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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