L 1 Manufacturing and Service Systems Management ISE

L 1: Manufacturing and Service Systems Management ISE 360 Engineering Economics Mahmut Ali GÖKÇE Industrial Systems Engineering Computer Sciences www. izmirekonomi. edu. tr 1

Today n n Course Description Requirements, Topics Rules of the Course Lecture on Service and Manufacturing Systems www. izmirekonomi. edu. tr

Course Description n Management of Manufacturing and Service Systems. q q q Management in “Engineering” sense. Learn what types of manufacturing and service systems exist. Learn the importance of and difficulties in managing these systems Learn methods and tools to manage Exercise these methods. www. izmirekonomi. edu. tr

Course Requirements and Rules n Course will require q q n Analytical thinking Mathematical modeling Basic Calculus and Probability Theory Reading Course Rules q q q Regular Attendance, Participation Midterm 30%, Final 40%, HW/Quiz 20%, Part. /Attendance 10% Syllabus available at http: //homes. ieu. edu. tr/~agokce/ www. izmirekonomi. edu. tr

Your Background and e-Service Interests n n n What is your interest in this topic? Why? Which topics specifically interest you? Information Technology background Service management and/or manufacturing systems experience? Have you previously taken a service operations or service marketing class? E-Service experiences? www. izmirekonomi. edu. tr

Definitions www. izmirekonomi. edu. tr 6

Marketing Operations Finance Functional Areas of the Firm www. izmirekonomi. edu. tr

Production is the creation of goods and services n. The set of activities that creates value in the form of goods and services by transforming inputs into outputs is called Operations management (OM) www. izmirekonomi. edu. tr

n n Managing mfg. /service systems = managing operations involved. All organizations have operations function. What are operations you see or get involved as customers? n n You might wake up with radio, wash your face, take public transportation, depend on banking to get money from parents…etc. Operations differ in volume, variety, variation in demand visibility www. izmirekonomi. edu. tr

Organizational Charts Commercial Bank Operations Finance Marketing Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Investments Security Real estate Loans Commercial Industrial Financial Personal Mortgage Accounting Auditing Trust Department Figure 1. 1(A) www. izmirekonomi. edu. tr

Organizational Charts Airline Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising Figure 1. 1(B) www. izmirekonomi. edu. tr

Organizational Charts Manufacturing Operations Facilities Construction; maintenance Production and inventory control Scheduling; materials control Quality assurance and control Supply-chain management Manufacturing Tooling; fabrication; assembly Design Product development and design Detailed product specifications Industrial engineering Efficient use of machines, space, and personnel Marketing Finance/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall Sales promotion Advertising Sales Market research Process analysis Development and installation of production tools and equipment Figure 1. 1(C) www. izmirekonomi. edu. tr

Options for Increasing Contribution Marketing Option Current Sales Cost of Goods Gross Margin Finance Costs Subtotal Taxes at 25% Contribution $100, 000 – 80, 000 20, 000 – 6, 000 14, 000 – 3, 500 $ 10, 500 Finance/ Accounting Option Increase Reduce Sales Finance Revenue 50% Costs 50% $150, 000 – 120, 000 30, 000 – 6, 000 24, 000 – 6, 000 $ 18, 000 $100, 000 – 80, 000 20, 000 – 3, 000 17, 000 – 4, 250 $ 12, 750 OM Option Reduce Production Costs 20% $100, 000 – 64, 000 36, 000 – 6, 000 30, 000 – 7, 500 $ 22, 500 www. izmirekonomi. edu. tr

Critical Decisions þ þ þ þ þ Decision Areas Service and product design Process and capacity design Location Layout design Human resources, job design Supply-chain management Inventory management Scheduling Maintenance www. izmirekonomi. edu. tr

Significant Events in OM Figure 1. 3 www. izmirekonomi. edu. tr

Challenges in Mfg/Service Sys. Mgt To From þ Local or national focus þ Batch shipments þ þ Low bid purchasing þ þ Lengthy product development þ þ þ Standard products Global focus Just-in-time Supply chain partnering Rapid product development, alliances Mass customization Empowered employees, teams þ Job specialization www. izmirekonomi. edu. tr

Characteristics of Goods þ þ þ Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction www. izmirekonomi. edu. tr

Characteristics of Service þ þ þ þ Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed www. izmirekonomi. edu. tr

Service n The Service Economy q q q Early 1900 s … 30% of U. S. economy produced services Today (in the USA) … > 80% of economy produces services Rate in Turkey is lower but increasing. But is a dominantly service economy desirable? Can there be service w/o manufacturing? www. izmirekonomi. edu. tr

Service n Categories of Service q q q n Business services: consulting, finance, banking, insurance, real estate (FIRE) Trade services: retailing, maintenance, repair Social/personal services: restaurants, health care Public administration: education, government Infrastructure services: communications, transportation How to categorize e-Service? www. izmirekonomi. edu. tr

Definitions: Service n What is “service”? q q Difficult to define … often, one observes circular definitions of what service is General characteristics of services n n n n Services are deeds, processes, and performances Service is an experience Service is an activity that takes place between a customer and a service employee/system Service is co-produced by the consumer Service is intangible, goods are tangible Services are consumed at the same time as they are produced Goods exist over time, services perish if not consumed www. izmirekonomi. edu. tr

Definitions: Service n Service Components q Service package/Service product n n n q Service process n q That which is “offered” or of value in the experience A bundle of goods and services that is provided in some environment Consists of goods, services, and information The way the service experience is created Service supply chain n Supports/facilitates the process www. izmirekonomi. edu. tr

Definitions Service n Service package consists of four features q Supporting facility n q Facilitating goods n q some “thing” consumed or used during the service experience that contributed to the experience Explicit services n q physical resources; where the service is delivered readily observable benefits of the service Implicit services n psychological benefits of the service, less easy to sense www. izmirekonomi. edu. tr

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Definitions What is e-Service? n Given the previous definitions of a service q q would an e-Service be characterized as a service? would we have to modify those definitions? www. izmirekonomi. edu. tr

Definitions What is e-Service? n An e-Service is … q q [1] a service package of goods, offline services, and digital content [2] involves some agent (Consumer, Business, Government) who consumes the service [3] the consumer of service (“agent”) interacts with an IT technology delivery system to co-produce service [4] digital content is a core attribute of service-product www. izmirekonomi. edu. tr

Definitions Examples of e-Service Not an e-Service v Digital watch v v Vacuum with embedded intelligence v v an intelligent good v Vending machine v v Barcode scanner data put into internal database about supply chain information for optimizing supply chain Traditional B 2 C, B 2 B, etc. v v v Digital watch with GPS, atomic clock polling Vacuum with embedded intelligence that dynamically adapts via communication with centralized server Vending machine with i-Phone support for payment process Supply chain “object” (barcode scanner) that communicates status to customer of supply chain via “service-product” E-Commerce B 2 C, B 2 B, etc. www. izmirekonomi. edu. tr

e-Service Types of e-Service www. izmirekonomi. edu. tr 28

Types of e-Service n n x 2 y’s q B 2 C q B 2 B q C 2 B, C 2 G, C 2 C, B 2 G, G 2 C, G 2 B, G 2 G, B 2 E, P 2 P x. SP’s q ASP: application service provider q BSP: business service provider q CSP: commerce service provider q CSP: content service provider q MSP: management service provider q SSP: security service provider www. izmirekonomi. edu. tr

Productivity Challenge Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital) The objective is to improve this measure of efficiency Important Note! Production is a measure of output only and not a measure of efficiency www. izmirekonomi. edu. tr

Productivity Units produced Productivity = Input used þ þ þ Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve www. izmirekonomi. edu. tr

Productivity Calculations Labor Productivity Units produced Productivity = Labor-hours used 1, 000 = = 4 units/labor-hour 250 www. izmirekonomi. edu. tr

Multi-Factor Productivity Output Productivity = Labor + Material + Energy + Capital + Miscellaneous þ Also known as total factor productivity þ Output and inputs are often expressed in dollars www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day 8 titles/day Overhead = $400/day 8 titles/day Old labor = productivity 32 labor-hrs www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day 8 titles/day Overhead = $400/day 8 titles/day Old labor = productivity 32 labor-hrs =. 25 titles/labor-hr www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day New System: 14 titles/day 8 titles/day Overhead = $400/day Overhead = $800/day 8 titles/day Old labor = productivity 32 labor-hrs =. 25 titles/labor-hr 14 titles/day New labor = productivity 32 labor-hrs www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day New System: 14 titles/day 8 titles/day Overhead = $400/day Overhead = $800/day 8 titles/day Old labor = productivity 32 labor-hrs =. 25 titles/labor-hr 14 titles/day New labor = =. 4375 titles/labor-hr productivity 32 labor-hrs www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day New System: 14 titles/day 8 titles/day Overhead = $400/day Overhead = $800/day 8 titles/day Old multifactor = productivity $640 + 400 www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day New System: 14 titles/day 8 titles/day Overhead = $400/day Overhead = $800/day 8 titles/day Old multifactor = =. 0077 titles/dollar productivity $640 + 400 www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day New System: 14 titles/day 8 titles/day Overhead = $400/day Overhead = $800/day 8 titles/day Old multifactor = =. 0077 titles/dollar productivity $640 + 400 14 titles/day New multifactor = productivity $640 + 800 www. izmirekonomi. edu. tr

Collins Title Productivity Old System: Staff of 4 works 8 hrs/day Payroll cost = $640/day New System: 14 titles/day 8 titles/day Overhead = $400/day Overhead = $800/day 8 titles/day Old multifactor = =. 0077 titles/dollar productivity $640 + 400 14 titles/day New multifactor = =. 0097 titles/dollar productivity $640 + 800 www. izmirekonomi. edu. tr

Measurement Problems þ Quality may change while the quantity of inputs and outputs remains constant þ External elements may cause an increase or decrease in productivity þ Precise units of measure may be lacking www. izmirekonomi. edu. tr

Productivity Variables þ Labor - contributes about 10% of the annual increase þ Capital - contributes about 32% of the annual increase þ Management - contributes about 52% of the annual increase www. izmirekonomi. edu. tr

Next Lecture on Forecasting n Reading : q Ch 2 from Nahmias www. izmirekonomi. edu. tr