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Chapter 1 Operations and Competitiveness Operations Management - 5 th Edition Roberta Russell & Chapter 1 Operations and Competitiveness Operations Management - 5 th Edition Roberta Russell & Bernard W. Taylor, III Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga

What Do Operations Managers Do? w What is Operations? n a function or system What Do Operations Managers Do? w What is Operations? n a function or system that transforms inputs into outputs of greater value w What is a Transformation Process? n a series of activities along a value chain extending from supplier to customer Copyright 2006 John Wiley & Sons, Inc. 1 -2

Operations as a Transformation Process INPUT • Material • Machines • Labor • Management Operations as a Transformation Process INPUT • Material • Machines • Labor • Management • Capital TRANSFORMATION PROCESS OUTPUT • Goods • Services Feedback Copyright 2006 John Wiley & Sons, Inc. 1 -3

Next sub topic Competitiveness and Productivity w Competitiveness n degree to which a nation Next sub topic Competitiveness and Productivity w Competitiveness n degree to which a nation can produce goods and services that meet the test of international markets w Productivity n ratio of output to input w Output n sales made, products produced, customers served, meals delivered, or calls answered w Input n labor hours, investment in equipment, material usage, or square footage Copyright 2006 John Wiley & Sons, Inc. 1 -4

Competitiveness and Productivity (cont. ) Measures of Productivity Copyright 2006 John Wiley & Sons, Competitiveness and Productivity (cont. ) Measures of Productivity Copyright 2006 John Wiley & Sons, Inc. 1 -5

Changes in Productivity for Select Countries Internet-enabled productivity - Dot com bust - 9/11 Changes in Productivity for Select Countries Internet-enabled productivity - Dot com bust - 9/11 terrorist attacks Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, ” Bureau of Labor Statistics, U. S. Department of Labor, September 2003. U. S. figures for 2002– 2003 from “Major Sector Productivity and Costs Index, ” Bureau of Labor Statistics, U. S. Department of Labor, March 2004 Copyright 2006 John Wiley & Sons, Inc. 1 -6

Productivity Increase w Become efficient n output increases with little or no increase in Productivity Increase w Become efficient n output increases with little or no increase in input w Expand n both output and input grow with output growing more rapidly w Achieve breakthroughs n output increases while input decreases w Downsize n output remains the same and input is reduced w Retrench n both output and input decrease, with input decreasing at a faster rate Copyright 2006 John Wiley & Sons, Inc. 1 -7

Competitiveness and Productivity Breakthrough Performance More Efficient Retrench Productivity as a Function of Inputs Competitiveness and Productivity Breakthrough Performance More Efficient Retrench Productivity as a Function of Inputs and Outputs, 2001– 2002 Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, ” Bureau of Labor Statistics, U. S. Department of Labor, September 2003 Copyright 2006 John Wiley & Sons, Inc. 1 -8

Operations–Oriented Barriers to Entry w Economies of Scale w Capital Investment w Access to Operations–Oriented Barriers to Entry w Economies of Scale w Capital Investment w Access to Supply and Distribution Channels w Learning Curve (can be quite steep) Copyright 2006 John Wiley & Sons, Inc. 1 -9

Chapter 2 Operations Strategy Copyright 2006 John Wiley & Sons, Inc. Chapter 2 Operations Strategy Copyright 2006 John Wiley & Sons, Inc.

Four Steps for Strategy Formulation w Defining a primary task n What is the Four Steps for Strategy Formulation w Defining a primary task n What is the firm in the business of doing? (TGV? , JUSCO? ) w Assessing core competencies What does the firm do better than anyone else? (exceptional service? Lower cost? Higher quality? ) w Determining order winners and order qualifiers (look at customer) n OW: What wins the order? (characteristic of the product? ) n OQ: What qualifies an item to be considered for purchase? (Price range? A set of features that is compulsory for a product? Eq: mobile phone) n w Positioning the firm n How will the firm compete? (Choose important things on which to concentrate and doing them extremely well. What unique value it will deliver to customer? Eg: Air Asia) Copyright 2006 John Wiley & Sons, Inc. 1 -11

Competitive Priorities w w Cost Quality Flexibility Speed Copyright 2006 John Wiley & Sons, Competitive Priorities w w Cost Quality Flexibility Speed Copyright 2006 John Wiley & Sons, Inc. 1 -12

Competitive Priorities: Cost (eliminating all waste) w Lincoln Electric n n reduced costs by Competitive Priorities: Cost (eliminating all waste) w Lincoln Electric n n reduced costs by $10 million a year for 10 years skilled machine operators save the company millions that would have been spent on automated equipment w Southwest Airlines (local example: Air asia) n n n one type of airplane facilitates crew changes, recordkeeping, maintenance, and inventory costs direct flights mean no baggage transfers $30 million annual savings in travel agent commissions by requiring customers to contact the airline directly Copyright 2006 John Wiley & Sons, Inc. 1 -13

Competitive Priorities: Quality (Please the customer) w Ritz-Carlton - one customer at a time Competitive Priorities: Quality (Please the customer) w Ritz-Carlton - one customer at a time n n Every employee is empowered to satisfy a guest’s wish Teams at all levels set objectives and devise quality action plans Each hotel has a quality leader Quality reports tracks l l l n guest room preventive maintenance cycles percentage of check-ins with no waiting time spent to achieve industry-best clean room appearance Guest Preference Reports are recorded in a database Copyright 2006 John Wiley & Sons, Inc. 1 -14

Competitive Priorities: ability to adjust to Flexibility (The production volume, changes in product mix, Competitive Priorities: ability to adjust to Flexibility (The production volume, changes in product mix, or design) w Andersen Windows: (Product mix) n n number of products offered grew from 28, 000 to 86, 000 number of errors are down to 1 per 200 truckloads w Custom Foot Shoe Store: ( ? ? ) ? n n n customer’s feet are scanned electronically to capture measurements custom shoes are mailed to the customer’s home in weeks prices are comparable to off-the-shelf shoes w National Bicycle Industrial Company: ( ? ? ) ? n n offers 11, 231, 862 variations delivers within two weeks at costs only 10% above standard models Are your business operation flexible enough to have flexibility in the three aspect above? ? Copyright 2006 John Wiley & Sons, Inc. 1 -15

Competitive Priorities: Speed (Fast moves, fast adaptations, tight linkages) w Citicorp n advertises a Competitive Priorities: Speed (Fast moves, fast adaptations, tight linkages) w Citicorp n advertises a 15 -minute mortgage approval w Domino’s Pizza n 30 minutes delivery or your pizza free w Wal-Mart n replenishes its stock twice a week w Hewlett-Packard n produces electronic testing equipment in five days w General Electric n reduces time to manufacture circuit-breaker boxes into three days and dishwashers into 18 hours w Dell n ships custom-built computers in two days Copyright 2006 John Wiley & Sons, Inc. 1 -16

Operations’ Role in Corporate Strategy (cont. ) Operations’ Role in Corporate Strategy Strategic Decision Operations’ Role in Corporate Strategy (cont. ) Operations’ Role in Corporate Strategy Strategic Decision in Operations (next slides) Dec. must be made in the following area: a. Products and Services b. Processes and Technology c. Capacity and Facilities d. Human Resources e. Quality f. Sourcing g. Operating Systems Copyright 2006 John Wiley & Sons, Inc. 1 -17

Operations Strategy: Products and Services w Make-to-Order n products and services are made to Operations Strategy: Products and Services w Make-to-Order n products and services are made to customer specifications after an order has been received w Make-to-Stock n products and services are made in anticipation of demand (customer then chooses from avail. Product or services) w Assemble-to-Order n products and services add options according to customer specifications Copyright 2006 John Wiley & Sons, Inc. 1 -18

Production Strategy: Processes and technology w Project (eg. Construction project, shipbuilding, aircraft mfg) n Production Strategy: Processes and technology w Project (eg. Construction project, shipbuilding, aircraft mfg) n one-at-a-time production of a product to customer order w Batch Production (eg. Bakeries, furniture making) n systems process many different jobs at the same time in groups (or batches) w Mass Production (eg. ? ? ? ) n large volumes of a standard product for a mass market w Continuous Production (eg. ? ? ? ) n used for very high volume commodity products (very standardized product, highly automated, operates 24 hrs) Copyright 2006 John Wiley & Sons, Inc. 1 -19

M or e St an da rd ize d – Hi gh er Vo M or e St an da rd ize d – Hi gh er Vo lum e Continuous Production A paper manufacturer produces a continuous sheet paper from wood pulp slurry, which is mixed, pressed, dried, and wound onto reels. Mass Production Here in a clean room a worker performs quality checks on a computer assembly line. Batch Production At Martin Guitars bindings on the guitar frame are installed by hand are wrapped with a cloth webbing until glue is dried. Project Construction of the aircraft carrier USS Nimitz was a huge project that took almost 10 years to complete. Copyright 2006 John Wiley & Sons, Inc. 1 -20

Service Strategy: Processes and Technology w Professional Service eg. Lawyer n highly customized and Service Strategy: Processes and Technology w Professional Service eg. Lawyer n highly customized and very labor intensive w Service Shop eg. Hospital, school n customized and labor intensive w Mass Service Offer same basic service to all customer (eg ? ? ) n less customized and less labor intensive w Service Factory eg ? ? n least customized and least labor intensive Copyright 2006 John Wiley & Sons, Inc. 1 -21

La bo r. I nte ns ive Le ss Cu sto mi ze d. La bo r. I nte ns ive Le ss Cu sto mi ze d. Le ss Service Factory Electricity is a commodity available continuously to customers. Mass Service A retail store provides a standard array of products from which customers may choose. Service Shop Although a lecture may be prepared in advance, its delivery is affected by students in each class. Professional Service A doctor provides personal service to each patient based on extensive training in medicine. Copyright 2006 John Wiley & Sons, Inc. 1 -22

Operations Strategy: Capacity and Facility w Capacity strategic decisions include: n When, how much, Operations Strategy: Capacity and Facility w Capacity strategic decisions include: n When, how much, and in what form to alter capacity w Facility strategic decisions include: n n n Whether demand should be met with a few large facilities or with several smaller ones Whether facilities should focus on serving certain geographic regions, product lines, or customers Facility location can also be a strategic decision Copyright 2006 John Wiley & Sons, Inc. 1 -23

Operations Strategy: Quality w What is the target level of quality for our products Operations Strategy: Quality w What is the target level of quality for our products and services? w How will it be measured? w How will employees be involved with quality? w What will the responsibilities of the quality department be? Copyright 2006 John Wiley & Sons, Inc. 1 -24

Operations Strategy: Quality (cont. ) w What types of systems will be set up Operations Strategy: Quality (cont. ) w What types of systems will be set up to ensure quality? w How will quality awareness be maintained? w How will quality efforts be evaluated? w How will customer perceptions of quality be determined? w How will decisions in other functional areas affect quality? Copyright 2006 John Wiley & Sons, Inc. 1 -25

Operations Strategy: Sourcing w Vertical Integration (eg? ) n degree to which a firm Operations Strategy: Sourcing w Vertical Integration (eg? ) n degree to which a firm produces parts that go into its products w Strategic Decisions n n How much work should be done outside the firm? On what basis should particular items be made in-house? When should items be outsourced? How should suppliers be selected? Copyright 2006 John Wiley & Sons, Inc. 1 -26

Operations Strategy: Sourcing (cont. ) If you outsourced… ask n n n What type Operations Strategy: Sourcing (cont. ) If you outsourced… ask n n n What type of relationship should be maintained with suppliers? What is expected from suppliers? How many suppliers should be used? How can quality and dependability of suppliers be ensured? How can suppliers be encouraged to collaborate? Copyright 2006 John Wiley & Sons, Inc. 1 -27

Chapter 3 Quality Management Copyright 2006 John Wiley & Sons, Inc. Chapter 3 Quality Management Copyright 2006 John Wiley & Sons, Inc.

What is quality in the eye of beholder? What are the different quality characteristics What is quality in the eye of beholder? What are the different quality characteristics you (as a consumer) would expect to find in the following three products: a DVD player, a pizza, running shoes? Conduct threaded discussion on each selected product. Copyright 2006 John Wiley & Sons, Inc. 1 -29

The Meaning of Quality 1. Quality from the Consumer’s Perspective a. Dimensions of Quality: The Meaning of Quality 1. Quality from the Consumer’s Perspective a. Dimensions of Quality: Manufactured Products (what do you look at ? ) §Performance §Features §Reliability §Conformance §Durability §Serviceability §Aesthetics §Safety Copyright 2006 John Wiley & Sons, Inc. 1 -30

b. Dimensions of Quality: Services § § § § Time and timeliness Completeness Courtesy b. Dimensions of Quality: Services § § § § Time and timeliness Completeness Courtesy Consistency Accessibility Convenient Accuracy Responsiveness Copyright 2006 John Wiley & Sons, Inc. 1 -31

The Cost of Achieving good Quality 1. The Cost of Achieving Good Quality a. The Cost of Achieving good Quality 1. The Cost of Achieving Good Quality a. Prevention Costs b. Appraisal Costs Copyright 2006 John Wiley & Sons, Inc. 1 -32

The Cost of Achieving good Quality a. Prevention Costs ( Cost of trying to The Cost of Achieving good Quality a. Prevention Costs ( Cost of trying to prevent poor- quality from reaching the customer) § § § Quality planning costs: The cost of developing and implementing quality management program Product-Design costs: The costs of designing products with quality characteristics. Process costs: The cost expended to make sure the productive process conforms to quality specification Training costs: The cost to train employee Information costs: The cost of acquiring and maintaining (typically on computers) data related to quality, and the development and analysis of reports on quality performance Copyright 2006 John Wiley & Sons, Inc. 1 -33

The Cost of Achieving good Quality b. Appraisal Costs ( Costs of measuring, testing, The Cost of Achieving good Quality b. Appraisal Costs ( Costs of measuring, testing, and analyzing materials, parts, products, and the productive process to ensure product-quality specifications are being met) § § § Inspection and testing cost Test equipment costs Operator costs Copyright 2006 John Wiley & Sons, Inc. 1 -34

The Cost of Poor Quality (The cost of nonconformance) Normally accounts for 70% -90% The Cost of Poor Quality (The cost of nonconformance) Normally accounts for 70% -90% of total quality cost. a. Internal Failure Costs b. External Failure Costs Copyright 2006 John Wiley & Sons, Inc. 1 -35

The Cost of Poor Quality a. Internal Failure Costs: Costs incurred when poor quality The Cost of Poor Quality a. Internal Failure Costs: Costs incurred when poor quality products are discovered before they are delivered to the customer (eg) § Scrap costs § Rework costs § Price- downgrading costs Copyright 2006 John Wiley & Sons, Inc. 1 -36

The Cost of Poor Quality b. External Failure Costs : Costs incurred after the The Cost of Poor Quality b. External Failure Costs : Costs incurred after the customer has received a poor-quality products and primarily related to customer service. Eg: § Product return cost § Lost sale cost: customer dissatisfied with poor quality product and do not make future purchase. Copyright 2006 John Wiley & Sons, Inc. 1 -37

Measuring and Reporting Quality Costs w Example H & S Motor Company (pg: 101) Measuring and Reporting Quality Costs w Example H & S Motor Company (pg: 101) Copyright 2006 John Wiley & Sons, Inc. 1 -38

The Effect of Quality Management on Productivity 1. Productivity 2. Measuring Product Yield and The Effect of Quality Management on Productivity 1. Productivity 2. Measuring Product Yield and Productivity 3. The Quality-Productivity Ratio Copyright 2006 John Wiley & Sons, Inc. 1 -39

Measuring Product Yield and Productivity The UMRO Company starts production for a special sport Measuring Product Yield and Productivity The UMRO Company starts production for a special sport bag. The production process begins with 100 bags each day. The percentage of good bags produced each averages to 80% and the percentage of poor-quality bags that can be reworked is 50%. w w What is the company’s daily product yield? If the percentage of good-quality bags increased to 90%, what is the effect on productivity? Copyright 2006 John Wiley & Sons, Inc. 1 -40

Computing product cost per unit The UMRO company has a direct manufacturing cost per Computing product cost per unit The UMRO company has a direct manufacturing cost per unit of RM 30, and bags that are inferior quality can be reworked for RM 12 per unit. 100 bags are produced daily, 80% are good quality and 20% are defective. Of the defective bags, half can be reworked to yield goodquality products. Through its quality management program, the company has discovered a problem in its production process that, when corrected (at a minimum cost), will increase the good-quality product to 90%. What is the direct impact on the direct cost per unit of improvement in product quality? Copyright 2006 John Wiley & Sons, Inc. 1 -41

Computing product yield for a multi stage process At UMRO Company, bags are produced Computing product yield for a multi stage process At UMRO Company, bags are produced in a fourstage process. Bags are inspected following in each stage, with percentage yield (on average) of goodquality work-in-process units as follows. w w What is the daily product yield for product input of 100 units per day ? How many input units it would have to start with each day to result in a final daily yield of 100 goof-quality units? Copyright 2006 John Wiley & Sons, Inc. 1 -42

Computing the Quality. Productivity Ratio (QPR) UMRO Company produces bags at processing cost of Computing the Quality. Productivity Ratio (QPR) UMRO Company produces bags at processing cost of RM 30 per unit. Defective bags can be reworked for RM 12 per unit. 100 bags are produced daily, 80% are good quality, resulting in 20% defects, 50% of which can be reworked prior to shipping to customers. The company wants to examine the effects of: 1. 2. 3. 4. Increasing the production rate to 200 bags per day Reducing the processing cost to RM 26 and the rework cost to RM 10 Increasing, through quality improvement, the product yield of good-quality products to 95% The combination of 2 and 3 Copyright 2006 John Wiley & Sons, Inc. 1 -43

Chapter 5 Products and Services Copyright 2006 John Wiley & Sons, Inc. Beni Asllani Chapter 5 Products and Services Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga

Compare product design w Have you ever experienced looking or buying a particularly well-designed Compare product design w Have you ever experienced looking or buying a particularly well-designed or particularly poorly designed product? What is it? Copyright 2006 John Wiley & Sons, Inc. 1 -45

w Cup holders in cars that, when occupied, hide the radio buttons or interfere w Cup holders in cars that, when occupied, hide the radio buttons or interfere with the stick shift w Salt shakers that must be turned upside down to fill (thereby losing their contents) w Doors that you can’t tell whether to pull or push w Pen drive (memory stick) ? Copyright 2006 John Wiley & Sons, Inc. 1 -46

Perceptual Map of Breakfast Cereals GOOD TASTE Cocoa Puffs LOW NUTRITION HIGH NUTRITION Rice Perceptual Map of Breakfast Cereals GOOD TASTE Cocoa Puffs LOW NUTRITION HIGH NUTRITION Rice Krispies Cheerios Wheaties Shredded Wheat BAD TASTE Copyright 2006 John Wiley & Sons, Inc. 1 -47

Feasibility Study w Market analysis w Economic analysis w Technical/strategic analysis (Does the new Feasibility Study w Market analysis w Economic analysis w Technical/strategic analysis (Does the new product require certain technology? Does the company have sufficient labor capabilities, expertise, resources to do it? ) w Performance specifications (What the product should do to satisfy customers) Copyright 2006 John Wiley & Sons, Inc. 1 -48

Form and Functional Design w Form Design n how product will look? w Functional Form and Functional Design w Form Design n how product will look? w Functional Design n Copyright 2006 John Wiley & Sons, Inc. reliability maintainability usability 1 -49

Computing Reliability Components in series 0. 90 Parts A 0. 90 x 0. 90 Computing Reliability Components in series 0. 90 Parts A 0. 90 x 0. 90 = 0. 81 Parts B Copyright 2006 John Wiley & Sons, Inc. 1 -50

Computing Reliability Components in parallel 0. 90 R 2 Reliability of backup component 0. Computing Reliability Components in parallel 0. 90 R 2 Reliability of backup component 0. 95 R 1 If the original component fail, at 5% chances, backup will effective only in 90% of the time Reliability of original component Reliability of the system Copyright 2006 John Wiley & Sons, Inc. 0. 95 + 0. 90(1 -0. 95) = 0. 995 1 -51

Determine the reliability of the system of components shown below 0. 90 0. 98 Determine the reliability of the system of components shown below 0. 90 0. 98 0. 92+(1 -0. 92)(0. 90)=0. 99 0. 98 x 0. 99 x 0. 98 = 0. 951 Copyright 2006 John Wiley & Sons, Inc. 1 -52

Reliability: Length of time product or services in operation before it fails w MTBF Reliability: Length of time product or services in operation before it fails w MTBF = Mean Time before Failure= 1/failure rate. Eg if laptop batery fail 4 times in 20 hour, failure rate = 4/20 = 0. 20, its MTBF = 1/0. 20 = 5 hours. Copyright 2006 John Wiley & Sons, Inc. 1 -53

Maintainability (also called serviceability) PROVIDER MTBF (HR) MTTR (HR) A B C 60 36 Maintainability (also called serviceability) PROVIDER MTBF (HR) MTTR (HR) A B C 60 36 24 4. 0 2. 0 1. 0 SAA = 60 / (60 + 4) =. 9375 or 93. 75% SAB = 36 / (36 + 2) =. 9726 or 97. 26% SAC = 24 / (24 + 1) =. 9473 or 94. 73% System Availability = MTBF/(MTBF + MTTR) Copyright 2006 John Wiley & Sons, Inc. 1 -54

Usability w Ease of use of a product or service Examples: n n ease Usability w Ease of use of a product or service Examples: n n ease of use (volume control at steering) frequency and severity of errors (wedding door gift – soap instead of sweets) n n user satisfaction with experience (web page) Easy to learn (web page) Copyright 2006 John Wiley & Sons, Inc. 1 -55

Production Design § Simplification n reducing number of parts, assemblies, or options in a Production Design § Simplification n reducing number of parts, assemblies, or options in a product (remote control. Too many buttons? ) § Standardization n using commonly available and interchangeable parts (eg – PC) § Modularity n combining standardized building blocks, or modules, to create unique finished products (eg same basic chasis, same basic brooth (beef, chicken, tomato) then adding special ingredients to produce more varieties of final product. Copyright 2006 John Wiley & Sons, Inc. 1 -56

Production Design (con’t) Think about the tension between Design department, production department, finance department, Production Design (con’t) Think about the tension between Design department, production department, finance department, and HR department. Copyright 2006 John Wiley & Sons, Inc. 1 -57

Design Team Copyright 2006 John Wiley & Sons, Inc. 1 -58 Design Team Copyright 2006 John Wiley & Sons, Inc. 1 -58

Technology in the Design Process w Computer Aided Design (CAD) n n assists in Technology in the Design Process w Computer Aided Design (CAD) n n assists in creation, modification, and analysis of a design includes l computer-aided engineering (CAE) w tests and analyzes designs on computer screen l computer-aided manufacturing (CAM) w ultimate design-to-manufacture connection Copyright 2006 John Wiley & Sons, Inc. 1 -59

Improving Quality of Design w Review designs to prevent failures and ensure value w Improving Quality of Design w Review designs to prevent failures and ensure value w Design for environment w Measure design quality w Use quality function deployment w Design for robustness Copyright 2006 John Wiley & Sons, Inc. 1 -60

Design Review w Failure mode and effects analysis (FMEA) n a systematic method of Design Review w Failure mode and effects analysis (FMEA) n a systematic method of analyzing product failures w Fault tree analysis (FTA) n a visual method for analyzing interrelationships among failures w Value analysis (VA) n helps eliminate unnecessary features and functions Copyright 2006 John Wiley & Sons, Inc. 1 -61

FMEA for Potato Chips Failure Mode Cause of Failure Effect of Failure Corrective Action FMEA for Potato Chips Failure Mode Cause of Failure Effect of Failure Corrective Action Stale wlow moisture content wexpired shelf life wpoor packaging wtastes bad wwon’t crunch wthrown out wlost sales wadd moisture w cure longer wbetter package seal wshorter shelf life Broken wtoo thin wtoo brittle wrough handling wrough use wpoor packaging wcan’t dip wpoor display winjures mouth wchocking wperceived as old wlost sales wchange recipe wchange process wchange packaging Too Salty woutdated receipt weat less wprocess not in control wdrink more wuneven distribution of salt whealth hazard wlost sales Copyright 2006 John Wiley & Sons, Inc. wexperiment with recipe wexperiment with process wintroduce low salt version 1 -62

Fault tree analysis (FTA) Copyright 2006 John Wiley & Sons, Inc. 1 -63 Fault tree analysis (FTA) Copyright 2006 John Wiley & Sons, Inc. 1 -63

Value analysis (VA) w w w Can we do without it? Does it do Value analysis (VA) w w w Can we do without it? Does it do more than is required? Does it cost more than it is worth? Can something else do a better job? Can it be made by n n n a less costly method? with less costly tooling? with less costly material? w Can it be made cheaper, better, or faster by someone else? Copyright 2006 John Wiley & Sons, Inc. 1 -64

Design for Environment w Design for environment n n n designing a product from Design for Environment w Design for environment n n n designing a product from material that can be recycled design from recycled material design for ease of repair (so do not discard if out of order) minimize packaging minimize material and energy used during manufacture, consumption and disposal w Extended producer responsibility holds companies responsible for their product even after its useful life In Minnesota: agreement Sony takes back and recycle Sony electronic product. n EU: Auto makers pay for the recycling of old cars Copyright 2006 John Wiley & Sons, Inc. 1 -65

Design for Environment (cont. ) Copyright 2006 John Wiley & Sons, Inc. 1 -66 Design for Environment (cont. ) Copyright 2006 John Wiley & Sons, Inc. 1 -66

Quality Function Deployment (QFD) w Translates voice of customer into technical design requirements w Quality Function Deployment (QFD) w Translates voice of customer into technical design requirements w Displays requirements in matrix diagrams n n first matrix called “house of quality” series of connected houses Copyright 2006 John Wiley & Sons, Inc. 1 -67

Importance House of Quality 5 Trade-off matrix 3 Design characteristics 1 4 2 Customer Importance House of Quality 5 Trade-off matrix 3 Design characteristics 1 4 2 Customer requirements Relationship matrix Competitive assessment 6 Target values Copyright 2006 John Wiley & Sons, Inc. 1 -68

Competitive Assessment of Customer Requirements Competitive Assessment Easy and safe to use Irons well Competitive Assessment of Customer Requirements Competitive Assessment Easy and safe to use Irons well Customer Requirements Presses quickly 9 Removes wrinkles Doesn’t stick to fabric Provides enough steam Doesn’t spot fabric Doesn’t scorch fabric Heats quickly Automatic shut-off Quick cool-down Doesn’t break when dropped Doesn’t burn when touched Not too heavy 8 6 9 6 3 3 5 5 8 Copyright 2006 John Wiley & Sons, Inc. 1 2 B A 3 4 5 X AB X X BA AB X AB A XB X A ABX X AB AB X X A B 1 -69

Easy and safe to use Irons well Removes wrinkles Doesn’t stick to fabric Provides Easy and safe to use Irons well Removes wrinkles Doesn’t stick to fabric Provides enough steam Doesn’t spot fabric Doesn’t scorch fabric Heats quickly Automatic shut-off Quick cool-down Doesn’t break when dropped Doesn’t burn when touched Not too heavy Copyright 2006 John Wiley & Sons, Inc. - - + + - Automatic shutoff Protective cover for soleplate Time to go from 450º to 100º Time required to reach 450º F Flow of water from holes Size of holes Number of holes Material used in soleplate Thickness of soleplate Size of soleplate Weight of iron Customer Requirements Presses quickly Energy needed to press From Customer Requirements to Design Characteristics - + + + + - - + + + - - + + + - - - + + + 1 -70

Copyright 2006 John Wiley & Sons, Inc. Automatic shutoff Protective cover for soleplate Time Copyright 2006 John Wiley & Sons, Inc. Automatic shutoff Protective cover for soleplate Time to go from 450º to 100º Time required to reach 450º + Flow of water from holes - Size of holes Designers must take into account when designing Number of holes Material used in soleplate - Thickness of soleplate Size of soleplate Weight of iron Energy needed to press Tradeoff Matrix + + 1 -71

Copyright 2006 John Wiley & Sons, Inc. lb in. cm ty ea 3 1. Copyright 2006 John Wiley & Sons, Inc. lb in. cm ty ea 3 1. 4 8 x 4 2 SS 27 15 0. 5 45 500 N Y 4 1. 2 8 x 4 1 MG 27 15 0. 3 35 350 N Y 2 1. 7 9 x 5 4 T 35 15 0. 7 50 600 N Y 3 4 4 4 5 4 3 2 5 5 3 0 3 3 4 3 3 3 4 4 5 2 1. 2 8 x 5 3 SS 30 30 500 * * * * Automatic shutoff Number of holes Protective cover for soleplate Material used in soleplate Time to go from 450º to 100º Thickness of soleplate Time required to reach 450º Size of soleplate ft-lb Flow of water from holes Weight of iron Objective measures Units of measure Iron A Iron B Our Iron (X) Estimated impact of change Estimated cost Targets Design changes (impact>cost) Size of holes Energy needed to press Targeted Changes in Design mm oz/s sec Y/N 1 -72

Completed House of Quality SS = Silverstone MG = Mirorrglide T = Titanium Copyright Completed House of Quality SS = Silverstone MG = Mirorrglide T = Titanium Copyright 2006 John Wiley & Sons, Inc. 1 -73

A Series of Connected QFD Houses Part characteristics Process characteristics A-2 Parts deployment Which A Series of Connected QFD Houses Part characteristics Process characteristics A-2 Parts deployment Which components parts are affected by reducing the thickness of the soleplate? fasteners soleplate to iron, depth of holes) Copyright 2006 John Wiley & Sons, Inc. A-3 Process planning Change dies used for stamping the plate Operations Process characteristics House of quality Part characteristics A-1 Product characteristics Customer requirements Product characteristics A-4 Operating requirements - Operator training - Adjustment preven. 1 -74 maintenance

Special Considerations in Service Design w w Services are intangible Service output is variable Special Considerations in Service Design w w Services are intangible Service output is variable Service have higher customer contact Services are perishable Copyright 2006 John Wiley & Sons, Inc. w Service inseparable from delivery w Services tend to be decentralized and dispersed w Services are consumed more often than products w Services can be easily emulated 1 -75

Service Design Process w Service concept n purpose of a service; it defines target Service Design Process w Service concept n purpose of a service; it defines target market and customer experience (Mc D – Starbuck – Domino pizza) w Service package n mixture of physical items, sensual benefits, and psychological benefits w Service specifications n n n performance specifications design specifications delivery specifications Copyright 2006 John Wiley & Sons, Inc. 1 -76

High v. Low Contact Services Design Decision High-Contact Service w Facility w Convenient to High v. Low Contact Services Design Decision High-Contact Service w Facility w Convenient to location customer w Facility layout Low-Contact Service w Near labor or transportation source w Must look presentable, w Designed for accommodate efficiency customer needs, and facilitate interaction with customer Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -77

High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w Quality control w More variable since w Measured against customer is involved in established process; customer standards; testing expectations and rework possible perceptions of quality may differ; customer to correct defects present when defects occur w Capacity w Excess capacity required to handle peaks in demand w Planned for average demand Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -78

High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w Worker skills w Must be able to interact well with customers and use judgment in decision making w Technical skills w Scheduling w Must accommodate customer schedule w Customer concerned only with completion date Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -79

High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w High v. Low Contact Services (cont. ) Design Decision High-Contact Service Low-Contact Service w Service process w Mostly front-room w Mostly backactivities; service may room activities; change during delivery planned and in response to executed with customer minimal interference w Service package w Varies with customer; includes environment as well as actual service w Fixed, less extensive Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -80

Chapter 6 Processes, Technology, and Capacity Operations Management - 5 th Edition Roberta Russell Chapter 6 Processes, Technology, and Capacity Operations Management - 5 th Edition Roberta Russell & Bernard W. Taylor, III Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga

Make or Buy Decisions w Cost w Capacity w Quality Copyright 2006 John Wiley Make or Buy Decisions w Cost w Capacity w Quality Copyright 2006 John Wiley & Sons, Inc. w Speed w Reliability w Expertise 1 -82

Sourcing Continuum Vertical Integration (100% ownership) Joint Venture (equity partner) Strategic Alliance (long-term supplier Sourcing Continuum Vertical Integration (100% ownership) Joint Venture (equity partner) Strategic Alliance (long-term supplier contract; collaborative relationship) Arms-Length Relationship (short-term contract or single purchasing decision) Source: Adapted from Robert Hayes, Gary Pisano, David Upton, and Steven Wheelwright, Operations Strategy and Technology: Pursuing the Competitive Edge (Hoboken, NJ: 2005), p. 120 Copyright 2006 John Wiley & Sons, Inc. 1 -83

Types of Processes PROJECT Type of product Type of customer Product demand BATCH MASS Types of Processes PROJECT Type of product Type of customer Product demand BATCH MASS CONT. Unique Made-toorder Made-tostock Commodity (customized) (standardized ) Few individual customers Mass market Fluctuates Stable Very stable One-at-atime Infrequent Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -84

Types of Processes (cont. ) PROJECT BATCH MASS CONT. Demand volume Very low Low Types of Processes (cont. ) PROJECT BATCH MASS CONT. Demand volume Very low Low to medium High Very high No. of different products Infinite variety Many, varied Few Very few Production system Long-term project Discrete, job shops Repetitive, assembly lines Continuous, process industries Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -85

Types of Processes (cont. ) PROJECT Equipment BATCH MASS CONT. Varied Generalpurpose Specialpurpose Highly Types of Processes (cont. ) PROJECT Equipment BATCH MASS CONT. Varied Generalpurpose Specialpurpose Highly automated Fabrication Assembly Mixing, treating, refining Wide range of skills Limited range of skills Equipment monitors Specialized Primary type of work contracts Worker skills Experts, craftspersons Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -86

Types of Processes (cont. ) PROJECT Advantages Disadvantages Examples BATCH MASS CONT. Custom work, Types of Processes (cont. ) PROJECT Advantages Disadvantages Examples BATCH MASS CONT. Custom work, latest technology Flexibility, quality Efficiency, speed, low cost Highly efficient, large capacity, ease of control Non-repetitive, small customer base, expensive Costly, slow, difficult to manage Capital investment; lack of responsiveness Difficult to change, far-reaching errors, limited variety Construction, shipbuilding, spacecraft Machine shops, print shops, bakeries, education Automobiles, televisions, computers, fast food Paint, chemicals, foodstuffs Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New York: Mc. Graw-Hill, 2001), p. 210 Copyright 2006 John Wiley & Sons, Inc. 1 -87

Process Selection with Break-Even Analysis w Cost n Fixed costs l n constant regardless Process Selection with Break-Even Analysis w Cost n Fixed costs l n constant regardless of the number of units produced Variable costs l vary with the volume of units produced w Revenue n price at which an item is sold w Total revenue n is price times volume sold w Profit n difference between total revenue and total cost Copyright 2006 John Wiley & Sons, Inc. 1 -88

Break-Even Analysis: Graph Total cost line $3, 000 — $2, 000 — $1, 000 Break-Even Analysis: Graph Total cost line $3, 000 — $2, 000 — $1, 000 — Total revenue line 400 Break-even point Copyright 2006 John Wiley & Sons, Inc. Units 1 -89

Process Flowchart Symbols Operations Inspection Transportation Delay Storage Copyright 2006 John Wiley & Sons, Process Flowchart Symbols Operations Inspection Transportation Delay Storage Copyright 2006 John Wiley & Sons, Inc. 1 -90

Description of process Unload apples from truck 2 Move to inspection station 3 Weigh, Description of process Unload apples from truck 2 Move to inspection station 3 Weigh, inspect, sort 4 Move to storage 5 Wait until needed 6 Move to peeler 7 Apples peeled and cored 15 8 Soak in water until needed 20 9 Place in conveyor 5 10 Move to mixing area 11 Process Flowchart of Apple Processing 1 Weigh, inspect, sort Distance (feet) Location: Graves Mountain Process: Apple Sauce Time (min) Operation Transport Inspect Delay Storage Step Date: 9 -30 -02 Analyst: TLR Page 1 0 f 3 Copyright 2006 John Wiley & Sons, Inc. 20 100 ft 30 50 ft 360 20 ft Total 20 ft 30 480 190 ft 1 -91

From Function to Process Sales Manufacturing Purchasing Accounting Product Development Order Fulfillment Supply Chain From Function to Process Sales Manufacturing Purchasing Accounting Product Development Order Fulfillment Supply Chain Management Customer Service Function Copyright 2006 John Wiley & Sons, Inc. Process 1 -92

Chapter 7 Facilities Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Chapter 7 Facilities Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga

Facility Layout Arrangement of areas within a facility to: w Minimize material-handling costs w Facility Layout Arrangement of areas within a facility to: w Minimize material-handling costs w Utilize space efficiently w Utilize labor efficiently w Eliminate bottlenecks w Facilitate communication and interaction w Reduce manufacturing cycle time (max time at each work station for a product) w Reduce customer service time w Eliminate wasted or redundant movement w Increase capacity Copyright 2006 John Wiley & Sons, Inc. w Facilitate entry, exit, and placement of material, products, and people w Incorporate safety and security measures w Promote product and service quality w Encourage proper maintenance activities w Provide a visual control of activities w Provide flexibility to adapt to changing conditions 1 -94

BASIC LAYOUTS w Process layouts Layouts (eg. Furniture making) n group similar activities together BASIC LAYOUTS w Process layouts Layouts (eg. Furniture making) n group similar activities together according to process or function they perform w Product layouts (also known as assembly line) n arrange activities in line according to sequence of operations for a particular product or service w Fixed-position layouts n are used for projects in which product cannot be moved Copyright 2006 John Wiley & Sons, Inc. 1 -95

Eg. Process layout in furniture factory - Cutting the wood Polishing the wood Designing Eg. Process layout in furniture factory - Cutting the wood Polishing the wood Designing the wood Assemble the parts Paint and further polishing Copyright 2006 John Wiley & Sons, Inc. 1 -96

Product layout (page 261) w eg: Krispy Kreme (or dunkin donut) Dough mixer – Product layout (page 261) w eg: Krispy Kreme (or dunkin donut) Dough mixer – shaping – fried – glazing(topping style) – cold – boxed * Disadvantage of assembly line ? Copyright 2006 John Wiley & Sons, Inc. 1 -97

Fixed-Position Layouts § Typical of projects § Equipment, workers, materials, other resources brought to Fixed-Position Layouts § Typical of projects § Equipment, workers, materials, other resources brought to the site (Because the product produced is too: fragile, bulky, or heavy to move) § Highly skilled labor § Often low fixed (equipment normally leases by the company) § Typically high variable costs (high labor rate) § Eg: Ships, houses, aircraft Copyright 2006 John Wiley & Sons, Inc. 1 -98

Designing Service Layouts w Must be both attractive and functional w Types n Free Designing Service Layouts w Must be both attractive and functional w Types n Free flow layouts l n Grid layouts l n encourage browsing, increase impulse purchasing, are flexible and visually appealing encourage customer familiarity, are low cost, easy to clean and secure, and good for repeat customers Loop and Spine layouts l both increase customer sightlines and exposure to products, while encouraging customer to circulate through the entire store Copyright 2006 John Wiley & Sons, Inc. 1 -99

Types of Store Layouts Encourage familiarity Forcing customer to travel through aisles of merchandise Types of Store Layouts Encourage familiarity Forcing customer to travel through aisles of merchandise that might prompt additional purchases : eg. Book store) Copyright 2006 John Wiley & Sons, Inc. Maximize customer exposure to as many goods as possible 1 -100

Copyright 2006 John Wiley & Sons, Inc. 1 -101 Copyright 2006 John Wiley & Sons, Inc. 1 -101

Foreman sedang melakukan servis sebuah kereta di dalam kawasan bay 2 (petak berwarna biru) Foreman sedang melakukan servis sebuah kereta di dalam kawasan bay 2 (petak berwarna biru) Copyright 2006 John Wiley & Sons, Inc. 1 -102

Gambar G : Ruang legar pameran kereta Honda di Global Amity Copyright 2006 John Gambar G : Ruang legar pameran kereta Honda di Global Amity Copyright 2006 John Wiley & Sons, Inc. 1 -103

Designing Product Layouts Eg. Imagine the making of kuih karipap w Objective n Balance Designing Product Layouts Eg. Imagine the making of kuih karipap w Objective n Balance the assembly line w Line balancing n tries to equalize the amount of work at each workstation w Precedence requirements n physical restrictions on the order in which operations are performed w Cycle time n maximum amount of time a product is allowed to spend at each workstation If the targeted production rate is to be reached Copyright 2006 John Wiley & Sons, Inc. 1 -104

Cycle Time Example Wants to produce karipap 120 units in 8 hour day Desired Cycle Time Example Wants to produce karipap 120 units in 8 hour day Desired cycle time Cd = production time available desired units of output (8 hours x 60 minutes / hour) (120 units) Cd = 480 120 Copyright 2006 John Wiley & Sons, Inc. = 4 minutes 1 -105

Flow Time vs Cycle Time w Cycle time = max time spent at any Flow Time vs Cycle Time w Cycle time = max time spent at any station w Flow time = time to complete all stations 1 2 3 4 minutes Flow time = 4 + 4 = 12 minutes Cycle time = max (4, 4, 4) = 4 minutes Copyright 2006 John Wiley & Sons, Inc. 1 -106

Efficiency of Line Efficiency Minimum number of workstations i t i i i=1 E Efficiency of Line Efficiency Minimum number of workstations i t i i i=1 E = n. C a t i N= i=1 Cd where ti j n Ca Cd = completion time for element i = number of work elements = actual number of workstations = actual cycle time = desired cycle time Copyright 2006 John Wiley & Sons, Inc. 1 -107

Line Balancing Procedure 1. Draw and label a precedence diagram 2. Calculate desired cycle Line Balancing Procedure 1. Draw and label a precedence diagram 2. Calculate desired cycle time required for the line 3. Calculate theoretical minimum number of workstations 4. Group elements into workstations, recognizing cycle time and precedence constraints 5. Calculate efficiency of the line 6. Determine if theoretical minimum number of workstations or an acceptable efficiency level has been reached. If not, go back to step 4. Copyright 2006 John Wiley & Sons, Inc. 1 -108

Line Balancing: Example WORK ELEMENT A B C D PRECEDENCE TIME (MIN) — A Line Balancing: Example WORK ELEMENT A B C D PRECEDENCE TIME (MIN) — A A B, C 0. 1 0. 2 0. 4 0. 3 Press out sheet of fruit Cut into strips Outline fun shapes Roll up and package B 0. 1 0. 2 A D 0. 3 C Copyright 2006 John Wiley & Sons, Inc. The company need to produce 6000 fruits strips every 40 hr week 0. 4 1 -109

The company need to produce 6000 fruits strips every 40 hr week Line Balancing: The company need to produce 6000 fruits strips every 40 hr week Line Balancing: Example (cont. ) WORK ELEMENT A B C D Press out sheet of fruit Cut into strips Outline fun shapes Roll up and package Cd = PRECEDENCE TIME (MIN) — A A B, C 0. 1 0. 2 0. 4 0. 3 40 hours x 60 minutes / hour 2400 = = 0. 4 minute 6, 000 units 6000 0. 1 + 0. 2 + 0. 3 + 0. 4 1. 0 N= = = 2. 5 3 workstations 0. 4 Copyright 2006 John Wiley & Sons, Inc. 1 -110

Line Balancing: Example (cont. ) WORKSTATION 1 REMAINING ELEMENTS 0. 3 0. 1 0. Line Balancing: Example (cont. ) WORKSTATION 1 REMAINING ELEMENTS 0. 3 0. 1 0. 0 0. 1 ELEMENT REMAINING TIME B, C C, D D none A B C D 2 3 B 0. 1 0. 2 A D 0. 3 C Copyright 2006 John Wiley & Sons, Inc. Cd = 0. 4 N = 2. 5 0. 4 1 -111

Line Balancing: Example (cont. ) Work station 1 Work station 2 Work station 3 Line Balancing: Example (cont. ) Work station 1 Work station 2 Work station 3 A, B C D 0. 3 minute 0. 4 minute 0. 3 minute Cd = 0. 4 N = 2. 5 1. 0 0. 1 + 0. 2 + 0. 4 + 0. 3 E= = = 0. 833 = 83. 3% 1. 2 3(0. 4) Copyright 2006 John Wiley & Sons, Inc. 1 -112

The company has 5 step process to prepare its product for shipment. If the The company has 5 step process to prepare its product for shipment. If the company needs a new product off the line every 10 minutes, determine the efficiency of the line and calculate the expected output for an eight-hour day Task Precedence Time (mins) A B C None A A 5 2 4 D A 7 E B, C, D Copyright 2006 John Wiley & Sons, Inc. 5 1 -113

Exercise: 1. The following are the list of tasks, task time, and precedence requirement Exercise: 1. The following are the list of tasks, task time, and precedence requirement of an activity at X-pac company. If the mission is to produce a 100 unit of product in a fourty-hour period? balance the line and calculate the efficiency. Copyright 2006 John Wiley & Sons, Inc. 1 -114

Domino pizza is revamping its order processing and pizza making procedure. Domino must produce Domino pizza is revamping its order processing and pizza making procedure. Domino must produce 600 pizza in a 40 -hour week. Use the following information to draw and label a precedence diagram, compute cycle time, theoretical min. number of WS, balance the assembly line, and calculate its efficiency. Copyright 2006 John Wiley & Sons, Inc. 1 -115

Construct precedence diagram and compute the lead time for the process. If demand for Construct precedence diagram and compute the lead time for the process. If demand for pizza is 120 per night (5 pm to 1 am), what is cycle time? . Balance the line and calculate its efficiency. Copyright 2006 John Wiley & Sons, Inc. 1 -116

Computerized Line Balancing § Use heuristics to assign tasks to workstations § § § Computerized Line Balancing § Use heuristics to assign tasks to workstations § § § Longest operation time Shortest operation time Most number of following tasks Least number of following tasks Ranked positional weight Copyright 2006 John Wiley & Sons, Inc. 1 -117