Upload
vikas
View
214
Download
0
Embed Size (px)
DESCRIPTION
Ops
Citation preview
Operations 1
Process Analysis Terms
Process: Is any part of an organization that takes inputs and transforms them into outputs
Cycle Time: Is the average successive time between completions of successive units
Utilization: Is the ratio of the time that a resource is actually activated relative to the time that it is available for use
Process Flowcharting Defined Process flowcharting is the use of a
diagram to present the major elements of a process
The basic elements can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues
It is an ideal methodology by which to begin analyzing a process
Other Process Terminology Blocking
Occurs when the activities in a stage must stop because there is no place to deposit the item just completed
If there is no room for an employee to place a unit of work down, the employee will hold on to it not able to continue working on the next unit
Starving Occurs when the activities in a stage must stop
because there is no work If an employee is waiting at a work station and no
work is coming to the employee to process, the employee will remain idle until the next unit of work comes
Other Process Terminology (Continued)
Bottleneck Occurs when the limited capacity of a
process causes work to pile up or become unevenly distributed in the flow of a process
If an employee works too slow in a multi-stage process, work will begin to pile up in front of that employee. In this is case the employee represents the limited capacity causing the bottleneck.
Pacing Refers to the fixed timing of the movement of
items through the process
Process Performance Metrics
Operation time = Setup time + Run time Cycle time = Average time between completion of
successive units Throughput time = Average time for a unit to move
through the system ie entire process Lead time = The total time it takes a customer to receive
an order (includes time to process the order, throughput time and delivery time)
Process Velocity = Throughput time (Throughput ratio) Value-added time
COMPONENTS OF LEAD TIME
Total Flow time spent in the system comprises: Processing Time Setup Time Move Time Wait for Batch Time Wait for Match Time (for assemblies/ kits) Queue Time
Allowed Lead Time = Average Flow Time + Safety Time
Process Performance Metrics (Continued)
Throughput rate = 1 . Cycle time
Efficiency = Actual output Standard Output
Productivity = Output Input
Utilization = Time Activated Time Available
A Few 1-Dimensional Frameworks
By Nature of Product: Discrete ------- Discrete ------ Commodity Heterogeneous Homogeneous
By Job Processing Requirements: Job Shop ------ Flow Shop
By Layout Type: Process/ ------ Product Layout Functional
.. A Few 1-Dimensional Frameworks
By Process Technology Type: Project ------- Intermittent ------ Continuous By Logistics Positioning To Order -------------- To Stock
ETO MTO ATO MTS
Design Manufacture Assembly Delivery
IV. Continuous
Flow
III. Connected Flow (Line)
II. Disconnected Flow (Batch)
I. Jumbled Flow (Job Shop)
Low Volume, One of a
Kind
Multiple Products,
Low Volume
Few Major
Products, Higher Volume
High Volume,
High Standard-
ization Heavy/
Customized Machinery
Low-customization Light/ Medium
Machines
Assembly of Autos, PCs,
TVs etc.
Sugar Refinery
Unit Cost (High) Flexibility (High)
Dependability (Low)
Dependability (High) Flexibility (Low) Unit Cost (Low)
The Product-Process Matrix (Hayes & Wheelwright)
Inefficient Region
Wasteful Region
Effectiveness Measures:
From Chase, Aquilano & Jacobs Ch. 5
2-D Framework: Volume-Specificity
Volume
Customer Specificity
Design for Customer
Mass Production
Craft
Concurrent
Response
2-D Framework: Volume-Variety (in Discrete Manufacturing)
Volume
Variety
NC Job Shop
Flow/ Transfer Lines
GT/CM
FMS
FLOW LINES IN MASS PRODUCTION HIERARCHY
Mass Production
Quantity Production
Flow Production
Flow Process
Discrete Item Flow Line
Assembly Flow Line
Transfer Line
FMS Defined
An integrated computer-controlled complex of Numerically Controlled machine tools, with Automated Tool Management, and Automated Material Handling, that can simultaneously process a Medium-sized volume of a Moderate variety of parts
Group Technology A management approach of recognizing and
exploiting similarities, to break down a complex task and obtain greater productivity in design and manufacturing, by:
Efficiently storing/ retrieving information about recurring situations and problems
Standardizing similar tasks Performing like activities together
Cellular Manufacturing The organisation of manufacturing tasks into self-
contained units or cells, comprising: Different kinds of manufacturing processes, Arranged in physical proximity, To produce a limited range or family of items Attempts to combine flexibility of job shop with efficiency
of flow lines
The Volume Variety Map
Goal concepts
Systems view Local optimization is not the best Bottleneck the real target Loss at bottleneck is loss for system Statistical fluctuations (CV) Use buffer on both sides of bottleneck
What is SCM
The process of planning, implementing and controlling the efficient and effective flow of raw material, work in process and finished goods and related information from the point of source to the point of consumption or the purpose of conforming to customer requirements.
- Council of Logistics Management
Supply Chain Management
S M W D R
Product / Service
Funds / Money
Information
Topics Inventory Management
P & Q Systems EOQ Risk Pooling Square Root Law RFID / Barcodes Bull Whip Effect Relationship with Communication Technology
Strategic Alliances - VMI Logistics
Dist Models / 3PL
Inventory Management
COST ASSOCIATED WITH INVENTORY
Holding / Carrying Cost Ordering Cost Set-up cost Shortage Cost
Demand
Certainty Risk Uncertainty
Ordering
When to Order How Much to Order
P & Q SYSTEM
We have two general type of inventory system :
FixedOrder Quantity model ( Q- System ) FixedTime Period Model ( P-System )
Q System Here, order quantity is fixed which is equal
to EOQ. Whenever inventory level falls to a predetermined level, reorder point , order is placed .
Reorder point , R= Average demand over lead time +Safety Stock (S.S)
Order quantity , q = Economic Order quantity
Average Inventory = [ EOQ/2+safety stock ]
P System Here, review period is fixed and order size
varies . Order size is calculated as : Replenishment level , R = average demand over lead
time & review period + safety stock .
Ordered Quantity = Replenishment level Inventory on hand - Inventory on order.
Average Inventory = Average Consumption during review period / 2 + S.S
A3
ORDERING POINTS
1 2 3 4 5 6 7 8 9 10 11 12 13 Q SYSTEM FIXED ORDER QUANTITY SYSTEM ( ORDER QUANTITY = 500 )
1000
800
600
400
200 (100)
(400) A1 A2 ROP Level
SS Level
P SYSTEM- FIXED PERIOD REVIEW SYSTEM
L 2 4 6 L 8 10 12 14 R =6 R = 6 MONTHS
1000
800
600
400
200 SAFETY STOCK
1100 ROP = 1100
Within the suggested classification, regularity of orders has been considered to fix the review policy, replenishment frequency, review period & lead times
ABC HILRegular Irregular Sporadic Regular Irregular Sporadic Regular Irregular Sporadic
HILHILHILHIL
C2
B
C1
Classification - ReviewAS/FES FMS
A
F M S
Manual Review System Review
Inventory Review Mechanism
ITEMS ARE FED FROM THIS
WHEN BIN IS EMPTY , IT IS SIGNAL TO PLACE ORDER
THIS CONTAINS ITEMS = REORDER LEVEL, R
THIS IS USED WHEN 1ST BIN IS EXHAUSTED THIS SYSTEM OBVIATES CONTINUOUS MONITORING
USEFUL IN MANUAL SYSTEM
1st BIN
2nd BIN
Economic Order Quantity (EOQ)
Occurs when Ordering Cost equals Holding Cost
Assumptions Single Product Stable Demand Zero Lead Time
Risk Pooling
DEMAND VARIABILITY IS REDUCED IF IT IS AGGREGATED ACROSS LOCATIONS. HIGH DEMAND OF ONE MAY BE OFF-SET BY LOW DEMAND OF ANOTHER. THIS LEADS TO REDUCED SAFETY STOCK AND HENCE AVGE INVENTORY.
Square Root Law
Amount of inventory is approximately proportional to the square root of the number of warehouses
RFIDs and BARCODEs
BULL WHIP EFFECT
While the consumers consume the product at a steady state with minor
fluctuations, the demand order variability in the supply chains are amplified as they
move up the chain.
DEMAND VARIABILITY
DEMAND VARIABILITY
BULLWHIP EFFECT IN SUPPLY CHAIN
Variability in Demand
02468
10
1 2 3 4 5 6 7 8
Time
Ord
er
Qu
an
tity
Consumer Sales
Retailers order toWholesaler
Wholesalers orderto Manufacturer
Manufacturer'sorder to Supplier
Demand forecast updating Order batching Price fluctuation Rationing and shortage gaming
CAUSES OF BULL WHIP EFFECT
Communication Technology
MAJOR ERP PLAYERS
SAP : MARKET LEADER. DEVELOPING ANALYTICAL SOFTWARE FOR SUPPLY CHAIN PLANNNG
ORACLE: INITIALLY ADDED FINANCIAL APPLICATINS TO ITS
DATA BASE PROGRAMS NOW A LARGE ERP PROVIDER PEOPLE SOFT: SAP STARTED WITH MANUFACTURING
APPLICAIONS AND ORACLE WITH FINANCE, PEOPLESOFT STARTED WITH HUMAN RESOURCES APPLICATIONS.
BAAN: CROSS FUNCTIONAL INTEGTRATED SYSTEMS WITH
ENTIREPRISE WIDE BUSINESS VIEW. FOCUS ON MIDSIZE MANUFACTURING COMPANIES.
Strategic Alliances
Supplier Selection
ADVANTAGE OF SINGLE VERSUS MULTIPLE SOURCES
MULTIPLE SINGLE Assurance of supply in case of trouble Lever to guard against price increase Some suppliers cant handle all the work Ability to call on unused capacity of several suppliers
Easier to manage coordination and relationship Leverage over supplier is greater with volume purchase . Vendor feels fully responsible / total obligation Supplier more inclined to do special things . Lesser tooling cost Feasible to introduce JIT
Factor Weight (%)
Measurement
Performance Of Vendor
Rating
Quality Delivery
Price Service
40 30 20 10
(No of sample accepted / Total samples )* 100 (On time Delivery/Total Delivery )*100 (Standard price / customer price) * 100 Good : fair : poor ::100:70:40
96 % 97% 92% 70%
38.4(0.4*96) 29.1(30*0.97) 18.4 (0.2*92) 7 (0.1 * 70)
WEIGHTED POINT RATING SYSTEM OF VENDOR EVALUATION
THE SEVEN Cs OF EFFECTIVE SUPPLIER EVALUATION Competence : This includes - Technical skills of staff at all levels - Ability to design and deliver product / service Capacity physical , human , financial resource Commitment in terms of quality , cost and service Control system : resource control systems, inventory, costs, budgets, people and
information. Cash resource and financial stability Cost total cost of acquisition Consistency
STRATEGIC ALLIANCES V M I
COSTCO RETAILER -155 STORES, $ 27 b KIMBERLY CLARK DIAPER MANUFACTUERER OBJECTIVE
CUTTING COSTS ACROSS THE CHAIN
STOCK REPLENISHMENT RESPONSIBILITY- SUPPLIER HOW MUCH TO SHIP TO WHICH STORE WHEN COST OF W/ HOUSING EXCESS STOCK LIMITED STORE SPACE AVAILABLE
SUPPLIER PAYS FOR EVERYTHING INVOLVED IN
MANAGING COTSCO,S INVENTORY EXCEPT ACTUAL SHELF-STOCKS
STRATEGY
TECHNOLOGY ENABLED SHARING OF POS DATA -RECORDED SALE COMMUNICATION WITH LOADING POINTS/ TRUCKING AGENT/
VEHICLES ON THE MOVE. TO MEET DEMAND FLUCTUATION OPERATIONAL EXIGENCIES -LEVERGE LOGSTCS SUPERVISE STORES INVENTORY LEADTIME, SAFETY STOCK -INV.CARRYNG COST
PRODUCT SKU RATIONALISATION
eg: UNISEX PRODUCT - RISK POOLING ENHANCED CUSTOMER SERVICE SCOUTING STORES, PACKGNG DESIGN, RANDOM STOCK VERIFICATION, INCOMPLETE IVERY, WRONG DELIVERY.
ORDER-CUSTOMER-CONSIGNMENT LINK UP. -CUSTOMER SERVICE
KIMBERLY CLARK EXTENDED SERVICES TO ALL STORES AND ALL REGIONS
- ECONOMY OF SCALE
THE COCEPT EXTENDED TO SUPPLIERS SUPPLIER VELCRO FABSHIPMENTS BASED ON DEMAND DATA SHARING
BASED ON STORES SALE. - RM PLANNING
STRATEGIC ALLIANCE FRAMEWORK
ADDING VALUE TO PRODUCT COMPLEMENTARY PRODUCTS IMPROVED DISTRIBUTION TIME TO MARKET TIME TO REPAIR AND SERVICES IMPROVED MARKET ACCESS COOPERATE TO ADDRESS NEED OF MAJOR
RETAILERS ACCESS TO NEW MARKET CHANNELS
JOINT ACTION TO REDUCE CYCLE TIME SYSTEM COSTS AND IMPROVE OPERATIONS COMPANIES WITH COMPLEMENTARY
SEASONAL PRODUCT TO OPTIMISE WARE HOUSE AND TRANSPORT ASSETS.
ADDING TECHNOLOGICAL STRENGTHS PARTNERSHIP WITH MATCHING STRENGTHS TIMKEN,CUMMINS
LOGISTICS
OUTBOUND DISTRIBUTION STRATEGIES
DIRECT SHIPMENT WAREHOUSING CROSS DOCKING TRANS-SHIPMENT
DIRECT SHIPMENT: ELIMINATES EXPENSES OF OPERATING - DISTRIBUTION CENTER - REDUCED LEAD TIMES RISK POOLING EFFECT NEGATED AS THERE IS - NO WAREHOUSE
INCREASED MAFR./DISTRB COST DUE TO FREQUENT TRIPS TO MORE LOCATIONS.
DIRECT SHIPMENT AS PREFERRED STRATEGY
SUCCESS STORY: J C PENNEY sells merchandise through a thousand stores and millions of catalogues. It deals in 200,000 items sourcing from more than 20,000 suppliers. Each store retains total accountability for sales,inventory & profit and is responsible for sales forecast and release of orders.
Orders are communicated to buyers who coordinate shipment with distribution personnel to ensure quick response and a tracking system is used to monitor flow of materials.
IN MOST CASES PRODUCTS ARE SHIPPED DIRECT TO PENNEYS STORES.
CROSS DOCKING IN 1979 KMART WAS ONE OF THE LEADING COMPANIES IN THE RETAIL INDISTRY WITH 2000 STORES. WAL- MART WAS A SMALL NICHE RETAILER WITH 200 STORES. IN TEN YEARS WAL-MART BECAME THE LARGEST AND THE HIGHEST PROFIT RETAILER IN THE WORLD. HOW DID THEY DO IT?
STRATEGY: INVENTORY REPLENISHMENT POLICY AS THE CENTER PIECE OF STRATEGY
KEY SUCCESS FACTOR: INNOVATIVE LOGISTICS TECHNIQUE - CROSS DOCKING
CROSS DOCKING
In CROSS DOCKING a warehouse functions as inventory coordinator point.No inventory is maintained except waiting for a few hours. Goods arrive at the warehouse and are transferred to vehicles serving retailers as rapidly as possible. The system reduces Inventory Costs and Lead Time.
WALL-MART delivers 85% of consignments through CROSS DOCKING. Shares POS data with its vendors through a private satellite communicating system. Has a dedicated fleet of 2000 trucks. Stocks are replenished twice a week on average. Has achieved Economics Of Scale and reduced the need for safety stocks and cost for sale.
TRANS SHIPMENT
SHIPMENT OF ITEMS BETWEEN DIFFERENT FACILITIES AT THE SAME LEVEL IN THE SUPPLY CHAIN TO MEET SOME EMERGENT DEMAND.
PRACTICED MOSTLY AT THE RETAIL LEVEL. EACH RETAILER MUST HAVE ACCESS TO THE INFORMATION OF INVENTORY HELD BY OTHERS.
IF ALL THE RETAIL OUTLETS HAVE THE SAME OWNER(?) , INFORMATION SYSTEM IS STRONGLY INTEGRATED AND PHYSICAL TRANS SHIPMENT COST REASONABLE.
TARNS SHIPMENT COMBINES THE ADVANTAGE OF RISK POOLING AS WELL AS DECENTRALISED OPERATION.
STRATEGIC ISSUES IN 3 PL
COMPARE WITH COST OF DOING IT INTERNALLY. ACTIVITY BASED COSTING HELPS IN TRACING OVERHEADS AND DIRECT COST TO THE LEVEL OF SPECIFIC PRODUCTS AND SERVICES.
CUSTOMER ORIENTATION OF 3PL THE VALUE OF A THIRD PARTY PROVIDER IS DIRECTLY RELATED TO ITS UNDERSTANDING OF THE NEEDS OF THE HIRING FIRM AND TO ADAPT ITS SERVICES TO SUIT THE SPECIAL NEEDS OF THE FIRM. COST CONSIDERATIONS COME ONLY AFTERWARDS.
SPECIALIZATION OF THE 3PL THE CORE STRENGTH OF THE PROVIDER IS THE MAIN CONSIDERATION. -SMALL PACKAGE EXPERTISE -TRUSTED CORE CARRIER -LTL CARRIER -MULTI MODAL
3 PL CONT.
ASSET OWNING VERSUS NON-ASSET-OWNING 3 PL COMPARATIVE ADVANTAGES IN RESPECT OF
SIZE RESOURCES EFFECIENCY OF DECISION MAKING FLEXIBILITY OVERHEAD COSTS CUSTOMER BASE SCALE OF OPERATION SPECIALISATION INDUSTRY EXPERTISE
MOTIVATION FOR 3 PL
SAVINGS ON OPERATING COSTS LIBERATING VAST AMOUNT OF CAPITAL DRAMATIC SERVICE IMPROVEMENT OBVIATE IR HASASSLES FREEDOM TO CONCENTRATE ON AREAS OF CORE
STRENGTH
IN-HOUSE SPECIALIST 3 PL
GENERAL 3rd PARTY CONTRACTOR
N/A
CR I T I C A L I T Y
LOW HIGH
HIGH
COMPLEXITY
COMPLEXITY-CRITICALITY MATRIX
REASONS FOR CONTRACTING OUT DISTRIBUTION
Quality
What is quality? Meeting the customer specifications
It is the customer's perception about the degree
to which the product or service meets his/her expectations.
Therefore, quality is defined by customer needs and expectation.
Customers Smile
Quality Specifications
Design quality: Inherent value of the product in the marketplace
Dimensions include: Performance, Features, Reliability, Durability, Serviceability, Response, Aesthetics, and Reputation.
Conformance quality: Degree to which the product or service design specifications are met
Costs of Quality
External Failure Costs
Appraisal Costs
Prevention Costs
Internal Failure Costs
Costs of Quality
Six Sigma Quality
A philosophy and set of methods companies use to eliminate defects in their products and processes
Seeks to reduce variation in the processes that lead to product defects
The name, six sigma refers to the variation that exists within plus or minus three standard deviations of the process outputs
Six Sigma Quality (Continued) Six Sigma allows managers to readily
describe process performance using a common metric: Defects Per Million Opportunities (DPMO)
1,000,000 x
units of No. x unit
per error for iesopportunit ofNumber
defects ofNumber
=DPMO
Six Sigma Quality: DMAIC Cycle
Define, Measure, Analyze, Improve, and Control (DMAIC)
Developed by General Electric as a means of focusing effort on quality using a methodological approach
Overall focus of the methodology is to understand and achieve what the customer wants
DMAIC consists of five steps.
Six Sigma Quality: DMAIC Cycle (Continued)
1. Define (D)
2. Measure (M)
3. Analyze (A)
4. Improve (I)
5. Control (C)
Customers and their priorities
Process and its performance
Causes of defects
Remove causes of defects
Maintain quality
Other Six Sigma Tools Opportunity Flow Diagram used to
graphically show those activities that add value from those that are performed (and maybe could be reduced or removed) that do not add value to the finished product
Failure Mode and Effect Analysis (DMEA) is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage in the process
Design of Experiments (DOE) a statistical test to determine cause-and-effect relationships between process variables and output
TQM: PDCA
ISO 9000
Series of standards agreed upon by the International Organization for Standardization (ISO)
Adopted in 1987
More than 100 countries
A prerequisite for global competition?
ISO 9000 directs you to "document what you do and then do as you documented"
Kaizen
to take it apart and put back together in a better way
The goals of kaizen include the elimination of waste ("activities that add cost but do not add value"), production load leveling of amount and types, standardized work, paced moving lines, right-sized equipment,
Quality Gurus
Deming Juran Crosby
Exhibit 7.1 (Chase Jacobs Aquilano book)
Sources
Prof RKS notes Chase Aquilano Jacobs SCM notes OM2 notes Matman Notes
\\192.168.1.199/profiles../oig
Thank You
Operations 1Process Analysis TermsProcess FlowchartingDefined Other Process TerminologyOther Process Terminology (Continued)Process Performance MetricsCOMPONENTS OF LEAD TIMEProcess Performance Metrics (Continued)A Few 1-Dimensional Frameworks .. A Few 1-Dimensional FrameworksSlide Number 112-D Framework: Volume-Specificity2-D Framework: Volume-Variety (in Discrete Manufacturing)FLOW LINES IN MASS PRODUCTION HIERARCHYFMS DefinedGroup TechnologyCellular ManufacturingThe Volume Variety MapGoal conceptsSlide Number 20What is SCMSupply Chain ManagementTopicsInventory ManagementDemandOrderingP & Q SYSTEMQ SystemP SystemSlide Number 30Slide Number 31Slide Number 32Slide Number 33Economic Order Quantity (EOQ)Risk PoolingSquare Root LawRFIDs and BARCODEsBULL WHIP EFFECTDEMAND VARIABILITYDEMAND VARIABILITYBULLWHIP EFFECT IN SUPPLY CHAINSlide Number 42Communication TechnologyMAJOR ERP PLAYERSStrategic AlliancesSupplier SelectionSlide Number 47Slide Number 48STRATEGIC ALLIANCESV M ISlide Number 50STRATEGYSlide Number 52Slide Number 53STRATEGIC ALLIANCE FRAMEWORKSlide Number 55LOGISTICSOUTBOUND DISTRIBUTION STRATEGIES DIRECT SHIPMENT AS PREFERRED STRATEGYCROSS DOCKINGIN 1979 KMART WAS ONE OF THE LEADING COMPANIES IN THE RETAIL INDISTRY WITH 2000 STORES. WAL- MART WAS A SMALL NICHE RETAILER WITH 200 STORES. IN TEN YEARS WAL-MART BECAME THE LARGEST AND THE HIGHEST PROFIT RETAILER IN THE WORLD.HOW DID THEY DO IT?Slide Number 60CROSS DOCKINGTRANS SHIPMENTSTRATEGIC ISSUES IN 3 PL3 PL CONT.MOTIVATION FOR 3 PLSlide Number 66Slide Number 67QualityWhat is quality?Quality SpecificationsCosts of Quality Six Sigma Quality Six Sigma Quality (Continued)Six Sigma Quality: DMAIC CycleSix Sigma Quality: DMAIC Cycle (Continued) Other Six Sigma ToolsTQM: PDCAISO 9000KaizenSlide Number 80Quality GurusSourcesThank You