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To help the Companies appreciate the role of OM & translate his strategic plans into viable processes. To identify strategic areas of operational conflict. To identify impediments for growth and generate ideas of how to solve them. To create a general understanding for successful management of operations to fill in the role of the Company as (general) manager. To help companies draw up his Operations Growth Plan
Strategic Management
Marketing Management
Financial Management
Operations Management (OM) is concerned with the transformation process to create output out of resources being put in.
Input
Transform
Output
Transformation process
Display goods Give sales advice Sell goods Check and treat teeth Give preventative advice Design Print Bind Prevent crime Solve crime Apprehend criminals Fruit preparation Juice production Direct questions to the right person Answer questions Store questions Take orders Prepare and serve meals Eating & Washing
Outputs
Customers and goods assembled together Patients with healthy teeth and gums Designed and printed material Lawful society Public with feeling of security Fruit juices Useful waste Informed customers Satisfied customers
Dentist
Printer
Police
Restaurant
Endulged customers
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` People ` Plants
Strategic
x x x x Mission Generic strategy Industry success factors Distinctive competency
Marketing
x Products and Markets (existing and new) x Annual sales increase x Rate of customization
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Too much direct involvement in daily operations. Wanting to take in every type of customer. No real or very weak connection between strategic & marketing identity and operations. No comprehensive control of operations. No or poor MIS present. Reactive instead of proactive throughout the organisation. Struggling to make their organization more effective and efficient.
GROWTH
Straegic Implications
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Step 1: List your most important strategic and marketing objectives Step 2: PMCs and their most important operations performance objectives (OPO) Step 3: Evaluate the impact of each OPO Step 4: Identify areas of conflict Step 5: How to deal with these conflicts? What are the main issues coming out of this?
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1. Speed 2. Quality
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Resource Usage
Few products in the pipeline, many products in stock and prioritisation of urgent orders increase speed Performance monitoring systems and strict processes give reliable output Smaller batches of different products with lots of variety increase the choice of customers Producing large batches with low variety or cheap materials decrease costs
Strategic decisions
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Market Competitiveness
Low quality fluctuation demands quality machines and processes and increased testing
Detailed Demand
Network Design
Location
CODP
Deatiled Capacity
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List per group of products (ideally, based on production characteristics) Take in any seasonal effects Distinguish between
x Existing products x New products (procured) x New products (newly developed)
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Make three scenarios: worst, expected, best Be reasonable and increase reliability
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Mapping the network To what extent is each member capable of following the demand? To what extent is each member able to perform in line with your OPOs? See questions in par. 3.3.3. Where to improve? Vertical integration?
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Second-tier suppliers
First-tier suppliers
First-tier customers
Second-tier customers
The Operation
Demand side Physical distribution management Logistics Materials management Supply chain management
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Using:
x Centre of Gravity Method x Factor weighing system
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Identify the Process type: how unique is each products/service and in what kind of process are they being made?
Manufacturing
x Project / Jobbing / Batch / Mass / Continuous flow
Service firms
x Professional service / Service shops / Mass service
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High
Project Jobbing
Variety
Batch
Mass
Continuous
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High
Variety
Construction Work Shipbuilding devoted resources Installing Computer System ill defined activities Movie Production Companies complex process Building Mass Rapid Transportation System long time period well defined start & end Drilling Oil Wells
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High
Jobbing Process
More products; smaller items Sharing of resources Low degree of repetition Fewer unpredictable circumstances Specialist Toolmakers Furniture Restorers Tickets Printer Social Events
Variety
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High
Batch Process
More products in one batch Repetitive with large batches Can be used over wide range Different process routes
Variety
Machine Tool Makers Component Parts Production Production of most Clothing Production of Gourmet Frozen Food
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High
Variety
Mass Process
Automobile Plant Consumer Durables Mfg Food Processes (pizzas) Beer Bottling High volume/low variety Discrete products Repetitive Large predictability
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High
Variety
Low Low
Petrochemical Refineries Edible Oil Processing Steel Making Paper Making Electricity Utilities Beer Brewing
Continuous Process
Long production periods Liquid flow processing Capital intensive technologies Highly predictable flow
Volume
High
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High
Professional Services
Variety
Service Shops
Mass Services
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High
Professional Services
High customer contact High customization Highly adaptable Value adding in front-office People based High ratio of staff to customers Emphasis on process (how) Management Consultants Lawyers Practices Architects Auditors H&S Inspectors Computer Field Service Operations
Variety
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High
Variety
Service Shops
Services by mix of front/back office People & Equipment based Product/Process emphasis Banking High Street Shops Tour Operators Car Rental Cos Schools Travel Agents
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High
Variety
Low Low
Supermarkets National Rail Network Airport Telecom Library Television Station Police Service
Mass Services
Limited Customer Contact Time Little customization Equipment based Product oriented (what) Value adding in back-office Division of labor/mainly non-prof.
Volume
High
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Jobbing processes
Batch processes
Service shops
Cell layout
Mass processes Continuous processes Mass services
Product layout
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managerial challenges j Different layouts present different opportunities to satisfy customers unmet needs j A strategic perspective is required to make the right layout choices
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travel to the
customer or need
film a movie on location; build a house
j Specialized experts can be brought in j Disadvantages: lack of efficiency difficulty in scheduling potential for cost overruns and quality problems
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Volume-variety characteristics
Low Low Fixed position layout
Vulnerable layout to planning and control disruptions
VOLUME
Motorway Construction Open-heart Surgery High-Class Service Restaurant Nuclear Power Station
High
Low
VARIETY
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Volume-variety characteristics
Low Low VOLUME High
VARIETY
Process layout
Transforming resources dominate layout Similar processes are located together
Low
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disadvantages of process and product layouts, depending on how they are run
more efficient than process layouts more flexible than product layouts
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Volume-variety characteristics
Low Low VOLUME High
VARIETY
Computer Component Mfg Lunch products area in Supermarket Maternity area in Hospital
Cell layout
Transformed resources are pre-selected for group of activities Product or process layout To reduce complexity in process layout
Low
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Volume-variety characteristics
Low Low VOLUME High
VARIETY
Low
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Volume-variety characteristics
Low High Fixed position layout Process layout VOLUME High
VARIETY
Low
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excellence j Enhance the quality of work life j Provide for customer involvement
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Process layout
High product and mix flexibility. Relatively robust in the case of disruptions. Easy to supervize.
Cell layout
Can give good compromise. Fast throughput. Group work can result in good motivation.
Product layout
Low unit costs for high volume. Opportunities for specialization of equipment.
Advantages
Disadvantages
Can have low mix flexibility. Not very robust to disruption. Work can be very repetitive.
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Fixed position - resource location analysis. Process layout - flow charts and relationship charts. Cell layout - product flow analysis. Product layout - assembly line balancing techniques.
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Objectives
j Minimize material handling costs j Efficient space, labor utilization j Reduce manufacturing lead time j Eliminate wasted movements j Improve quality j Facilitate communications j Provide flexibility
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Accidents
Safety hazards
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Process layout
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Product layout
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Learning Objectives
j Discuss the impact of the servicescape on the
behavior of customers and employees. j Describe the critical facility design features. j Identify the bottleneck operation in a product layout and rebalance for increased capacity. j Use operations sequence analysis to minimize flow-distance in a process layout. j Prepare a process flowchart. j Recommend facility design features to remove anxiety of disorientation.
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Servicescapes
Designing Physical Surroundings to Affect Employee and Customer Behavior j Ambient Conditions: background characteristics such as noise level, music, lighting, temperature, and scent. j Spatial Layout and Functionality: reception area, circulation paths of employees and customers, and focal points. j Signs, Symbols, and Artifacts: selection, orientation, location, and size of objects.
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Typology of Servicescapes
Who Performs in Servicescape Self-service (customer only) Interpersonal (both) Remote service (employee only) Physical Complexity of the Servicescape Elaborate Lean Golf course Water slide park Luxury hotel Airline terminal Research lab L.L. Bean Post office kiosk E-commerce Budget hotel Bus station Telemarketing Online tech support
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Organization j Land Availability and Space Requirements j Flexibility j Aesthetic Factors j The Community and Environment
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In
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Out
In
1,4 65 55
3 60 60
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B
7
C
20 6
D
0 10 15
E
5 0 7 10
F
6 2 8 3 6 Net flow
B
15
C
30 12
D
0 40 20
E
15 10 8 30
F
6 8 8 6 10
Flow matrix
Triangularized matrix
Description of attractions: A=killer whale, B=sea lions, C=dolphins, D=water skiing, E=aquarium, F=water rides.
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30 ft. 30 ft.
Total time: Server: 7.5 min. (210 ft.) Customer: 6.75 min.
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experience j Entrance atrium allows visitors to gain a quick orientation and observe others for behavioral cues j Orientation aids and signage such as You Are Here maps reduce anxiety
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rooms that you have visited. How did the different environments affect your mood? j Give an example of a servicescape that supports the service concept and another that detracts. Explain the success or failure in terms of the servicescape dimensions j Based on your work experience, contrast a supportive servicescape with a poor one in terms of job satisfaction and productivity.
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volume variety
high low
None
an th y ilit ts xib os fle c s gh es hi oc o pr s e or ed M eed n
Professional service
Jobbing
Batch
Service shop
Mass
Continuous
Mass service
None
Advantages
Very high mix & product flexibility Product or customer not moved or disturbed High variety of tasks for staff High mix and product flexibility Relatively robust if in the case of disruptions Relative easy supervision of equipment or plant Can give a good compromise between cost and flexibility for relatively highvariety operations Fast throughput Group work may improve motivation Low unit costs for high volume Gives opportunities for specialization of equipment Materials or customer movement is convenient
Disadvantages
Very high unit costs Scheduling of space & activities can be hard Can be much moving of plant and staff Low facility utilization Can have very high work-in-progress or customer queuing Complex flow can be difficult to control Can be costly to rearrange existing layout Can need more plant and equipment Can give lower plant utilization Can have low mix flexibility Not very robust in case of disruption Work can be very repetitive
Product
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Delay (a wait e.g. for materials) Deliberate storage (as opposed to delay)
Direction of flow
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Intermediate Products
Job preperation
Cutting
Assembling
Packing
Up-stream
Customer Order Decoupling Point
Down-stream
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Only one CODP in each production flow. After the CODP there is no more inventory Before the CODP there is only inventory for economic reasons More CODP means splitting of production system
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Translate process map to capacity map of each step on average output (not absolute maximum) Compare to the demand scenarios Identify possible conflicts in time Be aware of bottlenecks, capacity-restrained resources, and non-bottlenecks Draw up a capacity increase plan Check on the strategic timeframe
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Translate process map to capacity map of each step on average output (not absolute maximum) Compare to the demand scenarios Identify possible conflicts in time Be aware of bottlenecks, capacity-restrained resources, and non-bottlenecks Draw up a capacity increase plan Check on the strategic timeframe
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By formulating operational policies to manage expectations. By eliminating mistakes through formatting the intake. By communicating a reliable delivery date by using planning buckets. By linking sales orders to production orders to monitor timely delivery.
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By adapting procurement policies to the logistical and financial risks involved. By improving the process of ordering goods and services. By improving the process of receiving goods and services. By better managing the interaction with the suppliers.
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By creating a structured warehouse. By controlling your inventory. By monitoring the validity of your forecast. By improving your replenishment warning system.
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WHAT IT REQUIRES
Employee participation
Industrial engineering/basics Continuing improvement Total quality control Small lot sizes
2/18/2012
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Machine downtime Scrap Work in process queues (banks) Vendor delinquencies Change orders Design backlogs
Paperwork backlog
Inspection backlogs
Decision backlogs
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Not using the capacity efficiently Producing wrong goods or services or amounts Fluctuating quality and or too much waste Having too much inventory in the system
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Better organise Better control Make it more reliable Increase output Make it more flexible Anticipate future growth
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1) Waste from overproduction (2) Waste of waiting time (3) Transportation waste (4) Inventory waste (5) Processing waste (6) Waste of motion (7) Waste from product defects
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Planning and controlling capacity Standard flexibility Production administration Quality control system Preventive maintenance Balancing capacity utilisation
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Content Products, markets, prod measures Amounts to sell and produce Order plan, capacity plan Sequencing work and orders Orders parts and products
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Year , month
Coordination targets sales and production Coordination prod. phases and Starting each phase in prod produce
Hour, minute
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Malfunction of machines Illness of employees Late deliveries of supplies Mistakes made in planning Unexpected fluctuation in demand Rush order from the customers
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Planning activities
Operating time Non-productive time Tool change time-SMED Amounts of raw material used Amounts of disposal Quality results
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Check planned, released and ready Automation of admin activities. Link customer order to specific batch
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Be adequate to represent what on the shop floor Not too many Be linked to the shop floor Be very clear Be controllable by the shop floor workers Be clear what level of fine or bad Be visible to the employees
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Performance indicator 1.Defect rate On-hour delivery Cycle time Cost of raw material Rush orders
5. Flexibility
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By use general order picking principles. By have some form of route planning. By timely adding distribution capacity.
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Preparing deliveries in a structured way Wishes of the customers in delivery process Delivering right goods at the right quantities without damages Delivering efficiency customers, routes and capcities Tracking and tracing delivery of goods and services Quality of the distribution process Increase distribution capacity
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By assessing and eliminating hazards. By improving housekeeping. By improving work organization. By improving personal protection. By developing contingency plans.
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Improving housekeeping Improving work organisation Improve personal protection Contingency planning Assessing and eliminating hazards
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Designing your mgmt info system (MIS) Get automated to a certain extent Know the pitfalls
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Reduction of labour Real time information Reduced reaction time Integrate information flow between departmentsfinance, marketing purchasing production Formatting to reduce mistakes
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Level
Operations
Financial
HRM
Strategic
CEO
-6 months forecast -3 months forecast Forecast one month Cost of raw material
Total sales
Average hours Hours worked per week Hours worked per employee Workers throughput
New product development New machines New machines Purchasing new machines
Head of sales
Sales budget
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Type 3 Very complex and wide varieties Highest customization Network software Needs heavy server Infinite users
Hardware
98
Suitable for
Large scale Integrated process Small to medium sized companies Fairly reliable
Reliability
Reliable
In the initial phase will cause difficulties Resolve after some time
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Price
500 to 5000
Over 150,000
ERP
not possible
Some possibility
Yes
Possible
Example
Davilex
SAP
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1) 2) 3)
4)
5)
6)
Strategic objectives Marketing objectives Product-Market combinations and their most important Op. Perform. Objectives Impact of each OPO on the network, location, production system Areas of conflict between OPO and possible solutions Detailed capacity plan
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Evaluation of the network Process & layout within the system The production process mapped in detail Detailed capacity plan for next 3-5 years Identified impediments for growth Improvements on:
1) 2) 3) 4) Order intake Procurement Storage & Inventory Production 5) Distribution 6) Safety & Health 7) Info & Automation
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I am now able to have an aerial view of operational issues. Now I know where to start from to manage my business operations. I had no clear understanding of how OM links with all other organisational functions, but its now a talk of the past. I now know the real areas an Op.mngr should work on. I am now equipped to use inventory as a tool to make working capital sweat even more.
10 3
GROWTH
Straegic Implications
10 4
Any Questions?
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