is 3315: manufacturing systems part 1: the organisation of manufacturing firms –understand the...

IS 3315: Manufacturing Systems

Part 1: The organisation of Manufacturing firms– Understand the basic business processes

– understand the basic flows of information

– know the basic systems / sub systems implemented

– understand their linkages

Basic business processes

Processing orders

BuyingSelling

DesigningBuilding

Getting paidPaying

1 – Arrange these in sequence 2 – name proper departments

Basic flows of information

• Organisations are organised in a number of functional areas

• They collect and organise data to support their complementary missions

• they interact and collaborate in managing the organisation

Examples

• Finance: managing the cash flows, providing resources to the firm

• Marketing: promoting the firm and its products• Sales: selling the products; dealing with customers• Production: manufacture goods• These are broken down further into sub areas

Name some of these sub areas

Collaboration / Conflict between areas

• All areas of the firm must exchange info with the others (just like organisations must interact with the outside)

• divergence of viewpoints means there are opportunities for conflict

• managing same resources / using the same assets but with radically different goals

Describe situations involving these conflicts

Examples:

• Quality control versus production• Procurement versus production• Dealing with customer returns• Sales and accounting

Explain the underlying cause of these conflicts

Manufacturing Organisations

• Business Processes more complex• Lead time must be built into process of planning

for demand• Scheduling of resource use is more complex• productivity is a composite indicator which

measures many operators’ work together• the definition of productivity / the way it is

measured affects the results

Illustration

StocksRMQuality

Control

Preparation ovens

WP1cooling

WP2storage

W1W1

W2W2

W3W3

StocksFinishedGoods

Shipping

ChangingRooms

and RelatedFacilities

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Collaboration and Information

• Functional areas cannot collaborate if no information circulates

• first stage: people talk to one another• then exchange of documents• then develop integrated systems shared by several

functional areas / the whole firm• This requires the existence of common definitions

and reliable / undisputed sources of data• Also people must have incentives to collaborate

Reliable Common Grammar: Examples

• Sales statistics:– as per customer orders?– Goods sent?– what feed back time?

• Production figures:– after rejects– adjusted for loss / destruction in finished goods storage

• business analysts must talk to everyone to ensure existence of reliable common methods

Reliable / Undisputed sources of data

• Reliable mechanisms for data collection

• No room for controversy RE basic figures of the business

• Robust externally oriented systems for invoicing / paying

• Robust measures of individual / area performance for the purpose of assessment and rewarding

• Reliable systems for storage / processing / retrieval of data

• Archiving

Corresponding Information Systems

• The basic sub-systems are (see diagram):– payroll– order entry– inventory (goods for sales, raw material...)– shipping– accounts receivable– purchasing– receiving– accounts payable– general ledger

Describe each sub-system’s missions

Part 2: Resources and constraints in Manufacturing environments

• Goods are manufactured, not purchased• Demand must be counted or planned• Need RECIPES• activity must be planned for in advance• Resources must be allocated in advance

– raw materials

– Machine time

– competent personnel (shift work)

limiting / constraining factors}

Organisational Model

• Driven by sales?• Driven by production?• Driven by marketing?

• History of organisation and power structure determine which model is used

• Plan dictates what volumes must be produced• Everything else follows from there

Product matrix

Recipe or formula

• How to produce our products• List of components including possible substitutes• How much of each• Special conditions of operation• Expected yields and labour productivity (i.e.

standards)• Extrapolate a cost per unit• Stored in a Bill of Material (BOM)

Example: Bill of Material for desk

1 – List out the components2 – describe the steps required for assembly3 – arrange them in a possible manufacturing sequence

Screw Kit (1)

Desk

Top (1) Frame (1) Adjustable legs (4)

Painted metal legs (4)Painted tubing (4)

Long Tubes (2) Paint (1 dl)

Leg Tubes (4) Paint (0.6 dl)

Short Tubes (2)

Solution

3 way junctions (4)

Capacity

• Have limited capacity• Each unit of product requires a set time for each

operation• Planning for capacity means analysing the

requirement of all production runs for all products on all machines

• Also, machines must be manned by operators• and machines have down time

Scheduling Manufacturing Tasks

Based on desired production• determine quantities of RM to commit• schedule production runs (including sub-assemblies)• line up workers to operate the machines• Purchase required supplies

This is called the Master Schedule

Master schedule

• Issue for each week / day of production• aims at meeting the plan or the customers’ orders• allocate resources to all required activities• meeting of the key production people (end of

week or Monday mornings).• Also review the problems with previous runs• Some computer systems are required for these

tasks

Part 3: Data collection in the Factory

• Computer Integrated Manufacturing (CIM) environments requires that companies:

Know what they are doing• availability of data and quality of that data are key

elements• many different types of data must be collected• procedures must be put in place

– reliable– but not intrusive

Types of data

• Volume data (production)• consumption data (raw material, packaging…)• personnel data• maintenance data• time related measurements• productivity data• All form the basis of the calculations used to

monitor manufacturing activities

Type of data (2)

• Primary data:

• Secondary data or calculated data:

• High level data:

Data for monitoring activities

• Norm or budget is put together:• the more complete the model the more complete

the monitoring• measurement methods and procedures are also put

together• the structure of the budget tells you what data to

collect

Data acquisition

• Manual recording in a docket or other form (e.g. down time)

• Sampling / testing of RM or products

• collection and count of key part (e.g. shoulder blade)

• scales for weight measurement- computerised or not

• direct data entry in computer with infra-red beam (scanning) device (e.g. Dell)

• remote electronic tracking

• All these involve a trade-off between cost and accuracy and intrusiveness

Bad data recording

• No data!• Too costly - e.g. in equipment or time• not timely – feed back too slow• inaccurate (e.g. procedure not well designed)• Lack of operator training / understanding• wrong incentive / instructions given• lack of control - open to dishonesty

Data storage

• Series of ad-hoc systems manual and computer-based (spreadsheet, filed forms…)

• Dedicated databases for manufacturing data (QC, shipping etc…)

• Process Control Systems (technical parameters)• Other specialised proprietary systems• Entreprise Resource Planning (ERP) system

Using Manufacturing data• Operational data:

– volumes - schedule / re-schedule runs– labour report - line up workers for next days– quality of output

• Tactical data:– defect rates– productivity– Quality of RM

• Strategic data:– product mix information– Market research– turnover of staff Some soft information

is also required

Soft information

• Data collection - – Grapevine– factory tours (talking and observing)

• Data storage -– managers’ minds– special reports

• Data usage:– ad-hoc basis– decision making

Part 4: Developing the Dashboard of information

• Information cost• Information overload• Not all data can be / should be provided• Push versus pull model• For operational data => dashboard approach

– Concept of control room

– Analogy with process control or driving a car

– Focus on most important factors

CSF - Theory

• Definition:Limited number of areas where satisfactory results will

ensure successful competitive performance for the individual, the department or the firm

• Monitored on the basis of a set of measures - specific standards that allow the calibration of performance

• Measures can be soft or hard - ie: objective or subjective

CSF method diagram• Identification of a hierarchy of performance

measures that lead to identification of Critical Factors and Issues that will determine a business’ success

The business mission statement

The business vision statement

multiple business goals

multiple business objectives for each goal

multiple CSFs for each objective

Implications for IS:multiple business objectives for each goal

multiple CSFs for each objective

Monitoring and Control Systems

Central Database - Data Warehouse

Common Interface

IS #2 IS #4IS #3IS #1

Dashboard

Indicators

Sources of CSFs

• Industry• Competitive strategy and industry position

(leader / follower; big / small…)• Environmental factors (eg: economic fluctuations

and national government policies)• Temporal factors (temporary CSFs)• Managerial position (more specific to one

manager)

Classification of CSFs

• Internal versus external

• Monitoring versus Building / Adapting (eg: implementing of major corporate plan)

• Evolution over time - eg: motor industry

+ / - of the CSF technique

• Small number of CSFs• Managers normally aware of them - make them

explicit is possible• Specific to firm / dept / manager• But; not all CSFs are measurable at all (access to

data)• Known CSFs may be trivial• Time consuming to go beyond the obvious• Will managers make time for CSF analysis?

Dashboards of information

• A CSF analysis can be turned into a dashboard of info

• indication in real time of what is happening• Concentration on the most important + visual

impact (e.g. colour coding)• But data has to be very reliable and design of

interface must be good :– three mile island

Some Problems with 3 mile Island

• Layout of control not consistent with use of indicators• no consistency on where associated controls are situated

or how they operated• layout of controls did not reflect layout of plant• indicators and alarms were not sorted by degree of

importance• no consistency in use of colour• Cl: the layout of the dashboard and what indicators

represent (+ how they do it) requires much attention

About dashboard development

• Developing IS with decision making relevance is tricky

• Nature of management work means difficult to imagine generic features

• 1970 – 1980: focus on complex models borrowed from OR

• Managers need simple systems that save them time

The Control Room

• Monitoring complex processes through technology mediated systems

• Controlling without seeing directly• Not directly applicable to management (human

interaction component missing)• But useful anyway to measure performance in a

more complete fashion

Key issues for dashboard development

• Limited attention - selection of indicators (CSF)• Accurate performance measurement - methods used• Operator / user training - consensus / awareness• Dashboard layout - avoid confusion / be consistent

Framework for dashboard development

Question 1: Who will use this indicator?Question 2: Can it be mapped out to a specific objective at a higher level?Question 3: How frequently will managers need to monitor it?Question 4: What calculation methods? What unit of measurement?Question 5: What data source exists? What should be created?Question 6: How detailed should the analysis be? How can the indicators be broken down?Question 7: What threshold values should be used to differentiate between adequate and inadequate performance? What comparisons can be made to assess the company’s performance?Question 8: How can it be represented for maximum visual impact?Question 9: What action must be taken when good or bad performance is measured? Question 10: How will it be monitored / archived in the long termQuestion 11: Is there any potential bias with the methods and data used for calculations? What incentives may be given to organizational actors?

See handout

Example 1: Monitoring Maintenance

• Imagine down time is increasing

• don’t know enough to fix the problem

(1) collect appropriate data on accidents:– maintenance staff time sheets

– accident report for each problem - documented by operators

– match both sources of data

(2) store it in a suitable DB

(3) analyse based on a number of CSF

(4) present analysis in computer dashboard

CSF analysis for the maintenance

• Number of accidents per run (per unit / product)• Nature of accident (several categories to be found)• Location of accidents• Average duration of repair (for each assembly line)• Average duration of repair for each staff?• Average duration of repair for each type of accident• Mapping of when accidents happen• establish thresholds

Location (% of all accidents)

StocksRM

QualityControl

Preparation ovens

WP1cooling

WP2storage

W1W1

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W3W3

StocksFinishedGoods

Shipping

ChangingRooms


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5%

10%8%

35%

3%

6%

3 - 3 - 15%

10%

Other Areas:2 %

Time spent (% of down time)

StocksRM

QualityControl

Preparation ovens

WP1cooling

WP2storage

W1W1

W2W2

W3W3

StocksFinishedGoods

Shipping

ChangingRooms


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5%

20%41%

8%

3%

4%

3 - 3 - 8%

5%

Other Areas:2 %

When accidents happen

0

10

20

30

6 - 7 7 - 8 8 - 9 9 - 10 10 - 11 11 - 12 12 - 14 14 - 15 15 - 16

Number of Accidents per time period

Who does what?

Name Job Title Nb Acc. Avg time Gravity

Steve Maint.Manager

27 1 hour 25 4.5

Martin Maint.Staff

35 1 hour 3

Bob Maint.Staff

18 2 hours 3

Mark App. 20 1 hour 1

Analysing the types of accidents

Proportion of acc. types

45%

20%

20%

15%

film jammachine faultran outOp. Error

Time spent per acc. type

20%

40%15%

25%film jammachine faultran outOp. Error

Conclusion on Maintenance

• Can’t show everything• Data should be collected, but choices must be

made for dashboard• Choices can be made based on:

– scope for improvement– development VS monitoring (hierarchy of CSFs)– preferences of managers

• Archives will show whether targets are achieved => new threshold values can be set

Example 2: sales figures

• Sales dashboard is a key tool:– Allocate responsibility for poor performance with more accuracy– Break down per product / market– Present both volumes, gross revenues and contribution figures

• Use colour coding to indicate where results are good or bad• Use sales maps for visual impact• Comparison with:

– Budget figures (e.g. weekly figures)– Competitors– Previous period– Same period previous year in case of seasonality

Electronic Products Ltd.

• Overall goal: Develop the dashboard for staff and management

• Follow the guidelines spelt out in the paper• Carry out a CSF analysis based on the case notes• Use the framework in table 1 to verify that you have

all angles covered

Computer-based dashboard

• Select design targets based on the case and your own preferences

• Develop a small data structure containing the data required for your dashboard (MS Access)

• Design the interface in VB• Package you prototype including a small sample of

dummy data• Submit your project on disk

– Be economical with the size of the components– Be careful that you give me all the files

Reading the case

Common goals of company (page 3):

• Customers are essential to the success of the business

• Survival of the business is paramount

Keeping the pioneering spirit alive

Critical success factors

• Price, quality, delivery and flexibility (page 3)• longer-term survival and success (page 3)• customer is king = can visit premices at any time (page 4)• everybody was responsible for his or her own work (page

4)• Reliance on Self-directed teams (page 4)

– planned their own work, set production and performance goals, and assumed complete responsibility for their tasks

• Reliance on free issuing’ of material to the company (page 4)

• Responsiveness /flexibility in responding to customers queries (page5)

• Profitability target = 10% (page 6)• Turnover growth target = 32% per annum (page 6)• Product mix (page 7)• sourcing jobs (pages 6 and 7)• Move back to profitable position (page 7)

Critical success factors (2)

Example: Profitability

Question 1: Who?Question 2: Can it be mapped out ?Question 3: How frequently

Question 4: What calculation methods? What unit of measurement?Question 5: What data source exists? What should be created?Question 6: How detailed should the analysis be? Question 7: What threshold values

Question 8: How can it be representedQuestion 9: What action must be taken when good or bad

performance is measured?Question 10: How will it be monitored / archived in the long termQuestion 11: Is there any potential bias with the methods and data used for

calculations? What incentives may be given?

Profitability• Q1: everyone but MD and key managers in priority• Q2: High level objective• Q3: 2 types – quarterly / annual – per job• Q4: revenues – costs : percentage of revenues• Q5: accounting systems have everything, but is there job accounting?• Q6: see Q2• Q7: case says 10% overall, but 30 – 50% per job• Q8: line overall and bar chart for jobs + pie chart for breakdown of costs

(cost structure)• Q9: not an easy one – selection of jobs is key (see page 6)• Q10: Try to stick to target / review each job + overheads• Q11: tendency to eliminate marginal jobs => reduce turnover too much =>

overheads no absorbed + potential loss of customer good will?

Other CSFs

• Empowering work teams• Measuring marketing efficiency (number of

customers approached VS contracts executed)• Monitoring the issue / use of goods• Measuring the speed and accuracy of response

(quotes VS actual job costings)• Quality• Customer satisfaction• ……..

Problems in the case• RM consumption at various stages

– price of RM

– comparison with budget = recipe

• labour cost on factory floor– where do they actually work?

– What are the tasks where productivity is lost?

• Packaging cost

• Quality of products– why are volumes not growing as fast anymore?

• Maintenance is not working

Overall method• More rigorous procedures for reporting and monitoring

• Set up a complete Budget framework

• Budget broken down per responsibility - e.g. buyers give prices, production gives productivity

• once a year = > budget put together– expected levels are put proposed by each area

– full report compiled (p/l for the year ahead)

– negotiated with top management

– final budget

– used to measure up everything that happens

General Indicators - monitoring the business

• Focus on three key indicators in comparison with budget to make it easier to analyse responsibilities:– volume V (Vb for budget and Va for actuals)– price P– formula F

• total variance = Va Pa Fa - Vb Pb Fb• volume variance = Va Pb Fb - Vb Pb Fb = (Va-Vb) Pb Fb• Price variance = Va Pa Fa - Va Pb Fa = (Pa - Pb) Va Fa• Formula variance = Va Pb Fa - Va Pb Fb = (Fa - Fb) Va Pb

Applies to the cost sideE.g. Pb Fbnote that total = tot var

Analysing the general indicators

• Volume variance :– breakdown per product / market / week

– also per rep?

– source: budget / weekly sales

– who? Sales Director and reps + regional supervisors + MD

– colour maps showing areas / markets

– threshold values determine colour

– volume and £ figure


• Price variance:– breakdown per RM / component + labour (for each

category) [focus on most expensive]

– buyers / production director + supervisors +personnel director

– source: budget figures + account payable / payroll

– Monthly probably enough (changes don’t occur that often)

– tables for detail + exception reporting using shape of RM that is causing the variance to be negative


• Formula variance:– per product / per RM + labout

– source: stock out sheets + production sheets (sales too late) + personnel hours

– some figures cannot be known exactly => use surrogate or estimate

– target: foremen, production staff and director

– gauges, colour map of the factory, colour coded £ signs

Specific indicators• Read in the case• do the same job as on the previous slides• try to find indicators of specific interest to some of the

managers described in the case• e.g. maintenance problem:

– collect data on all accidents (foremen)– store in db– provide statistics on how long it takes to re-start, how often certain

accidents occur, where...– ask maintenance staff to fill out time sheets– compare the two data sets– how would you present this?