production management ieor 4000
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Production Management IEOR 4000. Prof. Guillermo Gallego. Self Introduction. Professor and Chairman of Industrial Engineering & Operations Research Dept. Research interest in Supply Chain Management and Revenue Management Published over fifty papers - PowerPoint PPT PresentationTRANSCRIPT
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04/19/23 1
Production Management
IEOR 4000
Prof. Guillermo Gallego
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Self Introduction
• Professor and Chairman of Industrial Engineering & Operations Research Dept.
• Research interest in Supply Chain Management and Revenue Management
• Published over fifty papers
• Visiting professor at Stanford GSB 1997-1997
• Visiting scientist at IBM 1999-2003
• Senior editor for MSOM and POM.
• Consultant for Lucent Technologies
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Topics to Be Covered
• Today: History of Operations Management, Production systems, Recent trends.
• Deterministic models:– EOQ, EPQ, JRP, ELSP, APP, MRP, JIT
• Forecasting:– MA, ES, MMFE.
• Stochastic models:– Newsvendor model.– Serial Systems: Supply chain models.– Distribution and Assembly Systems
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Benefits to Be Obtained
• Understand production and inventory systems.• Understand basic tradeoffs between
– Holding costs versus fixed costs.– Holding costs versus service levels.– Efficiency versus variety
• Learn about– Production/inventory management techniques– Forecasting– Risk and sensitivity analysis– Supply chain design issues
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Intended Audience
• A required course for MS degree in IE and MS in OR.
• Students entering the fields of industrial engineering or supply chain management.
• Students interested in learning how to develop models.
• Production and general managers wishing to understand models behind decision support systems.
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Prerequisites
• Working knowledge of calculus.• A good course in probability and statistics. This
can be taken concurrently.• A deterministic models course (linear
programming). This can be taken concurrently.• Knowledge of Excel or equivalent spreadsheet
program.• Willing to work hard.
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Evaluation
• Assignments: 15%
• Midterm: 40%
• Final: 45%
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Today’s Lecture
• Motivation• History of Operations Management• Recent Trends in Inventory Management Types
of Manufacturing Systems• Strategic and Hierarchical Planning• Inventory Classification• Relevant Costs• Performance Measures
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Motivation
• Operations is concerned with the transformation of inputs into goods and services
• Primary business function together with marketing and finance
• It involves the greatest portion of the company's employees and capital assets.
• Activities include– plant management, product development, process
engineering, facility layout, production and capacity planning, quality control, inventory control, product distribution
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History of Operations Management
• Life before organized production
• The industrial revolution– Invention of the steam engine.– Specialization of labor– Interchangeable parts– Assembly line (Ford)– Product variety (GM)
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Scientific Method
• The Principles of Scientific Management by Frederic Taylor
• Experiment with methods to find best way to perform a job– Improve efficiency results in:
• Lower costs to companies
• Higher wages for laborers
• Better and less expensive products for consumers
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Management Science
• Also known as Operations Research• Use of models, mathematics and statistics
to solve business problems– Objectives, Decision Variables, Constraints
• Initially lack of data and computing power and management skepticism
• ERP systems and better trained management opens possibilities
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Recent Trends
• Plant Automation• Just-in-Time• Reengineering• Supply Chain Initiatives
– EDI, ECR, VMI
• Sharing Demand Information• Demand Lead Times• Changing the Givens
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Operations Systems
• Job Shops– Low volume high variety– Custom made goods
• Repetitive Manufacturing– High volume low variety– Televisions, roller skates
• Batch Manufacturing– Medium volume and variety– Hand tools, drills
• Processes and Projects– Refineries, ship manufacturing
• Non Manufacturing
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Strategic and Hierarchical Planning
• Strategic Planning– Product line, location, size and number of plants and
warehouses
• Tactical Planning– Size of workforce, rate of production, distribution of
goods
• Operational Control– Assignment of work to stations, short term inventory
control issues.
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Impact of Inventories
• Firm level:– One third of the current assets– 2.5 years of after-tax profits– Potential to increase profits and reduce costs
• Macro level:– Accumulation at peak of cycle
• Downscale production, slash prices, some firms do not survive
– Low inventories at bottom of cycle• Increase production, hire people, additional increase in
demands, higher prices, etc.
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Inventory Classification
• Functional:– Cycle stock– Congestion stock– Safety stock– Anticipation inventories– Pipeline inventories (WIP)
• Time– Input, WIP, In-transit, Output.
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Classification by Value
• Sort by annual dollar volume
• Most firms:– 20% SKUs account for 80% usage– 30% SKUS account for 15% usage– 50% SKUS account for 5% usage
• ABC analysis treats high dollar volume parts differently.
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Characteristics of Inventory Systems
• Demand:– Constant versus variable– Known or unknown
• Lead Times: Constant versus random• Review Times: Periodic versus continuous
review• Excess Demand: Lost versus backlogged• Changing Inventory: Perishable, obsolescence• Structure of System: Assembly, distribution, etc.
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Relevant Costs
• Procurement costs: fixed and variable
• Holding costs: Warehousing, insurance, opportunity cost
• Stockout or penalty costs
• Cost of changing the production rate: hiring, firing, overtime
• System control costs
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Performance Measures
• Probability of not stocking out during lead time
• Fill rate: Proportion of demands that are met directly from stock
• Average number of backorders
• Turnover ratio: Ratio of throughput to average inventory