opm basics v0.4 summary
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BAJJonker Operations Management Basics 1
Bernoud A.J. Jonker MBA
OPERATIONS
MANAGEMENTBASICS
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OPERATIONS MANAGEMENTObjectives
Objectives of this lecture are to introduce OperationsManagement its place and connections withinorganisation and some important concepts:
Efficiency
Batch production Quality
Customer Order Decouple Point
Process layout
Production Planning
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1OPERATIONS
MANAGEMENTBASICS
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OPERATIONS MANAGEMENTIntroduction
What is Operations?
How does the role of Operationsrelate to other functional areas?
What Operations Managementconcepts do you know?
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Operations can be defined as a transformationprocess where e. g. materials, labour is transformedinto e.g. goods, services
OPERATIONS MANAGEMENTWhat is Operations?
I NPUTMaterialMachinesLabourEnergy
ManagementCapital
OUTPUTGoods
Services
Feedback Feedback
Requirements
OPERATIONS
1
2
3
4
5
Source: Russel & Taylor, 2009
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OPERATIONS MANAGEMENTTransformation processes
Transformation
can be:
Physical
Locational
Exchange Physiological
Psychological
Informational
Example:
- Manufacturing operations
- Transportation/warehousing
- Retail
- Health care
- Entertainment
- Communication
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OPERATIONS MANAGEMENTStrategic planning hierarchy
Mission andVision
CorporateStrategy
Voice of theBusiness
Operations
Strategy
Marketing
Strategy
Financial
Strategy
Voice of theCustomer
Source: Russell & Taylor, 4th Edition, 2003
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OPERATIONS MANAGEMENTSupply Chain perspective
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Transformationprocess
Supply side Demand side
Tier 3suppliers Tier 2suppliers Tier 1suppliers Warehouses/Wholesale Retail Customers
Supply Chain
Source: David Barnes, 2008
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OPERATIONS MANAGEMENTOperations within organisation
Generalmanagement
Market ing Operat ions FinanceHuman
Resources
Generalmanagement
Market ing Operat ions FinanceHuman
Resources
AvailabilityLead time
Sales forecastCustomer orders
BudgetsCost analysis
Production- andinventory data
Job designEmployee evaluation
Hiring/firingTraining
Source: Own compilation
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OPERATIONS MANAGEMENTProductivity and Competitiveness
Productivity = ratio of output to input
Output Output
Productivity = ------------- = -----------------
input Labour
Competitiveness = degree to which an countriescan produce goods and services that meet the test of
international markets.
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OPERATIONS MANAGEMENTProduction process selection
Projects
High
High
LowLow
Volum
e
Standardisation
Batchproduction
Mass
production
Continuousproduction
Production of oil, electricity,paper, steel, foodstuffs.
Production of automobiles,televisions, personal
computers, fast food.
Machine shops, bakeries,education, furniture making.
Building ship, rock concert,development new product.
Examples
Source: Russel & Taylor, 2009
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THE OPERATING SYSTEMCustomer-order-decoupling-point
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Supplier
C
ustomer
The logistic chainmake-to-stock
assemble-to-order
make-to-order
design-to-order
Source: Own compilation
Operations Management, an international perspective
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OPERATIONS MANAGEMENTCustomer-order-decouple-point
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Ship buildingindustry
Car buildingindustry
Manyindustries
Make-to-order Assemble-to-order Make-to-stock
Examples from manufacturing industry
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OPERATIONS MANAGEMENTDifferent layout types
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Process layout Product layout
Fixed position layout Hybrid layout
Adopted from: Russel & Taylor, 2009
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OPERATIONS MANAGEMENTLine balancing
Flow time = 4 + 4 + 4 = 12
Cycle time = max{ 4, 4, 4} = 4
Idle time = 0
Balance delay = 0
Flow time = 3 + 4 + 3 = 10
Cycle time = max{3, 4, 3} = 4
Idle time = 1
Balance delay = 2
21 34 minutes 4 minutes 4 minutes
21 33 minutes 4 minutes 3 minutes
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OPERATIONS MANAGEMENTThe supply chain
Supplier Manufact urer Wholesale Cust omer
Purchasing
Physical distribution
Production
Retailing
Supply chain
Reverse logistics
Source: Own compilation
Retail
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OPERATIONS MANAGEMENTInformation in the supply chain
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Supplier Manufacturer Ret ail Cust omer
EDI EDI EDI
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OPERATIONS MANAGEMENTPlanning hierarchy
Operations planning hierarchy:
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Forecasting
Planning
Scheduling
Input from sales/marketing incombination with historic data
Input from forecasting in combinationwith rough capacity calculations
Input from planning in combination
with machine capacity calculations
Source: own compilation
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OPERATIONS MANAGEMENTLevels of scheduling
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Make-to-stock Assemble-to-order Make-to-order
Master schedulefinished products
Master schedulemajor subassemblies
or modules
Master schedulecomponents or
materials
Source: Russell & Taylor, 2009, p. 652
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LEAN MANUFACTURINGReduction of lead time
Lead time is typically made up of four components:
Waiting time, reduce or eliminate
Moving time, reduce by shorter distances
Set-up time, reduce by smart set-up
Processing time, reduce by increasing speed
Storage Transportation Set-up machine Production Storage
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OPERATIONS MANAGEMENTInventory management elements
Raw mat erial buf fers: to cover for variations insuppliers deliveries;
buffer inventories: so that production can runsmoothly in case of temporary machine breakdowns,or other work stoppages.
Finished goods invent ories: to cover forfluctuations in demand and work stoppage.
Raw material In-processbuffer
Productionstep 2
Finished productProductionstep 1
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PLANNING AND SCHEDULINGEconomic order quantity models
Reorder point, R
Order quantity, Q
Inventory level
Time
Orderplaced Orderreceived
Leadtime
Orderplaced Orderreceived
Leadtime
Demand rate
The I nvent ory Order Cycle
Source: Russell & Taylor, 2009
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OPERATIONS MANAGEMENTEvolution of quality management
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Quality inspection
Quality Control
Quality Assurance
Total Quality
Management
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OPERATIONS MANAGEMENTIntegrated overview
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General Management
Finance
Marketing
Human Resource Management
Operations
Integrating allfunctional areas
BudgetsCost analysis
Production- and
inventory data
Availability
Lead timeSales forecast
Customer orders
Job designEmployeeevaluation
Hiring/firingTraining
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OPERATIONS MANAGEMENTIssues and trends in Operations
Globalisation of markets, sourcing, operations
Virtual companies
Greater choice more individualism
Emphasis on service
Speed and flexibility Supply chains
C(ollaborative)-commerce
Technological advances
Knowledge Environmental and social responsibilities
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