Production and Operations Management

SWOT: SW => internal, OT => external, environment

Strength, Weaknesses

Opportunities, Threats

Political, Economic, Social, Technological, Environmental, Legal

=> To study environment

- Threat of new entrants

- Threat of substitute

- Bargaining power of customers

- Bargaining power of suppliers

- Rivalery

• Cost

• Quality

• Delivery

• Flexibility

• Dependability

• Speed

• Service

• Innovation

• Personalization

• Safety

• Environment

• Responsibility

• Competitive priorities: strategic preferences or the ways in which an organization chooses to compete in the marketplace ⇒ what we want to do

• Competitive capabilities: provide the business with the ability to do something that provides competitive advantage ⇒ what we can do

• Order qualifier: a required capability (or product/ service characteristics) for selling, but will not win orders
  • Safety
  • Cost
  • Quality
  • Dependability
• Order winner: is a capability (or product/ service characteristics) that can win you orders
  • Service
  • Environment
  • Price
  • Quality

(VRIN):

• Valuable

• Rare

• Imperfectly imitable

• Non-substitutable

1. Understand what your business is – business definition model

2. From the MBV (market based view):

• Investigate your overall market environment (for ex. PESTEL)

• Define your immediate competitive position (for ex. Porter’s Five Forces)

• Understand what your customer wants → order qualifiers vs order winners, Define competitive priorities

3. From the RBV (resource based view):

• Leverage your competencies to create a competitive advantage → competitive capabilities

4. Analyze the nature of your competitive advantage to understand how
sustainable it is (for ex. SWOT)

• Match competitive capabilities with competitive priorities

• Analyze how your competence must change to maintain advantage → dynamic capabilities (ability to upgrade and reconstruct its capabilities in response to the changing environment, therefore attaining and sustaining its competitive advantage)

Structural Decision Areas

1. Facilities: location, size, focus, layout..

2. Capacity: ability to meet demand

3. Process technology

4. Supply network: make-or-buy, network config…

Infrastructural Decision Areas

1. Planning and control

2. Quality

3. Work organization

4. Human resources

5. New product development

6. Performance measurement

Stage 1: correct the worst problems

Stage 2: Adopt best practice

Stage 3: Link strategy with operations

Stage 4: Provide a competitive advantage

Competitive priorities

=> Decision areas

=> Develop competitive capabilities

• Continuous
• Assembly lines
• Batch
• Jop Shop
• Project

• Engineer-to-Order (ETO) [specialised machines, projects]

  • Products and services are created from the drawing board meeting customer requirements

• Make-to-Order (MTO) [aircrafts]

  • Individual customers are identified during production, each order is made to a particular customer specification

• Assemble-to-order (ATO) [subway]

  • Builds sub-assemblies in advance of demand, and then puts them together to make the final product when a specific customer order is received

• Make-to-Stock (MTS) [Coca-Cola]

  • Making standard items that are put into inventory, which can then be used immediately to fulfil customer demand

CODP separates order-driven activities from forecast-driven activities

• Flow diagram
• Swim Lane Diagram
• Process Chart
• Service Blueprint
• Value Stream Map

=> The key point about process mapping is that, whatever technique is used, it must be a team exercise involving all the important stakeholders; process mapping is a tool to develop a

collective vision for change, and needs to take a holistic, systems thinking approach!

Capacity=total time available/time needed for task (cycle time)

Design Capacity: is the expected output of an operation when there are no stoppages

Effective Capacity: is the expected output of an operation considering planned stoppages for maintenance, shift change over etc.

Actual Capacity: is the expected output of an operation considering both planned stoppages and unplanned stoppages

Eff. = actual output / eff. capacity

Util. = actual output / design capacity

• Increase design capacity, eg. more labour, reduce cycle time, new machines, new lines

• Use overtime, working hours

• Improve production process, increase throughput

⇒ altering capacity can be difficult, time-consuming and costly and it has no effect, if it does not address the capacity constraint!

Forecasting is the prediction of future demand, based upon qualitative and quantitative measures

=> demand forecasting

=> capacity forecasting

Seasonal, random and cyclic variation, trend

• Market surveys

  • Asking people their opinions about product services or buying intentions

• Scenario Planning

  • Considers the potential scenarios that an organization might face, and then analyses the demand pattern that might result from each scenario.

• Delphi Methods

  • detailed interviews and studies of the opinions of a panel of experts in a particular area

• Level production:

  • Use inventory to smooth demand.

  • The product must be suitable for storage,i.e. not highly customized, and nonperishable, or with a reasonable shelf life

  • Demand must be relatively reliable, to avoid the risk of large stock-outs or excessive stock levels
    
    
     

• Chase demand:

  • Dynamic capacity. Heavy use of forecasting.

  • There will always be an element of fixed capacity that can be adjusted only over the long term, such as a building or facilities, but other elements are flexible

• 3. Demand management:

  • Manipulate demand.

  • Involve the marketing department

  • Varying the price.

  • Advertisement

  • Providing an incentive for off-peak services or products.

  • Additional marketing can create awareness of a product that wasn’t there before

  • Providing alternative products or services

• Raw materials – purchased but not used

• Semi-finished goods

• Work-in-process inventory – being worked on

• Maintenance/repair/operating supplies (MRO) – for the plant

• Finished goods inventory – completed and waiting shipment

• Goods in transit – to warehouses and customers

• Meeting demand (anticipation)

• Protection against stock-out (buffer / “safety stock”)

• Cutting costs by ordering in bulk

• Flexibility (buffer)

• Covering delays (decoupling)

• Taking advantage of price changes

• Transit or pipeline, and cycle inventories

• Inventory ties up working capital

• Inventory takes up (expensive) space

• Inventory is prone to:

  • Damage

  • Pilferage (=> Raub, Plünderung)

  • Obsolescence

• Inventory causes manufacturing errors to go undetected

  • Reducing inventory can make it easier to see problems and delays

• ordering at fixed points in time

  • P-system (p for periodic): the cyclical review (CR): reorder cycle system

  • Different amount ordered each time

  • advantage of CR over ROL: noneed to track how many parts are in stock on a daily basis, But must count or “read” the stock level before each order. See “Stock-Time-Chart”

• ordering fixed quantities

  • Q: the reorder level (ROL) system: sometimes called the reorder point (ROP)

  • Order a fixed amount (normally the EOQ)

  • Simplest system: Two-bin system (disadvantage: on average higher inventory level, suitable for high volume, low value parts)

depends on several things:

• Accuracy:

  • ROL systems can be more accurate as they always monitor stock levels

• Consolidating orders:

  • CR groups orders from different product groups

• Safety stocks:

  • ROL is short and fixed: Delivery time

  • CR must also include the time to next review

• Implementation costs:

  • CR’s counting every review period is costly

1. BOM: Bill of materials
2. MRP: Material Requirements Planning
3. closed loop MRP
4. MRPII: Manufacturing Resource Planning (MRP + money, people, engineering)
5. ERP SAAS

Independent: traktor

Dependent: tyers of the traktor