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6616618-Production-Operation-Management.doc
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MODULE 1
MODULE 1
Introduction
Production and operations management (POM) is the management of an organizations 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
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 firms 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 products 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 managements expectations
When there is a difference, management must take corrective action to maintain control of the systemWhat is Operations Management?
Defined Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firms primary products and services
The Future of Operations Outsourcing everything
Smart factories
Talking inventory
Industrial army of robots
Whats in the box
Mass customization
Personalized recommendations
Sign here, pleaseOperations 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
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 firms profit.The Basics of Operations Management
Operations Management The process of managing the resources that are needed to produce an organizations goods and services.
Operations managers focus on managing the five Ps of the firms 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.
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.Mass Customization
Designing, producing, and delivering customized products to customers for at or near the cost and convenience of mass-produced items. Mass customization combines high production volume with high product variety. Elements of mass customization: Modular product design
Modular process design
Agile supply networksContinuous Production Processes
A production process, such as those used by chemical plants or refineries, that runs for very long periods without the start-and-stop behavior associated with intermittent production. Enormous capital investments are required for highly automated facilities that use special-purpose equipment designed for high volumes of production and little or no variation in the type of outputs.
Mass Production System (Flow)Continuous Production
Anticipation of demand
May not have uniform production
Standardized Raw material
Big volume of limited product line
Standard facility- high standardization.
Fixed sequence of operation
Material handling is easier
High skilled operator not required
More Human problem is foreseen
Huge investment.
High raw material inventory.
Processing Production System Extended form of mass production system
F.G of one stage is fed to next stage
More automatic machines
One basic raw material is transferred into several products at several stages.
Less highly skilled workers required
More human problems foreseen
Highly standardized system
Batch Production System
Highly specialized Human resource is required
Highly specialized multi tasking machines
Machines are shared.
Production in batches
Production lots are based on customer demand or order.
No single sequence of operation
Finished goods are heterogeneous
Custom built / job order production system
Highly specialized Human resource is required
Highly specialized multi tasking machines
Machines are shared
Raw material is not standardized
Process is not standardized
No scope for repetition of production
Comparative study of different production systems
Type
ParameterMass/ FlowProcessJobBatch
Per unit manf.costHighLowHighHigh
Size &
Capital Invest.Large
LessV. Large
HighSmall
LowMedium
High
FlexibilityNoNoMoreMore
Technical ability SkillsLessLessHighHigh
Orgn. StructureLine staffLine staffFunctionalFunctional
Industrial applicationAutomobile
Sugar
RefineryChemical
Petroleum
Milk proces.Construction
Bridges
SPMConsumer prod.
M/c. Tools
Competitiveness, Strategy, and ProductivityCompetitiveness:
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
Businesses Compete Using Marketing
Identifying consumer wants and needs
Pricing
Advertising and promotion
Businesses Compete Using Operations
Product and service design
Cost
Location
Quality
Quick response
Businesses Compete Using Operations
Flexibility
Inventory management
Supply chain management
Service
Why Some Organizations Fail Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities
Failing to recognize competitive threats
Neglecting operations strategy
Why Some Organizations Fail
Too much emphasis in product and service design and not enough on improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications
Failing to consider customer wants and needs
Strategy Strategies
Plans for achieving organizational goals
Mission
The reason for existence for an organization
Mission Statement
Answers the question What business are we in?
Goals
Provide detail and scope of mission
Tactics
The methods and actions taken to accomplish strategies
Strategy and Tactics Distinctive CompetenciesThe special attributes or abilities that give an organization a competitive edge. Price
Quality
Time
Flexibility
Service
Location
Operations Strategy
Operations strategy The approach, consistent with organization strategy, which is used to guide the operations function.
Strategy Formulation
Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners
Strategy Formulation
Order qualifiers
Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase
Order winners
Characteristics of an organizations goods or services that cause it to be perceived as better than the competition
Key External Factors
Economic conditions
Political conditions
Legal environment
Technology
Competition
Markets
Key Internal Factors Human Resources
Facilities and equipment
Financial resources
Customers
Products and services
Technology
Suppliers
Quality and Time Strategies Quality-based strategies
Focuses on maintaining or improving the quality of an organizations products or services
Quality at the source
Time-based strategies
Focuses on reduction of time needed to accomplish tasks
Operations Strategy and Competitiveness Operations Strategy
A Framework for Operations Strategy
Meeting the Competitive Challenge
Productivity Measurement
Operations Priorities Cost
Quality
Delivery Speed (Also, New Product Introduction Speed)
Delivery Flexibility
Greenness
Delivery Reliability
Coping with Changes in Demand
Other Product-Specific Criteria
OPERATIONS STRATEGY OBJECTIVES
TRANSLATE MARKET REQMTS TO SPECIFIC OPERATIONS PRIMARY MISSIONS
ASSURE OPERATIONS IS CAPABLE TO ACCOMPLISH PRIMARY MISSION.1) SEGMENT MARKET BY PRODUCT GROUPS
2) IDENTIFY PRODUCT REQUIREMENTS
3) DETERMINE ORDER WINNERS AND QUALIFIERS
4) CONVERT ORDER WINNERS INTO SPECIFIC PERFORMANCE REQMTS
Elements of operation strategy
Positioning the production systemA. Product Focused
B. Process Focused
Product / Service plans
Out sourcing plans
Process technology plans
Strategic allocation of resources
Facility plans *Capacity plans
*Location
*Layout
Productivity
A measure of the effective use of resources, usually expressed as the ratio of output to input Productivity ratios are used for Planning workforce requirements Scheduling equipmentfinancial analysis
MIT Commission on Industrial Productivity1985 Recommendations - Still Very Accurate Today Less emphasis on short-term financial payoffs and invest more in R&D.
Revise corporate strategies to include responses to foreign competition.
greater investment in people and equipment
Knock down communication barriers within organizations and recognize mutuality of interests with other companies and suppliers.
MIT Commission on Industrial Productivity1985 Recommendations Recognize that the labor force is a resource to be nurtured, not just a cost to be avoided.
Get back to basics in managing production/ operations.
Build in quality at the design stage.
Place more emphasis on process innovations rather than focusing sole attention on product innovations - dramatically improve costs, quality, speed, & flex.
U. S. Competitiveness Drivers
Product/Service Development - NPD
Teams speed development and enhance manufacturability
Waste Reduction (LEAN/JIT Philosophy)
WIP, space, tool costs, and human effort
Improved Customer-Supplier Relationships
Look for Win-Win! Taken from Japanese Keiretsu
Early Adoption of IT Technology Including
PC Technology WWW - ERPS
Productivity
Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)
Other Factors Affecting Productivity Standardization
Quality
Use of Internet
Computer viruses
Searching for lost or misplaced items
Scrap rates
New workers
Safety
Shortage of IT workers
Layoffs
Labor turnover
Design of the workspace
Incentive plans that reward productivity
Improving Productivity Develop productivity measures
Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish reasonable goals
Get management support
Measure and publicize improvements
Dont confuse productivity with efficiency MODULE 2Typical Phases of Product Development Planning
Concept Development
System-Level Design
Design Detail
Testing and Refinement
Production Ramp-up
Economic Analysis of Project Development Costs
Using measurable factors to help determine:
Operational design and development decisions
Go/no-go milestones Building a Base-Case Financial Model
A financial model consisting of major cash flows
Sensitivity Analysis for what if questions
Designing for the Customer: Quality Function Deployment Interventional teams from marketing, design engineering, and manufacturing
Voice of the customer
House of Quality Designing for the Customer: Value Analysis/Value Engineering Achieve equivalent or better performance at a lower cost while maintaining all functional requirements defined by the customer Does the item have any design features that are not necessary?
Can two or more parts be combined into one?
How can we cut down the weight?
Are there nonstandard parts that can be eliminated?
Design for Manufacturability
Traditional Approach
We design it, you build it or Over the wall
Concurrent Engineering
Lets work together simultaneously
Design for Manufacturing and Assembly Greatest improvements related to DFMA arise from simplification of the product by reducing the number of separate parts: During the operation of the product, does the part move relative to all other parts already assembled?
Must the part be of a different material or be isolated from other parts already assembled? Must the part be separate from all other parts to allow the disassembly of the product for adjustment or maintenance?
Product Design Standard parts
Modular design
Highly capable production systems
Concurrentengineering
Process Design Small lot sizes
Setup time reduction
Manufacturing cells
Limited work in process
Quality improvement
Production flexibility
Little inventory storage
Production Flexibility Reduce downtime by reducing changeover time
Use preventive maintenance to reduce breakdowns
Cross-train workers to help clear bottlenecks
Use many small units of capacity
Use off-line buffers
Reserve capacity for important customers
Quality Improvement Autonomation
Automatic detection of defects during production Jidoka
Japanese term for autonomation
Personnel/Organizational Elements Workers as assets
Cross-trained workers
Continuous improvement
Cost accounting
Leadership/project management
Manufacturing Planning and Control
Level loading
Pull systems
Visual systems
Close vendor relationships
Reduced transaction processing
Preventive maintenance
Pull/Push Systems Pull system: System for moving work where a workstation pulls output from the preceding station as needed. (e.g. Kanban) Push system: System for moving work where output is pushed to the next station as it is completed
Kanban Production Control System Kanban: Card or other device that communicates demand for work or materials from the preceding station Kanban is the Japanese word meaning signal or visible record Paperless production control system Authority to pull, or produce comes from a downstream process.
Kanban Formula
N = Total number of containersD = Planned usage rate of using work centerT = Average waiting time for replenishment of parts plus average production time for a container of partsX = Policy variable set by management - possible inefficiency in the systemC = Capacity of a standard container
Product and Service Design
Major factors in design strategy Cost
Quality
Time-to-market
Customer satisfaction
Competitive advantageProduct and service design or redesign should be
closely tied to an organizations strategy
Product or Service Design Activities Translate customer wants and needs into product and service requirements
Refine existing products and services
Develop new products and services
Formulate quality goals
Formulate cost targets
Construct and test prototypes
Document specificationsReasons for Product or Service Design Economic
Social and demographic
Political, liability, or legal
Competitive
Technological
Objectives of Product and Service Design Main focus
Customer satisfaction Secondary focus
Function of product/service
Cost/profit
Quality
Appearance
Ease of production/assembly
Ease of maintenance/service
Designing For Operations
Taking into account the capabilities of the organization in designing goods and servicesLegal, Ethical, and Environmental Issues Legal
Product liability
Uniform commercial code Ethical
Releasing products with defects Environmental
EPA Regulations & Legal Considerations
Product Liability - A manufacturer is liable for any injuries or damages caused by a faulty product. Uniform Commercial Code - Products carry an implication of merchantability and fitness.
Standardization Standardization
Extent to which there is an absence of variety in a product, service or process Standardized products are immediately available to customers
Advantages of Standardization Fewer parts to deal with in inventory & manufacturing
Design costs are generally lower
Reduced training costs and time
More routine purchasing, handling, and inspection procedures
Orders fallible from inventory
Opportunities for long production runs and automation
Need for fewer parts justifies increased expenditures on perfecting designs and improving quality control procedures.Disadvantages of Standardization Designs may be frozen with too many imperfections remaining.
High cost of design changes increases resistance to improvements.
Decreased variety results in less consumer appeal.
Mass customization:
A strategy of producing standardized goods or services, but incorporating some degree degree of customization
Delayed differentiation
Modular design
Delayed Differentiation Delayed differentiation is a postponement tactic
Producing but not quite completing a product or service until customer preferences or specifications are known
Modular DesignModular design is a form of standardization in which component parts are subdivided into modules that are easily replaced or interchanged. It allows:
easier diagnosis and remedy of failures
easier repair and replacement
simplification of manufacturing and assembly
Reliability Reliability: The ability of a product, part, or system to perform its intended function under a prescribed set of conditions
Failure: Situation in which a product, part, or system does not perform as intended
Normal operating conditions: The set of conditions under which an items reliability is specified
Improving Reliability Component design
Production/assembly techniques
Testing
Redundancy/backup
Preventive maintenance procedures
User education
System design
Product Design
Product Life Cycles
Robust Design
Concurrent Engineering
Computer-Aided Design
Modular Design
Robust Design: Design that results in products or services that can function over a broad range of conditions
Taguchi Approach Robust Design
Design a robust product
Insensitive to environmental factors either in manufacturing or in use. Central feature is Parameter Design. Determines:
factors that are controllable and those not controllable
their optimal levels relative to major product advances
Degree of Newness Modification of an existing product/service
Expansion of an existing product/service
Clone of a competitors product/service
New product/service
Degree of Design Change
Type of Design ChangeNewness of the organizationNewness to the market
ModificationLowLow
ExpansionLowLow
CloneHighLow
NewHighHigh
Phases in Product Development Process1. Idea generation
2. Feasibility analysis
3. Product specifications
4. Process specifications
5. Prototype development
6. Design review
7. Market test
8. Product introduction
9. Follow-up evaluation
Reverse EngineeringReverse engineering is the dismantling and inspecting of a competitors product to discover product improvements.
Research & Development (R&D)
Organized efforts to increase scientific knowledge or product innovation & may involve: Basic Research advances knowledge about a subject without near-term expectations of commercial applications.
Applied Research achieves commercial applications.
Development converts results of applied research into commercial applications.
Manufacturability
Manufacturability is the ease of fabrication and/or assembly which is important for:
Cost
Productivity
Quality
Designing for Manufacturing Beyond the overall objective to achieve customer satisfaction while making a reasonable profit is:
Design for Manufacturing (DFM)
The designers consideration of the organizations manufacturing capabilities when designing a product.
The more general term design for operations encompasses services as well as manufacturing
Concurrent Engineering
Concurrent engineering is the bringing together of engineering design and manufacturing personnel early in the design phase.
Computer-Aided Design Computer-Aided Design (CAD) is product design using computer graphics.
increases productivity of designers, 3 to 10 times
creates a database for manufacturing information on product specifications
provides possibility of engineering and cost analysis on proposed designs
Product design Design for manufacturing (DFM)
Design for assembly (DFA)
Design for recycling (DFR)
Remanufacturing
Design for disassembly (DFD)
Robust design
Recycling Recycling: recovering materials for future use
Recycling reasons
Cost savings
Environment concerns
Environment regulations
Service Design Service is an act
Service delivery system
Facilities
Processes
Skills
Many services are bundled with products Service design involves
The physical resources needed
The goods that are purchased or consumed by the customer
Explicit services
Implicit services
Service Something that is done to or for a customer Service delivery system The facilities, processes, and skills needed to provide a service Product bundle
The combination of goods and services provided to a customer Service package
The physical resources needed to perform the service
Differences between Product and Service Design Tangible intangible
Services created and delivered at the same time
Services cannot be inventoried
Services highly visible to customers
Services have low barrier to entry
Location important to service
Phases in Service Design Conceptualize
Identify service package components
Determine performance specifications
Translate performance specifications into design specifications
Translate design specifications into delivery specifications
Service Blueprinting Service blueprinting
A method used in service design to describe and analyze a proposed service A useful tool for conceptualizing a service delivery system
Major Steps in Service Blueprinting Establish boundaries
Identify steps involved
Prepare a flowchart
Identify potential failure points
Establish a time frame
Analyze profitability
Characteristics of Well Designed Service Systems Consistent with the organization mission
User friendly
Robust
Easy to sustain
Cost effective
Value to customers
Effective linkages between back operations
Single unifying theme
Ensure reliability and high quality
Challenges of Service Design Variable requirements
Difficult to describe
High customer contact
Service customer encounter
Quality Function Deployment Quality Function Deployment
Voice of the customer
House of qualityQFD: An approach that integrates the voice of the customer into the product and service development process.
Operations Strategy1. Increase emphasis on component commonality
2. Package products and services
3. Use multiple-use platforms
4. Consider tactics for mass customization
5. Look for continual improvement
6. Shorten time to market
Shorten Time to Market1. Use standardized components
2. Use technology
3. Use concurrent engineering
Process Selection Variety
How much
Flexibility
What degree
Volume
Expected output
Process Types Job shop
Small scale Batch
Moderate volume Repetitive/assembly line
High volumes of standardized goods or services Continuous
Very high volumes of non-discrete goods
Process designThe complete delineation and description of specific steps in the production process and the linkage among the steps that will enable the production system to produce products of the desired quality
required quantity
at required time
at the economical cost
Expected by the customer
Types of Process Project
Job Shop
Batch
Assembly line
ContinuousProduction Technology The method or Technique used in Converting the Raw material into SFG or FG Economically, Effectively and efficiently is termed as Production Technology.
The Selection of Technology
Time
Cost Type of Product Volume of production Expected Productivity Technical Complexity involved
Degree of Human skill required
Degree of Quality required
Availability of Technology
The Degree of Obsolescence expected.
MODULE 3Facility Planning Long range capacity planning,
Facility location
Facility layout
Strategic Capacity Planning
Defined Capacity can be defined as the ability to hold, receive, store, or accommodate.
Strategic capacity planning is an approach for determining the overall capacity level of capital intensive resources, including facilities, equipment, and overall labor force size.
Capacity Utilization Capacity utilization rate = Capacity used
Best operating level
Capacity used
rate of output actually achieved
Best operating level
capacity for which the process was designed
Example of Capacity Utilization During one week of production, a plant produced 83 units of a product. Its historic highest or best utilization recorded was 120 units per week. What is this plants capacity utilization rate?
Answer:
Capacity utilization rate = Capacity used .
Best operating level
= 83/120
=0.69 or 69%
Capacity Focus The concept of the focused factory holds that production facilities work best when they focus on a fairly limited set of production objectives.
Plants Within Plants (PWP) (from Skinner)
Extend focus concept to operating level
Capacity Flexibility
Flexible plants
Flexible processes
Flexible workers
Capacity Planning Frequency of Capacity Additions
External Sources of Capacity
Determining Capacity Requirements Forecast sales within each individual product line.
Calculate equipment and labor requirements to meet the forecasts.
Project equipment and labor availability over the planning horizon.
Example of Capacity RequirementsA manufacturer produces two lines of mustard, Fancy Fine and Generic line. Each is sold in small and family-size plastic bottles.
The following table shows forecast demand for the next four years.
Example of Capacity Requirements: Equipment and Labor Requirements
Three 100,000 units-per-year machines are available for small-bottle production. Two operators required per machine.
Two 120,000 units-per-year machines are available for family-sized-bottle production. Three operators required per machine.
Planning Service Capacity Time
Location
Volatility of Demand Capacity Utilization & Service Quality Best operating point is near 70% of capacity
From 70% to 100% of service capacity, what do you think happens to service quality?
Capacity Planning
Capacity is the upper limit or ceiling on the load that an operating unit can handle. The basic questions in capacity handling are:
What kind of capacity is needed?
How much is needed?
When is it needed?
Importance of Capacity Decisions
1. Impacts ability to meet future demands
2. Affects operating costs
3. Major determinant of initial costs
4. Involves long-term commitment
5. Affects competitiveness
6. Affects ease of management
7. Globalization adds complexity
8. Impacts long range planning
Capacity Design capacity
maximum output rate or service capacity an operation, process, or facility is designed for
Effective capacity
Design capacity minus allowances such as personal time, maintenance, and scrap
Actual output
rate of output actually achieved--cannot exceed effective capacity.
Efficiency and Utilization
Actual output
Efficiency =
Effective capacity
Actual output
Utilization =
Design capacity
Both measures expressed as percentages
Determinants of Effective Capacity
Facilities
Product and service factors
Process factors
Human factors
Operational factors
Supply chain factors
External factors
Strategy Formulation
Capacity strategy for long-term demand
Demand patterns
Growth rate and variability
Facilities
Cost of building and operating
Technological changes
Rate and direction of technology changes
Behavior of competitors
Availability of capital and other inputs
Key Decisions of Capacity Planning
1. Amount of capacity needed
2. Timing of changes
3. Need to maintain balance
4. Extent of flexibility of facilities
Capacity cushion extra demand intended to offset uncertainty
Steps for Capacity Planning1. Estimate future capacity requirements
2. Evaluate existing capacity
3. Identify alternatives
4. Conduct financial analysis
5. Assess key qualitative issues
6. Select one alternative
7. Implement alternative chosen
8. Monitor results
Make or Buy1. Available capacity
2. Expertise
3. Quality considerations
4. Nature of demand
5. Cost
6. Risk
Developing Capacity Alternatives 1. Design flexibility into systems
2. Take stage of life cycle into account
3. Take a big picture approach to capacity changes
4. Prepare to deal with capacity chunks
5. Attempt to smooth out capacity requirements
6. Identify the optimal operating level
Economies of Scale
Economies of scale
If the output rate is less than the optimal level, increasing output rate results in decreasing average unit costs
Diseconomies of scale
If the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs
Planning Service Capacity Need to be near customers
Capacity and location are closely tied
Inability to store services
Capacity must be matched with timing of demand
Degree of volatility of demand
Peak demand periods
Assumptions of Cost-Volume Analysis1. One product is involved
2. Everything produced can be sold
3. Variable cost per unit is the same regardless of volume
4. Fixed costs do not change with volume
5. Revenue per unit constant with volume
6. Revenue per unit exceeds variable cost per unit
Financial Analysis Cash Flow - the difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes.
Present Value - the sum, in current value, of all future cash flows of an investment proposal.
Calculating Processing Requirements
Location Planning and Analysis
Need for Location Decisions
Marketing Strategy
Cost of Doing Business
Growth
Depletion of Resources
Nature of Location Decisions
Strategic Importance
Long term commitment/costs
Impact on investments, revenues, and operations
Supply chains
Objectives
Profit potential
No single location may be better than others
Identify several locations from which to choose
Options
Expand existing facilities
Add new facilities
Move
Making Location Decisions Decide on the criteria
Identify the important factors
Develop location alternatives
Evaluate the alternatives
Make selection
Location Decision Factors
1. Regional Factors
Location of raw materials
Location of markets
Labor factors
Climate and taxes
2. Community Considerations
Quality of life
Services
Attitudes
Taxes
Environmental regulations
Utilities
Developer support
3. Multiple Plant Strategies Product plant strategy
Market area plant strategy
Process plant strategy
4. Site-related Factors Land
Transportation
Environmental
Legal
Comparison of Service and Manufacturing ConsiderationsManufacturing/DistributionService/Retail
Cost FocusRevenue focus
Transportation modes/costsDemographics: age,income,etc
Energy availability, costsPopulation/drawing area
Labor cost/availability/skillsCompetition
Building/leasing costsTraffic volume/patterns
Customer access/parking
Evaluating Locations Cost-Profit-Volume Analysis
Determine fixed and variable costs
Plot total costs
Determine lowest total costs
Location Cost-Volume Analysis Assumptions
Fixed costs are constant
Variable costs are linear
Output can be closely estimated
Only one product involved
Evaluating Locations
Transportation Model
Decision based on movement costs of raw materials or finished goods
Factor Rating
Decision based on quantitative and qualitative inputs
Center of Gravity Method
Decision based on minimum distribution costs
Facility Layout
Layout: the configuration of departments, work centers, and equipment, with particular emphasis on movement of work (customers or materials) through the systemImportance of Layout Decisions
Requires substantial investments of money and effort
Involves long-term commitments
Has significant impact on cost and efficiency of short-term operations
The Need for Layout Decisions
Basic Layout Types
Product layouts
Process layouts
Fixed-Position layout
Combination layouts
Basic Layout Types
Product layout
Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow
Process layout
Layout that can handle varied processing requirements
Fixed Position layout
Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed
Advantages of Product Layout
Advantages of Product Layout High rate of output
Low unit cost
Labor specialization
Low material handling cost
High utilization of labor and equipment
Established routing and scheduling
Routing accounting and purchasing
Disadvantages of Product Layout Creates dull, repetitive jobs
Poorly skilled workers may not maintain equipment or quality of output
Fairly inflexible to changes in volume
Highly susceptible to shutdowns
Needs preventive maintenance
Individual incentive plans are impractical
Advantages of Process Layouts
Can handle a variety of processing requirements
Not particularly vulnerable to equipment failures
Equipment used is less costly
Possible to use individual incentive plans
Disadvantages of Process Layouts
In-process inventory costs can be high
Challenging routing and scheduling
Equipment utilization rates are low
Material handling slow and inefficient
Complexities often reduce span of supervision
Special attention for each product or customer
Accounting and purchasing are more involved
Cellular Layouts
Cellular Production
Layout in which machines are grouped into a cell that can process items that have similar processing requirements
Group Technology
The grouping into part families of items with similar design or manufacturing characteristics
Functional vs. Cellular LayoutsDimensionFunctionalCellular
Number of moves between departmentsmanyfew
Travel distanceslongershorter
Travel pathsvariablefixed
Job waiting timesgreatershorter
Throughput timehigherlower
Amount of work in processhigherlower
Supervision difficultyhigherlower
Scheduling complexityhigherlower
Equipment utilizationlowerhigher
Other Service Layouts
Warehouse and storage layouts
Retail layouts
Office layouts
Design Product Layouts: Line Balancing
Line Balancing is the process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements.
Cycle TimeCycle time is the maximum time allowed at each workstation to complete its set of tasks on a unit.
Determine Maximum Output
Determine the Minimum Number of Workstations Required
Calculate Percent Idle Time
Efficiency = 1 Percent idle time
Designing Process LayoutsInformation Requirements:
1. List of departments
2. Projection of work flows
3. Distance between locations
4. Amount of money to be invested
5. List of special considerations
6. Location of key utilities
MODULE 4 (08 Hours)Capacity Management:Job Design, Ergonomics,
Methods Study and Work Measurement,
Employee Productivity,
Learning Curve, Short-term Capacity Planning
Aggregate planning and Capacity requirement planning
(Problems in Work Measurement and Short term Capacity Planning)
Design of Work Systems
Job Design, Ergonomics,
Methods Study and Work Measurement,
Employee Productivity,
Job Design
Job design involves specifying the content and methods of job
What will be done
Who will do the job
How the job will bob will be done
Where the job will be done
Ergonomics
Design of Work Systems
Specialization
Behavioral Approaches to Job Design
Teams
Methods Analysis
Motions Study
Working conditions
Job Design Success
Successful Job Design must be:
Carried out by experienced personnel with the necessary training and background
Consistent with the goals of the organization
In written form
Understood and agreed to by both management and employees
Specialization in Business: Advantages
Table 7.1
Disadvantages
Behavioral Approaches to Job Design
Job Enlargement
Giving a worker a larger portion of the total task by horizontal loading
Job Rotation
Workers periodically exchange jobs
Job Enrichment
Increasing responsibility for planning and coordination tasks, by vertical loading
Motivation and Trust
Motivation
Influences quality and productivity
Contributes to work environment
Trust
Influences productivity and employee-management relations
Teams
Benefits of teams
Higher quality
Higher productivity
Greater worker satisfaction
Self-directed teams
Groups of empowered to make certain changes in their work process
Methods Analysis
Methods analysis
Analyzing how a job gets done
Begins with overall analysis
Moves to specific details
Methods Analysis
The need for methods analysis can come from a number of different sources:
Changes in tools and equipment
Changes in product designor new products
Changes in materials or procedures
Other factors (e.g. accidents, quality problems)
Methods Analysis Procedure
1. Identify the operation to be studied
2. Get employee input
3. Study and document current method
4. Analyze the job
5. Propose new methods
6. Install new methods
7. Follow-up to ensure improvements have been achieved
Analyzing the Job
Flow process chart
Chart used to examine the overall sequence of an operation by focusing on movements of the operator or flow of materials
Worker-machine chart
Chart used to determine portions of a work cycle during which an operator and equipment are busy or idle
Motion Study
Motion study is the systematic study of the human motions used to perform an operation.
Motion Study Techniques
Motion study principles - guidelines for designing motion-efficient work procedures
Analysis of therbligs - basic elemental motions into which a job can be broken down
Micromotion study - use of motion pictures and slow motion to study motions that otherwise would be too rapid to analyze Charts
Developing Work Methods
1. Eliminate unnecessary motions
2. Combine activities
3. Reduce fatigue
4. Improve the arrangement of the workplace
5. Improve the design of tools and equipment
Working Conditions
Work Measurement
Standard time
Stopwatch time study
Historical times
Predetermined data
Work Sampling
Compensation
Time-based system
Compensation based on time an employee has worked during a pay period
Output-based (incentive) system
Compensation based on the amount of output an employee produces during a pay period
Form of Incentive Plan
Accurate
Easy to apply
Consistent
Easy to understand
Fair
Compensation
Individual Incentive Plans
Group Incentive Plans
Knowledge-Based Pay System
Management Compensation
Learning Curves
Learning curves: the time required to perform a task decreases with increasing repetitions
Learning Effect
Learning with Improvements
Applications of Learning Curves
1. Manpower planning and scheduling
2. Negotiated purchasing
3. Pricing new products
4. Budgeting, purchasing, and inventory planning
5. Capacity PlanningWorker Learning Curves
Cautions and Criticisms
Learning rates may differ from organization to organization
Projections based on learning curves should be viewed as approximations
Estimates based the first unit should be checked for valid times
At some point the curve might level off or even tip upward
Some improvements may be more apparent than real
For the most part, the concept does not apply to mass production
Aggregate Planning
Operations Planning Overview
The hierarchical planning process
Aggregate production planning
Examples: Chase and Level strategies
Operations Planning Overview
Long-range planning
Greater than three year planning horizon
Usually with yearly increments
Intermediate-range planning
1 to 3 years
Usually with monthly or quarterly increments
Short-range planning
One year
Usually with weekly increments
Hierarchical Production Planning
Aggregate Planning Goal: Specify the optimal combination of
production rate (units completed per unit of time)
workforce level (number of workers)
inventory on hand (inventory carried from previous period)
Product group or broad category (Aggregation)
Intermediate-range planning period: 6-18 months
Balancing Aggregate Demand and Aggregate Production Capacity
Key Strategies for Meeting Demand Chase
Level
Some combination of the two
STRATEGIES ACTIVE WRT DEMAND USE MARKETING TO SMOOTH DEMAND
EXAMPLES
PRICE
PRODUCT
PLACE
PROMOTION
Proactive Demand Management to Equate Supply and Demand
Proactive Demand Management to Equate Supply and Demand
Jason Enterprises Aggregate Planning Examples: Unit Demand and Cost Data
Capacity Planning
Capacity is the upper limit or ceiling on the load that an operating unit can handle.
The basic questions in capacity handling are:
What kind of capacity is needed?
How much is needed?
When is it needed?
Importance of Capacity Decisions
1. Impacts ability to meet future demands
2. Affects operating costs
3. Major determinant of initial costs
4. Involves long-term commitment
5. Affects competitiveness
6. Affects ease of management
7. Globalization adds complexity
8. Impacts long range planning
Capacity
Design capacity
maximum output rate or service capacity an operation, process, or facility is designed for
Effective capacity
Design capacity minus allowances such as personal time, maintenance, and scrap
Actual output
rate of output actually achieved--cannot exceed effective capacity.
Efficiency and Utilization
Actual output
Efficiency =
Effective capacity
Actual output
Utilization =
Design capacity
Both measures expressed as percentages
Efficiency/Utilization Example
Determinants of Effective Capacity
Facilities
Product and service factors
Process factors
Human factors
Operational factors
Supply chain factors
External factorsStrategy Formulation
Capacity strategy for long-term demand
Demand patterns
Growth rate and variability
Facilities
Cost of building and operating
Technological changes
Rate and direction of technology changes
Behavior of competitors
Availability of capital and other inputs
Key Decisions of Capacity Planning
1. Amount of capacity needed
2. Timing of changes
3. Need to maintain balance
4. Extent of flexibility of facilities
Capacity cushion extra demand intended to offset uncertainty
Steps for Capacity Planning
1. Estimate future capacity requirements
2. Evaluate existing capacity
3. Identify alternatives
4. Conduct financial analysis
5. Assess key qualitative issues
6. Select one alternative
7. Implement alternative chosen
8. Monitor results
Make or Buy
1. Available capacity
2. Expertise
3. Quality considerations
4. Nature of demand
5. Cost
6. Risk
Developing Capacity Alternatives
1. Design flexibility into systems
2. Take stage of life cycle into account
3. Take a big picture approach to capacity changes
4. Prepare to deal with capacity chunks
5. Attempt to smooth out capacity requirements
6. Identify the optimal operating level
Economies of Scale
Economies of scale
If the output rate is less than the optimal level, increasing output rate results in decreasing average unit costs
Diseconomies of scale
If the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs
Evaluating Alternatives
Evaluating Alternatives
Planning Service Capacity
Need to be near customers
Capacity and location are closely tied
Inability to store services
Capacity must be matched with timing of demand
Degree of volatility of demand
Peak demand periods
Cost-Volume Relationships
Cost-Volume Relationships
Cost-Volume Relationships
Break-Even Problem with Step Fixed Costs
Break-Even Problem with Step Fixed Costs
Assumptions of Cost-Volume Analysis
1. One product is involved
2. Everything produced can be sold
3. Variable cost per unit is the same regardless of volume
4. Fixed costs do not change with volume
5. Revenue per unit constant with volume
6. Revenue per unit exceeds variable cost per unit
Financial Analysis
Cash Flow - the difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes.
Present Value - the sum, in current value, of all future cash flows of an investment proposal.
Calculating Processing Requirements
MODULE 5(10 Hours)Materials Management:Scope of Materials Management, functions,
information systems for Materials Management,
Purchasing functions, Stores Management,
Inventory Management,
Materials requirement planning,
Just in Time (JIT) and Enterprise Resource Planning (ERP),
(Problems in Inventory Management and Vendor Selection)
Inventory Management
Inventory
Types of Inventory Items
Raw materials and purchased parts from outside suppliers.
Components: subassemblies that are awaiting final assembly.
Work in process: all materials or components on the production floor in various stages of production.
Finished goods: final products waiting for purchase or to be sent to customers.
Supplies: all items needed but that are not part of the finished product, such as paper clips, duplicating machine toner, and tools.
The Role of Inventory Management
Inventory Management
The process of ensuring that the firm has adequate inventories of all parts and supplies needed, within the constraint of minimizing total inventory costs.
Inventory Costs
Ordering (setup) costs
Acquisition costs
Holding (carrying) costs
Stockout costs
Inventory Costs
Ordering (Setup) Costs
The costs, usually fixed, of placing an order or setting up machines fora production run.
Acquisition Costs
The total costs of all units bought to fill an order, usually varying with the size of the order.
Inventory-Holding (Carrying) Costs
All the costs associated with carrying parts or materials in inventory.
Stockout Costs The costs associated with running out of raw materials, parts, or finished-goods inventory.
Basic Inventory Management Systems
ABC Inventory Management
Inventory is divided into three dollar-volume categoriesA, B, and Cwith the A parts being the most active (largest dollar volume).
Inventory surveillance concentrates most on checking the A parts to guard against costly stockouts.
The idea is to focus most on the high-annual-dollar-volume A inventory items, to a lesser extent on the B items, and even less on the C items.
Economic Order Quantity (EOQ)
Economic Order Quantity (EOQ)
An inventory management system based on a simple formula that is used to determine the most economical quantity to order so that the total of inventory and setup costs is minimized.
Assumptions:
Constant per unit holding and ordering costs
Constant withdrawals from inventory
No discounts for large quantity orders
Constant lead time for receipt of orders
The Economic Order Quantity Model
Controlling For Quality And Productivity
Quality
The extent to which a product or service is able to meet customer needs and expectations.
Customers needs are the basic standard for measuring quality
High quality does not have to mean high price.
ISO 9000
The quality standards of the International Standards Organization.
Total Quality Management (TQM)
A specific organization-wide program that integrates all the functions and related processes of a business such that they are all aimed at maximizing customer satisfaction through ongoing improvements.
Also called: Continuous improvement, Zero defects, Six-Sigma, and Kaizen (Japan)
Malcolm Baldridge Award
A prize created in 1987 by the U.S. Department of Commerce to recognize outstanding achievement in quality control management.
Inventory: a stock or store of goods
Types of Inventories
Raw materials & purchased parts
Partially completed goods called work in progress
Finished-goods inventories
(manufacturing firms) or merchandise (retail stores) Replacement parts, tools, & supplies
Goods-in-transit to warehouses or customers
Functions of Inventory
To meet anticipated demand
To smooth production requirements
To decouple operations
To protect against stock-outs
To take advantage of order cycles
To help hedge against price increases
To permit operations
To take advantage of quantity discounts
Objective of Inventory Control
To achieve satisfactory levels of customer service while keeping inventory costs within reasonable bounds
Level of customer service
Costs of ordering and carrying inventory
Effective Inventory Management
A system to keep track of inventory
A reliable forecast of demand
Knowledge of lead times
Reasonable estimates of
Holding costs
Ordering costs
Shortage costs
A classification system
Inventory Counting Systems
Periodic SystemPhysical count of items made at periodic intervals Perpetual Inventory System System that keeps track of removals from inventory continuously, thus monitoringcurrent levels of each item
Two-Bin System - Two containers of inventory; reorder when the first is empty
Universal Bar Code - Bar code printed on a label that hasinformation about the item to which it is attached
Key Inventory Terms
Lead time: time interval between ordering and receiving the order
Holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a year
Ordering costs: costs of ordering and receiving inventory
Shortage costs: costs when demand exceeds supply
ABC Classification System
Classifying inventory according to some measure of importance and allocating control efforts accordingly.
A - very importantB - mod. important
C - least important
Cycle Counting
A physical count of items in inventory
Cycle counting management
How much accuracy is needed?
When should cycle counting be performed?
Who should do it?
Economic Order Quantity Models
Economic order quantity model
Economic production model
Quantity discount model
Assumptions of EOQ Model
Only one product is involved
Annual demand requirements known
Demand is even throughout the year
Lead time does not vary
Each order is received in a single delivery
There are no quantity discounts
The Inventory Cycle
Total Cost
Cost Minimization Goal
Deriving the EOQ
Using calculus, we take the derivative of the total cost function and set the derivative (slope) equal to zero and solve for Q.
Minimum Total Cost
The total cost curve reaches its minimum where the carrying and ordering costs are equal.
Economic Production Quantity (EPQ)
Production done in batches or lots
Capacity to produce a part exceeds the parts usage or demand rate
Assumptions of EPQ are similar to EOQ except orders are received incrementally during production
Economic Production Quantity Assumptions
Only one item is involved
Annual demand is known
Usage rate is constant
Usage occurs continually
Production rate is constant
Lead time does not vary
No quantity discounts
Economic Run Size
Total Costs with Purchasing Cost
Total Costs with PD
Total Cost with Constant Carrying Costs
When to Reorder with EOQ Ordering
Reorder Point - When the quantity on hand of an item drops to this amount, the item is reordered
Safety Stock - Stock that is held in excess of expected demand due to variable demand rate and/or lead time.
Service Level - Probability that demand will not exceed supply during lead time.
Determinants of the Reorder Point
The rate of demand
The lead time
Demand and/or lead time variability
Stockout risk (safety stock)
Safety Stock
Reorder Point
Fixed-Order-Interval Model
Orders are placed at fixed time intervals
Order quantity for next interval?
Suppliers might encourage fixed intervals
May require only periodic checks of inventory levels
Risk of stockout
Fixed-Interval Benefits
Tight control of inventory items
Items from same supplier may yield savings in:
Ordering
Packing
Shipping costs
May be practical when inventories cannot be closely monitored
Fixed-Interval Disadvantages
Requires a larger safety stock
Increases carrying cost
Costs of periodic reviews
Single Period Model
Single period model: model for ordering of perishables and other items with limited useful lives
Shortage cost: generally the unrealized profits per unit
Excess cost: difference between purchase cost and salvage value of items left over at the end of a period
Continuous stocking levels
Identifies optimal stocking levels
Optimal stocking level balances unit shortage and excess cost
Discrete stocking levels
Service levels are discrete rather than continuous
Desired service level is equaled or exceeded
Operations Strategy
Too much inventory
Tends to hide problems
Easier to live with problems than to eliminate them
Costly to maintain
Wise strategy
Reduce lot sizes
Reduce safety stock
Economic Production Quantity
Material Requirement Planning and Just In Time
Material Requirements Planning Information System Inventory control & production planning
Schedules component items when they are needed - no earlier and no later
Contrast with order point replenishment systems
When to Use MRP Job shop production
Assemble-to-order
Any dependent demand environment
MRP Inputs & Outputs
Master Production Schedule
Toy Car
Assumption: wheel assembly is produced as a work-in-process item
Toy Car Product Structure Tree
Toy Car Production Schedule Example
Example Order Release Schedule
ItemNumberPeriod
Wheels283
Axles143
Wheel assembly145
Bodies62
Bodies84
Final assembly66
Final assembly88
Rules for Evaluating Toy Car Production Schedules Final product cannot ship before the required date
ASAP orders can ship as soon as done
Cost of 4 units for every week late on every car
For ASAP orders, credit of 4 for every week earlier than 5, charge of 4 for every week later than 5
Carrying cost of one unit for every part from the time it arrives until the final product ships
Carrying cost of one unit for every assembly operation from the time it is finished until the final product ships
Cost for Example Schedule
Master Production Schedule:
Toy Car Exercise
Car Production Schedule
Find the least cost order release and production schedule
Least Cost Production Schedule
For one car:
Wheels(4) and axles(2) wait 2 periods, wheel assemblies(2) and bodies wait one period: cost=15
For 10 ASAP cars add 40 (for 1 week later than target) to 150 to get 190
For 20 week 8 cars, cost is 300
Least cost total = 490
Real World MRP Inputs Bill of materials/ Product structure tree, lead times, costs (as in our exercise)
Existing inventory
Capacity
Lots sizes for efficient production
Equipment downtime
Other uncertainties
Capacity Requirements Planning (CRP) Computerized system that projects load from material requirements plan
Creates load profile
Identifies under-loads and over-loads
Capacity Requirements Planning: Inputs and outputs
Open Loop MRP (MRP I)
Matching Load to Capacity
Closed Loop MRP (MRP II)
Enterprise Resource Planning (ERP) Extension of MRP
Integrates information on all resources needed for running a business
Especially sales, purchasing, and human resources
Just-In-Time Like MRP aim is to minimize inventory
But people focus is different
MRP computer optimization
JIT empowerment of workers doing the job
And inventory technical approach is different
MRP push by computer schedule
JIT pull by need for replenishment as parts are used up
Experience (e.g. Toyota) favors JIT in many situations
Job shop vs repetitive
Video JIT implementation at Federal Signal
Specialty lights for emergency vehicles
During the video, make a list of JIT elements in two categories:
Technical stuff (e.g. use of Kanban system)
People stuff (e.g. worker ownership)
Pull system Production Control
Kanban - Visual Production Control Kanban maintains discipline of pull production
Kanban card moves with empty and full containers of parts
Production Kanban authorizes production
And contains production information
The Broader Sense of JIT Producing only what is needed, when it is needed
- eliminate all waste, not just unproductive inventory
An integrated management system.
JITs objective: Improve Profits and R.O.I
World Class cost, quality, delivery
Overlap with Quality Philosophies (e.g. TQM)
Some Examples of Waste Waiting for parts
Counting parts
Multiple inspections
Over-runs in production
Moving parts over long distances
Storing and retrieving inventory
Looking for tools
Machine breakdown
Rework
Effect of JIT on Workers Multifunction workers
Cross-training
New pay system to reflect skills variety
Teamwork
Suggestion system
MODULE 6
08 Hours)Production scheduling:Master Production scheduling, detailed scheduling,
facility loading sequencing operations,
priority sequencing techniques,
line balancing and line of balance (LOB),
(Problems in Priority sequencing, Johnsons rule and Line Balancing)
Scheduling
Scheduling: Establishing the timing of the use of equipment, facilities and human activities in an organization
Effective scheduling can yield
Cost savings
Increases in productivity
High-Volume Systems
Flow system: High-volume system with Standardized equipment and activities
Flow-shop scheduling: Scheduling for high-volume flow system
Scheduling Manufacturing Operations
High-Volume Success Factors
Process and product design
Preventive maintenance
Rapid repair when breakdown occurs
Optimal product mixes
Minimization of quality problems
Reliability and timing of supplies
Intermediate-Volume Systems
Outputs are between standardized high-volume systems and made-to-order job shops
Run size, timing, and sequence of jobs
Economic run size:
Scheduling Low-Volume Systems
Loading - assignment of jobs to process centers
Sequencing - determining the order in which jobs will be processed
Job-shop scheduling
Scheduling for low-volume systems with many variations in requirements
Gantt Load Chart
Gantt chart - used as a visual aid for loading and scheduling
Loading
Infinite loading
Finite loading
Vertical loading
Horizontal loading
Forward scheduling
Backward scheduling
Schedule chart
Sequencing
Sequencing: Determine the order in which jobs at a work center will be processed.
Workstation: An area where one person works, usually with special equipment, on a specialized job. Priority rules: Simple heuristics used to select the order in which jobs will be processed.
Job time: Time needed for setup and processing of a job.
Priority Rules
FCFS - first come, first served
SPT- shortest processing time
EDD - earliest due date
CR - critical ratio
S/O - slack per operation
Rush - emergency
Example 2
Two Work Center Sequencing
Johnsons Rule: technique for minimizing completion time for a group of jobs to be processed on two machines or at two work centers.
Minimizes total idle time
Several conditions must be satisfied
Johnsons Rule Conditions
Job time must be known and constant
Job times must be independent of sequence
Jobs must follow same two-step sequence
Job priorities cannot be used
All units must be completed at the first work center before moving to second
Johnsons Rule Optimum Sequence
1. List the jobs and their times at each work center
2. Select the job with the shortest time
3. Eliminate the job from further consideration
4. Repeat steps 2 and 3 until all jobs have been scheduled
Scheduling Difficulties
Variability in
Setup times
Processing times
Interruptions
Changes in the set of jobs
No method for identifying optimal schedule
Scheduling is not an exact science
Ongoing task for a manager
Minimizing Scheduling Difficulties
Set realistic due dates
Focus on bottleneck operations
Consider lot splitting of large jobs
Scheduling Service Operations
Appointment systems
Controls customer arrivals for service
Reservation systems
Estimates demand for service
Scheduling the workforce
Manages capacity for service
Scheduling multiple resources
Coordinates use of more than one resource
Cyclical Scheduling
Hospitals, police/fire departments, restaurants, supermarkets
Rotating schedules
Set a scheduling horizon
Identify the work pattern
Develop a basic employee schedule
Assign employees to the schedule
Service Operation Problems
Cannot store or inventory services
Customer service requests are random
Scheduling service involves
Customers
Workforce
Equipment
MODULE 7 (08 Hours)Quality Management:
Inspection and Quality control,
Statistical Quality Control Techniques
(Control Charts and acceptance sampling),
quality circles
Introduction to Total Quality Management (TQM),
(Problems in Control Charts)
Objectives To introduce the quality management process and key quality management activities
To explain the role of standards in quality management
To explain the concept of a software metric, predictor metrics and control metrics
To explain how measurement may be used in assessing software quality and the limitations of software measurement
Quality Control
Controlling For Quality And Productivity
Quality
The extent to which a product or service is able to meet customer needs and expectations.
Customers needs are the basic standard for measuring quality
High quality does not have to mean high price.
ISO 9000
The quality standards of the International Standards Organization.
Controlling For Quality And Productivity
Total Quality Management (TQM)
A specific organization-wide program that integrates all the functions and related processes of a business such that they are all aimed at maximizing customer satisfaction through ongoing improvements.
Also called: Continuous improvement, Zero defects, Six-Sigma, and Kaizen (Japan)
Malcolm Baldridge Award
A prize created in 1987 by the U.S. Department of Commerce to recognize outstanding achievement in quality control management.
Checklist 15.1How to Win a Baldridge Award
Is the company exhibiting senior executive leadership?
Is the company obtaining quality information and analysis?
Is the company engaging in strategic quality planning?
Is the company developing its human resources?
Is the company managing the entire quality process?
How does the company measure operational results?
Does the company exhibit a customer focus?
Quality Control Methods
Acceptance Sampling
a method of monitoring product quality that requires the inspection of only a small portion of the produced items.
Example of a Quality Control Chart
Commonly Used Tools for Problem Solving and Continuous Improvement
Fishbone Chart (or Cause-and-Effect Diagram) for Problems with Airline Customer Service
Pareto Analysis Chart
Phases of Quality Assurance
Inspection
How Much/How Often
Where/When
Centralized vs. On-site
Inspection Costs
Where to Inspect in the Process
Raw materials and purchased parts
Finished products
Before a costly operation
Before an irreversible process
Before a covering process
Examples of Inspection Points
Statistical Process Control: Statistical evaluation of the output of a process during production
Quality of Conformance:A product or service conforms to specifications
Control Chart
Control Chart
Purpose: to monitor process output to see if it is random
A time ordered plot representative sample statistics obtained from an on going process (e.g. sample means)
Upper and lower control limits define the range of acceptable variation
Statistical Process Control
The essence of statistical process control is to assure that the output of a process is random so that future output will be random.
Statistical Process Control
The Control Process
Define
Measure
Compare
Evaluate
Correct
Monitor results
Statistical Process Control
Variations and Control
Random variation: Natural variations in the output of a process, created by countless minor factors
Assignable variation: A variation whose source can be identified
Sampling Distribution
Normal Distribution
Control Limits
SPC Errors
Type I error
Concluding a process is not in control when it actually is.
Type II error
Concluding a process is in control when it is not.
Type I Error
Observations from Sample Distribution
Control Charts for Variables
Variables generate data that are measured.
Mean control charts
Used to monitor the central tendency of a process.
X bar charts
Range control charts
Used to monitor the process dispersion
R charts
Mean and Range Charts
Control Chart for Attributes
p-Chart - Control chart used to monitor the proportion of defectives in a process
c-Chart - Control chart used to monitor the number of defects per unit
Attributes generate data that are counted.
Use of p-Charts
When observations can be placed into two categories.
Good or bad
Pass or fail
Operate or dont operate
When the data consists of multiple samples of several observations each
Use of c-Charts
Use only when the number of occurrences per unit of measure can be counted; non-occurrences cannot be counted.
Scratches, chips, dents, or errors per item
Cracks or faults per unit of distance
Breaks or Tears per unit of area
Bacteria or pollutants per unit of volume
Calls, complaints, failures per unit of time
Use of Control Charts
At what point in the process to use control charts
What size samples to take
What type of control chart to use
Variables
Attributes
Run Tests
Run test a test for randomness
Any sort of pattern in the data would suggest a non-random process
All points are within the control limits - the process may not be random
Nonrandom Patterns in Control charts
Trend
Cycles
Bias
Mean shift
Too much dispersion
Process Capability
Tolerances or specifications
Range of acceptable values established by engineering design or customer requirements
Process variability
Natural variability in a process
Process capability
Process variability relative to specification
Process Capability Ratio
Improving Process Capability
Simplify
Standardize
Mistake-proof
Upgrade equipment
Automate
Limitations of Capability Indexes
1. Process may not be stable
2. Process output may not be normally distributed
3. Process not centered but Cp is used
Additional PowerPoint slides contributed by Geoff Willis, University of Central OklahomaStatistical Process Control (SPC)
Invented by Walter Shewhart at Western Electric
Distinguishes between
common cause variability (random)
special cause variability (assignable)
Based on repeated samples from a processEmpirical Rule
Control Charts in General
Are named according to the statistics being plotted, i.e., X bar, R, p, and c
Have a center line that is the overall average
Have limits above and below the center line at 3 standard deviations (usually)
Variables Data Charts
R Charts
Center line is the grand mean (R bar)
Points are R
D3 and D4 values are tabled according to n (sample size)
Use of X bar & R charts
Charts are always used in tandem
Data are collected (20-25 samples)
Sample statistics are computed
All data are plotted on the 2 charts
Charts are examined for randomness
If random, then limits are used forever
Training
MQ4
Job rotation/quality fatigue at Honda
Quality Measurement
Services/Measurement
STAO3
Survey/Efficiency, Admission/Discharge
Inspection Acceptance Sampling
Sampling Plans
Acceptance sampling: Form of inspection applied to lots or batches of items before or after a process, to judge conformance with predetermined standards Sampling plans: Plans that specify lot size, sample size, number of samples, and acceptance/rejection criteria
Single-sampling
Double-sampling
Multiple-sampling
Sampling Terms
Acceptance quality level (AQL): the percentage of defects at which consumers are willing to accept lots as good
Lot tolerance percent defective (LTPD): the upper limit on the percentage of defects that a consumer is willing to accept
Consumers risk: the probability that a lot contained defectives exceeding the LTPD will be accepted
Producers risk: the probability that a lot containing the acceptable quality level will be rejected
OC Curve Terms
Acceptable Quality Level (AQL)
Percentage of defective items a customer is willing to accept from you (a property of mfg. process)
Lot Tolerance Percent Defective (LTPD)
Upper limit on the percentage of defects a customer is willing to accept ( a property of the consumer)
Average Outgoing Quality (AOQ)
Average of rejected lots and accepted lots
Average Outgoing Quality Limit (AOQL)
Maximum AOQ for a range of fractions defective
Statistical Quality Control Techniques
Topics covered Process and product quality
Quality assurance and standards
Quality planning
Quality control
Software quality management Concerned with ensuring that the required level of quality is achieved in a software product.
Involves defining appropriate quality standards and procedures and ensuring that these are followed.
Should aim to develop a quality culture where quality is seen as everyones responsibility.
What is quality? Quality, simplistically, means that a product should meet its specification.
This is problematical for software systems
There is a tension between customer quality requirements (efficiency, reliability, etc.) and developer quality requirements (maintainability, reusability, etc.);
Some quality requirements are difficult to specify in an unambiguous way;
Software specifications are usually incomplete and often inconsistent.
The quality compromise We cannot wait for specifications to improve before paying attention to quality management.
We must put quality management procedures into place to improve quality in spite of imperfect specification.
Scope of quality management
Quality management is particularly important for large, complex systems. The quality documentation is a record of progress and supports continuity of development as the development team changes.
For smaller systems, quality management needs less documentation and should focus on establishing a quality culture.
Quality management activities Quality assurance
Establish organisational procedures and standards for quality.
Quality planning
Select applicable procedures and standards for a particular project and modify these as required.
Quality control
Ensure that procedures and standards are followed by the software development team.
Quality management should be separate from project management to ensure independence.
Quality management and software development
Process and product quality The quality of a developed product is influenced by the quality of the production process.
This is important in software development as some product quality attributes are hard to assess.
However, there is a very complex and poorly understood relationship between software processes and product quality.
Process-based quality There is a straightforward link between process and product in manufactured goods.
More complex for software because:
The application of individual skills and experience is particularly imporant in software development;
External factors such as the novelty of an application or the need for an accelerated development schedule may impair product quality.
Care must be taken not to impose inappropriate process standards - these could reduce rather than improve the product quality.
Process-based quality
Practical process quality Define process standards such as how reviews should be conducted, configuration management, etc.
Monitor the development process to ensure that standards are being followed.
Report on the process to project management and software procurer.
Dont use inappropriate practices simply because standards have been established.
Quality assurance and standards Standards are the key to effective quality management.
They may be international, national, organizational or project standards.
Product standards define characteristics that all components should exhibit e.g. a common programming style.
Process standards define how the software process should be enacted.
Importance of standards Encapsulation of best practice- avoids repetition of past mistakes.
They are a framework for quality assurance processes - they involve checking compliance to standards.
They provide continuity - new staff can understand the organisation by understanding the standards that are used.
Product and process standards
Problems with standards They may not be seen as relevant and up-to-date by software engineers.
They often involve too much bureaucratic form filling.
If they are unsupported by software tools, tedious manual work is often involved to maintain the documentation associated with the standards.
Standards development Involve practitioners in development. Engineers should understand the rationale underlying a standard.
Review standards and their usage regularly. Standards can quickly become outdated and this reduces their credibility amongst practitioners.
Detailed standards should have associated tool support. Excessive clerical work is the most significant complaint against standards.
ISO 9000 An international set of standards for quality management.
Applicable to a range of organisations from manufacturing to service industries.
ISO 9001 applicable to organisations which design, develop and maintain products.
ISO 9001 is a generic model of the quality process that must be instantiated for each organisation using the standard.
ISO 9000 certification Quality standards and procedures should be documented in an organisational quality manual.
An external body may certify that an organisations quality manual conforms to ISO 9000 standards.
Some customers require suppliers to be ISO 9000 certified although the need for flexibility here is increasingly recognised.
ISO 9000 and quality management
Documentation standards Particularly important - documents are the tangible manifestation of the software.
Documentation process standards
Concerned with how documents should be developed, validated and maintained.
Document standards
Concerned with document contents, structure, and appearance.
Document interchange standards
Concerned with the compatibility of electronic documents.
Documentation process
Document standards Document identification standards
How documents are uniquely identified.
Document structure standards
Standard structure for project documents.
Document presentation standards
Define fonts and styles, use of logos, etc.
Document update standards
Define how changes from previous versions are reflected in a document.
Document interchange standards Interchange standards allow electronic documents to be exchanged, mailed, etc.
Documents are produced using different systems and on different computers. Even when standard tools are used, standards are needed to define conventions for their use e.g. use of style sheets and macros.
Need for archiving. The lifetime of word processing systems may be much less than the lifetime of the software being documented. An archiving standard may be defined to ensure that the document can be accessed in future.
Quality planning A quality plan sets out the desired product qualities and how these are assessed and defines the most significant quality attributes.
The quality plan should define the quality assessment process.
It should set out which organisational standards should be applied and, where necessary, define new standards to be used.
Quality plans Quality plan structure
Product introduction;
Product plans;
Process descriptions;
Quality goals;
Risks and risk management.
Quality plans should be short, succinct documents
If they are too long, no-one will read them.
Software quality attributes
Quality control This involves checking the software development process to ensure that procedures and standards are being followed.
There are two approaches to quality control
Quality reviews;
Automated software assessment and software measurement.
Quality reviews This is the principal method of validating the quality of a process or of a product.
A group examines part or all of a process or system and its documentation to find potential problems.
There are different types of review with different objectives
Inspections for defect removal (product);
Reviews for progress assessment (product and process);
Quality reviews (product and standards).
Quality reviews A group of people carefully examine part or all of a software system and its associated documentation.
Code, designs, specifications, test plans, standards, etc. can all be reviewed.
Software or documents may be 'signed off' at a review which signifies that progress to the next development stage has been approved by management.
Review functions Quality function - they are part of the general quality management process.
Project management function - they provide information for project managers.
Training and communication function - product knowledge is passed between development team members.
Quality reviews The objective is the discovery of system defects and inconsistencies.
Any documents produced in the process may be reviewed.
Review teams should be relatively small and reviews should be fairly short.
Records should always be maintained of quality reviews.
Review results Comments made during the review should be classified
No action. No change to the software or documentation is required;
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