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Operations Management Product Design and Development Process Selection Facility Location Facility Layout Capacity Planning PPC or! Study & Met"od Study Plus ##$
Operations Management
The field of management that specializes in the physical production of goods or services and uses quantitative techniques for solving manufacturing problems
Production System
Inputs
Materials Capital Labor Manag. Res.
Outputs Organization
Goods Services
Operations Management
Operations Management is t"e conversion o( inputs into outputs) using p"ysical resources) so as to provide t"e desired utility,utilities o( (orm) place) possession or state or a com'ination t"ere o( to t"e customer +"ile meeting t"e ot"er organi-ational o'.ectives o( e((ectiveness) e((iciency and adapta'ility$
Goods & service design Quality Process & capacity design Location selection Layout design Human resource and job design Supply-chain management Inventory Scheduling Maintenance
Management
Inputs
Flo+ units
2customers) data) material) cas") etc$3
Outputs
0oods Services
Resources
Process Management
/ 'usiness process is a net+or! o( activities per(ormed 'y resources t"at trans(orms inputs into outputs# Process Management is a set o( managerial policies speci(ying "o+ a process s"ould 'e operated over time$$$
Operations Management
Outputs Products Services
Products & Facilities Structure Product design "eporting relationships acilities layout #eams !apacity planning acilities location
ervices!
4ntangi'le product Product cannot 'e inventoried 5ig" customer contact S"ort response time La'or intensive
Manufacturer s!
&angi'le product Product can 'e inventoried Lo+ customer contact Longer response time Capital intensive
/ll use tec"nology Bot" "ave 6uality) productivity) & response issues /ll must (orecast demand 7ac" +ill "ave capacity) layout) and location issues /ll "ave customers and suppliers /ll "ave sc"eduling and sta((ing issues
Products
Product /ttri'utes
4nputs:Outputs
&angi'le 4nputs
People ;a+ material 4n(ormation &ime Buildings Cars Outgoing patient 2"ospital3 Delivered message 2advertising company3
4ntangi'le 4nputs
&angi'le Outputs
4ntangi'le Outputs
&rans(ormations
/ll managers must trans(orm inputs into outputs 7<ample: /ccounting Manager
4nputs: data) in(ormation) la'or &rans(ormation: application o( accounting principles and !no+ledge Outputs: accounting reports) !no+ledge o( per(ormance) $$$
&"ere(ore) all managers are in some sense Operations managers /ll managers "ave an >operation? to run
Operations Management
"alue Proposition Operations Strategy Operation Priorities Cost 9uality Delivery Fle<i'ility 4nnovation Service ystem #esign Product,Service Design Process Selection &9M Facility location Facility Layout @4& Planning $ %ontrol /ggregate Planning 4nventory Systems Pro.ect Management Sc"eduling M;P Statistical Process Control
Sc"eduling Must o'tain materials and supplies Bot" must 'e concerned +it" 6uality and productivity
Materials Met"ods Mac"ines and 76uipments 7stimating Loading and Sc"eduling ;outing
OM Decisions
trategic!
Product,Service Design Process Selection Capacity Planning Facility Location Facility Layout @o' Design
Tactical!
9uality Control Demand Forecasting Supply C"ain Management Production Planning 4nventory Control Sc"eduling
Product Design
Product design deals +it" its (orm and (unction$ Form implies t"e s"ape and appearance o( t"e product +"ile (unction is related to t"e +or!ing o( t"e product$
C"aracteristics o( 0oods
&angi'le product Consistent product de(inition Production usually separate (rom consumption Can 'e inventoried Lo+ customer interaction
C"aracteristics o( Service
4ntangi'le product Produced & consumed at same time O(ten uni6ue 5ig" customer interaction 4nconsistent product de(inition O(ten !no+ledge: 'ased
C00
BA
A0
2A
2A
A0
BA C00
Four 4mportant Operations 9uestions: ill you compete on D Cost% 9uality% &ime% Fle<i'ility% /ll o( t"e a'ove% Some% &radeo((s%
Competing on Cost%
&ypically "ig" volume products O(ten limit product range & o((er little customi-ation May invest in automation to reduce unit costs Can use lo+er s!ill la'or Pro'a'ly use product (ocused layouts
Competing on 9uality%
Competing on &ime%
'ast delivery!
On(time delivery!
Competing on Fle<i'ility%
Product fle)ibility!
7asily s+itc" production (rom one item to anot"er 7asily customi-e product,service to meet speci(ic re6uirements o( a customer
"olume fle)ibility!
Growth
)ractical to c!ange price or %ualit( image Strengt!en nic!e
Maturity
)oor time to c!ange image- price or %ualit( Competitive costs become critical #e*end mar et position
Decline
Cost control critical
Sales Time
$re%uent product and process c!anges S!ort production runs &ig! production costs Limited models 'ttention to %ualit(
$orecasting critical )roducts and process reliabilit( Increase capacit( S!i*t to+ards product *ocus ,n!ance distribution
Standardization . minor product c!anges Optimum capacit( )rocess stabilit( Long production runs
Little product di**erentiation Overcapacit( in t!e industr( Reduce capacit( and eventuall( prune line to eliminate items not returning good margin
Product Development
&"e aim o( Product development is to 2i3 provide t"e goods t"e mar!et demands +it" time)2ii3 ad.ust +it" t"e variation in 6uantity re6uired and 2iii3 c"arge t"e prices +"ic" t"e customer is +illing to pay as +ell as under conditions t"at it may "ave net pro(it also$
Introduction
Practical to change price or quality image trengthen niche #rive(thru restaurants %#( ROM
*ro+th
Maturity
#ecline
Poor time to change image/ price/ or quality %ompetitive costs become critical #efend mar.et 'a) position machines
Sales
%olor copiers &#T" Product design and development critical
Internet
'orecasting critical Product and process reliability %ompetitive product improvements and options Increase capacity hift to+ard product focused -nhance distribution
tandardization ,ess rapid product changes ( more minor changes Optimum capacity Increasing stability of process ,ong production runs Product improvement and cost cutting
,ittle product differentiation %ost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity
OM trategy0Issue s
'requent product and process design changes hort production runs &igh production costs ,imited models Attention to quality
/eeds Identi*ication
'dvance design
1eeds 4denti(ication
Once a product idea sur(aces) it must 'e demonstrated t"at t"e product (ul(ils some consumer need) and t"at e<isting products do not already (ul(ill t"at need$
'dvance design
Promising design alternatives are evaluated according to critical parameters to determine +"et"er design support suc" as analytical testing) e<perimentation) p"ysical modeling) and prototype testing +ill 'e re6uired$
G$
H$ A$
Support systems mig"t 7ducate users on speci(ic applications o( t"e product Provide +arranty and repair service Distri'ute replacement partsF or Epgrade t"e product +it" design improvements$
Standardi-ation
Standardi-ation means (i<ation o( some appropriate si-e) s"ape) 6uality) manu(acturing process) +eig"t and ot"er c"aracteristics as standards to manu(acture a product o( desired variety and utility$
Simpli(ication
Simpli(ication in an enterprise connotes t"e elimination o( e<cessive and undesira'le or marginal lines o( product to "ammer out +aste and to attain economy coupled +it" t"e main o'.ect o( improving 6uality and reducing costs and prices leading to increased sales$
Speciali-ation
Speciali-ation implies e<pertise in some particular area or (ield$ Speciali-ation implies reduction in t"e variety o( products manu(actured 'y t"e organisation$
Diversi(ication
4t implies policy o( producing di((erent types o( products 'y an enterprise$ Diversi(ication can 'e adopted (or t"e purpose o( Etilisation o( idle,surplus resources Sta'ilisation o( sales &o cope +it" demand (luctuations and For survival o( t"e organisation$
Process Selection
Pro.ect
Pro.ect tec"nology deals +it" one: o(:a !ind products t"at are tailored to t"e uni6ue re6uirements o( eac" customer$Since t"e products cannot 'e standardi-ed) t"e conversion process must 'e (le<i'le in its e6uipment capa'ilities) "uman s!ills) and procedures$
4ntermittent System
4ntermittent System
4n t"is system) t"e goods are manu(actured specially to (ul(ill orders made 'y customers rat"er t"an (or stoc!$ 5ere t"e (lo+ o( material is intermittent$ 4ntermittent production system are t"ose +"ere t"e production (acilities are (le<i'le to "andle a +ide variety o( products and si-es$
@o' S"op
@o' s"op tec"nology is appropriate (or manu(acturers o( small 'atc"es o( many di((erent products) eac" o( +"ic" is custom designed and) conse6uently) re6uires its o+n uni6ue set o( processing steps) or routing) t"roug" t"e production process$ For e<ample) printing s"op) restaurant) etc$
Batc"
&"is process is adopted +"en 'atc"es or lots o( items are to 'e produced using t"e same set o( mac"ines in t"e same se6uence$For e<ample) Ba!ery) C"emical industry) Printing press) etc$
Mass Process
Continuous production system is t"e speciali-ed manu(acture o( identical products on +"ic" t"e mac"inery and e6uipment is (ully engaged$ &"e continuous production is normally associated +it" large 6uantities and +it" "ig" rate o( demand$
Process Design
5ig"
Process(focused
5ob
8ariety o( Products
hops
6Print shop/ emergency room / machine shop/ Repetitive 6modular7 fine dining focus
Assembly line
6%ars/ appliances/ T"s/ fast(food restaurants7 Product(focused
Moderate
%ontinuous
6steel/ beer/ paper/ bread7
Lo+ Lo+ Moderate
8olume
5ig"
S1-0
S1-1
S1-i
S1-m
Product:Process Mi<
&ypical com'inations o( product:process structures are illustrated in Figure$/s t"e product s"i(ts to a di((erent stage) t"e manu(acturing process structure also s"i(ts) and ne+ manu(acturing priorities emerge$ "ereas manu(acturing (le<i'ility and 6uality are competitive priorities in earlier stages) priorities s"i(t to+ard dependa'le delivery and competitive cost in later stages$
Lo+ volume) Process structure lo+ process standardi-atio li(e:cycle stages n) one o( a !ind 5umbled flo+ 69ob shop7 Disconnected line (lo+ 2'atc"3 Connected line (lo+ 2assem'ly line3 Continuous (lo+
Commercial printer
5eavy e6uipmen t
/uto assem'ly
Sugar re(inery
Facility Location
/ (acility 2plant3 is a place +"ere men) materials) money) mac"inery and e6uipment) etc$) are 'roug"t toget"er (or manu(acturing product$
Facility Location
Cost:'ene(it analysis D most common approac" to selecting a site (or a ne+ location 1e+ location scouting so(t+are is "elping managers turn (acilities location into a science
Location Factors
Primary (actors
/vaila'ility o( ra+ material 1earness to mar!et &ransport (acilities /vaila'ility o( la'our /vaila'ility o( (uel and po+er /vaila'ility o( +ater
Secondary (actors
Soil and climate 4ndustrial atmosp"ere Financial and ot"er aids /vaila'ility o( (acilities li!e "ousing) sc"ools) "ospitals and recreation clu's Momentum o( an early start
Secondary (actors
Special advantage o( t"e place Personal (actors 5istorical (actors Political sta'ility
;ural
Availability of local mar.et! Due to large &"e mar!et place is (ar a+ay population t"e local demand (rom t"e industries) t"ere(ore (or t"e product is (airly "ig"$ cost o( distri'ution o( (inis"ed products is more$ ,abour! /mple availa'ility 4t is rat"er di((icult to get o( diversi(ied la'our$ s!illed la'our in rural areas$ Transport facilities! 0ood transport (acilities are availa'le$ Allied Industries! Pro<imity to allied industries are availa'le$ /de6uate transport (acilities are not availa'le$ /'sence o( allied industries$
;ural
&"ere are (e+er educational) social and recreational (acilities$ Su((icient land is availa'le at c"eaper rates$
&"ere are (e+ restrictions on construction o( (actory 'uildings$ Municipal (acilities and pu'lic utility services are not availa'le$
;ural
Prompt postal and communication services are not availa'le$ &"e rates o( ta<es are 6uite lo+$ La'our is availa'le at c"eaper rate$ /'sence o( 'an!ing (acilities) credit (acilities and insurance (acilities$
;ural
&rade union movement is not very strong$ /'sence o( training (acilities and management institutes$ Storing and +are"ouse (acilities are not availa'le$ Pro'lems o( air pollution) +ater pollution) etc$ are less and t"e rural environment is conducive to good "ealt" o( +or!ers$
;ural
Less danger o( 'om'ardment in +ar time$ 0overnment provides (inancial assistance and land at c"eaper rates to attract t"e entrepreneurs to start industries in rural areas$
;esource s La'or s!ills and productivity Land availa'ility and cost ;a+ materials Su'contractors &ransportation (acilities Etility availa'ility and rates
Local Conditions Community receptivity to 'usiness Construction cost Organi-ed industrial comple<es 9uality o( li(e: climate) "ousing) recreation) sc"ools &a<es
Sources o( 4n(ormation
/(ter identi(ying !ey location re6uirements) management underta!es a searc" to (ind alternative locations t"at are consistent +it" t"ese re6uirements$
Detailed /nalysis
Once t"e preliminary screening narro+s alternative sites to .ust a (e+) more detailed analysis 'egins$
Factor ;atings
Steps in using Factor ;ating
List t"e most relevant (actors in t"e location decision 2column C3 7ac" (actor is rated ) say (rom C 2very lo+3 to A 2very "ig"3)according to its importance 2column 23 7ac" location is rated) say (rom C 2very lo+3 to C0 2very "ig"3) according to its merits on eac" c"aracteristic 2column G3 &"e (actor rating is multiplied 'y t"e location rating (or eac" (actor &"e sum o( t"e product yields t"e total rating score (or t"at location
Factor
&a< advantages Suita'ility o( la'or s!ills Pro<imity to customers Pro<imity to suppliers /de6uacy o( +ater ;eceptivity o( community 9uality o( educational system /ccess to rail and air transp$ Suita'ility o( climate
&otal
Fi<ed cost include e<penditure on land) 'uilding) mac"ines and ot"er e6uipments etc$ Operational costs are t"e e<penditure incurred on inputs) trans(ormation process and t"e distri'ution o( output$
&ota l cost s
A H G 2 C
Locations
Brea!:even C"art
La'or &ransportation
Material
Costs o( Facts
8olume o( Enits
Brea!:even C"art
B &otal / Costs D 7 C 8olume o( Output 7B C / D
Dimensional /nalysis
M/ MB L NC/CO NCBCO
C
NC/2O NCB2O
###$
2
NC/ nO NCB nO
If
Facility Layout
Layout are concerned +it" arrangement o( production) support) customer service and ot"er (acilities used in operation$
Facilities Layout
Product and material speci(ication Location and site o( t"e Plant Manu(acturing process Material 5andling Storage o( in:process inventory Plant personnel and employee (acilities
Service (acilities Design o( 'uilding Fle<i'ility or! areas and e6uipment or!ing conditions Disposal o( +aste and dangerous gases
Capacity Planning
Capacity is t"e rate o( productive capa'ility o( a (acility$ Capacity is usually e<pressed as volume o( output per time period$
Capacity Planning
Determination and ad.ustment o( t"e organi-ation*s a'ility to produce products and services to matc" customer demand
/ssessing e<isting capacity Forecasting capacity needs 4denti(ying alternative +ays to modi(y capacity 7valuating (inancial) economical) and tec"nological capacity alternatives Selecting a capacity alternative most suited to ac"ieving strategic mission
Production planning and control is t"e organisation and planning o( t"e manu(acturing process$ 4t co:ordinates supply and movement o( materials and la'or) ensures economic and 'alanced utili-ation o( mac"ines and e6uipment as +ell as ot"er activities related +it" production to ac"ieve t"e desired manu(acturing results in terms o( 6uantity) 6uality) time and place$
;outing Sc"eduling Loading Programming Ordering Dispatc"ing Progressing or Follo+:up 4nventory Control
or! Study
or! study is simply t"e study o( +or!$ 4t is t"e analysis o( +or! into smaller parts (ollo+ed 'y rearrangement o( t"ese parts to give t"e same e((ectiveness at lesser cost$ 4t e<amines 'ot" t"e met"od and duration o( t"e +or! involved in a process$
Components o( Study
or!
Met"od Study
or! Measurement
Select t"e tas! 'e studied ;ecord t"e (acts /naly-e t"e (acts Measure t"e tas!s De(ine t"e met"ods and related time Maintain t"e +or!
Productivity
Productivity is t"e ratio 'et+een t"e amount produced and t"e amount o( resources used in t"e course o( production$ &"e resources may 'e any com'ination o( materials) mac"ines) men and space$
Productivity
Measuring Productivity
Productivity L organi-ation*s output o( products and services divided 'y its inputs &otal (actor ) Productivity La'or Productivity
)
Output "abor ' Capital ' Materials ' (nergy
4mproving Productivity
C$
2$ G$
La'or
Better 'asic education Better diet Better social in(rastructure li!e transportation and sanitation Better la'or utili-ation and motivation Steady and +ell:planned investments on e6uipment and its timely maintenance ;esearc" & Development Controlling o( t"e cost o( capital 7<ploitation o( ne+ 2in(ormation3 tec"nologies Etili-ation o( accumulated !no+ledge
Capital
Management
Productivity
Outputs P= Inputs
Measuring Productivity
Productivity : output0input
La'or Productivity
7<ample:
/ssume t+o +or!ers paint t+enty:(our ta'les in eig"t "ours: 4nputs: CI "ours o( la'or 22 +or!ers < J "ours3 Outputs: 2H painted ta'les
4s t"e productivity measure o( C$HC in t"e previous e<ample good or 'ad% Can*t tell +it"out a re(erence point Compare to previous measures 2e.g.: last +ee!3 or to anot"er 'enc"mar!
Can 'e used to compare a process*s productivity at a given time 2P23 to t"e same process* productivity at an earlier time 2PC3
P1 P 0 Growth Rate = P 0
Last +ee! a company produced CA0 units using 200 "ours o( la'or &"is +ee!) t"e same company produced CJ0 units using 2A0 048 units "ours o( la'or
188 hours 0:8 units P1 = = 8.91 units 3 hour 148 hours P P 8.91 8.94 Growth Rate = 1 0 = = 8.86 P 8.94 0 or a negative 67 growth rate
P 0 =
Productivity -)ample : /n automo'ile manu(acturer "as presented t"e (ollo+ing data (or t"e past t"ree years in its annual report$ /s a potential investor) you are interested in calculating yearly productivity and year to year productivity gains as one o( several (actors in your investment analysis$
3==@ <nit car sales -mployee s Rs ales 2'illions ;s3 %ost of ales 2'illions3 2)B00)00 0 CC2)000 3==? 2)H00)00 0 CCG)000 3==> 200H 200I 2)C00)00 0 CCA)000 200A ,abor Productivity Enit Car Sales,7mployee CJ$G 2H$C 2C$2
;sHK)00 0 ;sGK)00 0
;sHC)000
;sGJ)000
;sGG)000
;sG2)000 &otal Cost Productivity C$CK Pear:to:year 4mprovement H$2Q C$2I C$2H
C$IQ