operations management mms i by suresh dadlani email: [email protected]...
TRANSCRIPT
OPERATION MANAGEMENT
HR
PRODUCT
MATERIALS
SCHEDULING
FACILITIES
PLANNING
PROCESSES
LAYOUT
Operations ManagementProduct Definition Process
Product: The end result of the manufacturing process to be
offered to the market place to satisfy a need or a want.
October3,2010
Objectives• Define product design and its strategic impact on organization• Describe steps to develop a product design• Using break-even analysis as a tool in selecting between product
alternatives• Identity production process differences and their characteristics• Describe the steps used in process design selection• Understand how to use a process flow chart• Understand current technology advancements and how they impact
process design• Understand issues impacting the design of service operations
October3,2010
Product & Service Design
• Product design must support the business strategy
• Product design defines a product’s characteristics
- Appearance, materials, dimensions, tolerances,
performance standards
• Service industries must define both the service and concept
- Physical elements, aesthetic & psychological benefits
e.g. promptness, friendliness, ambiance
• Product and service design must match the needs and preferences of the targeted customer group
October3,2010
Product & Service Design Steps
• Step 1 - Idea Development - Someone thinks of a need and a product/service design to satisfy it e.g. customers, marketing, engineering, competitors,
benchmarking, reverse engineering • Step 2 - Product Screening - Every business needs a formal/structured evaluation process
e.g. fit with facility and labor skills, size of market, contribution margin, break-even analysis, return on sales
• Step 3 – Preliminary Design and Testing - Technical specifications are developed, prototypes built, testing starts
• Step 4 – Final Design - Final design based on test results, facility, equipment, material, & labor skills defined, suppliers identified
October3,2010
Designing Services
• Service Characteristics– Pure services– Quasi-Manufacturing– Mixed services
• Service Package– The physical goods– The sensual benefits– The psychological benefits
• Differing designs– Substitute technology for
people– Get customer involved– High customer attention
October3,2010
Design/Process Highlights• Product and process design must support business and operation strategy• Product steps include idea generation, product screening, preliminary
design and testing, and final design• Break-even analysis is a tool used to screen processes• Process designs range from project to batch to line to continuous• Product design and process selection decisions are linked• Process flow charts can be a useful tool in process re-design• Product and process design can be significantly enhanced by proper
application of new technology• Designing service processes produce intangible products with more
customer contact
• Idea development– Technology push– Marketing pull
• Product screening– Marketing criteria– Financial criteria– Operational criteria
• Preliminary design and testing– Prototyping– Trial marketing
• Final design
Product design and process selection
ReverseEngineering
ConcurrentEngineering
BreakevenAnalysis
ValueEngineering
Remanufacturing
Benchmarking
October3,2010
Break-Even Analysis: Graphical Approach
• Compute quantity of goods that must be sold to break-even
• Compute total revenue at an assumed selling price
• Compute fixed cost and variable cost for several quantities
• Plot the total revenue line and the total cost line
• Intersection is break-even• Sensitivity analysis can be done to
examine changes in all of the assumptions made
Breakeven Analysis
• Used to determine volume needed to cover total costs
• Often first step in product development process
• Assumes linear costs
BreakevenF ixed t
un it price un it iab le t
cos
( ) ( var co s )
Fixed cost
Variable cost
Total cost
Revenue
Volume
Cost
Breakeven ExampleA firm is considering marketing a new toothbrush. The firm expects to sell each toothbrush for Rs.2.10 The per brush cost of material, labor and overhead equals Rs.1.45 The required investment in plant and equipment is Rs.50,000.
How many brushes must be sold for the firm to breakeven?
50 000
2 10 1 4576 923
,
. .,
If only 65,000 brushes are expected to sell, what must the variable costs be in order to allow the firm to breakeven?
65 000 2 10 50 000 65 000, ( . ) , , ( ) VC
VC 1 331.
October3,2010
Other Factors Impacting Design
• Need to Design for Manufacturing – DFM– Minimize parts
– Design parts for multiply applications
– Use modular design
– Avoid tools
– Simplify operations
The product life cycle• Every product and service
follows a life cycle that spans:– Planning– Introduction– Growth– Maturity – Decline
• Healthy companies manage their product and service offerings to insure a balanced portfolio
Sales
Profit
Plan Intro Growth Mat Dec
Dol
lars
© 2005 Wiley
Factor In Product Life Cycle
• Consider product life cycle stages
– Introduction– Growth– Maturity– Decline
• Facility & process investment depends on life cycle
October3,2010
Another Design factor-Organization
• Old “over-the –wall” sequential design process should not be used
– Each function did its work and passed it to the
next function
• Replace with a Concurrent Engineering process
– All functions form a design team working
together to develop specifications, involve
customers early, solve potential problems,
reduce costs, & shorten time to market
CE decision-making example
Concurrent Engineering
• Concurrent engineering can be defined as the simultaneous development of project design functions, with open and interactive communication existing among all team members for the purposes of reducing time to market, decreasing cost, and improving quality and reliability.
October3,2010
Process Selection
• Process selection is based on five considerations– Type of process; range from intermittent to continuous– Degree of vertical integration– Flexibility of resources– Mix between capital & human resources– Degree of customer contact
Process types can be:Project ProcessBatch ProcessLine ProcessContinuous Process
October3,2010
Underlying Process Relationship Between Volume and Standardization
© 2005 Wiley
Differences between Intermittent and Continuous Operations
Decision Intermittent Operation Continuous Operation
Product variety Great Small
Degree of standardization Low High
Organization of resources Grouped by Function Line flow
Path of products Varied, depends on product Line flow
Factor driving production Customer orders Forecast of demand
Critical resource Labor Capital
Type of equipment General purpose Specialized
Degree of automation Low High
Throughput time Longer Shorter
Work-in-process inventory More Less
October3,2010
Volume and Process Choice-Summary
• Low Volume typically means– Project or Batch processes– Less vertical integration– More resource flexibility– Less capital intensity– Higher skilled labor– More customer involvement
– More customized products– Make or assemble to order
strategy
• High Volume typically means– Line/continuous processes– More vertical integration– Less resource flexibility– More capital intensity– More specialized labor– Little to no customer
involvement– Standardized products– Make to stock strategy
Positioning Strategies and the Product / Process Matrix
Job Shop
Large Batch
Assembly Line
Process Focus
Product Focus
Product Volume
Flo
w P
atte
rn
The process-focused Project ShopCharacteristics1. Makes a one-of-a-kind product (volume = 1)2. Uses general purpose equipment3. Has informal relationships with many vendors4. Very little vertical integration5. Flexible layout often with factors of production moving to job
The Job Shop Characteristics1. Makes many products in small volume 2. Uses general purpose equipment3. Has informal relationships with vendors4. Very little vertical integration5. Departmentalized layout with chaotic flow
The Large Batch (Cell, Flow or Hybrid Shop)Characteristics1. Makes several families of products in moderate volume 2. Uses general purpose equipment often fixtured3. Little vertical integration4. Hybrid layout with flow lines
The Assembly LineCharacteristics1. Makes few products in large volume 2. Uses specialized high-volume equipment 3. Has formal relationships with vendors4. May use vertical integration5. Product-based layout with linear flow
Process Decisions
More resource flexibility & More customer involvement
More vertical integration & More capital intensity
Flexibility
Efficiency
Product Volume
Flo
w P
atte
rn
Low Medium High
Product Volume
Jumbled
Dominant
Line
Pro
cess
Cho
ice
Greater need for flexibility
Greater need for efficiency
Technology and the Product/Process Matrix
Technology decisions tend to be long-term in nature and greatly influence which products and services a firm is capable of providing to its customers profitably.
Managing the balance between efficiency and flexibility to optimize customer service performance: Product and Service Strategy
PrepareIngredientsRaw
Materials
AssembleMenu Items Finished
Goods
PrepareIngredientsRaw
Materials
AssembleMenu Items
WorkIn
Process
PrepareIngredientsRaw
Materials
AssembleMenu Items
Make to stock
Assemble to order
Make to order
© 2005 Wiley
Process Design Tools
• Process flow analysis is a tool used to analyze and document the sequence of steps within a total process. Usually first step in Process Reengineering.
• Process Re-engineering is a structured approach used when major business changes are required as a result of:– Major new products– Quality improvement
needed– Better competitors– Inadequate performance
© 2005 Wiley
Facility Layout and Process Choice
October3,2010
Process Performance Metrics
October3,2010
Linking Design & Process Selection
• Organizational Decisions appropriate for different types of operations
October3,2010
Intermittent VS. Repetitive Layouts
October3,2010
Product and Service Strategy Options
October3,2010
Process Decisions-Vertical Integration & Make or Buy
• Vertical integration refers to the degree a firm chooses to do processes itself- raw material to sales– Backward Integration means moving closer to primary operations– Forward Integration means moving closer to customers
• A firm’s Make-or-Buy choices should be based on the following considerations:– Strategic impact– Available capacity– Expertise– Quality considerations– Speed– Cost (fixed cost + variable cost)make = Cost (fixed cost + Variable cost)buy
• Business are trending toward less backward integration, more outsourcing
October3,2010
Manufacturing Technology Decisions
• Simplify first then apply appropriate technology
• Information Technology: ERP etc.
• Automation
• Automated Material Handling:– Automated guided vehicles (AGV)
– Automated storage & retrieval systems (AS/RS)
• Computer-Aided Design (CAD) software
• Robotics & Numerically-Controlled (NC) equipment
• Flexible Manufacturing Systems (FMS)
• Computer-Integrated Manufacturing (CIM)
Designing for the Customer
Achieve equivalent or better performance at a lower cost while maintaining all functional requirements defined by the customer.1. Does the item have any design features that are not necessary?2. Can two or more parts be combined into one?3. How can we cut down the weight?4. Are there nonstandard parts that can be eliminated?
Design for manufacturability: operability guidelines
1. Design multifunctional and multiuse components and service elements2. Design for ease of joining, separating, rejoining3. Design for one-way assembly, one-way travel4. Avoid special fasteners and connectors and off-line or misfit service elements5. Avoid fragile designs requiring extraordinary effort or attentiveness
Value Analysis/Value Engineering (VA/VE)
Manufacturing Systems
• Depend on the type of Plant in which we have to Operate• Factors determining place of Production Planning & Control in an
Organization are: > Type of Production - Quantity of Finished Products - Regularity of manufacture > Size of Plant > Type of Industry
Manufacturing SystemsTypes of Production
• Broadly eight types, Grouped under three Heads
> Job Production
> Batch Production
> Continuous Production
Manufacturing SystemsTypes of Production
JOB PRODUCTION
• To meet specific customer requirements• Quantity is small, usually “one off” or “several off”• Special Projects, Models, Prototypes• Large Turbo Generators, Large Engines, Boilers, Ship Building
Manufacturing SystemsTypes of Production
JOB PRODUCTION
• Types of Job Production > Small numbers produced once
> Small numbers produced intermittently when needed
> Small number produced periodically, at known intervals
Manufacturing SystemsTypes of Production
JOB PRODUCTION
• Important Points related to Job Production: - When produced once only, little scope of improvements in production techniques –
intricate method studies, special tools, Jigs & Fixtures. - For repeat requirements – Tools, Gauges and other items, considered carefully, as these
affect Production time and hence the costs. - Repeat orders may not require elaborate repeat planning and hence helps lowering costs
due to;
> Simplified Production Control
> Familiarity for dispatchers & Expediters with Designs > Can take pre-emptive actions on anticipated difficulties
> Scheduling is simpler, master scheduling for repeat orders at regular intervals > Possible to balance Production time and Plant Capacity
Manufacturing SystemsTypes of Production
JOB PRODUCTION
• Non repetitive Job Productions – most common Hence: > Scheduling is based on assessment/estimates of Production times > Estimates are based on judgment and often on then rule of thumb and hence experience and
skills of estimator plays key role > Requires frequent reviews to take into account realities affecting deliveries and costs. > As output depends on plant capacities and estimated times of jobs, it has possibilities of
resulting in queues of jobs for execution and hence could affect deliveries, costs, productivity and quality due to changing schedules to meet priorities
> Longer the queue , more important is to explore the ways - To increase plant capacity - To review Sales Policy - To judiciously discriminate order execution
Manufacturing SystemsTypes of Production
Batch Production
• To manufacture a number of identical items, either to meet a specific order or to satisfy continuous demand.
• When production of a batch is terminated, the plant and equipment are available for the production of similar or other products.
• Policies regarding tooling, fixtures and other aids depend on quantities involved – Batch.
Manufacturing SystemsTypes of Production
Batch Production
• Types of Batch Production :
- Batch produced once
- Batch produced repeatedly at regular intervals- need based
- Batch produced periodically at known intervals
Manufacturing SystemsTypes of Production
Batch Production
• Highlights/Features: - Planning & Control depend on quantities – simpler with higher
volumes. - Size of the batch and Scheduling for production are critical issues.
• Considerations for optimal Batch size: - Set up costs - Inventory Controls/Management - Plant Capacity - Delivery requirements of batches of different products.
Manufacturing SystemsTypes of Production
Batch Production
• Other Considerations for Batch sizes: - Governed by external orders, batch to suit Customers’ requirements - Plant act as Vendor in some cases - If for internal requirements, scheduling and batch size decisions are
relatively simpler.
• Batch sizes: - Determines lengths of production run - Affects Production schedule - Affects batch size consideration of other Products - Facilities are designed as a mix of Special Purpose and/or flexible
Manufacturing SystemsTypes of ProductionContinuous Production
• Specialized manufacture of identical articles on which equipment is fully engaged.
• Associated with large quantities/high demand products• Whereas in Job & Batch, Rate of Production exceeds Rate of demand,
Continuous production is justified only when its Rate of Production can be sustained by the market
• Full advantage of repetitive operations comes in; - Design of production auxiliary aids like special tools, jigs & fixtures,
Feeders, Material handling system, inspection devices, weighing systems etc.
Manufacturing SystemsTypes of ProductionContinuous Production
• Types of Continuous Production Systems:
- Mass Production
- Flow Production
Difference being mainly on the kind of Product and its relation to the Plant.
Manufacturing SystemsTypes of ProductionContinuous Production
• Mass Production: - Large number of identical articles
- Though use of advanced mechanization & tooling, the equipment need not be exclusively designed for the Product.
- Plant & Equipment are flexible to produce other Products involving same/similar production processes.
- Possibilities of discontinuance of certain Product lines & to change to another article, without excessive modifications in plant layout, except changes in tooling etc.
• Examples of facilities in Mass Production: - Mechanised press shop
- Moulding facilities - Automats - Finishing shops
Manufacturing SystemsTypes of ProductionContinuous Production
• Flow Production : - The plant, equipment, layout are primarily designed to manufacture specific Product.
- Limited flexibility in selection of Products with minor modifications in layouts or designs of models. - Most efficient in design - Less prone to human errors
• Examples : - Automobiles
- Engines - Household items - Chemical Plants
Manufacturing SystemsTypes of ProductionContinuous Production
• Flow Production – Critical/Important features:
- Switch over to different kind of Product requires extensive tooling, changes in layout and equipment policy
- Production planning & Control is far simpler
- Extensive efforts, use of best skills and experience for detailed planning before start of production, but once started scheduling and Control is simple
- Output is constrained by: > Production Capacity > Production targets ( Sales requirements)
Manufacturing SystemsTypes of Production
• Constraints in maintaining particular type of Production System:
- Uneven production rates , mismatch in production rates of different items
- Inventory Controls
- Product life cycle changes
- Machine reliability - Design changes
- Competition
Manufacturing SystemsSize of Plants
• Larger the plant, more complicated are activites• Issues relate to : - Planning ( Centalised/Decentralised) - Coordination between departments, high risks of lack of coordination - Man management• Centralisation helps in : - Methods planning - Standardisation & Simplification of Products & Materials - Purchasing & Storing of materials - Superior coordination - Possibilities for better utilisation of facilities and past experience. - Better inventory management - Less risks of damages and obsolescence - No empire building of satellites and hence better effectiveness
Manufacturing SystemsSize of Plants
• Too much of Centralisation may result in:
- Cumbersome planning & control
- Detached from reality
- Slow to react
- inefficiency in the system
Manufacturing SystemsType of industry
• It is the field in which plant specializes• Classified into several ways: - Availability of kind of labor in different geographical locations - Demand of different skills - Investment policies - Materials, Processes or end products• Division on the basis of materials used is not common, as usually most industries
use variety of materials• Classification by end Products is logical, as covers materials , methods and skills. - Complicated due to large number of Products & Plant involved with
multiple Products• Simpler method for classification is by process - Material Fabrication - Chemical Process etc.
Manufacturing SystemsType of industry
• Usually labeled according to the main activities, e.g., - Vehicles and accessories - Leather and leather goods - Textiles - Chemicals - Metal manufacture/processing - FMCG, Food, drinks etc - Pharmaceuticals
Manufacturing SystemsTo summarize
• With very few exceptions, no industry is confined to one type of production process.• Batch production at some or the other stages recurs in all the industries and statistically accounts for over
60% of the sample.• Batch production is more complex than Continuous Production for Production Planning & Control.• Continuous Production carries highest risks together with highest efficiencies.• Job production requires highest skills but provides lower efficiencies.• Plant utilization is the highest in Continuous Production followed by the Batch Production with lowest for
Job Production• The best flexibility in operation lies in Batch Production process and lowest with Continuous Process.• Highest skills requirements for Job Process and generally lower in Continuous.• High level of specialised skills required in setting up Continuous process plant, as - Mistakes costs recurring losses - Expensive to correct• Capacity Planning and increasing capacity for Batch Process is quicker, including though sub contracting.
Manufacturing SystemsFood for thought
• Continuing with the Case of Tata Motors in hand, please decide on which MAKE or BUY decision and in case of MAKE which manufacturing process will you follow for;
Assembly line of the vehicles Engines Gear box Dashboard Wind screen Horn Battery Music system Gear and Accelerator pedals Steering lever hand gripAnd reasoning for the same.
Manufacturing SystemsFood for thought
• Will you maintain the decision for ever or will you have review based on some factors/milestones in future.
• What major factors will you consider on going against the Buy decisions, for some of the items, where though Making may be more expensive than Buying.
Each Group to submit their recommendations in one page today at 1240pm, with R. Nos written in the sheet
The Group to present the approach, strategy with logical reasons next week. Each group will have 10 min to present incl discussion, Q&A and this will mean 10 marks for the internal out of 40 for the Semester.