MIDTERM OPS KILL ME

The Operation realities

Better quality, high productivity, lower costs and the ability to respond quickly to customer needs

Organizational strategies

• Overall strat. That relate to the entire org

• Support the achievement of organizational goals and mission

Functional level strategies

• Strategies that relate to each of the functional areas and that support achievement of the organizational strategy

Tactics vs Operations

Tactics:

• The methods and actions taken to accomplish strategies 

• The “how to” part of the process

Operations

• Actual “doing” part of the process 

Order qualifiers

• Characteristics that customers perceive as minimum standards of acceptability for them to consider purchase

Order winners

• Characteristics that lead customers to prefer one product over another, providing a competitive advantage.

• Have/ offering that causes you to get the order (transaction to happen)

Competitive Dimensions

• Cost or price

• Quality

• Delivery speed

• Delivery reliability

• Responsiveness to demand changes

• New products and flexibility

• Support functions (after sale)

Risk Mitigation Framework

1. Identify the source of potential disruptions

   _{a. Look @ highly unlikely events— that cause significant disruption to normal ops}

2. Assess the potential impact of the risk (risk mapping)

   _{a. Quantify probability and potential impact of risk (prob frequency & amount of loss)}

3. Develop plans to mitigate the risk

   _{a. Detailed strat. for minimizing the impact of risk (could take many diff. forms)}

FMEA

• Failure

• Modes

• Effects

• Analysis

Productivity

• Relative measure

• Measure of effective use of resources

• Normally dimensionless number (unless specified)

Efficiency

• Quality

• How well do you perform

• Look 4 underlying costs

• Refined measure

• Doing something at the lowest possible cost 

• Getting the most out of a given set of resources

Productivity

• Quantity

• Performance

• No look 4 underlying costs

• Raw measure

• Looks at alternative easy to increase the output or reduce the input 

Phases of product development

Phase 0: Planning

• Corporate strategy /// Tech. assessment

• Mission: What will we develop?

Phase 1: Concept Development

• Market needs identified /// Alternative concepts generated and evaluated

• Concept(s) selected for further development

Phase 2: System-Level Design

• Product architecture /// Sub-systems and components

• Layout, functional specifications, production process flow

Phase 3: Design Detail

• Complete specification of geometry, materials, and tolerances /// Suppliers and tooling for parts

• Drawings, process plan

Phase 4: Testing and Refinement

• Prototypes tested to evaluate product performance /// Multiple preproduction versions evaluated

Phase 5: Production Ramp-up

• Production system used for final product /// Pre-production samples sent to customers

• Worker training

Complexity:

• # of steps involved in a service & the possible actions that can be taken at each step

Divergence

• #  of ways a customer/service provider interaction can vary at each step according to the needs & abilities of each

Complexity and Divergence Determine:

• The resources (worker skills)

• Layout changes that might be required 

• Process controls needed for the new service

Steps to  determine capacity requirement

1. Forecast to predict sales 

2. Calculate equipment and labor requirements 

3. Project labor and equipment availability

Operating capacity:

• Volume of output that can be sustained that minimizes the average unit cost (Involves tradeoffs, fixed costs, equipment wear, etc.)

  • Sometimes called rated capacity

Capacity utilization rate:

a measure of how close the firm is to its best possible operating level

Economies of scale:

• as a plant gets bigger and volume increases, & average cost per unit drops

Diseconomies of scale:

• at some point, the plant becomes too large & average cost per unit begins to increase

How to fix capacity Imbalances

• Add capacity (overtime, equipment leasing)

• Add buffers to ‘smooth’ out fluctuations 

• Decouple operations

Where is best operating point?? _{(service utilization)}

• Best operating point is near 70 percent of maximum capacity 

Fixed cost:

• An expense that remains constant regardless of output level

Variable cost:

• Expenses that are directly proportional to the level of output

Sunk cost:

• Past expenses/ investment with no salvage value or current expenses that will have no bearing on the decision

Opportunity cost:

• Benefits foregone bc of choosing an action as opposed to the “best” known action

Capital Expenditure (CAPEX):

• Spending associated increases in plant, property and equipment

Expected Value

• The likelihood of a particular outcome happening is its probability 

• The ________ Value = expected outcome X the probability of that outcome happening

NPV

• _ _ _ is the value today of money you’ll receive or pay in the future

• It’s the difference between Pv of money coming in and Pv of $ going out over time.

Internal Rate of Return (IRR)

• Is a discount that make the NPV of all cash flows equal 0

• At a minimum IRR should be > WACC

Payback Period

•  the length of time required for an investment to recover its initial outlay in terms of profit savings

Learning Curves?

• As output doubles, there is a fixed percentage reduction in the time needed to produce each unit

3 Assumptions:

1. Time required to complete a given task will be less each time the task
   is undertaken

2. Unit time will decrease at a decreasing rate

3. Reduction in time will follow a predictable pattern

Individual learning:

• Improvement that results when people repeat a process and gain skill or efficiency from their own experience 

• Practice makes perfect 

Organizational learning:

• Biz learning

• Can come from changes in administration, equipment, and product design

Improvement Factor Table

Job Shop

• Nature of business: Customized goods or services

• Pros: Able to handle a wide variety of work.

• Cons: Slow, high cost per unit, complex planning, and scheduling.

• Organization: Product areas.

ie. operating room

Batch

• Nature of business: Semi-standardized goods or services.

• Pros: Flexible, easy to add or change.

• Cons: Moderate cost per unit, moderate scheduling complexity.

• Organization: Processes are continuous, but ____es can differ in flow and duration.

ie mas catering

Repetitive

• Nature of business: Standardized goods or services.

• Pros: Low unit cost, high volume.

• Cons: Low flexibility, high cost of downtime.

• Organization: Assembly lines.

ie Auto manufacturing

Continuous

• Nature of business: Highly standardized goods or services.

• Pros: Very efficient, very high volume.

• Cons: Very rigid, lack of variety, costly to change, very high cost of downtime.

• Organization: Runs continuously, materials are typically gases, liquids, powders, slurries.

ie Plant??

Lead Time:

• Time from when an order is placed to when customer receives the order

• The sum of all the cycle times in process from start to finish (assume no parallel processes)

Types of Manufacturing Environments

• Make to stock: Customer purchases from existing finished goods inventory

  • Trade-off between the costs of inventory and level of customer service

• Assemble to Order: Product is assembled from limited set of options upon receipt of order

  • Computers ordered online with selection of options

• Make to Order: Higher degree of customization than assemble to order

  • Aircraft manufacturing

• Engineer to Order: Designed to customer specifications

  • Satellites

Variety Leads to Complexity

• N1 x N2 x N3 x N4 ....x Ni

• 4 different models, each model with 3 different case colors, 3
  different memory configurations
  Total combinations 4 x 3 x 3 = 36 possible configurations

Breakeven Analysis

• The choice of equipment or process involves a cost tradeoff

  • General purpose (do many different things slower) vs. special purpose (few things fast)

• ________ _______ compares choices in processes/ equipment on the basis of TC,
  which will vary with Volume of production

• The point of indifference between them because total cost is the same 

Process technology

• Methods, procedures, and equipment used to produce goods and provide services

Information technology

• The science and use of computers and other electronic equipment to store, process and send information

Product layouts: _______ line

• Layout that uses standardized processing operations to achieve smooth,
  rapid, high-volume flow

• Subway or Car build lines

• Pro: High output, low unit cost, high utilization equip/labor

• Con: Boring, no changes, shutdowns

Process layouts: Work Center, Functional or Job-shop layout

• Non-repetitive

• Layouts allocate similar machines or activities into an area

Fixed-position layout: Project layout

• Layout in which the product or project remains stationary, and workers,
  materials, and equipment are moved as needed

• Large construction projects: Shipbuilding/ aircraft manufacturing, Space mission

• (very specific sequence of task order)

Combination layouts: Manufacturing cells

• Some operational environments use a combination of the three basic layout types:

  • Hospitals 

  • Supermarkets

  • Shipyards

• Cells:  allocate dissimilar machines into cells

Cycle time

• It is the average elapsed time between any two parts

• In ACTUAL production the cycle time SHOULD be < the Takt time in order to meet demand 

  • BC there will always be delays and variation when doing things

Takt time

• Maximum allowable cycle time in order to meet the production goals

Line Balancing

• The sequence and process times are ordered to keep the line balanced and flowing 

• The longest process time (including wait time) are early in the sequence

• The operations with the longest process time will be the bottleneck

Mixed-Model Line Balancing

• Objective is to meet demand and avoid high inventories when you
  have more than one product being made on the same line

• One means scheduling this varied production

Information needed
1. Total amount of time available for prod
2. Total quantity needed in that time
3. Cycle times
4. Ratio of different models (calculated based on total quantity)
5. Changeover time

Service Layout

• Categorized as: product, process, or fixed position

• Requirements:

  • Degree of customer contact

  • Degree of customization

Retail Layout

• Goal is to maximize net profit per square foot of floor space

One-piece

• Shorter lead time when finished Inventory is not carried!!!

• Fast casual restaurants

• Can get same OR higher output w/ less capital equipment

Batch

• Used where setup time/ costs are high (more efficient to produce more per setup)