Production and operations management

MODULE A Bird view of Production System Marketing department Engineering Department Research & Development Materials Management Division Customer In Target Market Plant Engineering Department Production Department (shop floor) Raw Materials Stores Vendor/ Suppliers Sales Department Customer Support Department Factory Management & Liasioning Finance Department Human Resource Department Quality Assurance Department Management Information System Department Introduction • Production and operations management (POM) is the management of an organization’s production system • A production system takes inputs and converts them into outputs • The conversion process is the predominant activity of a production system • The primary concern of an operations manager is the activities of the conversion process Today's Factors Affecting POM • Global Competition • U.S Quality, Customer Service, and Cost Challenges • Computers and Advanced Production Technology • Growth of U.S Service Sector • Scarcity of Production Resources • Issues of Social Responsibility Different Ways to Study POM • Production as a System • Production as an Organization Function • Decision Making in POM Production as a System Production System Inputs Conversion Subsystem Outputs Control Subsystem Inputs of a Production System • External – Legal, Economic, Social, Technological • Market – Competition, Customer Desires, Product Info • Primary Resources – Materials, Personnel, Capital, Utilities Conversion Subsystem • • • • • • Physical (Manufacturing) Location Services (Transportation) Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services (Federal, State, Local) Outputs of a Production System • Direct – Products – Services • Indirect – Waste – Pollution – Technological Advances Production as an Organization Function •U.S companies cannot compete using marketing, finance, accounting, and engineering alone •We focus on POM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside •To succeed, a firm must have a strong operations function teaming with the other organization functions Decision Making in POM •Strategic Decisions •Operating Decisions •Control Decisions Strategic Decisions •These decisions are of strategic importance and have long-term significance for the organization •Examples include deciding: –the design for a new product’s production process –where to locate a new factory –whether to launch a new-product development plan Operating Decisions •These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits •Examples include deciding: –how much finished-goods inventory to carry –the amount of overtime to use next week –the details for purchasing raw material next month Control Decisions •These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance •Examples include deciding: –labor cost standards for a new product –frequency of preventive maintenance –new quality control acceptance criteria What Controls the Operations System? •Information about the outputs, the conversions, and the inputs is fed back to management •This information is matched with management’s expectations •When there is a difference, management must take corrective action to maintain control of the system What is Operations Management? Defined Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services Why Study Operations Management? Systematic Approach to Org Processes Business Education Operations Management Cross-Functional Applications •The Future of Operations –Outsourcing everything –Smart factories –Talking inventory –Industrial army of robots –What’s in the box –Mass customization –Personalized recommendations –Sign here, please Career Opportunities Operations Management Decision Types •Strategic (long-term) •Tactical (intermediate-term) •Operational planning and control (short-term) What is a Transformation Process? Defined A transformation process is defined as a use of resources to transform inputs into some desired outputs Transformations •Physical manufacturing •Location transportation •Exchange retailing •Storage warehousing •Physiological health care •Informational telecommunications Core Services Performance Objectives Quality Flexibility Operations Management Speed Price (or cost Reduction) 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 firm’s profit The Basics of Operations Management •Operations Management –The process of managing the resources that are needed to produce an organization’s goods and services –Operations managers focus on managing the “five Ps” of the firm’s operations: •People, plants, parts, processes, and planning and control systems The Production System •Input –A resource required for the manufacture of a product or service •Conversion System –A production system that converts inputs (material and human resources) into outputs (products or services); also the production process or technology •Output –A direct outcome (actual product or service) or indirect outcome (taxes, wages, salaries) of a production system Types of Production system Service System Manufacturing System Continuous Production Intermittent Production Batch Production Mass production( Flow) Job Production Processing Production Basic Types of Production Processes •Intermittent Production System –Production is performed on a start-and-stop basis, such as for the manufacture of made-to-order products •Mass Production –A special type of intermittent production process using standardized methods and single-use machines to produce long runs of standardized items Rapid Plant Assessment Rating Sheet World-Class Operations Management Methods • Total Quality Management (TQM) • Just-In-Time (JIT) manufacturing • Computer-Aided Design and Manufacturing (CADCAM) • Flexible Manufacturing Systems (FMS) Computer-Integrated Manufacturing (CIM), Supply-Chain Management • Enterprise Resource Planning (ERP) Just-In-Time (JIT) • Just-In-Time (JIT) – A production control method used to attain minimum inventory levels by ensuring delivery of materials and assemblies just when they are to be used – A philosophy of lean or value-added manufacturing manufacturing that aims to optimize production processes by continuously reducing waste – A management philosophy that assumes that any manufacturing process that does not add value to the product for the customer is wasteful • Seven Wastes and Their Solutions – Overproduction: reduce by producing only what is needed as it is needed – Waiting: synchronize the workflow – Transportation: minimize transport with better layouts – Processing: ―Why we need this process at all?‖ – Stock: reduce inventories – Motion: reduce wasted employee motions – Defective products: improve quality to reduce rework Computer-Aided Design and Manufacturing • Computer-Aided Design (CAD) – A computerized process for designing new products, modifying existing ones, or simulating conditions that may affect the designs • Computer-Aided Manufacturing (CAM) – A computerized process for planning and programming production processes and equipment Flexible Manufacturing Systems • Flexible Manufacturing System (FMS) – The organization of groups of production machines that are connected by automated materials-handling and transfer machines, and integrated into a computer system for the purpose of combining the benefits of made-toorder flexibility and mass-production efficiency • Automation – The automatic operation of a system, process, or machine Computer-Integrated Manufacturing • Computer-Integrated Manufacturing (CIM) – The total integration of all production-related business activities through the use of computer systems – Automation, JIT, flexible manufacturing, and CAD/CAM are integrated into one self-regulating production system The Elements of CIM Supply Chain Management • Supply Chain Management – The integration of the activities that procure materials, transform them into intermediate goods and final product, and deliver them to customers Trends in Supply Chain Management • Supplier Partnering – Choosing to business with a limited number of suppliers, with the aim of building relationships that improve quality and reliability rather than just improve costs • Channel assembly – Organizing the product assembly process so that the company doesn‘t send finished products to its distribution channel partners, but instead sends the partners components and modules Partners become an extension of the firm‘s product assembly process • • Channel Assembly – Organizing the product assembly process so that a company sends its distribution channel partners components and modules rather than finished products The partners then become an extension of the firm‘s product assembly process Internet Purchasing (e-Procurement) – Vendors interact with other firms via the Internet to accept, place and acknowledge orders via the Web The Supply Chain Managing Services • Service Management – A total organization-wide approach that makes quality of service the business‘s number one driving force • Why Service Management Is Important – Service is a competitive advantage – Bad service leads to lost customers – Customer defections drain profits • Moment of Truth – The instant when the customer comes into contact with any aspect of a business and, based on that contact, forms an opinion about the quality of the service or product • Cycle of Service – Includes all of the moments of truth experienced by a typical customer, from first to last The Service Triangle (Karl Albrecht) Well-Conceived Service Strategy CustomerOriented Front-line People Customer-Friendly Systems How to Implement a Service Management Program Step I: The Service Audit Step 2: Strategy Development Step 3: Education Step 4: Implementation Step 5: Maintenance— Making the Change Permanent Chapter Production Technology: Selection and Management Overview • Introduction • Proliferation of Automation • Types of Automation • Automated Production Systems • Factories of the Future • Automation in Services • Automation Issues • Deciding Among Automation Alternatives • Wrap-Up: What World-Class Producers Do Introduction • In the past, automation meant the replacement of human effort with machine effort • Today, automation means integrating a full range of advanced information and engineering discoveries into production processes for strategic purposes Advanced Production Technology • Types of Automation • Automated Production Systems • Factories of the Future • Automation in Services • Automation Issues • Decision Approaches Types of Automation • Machine Attachments - one operation • Numerically Controlled (N/C) - reads computer or tape inputs • Robots - simulates human movements • Automated Quality Control - verifies conformance to specifications • Auto ID Systems - automatic acquisition of data • Automated Process Control - adjusts processes per set parameters Automated Production Systems • Automated Flow Lines (Fixed Automation) – Automated processes linked by automated material transfer • Automated Assembly Systems – Automated assembly processes linked by automated material transfer • Flexible Manufacturing Systems (FMS) – Groups of processes, arranged in sequence, connected by automated material transfer, and integrated by a computer system Volume & Variety of Products Volume & Variety Low Volume High of products Variety Process (Intermittent) One or very few Project units per lot Very small runs, high variety Job shop Modest runs, modest variety Long runs, modest variations Very long runs, changes in attributes Equipment utilization Repetitive process (modular) High Volume Low Variety Process (Continuous) Poor strategy (Fixed costs and cost of changing to other products are high) Disconnected Repetitive Poor Strategy Connected Repetitive (High variable costs) 5%-25% Continuous 20%-75% 70%-80% Process Design Depends on Product Diversity and Batch Size This is an area of today‘s automation programs Product Focused, Dedicated Systems Batch Size Product Focused, Batch System Cellular Manufacturing Process-Focused, J o b Sh o p Number of Product Designs Flexible Manufacturing System Products General purpose 1000 Work cells CIM 100 Flexible Manufacturing System Focused automation 10 Dedicated automation 1 10 100 1000 10000 100000 1000000 Volume Design Products for Automation • Reduce amount of assembly required fewer parts • Reduce number of fasteners needed • Design parts to be automatically delivered/positioned • Design for layered assembly base to top • Design parts to self-align • Design parts into major modules • Increase quality of components to avoid jams Material-Handling Automation • Automated Storage & Retrieval System (ASRS) – Receive orders, pick parts, maintain inventory records – Benefits: increase storage density and throughput, reduce labor costs, improve product quality – Drawbacks: added maintenance costs • Automated Guided Vehicle (AGVS) – Follows wire or track in floor Newer versions use sensors placed around the factory to figure out where they are • Don‘t build monuments to manage inventory! – Most factories moving towards point-of-use stocks – Receiving docks built all around the exterior of buildings Computer-Based Systems • Computer-Aided Design (CAD) - Use of computer in interactive engineering drawing and storage of designs • Computer-Aided Manufacturing (CAM) - Use of computers to program, direct and control processes • CAD/CAM - merger and interaction between the two systems Computer Integrated Manufacturing (CIM) • Incorporates all manufacturing processes ASRS Automated Assembly CAD/CAM AGV NC Machining Order Entry Characteristics of Factories of the Future • High product quality • High flexibility • Fast delivery of customer orders • Changed production economics • Computer-driven and computer-integrated systems • Organization structure changes Automation in Services • Trend developing toward more-standardized services and less customer contact • Service standardization brings trade-offs: – Service not custom-designed for each customer – Price of service reduced, or at least contained • Banking industry is becoming increasingly automated • Service firm can have a manual/automated mix: – Manual - ―front room‖ operations – Automated - ―back room‖ operations Automation Issues • Not all automation projects are successful • Automation cannot make up for poor management • Economic analysis cannot justify automation of some operations • It is not technically feasible to automate some operations • Automation projects may have to wait in small and start-up businesses Automation Questions • What level of automation is appropriate? • How would automation affect the flexibility of an operation system? • How can automation projects be justified? • How should technological change be managed? • What are some of the consequences of implementing an automation project? Watch Out For !!! • Success many projects are not high tech skills required to manage advanced technologies • Technical feasibility There always are bugs with new technology • Economic analysis include both qualitative and quantitative Managing Technological Change • Have a master plan for automation • Recognize the risks in automating • Establish a new production technology department • Allow ample time for completion of automation • Do not try to automate everything at once • People are the key to making automation successful • Don‘t move too slowly in adopting new production technology; you might loose your competitive edge Deciding Among Automation Alternatives Three approaches commonly used in industry: • Economic Analysis • Rating Scale Approach • Relative-Aggregate-Scores Approach Economic Analysis • Provides an idea of the direct impact of automation alternatives on profitability • Break-even analysis and financial analysis are frequently used • Focus might be on: – cash flows – variable cost per unit – annual fixed costs – average production cost per unit Rating Scale Approach Automation alternatives are rated using, say, a fivepoint scale on a variety of factors such as: • Economic measures • Effect on market share • Effect on quality • Effect on manufacturing flexibility • Effect on labor relations • Amount of time required for implementation • Effect on ongoing production Relative-Aggregate-Scores Approach • Similar to Rating Scale Approach, but weights are formally assigned to each factor which permits the direct calculation of an overall rating for each alternative Wrap-Up: World-Class Practice • World-Class producers utilize the latest technologies/practices For example: – Design products to be automation-friendly – Use CAD/CAM for designing products – Convert fixed automation to flexible automation – Move towards smaller batch sizes – Plan for automation – Build teams to develop automated systems – Justify automation based on multiple factors Maintenance Introduction • Maintenance – All activities that maintain facilities and equipment in good working order so that a system can perform as intended • Breakdown maintenance – Reactive approach; dealing with breakdowns or problems when they occur • Preventive maintenance – Proactive approach; reducing breakdowns through a program of lubrication, adjustment, cleaning, inspection, and replacement of worn parts Maintenance Reasons • Reasons for keeping equipment running – Avoid production disruptions – Not add to production costs – Maintain high quality – Avoid missed delivery dates Breakdown Consequences • Production capacity is reduced – Orders are delayed • No production – Overhead continues – Cost per unit increases • Quality issues – Product may be damaged • Safety issues – Injury to employees – Injury to customers Total Maintenance Cost C os t Total Cost Preventive maintenance cost Breakdown and repair cost Optimum Amount of preventive maintenance Preventive Maintenance • Preventive maintenance: goal is to reduce the incidence of breakdowns or failures in the plant or equipment to avoid the associated costs • Preventive maintenance is periodic – Result of planned inspections – According to calendar – After predetermined number of hours Example S-1 Frequency of breakdown Number of breakdowns Frequency of occurrence 0 If the average cost of a breakdown is $1,000, and the cost of preventative maintenance is $1,250 per month, should we use preventive maintenance? Example S-1 Solution Number of Frequency of Breakdowns Occurrence 20 30 40 10 1.00 Expected number of Breakdowns 30 80 30 1.40 Expected cost to repair = 1.4 breakdowns per month X $1000 = $1400 Preventive maintenance = $1250 PM results in savings of $150 per month Predictive Maintenance • Predictive maintenance – An attempt to determine when best to perform preventive maintenance activities • Total productive maintenance – JIT approach where workers perform preventive maintenance on the machines they operate Breakdown Programs • Standby or backup equipment that can be quickly pressed into service • Inventories of spare parts that can be installed as needed • Operators who are able to perform minor repairs • Repair people who are well trained and readily available to diagnose and correct problems with equipment Replacement • Trade-off decisions – Cost of replacement vs cost of continued maintenance – New equipment with new features vs maintenance – Installation of new equipment may cause disruptions – Training costs of employees on new equipment – Forecasts for demand on equipment may require new equipment capacity • When is it time for replacement? ...Introduction • Production and operations management (POM) is the management of an organization’s production system • A production system takes inputs and converts them into outputs... salaries) of a production system Types of Production system Service System Manufacturing System Continuous Production Intermittent Production Batch Production Mass production( Flow) Job Production. .. systems that create and deliver the firm’s primary products and services Why Study Operations Management? Systematic Approach to Org Processes Business Education Operations Management Cross-Functional