Chapter 14 - Producing Materials and Services

8/6/2019 Chapter 14 - Producing Materials and Services

1/29

Chapter 14 Producing Materials and ServicesLearning Objectives

After reading this chapter, you should be able to do the following: Discuss the strategic value-adding role operations plays in the

supply chain.

Explain the concept ofa transformation process and its application

to goods and services. Appreciate the tradeoffs and challenges involved in production

operations.

Understand the primary production strategies and types ofplanning.

Discuss the primary assembly processes and production methodsfor goods creation.

Describe the various production process layouts.

Explain the role ofproductivity and quality metrics for improvingoperations performance.

Know how information technology supports efficient production ofgoods and services.


2/29

Introduction

Operations focus on the make/build portion of the supply chain.

Production facilities must interact with supply chain functions.

Operations create the outputs that are distributed through supply

chain networks.


3/29

The Role ofProduction Operations in Supply Chain Management

Manufacturing and service production supplies a economic utility called

form utility.

An effective production operation is supported by and also supports the

supply chain.

Supply chain tradeoffs must be understood and made.


4/29

Production Process Functionality

No two processes are organized exactly alike or perform to the

same level.

Process functionality helps the success ofan organization.

Assemble-to-order methods tend to be more complex, be more labor

intensive, and require longer processing time than the mass-

production-oriented, make-to-stock operations.


5/29


6/29

Production Tradeoffs

Processes that can produce a range ofproducts are said to have

economies ofscope.

Low-volume production runs ofa wide variety ofproducts are required

to meet changing customer demand.

Tradeoffs between production processes for goods and the costs

involved in manufacturing them must also be understood.

Production and supply chain costs vary for make-to-stock, assemble-to-

order, and build-to-order products.


7/29


8/29

Production Challenges

Intensified competition, more demanding customers, and relentless

pressure for efficiency as well as adaptability

Competitive pressures for many established manufacturers and service

providers

Customers demand for choice and rapidly changing tastes


9/29

Production Strategies

In the era ofmass production, operations strategy focused on reduction,

efficiency, and scale.

The push-based strategy works well for supply chains that focus on the

immediate delivery ofoff-the-shelf, low-cost, standardized goods.

Lean production tries to have materials arrive at the needed location just

in time for rapid processing and flow through the system.

Lean production relies on pull-based systems to coordinate production

and distribution with actual customer demand.


10/29


11/29


12/29

Production Strategies

Machine flexibility

general purpose machines and equipment staffed by cross-trained

workers provide the ability to produce different types ofproducts

Routing flexibility

provides managers with a choice between machines for a parts

next operation

Offshoring

activity be relocated to a contract manufacturer in another country

Adaptive manufacturing provides companies with the ability to replace planning and

replanning with execution based on real-time demand


13/29


14/29

Production Planning

Three planning timeframes:

Long-range plans

covering a year or more,focus on major decisions regardingcapacity and aggregate production plans

Medium-range plans

span 6 to 18 months and involve tactical decisions regarding

employment levels and similar issues

Short-range plans

ranging from a few days to a few weeks


15/29


16/29

Production Planning Resource requirements planning (RRP)

long-run, macro-level planning tool

Rough-cut capacity plan (RCCP)

checks the feasibility of the master production schedule Capacity requirements planning (CRP)

checks the feasibility of the materials requirement plan

Aggregate production plan (APP) long-range materials plan that translates annual business

plans, marketing plans into production plan

Master production schedule (MPS) medium-range plan that is more detailed than the APP


17/29

Assembly Processes

(MTS), make to order

(ATO), assemble-to-order

(BTO), build-to-order

(ETO), engineer-to-order


18/29

Production Process Layout facility layout

involves the arrangement ofmachines, storage areas, and otherresources within the four walls ofa manufacturing or an assemblyfacility.

successful layout is one that does the following: Reduces bottlenecks in moving people or materials

Minimizes materials-handling costs

Reduces hazards to personnel

Utilizes labor efficiently

Increases morale and ease ofsupervision Utilizes available space effectively and efficiently

Provides flexibility

Facilitates coordination and face-to-face communication


19/29

Production Process Layouts Project layout

fixed location layout where the product remains in place for theduration ofproduction

Workcenter

process-focused layout that groups together similar equipment orfunctions

Manufacturing cell process-focused layout that dedicates production areas to a narrow

range ofproducts that are similar in processing requirements

Assembly line product-focused layout in which machines and workers are

arranged according to the progressive sequence ofoperations Continuous process facilities

similar to assembly lines, with product flowing through apredetermined sequence ofstops.


20/29


21/29

Packaging

design issues can affect labor and facility efficiency

can provide another level ofproduct differentiation

design impacts ability to use space and equipment

ease ofhandling during materials handling and transportation

protecting the goods in the package


22/29

Production Metrics

use ofmeasurements and key performance indicators (KPIs)

Using KPIs that are too narrow

Encouraging wrong outcomes

Focusing on issues that are not key priorities

should be properly aligned with corporate objectives


23/29

Production Metrics Total cost

all money spent on manufacturing must be summarized and the

total compared to the previous period

Total Cycle Time

total cycle time is a measure ofmanufacturing performance that is

calculated by studying major purchased components and

determining the total days on hand ofeach one

Delivery performance

is the percentage ofcustomer orders shipped when the customer

requested them to be shipped


24/29

Production Metrics

Quality

This may vary by company but it must focus on quality from the

perspective of the customer.

Safety

The standard metrics ofaccident/incident frequency, severity, and

cost are important to monitor, with continuous improvement (i.e.,

reduction) as the goal.


25/29

Manufacturing Execution Systems (MES)

central software used to monitor and control production

operations

linked to other enterprise tools like ERP systems, product life

cycle management tools, and scheduling and planning systems


26/29


27/29

Summary The key concept from this chapter is the critical and codependent link between

production operations and logistics. Just as a heart and arteries need to worktogether to move blood through your circulatory system, production and logistics mustwork in concert to move product through the supply chain. For their part, productionmanagers must coordinate demand information, inputs, and resources to transformthem into outputs (products and materials) that are desired by customers. The fasterand more flexible the transformation processes, the more responsive the productionoperation can be to changing conditions and disruptions. This, in turn, makes the

supply chain more dynamic and competitive.

Additional topics from the chapter include the following:

Production operations include all activities and processes involved in changingthe composition ofa good or servicecomponent fabrication, product assembly,and service request executionfor the purpose ofcreating form utility.

Numerous tradeoffs must be made regarding production: volume versus variety,responsiveness or efficiency, make or outsource, and focusing on a limitednumber ofcompetitive dimensions.

Intensified competition, more demanding customers, and relentless pressure forefficiency as well as adaptability are driving significant changes across manymanufacturing industry settings.


28/29

Summary (cont.) There have been significant development and shifts in production strategy.

Organizations have advanced from forecast-driven mass production to demand-

driven lean, flexible, and adaptive approaches

Capacity planning and materials planning are used to balance inputs, capacity(resources), and outputs so that customer demand can be fulfilled without

creating waste.

Most manufacturers use a combination offour production methodsmake-to-

stock, assemble-to-order, build-to-order, and engineer-to-orderto satisfy

demand for their products.

Facility layout involves the arrangement ofmachines, storage areas, and other

resources within the four walls ofa manufacturing or an assembly facility.

Facility layout is influenced by the product characteristics, production strategy,

and assembly process employed by the organization.


29/29

Summary (cont.)

Packaging plays important roles in the smooth transfer offinished goods from the

plant to the distribution center and customer locations.

Production KPIs must be linked to corporate goals and objectives, customer

requirements, and overall performance of the production operation.

Relevant production KPIs address total cost, total cycle time, delivery

performance, quality, and safety.

Manufacturing execution systems software solutions improve an organizationsability to manage production operations and make them more responsive to

disruptions, challenges, and changing marketplace conditions.

Documents

Chapter 14 - Producing Materials and Services