Managerial Issues 1.Shift in balance of power to consumers Globalization of business and markets E-commerce 3.

Achieving higher levels of productivity Creating higher quality products Delivering better customer service Achieving shorter delivery times Reducing labor and material costs Trends Affecting Operation Decisions Globalization Global village with hyper-competition: Continuous information technology advances Lower trade barriers Lower transportation costs Emergence of newly industrialized countries (NIC) with high-growth markets and high standards of living Technology Connectivityanyone, anywhere, all the time Speedinstantaneous transactions Intangibilityfocus on innovative services to gain competitive advantage Characteristic of Customer Customization Competitive Priorities
Type Low Cost Quality Delivery Flexibility Priority Providing low cost products. Controlling costs across the board. Providing high quality products. Focus is on product and process quality. Providing products reliably and quickly. Providing a wide variety of products (mass customization). How fast a firm can produce a new product line. Providing value-added service. How products are delivered and supported.

Service

SEVEN WASTE (S. SHINGO) . OVER PRODUCTION 2. WAITING 3. TRANSPORTATION 4. STOCK 5. MOTION 6. DEFECT 7. PROCESSING Operations Management Management of the conversion process which transforms inputs such as raw material and labor into outputs in the form of finished goods and services. Operations Strategy Decisions Strategic (long-range) Needs of customers (capacity planning) Tactical (medium-range) Efficient scheduling of resources Operational planning and control (short-range) Immediate tasks and activities An Operational-Level OM Perspective OMs function focuses on adding value through the transformationo inputs into outputs. Physical: manufacturing Locational: transportation Exchange:retailing Storage: warehousing Physiological: health care Informational: telecommunications OMs Contributions to Society Higher Standard of Living Ability to increase productivity Lower cost of goods and services Better Quality Goods and Services Competition increases quality Concern for the Environment Recycling and concern for air and water quality Improved Working Conditions Better job design and employee participation Increased Global Competition Transformation into a global economy Pressure to excel on multiple competitive dimensions Increased emphasis on logistics Advances in Technology Information technology (IT) Internet email and commerce (B2B) Automation and robotics

MEASUREMENT & ANALYSIS

Defining a Process Selecting a Process Identifying the strengths and weaknesses of each processs capability to support the strategic focus of the firm on particular market segments. Standardization Flexibility Customization Speed of delivery Process Measurement Importance of Measuring Processes Is the basis for good managementIf you cant measure it, you cant manage it. Allows a firm to determine if its strategically important goals and standards are being met. Allows for performance comparisons with other competing firms. Types of Performance Measures Productivity The operational efficiency with which inputs are transformed (converted) into outputs. A relative measure that becomes meaningful when compared to itself over time, similar operations internally, or externally within its industry. Partial measures of productivity can be taken using the various inputs (e.g., labor, energy, and materials) that are combined to create a product. Outputs Productivi ty = Inputs Capacity Output of a process in a given period of timeunits of output per unit of time. Design capacity The ideal output rate at which the firm would like to produce under normal circumstances and for which the system was designed. Maximum capacity The maximum potential output rate that could be achieved when productive resources are used to their maximum. Capacity Utilization Percentage of available capacity actually used. Design capacity versus maximum capacity Homogeneous output

Variable output

Quality Usually measured by the defect rate of the products produced. Speed of Delivery Products lead timeamount of time from when product is ordered to when it is shipped. Inventoried versus customized products Variability/Uncertainty in delivery time Less uncertainty in delivery times is better. Flexibility The measure of how readily a firms transformation process can adjust to changes in customer demand (i.e., agile manufacturing). Flexibility Measures How quickly a process can convert from producing one product to another product. How quickly a process can adjust to changes in volume (demand). How capable is the process in producing more than one type of product Process Velocity (Manufacturing Velocity) Ratio of total throughput time for a product to the value-added time. Throughput timethe time the product spends in the process. Value-added timethe time it takes to complete the product.

Process Analysis in Manufacturing Multistage Process A process that consists of more than one step. Hybrid Process A multistage process that consists of more than one type of process. Make-to-Stock Process for making highly standardized products for finished goods inventory. Make-to-Order Process for making customized products to meet individual customer requirements Modularization Use of standard components and subassemblies to produce customized products. Tightness and Dependence The degree to which various process stages are related. Tight process are highly related, creating strongly dependence between the stages. Buffer inventories can make a process looser. Bottleneck A stage with the lowest output capacity that limits the total output of the process. Capacity versus Demand Capacity is the firms output capability; demand is the level of output that the market requires to meet customer needs. Process Flowcharts A schematic diagram for describing a process. What the official or documented method is. How the work is actually being performed. What the proper procedures should be. Process Analysis in Services Service Blueprinting The process of flowcharting for services that includes the customer: Identifying (mapping) processes Isolating fail points Establishing a time frame Analyzing profitability Line of visibility Above the line: stages in process, in direct contact with customer, that focus on providing good service. Below the line: stages in the process, not in contact with the customer, that focus on process efficiency. Failsafing Creating a control condition where the customer, server, or process can take only the correct (or desired) action while engaged in a service process. Business Processes Business Process A logical set of tasks or activities that crosses functional boundaries and recognizes its interdependence with other processes or businesses.

Business Process Analysis Define the Process Boundaries Identify where the process begins and where it ends (its boundaries). Determine its inputs and outputs. Recognize other processes that impact on the process under evaluation. Link the Process to the Corporate Strategy Understand how the process contributes to the firms competitive advantage. Identify key measures to be used evaluate the process. Map the Process Develop a process flow chart to provide a visual context for analyzing the process: Specific ordering of the process steps Length of time each step takes Resources required by each step Cross-functional relationships Granularity Describes the level of detail that is used in analyzing a process. Benchmarking Benchmarking Comparison of a companys measures of performance with those of firms that are considered to be world class. The search of the best practices that leads to superior performance. Involves continuous monitoring/measurement. Applicable to all functional areas: Goods and services Business processes Performance measures Key Steps in Benchmarking Planning Determining where we should bench mark. Analysis Obtaining an in-depth understanding of the firm. Integration Defining target areas for change. Action Incorporating findings into current processes. Maturity Having best practices at all organizational levels. Types of Benchmarking Internal Benchmarking Comparison of similar operations within the firm Competitive Benchmarking Comparison with like operations of competitors Functional Benchmarking Comparison with the best of breed in a specific function, regardless of industry Generic Benchmarking Adopting the innovative processes of industry leaders in commonly-held practices Business Process Reengineering Reengineering The process of rethinking and restructuring an organization Characteristics of a Reengineered Process Several jobs are combined into one. Workers make decisions. The steps in the process are performed in a natural order. Processes have multiple versions (flexibility). Work is performed where it makes the most sense. Issues with Reengineering Inability of management to link reengineering efforts to overall corporate strategy. Reengineering is regarded as a tactical program rather than as a strategy issue for the entire organization. Lack of commitment and participation by top management.

MEASUREMENT

Supplement Objectives Introduce the more common types of work methods that are practiced in the workplace. Understand the fundamental issues involved in developing work measurements. Identify the basic elements associated with conducting a time study. Determine how to design a work sampling study and apply it to an actual operation. Work Methods Studying the production system to: Identify non-valued-added time delays, transport distances, process and processing time requirements Simplify the entire operation by eliminating any step that does not add value to the product. Common Notation in Process Charting

Gilbreths Principles of Motion Economy

Work Measurement Work Measurement The methodology used for establishing time standards. Basic Industrial Engineering Methods Time study Elemental standard time data Predetermined motion-time data Work sampling Types of Work Measurement Applied to Different Tasks

Time Study Time Study The determination, with the use of a stopwatch, of how long it takes to complete a task or set of tasks. Normal time = Observed performance time per unit x Performance rating Piece rate is the rate paid for work completed. Break down tasks by: Defining each work element. Separating human work from machine work. Defining operator and machine delays separately. Elemental Standard-Time Data Time Standard The established time for completing a job, used in determining labor costs associated with making a product. Steps Breakdown the new job into its elements Match elements to the time for similar job-specific elements in the elemental table. Adjust elements for special characteristics of the new job. Add element times together and add delay and fatigue allowances.

Predetermined Motion-Time Data Predetermined Motion-Time Tables Create a time standard for a job or task based on standard times for basic motions (therbligs). Can be applied to a wide-variety of tasks. Work Sampling Work Sampling A statistical technique for estimating how workers allocate their time among various activities throughout a workday. Issues involved: What level of statistical confidence is desired in the results? How many observations are necessary? When should the observations be made? Determining the Required Number of Samples:

N =
N= Z=

Z 2 p(1 p) E2

Number of observations to be made Number of standard deviations associated with a given confidence level p = Estimated proportion of time that the activity being measured occurs E = Absolute error that is desired Steps in Conducting a Work Sampling Study: Identify the activities for study. Estimate the proportion of time of the activity of interest to the total time. State the desired accuracy in the study results. Determine the specific time when each observation is to be made. If using an estimated time, recompute the required samples size at intervals during the study and adjust the number of observations Financial Incentive Plans Basic Compensation Systems Hourly pay Straight salary Piece rate Commissions Individual or Small-Group Plans Organizational Plans Profit sharing Gainsharing

LOCATION Locating Manufacturing Facilities Products that decrease in weight and volume during manufacturing tend to be located near the sources of raw materials.

Products that increase in weight and volume during manufacturing tend to be located near the consumers. One site cost disadvantage such as transportation may be offset by a cost savings advantage specific to the site such as low labor costs. A location analysis should consider both qualitative and quantitative factors Qualitative Location Factors Local Infrastructure Institutional (e.g., reliable electrical power grid) Transportational (e.g., railway systems) Worker Education and Skills Education and skills of local workers. Product Content Requirements The minimum percentage of product that must be produced in a country in order for the product to be sold in that country. Political/Economic Stability Quantitative Location Factors Labor Costs Labor costs vary dramatically, depending on location. Cheap labor often lacks needed education and skills. Distribution Costs Distance and the time required to deliver products can offset lower location costs. Facility Costs Special economic zones (SEZ) Duty-free areas established to attract foreign investment in the form of manufacturing facilities. Exchange Rates Variations in rates can have a significant effect on sales and profits. Tax Rates Taxes vary considerably between countries and within countries. All forms of taxes should be considered (property, payroll, inventory, and investment taxes). Evaluating Potential Locations Factor Rating System 1.Identify the specific criteria or factors to be considered. 2.Assign a weight to each factor. 3.Select a common scale for rating each factor. 4.Rate each potential location on each of the factors. 5.Multiply each factors score by its weight. 6.Sum the weighted scores and select the location with the highest score. Factors Affecting Capacity Decisions External Factors Government regulations Union agreements Supplier capabilities Internal Product and service design Personnel and jobs Plant layout and process flow Equipment capabilities and maintenance Materials management Quality control systems Management capabilities Capacity Decisions Production System Capacity Affects: Response rate to market changes Overall product cost structure Composition of the workforce Level of production technology utilized Extent of management and staff support General inventory strategy Important Capacity Concepts Balancing Capacity and Demand Demand exceeds capacity, customers are turned away. Demand exceeds optimum capacity, customers receive poor service. Demand equals optimum capacity, customers are service properly. Demand is less than optimum capacity, there is idle capacity Too much capacitycosts rise. Too little capacitycustomers are lost. Capacity Flexibility Ability to provide a wider range of products and volumes with short lead times. Flexible plants Flexible processes Flexible workers Use of External Capacity Subcontracting Sharing capacity Agile Manufacturing The capability of a manufacturing process to respond quickly to marketplace changes. Capacity Balance Balanced internal operational capacities Capacity Planning Capacity Planning

Determining which level of capacity to operate at to meet customer demand in a cost efficient manner 1.Forecast sales for each product line. 2.Forecast sales for individual products within each line. 3.Calculate labor and equipment requirements to meet product line forecasts. 4.Project labor and equipment availabilities over the planning horizon. Capacity Measures Capacity The output of a process or facility over a given time period. Capacity Utilization The percentage of the available capacity that is actually being used.

LAYOUT Types of Manufacturing Layouts

Characteristics of a Good Layout

Product Layout Assembly Lines A progressive paced assembly linked by some sort of material handling device. Assembly Line Type Differences Material handling devices Line configuration Pacing (machine or human) Product mix Workstation characteristic Length of line Product Layout: Key Terms Product Interval Time The time between products being completed (processed through) at a single station (process step). Also cycle time or takt time. Product Duration (Throughput) Time. The overall time required to entirely complete an individual product. Assembly Line Balancing Assignment of tasks to workstations within a given cycle time and with minimum idle worker time. Assembly Line Balancing Steps 1.Specify the sequential relationships among tasks using a precedence diagram. 2.Determine the required takt (T) time. 3.Determine the theoretical minimum number of workstations (Nt) required to satisfy the takt time constraint. 4.Select a primary rule by which tasks are to be assigned to workstations and a secondary rule to break ties. 5.Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to the takt time. Continue assigning tasks to other workstations until all tasks are assigned. 6.Evaluate the efficiency of the resulting assembly line. 7.If efficiency is unsatisfactory, rebalance the line using a different decision rule in step 4. Takt Time and Throughput Time on an Assembly Line Matching task time to takt time: 1.Split the task 2.Duplicate the station 3.Share the task 4.Use a more skilled worker 5.Work overtime 6.Redesign the product

Assembly Line Balancing Formulas

Efficiency Calculation

Ec n fii c f ey Ec n fii c f ey

S = N T 1 9 5 = = 7 ,o 0. 7 r ( ) 5 .4 ) 5 (0

7 % 7

Group Technology (Cellular) Layout Benefits Better human relations in small work teams. Improved operator expertise from the limited number of parts and quick production cycle. Less work-in-process inventory and material handling due to reduced number of production stages. Faster production setup from faster tooling changes. Group Technology (GT) Layout Developing a GT Layout Grouping parts into families that follow a common sequence of steps. Identifying dominant flow patterns of parts-families for location of processes. Physically grouping machines and processes into cells. Facilities Layout for Services Goals of Service Facility Layouts Minimize travel time for workers and customers Maximize revenues from customers Types of Service Layouts Process layoutemergency rooms Product layoutcafeteria line Fixed-position layoutautomobile repair shop Servicescape The aspects of the physical surroundings in a service operation that can affect a customers perception of the service received. Ambient conditions Noise, lighting, and temperature Spatial layout and functionality Minimizing employee travel time and maximizing revenue opportunities from customers Signs, symbols, and artifacts Objects that create positive images of the firm