Operations Flexibility

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Operations Flexibility
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Motivation

• What is flexibility
• What benefits does it provide, and how much does
  it cost
• What is its fit with operations strategy
• What are its dimensions
• How do you measure it

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Strategic Considerations

• Environmental uncertainties
• System capabilities
• Advanced technology
• Adequate managerial response
• Scheduling, routing, product/process design

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Company Posture

• Reactive (defensive)
• Proactive
• Reactive/Proactive

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Strategy Options

• Adapt to uncertainty in real time
• Create rainy-day resource-bank
• Reduce uncertainty

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Implications for Flexibility
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Types of Uncertainty

• Market acceptance of kinds of products
• Length of product life cycles
• Specific product characteristics
• Aggregate product demand
• Machine downtime
• Characteristics of materials

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Flexibility Dimensions

• Mix
• Changeover
• Modification
• Volume
• Rerouting
• Material

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Uncertainty and Flexibility
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Adaptive/Reduction
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Delivering Flexibility
Component or basic Flexibilities
System Flexibilities
Aggregate Flexibilities
ORGANIZATIONAL STRUCTURE
Process
Program
Routing
Machine
Production
Material Handling
Product
Operation
Volume
Markets
Expansion
MICROPROCESSOR TECHNOLOGY
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Measuring Flexibility

• Number of options available at a given point in
  time
• Number of rerouting paths in scheduling
• Entropy opportunity to select a given option or
  the degree of randomness (uncertainty) in a
  system
• Range of some defining characteristics of outputs
• Instead of the number of car models produced use
  the range of wheel bases
• Difference in expected profits with and without
  flexibility
• Most of the value of flexibility can be realized
  at low cost because only a few options are
  necessary

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Flexibility postulates

• Increasing variety (hence mix flexibility)
  increase complexity
• Innovations in process technology make flexible
  technology obsolete
• Modification flexibility reduces pressure to get
  design right first time
• Volume flexibility requires excess capacity and
  slack in production/service schedules
• Rerouting flexibility discourages efforts to
  reduce machine breakdowns
• Material flexibility reduces pressure to reduce
  quality problems

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Flexibility through Capacity-chain

• Two plants
• Each plant with capacity of 100 units
• Production of two products
• Both products with equally likely demands 50,
  100, and 150 units

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Value of Flexibility
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Capacity Chain
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10 products/10 plants

• No flexibility
• Each plant builds only one product (product 1
  built in plant 1, product 2 in plant 2, etc.).
• Expected sales 853 units, expected capacity
  utilization 85.3.
• Partial flexibility
• Each plant can build all 2 products, 10 links
  between plants
• Capacity utilization increase to 95,
  respectively.

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Guidelines for Adding Flexibility

• Try to equalize the number of plants (measured in
  total units of capacity) to which each product in
  the chain is directly connected
• Try to equalize the number of products (measured
  in total units of expected demand) to which each
  plant in the chain is directly connected and
• Try to create a circuit(s) that encompasses as
  many plants and products as possible.

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Conclusions

• Advanced technology is only one way of delivering
  flexibility
• Flexibility responsiveness may be the most
  important dimension if market uncertainty is high
• Flexibility has a proactive function in creating
  uncertainties that competitors find hard to cope
  with (satisfying short lead time preference of
  customers, which they then expect of all
  competitors)
• Flexibility impacts the balance between reactive
  and proactive operations strategies
• Flexibility dimensions should be integrated so
  that they complement one another