1 - Intro + Process Analysis

Introduction to Operations and Supply Management

What is Operations and Supply Management?

  • Operations and Supply Management (OM) is the design, operation, and improvement of the systems that create and deliver a firm’s primary products and services.

Transformation Processes Defined

  • A transformation process uses resources to convert inputs into desired outputs.

Operations and Supply Management Processes

  • Supply Chain Processes: Managing the flow of goods, information, and finances across the supply chain.

  • Sourcing Processes: Identifying, selecting, and managing suppliers.

  • Manufacturing Processes: Converting raw materials into finished goods.

  • Service Processes: Providing services to customers.

  • Distribution Processes: Moving goods from manufacturers to customers.

  • Logistics Processes: Planning, implementing, and controlling the efficient flow and storage of goods, services, and related information.

Differences Between Services and Goods

  • Goods are tangible, while services are intangible.

  • The goods-services continuum ranges from pure goods (e.g., food products) to pure services (e.g., teaching).

  • Core goods have a significant service component (e.g., appliances with warranty service).

  • Core services have a tangible component (e.g., hotels providing physical accommodation).

Process Analysis

Process Analysis Terms

  • Process: Any part of an organization that takes inputs and transforms them into outputs.

  • Cycle Time: The average successive time between completions of successive units.

  • Utilization: The ratio of the time that a resource is actually activated relative to the time that it is available for use.

Other Process Terminology

  • Blocking: Occurs when activities must stop because there's no place to deposit the completed item.

    • Ex an employee cannot place a unit down and must hold onto it.

  • Starving: Occurs when activities must stop because there is no work available.

    • Ex an employee is waiting for work to arrive.

  • Bottleneck: Occurs when limited capacity causes work to pile up or become unevenly distributed.

    • Ex an employee working too slowly causes backlog.

  • Pacing: Refers to the fixed timing of the movement of items through the process.

Other Types of Processes

  • Make-to-order: Activated in response to an actual order, minimizing work-in-process and finished goods inventory.

  • Make-to-stock: Activated to meet expected demand, serving customer orders from a target stocking level.

What is Productivity?

  • Productivity is a measure of how well resources are being used, defined as: OutputsInputs\frac{Outputs}{Inputs}

Total Measure Productivity

  • Total Measure Productivity = OutputsInputs\frac{Outputs}{Inputs} or Goods and services producedAll resources used\frac{Goods \, and \, services \, produced}{All \, resources \, used}

Other Measures of Productivity

  • Partial measures of productivity include:

    • OutputLabor\frac{Output}{Labor}

    • OutputCapital\frac{Output}{Capital}

    • OutputMaterials\frac{Output}{Materials}

    • OutputEnergy\frac{Output}{Energy}

  • Multifactor measures of productivity include:

    • OutputLabor+Capital+Energy\frac{Output}{Labor + Capital + Energy}

    • OutputLabor+Capital+Materials\frac{Output}{Labor + Capital + Materials}

Example of Productivity Measurement

  • Service employees process 560 insurance forms in 2400 labor hours this week, compared to 480 forms in 2000 hours last week.

    • Last week’s productivity = 4802000=0.24\frac{480}{2000} = 0.24

    • This week’s productivity = 5602400=0.23\frac{560}{2400} = 0.23

    • Productivity is slightly decreasing.

Process Performance Metrics

  • Operation time = Setup time + Run time

  • Flow time = Average time for a unit to move through the system (Throughput time)

  • Velocity = Value−added timeFlow time\frac{Value-added \, time}{Flow \, time}

  • Cycle time = Average time between completion of units

  • Throughput rate = 1Cycle time\frac{1}{Cycle \, time}

  • Efficiency = Actual outputStandard Output\frac{Actual \, output}{Standard \, Output}

  • Productivity = OutputInput\frac{Output}{Input}

  • Utilization = Time ActivatedTime Available\frac{Time \, Activated}{Time \, Available}

Cycle Time Example

  • Producing 600 units in 80 hours requires a cycle time of:

    • Cycle time = 4,800 minutes600 units=8 minutes\frac{4,800 \, minutes}{600 \, units} = 8 \, minutes