BSAD 102 Mike

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BSAD 102Mikes BikesBusiness Simulation
St. Francis Xavier University
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Introduction

• The importance of Operations Management
• OM is one of the three major functions of any
  organization
• OM is central to the production of goods and
  services
• OM is a costly part of an organization
• OM is a key organizational link to a firms
  supply chain
• The aim of Operations Management is to be
  efficient and effective
• Faster, cheaper, better

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Objectives

• OM is central to the production of goods and
  services
• Developing an understanding of effective and
  efficient production in your companies
• OM is a costly part of an organization
• Developing an understanding of the drivers of
  costs (capacity utilization, wastage, idle time,
  quality orientation, inventory) in your companies
• Finding relevant operations management reports

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Decision Scenario

• Your design team has announced that they are now
  only one year away from releasing three new bike
  designs, an improved Mountain bike, and one
  design each for the Road and Youth bike segments.
   
• Your main challenge for this year is to create a
  capacity and quality management plan that takes
  into account that you will have new products
  available for launch next year.

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Concepts

• Capacity
• Amount of output a system is capable of achieving
  over a specified period of time or the amount of
  a good that a firm can produce under normal
  conditions
• Determines the maximum number of bikes that can
  be produced in your factory and your ability to
  satisfy demand
• Depends on the number, skill level, and
  productivity of people working, the size and
  layout of facilities, quantity and quality of
  equipment, availability of inputs, and overall
  scheduling of operations
• Relevant Mikes Bikes Concepts
• Capacity maximum capable output of bikes
• Wastage time spent on activities such as
  setting up and maintenance of machines
• Idle time non-production time

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Decisions

• Capacity re Mikes Bikes (see The Year Ahead)
• How is capacity measured?
• What is your capacity situation?
• How can you change your capacity? What impact
  does a change in capacity have on your firm?
• Should you increase, maintain or decrease your
  capacity?

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Decisions

• Capacity re Mikes Bikes
• How is capacity measured?
• Standard Capacity Unit (SCU) is the amount of
  production resources required to manufacture one
  bike
• Varies by type of bike
• Mountain bike 0.5 SCU
• Road bike 1.0 SCU
• Youth bike 0.25 SCU
• What is your capacity situation?
• Refer to Production Planner
• 20,000 SCUs means at full capacity you can
  produce 30,000 mountain bikes with .5 SCU with
  5,000 SCUs wastage

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Decisions

• Capacity re Mikes Bikes
• How can you change your capacity?
• Two ways to increase capacity
• Buy capacity (Asset on B/S and accounted on I/S)
  this is adding to or expanding your current
  production system
• Reduce wastage (COGS) this is a method to
  improve the efficiency of your current production
  system
• Sell capacity

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Decisions

• Capacity re Mikes Bikes
• Should you increase, maintain or decrease your
  capacity?
• Are you launching a new bike?
• Do you have enough capacity? Do you have too
  much?
• Idle time
• You have too little if your idle time is 0
• You have the right amount if your idle time is
  1-10
• You have too much capacity if your idle time is
  more than 10
• Forecast(s)
• Maintain Mountain Bike? Adjust forecasts?
• Demand for new bike?
• Competition?

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Concepts

• Capacity
• Key input to your firms costs, production speed,
  and ability to generate a quality product
• Production incurs direct and indirect outlays of
  labour, materials and machine hours see COGM
  and Gross Margin Report
• Production efficiency improvements cost the firm
  and lead to cost reductions see Factory
  Overhead Allocation Rates

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Concepts

• Quality
• The totality of features and characteristics of
  a product or service that bear on its ability to
  satisfy stated or implied needs American Society
  for Quality
• Quality refers to the satisfaction experienced
  by customers from a product and is an important
  determinant of demand Mikes Bikes Handbook
• Implications re company reputation, customer
  satisfaction, future growth, product liability,
  competitiveness, marketing mix, manufacturing
  strategy (faster, cheaper, better)

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Quality Assurance Tools

• Benchmarking
• ISO 9000
• Re-engineering
• Competitive product analysis
• Value-added analysis
• Statistical process control

• Quality/cost studies
• Quality improvement teams
• Control charts
• Adding value through supply chains

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Quality Control Ensuring goods meet the firms
quality standards. Quality control requires
attention to both efficiency (quantity produced)
and quality (the ability of the product to
deliver the consumers expectations)
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Decisions

• Quality re Mikes Bikes
• There are three basic quality targets
• Low quality 0.50
• Medium quality is 0.75
• High quality is a rating of 0.95
• Do you have the quality rating your current
  market demands?
• Market Scenario Report and Product Dimension
  Sensitivities
• Are you launching a new bike? Do you have the
  quality rating for your future market demands?

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Decisions

• Quality re Mikes Bikes
• Implementing Quality Decisions Capacity Planner
  
• How much quality can you afford given the price
  of your bike and your other functional decisions
  (marketing, ops)?
• Accounted as COGS
• Quality effectiveness improvements cost the firm
  but should lead to fewer warranty returns (the
  measure of quality in Mikes Bikes) see Factory
  Overhead Allocation Rates and All Product Details

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Concepts

• Physical Distribution
• Those activities needed to move a product from
  the manufacturer to the end customer, including
  warehousing (storage of goods) and transportation
  (delivery of goods)
• Warehousing costs include space rental or
  mortgage payments, insurance, wages, inventory
  control
• Transportation costs include speed of delivery
  (timeliness), weight of product, insurance, ease
  of handling, and distance, as well as
  cross-border considerations

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Next Class

• Have your decisions input by 4 pm Tuesday
• Wednesdays class will focus on the Beothic case
  please read and prepare questions
• Mikes Bikes Report II due today or tommorrow by
  300pm
• Mike Bikes Report III due March 21st and
  available on-line next class

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