Production

1
Production Operations Management

• Introduction
• History
• Manufacturing versus Service
• Production Process Structures
• Product/ Process Layouts

2
The Strategic Role of Ops

• A companys operations function is
• either a competitive weapon
• or
• a corporate millstone.
• It is seldom neutral. Skinner 69

3
The Process View of Ops

• By rethinking the IBM Austin assembly plant and
  introducing cells,
• distance traveled by a card was cut from 1.5
  miles to 200 yards
• floor space was reduced to half
• production tripled with about the same number of
  workers.
• Chicago Tribune, July 1992

4
What is a Process?
5
What is Operations Management?

• Management of business processes
• How to structure the processes and manage
  resources to develop the appropriate capabilities
  to convert inputs to outputs.
• What is appropriate?

6
What are appropriate capabilities?
An example A Supply Chain
The market your strategy determine criteria
for appropriate.
7
What defines a good process? Performance
Financial Measures

• Absolute measures
• revenues, costs, operating income, net income
• Net Present Value (NPV)
• Relative measures
• ROI, ROE
• ROA
• Survival measure
• cash flow

8
Product Attributes Process Capabilities

• Price (Cost) P
• Quality Q
• Customer service
• Product quality
• Time T
• Rapid, reliable delivery
• New product development
• Variety V
• Degree of customization

order winners
To deliver we need capabilities

9
History

• Industrial Revolution (1700-1820)
• Scientific Management (1830-1915)
• Babbage, Taylor, Gilbreths, Ford
• Human Relations (1927)
• Gilbreths

10
History

• Operations Research/ Mgmt. Science (1915-1940)
• EOQ, QC tools, Queuing theory, OR
• Computers in OM (1945)
• Japanese impact
• Service and environment (1980)

11
Linking the strategic role process view
12
Wal-Mart

• Corporate Strategy
• (Gain competitive advantage by) providing
  customers access to quality goods, when and where
  needed, at competitive prices

• Operations Structure
• Cross docking
• EDI
• Fast transportation system
• Focused locations
• Communication between retail stores

• Operations Strategy
• Short flow times
• Low inventory levels

13
Wal-Mart (Resulting Benefits)

• Inventory at retail stores turned over twice a
  week (Industry averages once every two weeks)
• Improved targeting of products to markets
• Sales per square foot increased from 102 in 1985
  to 140 in 1991 (Industry average increased from
  102 to 110)

14
Manufacturing versus Service

15
Factors Affecting Process Choice

• Expected volume and demand patterns
• Variety
• Made to stock/ Made to order
• Physical characteristics

16
Product Process Structures

• Flow processes
• All products require the same type of processes
  (flow)
• Continuous paper, chemical, petroleum, etc.
• Discrete assembly lines - automobiles,
  electronics, etc.
• Batch printing, clothing, etc.

17
Flow processes - Advantages
18
Flow processes - Disadvantages
19
Product Process Structures

• Job-Shop Processes
• Several products require different processes and
  in different sequence
• Made to order
• Colleges, department stores, hospitals, etc.

20
Job shop - Advantages
21
Job shops - Disadvantages
22
Product Process Structures...

• Projects
• One of a kind
• Construction, consulting services, software, etc.

23
Product/ Process Layouts

• Product
• tasks are performed at workstations in sequential
  order
• televisions, automobiles, student hospitals
• Functional (Process)
• equipment of similar processes grouped together
• job shops, tailors, universities

24
Product/ Process Layouts

• Functional Focus
• Product Focus

Product 1
A
B
Product 2
C
D
resource pool (e.g., X-ray dept, billing)
Product 1
A
D
B
Product 2
C
B
A
25
Classification of Orders

• Make to Stock
• Make to Order

26
Product - Process Matrix Manufacturing

• Product volume/ variety process
• Strategic planning
• Is firm using correct process?

27
Product-Process Matrix
28
Service-Process Matrix

• Customer/server contact vs. standardization/variet
  y of services
• Decoupling activities from customers
• Form of service
• Operations and sales functions

29
Service - Process Matrix