Business Bootcamp (Operations)

Yield Management

When businesses adjust prices and availability to maximize revenue with limited capacity that expires over time.

What is operations focused on?

Cost minimization

1st Goal of Operations

Cost: Can I make the process cheaper?

2nd Goal of Operations

Speed: Can I make the process faster?

3rd Goal of Operations

Quality: Conformance quality --> Minimize variance

4th Goal of Operations

Flexibility: Can I easily adapt my operations when the product itself changes?

Order Qualifiers

The minimum standard a company must meet before the customer will consider buying

Order Winners

The differentiators that give a product a competitive advantage

Structure of Operations

S-I-P-O-C (Suppliers, Inputs, Process, Outputs, Customers)

Product-Process Matrix

Shows the relationship between process structure and product volume

Elements of the Product-Process Matrix

Project, Job Shop, Batch, Assembly Line, Continuous Flow

Project

One unique product, low volume, high customization

Job Shop

Few products, low volume, customized for individual customers

Batch

Make products in groups, moderate customization, moderate volume

Assembly Line

Product moves, worker is stationary, each worker performs a specific task repeatedly, low customization, high volume

Continuous Flow

Products are produced continuously without stopping, no customization, extremely high volume, highly automated

Delayed Differentiation

Everything that needs to be customized should be kept until the end of the process

Product and Process Innovation Model

Shows the relationship between product innovation and process innovation, Companies usually focus on new products first, then focus on making the production process more efficient

Stages in the Product Life Cycle

Introduction, Growth, Maturity, Decline

Stage 1 of the Product and Process Innovation Model

Fluid Phase: The company is figuring out what the product should be

Stage 2 of the Product and Process Innovation Model

Transitional Phase: A dominant product design appears, and companies start improving the manufacturing process.

Stage 3 of the Product and Process Innovation Model

Specific Phase: The product and process are both highly standardized, Focus on efficiency

Stage 4 of the Product and Process Innovation Model

Discontinuous Phase: A new technology appears and a new product innovation starts the cycle over again

Dominant Design

The version of a product that wins and becomes the industry standard

Project Process Examples

Cruise ships, custom house

Job Shop Process Examples

Dentist's office, auto repair shop

Batch Process Examples

Bakery, MSBA program

Assembly Line Process Examples

Car manufacturing, iPhone manufacturing

Continuous Flow Process Examples

Electricity, Water treatment plant

Firm Value Chain

Suppliers, Distributors --> Firm + Departments --> Firewall --> Internet --> Customers

Inputs

The starting materials

Resources

The tools used to do the work

Tasks

The actual steps of work being done

Output

The final product

Work in progress goods

Items that are partially done and waiting in line

Finished Goods

Completed items waiting to be sold

Capacity

The absolute maximum of a product you can make in a specific amount of time

Efficiency & Utilization

How well you are using what you pay for

Cycle Time

The time it takes the bottleneck to complete its process

Bottleneck

The single slowest step in the entire process

Throughput Time

The total time it takes for one specific item to travel from the very beginning of the process to the very end

Setup Time

The time it takes to clean a machine or change its settings

Run Time

The actual time the machine spends making the product

Line of Visibility

The line in the process flow diagram that separates what customers see from what is hidden in the backend

Startup Time

The time it takes to get a process ready to produce output

Shutdown Time

The time it takes to stop the process after the desired outputs have been made

Theoretical Capacity

The capacity of the system without including startup / shutdown time

Effective Capacity

The capacity of the system after including startup and shutdown time

Direct Cost Method

Only includes costs that are directly traced to the product

Overhead Cost Method

Includes costs that support production but cannot be linked to one specific product

Discount

If capacity > demand, give a discount

Line Balancing

Choose the appropriate amount of resources to ensure every resource operates at similar utilization

Buffer Capacity

Using extra resources (safety net) to make sure the business runs smoothly for unexpected disruptions

Replenishment Rate

How often to replenish the buffer resources

Maintenance Line

Add another line in the process flow diagram as a buffer for machines

Predictive Maintenance

Determining when the machine will break

Individual Capacity Calculation

Find out how much she works / dozen, then do:

Total Time * dozen/individual working time

Do this for each resource

Utilization calculation

System capacity / individual capacity * 100