chapter 11 1 copyright © 2008 by nelson, a division of thomson canada limited chapter achieving...

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1Copyright © 2008 by Nelson, a division of Thomson Canada Limited

Chapter

Achieving World-ClassOperations ManagementAchieving World-Class

Operations Management

Prepared byNorm Althouse

University of Calgary

Prepared byNorm Althouse

University of Calgary

11

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Principles of Operations

changes in consumer

expectations, technology, and

competition

finding the most efficient and effective methods of

producing the goods or services

rethinking where, when and how the organization

will produce products and services

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Production and Operations Management1

The creation of products and services by turning

inputs into outputs, which are products

and services

The creation of products and services by turning

inputs into outputs, which are products

and services

ProductionProduction

Management of theproduction process

Management of theproduction process



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The Production Process1

Raw materials

Raw materials

Natural resources

Natural resources

Human resources

Human resources CapitalCapital

Inputs Outputs

Conversionprocess

Conversionprocess

ProductsProducts

ServicesServices

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Production and Operations Management1

Main Main Types ofTypes of

DecisionsDecisions

Main Main Types ofTypes of

DecisionsDecisions

1. Production Planning

2. Production Control

3. Improving production and operations

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1 Production Planning

Site selectionSite selection

Facility layoutFacility layout

Resource planningResource planning

Type of Production ProcessType of Production Process

DecisionsDecisionsin in

ProductionProductionPlanningPlanning

DecisionsDecisionsin in

ProductionProductionPlanningPlanning

Long-TermMedium-TermShort-Term

1 Year1 Year 2 Years2 Years 3-5 Years3-5 Years

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2 Types of Production

MassCustomization

MassCustomization

Goods are mass-produced up to a point, then custom tailored to

the needs of individual customers.

Goods are mass-produced up to a point, then custom tailored to

the needs of individual customers.

CustomizationCustomizationThe production of goods or services

one at a time according to theneeds of individual customers.

The production of goods or services one at a time according to theneeds of individual customers.

MassProduction

MassProduction

The ability to manufacture manyidentical goods at once.

The ability to manufacture manyidentical goods at once.

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2Classification and Timing of

Production

Assembly Process

Assembly Process

The basic inputs are combined or transformed into the output.

The basic inputs are combined or transformed into the output.

ProcessManufacturing

ProcessManufacturing

The basic input is broken down into one or more outputs.

The basic input is broken down into one or more outputs.

ContinuousProcess

ContinuousProcess

A production process that uses long production runs without

equipment shutdowns.

A production process that uses long production runs without

equipment shutdowns.

Intermittent Process

Intermittent Process

A production process that uses short production runs to make batches of

different products.

A production process that uses short production runs to make batches of

different products.

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Manufacturing to order, or for inventory


Manufacture to order

Manufacture to order

A product is not made until a customer has placed an order for it.

E.g. Dell Computers, Burger King

A product is not made until a customer has placed an order for it.

E.g. Dell Computers, Burger King

Manufacture for inventory

Manufacture for inventory

A product is made in advance of a customer ordering it. E.g. Hewlett

Packard, McDonalds

A product is made in advance of a customer ordering it. E.g. Hewlett

Packard, McDonalds

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order?


25% 25%25%25%1. Black

2. White

3. Red

4. Yellow

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3Factors in Facility Location

Decisions

Marketing factorsMarketing factors

Manufacturing environmentManufacturing environment

Local incentivesLocal incentives

Availability of production inputsAvailability of production inputs

International location considerations

International location considerations

Make-or-buy decisionsMake-or-buy decisions

Process layoutProcess layout

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Production location problem


Where should the factory be built in Outlandia? …near to the source of supply? … or near to the consumers?

Location of main supply inputs

Location of main consumption market

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Physical weight loss Supply Smelters; sawmills Physical weight gain Consumer Soft-drink bottling; manufacture of

cement blocks Bulk loss Supply Compressing cotton into high-

density bales Bulk gain Consumer Manufacturing containers; sheet-

metal work Perishability loss Supply Fish processing Perishability gain Consumer Newspaper (and job) printing;

baking bread Fragility loss Supply Packing goods for shipment Fragility gain Consumer Coking of coal Hazard loss Supply Deodorizing captured skunks Hazard gain Consumer Manufacturing explosives;

distilling moonshine whiskey


Process characteristic

…implies locating close to Examples

Source: The Dynamics of Industrial Location: The Factory, the Firm and the Production Systemby Roger Hayter, Department of Geography, Simon Fraser University, Burnaby, 2004(http://www.sfu.ca/geography/people/faculty/Faculty_sites/RogerHayter/books.htm)

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Where should the factory be built in Outlandia? A centre of gravity model might be the answer when there are multiple consumption areas.

Location of main supply inputs

Consumer market B

Consumer market A

Consumer market C

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3 Types of Facility Layouts

ProductLayout

ProductLayout

Workstations or departments are arranged in a line with products

moving along the line

Workstations or departments are arranged in a line with products

moving along the line

Fixed-PositionLayout

Fixed-PositionLayout

The product stays in one place and workers and machinery

move to it as needed

The product stays in one place and workers and machinery

move to it as needed

ProcessLayout

ProcessLayout

Work flows according to theproduction process

Work flows according to theproduction process

Cellular Manufacturing

Cellular Manufacturing

Technique uses small, self-contained production units each performing all

or most of the tasks necessary

Technique uses small, self-contained production units each performing all

or most of the tasks necessary

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4 Make-or-Buy Decisions

FactorsFactorsFactorsFactors Size of componentsSize of components

Standard or nonstandard items

Standard or nonstandard items

Quantity of items neededQuantity of items needed

Special design featuresSpecial design features

Quality and reliabilityQuality and reliability

Should we be backward integrated, or not?

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4 Inventory Management

InventoryManagement

InventoryManagement

The determination of how much inventory a firm will keep on hand,

and the ordering, receiving, storing, and tracking of inventory

The determination of how much inventory a firm will keep on hand,

and the ordering, receiving, storing, and tracking of inventory

InventoryInventory The supply of goods that a firmholds for use in production or for

sale to customers

The supply of goods that a firmholds for use in production or for

sale to customers

PerpetualInventoryPerpetualInventory

A continuously updated list of inventory levels, orders,

sales, and receipts

A continuously updated list of inventory levels, orders,

sales, and receipts

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4 Supply Chain Management

Supply ChainSupply Chain The entire sequence of securing

inputs, producing goods, and delivering goods to customers

The entire sequence of securing inputs, producing goods, and delivering goods to customers

Goal:Satisfying customers with

quality products and services

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5

RoutingRouting Value-stream mapping

Value-stream mapping

Gantt chartsGantt charts

Critical pathmethod

Critical pathmethod

PERTPERT

SchedulingScheduling

Production Control

See Exhibits 11.6 and 11.7

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Gantt Chart


11 - 6

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Critical Path Method


11 - 7

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6

AutomationAutomation

Lean manufacturingLean manufacturing

Quality management techniques

Quality management techniques

Improving Production and Operations

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The Experience Curve


10 10 10 10 10 101 2 3 4 5 6

CostperUnitmade

Total Accumulated Production

Slope of .2 to .3, meaning a 20% to 30%reduction in unit manufacturing

costs for each doublingof production

As Boeing originally discovered with the 707, manufacturing cost continues to decline as you accumulate more production experience.

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6

Total QualityManagementTotal QualityManagement

The use of quality principles in all aspects of a company’s production and

operations.

The use of quality principles in all aspects of a company’s production and

operations.

Quality control

Quality control

The process of creating standards for quality, producing goods that meet them,

and then measuring finished products against them.

The process of creating standards for quality, producing goods that meet them,

and then measuring finished products against them.

ContinuousimprovementContinuous

improvementA commitment to constantly seek better

ways of doing things to maintain and increase quality.

A commitment to constantly seek better ways of doing things to maintain and

increase quality.

Six SigmaSix SigmaA quality control process relying on

defining what needs to be done to ensure quality, measuring and analyzing results,

and ongoing improvement.

A quality control process relying on defining what needs to be done to ensure quality, measuring and analyzing results,

and ongoing improvement.

Putting Quality First

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ISO 14000ISO 14000A set of technical standards to promote

clean production processes to protect the environment.

A set of technical standards to promote clean production processes to

protect the environment.

ISO 9000ISO 9000

A set of five technical standards of quality management to provide a uniform

way of determining whether manufacturing plants and service

organizations conform to sound quality procedures.

A set of five technical standards of quality management to provide a uniform

way of determining whether manufacturing plants and service

organizations conform to sound quality procedures.

International Quality Standards

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6

Just-in-time(JIT)

Just-in-time(JIT)

A system in which materials arrive exactly when they are needed for production,

rather than being stored on site.

A system in which materials arrive exactly when they are needed for production,

rather than being stored on site.

Leanmanufacturing

Leanmanufacturing

Streamlining production by eliminating steps in the production process that do

not add benefits that customers are willing to pay for.

Streamlining production by eliminating steps in the production process that do

not add benefits that customers are willing to pay for.

Lean Manufacturing

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7

Computer-Integrated ManufacturingComputer-Integrated Manufacturing

Flexible Manufacturing SystemsFlexible Manufacturing Systems

RoboticsRobotics

Computer-Aided Design andManufacturing Systems

Computer-Aided Design andManufacturing Systems

Technology

POS, ATMs, etc. POS, ATMs, etc.

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8

Modular productionModular production

Designs for production efficiencyDesigns for production efficiency

Asset managementAsset management

Trends in Operations Management

chapter 11 1 copyright © 2008 by nelson, a division of thomson canada limited chapter achieving...

Documents

production of goods

services production

mass production

short production

production control

process manufacturing

long production runs

continuous process