Operation management refers to managing the process to ______________________, in alignment with the company's business strategy as efficiently and
... [Show More] effectively as possible, while also controlling costs
Convert resources into goods/services
The nature of Ops is carried out ___________________ and depends on the nature of the products or services in the portfolio
varies by company
Brainpower
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Manufacturing
To process or make raw materials or components into a finished good or service especially by means of a large-scale industrial operations (i.e., mass production)
- Involves machines used, personnel involved, inventory handling, warehousing, etc.
____________________________ is the management of all processes which are involved in manufacturing
Manufacturing Management
Manufacturing Strategies
Companies must develop a manufacturing strategy that suits the types of product that they produce, their customer expectations, and their strengths.
- Developing a strategy that suits a company's strengths is essential for establishing and maintaining an effective supply chain
4 Major Manufacturing Strategies
1. Make-To-Order(MTO)
2. Make-To-Stock (MTS)
3. Assemble-To-Order (ATO)
4. Engineer-To-Order (ETO)
1. Make-To-Stock (MTS)
Manufacture products for stock based on demand forecasts. Push System
- How to forecast demand accurately is critical to prevent excess inventory and avoid stockout
- MTS products are daily necessities, such as food, sundries, textiles.
- Challenge: avoid having excess inventory
- Companies tend to hold more inventory in case they need it, and therefore struggle with ensuring that inventory levels don't get out of control
2. Make-To-Order (MTO)
Manufacturing starts only after a customer's order is received
- Additional wait time
- Allows customers to customize products to specifications
- MTO relieves excessive inventory, a problem found in MTS
- MTO is not appropriate for all products; appropriate for highly configured products (aircraft, bridges) and very expensive products in inventory
- Ex. Amazon, Etsy
3. Assemble-To-Order (ATO)
Products ordered by customers are produced quickly and are customizable to a certain extent.
- Requires basic parts for product are already manufactured but not yet assembled
- Parts are assembled into a finished product which is then sent to a customer
- ATO is a hybrid strategy, combining the benefits of MTO and MTS strategies. Getting products into customer's hands quickly while allowing for some customization available
- Ex. Dell, ordering a custom computer
4. Engineer-To-Order
Product is designed, engineered, and built to the customer's specifications after receipt of the order.
- Dramatic evolution of MTO
- Involves building a unique product every time; finished product is different every time
- Cost of Poor Quality can be very high
- Cost of poor quality = are costs that would disappear if systems, processes, and products were perfect (Ex. warranty costs, rework to replace an item in a complex assembly)
- Ex. specialty vehicles like firetrucks and ambulance
2 Broad Categories of the Manufacturing Process
1. Intermittent Process - used to produce large variety of products with different processing requirements in lower volumes
2. Repetitive Process - Used to produce one, or a few, standardized products in high volumes.
Intermittent Category
Composed of 2 processes:
a. Project - (aka Job Shop) creates a custom product for each customer. High customization
- Very High product variety
- Very Low volume
- ETO/MTO
- Very Long customer lead time
b. Batch - manufactures small quantity of an item in a single production run
- High product variety
- Low volume
- MTO/ATO/MTS
- Long customer lead time
Repetitive Category
Composed of 2 processes:
a.Line - standard products with a limited number of variations moving on an assembly line through stages of production
- Limited variety
- High volume
- ATO/MTS
- Short customer lead time
b. Continuous - used to manufacture such items such as gas, detergent, and chemicals. Inflexible processes and high capital investment
- Very limited product variety
- Very High volume
- MTS
- Very Short customer lead time
Manufacturing Strategy and Performance Cycle (Customer Experience Lead Times)
1. MTS - Customer Delivery Cycle (The product is already produced and available in the warehouse when the customer order is received,)
2. ATO - Manufacturing + Customer Delivery Cycle (The product design is complete and the components/materials have already been pro-cured when the customer order is received)
3. MTO - Procurement Cycle + Manufacturing + Customer Delivery Cycle (the product design is the only element complete when the customer order is received)
4. ETO - Product Design + Procurement Cycle + Manufacturing + Customer Delivery Cycle (no supply chain elements have been completed when the customer order is received, so full cumulative supply chain lead time.)
Total Cost of Manufacturing (TCM)
The complete cost of producing and delivering products to your customers
- Incorporates both fixed and variable costs in manufacturing, storing, and delivery of product
- TCM = cost/unit
- TCM includes:
a. Manufacturing and Procurement Activities
b. Inventory and Warehouse Activities
c. Transportation Activities
As volume goes up...
A. Manufacturing and Procurement costs go down due to economies of scale
B. Inventory and Warehousing costs goes up
C. Transportation costs goes down, but levels off at high volumes as shipping container gets filled to capacity and another container must be used
Lean
An operating philosophy of waste reduction and value enhancement.
- Created by Toyota
Six Sigma
Disciplined, statistical-based, data-driven methodology for identifying and removing the causes of defect (error) and minimize variability in manufacturing and business processes
- Developed by Motorola
Lean + Six Sigma =
faster speed and better accuracy
LEAN Manufacturing is a combination of these concepts:
Quick Response - Rapid replenishment of a customer's stock by a supplier with direct access to data from the customer's point of sale
Efficient Customer Response - a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers
Just In Time - inventory strategy to decrease waste by receiving materials only when and as needed in the production process, thereby reducing inventory costs
Keiretsu Relationship - involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit.
Lean is NOT a tool box of methods, ideas or methodologies, it is ________________/_________________
(1) Philosophy
(2) Culture
Goal of LEAN is:
The elimination of waste and minimization of the amount of all resources used in the operation of a company
- Results in:
a. Large cost reductions
b. Improved quality
c. Increased customer service
Value is the _______________________ of a product as judged by the customer, and reflected in its selling price and market demand.
Inherent worth
Understand "Value"
- Any activity that increase the market, form, or function of the product/service
- Things for which customer is willing to pay
Value-Added Process
Process steps that transform or shape a product or service which is eventually sold to a customer
Non-Value Added Process
Process steps that take time, resources, or space, but do not add value or transform or shape the product or service
LEAN is composed of three elements working in unison:
Lean Manufacturing
Total Quality Management (TQM)
Respect for People
Lean Manufacturing
*A natural fit within the discipline of SCM as all of the LEAN goals and objectives help to facilitate an efficient and effective supply chain
- Satisfying internal as well as external customer demand
- Communicating demand forecasts and production schedules up and down the supply chain, to reduce/eliminate the bullwhip eff ect
- Quickly moving products into and through the production process
- Optimizing inventory levels across the supply chain (internally and externally)
- Increasing the value, capabilities, and flexibility of the workforce through cross-training
- Extending collaboration and alliances beyond just 1st-tier suppliers and customers to include 2nd-and 3rd-tier suppliers and customers as well
7 Components of Lean Manufacturing
1. Waste reduction
2. Lean Layouts
3. Inventory, setup time, and changeover time reduction
4. Small batch scheduling and uniform plant loading
5. Lean supply chain relationships
6. Workforce Empowerment and Commitment
7. Continuous improvement
1. Waste Reduction
- Eliminate waste from production systems
- Waste encompasses wait times, inventories, material and people movement, processing steps, variability, any other non-value-adding activity
- Before waste is removed, processes are often scattered, which can negatively affect your customers.
- After waste is removed, processes are more [Show Less]