Lecture supply chain management chapter 4 making

Operations and SCMGoals:- Optimize production - Reduce cost- Control inventories - Increase efficiencies Goals:- Optimize production - Optimize distribution/servicesGoals:- Optimize all

Operation management perspectives

3 Production Capability Management

Lean Production

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Objective of learning

vOutline the role of Production management

and OM in business strategy

vDetail the 10 strategic decisions of OM vFind the good locations for facilities vKnow how to manage the Production

capability

vUnderstand the process of producing new

product

vApplying of Lean production

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1 Introduction

Make product

1 Introduction

vProduct and process

§ Products: The way products are designed determines the processes that are available to make them.

§ Process: The product design and the process determine the quality and cost of the product.

• Quality and cost determine the profitability of the company.

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Definition of Production

The processes and methods used to transform

tangible inputs (raw materials, semi-finishedgoods, subassemblies) and intangible inputs (ideas,information, knowledge) into goods or services

Resources are used in this process to create anoutput that is suitable for use or has exchange

value

http://www.businessdictionary.com/definition/prod uction.html

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Input: Human resources, capital, technical, raw

materials, land, energy, information

Output: product, service, wages, environmental

impact

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Role of production

Enterprise: provide variable good and service to enhance living

standard of whole society

Country: Manufacturing ability including productivity and production

efficiency

Supply chain: Value creation

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Classify production systems

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2.Operation management perspectives

1 Production Management

2 Operations management

3 Operations and process management

4 Operations and SCM

Goals:

- Optimize production - Reduce cost

- Control inventories - Increase efficiencies

- Optimize/integrate all planning

- Optimize/integrate supply chain

Production management

The design, execution, and control of operationsthat convert resources into desired goods andservices, and implement a company's business

strategy

http://www.businessdictionary.com/definition/oper ations-management.html

Definition

Nature of production management

- Establish production system

- Manage the process of converting inputs into outputs

- Meet the requirement of customers and company’s objectives

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Role of production management

Ensuring outputs provided based on operating resources effectively, and meet the highest

requirement of customers

- Ensuring the product and service quality suitable to customer’s demand

- Ensuring the right quantity

- Minimize the unit cost

- Shorten production time and service provision

- Building a dynamic and flexible production system

- Building a compact system and method of management

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Basic activities of production management

- Forecasting production demand

- Product design and

The scope of Operation Management functions

Strategy

Generating strategies that create distinctive operations competencies consistent with corporate

strategies

Quality Setting quality levels for products and services consistent with corporate strategies

Translating customer requirements into product and service designs while ensuring high quality and

reasonable cost

Product design

Process design

Designing processes that leverage operations competencies and optimize plant and delivery

Facilities

Generating strategies that create distinctive operations competencies consistent with corporate

strategies MsC Bui Thi Bich Lien

The scope of Operation Management functions

Human resources

Establishing a motivated, skilled, committed, innovative and customer-focused work force

Project Management

Using effective techniques to manage projects that ensure they are completed on time and within budget

Structuring a “chain” of suppliers, producers, and distributors capable of acting as a single source to satisfy

the customer

SCM

Forecasting forecast estimates of demand on operations resourcesUsing methods and quantitative techniques to

Planning and scheduling

Using manufacturing and distribution planning systems to assist operations to determine inventory and capacity

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Ten strategic OM decisions

v Product and service design: defining products and service that optimize OM resources and competencies

v Quality: Matching quality specifications and customer expectations

v Process and capacity design: Determining OM process technologies, quality, human capital and maintenance

v Location selection: Locating manufacturing and service resources that optimize marketplace needs

v Layout design: Maximizing plant material flows, capacity needs, personnel levels, technology decisions, and inventory requirements

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Lighthouse company need to choose a place to build site.

There are 3 options: A, B and C The infomation of 3 places as follow:

- Reasoning suitable location according to production output

- Which location should the company choose if it produces 2000 products per year.

Table: fixed cost and variable cost of each location

Location Fixed cost per year Var cost per year

2-dimension coordinate method

A detergent factory has a distribution warehouse located at the coordinatestaken according to the map is (59; 40) This warehouse X supplies goods to

6 agents A, B, C, D, E and F The coordinates and quantity of goods to betransported to agents are calculated in the following table, Is the location ofthe plant in the above position suitable?

Agents Coordinate Transport quantity

%) *

W%

𝑑%= 𝑥 − 𝑥%1 + (𝑦 − 𝑦%) 1

dn: distance to delivery location n Wn: quantity need to transport to location n

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Sources/

Markets

Transportation cost (USD/ton km) (Fn)

Quantity in tons (Qn)

Coordinates

Suppy sources

Ten strategic OM decisions

v Job design and work measurement: developing and measuring OM workforce, skills, talents and innovative thinking

v SCM: networking customers and suppliers with OM to promote mutual trust, quality, delivery and innovation

v Inventory: leveraging inventory to optimize customer satisfaction, supplier capabilities, production schedules and workforce planning

requirements with feasible production and purchasing schedules

maintenance to prevent equipment failure and

3 Production Capability Management

Production capability is the ability to produce the amount of product in a unit

of time, measured by the production capacity

Production capacity

- Production capacity of equipment or technological line in a unit of time

- Measurement unit: T, kg, m, currency value…

Definition

Capacity planning Balance between capacity and demand

Avoid waste due to excess capacity

Proceed when there are activities:

- Human resource changing

- Additional equipment

- Increase/decrease product

- Redesign production process

- Flexibility enhancing

- Production cost reduce

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Capacity planning

Capacity planning Capacity planning process

ü Current capacity evaluation

ü Capacity demand estimation

ü Additional capacity determination

ü Capacity plans determination

ü Selecting suitable capacity plan

ü Evaluating economics and social effectiveness

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Production moderating

ü Long – term: year

ü Resources determination: equipment

ü Mid – term: Quarter, month

ü Using equipment, labor

ü Mid – term: week

ü Material planning, production planning

ü Short – term: day, hour

ü Task order, completion time

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Role

ü Minimize completion time

ü Maximize equipment utilizing

ü Minimize doing tasks

ü Minimize delay

Benefit

ü Balance supply and demand in enterprise

ü Make the adaption in Supply chain

RESULTS COMPARED BY 3 PRINCIPLES

vAverage completion time = Total time line / number

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Evaluation of production process

Productivity

ü Productivity is a measurement for the effectiveness of task

ü Evaluating the effectiveness of business

Productivity measurement

Total measurement

Partmeasurement

Many factors measurement

OutputLabor number

OutputMaterials

OutputCapital

OutputEnergy

OutputLabor + material

OutputCapital + Energy

Number of product or services made

Total input

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Productive improvement= RSTUVWXYZYX[ (X)\ RSTUVWXYZYX[ (X\*)RSTUVWXYZYX[ (X\*)

Improve productivity

Enterprise (Increase Profit)

Government

(Increase tax, GDP)

Customer

(High Quality, suitable price)

Labor

(Increase income)

Improve productivity

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Factors to Improve productivity

Selecting strategy to improve productivity

Downsizing production

Reduce costEnhance EffectivenessPromote growthCreative, innovative

OutputInputOutputInputOutputInputOutputInputOutputInput

4 Need for new products

vThree ways for maintaining profitability in decline

phase

§ Introduce new products

§ Improve existing products

§ Improve the methods of production

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New product development process

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Productional design

Final design and testing

Rollout

Concept development Functional

design

Perform prototype testing, establish final designs, launch marketing campaign

Concept generation

Target customer and service experience

TIÊU ĐỀ

Determine physical appearance of the product

Analyze feasibility of proposed new products

General product release

Determine processing specificaitons of the product

Determine performance specifications of the product

Product Design process flow

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Product development principles

1) Customer focus:

§ Products and services should always be designed to satisfy customers’

wants or needs from their perspective

4) Specialization

§ In product specialization, a firm may produce and market only one or alimited range of similar products This leads to process and laborspecialization, which increases productivity and decreases costs

Product specification and design

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5 LEAN PRODUCTION

Always busy but not effective

ü A system of tools and methods

ü Continuously reduce waste in production process

ü Reduce cost, increase quantity and shorten production time

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ü Improvement method: systematic and continuous

ü Focus on creating “added value” for customer and reject wastes at

the same time

ü Cutting cost

ü Optimizing resources allocation

ü Shorten production/processing time and service supply

ü Increasing the flexibility in meeting the variable demand of customers

LEAN PRODUCTION

Wastes Identify and reject activities that do not create added value for customer but increasing cost

(wastes) in supply chain

Over production

Inventory

Defect

ü Produce more products or earlier than requirement

ü Increasing risk: outdated, wrong product categories

àDiscount or wasted materials

ü Inventory at the high rate, over needed

ü Increasing costs: capital, reservation

ü Increasing defect proportion

ü Defects: product, document, information, delivery

ü Increasing cost of producing and fix the error

àDo not satisfy customer demand

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ü Leisured time of labor and machine

ü Jammed and delay between stages and phases ofproduction

ü Increasing labor cost, depreciation unit cost

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Motions

Over processing

ü Unnecessary moving in a stage of production

ü Ex: moving to find tools, devices Arrange toolsinconveniently

ü Low working speed, reduce productivity

ü Doing more works than customers need

ü Increasing production cost

ü Ex: Increasing the complex of products that customerdon’t care

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Benefits

• Improving productivity and quality

Ø Increasing input resource utilities: reduce waste

Ø Increasing labor productivity: reduce waiting time, moving, unnecessary motions

• Assuring the quality from the origin

Ø Reduce wasted materials

Ø Employees are aware of ”value” and “value added activities” for customers

• Reducing production cycle time and service supply

Ø Rationalize the processes that create value

Ø Reduce the activities that don’t create value added, reject wastes due to wait

BenefitsReduce physical and invisible waste

ü More inventory than needed: semi-finished product and finished product

ü Apply the rule “JIT”

Increase the effectiveness in using equipment and premises

ü Total productive maintenance

ü Cell ManufacturingIncrease the flexibility, reduce pressure on input resources

ü Compact machine and simple process

ü Increase the ability to meet the requirements with current resources

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BenefitsSome companies applied Lean manufacturing with the results below:

üThe production space in each machine reduce average 45%

üWasted materials can reduce 90%

üProduction cycle reduce from 16 weeks to 5-6 days

üLead time reduce from 4-20 weeks to 1-4 weeks

www.themegallery.com

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