Operations – Flashcards

Input resources / transformation / Paper manufacturer Transformed resource: Wood pulp, recycled paper, chemicals, etc. Transforming resource: Paper-making machinery, staff Transformation: - Changing the physical and chemical composition of materials - Materials processing (a manufacturing operation) Output: Paper Passenger ferry Transformed resource: Passengers (at one port) Transforming resource: Ship, crew Transformation: - Changing the location of passengers - Customer processing (a service operation) Output: Passengers (at destination port)

Materials: Brewery (physical composition) Retail operations (possession) Parcel delivery (location) Information: Accountant (possession) Telecoms company (location) Customers: Massage Parlor (psychological state) Theatre (psychological state) Hospital (physiological state)

Idea that any operation can be viewed and analyzed on three levels - supply network (flow between operations), operations (flow between processes), processes (flow between resources) e.g. Supply network Farmers / Manufacturers - Wholesalers - Restaurant - Customer Restaurant operation Customer books table - Orders food - Food is cooked - Food is served - Food is eaten - Bill is paid Cooking process (Transformed resources) Food, Ingredients (Transforming resources) Oven, pots, pans - (Transformation process) Ingredients are combined and cooked - (output) A restaurant dish

Volume Low: 1)Low repetition 2)Each staff member performs more of job 3) Less systemization 4)High unit costs High: 1)High repeatability 2) Systemization 3) Capital intensive 4) Low unit costs Variation of demand High: 1)Anticipation 2) Flexibility needed 3) Changing capacity Low: 1) Stable 2) Routine 3)Predictable 4)High utilization Variety High: 1)Complex 2)Flexible 3)Match customers needs Low: 1)Well defined 2) Routine 3) Regular 4)Standardized Visibility High: 1)Satisfaction governed by customer perception 2) Customer contact skills needed Low: 1) High staff utilization 2)Low contact skills 3)Time lag between production and consumption

1. Volume Actual volume (the number of customers served) The capacity of the operation (the maximum the operation could cope with) Seat occupation rate e.g. with about 40 seats which is open 8 hours a day, if a customer occupied a seat for two hours on average, the capacity would be: 8 × 40 × 0.5 = 160 customers a day. 2.Variety There are two important aspects to measuring variety for restaurants. The first is the range of different foods that the restaurant serves. Just count the number of different items on the menu to get an indication of this. The second is whether the restaurant will 'customise' food to your own preference. For example, does it serve steak well done, medium and rare? Does it allow you to choose the fillings for your sandwiches? 3.Variation Possibly the easiest way to measure variation is the ratio of peak demand in a day or a week, to the lowest demand during that day or week. Again, you could try asking the restaurant manager for this information, or (if you have time) make observations throughout the day or even the week. For example, the restaurant might be up to its full capacity for part of the day but, at its quietest point, only 10 per cent full. 4.Visibility This is a relatively simple issue. Simply ask, 'How much of the preparation of the food do you witness?' It is unusual to see every aspect of food preparation - preparing the vegetables, slicing the bread, etc. But you may see food being cooked and assembled in some burger restaurants. The other way of looking at this issue is to ask yourself whether the preparation of the food is being deliberately put 'center stage' in the restaurant. Some restaurants have a policy of doing this so as to entertain customers while they are waiting for their food.

1. Internal neutral - Operations is holding the company back from competing - does not contribute competitively - it attempts to improve by avoiding mistakes 2. External neutral - Operations begins to compare itself to 'best practice' I outside market 3. Internally supportive - One of the best operations in the market - Develop a view of competitive and strategic goals and develops appropriate operational resources to support it. 4. Externally supportive - Driving function within the business - Provides the foundation for competitive success (Some would say Stage 4 doesn't exist since 'operations' cannot take a leading role and drive strategy. Those taking a 'marketing orientation' would say operations is a supportive function which exists to deliver what the marketing requires.)

1. Quality - customer satisfaction - fewer mistakes made by each process reduces the cost of having to remediate problems - increase dependability internally which leads to efficient and stable processes 2. Speed - faster throughput reduces inventories - shorter lead time and faster the throughput the later forecasting can be left which reduces risks 3. Dependability - saves time and reduces costs - gives stability and predictability to operations internally so each process can concentrate on improving its own area of responsibility 4. Flexibility (product flexibility, mix flexibility, volume flexibility, delivery flexibility) -maintains dependability in spite of unexpected events/disruptions 5. Cost (A universally attractive objective)

•the top-down perspective: what the business wants operations to do •the bottom-up perspective: what day-to-day experience suggests operations should do •the market requirements perspective: what the market position requires operations to do •the operations resources perspective: what operations resources can do.

1, Order-winning factors - contribute directly and significantly to winning business 2. Qualifying factors - may not b major competitive determinants of success but operation's performance needs to be over a particular 'qualifying' level to be considered. 3. Less important factors - have little impact on customers no matter how the operation performs them.

1. Introduction to the market - product/service specification 2. Growth in market acceptance - availability 3. Maturity of market, sales level off - low price, dependability 4. Decline as market becomes saturated - Low price

Structural decision areas the "building blocks" of the operation; they define its overall tangible shape and architecture. 1. Facilities The location, size and focus of operational resources. Decisions about where to locate production facilities, how large each should be, what goods or services should be produced at each location, what markets each facility should serve, etc. 2. Capacity management The capacity of operations and their ability to respond to changes in customer demand. The use of facilities, working hours and staffing levels. 3. Technology The technology of the equipment used in operations processes. For example, the degree of automation used, the configuration of equipment. 4. Supply network The extent to which operations are conducted in-house or are sub-contracted. The choice of suppliers, their location, the extent of dependence on particular suppliers, and how relationships with suppliers are managed. Infrastructure decision areas Infrastructural decisions, on the other hand, affect the people, systems, and culture 1. Planning and control The systems used for planning and controlling operations. 2. Quality Quality management policies and practices. 3. Work organisation Organisational structures, responsibilities and accountabilities in operations. 4. Human resources Recruitment and selection, training and development, management style. 5. Performance measurement Financial and non-financial performance management and its linkage to recognition and reward systems. 6. New product development The systems and procedures used to develop and design new products and services.

1. Emphasises 'repositioning' performance objectives by trading off improvements in one area for a reduction in performance elsewhere. (e.g. improve quality of teaching (hiring more qualified teachers) but also increase cost) 2. Increase the overall effectiveness of the operations to establish a new 'efficient frontier' (e.g. establish new classroom practices/ micro-operational improvements to increase quality but maintain cost) 3. Operational 'focus' - dedicating each operation to a concise, manageable set of objectives, services, products to promote increased efficiency. An 'operation-within-an-operation' concept allows organisations to accrue the benefits of focus without setting up independent operations. (e.g. more ESL departments with senior teachers responsible for improving standards relevant to student's preferences, motivations, needs)

High variety/low volume Professional services (service) Project processes (manufacturing) Medium variety/medium volume Service shops (service) Batch processes (manufacturing) Low variety/high volume Mass service (service) Continuous process (manufacturing)

- How much of the network should be outsourced? - Disintermediation? Should agents be used? - How wide is it process span? Upstream/ Downstream integration? - Long-term capacity management? - The shape of its network? - Co-opetition with suppliers, customers, universities

1. Adv. Quality - Supplier may have specialized knowledge Speed of response - Can be built into supply contract Dependability - Late delivery penalties can be built into contract Flexibility - Outsource suppliers may be larger wither wider capabilities Cost - Outsources companies can achieve economies of scale Disadv. Quality - origins of quality problems are easier to trace in-house Flexibility - easier to alert in-house operations to required changes even though they may be unable to respond Cost - capture the profits from outsource supplier 2. - If activity is of strategic importance - If they have specialized knowledge - If their operations performance is superior - If operations performance improvement is likely

Supply side (vary to influence costs): - Proximity to suppliers reduces transport costs - Land costs - Cheaper labour costs - Community factors (tax rates, political stability, local amenities, support services) Demand-side (vary to influence revenue): - More convenience for customers - Better image for customers - More suitable (intrinsic characteristics of site)

Weighted-score method Identifying the criteria which will be used to evaluate the various locations and their relative importance. e.g. Suitability of location (weighting 4) Rate of local property (weighting 3) Evaluating each location out of 100. e.g. Suitability - Brighton (80) Bournemouth (70) Centre-of-gravity method To find a location which minimizes transportation costs

concept - the nature, use and value of the product e.g. an economical two-seat convertible sports car package - 'component' products and services that provide benefits defined in the concept. i.e. core products/ supporting goods or services process - the way in which it will be created and delivered to the customer

Concept generation e.g. R and D, focus groups with customers, ideas from staff, ideas from competitor activity, reverse engineering (taking apart competitor products in order to understand it) Concept screening - assessing design against criteria (feasibility, acceptability, vulnerability) e.g. design funnel which reduces many options to one final design Preliminary design - specifying the components of the package, reducing design complexity (standardization, commonality, modularization) Design evaluation - e.g. Value engineering - prevent unnecessary costs before producing the product/service, design is subject to rigorous scrutiny by designers, purchasing specialists, financial analysts to find any similar components that could do the same job at a lower cost Taguchi methods - to test robustness of the design e.g. can design cope with staff shortages Prototyping and final design

Interactive design involves ones stage of development starting before the previous one has finished, so there is simultaneous (or concurrent) work on the stages. Simultaneous development to reduce time to market (TTM), which has several benefits: - it does not have to make such drastic improvements for each new product because it introduces new products more frequently - sequential design stages cause delays to revenues and cash flows - fewer development costs

Expert systems use an 'inference engine' which performs the reasoning or logic on the criteria that have been defined as governing the decision. ESs can be used for: - capacity planning - facility location - facility layout - scheduling - inventory control

Radio frequency identification (RFID) uses Electronic Product Codes (EPC) - a unique number that is embedded in a smart chip. At various stages of manufacturing, distribution, storage and sale each smart tag can be scanned and info transmitted to the internet. - help save money in lost products - identify location of potentially dangerous products to be recalled - tracking data on how customers use the product after sale

Slack et al. classify customer processing technologies in terms of type of interaction between customer and the technology. This can be: •Active interaction: in which a customer interacts directly with the technology (e.g., a bank's ATM). •Passive interaction: in which the customer has no, or very limited, control over the technology (e.g., cinemas and moving walkways). •Hidden interaction: in which the customer is typically unaware of the technology (e.g., security cameras and bar code scanners). •Interaction through an intermediary: in which the customer interacts with the person (typically a representative or employee of the processing organisation) who operates the technology (e.g. call centres and travel agents).

'Planning' and 'control' are the two interrelated terms associated with activities aimed at reconciling the supply from an operation with the demand for its outputs. Planning is concerned with deciding: •what activities should take place in the operation •when they should take place •what resources should be allocated to them. Control is concerned with: •understanding what is actually happening in the operation •deciding whether there is a significant deviation from what should be happening •(if there is deviation) changing resources in order to affect the operation's activities.

Long-term planning and control: - Uses aggregated demand forecasts - Determines resources in aggregated form - Objectives set in largely financial terms Short-term planning and control: - Uses total disaggregated forecasts or actual demand - Makes interventions to resources to correct deviations from plans (control) - Ad hoc consideration of operations objectives

- planning occurs on a relatively short-term basis - slow customer responsiveness - detailed control decisions - high robustness (ability to deal with changes in the environment)

Dependent: Demand which is relatively predictable because it is dependent upon some other factor which is known. Demand forecasting is relatively straightforward. Resource-to-order or create-to-order planning and control. e.g. Demand for King ESL places will be derived from number of international students applying for a place at a partnering UK university Independent: No firm visibility of customer orders. Bases planning and control on experience and understanding of the market.

In produce-to-stock planning and control, the P/D ratio is high. D (demand time - the time customers have to wait for the product) is far shorter than P (throughput time). Resources are obtained and products produced and stocked before customer orders. Produce-to-stock planning has a higher proportion of speculative activity and risk. Part produce to order Produce to order In resource-to-order planning and control, resources are obtained, produced and delivered only when orders are received. So, P = D. Reducing the P/D ratio takes some of the risk out of planning and control.

1. Loading - How much work is allocated, valuable operating time, finite loading (if safe, possible, cost of limiting the load is not prohibitive) or infinite loading (if not possible to limit the load, not necessary or if the cost of limiting the load is prohibitive) 2. Sequencing - customer priority (aggrieved or important customers served first), due date (DD), first come first served (FCFS), longest operation time (LOT) (to keep utilization high), shortest operation time (SOT) (to ease cash flow problems) 3. Scheduling - forward scheduling - doing work as soon as it is practical to do so (high labour utilization, flexible) backward scheduling - starting jobs so they are finished just before they are due (lower material costs, less exposed to risk if customer changes their mind, focuses the operation on customer due dates) Staff rostering - staff scheduling (to ensure capacity matches demand, the length of shifts are attractive to staff, holiday dates accommodated, sufficient flexibility and robustness) 4. Monitoring and controlling

Push control - each work centre pushes out material without considering whether succeeding work centres can make use of it. Work centres are coordinated by means of centralised operations planning. Characterised by high idle times, inventory and queues. Pull control - material is moved only when the next stage wants it and requests it. Inventory cannot accumulate. Associated with JIS philosophy. Drum, buffer, rope concept helps to decide where in a process, control should occur. Work processes are not perfectly balanced, this means there is a part which is likely to be acting as a bottleneck on the work flowing through the process. The bottleneck should be the drum (set the rhythm for the rest of the process to follow). It is sensible to keep a buffer of inventory before the drum. Communication rope is required at the drum to control prior activities and ensure activities before the bottleneck do not overproduce.

1. If there is consensus over operation's objectives 2. If output is measurable 3. If the effects of interventions into the operation are predictable 4. If there is repetition of operation activities to facilitate learning and improvement

1. Cost - surplus capacity, under utilization 2. Revenues - capacity levels equal or higher than demand ensure no revenue is lost 3. Working capital - producing extra inventory prior to demand has to be funded before generating revenue 4. Quality of products/services - e.g. part-time staff 5. Speed of response 6. Dependability 7. Flexibility - especially volume flexibility

Input capacity measures: a university - number of students a theatre - number of seats an airline - number of seats available a brewery - volume of fermentation tanks Output capacity measures: a university - number of students graduated per year a theatre - number of customers entertained per week an airline - number of passengers transported per week a brewery - litres per week

actual output / design capacity design capacity = theoretical capacity of operation if everything is completely full and runs at full speed

actual output / effective capacity effective capacity = design capacity minus unavoidable problems (market and technical demands of the operation)

OEE = Availability rate x Performance rate x Quality rate OEE = a x p x q Availability rate = total operating time / loading time Performance rate = net operating time / total operating time Quality rate = valuable operating time / net operating time Total operating time - loading time minus availability losses (set-up and change overs, breakdown failure) Net operating time - total operating time minus speed losses (slow running equipment, equipment idling) Valuable operating time - Net operating time minus quality losses

level capacity plans - ignore fluctuations and keep capacity at a uniform level e.g. use anticipation inventory to supply future demand chase demand plans - adjust capacity plans to reflect demand fluctuations demand management - attempt to change demand to fit capacity availability

- Overtime - Varying the size of the workforce - Using part-time staff - Sub-contracting

Operations which: - have relatively fixed capacity - the service cannot be stored - the service is sold in advance - the marginal cost of making a sale is relatively low Methods: - overbooking capacity - price discounting - varying service types (e.g. discounting, upgrading etc.)

Assessing the feasibility and capability of a capacity plan. To see whether anticipation inventory can reconcile future demand or whether demand will outstrip supply.

Buffer inventory - compensate for unexpected fluctuations in supply and demand Cycle inventory - because of batching Decoupling inventory - inventory accumulated between two different interdependent work centres as a buffer against unevenness or breakdowns. Allows work centres to operate independently and maximize utilization and efficiency Anticipation inventory - to compensate for seasonal demand fluctuations Pipeline inventory - exists because material cannot be transported instantaneously between points in the warehouse

1. Ties up working capital 2. Incurs storage costs 3. Becomes obsolete 4. Becomes damaged or deteriorates 5. Involves administration and insurance costs

1. Cost of placing orders 2. Price discount costs 3. Stock-out costs - lost revenue and dissatisfied customers 4. Working capital costs 5. Storage costs 6. Obsolescence costs 7. Operating inefficiency costs - JIT philosophies suggest high inventory levels prevent us from seeing the full extent of problems within the operation

Large quantities are delivered to the customer who pays storage costs, but the supplier only charges for inventory when it is used.

Economic order quantity (EOQ) Attempts to find the best balance between the advantages and disadvantages of holding stock. Co Order costs - Cost of placing order, price discount costs Ch Holding costs - Working capital, storage, obsolescence risk costs EOQ = √ (2CoD / Ch)

1. Simplistic 2. JIT suggests it is a reactive approach. Managers should ask "How can I change operations to reduce the overall inventory I need to hold?" instead of "What is the optimum order quantity?" 3. Cost minimization may not always be an appropriate objective for inventory management 4. The perpetual inventory principle is a common problem with all inventory systems. Any errors in recording transactions (e.g. keying errors) can lead to discrepancies between the recorded and actual inventory and these errors are perpetuated until physical stock checks are made.

The amount of buffer inventory that will be used between order replenishment and the inventory arriving when there is uncertainty in demand and order lead-times. Higher lead time usage may result in stock outs.

Continuous - when inventory reaches a certain level Periodic - at a point in time

Analysing the usage value of items and categorizing them (A, B and C) Usage value = usage rate x individual value Companies should also consider: - consequence of stock-out - uncertainty of supply - high obsolescence or deterioration risks

- Procurement/purchasing and supply chain management - Physical distribution management

- Purchase costs make up a large proportion of total costs

Long-term: Range of products Quality of products Responsiveness Delivery and Volume flexibility Total cost of being supplied Short-term: Potential for innovation Ease of doing business Willingness to share risk Long-term commitment to supply Technical/financial/operational capabilities

Single-sourcing Adv. - More supplier quality assurance possibilities (SQA) - Strong relationships - Dependency encourages commitment and effort - Better communication and easier to collaborate on new developments - Higher confidentiality - More scale economies Multi-sourcing (e.g. traditional market supply relationships) Adv. - Purchaser can drive down price and supplier cannot exert upward pressure on prices - Can switch sources in case of supply failure - Wide source of knowledge and expertise - Flexibility - Allows a supplier specialising in a small number of products to gain economies of scale.

- A private e-marketplace = conduct business with partners and suppliers by previous arrangement - The consortium e-marketplace = several large businesses combine to create an e-marketplace controlled by the consortium - A third-party e-marketplace = an independent party creates an unbiased, market-driven e-marketplace for buyers and sellers in an industry

- Cost savings from low-cost-country suppliers (competitive industries often force businesses to look to cut costs) - Trading blocs lower tariff barriers (e.g. EU) - Improved transportation infrastructures Problems: - Language/communication difficulties - Risk of delays - Cross-border taxes - Geopolitical / operational risks

vertical integration (owning the resources which supply you) and pure market relationships (having only a transactional relationship with those who supply you)

- Sharing success - Long-term expectations (but not permanent) - Multiple points of contact - Joint learning - Few relationships (but not necessarily single sourcing) - Information transparency - Joint coordination

Vendor-managed inventory (VMI) is when the buyer of a product (business) provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location (usually a store). A third-party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps. As a symbiotic relationship, VMI makes it less likely that a business will unintentionally become out of stock of a good and reduces inventory in the supply chain.

- Global sourcing is more common - Supply chains tend to hold far less buffer inventory

By emphasizing simplification and zero-excess waste, it aims to produce and deliver only the necessary quantity of parts at the right quality, at the right time and place, while using a minimum amount of facilities, equipment, materials and human resources. Eliminate waste: - Inventory is a 'blanket of obscurity' - Reducing buffer inventory reduces degree of insulation between stages and exposes problems. - Lower-capacity utilization but no surplus production goes into inventory Continuous improvement: - It is possible to get closer to the ideal of 'perfect quality and no waste' over time. Involve everyone: - Respect-for-humans system - Team-based problem solving - Job enrichment/rotation and multi-skilling

1. Over-production 2. Waiting time 3. Transport 4. process 5. Inventory 6. Motion 7. Defectives

1.Discipline 2. Flexibility 3. Equality 4. Autonomy 5. L and D 6. Quality of working life (QWL)

1. JIT planning and control - Kanban pull system - Levelled or Mixed modelling scheduling - equalizing mix of products (instead of producing 200 As, 120 Bs and 80 Cs, a steady mixed stream in the same ratio is produced AABABCAB) - Synchronization by classifying parts as runners, repeaters, strangers 2. Use small simple machines - more robust system - produce smaller batches 3. Layout for smooth flow 4. Total productive maintenance (TPM) - Process owners are encouraged to assume ownership of machines and undertake simple maintenance and repair tasks 5. Reduce setup times 6. Visibility - Problems are more detectable and it is easier for staff to share in management and improvement 7. Product design for process ease

MRP: - Push system - Highly dependent on stock record data - Fixed operations environment with fixed lead times used to calculate when materials should arrive at the next operation - Less flexible JIT: - Pull system - Control of the pull between stages is achieved using cards, tokens or simple visual clues - Decision making is largely decentralized - Scheduling is 'rate-based' (output of a part per unit of time) not 'volume-based' (number of parts to be made in a week) - Minimized lead times

1. Transcendent approach - the best possible product e.g. Rolls Royce 2. Manufacturing-based approach - free from errors 3. User-based approach - fit for purpose 4. Product-based approach - precise, measurable set of characteristics 5. Value-based approach

1. Customer's specification - Operation's specification gap Mismatch between customer's expectations and operation's own internal quality specifications. 2. Concept - specification gap 3. Quality specification - actual quality gap 4. Actual quality - communicated image gap Mismatch between the actual product and the image portrayed through advertising campaigns

1. Define the quality characteristics of product (functionality, appearance, reliability, durability, recovery, contact) 2. Decide how to measure each quality characteristic (disaggregating quality characteristics (e.g. appearance) into measurable sub-components (e.g. colour match, surface finish, visible scratches) 3. Set quality standards 4. Control quality against standards Where in process should checks take place? Every product or take a sample? 5. Find and correct causes of poor quality 6. Continue to make improvements

Variables - measured on a continuously variable scale e.g. number of blemishes visible on car Attributes - assessed by judgment and are dichotomous, i.e. have two states (OK or not OK) e.g. Is the colour to specification?

TQM is based on the belief that: •organisations need to make improving quality a central and strategic part of their operations •quality improvement is the business of everyone in the organisation •organisations should seek to improve every aspect of everything that they do (internal customer and internal supplier) •the pursuit of quality improvement is a continuous and never-ending task.

TQM rejects the notion of a trade-off between quality costs, which was central to traditional thinking about quality. TQM recognizes all costs and benefits of quality: - Prevention costs (trying to prevent problems, failures) - Appraisal costs (controlling quality) - Internal failure costs (costs of scrapped parts) - External failure costs (loss of customer goodwill)

Using a importance-performance matrix Comparing: performance against competitors (good, ok, bad) importance for customers (less important, qualifying factors, order winning factors) Segregating competitive factors into: Excess Appropriate Improve Urgent Performance measures can involve different levels of aggregation: Overall strategic objectives (broad strategic measures) Generic operations performance measures Disaggregated detailed performance measures (high diagnostic power and frequency of measurement)

Historically-based targets Strategic targets External performance-based targets Absolute performance targets

Activity of comparing methods and/or performance with other processes in order to learn from them. 1. Internal benchmarking - Comparison with other parts of the organization 2. External benchmarking - against parts of an external organization 3. Non-competitive benchmarking - against external organizations which are not direct competitors 4. Competitive benchmarking Disadvantages: - Limits the organization to currently accepted methods instead of searching for 'best practice' - Other organization's methods may be inappropriate

Breakthrough improvement - major or dramatic change in the way an operation works e.g. introduction of a new more efficient computer-based system Business Process Re-engineering (BPR) - the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements. - Organize work around outcomes of process rather than tasks which go into it. - Check to see whether internal customers can be their own supplier rather than depending on another function of the business - Do not separate those who do the work from those who manage it. Continuous improvement - known as 'kaizen' improvements, small incremental steps, whole philosophy relying primarily on people who operate the system, its is not the rate of improvement that is important but the momentum e.g. simplifying the question sequence when booking students on courses Improvement cycles (DMAIC cycle) Define, Measure, Analyze, Improve, Control

- By nature, BPR looks only at work activities rather than people who perform the work, disregarding HR. - Proponents cannot agree whether it should be implemented gradually or radically - BPR can be used an excuse to 'downsize' and put short-term interests of shareholders first