Ch. 6: Producing Goods and Services

Production

involves the transformation of inputs into outputs that customers demand

Operations

1. focus on the “make/build” portion of the supply chain

2. create the outputs that are distributed through supply chain networks

Production schedule

must be coordinated with delivery schedules and transportation methods to ensure that inventory is received when promised

Form utility

make the product or service more attractive to potential and actual users so that demand is created

assemble to order

tend to be more complex, be more labor intensive, and require longer processing time

Economies of scale

Higher volume leads to lower cost per unit of output

Economies of scope

processes that can produce a range of products

Centralized production facilities

provide operating cost and inventory efficiencies

Regional production facilities

improve customer proximity that reduces delivery costs and increases responsiveness

larger facilities

excess capacity provide the flexibility to respond to demand spikes

smaller facilities

better utilized will be more cost efficient

Product-focused facilities

perform many processes on a single product type will tend to be more responsive than process-focused facilities that concentrate on a few functions across multiple product types.

build to order

products incur the highest total cost of manufacturing due to the lower production economies of scale and higher transportation costs

MTS production

have lower total costs due to higher volumes and lower transportation costs but may sacrifice customer service, responsiveness, and variety.

Challenges for operations managers.

managing materials cost inflation, recruiting and retaining talent, minimizing supply chain disruptions, meeting customer expectations, maintaining data security, investing in automation and other advanced technology, and achieving sustainability requirements

Toyota production system

seeks to develop and redesign production processes to remove overburden (muri), smooth production (mura), and eliminate waste (muda). Table 6.1 describes the seven types of muda targeted for elimination in the TPS.

Overproduction

making more parts then you can sell

Delays

Waiting for processing, parts sitting in storage, etc.

Transporting

Excessive movement of parts to various storage locations, from process to process, etc.

Overprocessing

Doing more “work” to a part than is required.

Inventory

Committing money and storage space to parts not sold.

Motion

Moving parts more than the minimum needed to complete and ship them.

Making defective parts

Creating parts that cannot be sold “as is” or that must be reworked, etc.

Pull-based systems

the producer only responds to customer demand. No action is taken until an order is placed or a purchase is made

Lean production relies on ___ to coordinate production and distribution with actual customer demand rather than a potentially error-laden forecast of demand

pull-based systems

bullwhip effect

occurs when small, initial shifts in customer demand lead to progressively larger and amplified fluctuations in orders and inventory as they move upstream from retailers to manufacturers and suppliers

Machine flexibility

flexible machines and equipment staffed by cross-trained workers provide the ability to produce different types of products as well as change the order of operations executed on a product

Routing flexibility

the system’s capacity in employing various machines to carry out the same tasks on a single item. In addition, operations continuity and production uptime are guaranteed via flexible routing

offshoring

the activity be relocated to a contract manufacturer in another country

Additional reasons for production outsourcing include the following:

Reduce capital expenditures on manufacturing facilities and equipment

Leverage manufacturing expertise of manufacturing partners

Focus on core competencies and critical issues

Diversify risk through multiple production locations

Faster entry to new market opportunities

smart manufacturing

manufacturing that improves its performance aspects with integrated and intelligent use of processes and resources in cyber, physical, and human spheres to create and deliver products and services, which also collaborates with other domains within enterprises’ value chains

To make use of smart manufacturing

a network with messaging standards to collect and connect the information, an analytical toolkit to make sense of it, and flexible automation to drive action.

long range plans

which span a year or more, focus on major decisions regarding capacity and aggregate production plans

medium range plans

which span 6 to 18 months and involve tactical decisions regarding employment levels and similar issues

short range plans

which range from a few days to a few weeks, and deal with specific issues and the details of production—quantities of items to be produced, schedules, and sequences.

capacity

the maximum amount of work that an organization is capable of completing in a given period of time. It will help the company determine if changing customer demand can be met or if a discrepancy exists.

resource requirement planning

a long-run, macro-level planning tool. It helps the operations leaders determine whether aggregate resources are capable of satisfying the aggregate production plan

rough-cut capacity plan

a process that checks the feasibility of the master production schedule.

capacity requirements planning

used to check the feasibility of the materials requirement plan. This short-range capacity planning technique determines, in detail, the amount of labor and equipment resources that were needed to accomplish production requirements

aggregate production plan

a long-range materials plan that translates annual business plans, marketing plans, and forecasts into a production plan for all products produced by a facility.

master production schedule

a medium-range plan that is more detailed than the APP. The MPS breaks down the APP, listing the exact end items to be produced within a specific period.

materials requirement planning

a short-range materials plan that converts information regarding end-items in the MPS into a set of time-phased component and part requirements. MRP focuses on scheduling and placing orders for dependent demand items so that they are available in the exact quantities on the date the independent demand item is to be manufactured.

project manufacturing

successful ETO initiatives depend on effective collaboration between all supply chain participants. Customers must be involved throughout the entire design and production process

delayed differentiation

a hybrid strategy in which a common product platform is built to stock. It is later differentiated by assigning to it certain customer-specific features, only after demand is realized. Manufacturing occurs in MTO and ATO stages

facility layout

the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility.

goal of process layout

ensure that production activities are carried out as efficiently and effectively as possible

project layout 

a fixed location layout where the product remains in place for the duration of production

workcenter

a process-focused layout that groups together similar equipment or functions. The materials move from department to department for completion of similar activities and tasks.

manufacturing cell

process-focused layout that dedicates production areas to a narrow range of products that are similar in processing requirements. Setting up a manufacturing cell involves four activities:

(1) identifying families of parts with similar flow paths;

(2) grouping machines into cells based on part families;

(3) arranging cells so materials movement is minimized; and

(4) locating large, shared machines at the point of use.

assembly line

a product-focused layout in which machines and workers are arranged according to the progressive sequence of operations needed to make a product

continuous process facilities

similar to assembly lines, with product flowing through a predetermined sequence of steps. The main difference is the continuous, rather than discrete, nature of the flow. Widely used for high-volume, standardized products like chemicals, paper products, and soft drink concentrate, these highly automated, capital-intensive facilities need to run almost nonstop to gain maximum efficiency.

packaging

important roles in the smooth transfer of finished goods from the plant to the distribution center and customer locations.

manufacturing execution systems

connects, monitors, and controls complex manufacturing systems and data flows on the factory floor.

core functions of manufacturing execution systems

1. data collection and acquisition

2. scheduling

3. staff controls

4. resource management

5. production tracking and dispatch

6. product traceability and genealogy

7. quality management

8. process management

9. performance analysis

10. document management

11. maintenance management

Manufacturing operations management systems

a holistic solution that provides full visibility into manufacturing processes to help companies steadily improve manufacturing operations performance