Fundamentals of Operations Management BUS 3

1
Fundamentals ofOperations ManagementBUS 3
140Supply Chain ManagementNov 6, 2007
2
Agenda

• Exam Recap and Review
• Process Alternatives and Selection
• Work Design
• Supply Chain Management

3
Exam Review
4
Grade Distribution Exam 2
5
Grade Distribution Comparison (Exam 1 to 2)
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
A
A
A-
B
B
B-
C
C
C-
D
D
D-
F
First
Second
6
Grade Change per Student Exam 1 to 2
35
30
25
20
15
10
5
0
0
3
6
9
-9
-6
-3
12
15
18
21
24
27
30
33
-30
-27
-24
-21
-18
-15
-12
-5
-10
-15
-20
-25
-30
7
Semester to Date Grade Distribution (Exams 1 2)
30
25
25
20
16
15
15
10
5
5
1
0
A
B
C
D
F
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Process Alternatives and Selection
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Inputs and Outputs when Selecting a Process
OUTPUTS
INPUTS
Capacity planning is focused on How Many
(Quantity) that will be produced. Process
planning is focused on HOW the items will be
produced
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
10
Key Elements of Process Strategy

• Capital Intensity (does the output come more from
  machines or more from human labor?)
• Process flexibility required
• Technology
• Likelihood of Changes
• Product Design
• Volumes
• Technology

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Uses of Technology and Automation
Three (3) basic kinds of technology

• Product or service innovation (Cell Phones,
  Computers, etc..)
• Process technology (increasing quality and
  productivity, lowering costs)
• Information Technology (speed, data storage and
  retrieval, complex and high-volume processing,
  process support)

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Process Types
Table 6.1
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
13
Key Characteristics of different Process Types
Table 6.2
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
14
Work System Design
15
Considerations in Work System Design

• Observe actual performance and then establish a
  BASIS for any estimates
• Sandwiches made per hour
• Sales closed per quarter
• Design changes per model
• Other
• Be careful to distinguish between busy and
  valuable
• Track your own output and trends and see how you
  can improve your individual performance
• Watch your boss

16
Supply Chain Management
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Operations is a Key Element of a Supply Chain
Revenue Utilization of Assets (People, Plant,
Equip)
Cash Inventory
BALANCING keeping Customers completely satisfied
and Resources optimally utilized . against
spending the least amount of Cash and carrying
the least amount of Inventory
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Supply Chain Scope (this course shaded)
Customer Demand
Production Scheduling
Materials Mgmt
Production
Shipping
Customer Service

• Process Layout
• Work System Design
• Lean Operations
• Quality

• Inventory Mgmt
• MRP
• ERP

• Forecasting
• Aggregate Planning
• Strategic Capacity Planning

• Demand Supply Matching
• Scheduling
• Just In Time (JIT)
• Project Mgmt

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Example of Supply Chain Strategy
MAXIMIZE CUSTOMER SATISFACTION

• Assured Supply and best value
• Accurate and timely exchange of demand and supply
  data
• Shared savings from continuous improvement
• Other
• Other

MAXIMIZE PROFITABLE REVENUE
MINIMIZE TOTAL COST

• Optimal Inventory
• Company owned
• Supplier owned
• Customer owned
• Optimal headcount
• Manufacturing
• Support
• Worldwide indirect
• Lean optimization for entire Supply Chain
• Optimized Supply Chain Network (including
  integrating Mergers Acquisitions)
• Automation whenever possible and supported by
  business case

• Responsiveness to Market opportunities
• Speed to react
• Credibility of commits
• Assurance of delivery
• Optimum utilization of resources
• Manufacturing
• Product life cycle
• Suppliers
• Transportation and Logistics
• Scalability for growth and increased complexity
• Secure collaboration and visibility among
  customers, suppliers, and the enterprise

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The Increasing Emphasis on Supply Chain Management
Several factors are driving this trend

• Improve operations
• Opportunities and Risks of outsourcing
• Rising transportation costs
• Competitive pressures
• Globalization
• e-commerce
• Complexity of supply chains
• Manage inventories

Supply Chain Management is not simply a cost /
efficiency discipline. It is a key differentiator
in gaining customer satisfaction, market share
and loyalty
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Benefits of Supply Chain Management
Organization Benefit
Campbell Soup Doubled inventory turnover rate
Hewlett-Packard Cut supply costs 75
Sport Obermeyer Doubled profits and increased sales 60
National Bicycle Increased market share from 5 to 29
Wal-Mart Largest and most profitable retailer in the world
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
22
Benefits of Supply Chain Management

• Lower inventories
• Higher productivity
• Greater agility
• Shorter lead times
• Higher profits
• Greater customer loyalty
• Integrates separate organizations into a cohesive
  operating system

Monitoring Inventory is CRITICAL at virtually
every step in the Chain
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
23
Selected Supply Chain Metrics
Table 11.4
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
24
Logistics
Logistics
The management of inventory at motion and at rest
Logistics from the Council of Logistics
Management (CLM)
That part of the supply chain that plans,
implements, and controls the efficient, effective
flow and storage of goods, services, and related
information from the point of origin to the point
of consumption in order to meet customers
requirements
Transportation
The movement of goods from the point of origin to
the point of consumption a subset of the overall
Logistics process
Leenders, Johnson, Flynn, and Fearon,
Purchasing and Supply Management, Thirteenth
Edition, McGraw Hill Irwin
25
Services provided by Third Party Logistics
providers (3PL)

• Economies of Scale
• Professional focus and expertise
• Warehousing
• Outbound and Inbound transportation
• Freight bill auditing and payment
• Freight consolidation
• Distribution
• Order Fulfillment
• Cross-docking
• Packaging
• Returns

Major Carriers enable their customers to focus on
core competencies, while the carrier drives
efficiencies and increased services
in transportation and logistics
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Reverse Logistics
The backward flow of goods returned to the supply
chain

• Processing returned goods
• Sorting, examining/testing, restocking, repairing
• Reconditioning, recycling, disposing
• Gatekeeping
• Providing Return Material Authorization (RMA)
• screening goods to prevent incorrect acceptance
  of goods
• Avoidance
• finding ways to minimize the number of items that
  are returned

Good career opportunity for an entry level job
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Example of Reverse Logistics
Damaged Units
Refurbished Product sent to Distribution Center(s)
Refurbished Product shipped From FGI at DC
Customer Returns Damaged Product
Product Received at Local Service Center
Product Collected and Forwarded to Repair Center
Product Repaired to Refurbished Status
Repaired Units
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Distribution Requirements Planning (DRP)

• Expansion of MRP principles to plan and
  coordinate
• Transportation
• Warehousing
• Regional allocations
• Equipment
• Financial flows

The right amount of inventory, at the right
place, at the right time
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Supply Chain Metrics
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Supply Chain Challenges

• Barriers to integration of organizations
• Top management support
• Dealing with trade-offs
• Small businesses
• Variability and uncertainty
• Long lead times