Production & Operations Management An Introduction

Course Outline • Highlight the importance of Production and Operations Management (POM) • Define POM and its constituent elements • Link operations with strategy • Understand tools and techniques used to solve business problems • Capture knowledge from actual cases 2

Course Outline • Course organized along seven lectures • Content of each lecture: – – – – –

Session 1: Introduction – Processes / Operations Session 2: The beer game Session 3: Supply chains / Inventories Session 4: Inventory management Session 5: Material Requirements Planning 3

Course Outline • Content of each lecture (continued): – Lecture 6: Just-in-time – Lecture 7: Facility layout and location

• Case studies and illustrative examples will be discussed in class • Final exam will include both problem solving and question answering 4

Textbooks • The required textbook for the course is: – Krajewski, L. and L. Ritzman, 2007. Operations Management: Processes and Value Chains, AddisonWesley, 8th Edition, Pearson Prentice Hall

• Additional textbook (not required) with emphasis on Manufacturing Systems is: – Hopp, W.J. and M.L. Spearman, 2001. Factory Physics: Foundations of Manufacturing Management, 2nd Edition, Irwin, Chicago 5

POM Definition • What is Production and Operations Management? – Function that enables enterprises to achieve their goals through efficient acquisition and utilization of resources – Realize bottom-line results (value-added to stakeholders) by linking strategy and every-day decisions

The Enterprise Puzzle Solved

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The POM System • Direction and control of the processes that transform inputs into finished goods-services External Environment











Inputs Workers Managers Equipment Facilities Materials Services Land Energy

Customer or Client Participation

Operation or Process 1

Operation or Process 2

Operation or Process 3 Outputs Goods Services

Operation or Process 4

Operation or Process N Operations and Processes

Information on Performance

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The POM System • Input examples: – Medical professionals, building, diagnostic equipment, pharmaceuticals, first aid material (Hospital) – Workers, managers, engineering blueprints, drills, lathes, metals, paints, energy (Manufacturer) – Financial professionals, checks, currency, building (Bank) 8

The POM System • Output examples: – Healed patients - hopefully! (Hospital) – Physical products (Manufacturer) – Financial products (Bank)

• Transformation examples: – Physiological, behavioural (Hospital) – Physical change of shape (Manufacturer) – Monetary (Bank) 9

Manufacturing Vs. Services • Similar in most aspects • Differences: Nature of Product Nature of Inventories Level of Customer Contact Response Time Needs Size of Market Size of Facilities Capital Intensity Quality Measurment

Manufacturing Physical, Durable Raw, Intermmediate, Final Low Often not Critical Far Reaching Possible Large Capital Intensive Easy

Hospital Intangible Raw High Critical Local Small-to-medium Labor Intensive Difficult

Bank Financial Monetary Medium Varying Restricted Small Capital Intensive Difficult 10

The POM Function • POM is a distinct function within any enterprise organizational chart • Draws expertise from multiple disciplines Types of Organizations

Functions

Skill Areas

Manufacturing Construction Transportation Healthcare Wholesale Retail Bank Government

Accounting Engineering Logistics

Quantitative Methods General Management Information Systems Organizational Behaviour Economics International Business Business Ethics & Law

Operations Finance Human Resources Marketing

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The POM Function • Requires cross-functional coordination – – – – –

Strongest connection with marketing Accounting provides performance feedback Finance influences investment Human Resources recruits and trains personnel Engineering design should match manufacturing capabilities

• Critical links with Information Systems and Organizational Structure 12

POM and Decisions (Strategy) • Decisions define the scope and content of POM – five categories: – – – – –

Strategic choices (Strategy) Processes Quality Capacity, Location, Layout Operations 13

POM and Decisions (Strategy) • Strategic choices affect all POM categories and must be defined at all hierarchical enterprise levels: – – – – –

What is the corporate strategy? What are the competitive priorities? What is the flow strategy? What are the quality objectives? What are the functional area strategies? 14

POM and Decisions (Strategy) Market Analysis

• • • • • • •

Customer-driven Core competencies Market Priorities Engineering Flow Trends

Socioeconomic and business environment


Segmentation
Needs Assessment

Corporate Strategy
Mission
Goals
Distinctive Competencies

Competitive Priorities

Capabilities

Operations
Cost, quality
Time, flexibility


Current
Needed
Planned

Future Directions
Global Strategy
New Products/Services

Functional Area Strategies
Finance
Marketing
Operations

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POM and Decisions (Strategy) • Competitive priorities: – Cost • Basic food items – salt, flour, paper • Consumer electronics

– Quality • High performance design (superior features, tight tolerances, greater durability, courteous service, convenient location, safety – Universal Gyms) • Consistent quality (frequency of conformance to specs) 16

POM and Decisions (Strategy) • Competitive priorities (continued): – Time (time-based competition) • Fast delivery (FedEx) • On-time delivery (General Motors) • Product development speed (Zara, Japanese Auto Mfg)

– Flexibility • Customization – accommodate unique customer needs • Volume flexibility – quick changes in production rates 17

POM and Decisions (Strategy) • Flow strategies: – Make-to-stock (Sony, Siemens, Delta) • • • •

Finished goods held in stock for immediate delivery High volumes, standard products Production based on forecasted demand Supports low cost, consistent quality priority

– Standardized services (FedEx, Postal Services) • Services with little variety and high volumes • Supports low cost, on-time delivery & consistent quality 18

POM and Decisions (Strategy) • Flow strategies (continued): – Assemble-to-order (Dell, Vodafone, IKEA) • • • •

Assemblies & components held in stock Final assembly completed after customer selects options Large number of final configurations are possible Forecasting of customer demand for final products is impractical (multitude of combinations) • Widely used in computer manufacturing • Services: mobile providers (packages for individuals) 19

POM and Decisions (Strategy) • Flow strategies (continued): – Make-to-order (Home construction, Boeing) • Most required materials are purchased when customer places the order • Production based on individual customer specifications • Requires flexibility at all levels (organization, processes, flows etc.) • Supports customization as a competitive priority • Automotive industry towards make-to-order 20

POM and Decisions (Processes) • Five categories (continued): – Processes • • • • • • •

What will be the product-service design? What work will be performed in-house? What will be the level of automation? How do we improve existing processes? Can we provide leadership in technological change? Degree of job enlargement – participatory mgt? Time estimates for work requirements 21

POM and Decisions (Q-C-L-L) • Five categories (continued): – Quality • Objectives and means (Statistics – TQM) • Ways for monitoring and improvement

– Capacity, location and layout • What system capacity is needed? • Where should facilities be located? • How should facility layouts be organized? 22

POM and Decisions (Opns) • Five categories (continued): – Operations • • • • • • •

Coordination of external and internal supply chains Forecasting methods (for demand) Inventory management Output control and staffing levels over time Purchasing and production tactics Work scheduling Priorities and operations mode 23

POM and Decisions • Operating decisions link strategy with every day tasks and compliment strategy with feedback from existing systems • Operating decisions are also interconnected: – – – –

Purchasing and inventory management Production and staffing levels Forecasting and capacity requirements Product design and process layout 24

POM Trends • Service sector growth in three areas – Public (governments, utilities) – Wholesale and retail firms – Transportation, communications, health, finance

• Keeping manufacturing a vital sector – Creates value and wealth – Complementary to services 25

POM Trends • Emphasis on productivity – Continuous improvement pursuit – Productivity links to standard of leaving – Global competition

• Competition based on quality, time and technology • Environmental, ethical and work-force diversity issues 26

Case Studies • In-class discussion: – Chad’s Creative Concepts (from textbook, Chapter 1, page 29)

• Reading – think about – Custom Molds Inc. (from textbook, Chapter 3, pages 125-127)

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