Manufacturing, Service Operations

and Logistics

from Prof. Goldsman’s lecture notes

Outline

Manufacturing and ServiceManufacturing and Service

TerminologiesTerminologies

Product/Process MatrixProduct/Process Matrix

Vocabulary ListManufacturingManufacturingServiceServiceSetup, setup costSetup, setup costLot or batch sizeLot or batch sizeProduct mixProduct mixCapacityCapacityCustom process/projectCustom process/projectJobshopJobshopBatch flow/batch processBatch flow/batch processLine flow/flowshop/flowline/mass productionLine flow/flowshop/flowline/mass productionContinuous flowContinuous flowProduct/process matrixProduct/process matrixCapital intensive, labor intensiveCapital intensive, labor intensive

Manufacturing versus Service

Manufacturing: makes things Manufacturing: makes things Physical goods: books, cellphones, pipes, Physical goods: books, cellphones, pipes, bricks, cars, …bricks, cars, …

Service: makes intangible itemsService: makes intangible itemsEducation, lawyers and other professionals, Education, lawyers and other professionals, repairs, hotels, entertainment, …repairs, hotels, entertainment, …

Created, delivered, and consumed at onceCreated, delivered, and consumed at once<< capital investments compared to << capital investments compared to manufacturingmanufacturing

Why Service Matters?

Growing sectorGrowing sector

Newer, hence more opportunities Newer, hence more opportunities for IEsfor IEs

Environmental concerns turning Environmental concerns turning manufacturing into servicemanufacturing into service

Buy transportation, not a car!Buy transportation, not a car!

Product/Process MatrixPRODUCT MIX

PROCESS PATTERN

One of a kind or

few

Low Vol. many

products

Higher Vol. several major

products

Very high Vol.

Std product (commodity)

Challenges for management

Very jumbled flow; process segments loosely linked

PROJECT

JOB

SHOP

Scheduling; materials handling; shifting bottlenecks

Jumbled flow; but a dominant flow exists

BATCH FLOW

Worker motivation; balance; maintaining enough flexibility

Line flow LINE FLOW

Cont, automated, rigid flow; process segments tightly linked

CONTINUOUS FLOW

Capital expenses for big chunk capacity; technological changes; material mgt; vertical integration

Challenges for Mangement

Bidding; delivery;product design, flexibility

Quality (product diff’n); flex in output vol.

Price

Stay on the diagonal!Stay on the diagonal!

Note That…

During the lifecycle of a product During the lifecycle of a product ((Product Life CycleProduct Life Cycle), the process ), the process strategy may changestrategy may change

Computers?Computers?

Many real process don’t fit so Many real process don’t fit so neatly into these categoriesneatly into these categories

It’s just a guidelines!It’s just a guidelines!

Supply Chain Management

“Consist of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers and customer themselves” – Chopra and Meindl

Assembler

Distributors

Suppliers

LogisticsProviders

Suppliers’Suppliers

Customer

Supply Chain Management

Physical Physical ProductProduct

SCMSCM

MoneyMoneyInformationInformation

Manufacturers Wholesale Distributors

Suppliers Customers

Information Flows

Goods Flow

Retailers

The Traditional Supply ChainThe Traditional Supply Chain

Customers

Today’s Supply ChainToday’s Supply Chain

Supplier Exchanges

Customer Exchanges

LogisticsExchanges

Contract Manufacturers

Logistics Providers

Virtual Manufacturers

Manufacturers

Wholesale Distributors

Information FlowsGoods Flow

Retailers

Four Categories of SCM*)

*) Michael Hugo

PLANPLAN

SOURCESOURCE

MAKEMAKE

DELIVERDELIVER

Plan-Source-Make-Deliver

• Procurement• Credit and Collections

• Product Design• Productions Scheduling• Facility Management

• Order Management• Delivery Scheduling

MakeMake

DeliverDeliver

• Demand Forecasting • Product Pricing• Inventory Management

PlanPlan

SourceSource

Benefit of SCM• Delivery Performance• Inventory Reduction• Fulfillment Cycle Time• Forecast Accuracy• Overall Productivity• Lower Supply-Chain

Costs• Fill Rates• Improved Capacity

Realization

Increase Competitiveness

Customer Results: Increased ROI

Planning Cycle Time Operating Expenses

(Overtime)

expensesexpenses

CustomerService Throughput

revenuesrevenues

Inventory Order LT Production LT

assetsassetsROI

Key Drivers

Key drivers to the SCM process are:– Shorter life cycles– Reduced costs– Improved customer service

Program Binusian 2012Program Binusian 2012 17

ho

urs

ho

urs

day

sd

ays

wee

ksw

eeks

mo

nth

sm

on

ths

year

+ye

ar +

buybuy

makemake

movemove

sellsell

storestore

operationaloperational tacticaltactical strategicstrategicschedulingscheduling

strategicstrategicbusinessbusinessplanningplanning

strategicstrategicbusinessbusinessplanningplanning

mastermasterplanningplanning

demanddemandfulfillmentfulfillment

manufacturing planningmanufacturing planning

schedulingscheduling

distribution planningdistribution planning

transportation planningtransportation planning

demand managementdemand management

Supply Chain Solutions CoversROI

impact

SCM: Manufacturing Perspective

Production by lots

Make -to-orderproduction

Special machinebuildingP

RODUCTCOMPLEXITY

P R O D U C T S T A B I L I T Y

Assembly production /Assemble -to-order

Period -basedproduction /taktedflow production

Mass production

Process manufacturing