Operations Video Questions
Types of Quality
Product quality -characteristics that meet customers' acceptability Process quality -consistent results within a specified range Decision quality
What are 2 causes of process variability?
common cause - comes from stable part of process special cause - specific issue or event
Would you rather be consistent or accurate?
consistent
#1 characteristic employees want from managers
show they care about career and well being
What do we use control charts for?
shows us how process output varies over time -helps ID when variation occurs in our process
Single Period applications
single selling season, single order for inventory (no repeat business) -newspaper, Christmas trees risk of stock out vs risk of unsold inventory Formulas: P<= MP/(MP+ML) Purch Quantity = AD + (Z*stdev) MP = Price - Cost ML = Cost - Salvage If ML > MP, order qty lower than avg demand
What is the probability of producing a defect?
the Z formulas at the top 1. Prob of producing less than LSL: NORMSDIST(the Z lsl formula) 2. Prob of producing less than USL: NORMSDIST(the Z usl formula) 3. Prob of producing more than USL: 1-NORMSDIST(the Z usl formula) Prob of producing a defect: Add together 1. and 3.
Decoy effect
the economist example
Inventory allows us _____
the most effective way of matching supply and demand to meet customer expectations.
What do project control measurement tools not take into account?
the quality of work being done - so pull in experts to eval quality of work
Multi Period Time Quantity applications
time triggers the ordering of inventory, inventory is counted on a periodic basis (once a week, etc.) order is initiated to bring inventory up to a certain level aka Periodic review system Pros: -standardized delivery times -multiple orders from same vendor can be combined -inventory position only needs to be known when a review is done (quick and easy and cheap to implement) Formula is the one with big T T = Review Period I = amt that is in inventory
Even with an accurate forecast ______ can restrict your supply chain.
uncertainty reliability of suppliers, lean manufacturing, outside events
Why is supply chain management so difficult?
uncertainty in D/S, changing cust reqs, decreasing product life cycles, conflicting objectives in the supply chain, conflicting objectives inside the firm
When not to outsource:
anything that involves: IP, proprietary info/processes, core competencies, difficult to coordinate
Costs of quality
appraisal -inspecting, auditing, testing prevention -efforts to keep defects from occurring internal failure -caught internally and either scrapped or corrected external failure -defect seen by customer opportunity costs -loss of future business due to quality issues invest in good appraisal and prevention
Types of customer variability
arrival, request, capability, effort, subjective preference
What types of variability contribute to waiting times?
arrival, request, effort, capability
Product development process begins with and ends with what?
begins with the perception of a market opportunity and ends in the production, sale, and delivery of the product
How can PM track progress?
burndown chart - track actual progress against planned progress cons: -how do you actually measure progress? -ask employee and end up overestimate progress ^solution: verify progress with major milestone reviews Earned Value Management (EVM): combines measurement of scope, schedule, and cost in a project, adding cost helps ID discrepancies in work accomplished to date
What can we do to influence supply?
capacity (how much manufacturing capability we have), inventory, service level (how much of the time do we want to match demand)
Methods for waiting line management
virtual queues establish a waiting time goal
How do you match capacity and demand in the service industry? Managing Capacity Strategies
Workshift scheduling Increasing customer participation Cross-Training Employees Part-Time employees
Pull manufacturing
"make to order", just in time, lean manufacturing production line is controlled by the last operation (selling a finished good) efficiency of entire process is the goal controls/elims WIP and bottlenecks focuses on materials being "busy" not workstations Cons: -operators only work when there is a need to produce -no buffer/safety net in system if problem arises (no WIP inventory)
Why is inventory management necessary?
- To maintain independence of operations - To meet variation in product demand - To allow flexibility in production scheduling - To provide a safeguard for variation in raw material delivery time - To take advantage of economic purchase order size
What can you do if your process is not capable?
-Accept more defects -reduce the variation -reevaluate spec limits
How do we mitigate the bullwhip effect?
-All steps have access to same info -coordinated response to sales -faster response rate for orders and deliveries -vertically integrate
Low Cost Accommodation Strategies
-Companies are persuading customers to serve themselves -Experience varies with the customer's capability and effort -Effective for high arrival or request variability -Must ensure the customers feel compensated in some way: low prices, etc.
Distinctive traits of service operations
-Customer participation -Simultaneity (services are created and consumed simultaneously, no inventory), eliminates quality control aspect -Perishability - a service is a perishable commodity, full utilization of service capacity becomes a challenge, smooth demand, set expectations -Intangibility -Heterogeneity - more satisfying work experience -Nontransferable ownership - customers don't own the service upon service
What are techniques to reduce or eliminate waiting?
-Online troubleshooting -automation -give customers more control -transparency - inform of wait times, real time updates -segregate customers (disney fastpass, peach pass)
Free effect
-People have an emotional response to "Free" -There is pain associated with spending money
What are two time value models?
-Perishable goods/technology (value diminishes over time) -Event specific (value increases near a specific event such as a holiday)
What can we do to reduce the production variability?
-backup machinery -cross train employees -automation -backup suppliers
What makes services so difficult?
-customer perception matters most and customers are all unique -setting and meeting customer expectations is key!
What is SPC used for?
-measure quality of process output in real time by observing variation in output -used to keep processes stable, consistent, and predictable -monitors quality while the product or service is being produced -every output measure has a target value and a level of acceptable variation (upper and lower tolerance limits) -uses samples from output measures to estimate mean and amt of variation (stdev) weird formulas with the summation - X bar is avg and sigma is stdev
Data analytics in operations
-predictive maintenance (condition based monitoring) -optimization models -credit acceptance -route optimization
Why is data analytics important?
-support decision making -help make predictions -help you focus specific customers or problems
Gantt charts
-visualize tasks and relationships become limited when tasks are more than 25
Steps in implementing a new process
1. Create the Urgency 2. Form a Coalition 3. Answer "Why do we need to change?" 4. Answer "What's in it for me?" 5. Communicate 6. Remove obstacles 7. Create small Wins 8. Reevaluate and Improve 9. Anchor it in place
Principles of lean manufacturing
1. eliminate the useless -such as material (inv) and labor) 2. simplify what is left improve the timing of production resources ("just in time", pull manufacturing, make to order, only manufacture what we need) eliminate non-value adding things Lean is based on the logic that nothing is being produced until it is needed (order is placed) -not producing until we make a sale something, pulled through production
Steps in analyzing a process
1. map out the process 2. gather facts from all perspectives 3. determine designed output of each step 4. compare designed output vs actual output 5. identify the bottleneck in the process 6. calculate the financial impact of the bottleneck 7. remedy the bottleneck
What is the ABC Method for inventory management?
80/20 rule. 20% of their parts produce 80% of their profit. A: high dollar volume/profit B: moderate C: low
What is a project?
A series of tasks that need to be completed in order to reach a specific outcome
How do you handle customer variability?
Accommodate or reduce
Critical Path Method
Activities in a project that form the longest chain in terms of their time to complete -kind of like bottleneck in process -immediate predecessor
Time Series: Moving average
Assumes the most accurate forecast of future demand is a simply, linear combination of past demand Used when: no seasonality or trend exists (the data is random) Two types: -simple -weighted Simple: -taking avg of previous demand to forecast future demand -time period for averages is up to you Weighted -gives more importance (weight) to some of the data
How do we maximize profit?
Balance between supply and demand
What are operations planning costs?
Basic production costs -fixed and variable costs incurred in the production of a product Production rate changes -hiring, training, laying off personnel -start/stop costs Inventory holding costs Shortage costs -expediting -satisfaction -cancellation
What are different ops planning strategies?
Chase strategy -match demand by hiring and laying off employees as necessary - no inventory buildup. no overtime - requires access to large pool of available resources who require little training -difficult to maintain motivated employees Stable workforce -match demand by varying the work hours of employees -cut hours, overtime, outsourcing -no inventory buildup. no hiring. no termination -still may have difficulty motivating employees Level strategy -keep production level throughout the year and use inventory to match demand -no hiring, no termination, no overtime -may result in periods of high inventory, or lost sales
Consistency vs accuracy
Consistency - stdev is small accuracy - avg performance close to target
Why is quality important?
Customer's expect a certain level of it -the penalty for poor quality is > benefit of good quality
How do you match capacity and demand in the service industry? Managing Demand Strategies
Customer-induced variability (either accommodate or reduce) Offering price incentives (smooth demand) Promoting off-peak demand (smooth demand) Develop Complimentary Services Reservation systems
Least Squares Method
ID relationship between 2 or more variables -does a trend or relationship exist? -does not have to be time series Goal: ID line of best fit How: find the line that has the least amount of error by minimizing the distance between actual data points and the trend line R2 value is the indicator of best fit
What is more important? Start or finish strong?
Finish strong
How do we handle variation in demand?
For lower demand --> idle workshop, layoffs, switch to complimentary products quickly, influence demand For higher demand --> outsource, hire &/or expand, inventory Capacity level you should plan for under normal circumstances --> 80%
Effective inventory management is based on
Forecasting then supply chain
Why is forecasting important?
Helps management make best decisions possible with regards to resources, money
What are the costs of inventory?
Holding costs, cash flow, ordering costs, opportunity costs
What is the recovery paradox?
If you are able to recover from a bad experience, your view of the company may be better than it was originally. -but the recovery has to be appropriate in the eyes of the customer -the type of failure might not be recoverable
Why is behavioral science important?
If you understand the dynamics of decision making, you can influence that decision in your favor
Innovation steps
Innovation involves incremental improvements (evolution), with periods of radical innovation (disruption)
Classic Accommodation Strategies
Involves experienced/more employees to compensate for the variations among customers Costs more and forces the company to bear the brunt of the variability Success of strategy hinges on the company's ability to persuade the customer to pay more to cover the expense
How can you maximize profits through operations planning, revenue management?
Multiple price optimization instead of single price optimization
How do we measure process capability and how do we tell if a process is capable of being in control?
Process control limits (UPCL, LPCL) -range of variation that a proc is able to maintain Specification Limits (USL, LSL) -range of variation that is considered acceptable by the designer or customer If PCL > SL: Process is incapable of being defect-free If SL > PCL: proc is capable
What does marketing/sales want versus operations?
M/S: more inventory, fast delivery, many allowable configurations, high quality, low cost Ops: bigger batch sizes, decreased configurations, schedule known well in advance, full shipments
What factors can cause production variability?
Machine downtime Human Attendance Human Emotions Quality Defect Rate Raw Material Supply Issues
What tool does management use to manage demand?
Pricing - Price can be optimally set for various customer groups (diff customers, value diff products differently
What can we do to influence demand?
Pricing, promotion, placement, product
Forecasting options and when to use them
Moving Average (Simple and Weighted), Exponential smoothing (simple, double, triple) Linear regression
What is supply chain management?
Process of optimizing the shipment of goods and services from supplier to customer.
What are the goals of supply chain management?
Optimize production, decrease manufacturing time, minimize inventory, streamline order fulfillment, and reduce cost Ultimate goal: match supply and demand - can't do this in real time
What is project management?
Planning, directing, and controlling resources (people, equipment, material, etc.) to meet the technical, cost, and time constraints of the project.
Types of Project Organizations
Pure project -self contained team works full time on a project -PM is the manager of the employee -team members work on one project at a time Functional project -may work on multiple projects within your own fxn -needs of proj may coincide with needs of daily job Matrix project -blend of functional and pure structure -uses people from diff functional areas to work under a project under PM -employees have 2 bosses -PM must be good at negotiating
Lean Concepts
Quality at the Source: do it right the first time and if something goes wrong, stop the process immediately (Toyota), everyone is responsible for quality Just in Time Production: producing what is needed, when it is needed, and nothing more - heavily reliant on vendors being able to deliver materials several times a day, exposes problems otherwise hidden by inventory
What are 3 Components of Demand?
Randomness, Trends, Seasonality
What are some six sigma tools?
Run Chart - take a look at process in real time, good for identifying when things change Fishbone diagram - find root cause Process control chart - like run chart except you have process control limits (UCL and LCL), ID whether or not proc are in control
What is Six Sigma?
Set of methods to eliminate defects in products sand processes -seeks to reduce variation in the processes that lead to defects -goal: no more than 3.4 defects per million opportunities DMAIC: -define -measure -analyze -improve -control
What does the process capability index help us see?
Shows how well the parts being produced fit into the range specified by the design specifications. If Cpk > 1, capable. If <=1, then incapable. k is sigma level (relates to 6 sigma, how many defects per million of opportunities)
What are the common inventory models used in inventory management and when are they used?
Singe Period - used when we are making 1 time purchase of an item, seeks to balance costs of inventory overstock and understock Multi-period fixed order qty - used when we want to maintain an item "in-stock", and when we restock, a certain number of units must be ordered Multi-period fixed time period - item is ordered at certain intervals of time
How does operations planning start and end?
Start: forecast from sales Ends: Operational plan on what resources are needed to meet the demand
Most important way to ensure proj is successful and reason most projs fail/succeed
Statement of Work -written description of objectives to be achieved with a brief statement of work to be done and proposed high level schedule -prevents scope creep
How do we monitor and measure quality?
Statistical Process Control observe variation in output in real time
Flowcharting
Swim Lane flowchart - good for cross functional processes Flow Diagram - good for analyzing process statistics
What is the bullwhip effect?
The further away you get from the customer, the bigger the safety margin and bigger the inventory swing/range that the raw material supplier has to have why? -safety factor added in every step -time lag in information each steps act independently of each other
Exponential Smoothing
Weighted moving average model with ~sophistication~ main idea: prediction of future depends mostly on the most recent observation and the latest forecast Good for: short term forecasts (NOT LT) Prediction depends on 3 things: 1. most recent observation (A) 2. forecast of the period before the current time period (F) 3. correction factor (alpha aka the weight) 3 types: -simple, double, triple -use double when trend is present -use triple when trend AND seasonality are present
A 5% increase in customer retention can increase profits by 25%.
Turn those satisfied customers into loyal customers!
Uncompromised Reduction Strategy
Uses knowledge of the customer to develop procedures that enable good service, while minimizing the variability ex: college admissions
What is process variability?
Variation from the established limits in a process can occur in manufacturing operations, service operations, or measurements inventory buffers MINIMIZE the IMPACT of variability to the process
Framing expectations
We inherently expect higher priced items to be higher quality Why does it work? -confirmation bias (we hate to be wrong) Lesson: start w higher price to frame expectations, then offer discount to get down to market price
Types of data analytics
descriptive- what happened? diagnostic-why is it happening?, measure data against other data to ID relationships/dependencies predictive-what is likely to happen? prescriptive-what action to take?
Total Quality Management (TQM)
entails creating a total quality culture, involving managers and employees at all levels, bent on continuously improving the performance of every value chain activity 2 Operational goals: 1. careful design of product or service 2. ensure organization's systems can consistently produce the design
Multi Period Fixed Quantity applications
event triggers reordering of inventory, event is usually when inventory falls below a set limit aka EOQ Model Pros: -we always know what our inventory levels are (inv position known after every transaction) -quicker response to low inventory levels -results in lower safety stock requirements Assumptions: -demand for product is constant/uniform -lead time is constant -cost per unit is constant -ordering cost is constant Risk of stock out if supplier is late or demand is higher than expected. Reaching zero the day that the inventory arrives is risky!! Formulas: EOQ = sqrt(2DS/H) ^qty that will minimize total cost S = ordering cost H = annual holding cost As holding costs go up, ordering costs go down. So how to minimize total cost to company - when holding cost = ordering cost How many times per year should you order: D/Q When to place the order (w/o safety stock): find daily demand then reorder point = daily demand * L stock outs is worse than excess inventory --> so safety stock to fix the zero day risk, based on a range of demand safety stock = z score with stdev of lead time, amount of inventory carried in addition to expected demand, can be based on a certain number of lead times of supply OR use probability that was used w zscore
How do you validate your forecast?
find variance between your actual - forecast values
How important is the VoC
good for incremental product improvements
1st thing to do when deciding on forecasting technique
graph it out
In what environments will lean manufacturing work?
high volume production of similar products -bc lean manu is activities designed to achieve high volume production using minimal inventory and work
Why go global if it's so difficult to manage?
labor is SO much cheaper (ex: china vs us)
What does reducing the amount of variability do to the throughput?
levels the output (makes it more predictable)
Classic Reduction Strategy
limit request variabilities: pro: consistent service at a reasonable cost con: low cost companies that use this tend to attract customer who are willing to trade off an excellent service experience for a low price
Data analytics has transformed ______
marketing, operations
Service experience
nature of services has moved past transactional to one of experience baesd relationships experiences --> relationships --> loyalty
How do you measure success of project?
on time, on budget, on scope
Key resource in project management
people's time
Why do products fail?
quality, inability to scale, timing, marketing message
Constraint Theory
scope, time, and cost are all related/impacted by one another
What do we call companies the provide services AND products?
service package, ex: restaurant
Push manufacturing
workers maximize output of their own workstations, regardless of customer demand -goal: how do we maximize efficiency of workstation Cons -focuses on keeping individuals busy, rather than effective use of materials -volumes of defective work may be produced before being identified -results in high WIP inventory and bottlenecks are common "make to stock"
Quality Mgmt and Suppliers
you are only as good as your suppliers treat your suppliers as partners -share in the risk of supplying you a poor product -get a long term contract -think abt risks, keep multiple partnerships
