. uPlanning Process -Identify tasks involved, the resources and times for each task, and the timing of the task. uExecution and Control of the Project. uTermination -Hand over to the customer -Release of resources
Key Steps in Process Analysis
uDefine the process (Process Flow Diagram) -Determine the tasks, the storage points and the flows of information and goods. -Record this through a process flow diagram. uDetermine the capacity of the process -Analyze each task one by one -Are the different tasks balanced, i.e. have the same capacity? -Find the slowest task, known as bottleneck, which limits the capacity of the system uConsider the effects of inventories and variability in the system
Process Terminology
uDemand rate: The number of units per unit time that is demanded from the system. uLot size (batch size): It represents the number of units of a particular product type that will be produced before beginning production of another product type. uSetup time: It refers to the time spent arranging tools, changing dies, setting machine speeds, cleaning equipment, etc., in preparation for the beginning of work on a specific product type. uUtilization: The long-run average fraction of time that a productive resource is busy processing demand.
Enterprise Resource Planning Software
uERP systems link all areas of management uPlayers uSAP: A German firm, world leader in ERP software (100,000 sites and 12 Million users) uOracle: Comprehensive system, major database vendor ui2 Technologies: Forecasting, flow manufacturing uTypical applications module: Financials, Human capital management, Operations, Corporate services uActual cost of software is typically 1/3 of the total cost uIt may go as high as $ 250 M for companies such as Chevron Corp. uForecasting techniques (moving averages, exponential smoothing), inventory control, MRP techniques, scheduling tools are all included in the leading ERP packages
Balance and Imbalance
uIf every process step had the same cycle time (and performed with no variability in cycle time), then the process is in perfect balance.
linear Programming
uProduct mix decisions uLocation of plants and facilities uScheduling of employees, machines etc. uOptimizing how many hours you should study for OM, Marketing, Statistics, and IS, to maximize "benefits" uDeciding how to spend a million dollars on a house, boat, car, and charity, to maximize your satisfaction uInventory Planning uProfit Navigation
Machine/Worker Flexibility
uVarious types of operations that the machine or worker can perform without requiring a prohibitive effort to switch from one operation to another.
order winners (operational capabilities)
what makes a customer want to buy. The way companies compete... price - low cost process time - fast process quality - high quality process flexibility - flexible process
Traditional OM
§Production planning & scheduling §Inventory management §Warehouse & transportation
What is Six Sigma?
§Seeks to reduce variability in the processes that lead to defects § §A Six-sigma process produces two defects every billion products (practically zero defects) § §For normal distribution: §Mean ± 3σ contains about 99.73% of the data values §Mean ± 6σ contains about 99.9999998% (!!!) of the data values
Corporate Strategy
§Serve price- and convenience-sensitive travelers.
Modern OM
§Today OM refers more generally to the study of business processes. OM concerns both manufacturing and service industries.
Inventory Buildup and Throughput Rate example
§What happens if §Demand rate 120 > Capacity 100 : Customers waiting? yes Throughput rate = 100 §Demand rate 80 < Capacity 100: Customers waiting? no Throughput rate = 80
To conclude, MRP
•Achieves low levels of in-process inventories •Enables one to track material requirements •Enables one to evaluate capacity requirements •Enables one to change the master schedule (e.g., incorporate rush orders, delays, canceled orders, changed order quantities) •Is used by managers who want to see the planned schedule before actual order release
time cost models
•Assumption: Deterministic duration times for all activities. •Considers the cost of completing each activity. •Minimizes the total cost of the project. •Total cost = Cost to expedite + Cost of completing the activities + Penalty for finishing late (if any). •Answers the following questions: •What is the total project cost? •Which activities should be expedited to minimize total cost?
Supply Coordination via Contracts
•Buybacks •Wholesaler wants to "induce" retailer to purchase more newspapers. •Wholesaler agrees to "buy-back" unsold newspapers. •Retailer's overage cost is reduced. • •Revenue Sharing •Increased availability •Reduced margin
design detail
•Complete specification of •Product geometry •Materials •Tooling •Sourcing of materials and resources •Output: •Detailed drawings and specifications •Detailed process plan for fabrication and assembly
5) Testing and refinement
•Construction and evaluation of multiple preproduction versions •Prototypes tested to see whether they will work and cater to customer needs • •Refinement of design and processes according to the tests
Matrix project
•Cross-functional team where members are under the direction of both project manager and functional head. most common. a mix of both. •Blend functional and pure projects •Different projects borrow resources from different functional areas •Pros: •Enhanced communication between functional areas •Duplication of resources minimized •Cons: Reduced authority
final sample questions
•Demand information sharing between supplier and retailer is one of the causes of Bullwhip Effect. True False •Vendor Managed Inventories (VMI) is used one of the solutions to the Bullwhip Effect. True False •A "six-sigma" process is always in control. True False •The lack of information sharing between the retailer and manufacturer may lead to a large fluctuation in manufacturer orders. True False •Consider a two-stage system consisting of two machines. The first machine has a utilization of 46.5%. No inventory will build up in front of that machine. True False
System-level design
•Determine the product architecture •Decompose of the product into subsystems and components •Preliminary process flow diagram. •(Remember process analysis and Kristen's Cookie Company Case? )
Why do we need productivity measurements
•How effectively are we managing the plant? •Are we getting better at the things that are really important to strengthening our competitive position? •How are we doing in comparison to the best in the industry/nation/world ?
Concept development
•Identify the needs of the target market • •Steps •Identify customer needs •Concept generation (create alternatives) •Concept selection • •Product Concept: Description of the form function and specifications of the product
Who should hold inventory?
•If inventory is cheap, fast-moving, and easy to stock given the company's infrastructure, might be better to stock it • •If inventory is hard to store, slow moving, or the wholesaler server wide range of customers and can better management its inventory, drop ship from the wholesaler and pay it a premium
Improve
•Improve by making process better able to achieve what customer wants •Employ experienced engineers (pay them like managers, but keep them in the shop) •Use intelligent experimentation methods to detect cause and effect (Design of Experiments) •Rationalize amount of improvement with cost/benefit analyses
Sample questions
•In inventory models, high holding costs tend to favor high inventory levels. True False •Savings from reduced inventory results in increased profit. True False •Safety stock is not necessary in any fixed-time period system. True False
Variability, Buffers, and Inventory
•In systems with asynchronous variability, averages don't tell the whole story •Variability causes loss of throughput rate and effective capacity •Variability causes delays and congestion •In highly variable systems, flow time and WIP increase non-linearly with utilization
CPM (critical path method)
•J. E. Kelly of Remington-Rand and M. R. Walker of Du Pont (1957) •Scheduling maintenance shutdowns of chemical processing plants •Deterministic model, fixed time estimates for each step
Production ramp-up
•Product made using intended system • •Worker education • •Solve any remaining problems before large scale production • •Product launched
planning
•Referred to as "phase zero" • •Begins with corporate strategy and assessment of technology and market conditions. assessing benchmarks and targets. • •Output: Project mission which includes •Target market Key assumptions and boundaries/constraints
functional
•Team embedded in a functional area. 3 workers from 3 diff departments. they meet once a day for an hour for the projecct. •Team embedded in a functional area •Pros: •A team member can work on multiple projects •Technical expertise maintained in the functional area •Cons: •Slow response •Low motivation
sample questions for final
•The required safety inventory a)grows rapidly with a decrease in the desired product availability. b)grows rapidly with an increase in the desired product availability. c)decreases with an increase in the desired product availability. d)remains stable with an increase in the desired product availability. e)none of the above •In implementing a lean production system you should work with suppliers to do which of the following? A. Open facilities near your factoryB. Focus workstation capacitiesC. BackflushD. Provide quality at the sourceE. Reduce lead times
Where should inventory be held?
•Trade off shipping costs, regional demand patterns, and inventory holding costs • •If the product cannot be bundled to save on shipping costs, there is less reason to worry about where it is held • •When product is very country-specific, it makes sense to stock in that country
casual methods
•Used when •historical data are available and •enough analysis has been performed to spell out the relationships between the factor to be forecast and other factors •Best suited for medium and long- term strategic forecasts that lead to heavy financial commitments abd require great care
Sample questions
•When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time? A. Normal variation in shipping time B. A shortage of material at the vendor's plant causing backlogs C. An unexpected strike at the vendor's plant D. A lost order E. Redundant ordering systems •Which of the following is usually included as an inventory holding cost? A. Order placing B. Breakage C. Typing up an order D. Quantity discounts E. Annualized cost of materials
Three Main Questions
•Who holds inventory? • •Where inventory is held? • •How inventory is held?
doubled bottleneck capacity
≠ doubled system capacity
