operations basics pgp1
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8/3/2019 Operations Basics PGP1
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Club Kaizen,
IIM Indore
Introduction to OperationManagement
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OPERATIONS MANAGEMENT(OM)
isthe process of managing resourcesto deliver Goods & Services to
Customers
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What OM covers?
Production process
Aggregate planning
Location Planning
Inventory Management Models
Analytical Hierarchy Process (AHP)
Supply Chain Management
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Elements of a Process
What is a Process ?
• Inputs: labour, material, utilities & capital
• Outputs: goods & services
• Activities: equipment
• Flows: material & information• Storage: RM, WIP, FG
Inputs Outputs
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Process Concepts
Time: Cycle Time, Idle Time, Lead Time/ThroughputTime
Capacity: Rated Capacity, Effective Capacity,
Utilization
Inventory: RM, WIP (buffer), FG
Bottleneck
Lot Size/Batch Size
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Types of Processes
Single-stage Process
Stage 1
Stage 1 Stage 2 Stage 3
Multi-stage Process
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Types of Processes (Continued)
Stage 1 Stage 2
Buffer
Multi-stage Process with Buffer
A buffer refers to a storage area between stages
where the output of a stage is placed prior to being
used in a downstream stage
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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 continueworking 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
O h P T i l
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Other Process Terminology(Continued)
• Bottleneck – Occurs when the limited capacity of a process causeswork to pile up or become unevenly distributed in theflow of a process
– If an employee works too slow in a multi-stageprocess, work will begin to pile up in front of thatemployee. In this is case the employee represents thelimited capacity causing the bottleneck.
• Pacing – Refers to the fixed timing of the movement of items
through the process
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Other Types of Processes
• Make-to-order
– Only activated in response to an actual order
– Both work-in-process and finished goods inventory
kept to a minimum
• Make-to-stock
– Process activated to meet expected or forecast
demand
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Type of Process Layout
• Process Layout (Functional layout )
Similar equipment / functions are grouped together
e.g. layout of typical hospital , machine shop
• Product Layout (Flow Shop layout)
Equipment / work processes are arranged according to
the progressive steps by which product is manufactured.
The path therefore is a straight line
e.g. shoes, chemical plant
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Process Performance Metrics
• Operation time = Setup time + Run time
• Throughput time = Average time for a unit to
move through the system
• Productivity = Output
Input
• Utilization = Time Activated
Time Available
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Process Performance Metrics(Continued)
• Cycle time = Average time between completion of units
• Throughput rate = 1 .
Cycle time
• Efficiency = Actual output
Standard Output
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Cycle Time Example
Suppose you had to produce 600 units in 80 hours tomeet the demand requirements of a product. What isthe cycle time to meet this demand requirement?
Answer: There are 4,800 minutes (60 minutes/hour x 80 hours) in 80 hours.
So the average time between completions would have to be: Cycletime = 4,800/600 units = 8 minutes.
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Capacity Bottlenecks
Operation 2 is a bottleneck
Inputs
To customers
50/hr
1 2 3
200/hr 200/hr
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All operations are bottlenecks
2 31Inputs
To customers
200/hr 200/hr 200/hr
Capacity Bottlenecks
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Types of Production Processes
Job Shop
Batch Process
Assembly Line
Continuous Process
Project
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Job Shop
Variety of products
Customization
Variable time production
Low volume, fluctuations in volume
Small scale operations
Process layout
e.g., fabrication units, machine shop
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Batch Process
Goods produced in discrete batches (or lot sizes)
Moderate processing demand
Economies of scale
Process flow more or less routine
Little or no variability in product selection - known in
advance
e.g., apparel manufacturer
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Assembly Lines
Worker paced assembly line
e.g., fast food outlet
Machine paced assembly line
e.g., automobile assembly
Large to medium volume/standard products High processing turnover
Predefined standard BOM
High degree of labour & equipment utilization
Routing & scheduling fixed
System fairly inflexible
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Continuous Process
Continuous rapid movement of goods High volume operations
Highly standardized product
Product based layout
High levels of automation
e.g., oil refinery, paper, fertilizer
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Project
One of a kind
Customized-High Variety
Dedication of resources/Sharing across projects
e.g., construction, software
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The Planning Process
Long-range plans
(over one year)Research & DevelopmentNew product plansCapital investmentFacility location/expansion
Intermediate-range plans(3 to 18 months)Sales planningProduction planning and budgetingSetting employment, inventory,
subcontracting levelsAnalyzing cooperating plans
Short-range plans(up to 3 months)
Job assignmentsOrderingJob schedulingDispatchingOvertimePart-time help
Topexecutives
Operationsmanagers
Operationsmanagers,supervisors,foremen
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Master production
schedule and MRP
systems
Detailed work
schedules
Process planning and
capacity
decisions
Aggregate plan for
production
Product decisions
Demand forecasts,
orders
Marketplace and
demand
Research
and
technology
Raw materials available
External capacity
(subcontractors)
Workforce
Inventory on
hand
Aggregate Planning
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Location Planning
The decision problem involving the selection ofspecific site on which to locate one or more facilities,considering appropriate objectives.
For example,
Locate country wide distribution center(s) for aproduct
Locate a hospital/fire station/police station/library ina metropolitan area
Locate a new classroom building on a college
campus Locate RMC plant(s) in geographical area
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Need for Locationchanges/decisions
Shift in demand of goods and services (e.g., shift ingeography of demand, demand increase requiresextra capacity which can not be provided from theexisting location)
Changes in Supply of inputs to the operations (changes in cost, e.g., land cost, availability e.g.,stock depleted of the input to the operations)
New Facilities/Business, Merger
Political and economic conditions may change
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Hierarchy of Location Decisions
Location decision may involve geographic andinformational hierarchy.
I. Regional (choosing the region/country inwhich to locate the operation)
II. Local (choosing the area of theregion/country)
III. Site (choosing the specific site within the area)
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Inventory
What do you mean by inventory? Stock on hand of materials
All physical assets
Value of stock of goods
Types of inventory
Supplies
Raw materials
In process goods Finished goods
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Managing Inventory
HIGH inventory levels yield: Better customer service (traditionally)
Stock-out protection (+ wide variety and selection)
Short lead times (since it’s available)
Lower costs/unit purchased, made, transported Large lot production and transportation
economies
Quantity discounts and inflation hedging
LOW inventory levels yield:
Low holding costs (inventory carrying costs)
Easier and more accurate control of inventory
A focus on quality execution (no room for error)
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Analytic Hierarchy Process
The Analytic Hierarchy Process (AHP), is a proceduredesigned to quantify managerial judgments of therelative importance of each of several conflictingcriteria used in the decision making process.
Application:• Selection of contractors for the project
• Selection of equipments for project work
• Selection of project delivery methods
• Route selection of pipeline projects
• Facility location selection
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Supply Chain Management
Network of facilities and distribution options thatperforms the functions of procurement of materials,transformation of these material into intermediate andfinished products, and distribution of these finished
products to customers
Total flow of material, information and cash, from thesuppliers, right through an enterprise to the customers
Different stages: Procurement, Inbound Logistics,
Planning and Manufacturing, and OutboundLogistics/Distribution
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End of Deck
Club Kaizen
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