1

` ` `

To help the Companies appreciate the role of OM & translate his strategic plans into viable processes. To identify strategic areas of operational conflict. To identify impediments for growth and generate ideas of how to solve them. To create a general understanding for successful management of operations to fill in the role of the Company as (general) manager. To help companies draw up his Operations Growth Plan

Strategic Management

Marketing Management

Human Operations Resources Management Management

Financial Management

Operations Management (OM) is concerned with the transformation process to create output out of resources being put in.

Input

Transform

Output

Input resources Operation

Department store Goods for sale Staff sales Registers, Customers Dental surgeons Dental equipment Nurses, Patients Printers and designers Printing presses Paper and ink Police officers Computer systems Information, Public Fruit, Pans Bottles, Staff Customers with questions Building Telephone lines Computers, Staff Hungry customers Food and beverages Tables, Staff

Transformation process
Display goods Give sales advice Sell goods Check and treat teeth Give preventative advice Design Print Bind Prevent crime Solve crime Apprehend criminals Fruit preparation Juice production Direct questions to the right person Answer questions Store questions Take orders Prepare and serve meals Eating & Washing

Outputs

Customers and goods assembled together Patients with healthy teeth and gums Designed and printed material Lawful society Public with feeling of security Fruit juices Useful waste Informed customers Satisfied customers

Dentist

Printer

Police

Fruit juice manufacturer Call centre

Restaurant

Endulged customers
5

` People ` Plants

(location and means) ` Processes ` Parts (materials) ` Planning & Control

Strategic
x x x x Mission Generic strategy Industry success factors Distinctive competency

Marketing
x Products and Markets (existing and new) x Annual sales increase x Rate of customization

` ` ` ` ` ` `

Too much direct involvement in daily operations. Wanting to take in every type of customer. No real or very weak connection between strategic & marketing identity and operations. No comprehensive control of operations. No or poor MIS present. Reactive instead of proactive throughout the organisation. Struggling to make their organization more effective and efficient.

GROWTH

Straegic Implications

Strategic Capacity Plan Operations Impediments for Growth

` ` `

Step 1: List your most important strategic and marketing objectives Step 2: PMCs and their most important operations performance objectives (OPO) Step 3: Evaluate the impact of each OPO Step 4: Identify areas of conflict Step 5: How to deal with these conflicts? What are the main issues coming out of this?

10

a) Market b) Products c) Present volume d) % of total volume e) Growth rate

1. Speed 2. Quality
11

` Quality ` Dependability ` Speed ` Flexibility ` Cost

12

Resource Usage

Quality Performance objectives Speed Dependability Flexibility Cost

Few products in the pipeline, many products in stock and prioritisation of urgent orders increase speed Performance monitoring systems and strict processes give reliable output Smaller batches of different products with lots of variety increase the choice of customers Producing large batches with low variety or cheap materials decrease costs

Strategic decisions
13

Market Competitiveness

Low quality fluctuation demands quality machines and processes and increased testing

Detailed Demand

Network Design

Location

Strategic Capacity Plan

Process & Lay out

CODP

Deatiled Capacity

14

` ` `

List per group of products (ideally, based on production characteristics) Take in any seasonal effects Distinguish between
x Existing products x New products (procured) x New products (newly developed)

` `

Make three scenarios: worst, expected, best Be reasonable and increase reliability

15

` `

` ` `

Mapping the network To what extent is each member capable of following the demand? To what extent is each member able to perform in line with your OPOs? See questions in par. 3.3.3. Where to improve? Vertical integration?

16

Second-tier suppliers

First-tier suppliers

First-tier customers

Second-tier customers

The Operation

Supply side Purchasing & supply management

Demand side Physical distribution management Logistics Materials management Supply chain management
17

Impact on distance, speed, service, depend., etc. High-intensity contact system

x Near customer x Multiple sites if necessary

Low-intensity contact system

x Minimising costs x Near sources of raw material or labour x Logistical optimization

Using:
x Centre of Gravity Method x Factor weighing system
18

Identify the Process type: how unique is each products/service and in what kind of process are they being made?
Manufacturing
x Project / Jobbing / Batch / Mass / Continuous flow

Service firms
x Professional service / Service shops / Mass service

Variety and volume is leading

19

The facilities layout decision procedure

Decision 1 Process type Decision 2 Basic layout type Decision 3 Detailed design of layout
The physical position of all transforming resources Fixed position layout Process layout Cell layout Product layout Project process Jobbing process Batch process Mass process Continuous process

Volume and variety

Strategic performance objectives

Flow of transformed resources

20

Process types in manufacturing

High

Project Jobbing

Variety

Batch

Mass

Continuous

Low Low Volume High

21

Process types in manufacturing

High

Project Process customized P/S

Low Low Volume High

Variety

Construction Work Shipbuilding devoted resources Installing Computer System ill defined activities Movie Production Companies complex process Building Mass Rapid Transportation System long time period well defined start & end Drilling Oil Wells

22

Process types in manufacturing

High
Jobbing Process
More products; smaller items Sharing of resources Low degree of repetition Fewer unpredictable circumstances Specialist Toolmakers Furniture Restorers Tickets Printer Social Events

Low Low Volume High

Variety

23

Process types in manufacturing

High
Batch Process
More products in one batch Repetitive with large batches Can be used over wide range Different process routes

Low Low Volume High

Variety

Machine Tool Makers Component Parts Production Production of most Clothing Production of Gourmet Frozen Food

24

Process types in manufacturing

High

Variety

Mass Process
Automobile Plant Consumer Durables Mfg Food Processes (pizzas) Beer Bottling High volume/low variety Discrete products Repetitive Large predictability

Low Low Volume High

25

Process types in manufacturing

High

Variety

Low Low

Petrochemical Refineries Edible Oil Processing Steel Making Paper Making Electricity Utilities Beer Brewing

Continuous Process
Long production periods Liquid flow processing Capital intensive technologies Highly predictable flow

Volume

High

26

Process types in service operations

High

Professional Services

Variety

Service Shops

Mass Services

Low Low Volume High

27

Process types in service operations

High

Professional Services
High customer contact High customization Highly adaptable Value adding in front-office People based High ratio of staff to customers Emphasis on process (how) Management Consultants Lawyers Practices Architects Auditors H&S Inspectors Computer Field Service Operations

Low Low Volume High

Variety

28

Process types in service operations

High

Variety

Service Shops
Services by mix of front/back office People & Equipment based Product/Process emphasis Banking High Street Shops Tour Operators Car Rental Cos Schools Travel Agents

Low Low Volume High

29

Process types in service operations

High

Variety

Low Low

Supermarkets National Rail Network Airport Telecom Library Television Station Police Service

Mass Services
Limited Customer Contact Time Little customization Equipment based Product oriented (what) Value adding in back-office Division of labor/mainly non-prof.

Volume

High

30

The nature of the basic layout types

Manufacturing process types
Project processes Project processes

Basic layout types Fixed position layout Process layout

Service process types

Professional services

Jobbing processes

Batch processes

Service shops

Cell layout
Mass processes Continuous processes Mass services

Product layout

31

GENERAL LAYOUT TYPES

j Different layouts present different

managerial challenges j Different layouts present different opportunities to satisfy customers unmet needs j A strategic perspective is required to make the right layout choices
32

GENERAL LAYOUT TYPES: FIXED-POSITION LAYOUTS

j Value-adding resources

travel to the

customer or need
film a movie on location; build a house

j Specialized experts can be brought in j Disadvantages: lack of efficiency difficulty in scheduling potential for cost overruns and quality problems

33

Volume-variety characteristics
Low Low Fixed position layout
Vulnerable layout to planning and control disruptions

VOLUME
Motorway Construction Open-heart Surgery High-Class Service Restaurant Nuclear Power Station

High

Low

VARIETY

34

GENERAL LAYOUT TYPES: PROCES LAYOUTS

j Resources grouped according to function materials can be routed through processes in any order furniture factory; hospital j Highly customized product-service bundles j Disadvantages: less efficient slower response time complex managerial environment
35

Volume-variety characteristics
Low Low VOLUME High

VARIETY

Process layout
Transforming resources dominate layout Similar processes are located together

Hospital Machining of Parts for Engines Supermarket

Low

36

GENERAL LAYOUT TYPES: CELL LAYOUTS

j General-purpose resources dedicated to a

particular group of products or services

each cell is a pseudo product layout exercise circuit in health club

j Provide a mixture of the advantages/

disadvantages of process and product layouts, depending on how they are run
more efficient than process layouts more flexible than product layouts
37

Volume-variety characteristics
Low Low VOLUME High

VARIETY

Computer Component Mfg Lunch products area in Supermarket Maternity area in Hospital

Cell layout
Transformed resources are pre-selected for group of activities Product or process layout To reduce complexity in process layout

Low

38

Volume-variety characteristics
Low Low VOLUME High

VARIETY

Low

Automobile Assembly Mass-Immunization Program Self-service Cafeteria Packing Lines

Product (line) layout

Locating transforming resources entirely for transformed resources

39

Volume-variety characteristics
Low High Fixed position layout Process layout VOLUME High

VARIETY

Cell layout Product layout

Low

40

CONSIDERATIONS THAT DRIVE LAYOUT DECISIONS

j Reduce unnecessary activities j Prevent damage to inventory j Enhance communication among individuals,

groups, or departments j Prevent rework j Discourage dysfunctional communication j Provide privacy

41

CONSIDERATIONS THAT DRIVE LAYOUT DECISIONS

j Provide for safety j Provide for security of resources j Enhance labor skills and functional

excellence j Enhance the quality of work life j Provide for customer involvement
42

Advantages and disadvantages

Fixed position layout
Very high product and mix flexibility.

Process layout
High product and mix flexibility. Relatively robust in the case of disruptions. Easy to supervize.

Cell layout
Can give good compromise. Fast throughput. Group work can result in good motivation.

Product layout
Low unit costs for high volume. Opportunities for specialization of equipment.

Advantages

Product/customer not moved. High variety of tasks for staff.

Very high unit costs.

Low utilization. Can have very high WIP. Complex flow.

Disadvantages

Can be costly to rearrange existing layout. Can need more plant.

Can have low mix flexibility. Not very robust to disruption. Work can be very repetitive.

Scheduling space and activities can be difficult.

43

Detailed design techniques

Fixed position - resource location analysis. Process layout - flow charts and relationship charts. Cell layout - product flow analysis. Product layout - assembly line balancing techniques.

44

The Supporting Facility

j Creating the Right Environment

45

Objectives
j Minimize material handling costs j Efficient space, labor utilization j Reduce manufacturing lead time j Eliminate wasted movements j Improve quality j Facilitate communications j Provide flexibility

46

The need for layout decisions

Inefficient operations
For Example:

Changes in the design of products or services

High Cost Bottlenecks

The introduction of new products or services

Accidents

Safety hazards
47

The need for layout decisions

Changes in environmental or other legal requirements Changes in volume of output or mix of products

Changes in process and equipment

48

Process layout

49

Product layout

50

Learning Objectives
j Discuss the impact of the servicescape on the

behavior of customers and employees. j Describe the critical facility design features. j Identify the bottleneck operation in a product layout and rebalance for increased capacity. j Use operations sequence analysis to minimize flow-distance in a process layout. j Prepare a process flowchart. j Recommend facility design features to remove anxiety of disorientation.

51

Servicescapes
Designing Physical Surroundings to Affect Employee and Customer Behavior j Ambient Conditions: background characteristics such as noise level, music, lighting, temperature, and scent. j Spatial Layout and Functionality: reception area, circulation paths of employees and customers, and focal points. j Signs, Symbols, and Artifacts: selection, orientation, location, and size of objects.

52

Typology of Servicescapes
Who Performs in Servicescape Self-service (customer only) Interpersonal (both) Remote service (employee only) Physical Complexity of the Servicescape Elaborate Lean Golf course Water slide park Luxury hotel Airline terminal Research lab L.L. Bean Post office kiosk E-commerce Budget hotel Bus station Telemarketing Online tech support

53

Facility Design Considerations

j Nature and Objectives of Service

Organization j Land Availability and Space Requirements j Flexibility j Aesthetic Factors j The Community and Environment
54

Product Layout Line-balancing Problem

j Automobile Drivers License Office
Review 1 Payment 2 240 15 120 30 Violations 3 60 60 40 Eye Test 4 90 20 Photograph 5 180 30 Issue 6 120 Out

In

Activity numbers Flow rate per hour Time in seconds

55

Automobile Drivers License Office (Improved Layout)

In
1,4 65 55 60 2 120 30 20 5 180 30 6 120 3 60

Out

In

1,4 65 55

3 60 60

56

Process Layout Relative Location Problem

j Ocean World Theme Park Daily Flows
A A B C D E F
8 10 0 10 0 6 30 10 6 5 1 0 20 3 4

B
7

C
20 6

D
0 10 15

E
5 0 7 10

F
6 2 8 3 6 Net flow

B
15

C
30 12

D
0 40 20

E
15 10 8 30

F
6 8 8 6 10

Flow matrix

Triangularized matrix

Description of attractions: A=killer whale, B=sea lions, C=dolphins, D=water skiing, E=aquarium, F=water rides.

57

Process Flow Charting Symbols

Category Operation Customer contact Travel Delay Inspection D Symbol Description An operation performed by the server off-line or customers self-service. A possible service failure point. An occasion when server and customer interact. An opportunity to influence customer service perceptions. The movement of customers, servers, or information between operations. Delay resulting in a queue and a need for waiting space for customers. An activity by customer or server to measure service quality.

58

Credit Card Processing (Before)

Distance 30 ft. 30 ft. 30 ft. 30 ft. 30 ft. Time 0.5 min. 0.5 min. 0.5 min. 0.25 min. 0.5 min. 0.5 min. 0.5 min. 0.25 min 0.5 min. 0.5 min 0.5 min. 1.0 min. 0.5 min. 0.25 min. 0.5 min. 0.5 min. 0.5 min. 0.25 min. 0.5 min. D D D D D D D D D D D D D D D D D D D Activity Customer requests check Server walks Server prepares check Server walks Server presents check Server walks Customer inspects, puts card out Server returns to table Server picks up card Server walks to process Server fills out slip Server processes slip Server obtains preauthorization Server walks Server presents slip Server walks Customer signs (leaves) Server walks Server picks up slip (Customer leaves) Server walks
59

30 ft. 30 ft. 30 ft. 30 ft.

Total time: Server:9 min. (270 ft.) Customer: 7.75 min.

Credit Card Processing (After)

Distance 30 ft. Time 0.5 min. 0.5 min. 0.5 min. 0.5 min. 0.25 min. 0.5 min. 0.5 min 0.5 min. 0.25 min 0.5 min. 0.5 min. 1.0 min. 0.5 min. 0.25 min. 0.5 min. D D D D D D D D D D D D D D D D Activity Customer requests check Server walks Server prepares check Server fills out slip Server walks Server presents check and slip Server returns to table Customer inspects, puts card out, signs slip Server returns to table Server picks up card and slip Server walks Server processes slip an card Server obtains authorization Server walks Server presents card and receipt Server walks Customer leaves

30 ft. 30 ft. 30 ft. 30 ft.

30 ft. 30 ft.

Total time: Server: 7.5 min. (210 ft.) Customer: 6.75 min.

60

Environmental Orientation Considerations

j Need for spatial cues to orient visitors j Formula facilities draw on previous

experience j Entrance atrium allows visitors to gain a quick orientation and observe others for behavioral cues j Orientation aids and signage such as You Are Here maps reduce anxiety
61

Topics for Discussion

j Compare the attention to aesthetics in waiting

rooms that you have visited. How did the different environments affect your mood? j Give an example of a servicescape that supports the service concept and another that detracts. Explain the success or failure in terms of the servicescape dimensions j Based on your work experience, contrast a supportive servicescape with a poor one in terms of job satisfaction and productivity.
62

63

64

65

GENERAL LAYOUT TYPES: PRODUCT LAYOUTS

j Value-adding resources arranged in order in

which materials/customers must flow

resources dedicated solely to one product typically used in mass production

j Allows production and material-handling

tasks to be automated j Large quantities at low cost j Lack of flexibility

66

Manufacturing low operations high flow types Project

volume variety

high low

Service operations flow types

None
an th y ilit ts xib os fle c s gh es hi oc o pr s e or ed M eed n

Professional service

Jobbing

Batch

Service shop

n ha yt ilit ts xib os fle c s gh es hi oc so pr ss ed Le eed n

Mass

Continuous

Mass service

None

The natural line of fit of flow to volume/variety characteristics

67

Basic Layout Fixedposition    Process    Cell 

Advantages
Very high mix & product flexibility Product or customer not moved or disturbed High variety of tasks for staff High mix and product flexibility Relatively robust if in the case of disruptions Relative easy supervision of equipment or plant Can give a good compromise between cost and flexibility for relatively highvariety operations Fast throughput Group work may improve motivation Low unit costs for high volume Gives opportunities for specialization of equipment Materials or customer movement is convenient         

Disadvantages
Very high unit costs Scheduling of space & activities can be hard Can be much moving of plant and staff Low facility utilization Can have very high work-in-progress or customer queuing Complex flow can be difficult to control Can be costly to rearrange existing layout Can need more plant and equipment Can give lower plant utilization Can have low mix flexibility Not very robust in case of disruption Work can be very repetitive

  Product   

  

68

Detailed mapping to understand the process of creation

x All essential process steps x Duration of each step x Necessary resources (including labour)

` `

Improving the process Deciding on the position of the CODP

x Speed / time to delivery x Control and dependability x Variety/flexibility

69

Operation (activity that adds value)

Delay (a wait e.g. for materials) Deliberate storage (as opposed to delay)

Inspection (a check of some sort)

Decision Transport (a movement of something)

Direction of flow
70

Activities initiated by own orientation / inventory fill up

Activities initiated by a specific customer order

Intermediate Products

Job preperation

Cutting

Assembling

Packing

Up-stream
Customer Order Decoupling Point

Down-stream

71

` ` `

Only one CODP in each production flow. After the CODP there is no more inventory Before the CODP there is only inventory for economic reasons More CODP means splitting of production system

72

` ` ` ` `

Translate process map to capacity map of each step on average output (not absolute maximum) Compare to the demand scenarios Identify possible conflicts in time Be aware of bottlenecks, capacity-restrained resources, and non-bottlenecks Draw up a capacity increase plan Check on the strategic timeframe

73

` ` ` ` `

Translate process map to capacity map of each step on average output (not absolute maximum) Compare to the demand scenarios Identify possible conflicts in time Be aware of bottlenecks, capacity-restrained resources, and non-bottlenecks Draw up a capacity increase plan Check on the strategic timeframe

74

By formulating operational policies to manage expectations. By eliminating mistakes through formatting the intake. By communicating a reliable delivery date by using planning buckets. By linking sales orders to production orders to monitor timely delivery.

75

By adapting procurement policies to the logistical and financial risks involved. By improving the process of ordering goods and services. By improving the process of receiving goods and services. By better managing the interaction with the suppliers.

76

` ` ` `

By creating a structured warehouse. By controlling your inventory. By monitoring the validity of your forecast. By improving your replenishment warning system.

77

By optimising the existing production process through:

x x x x x x Balancing the capacity utilization Planning & controlling capacity Have standard flexibility Have good registration of production data Have a QC-system in place Carry out preventive maintenance

By timely increasing production capacity.

78

What is Lean production?

systematic elimination of the 7 types of waste:

Overproduction Waiting Transportation Inventory Motion over-processing, defective products (engl.waste)

79

The japanese call it Muda

WHAT IT IS Management philosophy Pull system though the plant

WHAT IT DOES Attacks waste

Exposes problems and bottlenecks Achieves streamlined production

WHAT IT REQUIRES

WHAT IT ASSUMES Stable environment

Employee participation
Industrial engineering/basics Continuing improvement Total quality control Small lot sizes
2/18/2012

80

80

Machine downtime Scrap Work in process queues (banks) Vendor delinquencies Change orders Design backlogs

Engineering design redundancies

Paperwork backlog

Inspection backlogs

Decision backlogs

81

` ` ` `

Not using the capacity efficiently Producing wrong goods or services or amounts Fluctuating quality and or too much waste Having too much inventory in the system

82

` ` ` ` ` `

Better organise Better control Make it more reliable Increase output Make it more flexible Anticipate future growth

83

` ` ` ` ` ` `

1) Waste from overproduction (2) Waste of waiting time (3) Transportation waste (4) Inventory waste (5) Processing waste (6) Waste of motion (7) Waste from product defects

84

` ` ` ` ` `

Planning and controlling capacity Standard flexibility Production administration Quality control system Preventive maintenance Balancing capacity utilisation

85

Time frame Strategic planning Yearly planning Years

Aim Long term

Content Products, markets, prod measures Amounts to sell and produce Order plan, capacity plan Sequencing work and orders Orders parts and products
86

Year , month

Coordination targets sales and production Coordination prod. phases and Starting each phase in prod produce

Capacity and order planning Detailed planning Primary process

Week, day Day, hour

Hour, minute

` ` ` ` ` `

Malfunction of machines Illness of employees Late deliveries of supplies Mistakes made in planning Unexpected fluctuation in demand Rush order from the customers

87

Planning activities
Operating time Non-productive time Tool change time-SMED Amounts of raw material used Amounts of disposal Quality results

` ` `

Check planned, released and ready Automation of admin activities. Link customer order to specific batch

88

` ` ` ` ` ` `

Be adequate to represent what on the shop floor Not too many Be linked to the shop floor Be very clear Be controllable by the shop floor workers Be clear what level of fine or bad Be visible to the employees

89

Opo 1. Quality 2. Dependability 3.Speed 4. Costs

Performance indicator 1.Defect rate On-hour delivery Cycle time Cost of raw material Rush orders

Lowest level 2 per 100 85 %

Highest level 1 per 100 More than 95 %

5. Flexibility

90

` ` `

By use general order picking principles. By have some form of route planning. By timely adding distribution capacity.

91

` ` `

` `

Preparing deliveries in a structured way Wishes of the customers in delivery process Delivering right goods at the right quantities without damages Delivering efficiency customers, routes and capcities Tracking and tracing delivery of goods and services Quality of the distribution process Increase distribution capacity
92

` ` ` ` `

By assessing and eliminating hazards. By improving housekeeping. By improving work organization. By improving personal protection. By developing contingency plans.

93

` ` ` ` `

Improving housekeeping Improving work organisation Improve personal protection Contingency planning Assessing and eliminating hazards

94

` ` `

Designing your mgmt info system (MIS) Get automated to a certain extent Know the pitfalls

95

` ` ` `

Reduction of labour Real time information Reduced reaction time Integrate information flow between departmentsfinance, marketing purchasing production Formatting to reduce mistakes

96

Level

Operations

Financial

HRM

Strategic

CEO

-6 months forecast -3 months forecast Forecast one month Cost of raw material

Total sales

Average hours Hours worked per week Hours worked per employee Workers throughput

New product development New machines New machines Purchasing new machines

Head of sales

Sales budget

Head of production Head of finance

Production budget Cash flow

97

Type 1 Description Simple Basic No customization Stand alone computers No network

Type 2 Complex Part customization

Type 3 Very complex and wide varieties Highest customization Network software Needs heavy server Infinite users

type4 Develop totally new software

Hardware

Network software Need separate server 5-10 users

Can network or stand alone Very expensive to stand alone

98

Suitable for

Small scale users Simple process Small companies

Large scale Integrated process Small to medium sized companies Fairly reliable

Almost all types of companies Need integration

Very unique process that do not match type 3

Reliability

Reliable

In the initial phase will cause difficulties Resolve after some time

Uncertain Will probably take long but bug free

99

Price

500 to 5000

10,000 to 200,000 US$

Over 150,000

Very very expensive erp

ERP

not possible

Some possibility

Yes

Possible

Example

Davilex

Exact Navison Axapta

SAP

4th generation computer

10 0

1) 2) 3)

4)

5)

6)

Strategic objectives Marketing objectives Product-Market combinations and their most important Op. Perform. Objectives Impact of each OPO on the network, location, production system Areas of conflict between OPO and possible solutions Detailed capacity plan
10 1

7) 8) 9) 10) 11) 12)

Evaluation of the network Process & layout within the system The production process mapped in detail Detailed capacity plan for next 3-5 years Identified impediments for growth Improvements on:
1) 2) 3) 4) Order intake Procurement Storage & Inventory Production 5) Distribution 6) Safety & Health 7) Info & Automation

10 2

I am now able to have an aerial view of operational issues. Now I know where to start from to manage my business operations. I had no clear understanding of how OM links with all other organisational functions, but its now a talk of the past. I now know the real areas an Op.mngr should work on. I am now equipped to use inventory as a tool to make working capital sweat even more.
10 3

GROWTH

Straegic Implications

Strategic Capacity Plan Operations Impediments for Growth

10 4

Any Questions?

10 5