SCM Exam 1

Production

The process of creating goods and services

Operation Management

The set of activities that create value in the form of goods and services by transforming inputs into outputs

Products

Everything you wear, eat, sit on or in, use, read, etc.

Serivices

Every book you borrow from the library, every medical treatment you receive, every lecture you attend, haircuts you get, landscaping services, etc.

Process

A system of activities that transforms inputs into valuable outputs

Marketing as a Function

Generates demand (nothing happens until there is a sale)

Productions/Operations as a Function

Creates, produces, and delivers the product (a large percentage of revenue is spent on operations)

Finance/Accounting as a Function

Track how well the organization is doing, pays bills, collects the money

The Supply Chain

A global network of organizations and activities that supply a firm with goods and services

Design of goods and services

- Defines what is required of operations
- Product design determines quality, sustainability, and human resources

Managing Quality and Statistical Process Control

- Determine the customer's quality expectations
- Establish policies and procedures to identify and achieve that quality

Process and Capacity Design

- How is a good or service is produced
- Commits management to specific technology, quality, resources and investment

Location Strategy

- Nearness to customers, suppliers, and talent
- Also considers costs, infrastructure, logistics and government

Layout Strategy

- Integrate capacity needs, personnel levels, technology, and inventory
- Determine the efficient flow of materials , people and information

Human Resources and Job Design

- Determines how to recruit, motivate, and retain personnel with required talent and skills
- Integral and expensive part of the total system design

Supply Chain Management

- Integrate supply chain into the firm's strategy
- Determine what is to be purchased, from whom, and under what conditions

Inventory Management

- Inventory ordering and holding decisions
- Optimize considering customer satisfaction, supplier capability, and production schedules

Scheduling

- Determine and implement intermediate and short-term schedules
- Utilize personnel and facilities while meeting customer demand

Maintenance

- Consider facility capability, production demands, and personnel
- Maintain a reliable and stable process

Frederick Taylor's beliefs

1. Match employees to the right job
2. Provide the proper training
3. Provide proper work methods and tools
4. Establish legitimate incentives for work to be accomplished

Contributions of Other Disciplines to OM

- Industrial engineering
- Statistics
- Management
- Analytics
- Economics
- Physical sciences
- Information technology

Growth of Services

- Constitutes the largest economic sector (85%)
- Changed from agriculture sector to service sector after the industrial revolution

Service Sectors

- Trade
- financial
- Lodging
- Education
- Legal
- Medical
- Professional occupations

Productivity

- the ratio of outputs (goods and services)/the inputs (resources such as capital and labor)
- OM job is to improve the ratio of outputs to inputs

Improvement Achieved in 2 Ways

- Reducing inputs while keeping output constant
- Increasing output while keeping inputs constant

Measuring Productivity

- Measuring productivity is an excellent way to evaluate if a country's ability to provide an improving standard of living for its people
- Increasing productivity increases the standard of living

Measurement Problems for Productivity

- Quality may change while the quantity of inputs and outputs remain constant
- External elements may cause an increase or decrease in productivity for which the system under study may not be directly responsible
- Precise units of measure may be lacking

Productivity Variables - Labor

- (contributes 10% of the annual increase)
- Basic education appropriate for an effective labor force
- Diet of the labor force
- Social overhead the makes labor available (transportation and sanitation)

Productivity Variables - Capital

- (contributes 38% of the annual increase)
- Human beings are tool using animals
- Capital investment provides these tools and has INCREASED in the US

Productivity Variables - Management

- (contributes 52% of the annual increase)
- Factor of production and an economic resource
- Responsible for ensuring that labor and capital are being used effectively to increase productivity

Knowledge Societies

much of the labor force has migrated from manual work to technical and information-processing tasks requiring ongoing education

Challenges in OM

- Globalization
- Supply chain partnering
- Sustainability
- Rapid product development
- Mass customization
- Lean operations

Ethical/Social Dilemmas

- Conflicting perspectives of stakeholders, the customers, distributors, suppliers, owners, lenders, employees, and community, as well as government agencies at various levels
- Managers must develop and produce safe, high quality green products, train, retain and motivate employees in a safe workplace, and honor stakeholder commitments
- IMPORTANT TO HAVE MORAL AWARENESS and INCREASE PRODUCTIVITY IN THE SYSTEM

Memorabilia

- objects kept or collected because of their historical interest
- old baseball cards or old jerseys

Extra Notes about Less Inventory

- If you have less inventory, you have less chance of running out
- Low Inventory DOES NOT EQUAL supply issues but it does equal operational efficiencies
- Operational Efficiencies \= Cost Advantage

Process Strategy

- an organization's approach to transforming resources into goods and services
- Creating a process that can produce offerings that meet customer requirements within cost and other managerial constraints

Strategy - Process Focus (Intermitten)

- Low volume, high variety
- They provide a high degree of product flexibility
- Perform a variety of activities
- Handle frequent changes
- Low utilization of facilities
- High variable costs

Strategy - Repetitive Focus (Classic Assembly Line)

- Use modules: parts or components previously prepared, often in a product-focused (continuous process)
- More structure
- Less flexibility
- Economically advantageous

Strategy - Product Focus (High Volume, Low Variety)

- Products only!!!
- Continuous processes because they have long, continuous production runs
- Set standards and maintain a given quality
- High fixed costs but low variable costs with high utilization

Strategy - Mass Customization (Cater to Customers)

- rapid
- low cost production
- What the customer wants, when the customer wants it (think rich customers want different things like new shoes, new water bottles, new tvs)
- Low volume manufacturing (process focused) at the cost of standardized high volume production (product focused)
- Need sophisticated operational capabilities
\- - Building agile processes that are rapid and inexpensive
- Build to Order System

Build to Order (BTO)

producing to customer orders, not forecasts
Mass customization needs a high volume system in which products are built to order

Advantages of Mass Customization/BTO

- Meeting demands of the marketplace mean that firms win orders and stay in business
- Firms trim costs that exist because of inaccurate sales forecasting

Challenges of BTO

- Product design must be imaginative
- Process design must be flexible and able to accommodate change in design and technology
\- - Postponement: allows for customization late in the production process
- Inventory management requires tight control
- Tight Schedules that track orders and material from design through delivery are a requirement of mass customization
- Responsive partners in the supply chain can yield effective collaboration

Crossover Chart

a chart of costs at the possible volumes for more than one process

Flexibility

- the ability to respond with little penalty in time, cost, or customer value
- Competitive advantage for companies that have flexibility to the production process
- Can be difficult
- Can be expensive

Flowchart

- a schematic or drawing of the movement of material, product, or people
- Quick way to view the big picture

Time Function Mapping (Process Mapping)

- Adds rigor and a time element to a macro analysis
- Nodes indicate activities
- Arrows indicate flow direction

Process Charts

- use symbols, time, and distance to provide an objective and structured way to analyze and record the activities that make up a process
- Much more detailed view of the process with value-added times, delay distance, storage, etc.

Value Stream Mapping (VSM)

- a process that helps managers understand how to add value in the flow of material and information through the entire production process
- Extends beyond the immediate organization to customers and suppliers

Service Blueprinting

- a process analysis technique that lends itself to a focus on the customer and the provider's interaction with the customer
- Designed to help focus on the customer interaction part of the process

Service Process Strategies - Mass/Professional Service (where labor content is high)

we expect the manager to focus extensively on human resources

Service Process Strategies - Low customization (fast food restaurants/airlines)

- Standardizing /restricting offerings (fast food restaurants)
- Automate (ticket vending machines)
- Remove some services (seat assignments on airplanes)
- Tight control may be required to maintain quality standards

Service Process Strategies - Low Labor Intensity

Lead to innovations in process technology and scheduling

Production Technologies - Machine technology

- Computer numerical controls (CNC): machines with their own computer and memory
- Additive manufacturing: 3D printing

Production Technologies - Automatic identification systems (AIS) (Transferring Data)

- Radio Frequency Identification (RFID): decreasing cost and increasing pervasiveness

Production Technologies - Process Control

the use of information technology to monitor and control a physical process

Production Technologies - Vision Systems

combine video cameras and computer technology and are used for inspection roles

Production Technologies - Robots

mechanical devices that use electronic impulses to activity motors and switches

Production Technologies - Automated storage and retrieval systems (ASRSs)

provide for the automatic placement and withdrawal of parts and products into and from designated places in a warehouse

Production Technologies - Automated guided vehicles (AGVs)

electronically guided and controlled carts used in manufacturing and warehousing to move parts and equipment

Production Technologies - Flexible manufacturing systems (FMSs)

an FMS is flexible because both the material-handling devices and the machines are controlled by easily changed electronic signals (computer programs)

Production Technologies - Computer integrated manufacturing (CIM)

this capability is integrated with inventory control, warehousing, and shipping as a part of a flexible manufacturing system

Process Redesign (process reengineering)

the fundamental rethinking of business processes to bring about dramatic improvements in performance

Capacity

the throughput or the number of units a facility can hold, receive, store or produce in a given time

Capacity Determines

- Capital requirements
- Large portions of fixed costs
- Whether demand will be satisfied
- Whether facilities will be idle

Long Range Capacity

- (3 years or more)
- Adding facilities and equipment with a long lead time

Intermediate Range Capacity

- (3 to 36 months)
- Adding equipment, personnel and shifts
- Building or using inventory
- "Aggregate planning" task

Short Range Capacity

- (3 months)
- Scheduling jobs and people
- Allocating machinery
- Modifications occur in the short run

Design Capacity

the maximum theoretical output of a system in a given period under ideal conditions

Effective Capacity

- the capacity a firm expects to achieve given the current operation standards
- Often lower than design capacity because the facility may have been designed for an earlier version of the product that is currently being produced

Utilization

the percentage of design capacity that is actually achieved

Efficiency

- the percentage of effective capacity that is actually achieved
- Actual Output \= current conditions

Capacity Consideration - Forecast demand accurately

product additions and deletions, competitive actions, product life cycle, and unknown sales volume all add challenge to accurate forecasting

Capacity Consideration - Match technology increments and sales volume

- capacity options are constrained by technology
- May be large increments: paper mills, power plants, steel mills
- May be small: hand-crafted louis vuitton handbags

Capacity Consideration - Find the optimum operating size (volume)

- Economies of scale: when the average cost declines as size increases
- Diseconomies of scale: when a larger size raises the average cost

Capacity Consideration - Build for change

- managers build flexibility into facilities/equipment
- Changes will occur in processes, products, product volume, and product mix

Demand \> Capacity

firm may be able to curtail demand by raising prices, scheduling longer lead times, and discouraging marginally profitable business

Capacity \> Demand

firms may want to stimulate demand through price reductions or aggressive marketing, or it may accommodate the market through product changes

Adjusting to Seasonal Demand

products may be in high demand during different seasons and low in others

Tactics for matching capacity to demand

- Make staffing changes
- Adjusting equipment
- Improving processes to increase throughout
- Redesigning products to facilitate more throughput
- Adding process flexibility to better meet changing product preferences
- Closing facilities

Demand Management

appointments, reservations, first come first serve

Capacity Management

when managing demand is not feasible, managing capacity through full-time, temporary or part-time staff

Capacity Analysis

- determining the throughput capacity of workstations in a system and ultimately the capacity of the entire system
- Using a bottleneck: an operation that is a limiting factor or constraint

4 Principles of Bottleneck Management

- Release work orders to the system at the pace set by the bottleneck's capacity
- Lost time at the bottleneck represents lost capacity for the whole system
- Increasing the capacity of a non-bottleneck station is a mirage
- Increasing the capacity of the bottleneck increases capacity for the whole system

Bottleneck Time

process time of the slowest workstation in a production system

Throughput Time

the time it takes a unit to go through production from start to end with no waiting

Theory of Constraints (TOC)

body of knowledge that deals with anything that limits or constrains an organization's ability to achieve its goals

Product Decision/Selection

- The selection, definition, and design of products
- Objective is to develop and implement a product strategy that meets the demands of the marketplace

Product Strategy

Focuses on developing a competitive advantage via differentiation, low cost, and/or rapid response

Product Life Cycle Stages

Introduction, growth, maturity, decline

Introduction Phase

- Research
- Product Development
- Process Modification and Enhancement
- Supplier Development

Growth Phase

- Product design begins to stabilize
- Effective forecasting of capacity requirements is necessary

Maturity Phase

- Competitors are established
- High volume, innovative production
- Improved cost control
- Reduction in options
- Paring down of the product line

Decline Phase

- Dying products are typically poor products in which to invest resources and managerial talent.
- Unless dying products make some unique contribution to the firm's reputation or its product line or can be sold with an unusually high contribution, their production should be terminated

Product-By-Value Analysis

- A list of products, in descending order of their individual dollar contribution to the firm, as well as the total annual dollar contribution of the product
- Lists products in descending order of their individual dollar contribution of the firm
- It also lists the total annual dollar contribution of the product
- allows management to evaluate possible strategies for each product

New Product Development Changes

- Understanding the customer
- Economic Change
- Sociological and demographic change
- Technological Change
Political and legal change
- Other Changes

Product Development System

- Determines product success and the firms future
- product options go through a series of steps, each having its own screening and evaluation criteria, but providing a continuing flow of information to prior steps

First Approach for Product Development

- traditional U.S. approach
- distinct departments: a research and development department to do the necessary research; an engineering department to design the product; a manufacturing engineering department to design a product that can be produced; and a production department that produces the product
- Advantage: fixed duties and responsibilities exist
- Disadvantage: lack of forward thinking

Second Approach for Product Development

- assign a product manager to "champion" the product through the product development system and related organizations

Third Approach for Product Development

- use of teams
- known variously as product development teams, design for manufacturability teams, and value engineering teams