OMSAN LOJİSTİK

Top Management Program in Logistics & Supply Chain Management (TMPLSM) Production and Operations Management 1: Strategic Role of Operations

OPERATIONS Chain of Activities that Create, Produce, and Deliver Products and Services Operations Are Made of Processes 3

What is POM? FIRM Inputs: Raw Materials Labor Production Capital Processes FIRM Inputs: Raw Materials Labor Capital Technology Energy …… Outputs: Goods Services POM = design and management of production processes

There is a “process” behind everything we do For External Customers For Internal Customers Operational Processes Administrative Processes Often a little attention to these processes produces great benefits

? A good starting question: Is the process aligned for maximizing value for the customer? Value for the customer ? Design and management of the process The answer, in a surprising number of cases, is “Not exactly!” 6

More Questions? … Cost Quality Service Flexibility What makes Customers to buy from you instead of the Competition? Cost Quality Service Flexibility

Typical Performance Measures for Operations Cost (Efficiency) Cost per unit, Labor productivity, Capacity utilization, … Quality Conformance to Specs, Rejects, Reworks, … Service (Dependability) Reliability of Delivery, Availability, Predictability, …. Flexibility Speed of delivery, Ability to customize, Min. order quantities, … Of course in addition to Safety, Environmental, and other good housekeeping measures

What does the customer want from the process? Cost Quality Service Flexibility Differentiate between “qualifiers” and “order winners”

Looks simple—but it is not easy! Always check, and re-check, the “fit” Value for customer Are “order winners” & “qualifiers” specified? (and updated?) Cost Quality Time Flexibility Is focus on maximizing the “order winners” and meeting acceptable levels for the qualifiers? Process Design & Management Looks simple—but it is not easy!

Are Operational Processes Aligned for Different Market Segments? Market Segments Served by the Business ? Operational Processes

Managerial Decisions behind these processes 12 Operational Processes Acquire production capacities Configure & improve the system Schedule and deploy resources 12

Acquire Capacities What? Facilities, equipment, people Ownership? Vertical integration How Much? For peak load? Average load?... When? Lead demand? Lag demand?... Where? Centralized or decentralized?...

Configure & Improve Orientation? Job shop, batch, flow shop Work Organization? Functional, cellular,… Linkages upstream and downstream? Interface with R&D? Key Performance Indicators?

Schedule & Deploy Flows, Inventories, and queues? Orders and Capacity Utilization? Continuous Improvement? Of cost efficiency, quality, flexibility, reliability,…

variability There is always in demand and supply And that’s a big challenge in management of operations

The Business as a System OPERATIONS ACT FIN MKT OB Operations & Logistics

Costs Schedules Flexibility High Quality Price Delivery Promise Role: Production of Goods and Services Role: Investigate Demand and establish distribution chain Organization’s Top Management Operations Marketing LINKS Costs Schedules Flexibility High Quality Price Delivery Promise Number of Models Repeat Sales

Producer’s View Matl Labor Goods Operations $$$ & Svcs TRANSFORMING PROCESSES INPUTS Goods & Svcs OUTPUTS Matl Labor $$$

Customer’s View Order Entry Logistics Del’y & Service DEMAND LINKING PROCESSES Del’y & Service SUPPLY

Cost Service Quality Flexibility Order Entry Matl Labor $$$ Operations & Logistics Goods & Svcs Del’y & Service Cost Quality Service Flexibility SERVICE LEVEL

Wilson Sporting Goods * Market share from 2% to 18% 96 million golf balls a year!! * Market share from 2% to 18% * Plantwide productivity up 121% * Cost: Total inventory reduced by 67% (Inventory turns from 6.5 to 85) * Flexibility: orders from 1 dozen to 85,000 dozens * Service: 99.9% on-time delivery, Normal lead time = 10 days * Quality: scrap reduced 67% ($9.5 million in quality costs) * Continuous Improvement, Associate Involvement, TQM, JIT, “Lowest Total Cost” Manufacturing

Business Portfolio MARKET ATTRACTIVENESS LOW HIGH MAINTAIN / PROTECT INVEST / GROW S T R O N G W E A K Profit Pool ? Possible Win ? C O M P E T I T I V E P O S I T I O N HARVEST/ DIVEST DEVELOP OR WITHDRAW

Marketing / Financial Framework CAPACITY INVESTMENT MARKET POTENTIAL MARKET SIZE MARKET SALES R.O.I. PENETRATION MARKET SHARE PROFITS BUSINESS / PROD. PORTFOLIO PRICE PROFIT M/P I/G MARGIN H/D D/W COST

Growth Opportunity Matrix OLD NEW MARKETS P R O D U C T S N E W L Diversification Market Development Product Performance Improvement

Elements of Operations Strategy 1. Workforce 2. Process Technology 3. Capacity 4. Production Planning and Control 5. Supply Chain 6. New Product & Process Development 7. Facilities 8. Organization 9. Performance Measures

Product / Process Spectrum

Objective: Job Shop to Flow Shop Job shop Batch flow Line flow Understand the differences between: Job shop Batch flow Line flow Flow shop

Example: Car Wash IN OUT Automatic Wash 2.5 min / car Interior Cleaning 3 min / car Queue 1 Queue 2 Let us look at an example. You go to the car wash, what does the process look like? There are two stages in the process: automatic wash and interior cleaning. The first stage is capital intensive: it is performed by a relatively expensive machine. The second stage is labor intensive as it is performed by an employee. The cycle time for the automatic wash is the time spent to wash each car. It is 2.5 min for each car. Therefore it can wash 1 divided by 2.5 cars per minute, that is 0.4 cars per minute or 24 cars per hour. This is the capacity of this machine. Capacity provides a measure of the potential rate of production. The cycle time for the interior cleaning is 3 minutes, therefore the interior cleaning capacity is 20 cars per hour. Even though the automatic wash can clean 24 cars per hour, the capacity of the total process is 20 cars, due to the capacity at the interior cleaning section. In this process, interior cleaning is the limiting resource, or the bottleneck resource. WE have mentioned about variability in the last session. First of all the customers arrival time are random, that is, there is demand variability. Second, the processing times are variable, especially at the interior cleaning section. As a result, from time to time, we see a queue build –up in front of the processes. At other times, the washer and the cleaner may stay idle.

Process Spectrum Job Jumbled Groups similar equipment together. Shop flow Groups similar equipment together. Jobs follow diverse paths Batch Flow Disconnected line flow Groups similar equipment together. Batches provide some standardization. Line Flow Assembly line flow Equipment placed in assembly sequence. Worker or machine paced flow. Flow Shop Continuous flow Equipment in process sequence. Expensive equipment but high utilization rates.

Types of Processes High Low Low High Volume Job Shop Batch Flow Line Variety, # of products Line Flow Flow Shop Low Low Volume High

Job Shop vs Flow Shop Job Shop: Production system designed for low volume manufacturing of highly customized products and services. Flow Shop: Production systems that is designed for high-volume production of a standardized products.

Job Shops Flow Shops Products Varied Standard Equipment General purpose Specialized Material Flows Jumbled Linear Scheduling & Planning Complex Simple Capacity Utilization Fluctuating High Inventories WIP Negligent Accounting Job costing Process costing Information Flow Structured Simple Direct Labor Skilled Less-skilled Managerial Focus Supervision Planning Competitive Challenges Flexibility, response Price, supply

Types of Production Processes Project Batch Process Assembly Line Continuous Flow Job shop Flow shop Increasing volume Increasing variety

Product Spectrum High Low Low High One-of-a kind product Satellites Batches of distinctly different product Apparel Variety, # of products Variations on a theme Auto Light bulbs Standard product Low Low High Volume

Product Life Cycle Introduction Growth Maturity Decline Demand time

Product X Process X X Product Life Cycle High Customization Low Volume High Standardization High Volume Job Shop X Process X Flow Shop X Product Life Cycle Entry Growth Mature

Product Process Matrix Competitive Modes Custom Designs hi margin Quality, Service margin Std, Designs availability Vertical int., Economies of Scale, cost Quoting and tracking jobs, shop floor control Satellites Develop stds, Process dev. Inventory mgt. Apparel Management Tasks Line balancing, Process dev. Personnel mgt. Auto Light bulbs Raise capital Run efficiently Material mgt.

Tension within the matrix High Job Shop Flexibility Variety, # of products Cost efficiency Flow Shop Low Low High Volume

Take-aways Each firm is a sequence of processes. Operational Performance measures: Cost, flexibility, quality and service While designing the process, you face a trade-off between efficiency and flexibility. Need to match processes to competitive priorities