Operations Management Class Notes PDF

Operations Management Chapter 1: Introduction OPERATIONS - responsible for producing goods or services - is not only for production but it evolves in every other part of the co...

Operations Management Chapter 1: Introduction OPERATIONS - responsible for producing goods or services - is not only for production but it evolves in every other part of the company. Operations Management - management of systems or processes that create goods and/or provide services Goods - Physical items such as raw materials, parts, subassemblies, and final products Services - Activities that provide some combination of time, location, form, or psychological value Supply Chain - sequence of activities & organizations involved in producing and delivering G&S - operations management is under the umbrella of supply chain - Suppliers>Direct Suppliers>Producers>Distributors>Final Customers - SIPOC Value-Added Process (IPO) - conversion of inputs into outputs - Value-added elements make the difference between the cost of inputs and the value or price of outputs - from the time they bought it til the time they will sell it INPUTS - land - labor - capital - information PROCESS - OUTPUTS - goods - Services - Feedback - measurements taken at various points in the process - Control - comparison of feedback against previously established standards to determine if corrective action is needed Product Packages - combination of goods and services - can make a company more competitive Goods-Service Continuum - A manufacturing company cannot go away with providing service - A service company cannot provide service without any goods Types of Operations (GESEC) Goods Producing - Farming, mining, construction, manufacturing, power generation Storage & Transportation - Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange - Retailing, wholesaling, financial advising, renting, leasing Entertainment - Films, radio, television, concerts, recording Communication - Newspaper, radio, TV, newscasts, telephone satellites Function Overlap Finance & Operations - Budgeting - Financial prepares the budget and analyzes the plan of operations - Operations find suppliers, prepare the plan - Marketing pressured to generate income to - Economic Analysis of Investment Proposal - Finance will evaluate and analyze the proposal - Operations will make investment proposals such as machines, items, and things needed for the project - Provision of Funds - Finance release of funds - Operations uses the funds to the project Marketing & Operations - Product & Service Design - Marketing produces the product design using the instruction from the clients or market research - Operations - Lead Time Data - Ability to hand over or deliver the product & services - Marketing promises to fulfill the demand of the customers - Marketing will pressure the operations to meet the delivery target - Operation will analyze the - Competitor Analysis - Marketing will - Operations will find gaps and that matters about product quality, service performance, process of - Demand Data Process Management Process - one or more actions that transform inputs into outputs Upper Management - govern the operation of the entire org Operational - core processes that make up to value system Supporting - support the core processes SUPPLY & DEMAND - Supply > Demand = Wasteful Costly / Surplus - Supply < Demand = Opportunity Loss Customer Dissatisfaction / Shortage - Supply = Demand = Ideal, hard to match in terms of economic factors, Scope of Operations Management - Forcasting - Capacity Planning - Facilities and Layout - Motivating Employees - Managing Inventories - Location of Facilities Role of the Operation Management System Design (TOP Management) - Capacity - Facility location - Facility layout - Product and service planning - Acquisition and placement of equipment - These are typically strategic decisions that usually require long-term commitment of resources determine parameters of system operation System Operation (LOWER to MIDDLE Management) - These are generally tactical and operational decisions - Management of personnel - Inventory management and control - Scheduling - Project management - Quality assurance - Operations managers spend more time on system operation decision than any other decision area - They still have a vital stake in system design - Day-by-day operations General Approach to Decision Making* WHAT: resources are needed and in what amounts WHEN: will each resource be needed? When should the work be scheduled? When should the materials and other supplies be ordered? WHERE: will the work be done? WHO: will do the work HOW: will the product/service be designed? How will the work be done? How will resources be allocated Modeling Approach - MODEL is an abstraction of reality - simplification of real-life phenomena - representation of something - Physical schematic mathematical - What is its purpose? - How is it used to generate results? - How are the results interpreted and used? - What are the model’s assumptions and limitations? Performance Metrics - profits - costs - quality - productivity - flexibility - inventories - schedules - forecast accuracy Analysis of Trade-Offs - giving up one thing in return for something else - carrying more inventory to achieve a greater level of customer service Systems Approach a set of interrelated parts that must work together the whole is greater than the sum of its parts the output and objectives of the organization take precedence over those of any one subsystem - Marketing Subsystem - Operations Subsystem - Finance Subsystem Historical Evolution of Operations Management Industrial Revolution - Pre-Industrial Revolution - Craft Production - a system in which highly skilled workers use simple flexible tools to produce small quantities of customized goods. - Management theory and practice did not advance appreciably during this period - began in England in the 1770s Scientific Management - a movement led by an efficiency engineer, Frederick Winslow Taylor - a science of management, based on observation, measurement, analysis, and improvement of work methods, and economic incentives - management is responsible for planning, carefully selecting and training cooperation between management and workers, and separating management activities from work activities - maximizing outputs Human Relations Movement - the importance of the human element in job design - Lillian Gilbreth - applications of psychology - Elton Mayo - Hawthorne studies on worker motivation, 1930 - Abraham Maslow - motivation theory, the hierarchy of needs - Frederick Hertzberg - two-factor theory - Douglas McGregor - theory X and theory Y - William Ouchi - Theory Z Decision Models & Management Science - F.W. Harris - mathematical model for inventory management - Dodge, Romig, and Shewhart - statistical procedures for sampling and quality control - Tippett - statistical sampling theory - Operations Research Groups - OR applications in warfare - George Dantzig - linear programming Influence of Japanese Manufacturers - refined and developed management practices that increased productivity  - credited with fueling the “quality revolution” - just-in-time production concept Key Issues for Operations Managers Today 1. Economic Conditions 2. Innovating 3. Quality Problems 4. Risk Management 5. Competing in a global economy Sustainability - using resources that do not harm ecological systems that support human existence - measures often go beyond traditional environmental and economic measures to include and incorporate social criteria in decision-making - product/service design - consumer education programs - disaster preparation and response - supply chain waste management - outsourcing decisions Ethical Issues - financial statements - worker safety - product safety - quality - environment - community - hiring and firing workers - closing facilities - rights Supply Chain Management - managing supply chain beyond their operations and immediate suppliers which led to numerous problems - oscillating inventory levels - inventory stockouts - late deliverables - quality - improve operations* - increasing levels of outsourcing - increasing transportation costs - competitive pressures - increasing globalization - increasing importance of e-business - complexity of supply chains - inventory managing May 13, 2024 Productivity, Competitiveness, & Strategy Chapter 2 Competitiveness - how effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services - organizations compete through some combination of their marketing and operations function - What do customers want - How can these customers needs best be satisfied - productivity is operation’s function - for marketing, by promising that the company will be able to supply the demand of the customers Business Compete Using Operations 1. Product and Service Design - Product - special characteristics - innovation and ideas offer - can differ from various selection of products - Service - special characteristics - innovation and ideas offer - convenience - the quality of service offered 2. Cost - in lowering the costs, they can play with their price, and they can be competitive because of their costing 3. Location - to become competitive, a company can choose a location close to the market to be easily reached by the consumers - logistics and availability wise 4. Quality - depends on durability - materials used 5. Quick Response - changing conditions of their demands - aside from quickly response to trends, adapting to technology will - complaint resolutions 6. Flexibility - adapt to new trends quickly - adapt to new preferences of consumers - adapt to new challenges that come in 7. Inventory Management - internal, if they can deliver the items to distributors or customers - external, if they can ensure enough finished goods are available in the market 8. Supply Chain Management - SIPOC - coordinating internal and external operations - management of inventory and delivery of output - smooth flow of delivery  9. Service - options - offering 10. Managers and Workers - competent and motivated - how they approach and handle complaints - good feedback and rating if they give good service - more reliable, knowledgeable, and considerate Hierarchical Planning Mission - the reason why the organization exists Goals - certain goals are set for the organization to live for its reason Organizational Strategies - to achieve those goals for the organization can live for its reason, they need to have strategies - overall strategies Functional Strategies - department strategies to meet the organizational strategies Tactics - specific ways to execute the strategies Strategy Formulation - Effective strategy formulation - Core competencies - making use of resources and great assets - Environmental Scanning - SWOT Order Qualifiers - characteristics that customers perceive as minimum standards of acceptability for a product or service to be considered as a potential for purchase Order Winners - to become competitive, we need to become winners not just qualifiers - characteristics of an organization’s goods or services that cause it to be perceived as better than the competition —--------------------------------------------------------------------------- Productivity - a measure of the effective use of resources, usually expressed as the ratio of output to input - Tracking an operating unit’s performance over time - to compare whether or not the operating unit has performed well - Judging the performance of an entire industry or country - if the company is effectively competitive among others. Factors Affecting Productivity 1. Methods - a better alternative/system for better production and productivity 2. Capital - the more capital more equipment and machinery - that equals efficient and high productivity 3. Quality - it is the reflection that is produced because the output is acceptable - if the product is rejected, have you been producing a lot? it is not considered productive 4. Technology - automation of tasks - simplifies production and processes - increases production efficiency - if efficiency increases, productivity increases 5. Management - People (Managers) - motivates and u - if the managers are too restrictive, it does not promote productivity - if the managers are supportive and encouraging, they will produce more productivity - Management - if the management is well-organized and technical with their processes and ways that they handle the people under them, it will promote productivity PRODUCTIVITY MEASURES DIAGRAM/MINDMAPS/LINKS Productivity growth Productivity = Output / Input Partial Measures (Single-Factor Productivity) (VAP)= Output / Single Input Output / Labor Output / Capital Multifactor Measures (Two or More Productivity) = Output / Multiple Inputs Output / Labor + Machine Productivity Output / Labor + Capital + Energy Total Measure = Goods or Services Produced / All inputs used to produce them Productivity Growth = Current Productivity - Previous Productivity / Previous Productivity * 100% TIP If its similar = add If its different = multiply Example What is the multifactor productivity? Units Produced: 5,000 Standard Price: $30 per unit Labor Unit(hr): 500 hours Cost of Labor: $25 per hour Cost of Materials: $5,000 Cost of Overhead: 2x labor cost - If the denominator is of the same Labor Unit: 500 hours kind, you have to add it X Cost of Labor: $25 per hour - If the denominator has two $12,500 X Cost of Overhead: $25,000 different types of input, you have $37,000 to multiply it to one another + Cost of Materials: $5,000 o Examples: = Total Cost: $42,000 For denominator: - 2 hours in machine, 3 hours in Units Produced: 5,000 labor X Standard Price: $30 0 - talking about “Hours done” 150,000 or “Ilang hours siya ginawa” - then you will have to add Unit Price: $150,000 - 5 hours in machine, 2 hours in / Total Cost: $42,000 0 labor, done using 5 machines. multifactor productivity = 3.5294 per unit per dollar input - Add muna ung hours then What is the implication of a unitless measure of productivity? multiply sa machine - none, because there is no unit of measure. - Then the denominator will - the unit of measure should be 3.5294 per unit per dollar input be… 5x2=10+2=12 May 20, 2024 Strategic Capacity Planning - internal learning, external learning from customers and suppliers, and proprietary processes and equipment - Strategic Capacity Management also needs to address both efficiency and effectiveness - implications for strategic objectives, (production) technology, outsourcing, and organizational structures (incl. skills of employees) as well as other factors than cost (e.g. lead-time, logistics, and quality) - add the proposition that the indirect strategic roles of manufacturing will become increasingly important - aims at managing resource utilization from a productivity perspective, management as a concept is oblivious, and more emphasis should be given to the underlying models that govern effective management in this field - organization, technology, and strategy are strongly linked to each other; organization and technology should support the strategy; management is required to implement the changes; organizational and technological changes should be implemented synchronously - Strategic Capacity Management, consisting of separate components, guiding the data collection, the research has followed a structured path - Capacity planning is the process of determining the potential needs of your project. The goal of capacity planning is to have the right resources available when needed. Resources could mean individuals with the right skills, time available to add another project or the necessary budget. - Lead capacity strategy, or lead strategy, is the process of increasing production capacity when you're in anticipation of a high demand. - Lag strategy planning is the process of increasing production capacity when you’re experiencing a real-time demand. - Match strategy planning is a combination of lead capacity planning and lag strategy planning. The process of match strategy planning requires slowly increasing capacity in small increments until you reach the desired resource utilization. - As a project manager, one of the best things you can do to support your team is to create a capacity plan. Knowing the capacity requirements for different projects can help prevent bottlenecks and keep a supply chain flowing. Here are the most important benefits of capacity planning - A well-strategized capacity plan can help prevent scope creep and take pressure off of your team. If you know the steps you have to take for each type of capacity—whether that’s excess capacity or a lack of resources—you’ll be able to meet demand during any given period. - Effective capacity planning aligns your current team’s skill sets with their availability for new projects. If there are not enough available resources for a project, you’ll know that you need to add more resources to your team. - When you manage your team's capacity, you're optimizing your resources for the scope of work that you need to complete. This means that you're not paying for more resources than you need, ultimately minimizing production costs. - Capacity planning isn’t just helpful for your current projects, it can also help you scope out capacity needs for the future. When you create a capacity plan for one project, you can use that as a template for a similar project in the future. - Your capacity plan will highlight any inefficiencies that you can optimize. This kind of data is highly valued by stakeholders who like to be in the know when it comes to how they invest their resources and money. - Strategic capacity planning is under system design. As discussed before, it involves a long-term strategic commitment of resources that determine the parameters of system operation and the impact of the overall design and structure of the system, including the facility layout/location, product/service design, capacity, and workforce. The goal of strategic capacity planning is to ensure that the system can meet future demands while maintaining balance and efficiency. This process involves estimating future capacity requirements, evaluating existing capacity, identifying alternatives, and selecting the best long-term strategy, which are all key aspects of system design. Product and Service Design - Process Selection and Facility Layout PROCESS TYPES - - Job Shop - Batch - Repetitive - Continuous - Project JOB SHOP - Operates on a relatively small scale - low volume of high-variety goods/services will be needed - processing is intermittent - work includes small jobs, each with different processing requirements - high flexibility using general-purpose equipment and skilled workers are important characteristics - ex. tool and die shop that is able to produce one of a kind tools. A service example is a veterinarian’s office, which is able to process a variety of animals and injuries and diseases. - customized product or services BATCH - used when a moderate volume of goods/services is desired, and it can handle a moderate variety in products/services - the equipment needed does not need to be flexible as in a job shop, but processing is still intermittent - the skill level of workers does not need to be as high as in a job shop, there is less variety in the jobs REPETITIVE - for higher volumes of more standardized goods/services - standardized output, only slight flexibility of equipment is needed - skill of workers are generally low - production and assembly lines - sometimes referred to as assembly CONTINUOUS - very high volume of non discrete - highly standardized output is desire - These systems have almost no variety in output - no need for equipment flexibility - Worker’s skill requirements can range from low to high, depending on the complexity of the system and the expertise workers need - if the equipment is highly specialized, workers skills can be lower LEAN PROCESS DESIGN - focuses on waste reduction, which relates to sustainability objectives - variance reduction in workload over the entire process to achieve level production  and improve process flow - Reduced inventory and floor space - Quicker response times and shorter lead times - Reduced defects, rework, and scrap - Increased productivity TECHNOLOGY - Process Technology - includes methods, procedures, and equipment used to produce goods and provide services. This is not only involves processes within an organization, it also extends to supply chain processes - Information Technology - it is the science and use of computers and other electronic equipment to store, process, and send information. Programmable AUTOMATION - Machinery that has sensing and control devices that enable it to operate automatically - Computer-Aided Manufacturing - the use of computers in process control, ranging from robots to automated quality control - Numerically Controlled Machines - programmed to follow a set of processing instructions based on mathematical relationships that tell the machine the details of the operations to be performed FACILITY LAYOUT - the arrangement of activities, processes, departments, workstations, storage areas, aisles, and common areas within an existing or proposed facility - the basic objective is to ensure a smooth flow of work, material, people, and information through system Objectives - To facilitate attainment of product/service quality - To use workers & space efficiently - To avoid bottlenecks - To minimize material handling costs - To eliminate unnecessary movements of workers or materials - To minimize production time or customer service time - To design for safety ELLE’S REVIEWER Operational Management (OM) A - administration C - create E - efficiency That converts M - materials L - labor Operations Part of a business organization that is responsible for producing goods or services Management of systems or processes that create goods and/or provide services Goods and Services Goods Physical items that include raw materials ○ Automobiles ○ Computer Services Activities that provide some combination of time, location, form, or psychological value ○ Education ○ Haircut Supply Chain - Sequence of activities and organizations involved in producing and delivering a good or service. Feedback - Measurements taken at various points in the transformation process Control - the comparison of feedback against previously established standards to determine if corrective action is needed Why Study Operations Management Every aspect of business affects or is affected by operations Many service jobs are closely related to operations Basic Functions of the Business Organization Organization ○ Marketing ○ Operations ○ Finance Role of the Operations Manager The operations function consists of all activities directly related to producing goods or producing services. System Design Decisions  System Design ○ Capacity ○ Facility Location ○ Facility Layout ○ Product and Service Planning ○ Acquisition and placement of equipment System Operation Decisions System Operation ○ Management of personnel ○ Inventory management and control ○ Scheduling ○ Project management Competitiveness - How effectively the organization meets the wants and needs of the consumers relative to others that offer similar goods and services Marketing Influence Identifying customer wants and needs ○ Basic input in an organization’s decision making process, and central to competitiveness Price and Quality ○ These are key factors to a customer’s buying decision Advertising and Promotion ○ Used to inform potential customers about their products or services such as features or promotions to attract them Why Organizations Fail? Neglecting operations strategy Not taking advantage of strengths and opportunities Not continuous innovation Not investing in people Systems not working with one another Failing to consider customer wants and needs Mission and Strategies Mission - reason for the existence of an organization Organizational Goals - provide more detail and describe the scope of the mission Organizational Strategies - guides the organization by providing direction and alignment Functional Goals - relate to each functional area of the organization such as finance, marketing, and operations. Tactics - provide guidance and direction for carrying out actual operations; individual steps Operations - actual “doing” part of the process Low Cost - outsource operations to third-world countries that have low labor cost Scale-Based Strategies - use capital-intensive methods to achieve high output volume and low unit costs Specialization - focus on narrow product lines or limited service to achieve higher quality Newness - focus on innovation to create new products or services Flexible Operations - focus on quick response and/or customization High Quality - focus on achieving higher quality than competitors Service - focus on various aspects or service Sustainability - focus on environmental-friendly and energy-efficient operations Core Competencies - special attributes or abilities possessed by an organization that give it a competitive edge Order Qualifiers - characteristics that potential customers perceive as minimum standards of acceptability for a product to be considered a purchase Order Winners - characteristics of an organization’s goods or services that cause them to be perceived as better than the competition. Strategy Formulation Link strategy directly to the organization’s mission or vision statement Assess strengths, weaknesses, threats, and opportunities, and identify core competencies Identify order winners and order qualifiers Select one or two strategies (low cost, speed, customer service, etc.) to focus on. Operations Strategy Quality and Time Strategies ○ Quality-Based Strategies ○ Time-Based Strategies Quality-based Strategy - Strategy that focuses on quality in all phases of an organization Time-based Strategies - strategies that focus on the reduction of time needed to accomplish tasks Implications of Organization Strategy for Operations Management Low-cost, High-Volume Strategy ○ Low price ○ High Quality ○ Quick Response ○ Newness/Innovation ○ Product or Service Variety ○ Sustainability The Balance Scorecard Transforming Strategy into Action Limitations and External Considerations Productivity One of the primary responsibilities of a manager Index of measurement Productivity’s Varying Implication Low Cost Strategies ○ The higher the productivity, the lower the cost of the output Nonprofit organizations ○ Higher productivity means lower cost Profit-based Organizations ○ Productivity is an important factor in determining how competitive a company is Forecasting It provides insights into future demand To align supply with demand Features Common to all forecasts Existed in the past will persist in the future Not perfect Groups of items are more accurate Accuracy decreases Elements of a Good Forecast Timely Accurate In writing Simple Cost-effective Meaningful unit Steps in the Forecasting Process Determine the purpose of the forecast ○ Indication of the level of detail required in the forecast, the amount of resources that can be justified, and the level of accuracy needed Establish a time horizon ○ Indicates a time interval, keeping in mind that accuracy decreases as the time horizon increases Obtain, clean, and analyze appropriate data ○ Data may need to be “cleaned” to get rid of outliers and incorrect data before analysis Select a forecasting technique ○ May vary but focus around the factors of cost and accuracy Make the forecast ○ Application of the technique being used Monitor the forecast errors ○ These errors should be monitored to determine if the forecast is performing in a satisfactory manner Forecast Accuracy - means of measuring how well a demand forecast has predicted actual outcomes or values of sales Forecast Error - difference between the actual or real and the predicted or forecast value of a time series or any other phenomenon of interest Approaches to Forecasting Qualitative Method - subjective inputs and expert judgment rather than numerical data Quantitative Method - historical data and mathematical methods to predict future outcomes Examples of Forecasting Techniques Judgmental Forecasts - subjective analysis of inputs Time-series forecasts - based on historical data Associative models - use mathematical equations that incorporate one or more explanatory variables to predict demand or outcomes. Qualitative Forecasts  Executive Opinions - involve gathering insights and predictions from top-level executives within an organization Salesforce Opinions - involve collecting forecasts and insights directly from the sales team or individuals responsible for interacting with customers Consumer Surveys - involve systematically collecting opinions and feedback from a sample of individuals or target customers Delphi Method - structured forecasting technique that involves a panel of experts or those who can contribute meaningfully. They provide their opinions, and the responses are aggregated and shared with the panel in rounds. Time Series Time-ordered sequence of observations taken at regular intervals Data are made on the assumption that future values of the series can be estimated from past values Data points are ordered chronologically, forming a time-ordered sequence. Key Components of Time Series Analysis Trend ○ A long-term upward or downward movement in data Seasonality ○ short-term , fairly regular variations related to the calendar or time of day Cycles ○ Wavelike variations lasting more than one year Irregular Variations ○ Due to unusual circumstances that do not reflect typical behavior Random Variations ○ Residual variation that remains after all other behaviors have been accounted for Naive Methods - bases its prediction on a single historical value from a time series. The naive approach can be applied to trends, seasonal variations, or stable series. Moving Average - produced by summing together several of the most current values of the actual data ○ Sum of the 3 most recent / 3 Weighted Moving Average - weighted average has one exception. Usually gives a time series’ most recent values greater weight. Exponential Smoothing Approach that is nevertheless quite simple to apply and comprehend. Where next forecast = previous forecast + a (Actual - Previous forecast) Where (Actual - Previous forecast) represents the forecast error and a is a percentage of the error Focus Forecasting Best recent performance Created using the approach with the highest accuracy Diffusion Models Extensively used in marketing and to evaluate the benefits of investing in new technology, even though the specifics are outside the purview of this work. Associative Forecasting Techniques Associative Techniques ○ Requires identifying related variables to help predict values of the variable of interest Simple Linear Regression ○ Simplest and widely used form – linear relationship between two variables ○ Used to summarize the effect of predictor variables to help develop an equation – aka regression Correlation ○ Strength and direction of the relations between two variables ○ Ranges from -1.00 to +1.00 Nonlinear and Multiple Regression Analysis ○ Simple linear regression may not be applicable ○ If there is more than one predictor variable, use nonlinear regression Implementation ○ Systematic forecasting process that includes goal-setting, setting deadlines, gathering clean data, choosing methods, creating predictions, and keeping an eyes out for mistakes Take Action ○ Review and improve the forecasting procedure on a regular basis in light of the feedback loop that forecast errors monitoring provides Product and Service Design Product Design - creating physical or digital solutions Service Design - ensuring customers have great experiences and value What does it do? It translates the wants and needs of the customer to products or services Refine existing products or services  Develop new products and/or services Formulate quality goals Formulate cost targets Construct and test prototypes Translate product and service specifications into process specifications Reason for Redesign Economic - low demand, reduce cost Social and Demographic - population shifts Political, Liability, or Legal - low demand, reduce cost Competitive - new or changed products or services Cost or Availability - raw materials, components, labor Technological - product components Idea Generation Reverse Engineering ○ Buying an item from a competitor to carefully dismantle and inspect to search for ways to improve their own product Research and Development ○ Organized efforts that are directed toward increasing scientific knowledge and product or process innovation Legal Considerations Product Liability ○ Responsibility of a manufacturer for any injuries or damages caused by a faulty product Uniform Commercial Code ○ Product must be suitable for its intended purposes Human Factors ○ Issues often arise in the design of consumer products Cultural Factors ○ Product designers in companies that operate globally also must take into account any cultural differences of different countries related to the product Global Product and Service Design ○ Involves a group of designers working together throughout different countries ○ Virtual global teams include benefits including working around the clock to shorten time-to-market. Sustainability Cradle-to-Grave Assessment ○ Evaluates the environmental impact of a product or service throughout its life cycle End-Of-Life Programs ○ Programs aimed at dealing with items that have exceeded their usefulness, including both consumer goods and office equipment The 3RS Reduce ○ Function of parts and materials to reduce cost and/or improve product performance Reuse ○ Refurbishing old goods by changing out worn-out or flawed parts Recycle ○ Recovering materials for future use Strategies for Product or Service Life Stages Introduction ○ Treated as a curiosity item with unstable standing where prices may drop ○ Higher reliability and lower costs leading to growth in demand Growth ○ Accurate projections of the demand growth rate and the span ○ Ensure increasing capacity coincides with its increasing demand Maturity ○ Product or service reaches maturity and demand levels off ○ Costs are low but productivity is high Decline ○ Decide whether to discontinue replacing it, abandon the market, or find new uses and users for the existing good ○ Life cycle relate to the matter of basic needs and rate of technology change Product Life Cycle Management Systematic approach to managing the series of changes a product undergoes Eliminate waste and improve efficiency ○ Beginning of life ○ Middle of life ○ End of life Degree of Standardization Standardization - absence of variety in a product, service, or process Products - homogenous products in large quantities Services - imply that each customer receives the same treatment Processes - deliver standardized service or produce standardized goods Mass Customization strategy producing standardized goods or services while ensuring some degree of customization in the final output  Delayed Differentiation ○ Postponement tactic, postponing the completion until the preferences or specifics are known Modular Design ○ Represents a group of component parts into subassemblies ○ Advantage: convenience of performing a diagnostic test and controlled inventories ○ Disadvantage: decrease in variety and the inability to disassemble a module Reliability - ability to perform its intended function under a prescribed set of conditions Failure - term used if a product did not perform as intended Normal Operating Conditions - reliabilities specified to certain conditions, including load, temperature, humidity ranges, operating procedures and maintenance schedules. Robust Design - results in products or services that can function over a broad range of conditions; higher customer satisfaction Taguchi’s Approach Genichi Taguchi, approach to robust design. Parameter design that determines the specification settings for production to achieve a robust design Degree of Newness Product or service design change range: ○ Modification of an existing product or service ○ Expansion of an existing product line or service offering ○ Clone of a competitor’s product or service ○ New product or service Quality Function Deployment Structured approach for integrating the “voice of the customer” into both the product and service development process Making customer requirements factored into the process The Kano Model Basic ○ Limited effect on customer satisfaction if present and otherwise a dissatisfaction ○ Once basic needs have been met, further efforts should not be pursued Performance ○ Generate satisfaction or dissatisfaction to their level of functionality and appeal ○ Cost-benefit analysis should be included if the benefit exceeds the cost Excitement ○ The “wow” factor ○ Challenging since customers are not likely to indicate excitement factors in surveys Service Design Service - act, something done to or for a customer Service Design - process where sustainable solutions and optimal experiences are created Service Delivery System - facilities, processes, and skills needed to provide a service Product Bundle - combination of goods and services; produces reliable customer-oriented serviced with products – key advantage Service Package - physical resources needed to perform the service, the accompanying goods, and the explicit and implicit services included Phases in Product Design and Development Feasibility Analysis ○ Involves assessing market demand, economic viability, and technical feasibility of a project Product Specification ○ Ensures that the final product aligns with customer need, meets regulatory requirements, can be efficiently produced and marketed Process Specification ○ Involved defining the methods and parameters needed to produce a product efficiently, considering factors like: Cost Resource availability Prototype Development ○ Involves creating one or a few units of a product based on finalized product and process specifications to identify any potential issues Design Review ○ Evaluate whether the project aligns with strategic goals, meets customer needs, and remains financially viable Market Test ○ Evaluates consumer acceptance of the product. If unsuccessful, the product returns to the design review phase for adjustments Product Introduction ○ Marketing takes the lead in promoting the new product to consumers Follow-up Evaluation ○ Gathering user feedback and assessing market performance ○ Adjustments may be made based on this feedback, and forecasts may be refined to improve product success Designing for Production Concurrent Engineering ○ To produce product designs that take into account both production capacity and consumer preferences Computer-aided design ○ Product design using computer graphics ○ Increases productivity of designers 3 to 10 times Production Requirements ○ Designers should consider production capabilities, and understand factors like equipment, skills, materials, etc.  ○ Manufacturability - ease of fabrication and/or assembly is important for cost, productivity, and quality ○ Design for Assembly (DFA) - design that focuses on reducing the number of parts in a product and on assembly methods and sequence ○ Design for Manufacturing (DFM) - the designing of products that are compatible with an organization’s capabilities. Component Commonality ○ They provide a variety of goods and services with comparable characteristics and components ○ Saves design time and organizes training procedures, bulk purchasing benefits, and inventory management. Service Blueprinting - approach used in service design and management to map and evaluate the numerous components and interactions involved in providing a service visually. Challenges of Service Design Intangibility and Inseparability ○ Might be difficult for consumers to assess them before using them Customer Involvement and Co-Creation ○ Services frequently necessitate the active involvement of the client in the planning and execution phase Lack of Standardization ○ Standardization is prevalent in the production of goods, the specific character of services frequently makes them resistant to standardization. Human Element and Training ○ Quality of service can be impacted by the diversity if human behavior, abilities, and attitudes Managing Customer Experience ○ Customer discontent may result from service offers that are not in line with their expectation Technological Challenges ○ Might be difficult to stay up to date with technological breakthroughs Operations Strategy Refers to the broad strategy and set of choices that determine how an organization’s operations work in tandem with its broader business goals and strategy Cause of Advantages of Operations Strategy Packaging Products and Ancillary Services - incorporating complementary services or bundling products Utilizing Platforms - employing common platforms for different products can lead to cost efficiency and streamlined production processes Implementing Mass Customization - involves efficiently producing customized products Continuous Monitoring for Small Improvement - small improvements in usability, design, or functionality can have a significant and long-lasting effect Reducing Time-to-Market - reducing the length of the product development and launch cycles is essential Process Selection Process Selection refers to how organizations produce or provide their goods and services. Major implications: ○ Capacity planning ○ Layout of facilities ○ Equipment ○ Design of work systems Key Questions: ○ How much variety will the process need ○ How much volume will the process need Types of Processing Job Shop - intermittent processing of a variety of goods and services. (printing shop) Batch - designed to handle a moderate volume of goods or service with moderate variety (bakery) Repetitive - higher volumes of standardized goods or services (motorcycle parts) Continuous - very high volumes of highly standardized goods or services (liquids or gas) Project - designed for non-routine, unique tasks or activities Technology Scientific knowledge to the development and improvements of goods and services Technological innovation - discovery & development of new or improved products and services 2 types of technology ○ Process Technology - methods and procedures used to produce goods ○ Information technology (IT) - use of computers and other electronics to store and process data Automation A machine that has sensing and control devices that enable it to operate automatically Three Kinds of Automations ○ Fixed Automation ○ Programmable Automation ○ Flexible Automation 3D Printing Additive manufacturing Industrial robot that is controlled using computer-assisted design (CAD) Create three-dimensional objects Applications of 3D Printing Industrial Applications  ○ Medical Devices: Prosthetics ○ Robots: Robots and Robot Parts ○ Construction: Architectural scale models Consumer Applications ○ Appliances and tools: replacement models Drones In remote areas, used for deliveries Monitoring Security Six Types of Facility Layout Product - uses standardized processing operations to achieve smooth, rapid, high-volume flow ○ Low unit cost due to high volume Process - layouts that can handle varied processing requirements ○ Flexible to use individual incentive systems ○ Equipment utilization rates are low Fixed-position - product or project remains stationary, and workers, materials, and equipment are moved as needed ○ Used in large construction projects Cellular - workstations are grouped into a cell that can process items that have similar processing requirements ○ Minimal work in process ○ Produce a variety of products with as little waste as possible Combination - combination of the three basic layouts = products, process, and fixed-position ○ System is flexible and yet efficient, with low unit production costs Service - degree of customer contact and the degree of customization ○ Restaurants, warehouses Basic Objectives of Layouts Facilitate the attainment of product or service quality Use workers and space efficiently Avoid bottlenecks Minimize material handling costs Eliminate unnecessary movements or workers or materials Minimize production time or customer service time Design for safety Designing Product Layouts Production/Assembly Line - Arrange workers or machine in a sequence Line Balancing Refers to the process of deciding how to assign tasks to workstations Minimizes the idle time along the line and results in a high utilization of labor and equipment Lines that are perfectly balanced will have a smooth flow of work as activities along the line are synchronized to achieve maximum utilization of labor and equipment Cycle Time Maximum time allowed at each workstation to perform the tasks before we proceed to the next station Task times govern the range of possible cycle times Minimum cycle time is equal to the longest task time and the maximum cycle time is equal to the sum of the task times Potential Rate of Output Theoretical Minimum Number of Stations The required number of workstations is a function of: ○ Desired output rate ○ Ability to combine tasks into a workstation Nmin - theoretical minimum number of stations Et (summation of T) - sum of task times Designing Process Layouts Main issue concerns the relative positioning of the departments involved Factors influencing layouts Location of entrances, elevators, loading docks, and windows Safety  Size and location of restrooms Expected operating costs Measures of Effectiveness Material-Oriented System - necessitates the use of variable-path material-handling equipment to move materials from work center to work center Customer-oriented systems - people must travel or be transported from work center to work center One of the major objectives in process layout is to minimize transportation cost, distance, or time. Information Requirements List of departments or work centers to be arranged, their approximate dimensions of the building Projection of future workflows between the various work centers Distance between locations and the cost per unit of distance to move loads between locations Amount of money to be invested in the layout List of any special considerations Location of key utilities, access and exit points, loading docks. Work Design and Measurement The act of specifying the contents and methods of jobs ○ What will be done in a job ○ Wh0 will do the job ○ How the job will be done ○ Where the job will be done Importance ○ Organization’s are dependent on human efforts to accomplish their goals Objectives ○ Productivity ○ Safety ○ Quality of work life Efficiency School - Emphasizes a systematic, logical approach to job design Behavioral School - Emphasizes satisfaction of needs and wants of employees Specialization - work that concentrates on some aspect of a product or service Behavioral Approaches to Job Design Job Enlargement - larger portion of the total task by horizontal loading Job Rotation - workers periodically exchange jobs Job Enrichment - increasing responsibility for planning and coordination tasks by vertical loading Motivation - key factor in many aspects of work life ○ Influences quality and productivity ○ Contributes to the work environment Teams - teams take a variety of forms: ○ Short-term team - formed to collaborate on a topic or solve a problem ○ Long-term team - self-directed teams groups empowered to make certain changes in their work processes Ergonomics - scientific discipline concerned with the understanding of interactions among humans and other elements of a system, and the profession that applies theory; incorporation of human factors in the design of the workplace. Methods Analysis Critical process used by self-directed teams and analysts to analyze how a job is performed The need for method analysis arises from various sources: ○ Changes in tools and equipment ○ Changes in product design or procedures ○ Government regulations or contractual agreements ○ Accidents or quality problems Flow Process Charts - used to review the overall sequence of an operation by focusing on movements of the operator or flow of materials Worker Machine Charts - help visualize the portions of a work cycle during which an operator and equipment are busy or idle. Motion Study Systematic study of the human motions used to perform an operation, aimed at eliminating unnecessary motions and identifying the best sequence of motions for maximum efficiency. Most used techniques: ○ Motion Study Principle ○ Analysis of Therbligs ○ Micromotion Study  ○ Charts Quality of Work Life Working Conditions Compensation Working Conditions Temperature and Humidity - performance tends to suffer outside a narrow comfort band, which varies with the intensity of the work Ventilation - address distracting odors and noxious fumes through proper ventilation Illumination - adequate lighting is essential for detailed tasks; also, prioritize safety in hazardous areas Noise and Vibrations - acknowledge the impact of noise on concentration and safety; considering measures like padding and shock absorbers Work Time and Breaks - aim for reasonable work hours to provide a sense of control. Occupational Health Care - considering implementing fitness programs to support the overall health of employees Safety - understand the cost and impact of accidents on both employers and employees OSHA and Safety Regulations - stay compliant with safety regulations, emphasizing the importance of of the OSHA (1970) Ethical Issues - Navigate ethical considerations in work methods, safety practices, record-keeping, performance appraisals, fair compensation, and opportunities for advancement. Compensation Knowledge-Based Pay Systems - valuing workers with diverse skills through knowledge-based pay Management Compensation - shifting towards performance-based executive pay; aligning executive compensation with company success Recent Trends - organizations adopting flexible compensation systems tired to performance Work Measurement - Concerned with determining the length of time it should take to complete the job Standard Time - amount of time it should take a qualified worker to complete a specific task, working at a sustainable rate, using given methods, tools, and equipment, raw materials, and workplace arrangement Work Measurement Techniques Stopwatch Time Study Predetermined Time Standards Standard Elemental Times Work Sampling Stopwatch Time Study - used to develop a time standard based on observations of a worker taken over a number of cycles ○ Number of cycles to observe Variability of the observed times Desired level of accuracy Desired level of confidence for the estimated job time Development of Time Standard involves computation of: Observed Time Normal Time Standard Time  Standard Elemental Times - historical time study data Predetermined TIme Standards - derived from historical data, time studies, or industry benchmarks; established time measurements for tasks, determined before execution Work Sampling - estimation of time spent on activities and idle time; intermittent observations rather than continuous monitoring. Location Planning and Analysis The Need for Location Decisions Marketing Strategy Depletion of Basic Inputs Shift in Markets Better Locations Supply Chain Considerations - management must address supply chain configuration which includes determining the number and location of suppliers, production facilities, warehouses, and distribution centers Have centralized or decentralized distribution Location: Options Managers of existing companies generally consider four (4) options in location planning ○ Expand an existing facility ○ Add new location wile retaining existing ones ○ Shut down at one location and move to another ○ Do nothing Facilitating Factors: Global Location Trade Agreements Technology Global Location: Benefits, Disadvantages, and Risk Benefits ○ Markets ○ Cost savings Disadvantages ○ transportation costs ○ Security cost RIsks ○ Political instability and unrest ○ Economic instability Managerial Implications for Global Operations - increased costs, language and cultural differences Automation - advances in automation cause many companies to take a new look at the question of where production should be done Location Decision: General Procedure Decide on evaluation criteria: cost, market access, resource availability Develop a list of potential locations: country, region, community, site Evaluate alternatives based on criteria Make a decision aligned with strategic goals and operational efficiency ○ Retail chain expansion Location Decision: Identifying a Country Consider government policies: foreign ownership, import restrictions Evaluate cultural differences: workforce conditions, business practices Analyze the labor market: skills, wages, language Assess financial aspects: incentives, taxes Determine market potential: size, competition ○ BPO companies in the PH Location Decision: Identifying a Region Availability of raw materials: specific to business needs Proximity to target markets: align with business model Labor market conditions: skill level, cost, availability Other considerations: climate, taxation, infrastructure ○ Agriculture Identifying Community Many communities actively attempt to attract new business they perceive to be a good fit for the community Microfactory - small factory near major markets with a narrow product focus. Enables manufacturing firms to integrate information from purchasing to distribution with design, engineering, and manufacturing Ethical Issues - governments offer incentives to attract companies for anticipated benefits; companies should avoid over promising jobs or longevity and underdelivering on noise or traffic Location: Identifying a site Primary site locations considerations are: ○ Land ○ Transportation ○ Zoning ○ Other restrictions Assessment of potential sites may involve heavy manufacturing or large buildings ○ Engineers ○ Architects Industrial parks might be an appropriate choice for business that do light manufacturing or assembly Multiple Plant Strategies Companies have numerous manufacturing facilities, they have various options for organization their operations Product Plant Strategy ○ Entire products or product lines are produced in separate plants, and each plant usually supplies the entire domestic market Market Area Plant Strategy ○ Plants are designated to serve a particular geographic segment of the market ○ Plants produce most, if not all, of a company’s products Process Plant Strategy ○ Different plants focus on different aspects of a process General-Purpose Plant Strategy ○ Plants are flexible and capable of handling range of products. Geographic Information System (GIS) Computer-based tool for collecting, storing retrieving, and displaying demographic data on maps Relies on an integrated system of computer hardware, software, and data. Easy to obtain information on factors such as population density, age, income, traffic patterns, etc. Examples ○ Real Estate ○ Retailers ○ Emergency Services Locational Cost-Profit-Volume Analysis Using cost-profit facilitates the economic comparison of location alternatives’ volume analysis. Can be done numerically or graphically. Steps of Locational Cost-Profit-Volume Analysis ○ Determine the fixed and variable costs associated with each location alternative ○ Plot the total-cost lines for all location alternatives on the same graph ○ Determine which location will have the lowest total cost for the expected level of output. Determine which location will have the highest profit  Transportation Model - transportation costs are critical factors influencing location decisions, whether involving raw materials or finished goods Factor Rating - general approach to evaluating locations that includes quantitative and qualitative inputs Factor Rating Procedure: Determine which factors are relevant Assign a weight to each factor that indicates its relative importance compared with all other factors Decide on a common scale for all factors, and set a minimum acceptable score if necessary Score each location alternative Multiply the factor weight by the score for each factor, and sum the results for each location alternative Choose the alternative that has the highest composite score, unless it fails to meet the minimum acceptable score Center of Gravity Method Method for locating a distribution center that minimizes distribution costs Treats distribution costs as a linear function of the distance and the quantity shipped Inventory Management Inventory - stock of goods that businesses hold, usually having hundreds to even thousands of items or supplies being held in storage in order to meet demand. Types of demand items Independent-Demand Items - finished products that are ready to be sold or used Dependent-Demand Items - components or parts that are used to actually create the finished product itself Functions of Inventory Management To meet expected customer demand To smoothen production requirements To decouple operations To reduce the risk of shortages To take advantage of order cycles To hedge against price increases To permit operations To take advantage of quantity discounts Requirement for Effective Inventory Management a system that keeps track of the inventory on hand and on order a reliable demand forecast that factors possible forecast order knowledge of lead times and lead variability reasonable estimates of holding costs, ordering costs, and shortage costs a system for classifying inventory Inventory Counting Systems Periodic System ○ Inventory is counted physically at periodic times ○ Manager then orders based on forecasted demand Perpetual System ○ Inventory is perpetually tracked by a computer ○ Once inventory reaches a certain minimum amount, more stock is ordered Two-bin System (under perpetual system) ○ Two-bins contain inventory ○ The first bin is emptied first before we order new stock ○ The second bin supplies enough stock as we wait for the new order Universal Product Code (UPC) ○ Bar code ○ Stuck on to the items  ○ First five numbers = manufacturer ○ Last five numbers = kind of product Point-of-Sale Systems (POS) ○ Electronically records sales ○ Allows management to see which products needs to be reordered ○ Lessen the need for periodic review and order-size determinations Radio Frequency Identification (RFID) ○ Transmit product information using radio waves ○ Used in agriculture to check crop temperatures, cultivation history, etc. Inventory Costs Purchase Costs - amount paid to buy the inventory Holding Costs - costs for physically having items in storage, opportunity costs for having the inventory are also accounted for, variable as it depends on the item. Ordering Costs - cost of ordering and receiving the inventory fixed dollar amount per order regardless of order size Shortage Costs - costs for demand exceeding supply, difficult to measure and can be subjectively estimated Classification System Classification System - not all items have the same costs, profit potential, sales volume, etc. A-B-C Approach - classifies inventory based on a certain metric of importance ○ A = most important ○ B = moderately important ○ C = least important ○ Generally, class A has least amount of items but has the highest annual dollar value, while class C has the most items but least annual dollar value Cycle Counting A physical count of items in an inventory Questions in cycle counting ○ How much accuracy is needed? ○ When should it be performed? ○ Who should do it? Lead Time - time interval between ordering and receiving, variability of lead time and demand forecasts in making decisions Inventory Ordering Policies Deals with the problem of how much inventory should be ordered and when to order them Cycle Stock - amount of inventory intended to meet expected demand Safety Stock - extra inventory held to reduce the probability of running out of stock due to high demand/lead time variability Economic Order Quantity - ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding, shortage, and order costs ○ Only product is involved ○ Annual demand requirements are known ○ No quantity discounts Inventory Cycle Time - amount of time it takes to produce and deliver an order from a customer, usually measured in days. Deriving Economic Order Quantity Reorder Point Ordering Reorder point ordering determines when to order to replenish a particular inventory and reduces the probability of experiencing a stockout. Reorder point is when the quantity on hand of an item drops to the amount, the item is reordered. 4 determinants: ○ rate of demand ○ Lead time ○ Extent of demand and/or lead time variability ○ Degree of stockout risk acceptable to management  The customer service level increases as the risk of stockout decreases Service level: probability that demand will not exceed supply during lead time Service level = 100% - stockout risk Fixed-Order-Interval (FOI) Model Used when orders must be placed at fixed time intervals. Operations Strategy Record Keeping - accurate and up-to-date inventory records Variation Reduction - reducing lead time variations and forecast errors Lean Operation - simplify and standardize activities to minimize ordering and setup costs Supply Chain Management - collaborate with suppliers to coordinate shipments, reduce lead time, reduce supply chain inventories, and reduce transaction costs.