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Decisions in Operations
Management
11
Operations Strategy
Corporate Strategy
Environmental scanning
Core competencies
Core processes
Global strategies
Market Analysis
Market segmentation
Needs assessment
Competitive Priorities
and Capabilities
New Service/Product
Development
No
Yes
Performance
Gap?
Operations Strategy
Decisions
Competitive Capabilities
Current
Needed
Planned
Figure 1.5
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
12
Corporate Strategy
2.
3.
Order fulfillment
4.
Global strategies
13
Market Analysis
Market segmentation
Needs assessment
Service
Delivery
Volume
Other
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Competitive Priorities
DEFINITIONS
COST
Definition
1. Low-cost
operations
Delivering a service or a
product at the lowest
possible cost
QUALITY
2. Top quality
Delivering an outstanding
service or product
3. Consistent
quality
Producing services or
products that meet design
specifications on a
consistent basis
TIME
4. Delivery speed
Quickly filling a
customers order
5. On-time
delivery
Meeting delivery-time
promises
6. Development
speed
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Competitive Priorities
DEFINITIONS
FLEXIBILITY
Definition
7. Customization
8. Variety
Handling a wide
assortment of services or
products efficiently
9. Volume
flexibility
Accelerating or
decelerating the rate of
production of service or
products quickly to
handle large fluctuations
in demand
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DESIGN
Information
Facility
System
Technology
Work
Systems
Facility
layout
Capacity
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Operations Strategy-Definition
The total pattern of decisions which shape
the long-term capabilities of any kind of
operation and their contribution to the
overall strategy.
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Design of
Work Systems
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Specialization : Advantages
For Management:
For Labor:
1. Simplifies training 1. Low education and
2. High productivity
3. Low wage costs
skill requirements
2. Minimum
responsibilities
3. Little mental effort
needed
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Specialization: Disadvantages
For Management:
For Labor:
1. Difficult to motivate
quality
1. Monotonous work
2. Limited opportunities
for advancement
2. Worker dissatisfaction,
possibly resulting in
3. Little control over work
absenteeism, high
4. Little opportunity for
turnover, disruptive
self-fulfillment
tactics, poor attention
to quality
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Job Rotation
Workers
Job Enrichment
Increasing
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Methods Analysis
Methods analysis
Analyzing
Begins
Moves
to specific details
1 15
Methods Analysis
The need for methods analysis can come
from a number of different sources:
Changes in tools and equipment
Changes in product design
or new products
Changes in materials or procedures
Other factors (e.g. accidents, quality
problems)
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ge
Stor
a
De l
ay
n
ect
io
nt
vem
e
Ins
p
Details of Method
Mo
ANALYST
Job Requisition of petty cash D. Kolb
Op
era
tion
Motion Study
Motion study is the systematic
study of the human motions used
to perform an operation.
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Working Conditions
T e m p e ra tu re &
H u m id it y
I llu m in a t io n
V e n t ila t io n
C o lo r
1 23
Work Breaks
Safety
Causes of Accidents
1 24
Design of Layouts
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Process
Focus
Inter.
Focus
Product
Focus
Low
Volume
High
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Process Layout
Human and capital resources used by
processes must be arranged physically
within their facilities which gives the process
structure a physical form.
The choice of process layouts largely
depends on the process structure.
Good process layouts can improve
coordination across departmental lines and
functional area boundaries.
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Product Layout
A Product layout arranges work stations in sequence. The line
is only as fast as its slowest workstation.
Line balancing is done to achieve the desired output rate with
the smallest number of workstations.
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Work
element
Time (sec.)
40
30
50
40
25
15
20
18
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= 4.067 or 5 stations
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244
= 81.3%
5(60)
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Process layout-Design
Gather information-required space, available
space, closeness factors.
Develop a Block Plan.
Apply the weighted distance method.
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Gather Information
Space Requirements
Department
1. Administration
2. Social services
3. Institutions
4. Accounting
5. Education
6. Internal audit
Total
4
100'
15,000
150'
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Closeness Matrix
Trips between Departments
Department
1. Administration
2. Social services
3. Institutions
4. Accounting
10
5. Education
6. Internal audit
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3
100'
150'
1 39
Applying the
Weighted- Distance Method
Weighted-distance method: A mathematical
model used to evaluate flexible-flow layouts
based on proximity factors.
Euclidean distance is the straight-line distance,
or shortest possible path, between two points.
Rectilinear distance: The distance between two
points with a series of 90 degree turns, as along
city blocks.
1 40
Distance Measures
Euclidian Distance
dAB =
Rectilinear Distance
dAB = |xA xB| + |yA yB|
1 41
Example
What is the distance between (20,10) and (80,60)?
Euclidian Distance
dAB =
= 78.1
Rectilinear Distance
dAB = |20 80| + |10 60| = 110
1 42
Current Plan
Proposed Plan
Current Plan
Proposed Plan
Dept Closeness Distance
Distance
Dept Closeness Distance
Distance
Pair
Factor, w
d
wd Score
d
wd Score
PairFactor, w d
wd Score d wd Score
1,2
3
1
3
2
6
1,2 3 1 3 2 6
1,3
6
1
6
3
18
1,3 6 1 6 3 18
1,4
5
3
15
1
5
1,4 5 3 15 1 5
1,5
6
2
12
2
12
1,5 6 2 12 2 12
1,6
10
2
20
1
10
1,6 10 2 20 1 10
2,3
8
2
16
1
8
2,3 8 2 16 1 8
2,4
1
2
2
1
1
2,4 1 2 2 1 1
2,5
1
1
1
2
2
2,5 1 1 1 2 2
3,4
3
2
6
2
6
3,4 3 2 6 2 6
3,5
9
3
27
1
9
3,5 9 3 27 1 9
4,5
2
1
2
1
2
4,5 2 1 2 1 2
5,6
1
2
2
3
3
5,6 1 2 2 3 3
ld = 112
ld = 82
2007 Pearson Education
ld = 112
ld = 82
1 43
Hybrid layouts
Two techniques for creating hybrid layouts
1 44
One Worker,
Multiple Machines
Machine
2
Machine
1
Machine
3
Materials in
Finished
goods out
Machine
5
Machine
4
1 45
Milling
Drilling
M
Grinding
Receiving and
shipping
Assembly
A
1 46
Assembly
area
A
Cell 2
Cell 1
Receiving
Cell 3
L
Shipping
1 47
Capacity Management
1 48
Capacity Management
Capacity denotes the extent of availability of
resources including labour and machines for use
by various processes. It also denotes the
maximum output of products and services one can
achieve by using these resources.
Capacity can therefore be defined by the following
two methods:
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Expansionist strategy
When economies of scale effects are
strong, a firm can reduce its cost and
compete on price.
A form of preemptive marketing-using
capacity as a competitive weapon.
1 54
Wait-and-see strategy
Reduces risks of overly optimistic demand
forecasts,technological change that would
make the facility obsolete and
unpredictable competitive reactions.
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Execution of an Operations
Management-Use of Project
Management
1 58
Agenda
What is a Project?
Project Management Processes and
Knowledge Areas.
Using Project Management to implement
the Operations Strategy.
Project Time Management (in detail).
Schedule Development
Case Study
1 59
What is a Project?
Project is an interrelated set of activities
with a definite start and ending point,
which results in a unique outcome for a
specific allocation of resources.
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Activity Sequencing
Precedence Diagram
Diagram
This
Schedule Development
Mathematical analysis
Critical
1 67
Network activities
ES-the
EF-the
LS-the
LF-the
1 68
For
For
For
If
1 69
Use
For
For
If
1 71