What is Operations Management?

Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firms primary products and services

Supply Chain of a Typical Original Equipment Manufacturer

Operations Strategy

Setting broad policies and plans for using the recourses of a firm to best support its long-term competitive strategy

Operations Strategy
Strategy Process
Customer Needs

Example
More Product

Corporate Strategy

Increase Org. Size

Operations and Supply Strategy Decisions on Processes and Infrastructure

Increase Production Capacity

Build New Factory

Competitive Dimensions

Cost or Price

Make the Product or Deliver the Service Cheap

Quality

Make a Great Product or Deliver a Great Service

Make the Product or Deliver the Service Quickly Deliver It When Promised Change Its Volume Change It Support It

Delivery Speed

Delivery Reliability

Coping with Changes in Demand

Flexibility and New Product Introduction Speed

Other Product-Specific Criteria

KAPLAN & NORTONS STRATEGY MAP

Order Qualifiers and Winners Defined

Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers Order winners are the criteria that differentiates the products and services of one firm from another

A brand name of a car can be an order qualifier

Repair services can be order winners

Examples: Warranty, Roadside Assistance, Leases, etc

Operations Strategy Framework

Customer Needs

New product : Old product

Competitive dimensions & requirements

Quality, Dependability, Speed, Flexibility, and Price

Enterprise capabilities Operations andSupplier capabilities Operations & Supplier Capabilities R&DD R&D Technology Systems Technology Systems People People Distribution Distribution

Support Platforms Financial management

Human resource management

Information management

The Importance of Operations Management

Synergies must exist with other functional areas of the organization Operations account for 60-80% of the direct expenses that burden a firms profit.

What is Productivity? Defined

Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs

Total Measure Productivity

Total Measure Productivity = Outputs Inputs

or
= Goods and services produced All resources used

Partial Measure Productivity

Partial measures of productivity =

Output or Output or Output or Output
Labor Capital Materials Energy

Multifactor Measure Productivity

Multifactor measures of productivity =

Output
Labor + Capital
or

.
+ Energy

Output
Labor + Capital +

.
Materials

Examples
Productivity measures of

Restaurant
Retail Store

Power plant
Construction work Consulting Car manufacturing

Process Analysis
Processes take inputs to convert them into outputs, which is expected to have/create greater value than the original inputs.

Process Analysis
Cycle time - is the average time between completion of successive units of products or services. Utilization is the ratio of the time that a

resource is actually activated relative to

the time that it is available for use.

Process Analysis
Process Flowcharting : To evaluate the existing flow of the processes and identify areas of improvement/correction.

Flowchart Symbols
Tasks or operations Examples: Giving an admission ticket to a customer, installing a engine in a car, etc.

Decision Points

Examples: How much change should be given to a customer, which wrench should be used, etc.

Flowchart Symbols
Storage areas or queues Examples: Sheds, lines of people waiting for a service, etc.

Flows of materials or customers

Examples: Customers moving to a seat, mechanic getting a tool, etc.

Example: Process Flow Chart

Material Received from Supplier

Inspect Material for Defects

No, Continue Defects found?

Yes

Return to Supplier for Credit

Process Analysis
Types of processes
1.

Single stage and Multi-stage

Buffering - Blocking, Starving, Bottleneck

2.

Make-to-order, make-to-stock, hybrid

Other Process Terminology

Blocking

Occurs when the activities in a stage must stop because there is no place to deposit the item just completed If there is no room for an employee to place a unit of work done, the employee will hold on to it not able to continue working on the next unit

Starving

Occurs when the activities in a stage must stop because there is no work
If an employee is waiting at a work station and no work is coming to the employee to process, the employee will remain idle until the next unit of work comes

Other Process Terminology (Continued)

Bottleneck

Occurs when the limited capacity of a process causes work to pile up or become unevenly distributed in the flow of a process If an employee works too slow in a multistage process, work will begin to pile up in front of that employee. In this is case the employee represents the limited capacity causing the bottleneck. Refers to the fixed timing of the movement of items through the process

Pacing

Process Analysis
Measuring Process Performance
1. 2. 3. 4.

Productivity (Output to input) Efficiency (Output to standards) Run time, Setup time, Operating Time Throughput time (TPT), Throughput rate (TPR). cycle time,

5. 6.

Process Velocity Total TPT to VATime Littles Law TPT = WIP/TPR

Process Analysis
Consider a chocolate box packaging machine that is designed to produce at a rate of 30 boxes per minute. To switch the machine from 16-unit boxes to 12-unit boxes requires 30 minutes. Find the operating time to make a batch of 10,000, 12-unit boxes.

Process Performance Metrics

Operation time = Setup time + Run

time

Throughput time = Average time for a unit to move through the system Velocity = Throughput time Value-added time

Process Performance Metrics (Continued)

Cycle time = Average time between completion of units Throughput rate = 1 .

Cycle time

Efficiency = Actual output

Standard Output

Cycle Time Example

Suppose you had to produce 600 units in 80 hours to meet the demand requirements of a product. What is the cycle time to meet this demand requirement?

Answer: There are 4,800 minutes (60 minutes/hour x 80 hours) in 80 hours. So the average time between completions would have to be: Cycle time = 4,800/600 units = 8 minutes.

Process Performance Metrics (Continued)

Productivity = Output
Input

Utilization = Time Activated Time Available

Process Throughput Time Reduction

Perform activities in parallel

Change the sequence of activities Reduce interruptions

Product Design and Process Selection - Manufacturing

Typical Phases of Product Development

Concept Development Product Planning

Product Architecture Conceptual design Target Market Market Building Small-scale testing Detailed Design of Investment/financials Product and tools Building/Testing prototypes

Product/Process Engineering Pilot Production/Ramp-up

Volume production prove out Factory start-up Volume increase for commercial target

Economic Analysis of Project Development Costs Using measurable factors to help determine:

Operational design and development decisions Go/no-go milestones A financial model consisting of major cash flows Sensitivity Analysis for what if questions

Building a Base-Case Financial Model

Designing for the Customer

House of Quality

Quality Function Deployment

Ideal Customer Product

Value Analysis/ Value Engineering

Designing for the Customer: Quality Function Deployment

Interfunctional teams from marketing, design engineering, and manufacturing

Voice of the customer

House of Quality

Designing for the Customer: Value Analysis/Value Engineering

Achieve equivalent or better performance at a lower cost while maintaining all functional requirements defined by the customer

Does the item have any design features that are not necessary? Can two or more parts be combined into one? How can we cut down the weight? Are there nonstandard parts that can be eliminated?

Design for Manufacturability

Traditional Approach

We design it, you build it or Over the wall

Concurrent Engineering

Lets work together simultaneously

Design for Manufacturing and Assembly

Greatest improvements related to DFMA arise from simplification of the product by reducing the number of separate parts: During the operation of the product, does the part move relative to all other parts already assembled? Must the part be of a different material or be isolated from other parts already assembled?

1.

2.

3.

Must the part be separate from all other parts to allow the disassembly of the product for adjustment or maintenance?

Measuring Product Development Performance Measures Performance Of new products introduced Dimension Freq. to market introduction Time
Time-to-market
Number stated and number completed Actual versus plan Percentage of sales from new products

Productivity

Engineering hours per project Cost of materials and tooling per project Actual versus plan

Quality

Conformance-reliability in use Design-performance and customer satisfaction Yield-factory and field