ops gyann to pgp1

8/6/2019 Ops Gyann to Pgp1

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PGP 1 SummersSession on OPS

30/10/06


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Where does OPS fit in?


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Process Analysis Terms

Process : Is any part of an organizationthat takes inputs and transforms theminto outputsCycle Time : Is the average successivetime between completions of successiveunitsUtilization : Is the ratio of the time that aresource is actually activated relative tothe time that it is available for use


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Process FlowchartingDefined

Process flowcharting is the use of adiagram to present the major elements of a processThe basic elements can include tasks or operations, flows of materials or customers, decision points, and storageareas or queuesIt is an ideal methodology by which tobegin analyzing a process


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O ther Process TerminologyBlocking O ccurs when the activities in a stage must stop

because there is no place to deposit the item justcompleted

If there is no room for an employee to place a unit of

work down, the employee will hold on to it not able tocontinue working on the next unit

Starving O ccurs 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, theemployee will remain idle until the next unit of workcomes


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O ther Process Terminology (Continued)

Bottleneck O ccurs when the limited capacity of a

process causes work to pile up or becomeunevenly distributed in the flow of a process

If an employee works too slow in a multi-stage process, work will begin to pile up infront of that employee. In this is case theemployee represents the limited capacity

causing the bottleneck.Pacing Refers to the fixed timing of the movement of

items through the process


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Process Performance Metrics

O peration time = Setup time + Run timeCycle time = Average time between completion of successive units

Throughput time = Average time for a unit to movethrough the system ie entire processLead time = The total time it takes a customer to receivean order (includes time to process the order,throughput time and delivery time)Process Velocity = Throughput time

(Throughput ratio) Value-added time


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C OMPONENTS OF LEAD TIME

Total Flow time spent in t h e system comprises:Processing TimeSetup TimeMove TimeW ait for Batc h TimeW ait for Matc h Time (for assemblies/ kits)

Queue Time

Allowed Lead Time = Average Flow Time + Safety Time


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Process Performance Metrics(Continued)

Throughput rate = 1 .Cycle time

Efficiency = Actual outputStandard O utput

Productivity = O utputInput

Utilization = Time ActivatedTime Available


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A Few 1-Dimensional Frameworks

By Nature of Product :Discrete ------- Discrete ------ C ommodity

Heterogeneous Homogeneous

By Job Processing Requirements :Job S h op ------ Flow S h op

By Layout Type :Process/ ------ Product LayoutFunctional


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.. A Few 1-Dimensional Frameworks

By Process Technology Type :Project ------- Intermittent ------ C ontinuous

By Logistics PositioningTo Order -------------- To Stock

ETO MTO ATO MTS

Design Manufacture Assembly Delivery


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IV.Continuous

Flow

III. Connected

Flow (Line)

II. DisconnectedFlow (Batch)

I. Jumbled Flow(Job Shop)

Low

Volume,One of aKind

Multiple

Products,LowVolume

FewMajor

Products,Higher Volume

HighVolume,

HighStandard-ization

Heavy/CustomizedMachinery

Low-customizationLight/ Medium

Machines

Assembly of Autos, PCs,

TVs etc.

Sugar Refinery

Unit Cost (High)Flexibility (High)

Dependability (Low)

Dependability (High)Flexibility (Low)

Unit Cost (Low)

Th e Product-Process Matrix(Hayes &Wh eelwrig h t)

Inefficient Region

Wasteful Region

EffectivenessMeasures:

From C h ase, Aquilano &Jacobs C h. 5


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2 -D Framework: Volume-Specificity

Volume

C ustomer Specificity

Design for C ustomer

MassProduction

C raft

C oncurrent

Response


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2 -D Framework: Volume-Variety(in Discrete Manufacturing)

Volume

Variety

NC JobS h op

Flow/ Transfer Lines

GT/C M

FMS


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FL OW LINES INMASS PR O DUCTI O N HIERARCHY

MassProduction

QuantityProduction

FlowProduction

FlowProcess

Discrete ItemFlow Line

AssemblyFlow Line

Transfer Line


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FMS Defined An integrated computer-controlled complex of Numerically C ontrolled mac h ine tools, wit h

Automated Tool Management, and AutomatedMaterial Handling, t h at can simultaneouslyprocess a Medium-sized volume of a Moderatevariety of parts


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Group Tec h nology A management approac h of recognizing andexploiting similarities, to break down a complex taskand obtain greater productivity in design andmanufacturing, by:

Efficiently storing/ retrieving information aboutrecurring situations and problemsStandardizing similar tasksPerforming like activities toget h er


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C ellular ManufacturingTh e organisation of manufacturing tasks into self-contained units or cells, comprising:Different kinds of manufacturing processes,

Arranged in p h ysical proximity,To produce a limited range or family of items

Attempts to combine flexibility of job s h op with efficiencyof flow lines


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Goal concepts

Systems viewLocal optimization is not t h e best

Bottleneck th e real targetLoss at bottleneck is loss for systemStatistical fluctuations ( CV )

Use buffer on bot h sides of bottleneck


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Supply C h ain Management

S M W D R

Product / Service

Funds / Money

Information


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TopicsInventory Management P & Q Systems EO Q

Risk Pooling Square Root Law RFID / Barcodes Bull Wh ip Effect Relations h ip with C ommunication Tec h nology

Strategic Alliances - V MILogistics Dist Models / 3PL


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Inventory Management

CO ST ASS O CIATED W ITHINVENT O RY

Holding / Carrying CostO rdering CostSet-up costShortage Cost


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Demand

C ertaintyRisk

Uncertainty


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Ordering

Wh en to Order How Muc h to Order


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P & Q SYSTEM

W e h ave two general type of inventorysystem :

Fixed

Order Q

uantity model (Q

- System )Fixed Time Period Model ( P-System )


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Q System

Here, order quantity is fixed w h ich is equalto EO Q . Wh enever inventory level falls toa 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 = [ EO Q /2+safety stock ]


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P System

Here, review period is fixed and order sizevaries . Order size is calculated as :

Replenishment level , R = average demand over leadtime & review period +safety stock .

Ordered Quantity = Replenishment level Inventory

on hand - Inventory on order.Average Inventory = Average Consumption during

review period / 2 + S.S


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A3

ORDERINGPOINTS

1 2 3 4 5 6 7 8 9 10 11 1 2 1 3Q SYSTEM FIXED ORDER QUANTITY SYSTEM

( ORDER QUANTITY = 500 )

1000

800

600

400

200

(100)

(400)A1 A2

ROP Level

SS Level


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P SYSTEM- FIXED PERIOD REVIEW SYSTEM

L 2 4 6 L 8 10 12 14 R =6 R = 6 MONTHS

1000

800

600

400

200SAFETY STOCK

1100 ROP = 1100


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W ithin the suggested classification, regularity of orders has beenconsidered to fix the review policy, replenishment frequency, review period

& lead times

Iegular Irregular poradic egular Irregular poradic egular Irregular poradic

I

I

I

I2

lassification - eview /

anual eview ystem eview

Inventory Review Mec h anism


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ITEMS ARE FEDFROM THIS

WHEN BIN ISEMPTY , IT ISSIGNAL TOPLACE ORDER

THIS CONTAINSITEMS = REORDER

LEVEL, RTHIS IS USED

WHEN 1 ST BIN ISEXHAUSTED

THIS SYSTEM OBVIATESCONTINUOUS MONITORINGUSEFUL IN MANUAL SYSTEM

1st BIN

2nd BIN


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Economic Order Q uantity (EO Q )

Occurs w h en Ordering C ost equalsHolding C ost

Assumptions Single Product Stable Demand Z ero Lead Time


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Risk Pooling

DEMAND VARIABILITY IS REDUCED IFIT IS AGGREGATED ACR O SSLO CATI O NS. HIGH DEMAND O F O NEMAY BE O FF-SET BY L OW DEMANDO F AN O THER. THIS LEADS T O REDUCED SAFETY ST O CK AND

HENCE AVGE INVENT O RY.


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BULL W HIP EFFECT

Wh ile th e consumers consume t h eproduct at a steady state wit h minor

fluctuations, t h e demand order variability inth e supply c h ains are amplified as t h ey

move up t h e c h ain .


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DEMAND VARIABILITY

0

4680

1 2 3 4 5 6 7 8

R ' W '

0

4

6

8

0

1 2 3 4 5 6 7 8


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Demand forecast updatingOrder batc h ing

Price fluctuationRationing and s h ortage gaming

CAUSES OF BULL WHIP EFFECT


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Communication Tec

hnology


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MAJOR ERP PLAYERS

SAP : MARKET LEADER . DEV ELOPING ANALYTIC AL SOFT W AREFOR S U PPLY C HAIN PLANNNG

O RACLE: INITIALLY ADDED FINANC IAL APPLIC ATINS TO ITSDATA BASE PROGRAMS NO W A LARGE ERP PRO V IDER

PE O PLE S O FT: SAP STARTED W ITH MANU FAC TU RING APPLI C AIONS AND ORA C LE W ITH FINANC E, PEOPLESOFTSTARTED W ITH HU MAN RESO U RC ES APPLI C ATIONS .

BAAN:C

ROSS FU

NC

TIONAL INTEGTRATED SYSTEMSW

ITHENTIREPRISE W IDE BU SINESS V IEW. FO C U S ON MIDSI Z EMANU FAC TU RING C OMPANIES .


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Supplier Selection


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ADVANTAGE OF SINGLE VERSUS MULTIPLE SOURCES

MU LTIPLE SINGLE Assurance of supply in case

of troubleLever to guard against priceincrease

Some suppliers cant h andleallth e work

Ability to call on unusedcapacity of several suppliers

Easier to managecoordination and relations h ipLeverage over supplier is

greater with volume purc h ase .

Vendor feels fully responsible/total obligation

Supplier more inclined to dospecial t h ings .

Lesser tooling costFeasible to introduce JIT


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ST O CK REPLENISHMENT RESP O NSIBILITY- S UPPLIER

HOW MUCH TO SHIP

TO WHICH STORE

WHEN

COST OF W/ HOUSING EXCESS STOCK

LIMITED STORE SPACE AVAILABLE

SUPPLIER PAYS F O R EVERYTHING INV O LVED IN

MANAGING COTSCO,S INVENTORY EXCEPT

ACTUAL SHELF-STOCKS


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STRATEGY

TEC HNOLOGY ENABLED SHARING OF POS DATA-REC O RDED SALE

C OMMU NIC ATION W ITH LOADING POINTS/ TR U C KING AGENT/V EHIC LES ON THE MO V E .

TO MEET DEMAND FL U C TU ATIONOPERATIONAL EXIGEN C IES

-LEV ERGE LOGST C S

S U PER V ISE STORES IN V ENTORYLEADTIME, SAFETY STO C K

-INV.CARRYNG COST


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PROD U C T SKU RATIONALISATION

eg:U

NISEX PRODU C

T- RISK POOLING

ENHANC ED C U STOMER SER V IC E

S C OU TING STORES, PA C KGNG DESIGN,RANDOM STO C K V ERIFIC ATION, IN C OMPLETE I V ERY,W RONG DELI V ERY .

ORDER- C U STOMER- C ONSIGNMENT LINK U P .

- CUSTOMER

SERVICE


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LOGISTIC S


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OU TBOU ND DISTRIB U TION STRATEGIES

DIREC

T SHIPMENTW AREHO U SINGC ROSS DO C KINGTRANS-SHIPMENT

DIREC T SHIPMENT:ELIMINATES EXPENSES OF OPERATING- DISTRIBU TION C ENTER- RED U C ED LEAD TIMES

RISK POOLING EFFE C T NEGATED AS THERE IS- NO W AREHO U SEINC REASED MAFR . /DISTRB C OST D U E TOFRE QU ENT TRIPS TO MORE LO C ATIONS .


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DIREC T SHIPMENT AS PREFERRED STRATEGY

S U CC ESS STORY :J C PENNEY sells merc h andise t h roug h a t h ousand stores andmillions of catalogues . It deals in 200,000 items sourcing frommore t h an 20,000 suppliers . Eac h store retains totalaccountability for sales,inventory & profit and is responsible for sales forecast and release of orders .

Orders are communicated to buyers w h o coordinate s h ipmentwith distribution personnel to ensure quick response and a

tracking system is used to monitor flow of materials .

IN MOST CASES PRODUCTS ARE SHIPPED DIRECT TOPENNEYS STORES .


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CROSS DO

CKINGIN 1979 KMART W AS ONE OF THE LEADING

C OMPANIES IN THE RETAIL INDISTRY W ITH2000 STORES .

W AL- MART W AS A SMALL NIC HE RETAILERW ITH 200 STORES . IN TEN YEARS W AL-MART BE C AME THE LARGEST AND THE

HIGHEST PROFIT RETAILER IN THE W ORLD .

HOW DID THEY DO IT?


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STRATEGY:INV ENTORY REPLENISHMENT POLI C Y ASTHE C ENTER PIE C E OF STRATEGY

KEY SU CC ESS FA C TOR:INNOV ATIV E LOGISTI C S TE C HNIQU E -C ROSS DO C KING

C ROSS DO C KING


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C ROSS DO C KING

In C ROSS DO C KING a ware h ouse functions as

inventory coordinator point.No inventory ismaintained except waiting for a few h ours . Goods

arrive at t h e ware h ouse and are transferred tove h icles serving retailers as rapidly as possible . Th esystem reduces Inventory C osts and Lead Time .

W ALL-MART delivers 85% of consignments t h roug h C ROSS DO C KING. S h ares POS data with its vendors

th

rough

a private satellite communicating system. Has a dedicated fleet of 2000 trucks . Stocks are

replenis h ed twice a week on average . Has ac h ievedEconomics Of Scale and reduced t h e need for safety stocks and cost for sale .

TRANS SHIPMENT


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TRANS SHIPMENT

SHIPMENT OF ITEMS BET W EEN DIFFERENT FA C ILITIES AT THE SAME LE V EL IN THE S U PPLY C HAIN TO MEETSOME EMERGENT DEMAND .

PRA C TIC ED MOSTLY AT THE RETAIL LE V EL. EAC HRETAILER M U ST HAV E ACC ESS TO THE INFORMATION OF

INV ENTORY HELD BY OTHERS .IF ALL THE RETAIL O U TLETS HA V E THE SAME O W NER(?) ,INFORMATION SYSTEM IS STRONGLY INTEGRATED ANDPHYSI C AL TRANS SHIPMENT C OST REASONABLE .

TARNS SHIPMENTC

OMBINES THE ADV ANTAGE OF RISKPOOLING AS W ELL AS DE C ENTRALISED OPERATION .

STRATEGI C ISS U ES IN 3 PL


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STRATEGI C ISS U ES IN 3 PL

C OMPARE W ITH C OST OF DOING IT INTERNALLY . AC TIV ITYBASED C OSTING HELPS IN TRA C ING OV ERHEADS AND DIRE C TC OST TO THE LE V EL OF SPE C IFIC PROD U C TS AND SER V IC ES .

C U STOMER ORIENTATION OF 3PLTHE V ALU E OF A THIRD PARTY PRO V IDER IS DIRE C TLY RELATED

TO ITS U NDERSTANDING OF THE NEEDS OF THE HIRING FIRM AND TO ADAPT ITS SER V IC ES TO S U IT THE SPE C IAL NEEDS OFTHE FIRM . C OST C ONSIDERATIONS C OME ONLY AFTER W ARDS .

SPE C IALIZ ATION OF THE 3PL

THE C ORE STRENGTH OF THE PRO V IDER IS THE MAINC ONSIDERATION .-SMALL PAC KAGE EXPERTISE-TRU STED C ORE C ARRIER-LTL C ARRIER-MU LTI MODAL

3 PL C O NT


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3 PL C O NT.

ASSET O W NING V ERS U S NON-ASSET-O W NING 3 PL

C OMPARATI V E ADV ANTAGES IN RESPE C T OFSIZ ERESO U RC ESEFFE C IENC Y OF DE C ISION MAKINGFLEXIBILITYOV ERHEAD C OSTSC U STOMER BASES C ALE OF OPERATIONSPE C IALISATIONINDU STRY EXPERTISE


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IN-HOUSE SPECIALIST3 PL

GENERAL3rd PARTYCONTRACTOR

N/A

CR

ITICALITY

LO W HIGH

HIGH

COMPLEXITY

COMPLEXITY-CRITICALITY MATRIX

REASONS FOR CONTRACTING OUT DISTRIBUTION


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Q uality


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Quality Specifications

Design quality : Inherent value of theproduct in the marketplace

Dimensions include: Performance, Features,Reliability, Durability, Serviceability,Response, Aesthetics, and Reputation.

Conformance quality : Degree to which theproduct or service design specificationsare met


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Costs of Quality

External FailureCosts

Appraisal Costs

Prevention Costs

Internal FailureCosts

Costs of Quality


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Six Sigma Quality

A philosophy and set of methods companiesuse to eliminate defects in their products andprocesses

Seeks to reduce variation in the processesthat lead to product defectsThe name, six sigma refers to the variationthat exists within plus or minus threestandard deviations of the process outputs


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Six Sigma Quality (Continued)Six Sigma allows managers to readily

describe process performance using acommon metric: Defects Per MillionO pportunities (DPM O )

1 ,000 ,000x

unitsof No.xunit

per error for iesopportunit of Number

defectsof Number

! DPMO


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Six Sigma Quality: DMAIC Cycle

Define, Measure, Analyze, Improve, andControl (DMAIC)Developed by General Electric as a

means of focusing effort on qualityusing a methodological approachO verall focus of the methodology is tounderstand and achieve what thecustomer wantsDMAIC consists of five steps.


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O ther Six Sigma ToolsO pportunity Flow Diagram used tographically show those activities that addvalue from those that are performed (andmaybe could be reduced or removed) thatdo not add value to the finished productFailure Mode and Effect Analysis (DMEA) isa structured approach to identify, estimate,prioritize, and evaluate risk of possible

failures at each stage in the processDesign of Experiments (DO E) a statisticaltest to determine cause-and-effectrelationships between process variablesand output


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IS O 9

Series of standards agreed upon by theInternational O rganization for Standardization (IS O )

Adopted in 19 7

More than 1 countries

A prerequisite for global competition?IS O 9 directs you to "document whatyou do and then do as you documented"


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Kaizen

to take it apart and put back toget h er in abetter way

Th e goals of kaizen include t h e eliminationof waste ("activities t h at add cost but donot add value"), production load leveling of amount and types, standardized work,paced moving lines, rig h t-sized equipment,


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Q uality Gurus

DemingJuranC

rosby

Exh ibit 7.1 (C h ase Jacobs Aquilano book)


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Sources

Prof RKS notesC h ase Aquilano Jacobs

SC

M notesOM2 notesMatman Notes

\\192 .168 .1 .199/profiles .. /oig


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