GMS401 Lecture 5 PDF

Ted Rogers School of Management GMS401 Lecture 5 Payman Ahi, Ph.D., P.Eng. Important Note These slides are intended only for the purposes of delivering GMS401 and students registered in this course can use them only for the purposes of the course....

Ted Rogers School of Management GMS401 Lecture 5 Payman Ahi, Ph.D., P.Eng. Important Note These slides are intended only for the purposes of delivering GMS401 and students registered in this course can use them only for the purposes of the course. Accordingly, no use of these slides is permitted for any other purposes including (but not limited to) selling, posting, and transferring the slides (wholly or partially) elsewhere.  Process Strategy, Sustainability and Job Design Copyright © 2020 Pearson Canada Inc.  Harley-Davidson ▪ Repetitive manufacturing works The leading U.S. motorcycle company Emphasizes quality and lean manufacturing Materials as Needed (MAN) system Many variations possible Tightly scheduled repetitive production line Copyright © 2020 Pearson Canada Inc.  Outline (1 of 2) ▪ Four Process Strategies ▪ Process Analysis and Design ▪ Selection of Equipment and Technology ▪ Production Technology ▪ Technology in Services ▪ Process Redesign Copyright © 2020 Pearson Canada Inc.  Outline (2 of 2) ▪ Office/Retail/Warehousing and Storage Layouts ▪ Fixed-Position Layout ▪ Process-Oriented Layout ▪ Work Cells ▪ Repetitive and Product-Oriented Layout Copyright © 2020 Pearson Canada Inc.  Learning Objectives (1 of 2) ❖When you complete this chapter you should be able to: 1. Describe four production processes 2. Compute crossover points for different processes 3. Use the tools of process analysis 4. Describe customer interaction and process design 5. Identify recent advances in production technology 6. Discuss important issues in office layout 7. Define the objectives of retail layout Copyright © 2020 Pearson Canada Inc.  Learning Objectives (2 of 2) ❖When you complete this chapter you should be able to: 8. Discuss modern warehouse management and terms such as ASRS, cross-docking, and random stocking 9. Identify when fixed position layouts are appropriate 10. Explain how to achieve a good process-oriented facility layout 11. Define work cell and the requirements of a work cell 12. Define product-oriented layout 13. Explain how to balance production flow in a repetitive or product- oriented facility Copyright © 2020 Pearson Canada Inc.  Process Strategies (1 of 3) The objective of a process strategy is to build a production process that meets customer requirements and product specifications within cost and other managerial constraints. Copyright © 2020 Pearson Canada Inc.  Process Strategies (2 of 3) ▪ How to produce a product or provide a service that ✓Meets or exceeds customer requirements ✓Meets cost and managerial goals ▪ Has long-term effects on ✓Efficiency and production flexibility ✓Costs and quality Copyright © 2020 Pearson Canada Inc.  Process Strategies (3 of 3) ▪ Four basic strategies 1. Process focus 2. Repetitive focus 3. Product focus 4. Mass customization ⁂ Within these basic strategies there are many ways they may be implemented Copyright © 2020 Pearson Canada Inc.  Figure 5.2a Process Focus ▪ Facilities are organized around specific activities or processes ▪ General purpose equipment and skilled personnel ▪ High degree of product flexibility ▪ Typically high costs and low equipment utilization ▪ Product flows may vary considerably making planning and scheduling a challenge a.k.a., Job shop Copyright © 2020 Pearson Canada Inc.  Repetitive Focus Figure 5.2b ▪ Facilities often organized as assembly lines ▪ Characterized by modules with parts and assemblies made previously ▪ Modules may be combined for many output options ▪ Less flexibility than process-focused facilities but more efficient Copyright © 2020 Pearson Canada Inc.  Product Focus Figure 5.2c ▪ Facilities are organized by product ▪ High volume but low variety of products ▪ Long, continuous production runs enable efficient processes ▪ Typically high fixed cost but low variable cost ▪ Generally less skilled labour Copyright © 2020 Pearson Canada Inc.  Figure 5.2d Mass Customization (1 of 6) ▪ The rapid, low-cost production of goods & service to satisfy increasingly unique customer desires ▪ Combines the flexibility of a process focus with the efficiency of a product focus Copyright © 2020 Pearson Canada Inc. Mass Customization (2 of 6) Figure 5.3  Mass Customization (3 of 6) Table 5.1 Mass Customization Provides More Choices Than Ever Number of Choicesa Item 1970s 21st Century Vehicle models 140 286 Vehicle styles 18 1 212 Bicycle types 8 211 000c Software titles 0 400 000 Websites 0 162 000 000d Movie releases per year 267 765e New book titles 40 530 300 000+ Copyright © 2020 Pearson Canada Inc.  Mass Customization (4 of 6) Table 5.1 Continued Number of Choicesa Item 1970s 21st Century TV channels 5 185 Breakfast cereals 160 340 Items (SKUs) in supermarkets 14 000b 150 000f LCD TVs 0 102 aVariety available in the U.S.; worldwide, the variety increases even more. b1989. cPossiblecombinations for one manufacturer. dRoyalPingdom Estimate (2008). ewww.movieweb.com (2009). fSKUs managed by H. E. Butts grocery chain. Copyright © 2020 Pearson Canada Inc.  Mass Customization (5 of 6) ▪ Build-to-order (BTO) Produce to customer’s order rather than to a forecast. ▪ Postponement The delay of any modifications or customization to a product as long as possible in the production process. Copyright © 2020 Pearson Canada Inc.  Mass Customization (6 of 6) Imaginative and fast product design Rapid process design Tightly controlled inventory management Tight schedules Responsive supply chain partners Copyright © 2020 Pearson Canada Inc.  Comparison of Processes Figure 5.1 * See Table 5.2 (page 98 in the Text) for more detail on comparison of the processes characteristics. Copyright © 2020 Pearson Canada Inc.  Crossover Charts ▪ A chart of costs at the possible Volumes for more than one process. Figure 5.4 Copyright © 2020 Pearson Canada Inc.  Focused Processes Specialized in high volume/quantity, standardized product or service ▪ Focus brings efficiency ▪ Focus on depth of product line rather than breadth ❖ Focus can be – Customers – Products – Service – Technology Copyright © 2020 Pearson Canada Inc.  Process Analysis and Design ▪ Flow Chart/Diagram - Shows the movement of materials * See the Figure on page 93 in the Text ▪ Time-Function Mapping - Shows flows & time-frame * See Figure 5.5 in the Text ▪ Value-Stream Mapping - Shows flows and time and value added beyond the immediate organization (* See Figure 5.6 in the Text) ▪ Process Charts - Uses symbols to show key activities * See Figure 5.7 in the Text ▪ Service Blueprinting - Focuses on customer/provider interaction * See Figure 5.8 in the Text Copyright © 2020 Pearson Canada Inc.  Special Considerations for Service Process Design ▪ Some interaction with customer is necessary, but this often affects performance adversely ▪ The better these interactions are accommodated in the process design, the more efficient & effective the process ▪ Find the right combination of cost and customer interaction Copyright © 2020 Pearson Canada Inc. Service Process Matrix (1 of 3) Figure 5.9  Service Process Matrix (2 of 3) ▪ Mass Service and Professional Service Labour involvement is high Selection and training highly important Focus on human resources Personalized services Copyright © 2020 Pearson Canada Inc.  Service Process Matrix (3 of 3) ▪ Service Factory and Service Shop Automation of standardized services Low labour intensity responds well to process technology & scheduling Tight control required to maintain standards Copyright © 2020 Pearson Canada Inc.  Improving Service Productivity (1 of 3) Table 5.3 Techniques for Improving Service Productivity Strategy Technique Example Separation Structure service so Bank customers go to a manager to customers must go where the open a new account, to loan officers service is offered for loans, and to tellers for deposits Self-service Self-service so customers Supermarkets and department examine, compare, and stores evaluate at their own pace Internet ordering Copyright © 2020 Pearson Canada Inc.  Improving Service Productivity (2 of 3) Table 5.3 Continued Strategy Technique Example Postponement Customizing at delivery Customizing vans at delivery rather than at production Focus Restricting the offerings Limited-menu restaurant Modules Modular selection of service Investment and insurance selection Modular production Prepackaged food modules in restaurants Copyright © 2020 Pearson Canada Inc.  Improving Service Productivity (3 of 3) Table 5.3 Continued Strategy Technique Example Automation Separating services that may Automatic teller machines lend themselves to some type of automation Scheduling Precise personnel scheduling Scheduling ticket counter personnel at 15-minute intervals at airlines Training Clarifying the service options Investment counsellor, funeral Explaining how to avoid directors problems After-sale maintenance personnel Copyright © 2020 Pearson Canada Inc.  More Opportunities to Improve Service Processes ▪ Layout Product exposure Customer education Product enhancement ▪ Human Resources Recruiting and training Impact of flexibility Copyright © 2020 Pearson Canada Inc.  Selection of Equipment and Technology ▪ Often complex decisions ▪ Possible competitive advantage Flexibility i.e., The ability to respond with little penalty in time, cost, or customer value Stable processes ▪ May allow enlarging the scope of the processes Copyright © 2020 Pearson Canada Inc.  Production Technology (1 of 4) ▪ Machine Technology Machinery with its own computer and memory » Computer Numerical Control (CNC) machines ▪ Automatic Identification Systems (AISs) A system for transforming data into electronic form » Barcode » Radio Frequency Identification (RFID) Copyright © 2020 Pearson Canada Inc.  Production Technology (2 of 4) ▪ Process Control The use of information technology to control a physical process ▪ Vision Systems The use of video cameras & computer technology in inspection roles ▪ Robots Flexible machines with the ability to hold, move, or grab items Copyright © 2020 Pearson Canada Inc.  Production Technology (3 of 4) ▪ Automated Storage & Retrieval Systems (ASRSs) Computer-controlled warehouses that provide for the automatic placement of parts into & from designated places within a warehouse ▪ Automated Guided Vehicles (AGVs) Electronically guided & controlled carts used to move materials Copyright © 2020 Pearson Canada Inc.  Production Technology (4 of 4) ▪ Flexible Manufacturing Systems (FMSs) Systems that use an automated work cell controlled by electronic signals from a common centralized computer facility ▪ Computer-Integrated Manufacturing (CIM) Extension of flexible manufacturing systems A manufacturing system in which CAD, FMS, inventory control, warehousing, & shipping are integrated * See Figure 5.10 in the Text Copyright © 2020 Pearson Canada Inc.  Technology in Services (1 of 2) Table 5.4 Examples of Technology’s Impact on Services Service Industry Example Financial services Debit cards, electronic funds transfer, automated teller machines, internet stock trading, online banking via cell phone. Education Online newspapers, online journals, interactive assignments via Web CT, Blackboard, and smartphones. Utilities and government Automated one-man garbage trucks, optical mail scanners, flood-warning systems, meters allowing homeowners to control energy usage and costs. Restaurants and foods Wireless orders from waiters to the kitchen, robot butchering, transponders on cars that track sales at drive-throughs. Copyright © 2020 Pearson Canada Inc.  Technology in Services (2 of 2) Table 5.4 Continued Service Industry Example Communications Interactive TV, ebooks via Kindle 2. Hotels Electronic check-in/checkout, electronic key/lock systems, mobile web bookings. Wholesale/retail trade Point-of-sale (POS) terminals, ecommerce, electronic communication between store and supplier, bar-coded data, RFID. Transportation Automatic toll booths, satellite-directed navigation systems, Wi-Fi in automobiles. Health care Online patient-monitoring systems, online medical information systems, robotic surgery. Airlines Ticketless travel, scheduling, internet purchases, boarding passes downloaded as two-dimensional bar codes on smartphones. Copyright © 2020 Pearson Canada Inc.  Process Redesign ▪ Rethink business processes to dramatically improve performance ▪ Reevaluate purpose of process ▪ Question both purpose and underlying assumptions ▪ Reexamine basic process and its objectives ▪ Focus on activities that cross functional lines ▪ Any process is a candidate for redesign Copyright © 2020 Pearson Canada Inc.  Strategic Importance of Layout Decisions (1 of 2) The objective of layout strategy is to develop an effective and efficient layout that will meet the firm’s competitive requirements. Copyright © 2020 Pearson Canada Inc.  Strategic Importance of Layout Decisions (2 of 2) ▪ Layout Design Considerations Higher utilization of space, equipment, & people Improved flow of information, materials, or people Improved employee morale & safer working conditions Improved customer/client interaction Flexibility Copyright © 2020 Pearson Canada Inc.  Types of Layout (1 of 4) 1. Office layout 2. Retail layout 3. Warehouse layout 4. Fixed-position layout 5. Process-oriented layout 6. Work-cell layout 7. Product-oriented layout Copyright © 2020 Pearson Canada Inc.  Types of Layout (2 of 4) 1. Office layout » Positions workers, their equipment, and spaces/offices to provide for movement of information 2. Retail layout » Allocates shelf space & responds to customer behaviour 3. Warehouse layout » Addresses trade-offs between space & material handling Copyright © 2020 Pearson Canada Inc.  Types of Layout (3 of 4) 4. Fixed-position layout » Addresses the layout requirements of large, bulky projects such as ships and buildings 5. Process-oriented layout » Deals with low-volume, high-variety production (also called job shop or intermittent production) Copyright © 2020 Pearson Canada Inc.  Types of Layout (4 of 4) 6. Work cell layout » Arranges machinery and equipment to focus on production of a single product or group of related products 7. Product-oriented layout » Seeks the best personnel and machine utilizations in repetitive or continuous production Copyright © 2020 Pearson Canada Inc.  Layout Strategies Table 5.5 Layout Strategies Objectives Examples Office Locate workers requiring frequent contact Intact Insurance, Microsoft Corp. close to one another Retail Expose customers to high-margin items Loblaws Supercentre, Joe Fresh, Harry Rosen Menswear Warehouse (storage) Balance low-cost storage with low-cost Federal-Mogul’s warehouse material handling The Gap’s distribution centre Project (fixed position) Move material to the limited storage areas Ingall Ship Building Corp., Trump Plaza, around the site Fredericton Airport Job shop (process oriented) Manage varied material flow for each Arnold Palmer Hospital, Hard Rock Café, product Olive Garden Work cell (product families) Identify a product family, build teams, Hallmark Cards, Wheeled Coach, cross-train team members Standard Aero Repetitive/continuous Equalize the task time at each workstation Sony’s TV assembly line, Toyota Scion (product oriented) Copyright © 2020 Pearson Canada Inc.  Good Layouts Consider ▪ Material handling equipment ▪ Capacity and space requirements ▪ Environment and aesthetics ▪ Flows of information ▪ Cost of moving between various work areas Copyright © 2020 Pearson Canada Inc.  Office Layout Grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information ▪ Movement of information is main distinction ▪ Typically in state of flux due to frequent technological changes ❖ Major trend influencing office layouts » Advances in technology allow employees to work off-site » Dynamic use of space and services Copyright © 2020 Pearson Canada Inc. Relationship Chart Figure 5.11  Retail Layout An approach that addresses flow, allocates space, and responds to customer behaviour ▪ Objective is to maximize profitability per square foot of floor space ▪ Sales and profitability vary directly with customer exposure Copyright © 2020 Pearson Canada Inc.  Five Helpful Ideas for Retail Layout 1. Locate high-draw items around the periphery of the store 2. Use prominent locations for high-impulse and high-margin items 3. Distribute power items to both sides of an aisle and disperse them to increase viewing of other items 4. Use end-aisle locations 5. Convey mission of store through careful positioning of lead-off department Copyright © 2020 Pearson Canada Inc.  Retail Slotting Fees manufacturers pay to get shelf space (slot) for their products ▪ Contributing factors Limited shelf space An increasing number of new products Better information about sales through POS data collection Closer control of inventory Copyright © 2020 Pearson Canada Inc.  Servicescapes The physical surroundings in which a service takes place, and how they affect customers & employees 1. Ambient conditions 2. Spatial layout and functionality 3. Signs, symbols, and artifacts Copyright © 2020 Pearson Canada Inc.  Warehousing and Storage Layouts (1 of 3) A design that attempts to minimize total cost by addressing trad-offs between space and material handling ▪ Maximize the total “cube” of the warehouse Copyright © 2020 Pearson Canada Inc.  Warehousing and Storage Layouts (2 of 3) ▪ Material Handling Costs All costs associated with the transaction – Incoming transport – Storage – Finding and moving material – Outgoing transport – Equipment, people, material, supervision, insurance, depreciation Minimize damage and spoilage Copyright © 2020 Pearson Canada Inc.  Warehousing and Storage Layouts (3 of 3) ❖ Important Considerations ▪ Warehouse density tends to vary inversely with the number of different items stored ▪ ASRSs can significantly improve warehouse productivity ▪ Dock location is a key design element Copyright © 2020 Pearson Canada Inc.  Cross-Docking Avoiding the placement of materials or supplies in storage by processing them as they are received for shipment ▪ Materials are moved directly from receiving to shipping and are not placed in storage in the warehouse ▪ Requires tight scheduling and accurate shipments ▪ Bar code or RFID identification used for advanced shipment notification as materials are unloaded Copyright © 2020 Pearson Canada Inc.  Random Stocking Used in warehousing to locate stock wherever there is an open location ▪ Typically requires automatic identification systems (AISs) and effective information systems ▪ Random assignment of stocking locations allows more efficient use of space ❖Key tasks 1. Maintain list of open locations 2. Maintain accurate records 3. Sequence items to minimize travel, pick time 4. Combine picking orders 5. Assign classes of items to particular areas Copyright © 2020 Pearson Canada Inc.  Customizing ▪ Value-added activities performed at the warehouse ▪ Enable low cost and rapid response strategies Assembly of components Loading software Repairs Customized labeling and packaging Copyright © 2020 Pearson Canada Inc.  Fixed-Position Layout ▪ Product remains in one place ▪ Workers and equipment come to site ❖Complicating factors Limited space at site Different materials required at different stages of the project Volume of materials needed is dynamic Copyright © 2020 Pearson Canada Inc.  Process-Oriented Layout (1 of 5) A layout that deals with low-volume, high-variety production in which like machines & equipment are grouped together ▪ Flexible & capable of handling a wide variety of products or services ▪ Scheduling can be difficult, and setup, material handling, and labour costs can be high ▪ Similar machines and equipment are grouped together * See Figure 5.13 in the Text Copyright © 2020 Pearson Canada Inc.  Process-Oriented Layout (2 of 5) ❖ Advantages ▪ Flexibility in equipment assignment ▪ Flexibility in labour assignment ❖ Disadvantages ▪ Scheduling can be difficult ▪ Setup, material handling, & labour (high-skilled) costs can be high ▪ Increased work-in-process (WIP) inventory Copyright © 2020 Pearson Canada Inc.  Process-Oriented Layout (3 of 5) ▪ Arrange work centres so as to minimize the costs of material handling ▪ Basic cost elements: Number of loads (or people) moving between centres Distance loads (or people) move between centres ❖ Cost is assumed to be a function of distance between work centres Copyright © 2020 Pearson Canada Inc.  Process-Oriented Layout (4 of 5) n n Minimize cost = ∑ ∑ Xij Cij i=1 j=1 Where n = total number of work centers or departments i, j = individual departments Xij = number of loads moved from department i to department j Cij = cost to move a load between department i and department j Copyright © 2020 Pearson Canada Inc.  Process-Oriented Layout (5 of 5) ❖ Computer Software ▪ Graphical approach only works for small problems ▪ Computer programs are available to solve bigger problems CRAFT ALDEP CORELAP Factory Flow Copyright © 2020 Pearson Canada Inc.  Work Cells ▪ Reorganizes people and machines into groups to focus on single products or product groups ▪ Group technology identifies products that have similar characteristics for particular cells ▪ Volume must justify cells ▪ Cells can be reconfigured as designs or volume changes Copyright © 2020 Pearson Canada Inc.  Requirements of Work Cells ▪ Identification of families of products ▪ A high level of training, flexibility, and empowerment of employees ▪ Being self-contained, with its own equipment and resources ▪ Test (poka-yoke) at each station in the cell Copyright © 2020 Pearson Canada Inc.  Improving Layouts Using Work Cells (1 of 2) Figure 5.19 a Copyright © 2020 Pearson Canada Inc.  Improving Layouts Using Work Cells (2 of 2) Figure 5.19 b Copyright © 2020 Pearson Canada Inc.  Advantages of Work Cells 1. Reduced work-in-process inventory 2. Less floor space required 3. Reduced raw material and finished goods inventory 4. Reduced direct labour 5. Heightened sense of employee participation 6. Increased use of equipment and machinery 7. Reduced investment in machinery and equipment Copyright © 2020 Pearson Canada Inc.  Staffing and Balancing Work Cells ▪ Determine the takt time Total work time available Takt time = Units required ▪ Determine the number of operators required Total operation time required Workers required = Takt time Copyright © 2020 Pearson Canada Inc.  Staffing Work Cells Example ▪ 600 Mirrors per day required ▪ Mirror production scheduled for 8 hours per day ▪ From a work balance chart: Total operation time =140 seconds ▪ How many workers are required? Work Balance Chart Takt time = (8 hrs ´ 60 mins)/600 units = 0.8 mins = 48 seconds 2.91 ≈ 3 workers Total operation time required are required to Workers required = produce one mirror Takt time every 48 seconds = 140/48 = 2.91 Copyright © 2020 Pearson Canada Inc.  Work Balance Charts ▪ Used for evaluating operation times in work cells ▪ Can help identify bottleneck operations ▪ Flexible, cross-trained employees can help address labour bottlenecks ▪ Machine bottlenecks may require other approaches Bottlenecks are critical areas of development within an operation Copyright © 2020 Pearson Canada Inc.  Focused Work Centre & Focused Factory ▪ Focused Work Center Identify a large family of similar products that have a large & stable demand Moves production from a general-purpose, process-oriented facility to a large work cell ▪ Focused Factory A focused work cell in a separate facility May be focused by product line, layout, quality, new product introduction, flexibility, or other requirements Copyright © 2020 Pearson Canada Inc.  Repetitive and Product-Oriented Layout Organized around products or families of similar high-volume, low-variety products ❖Assumptions 1. Volume is adequate for high equipment utilization 2. Product demand is stable enough to justify high investment in specialized equipment 3. Product is standardized or approaching a phase of life cycle that justifies investment 4. Supplies of raw materials & components are adequate and of uniform quality Copyright © 2020 Pearson Canada Inc.  Product-Oriented Layouts (1 of 2) ▪ Fabrication line Builds components on a series of machines Machine-paced Require mechanical or engineering changes to balance ▪ Assembly line Puts fabricated parts together at a series of workstations Paced by work tasks Balanced by moving tasks ❖ Both types of lines must be balanced so that the time to perform the work at each station is the same. Copyright © 2020 Pearson Canada Inc.  Product-Oriented Layouts (2 of 2) ▪ Advantages 1. Low variable cost per unit 2. Low material handling costs 3. Reduced work-in-process inventories 4. Easier training and supervision 5. Rapid throughput ▪ Disadvantages 1. High volume is required 2. Work stoppage at any point ties up the whole operation 3. Lack of flexibility in product or production rates Copyright © 2020 Pearson Canada Inc.  Assembly-Line Balancing (1 of 3) Objective is to minimize the imbalance between machines or personnel while meeting required output ▪ Starts with the precedence relationships Determine cycle time Calculate theoretical minimum number of workstations Balance the line by assigning specific tasks to workstations Evaluating efficiency of the line Copyright © 2020 Pearson Canada Inc.  Assembly-Line Balancing (2 of 3) ▪ Heuristic Rules May be used to assign tasks to workstations in assembly-line balancing 1. Longest task (operation) time 2. Most following tasks 3. Ranked positional weight 4. Shortest task (operation) time 5. Least number of following tasks Copyright © 2020 Pearson Canada Inc.  Assembly-Line Balancing (3 of 3) Production time available per day Cycle time = units required per day 𝑛 ෍ Time for task 𝑖 Theoretical minimum 𝑖=1 number of workstations = Cycle time Where “n” is the number of assembly tasks ෍ Task times Efficiency = (Actual number of workstations)×(Largest assigned cycle time) Copyright © 2020 Pearson Canada Inc. In-Class Exercise  Summary (1 of 2) ▪ Process strategy is a competitive weapon ▪ Production processes are selected to meet product & volume requirements ▪ Necessary quality, flexibility, and cost structure should be matched with output requirements ▪ Employee empowerment helps the design of equipment & processes ▪ Lean production techniques used Copyright © 2020 Pearson Canada Inc.  Summary (2 of 2) ▪ Layouts make a substantial difference in operating efficiency ▪ Different types of operations require different approaches to layout design ▪ Seven different types of layouts were discussed in this chapter: Copyright © 2020 Pearson Canada Inc.