Instructor: Spyros Reveliotis Office: Room 316, ISyE Bldng tel #: (404) homepage: IE3104: Supply Chain Modeling: Manufacturing & Warehousing

“Course Logistics” TA: Mr. Yonggang Guen Office Hours: (Reveliotis) 2-3:30pm MW (ow, an open- door policy will be generally adopted, but an appointment arranged by is preferred) (Guen) 2-3:30pm TuTh Grading policy: –Homework: 25% –Midterm I: 20% (Tent. Date: Friday, Feb. 9) –Midterm II: 20% (Tent. Date: Friday, March 30) –Final: 35% –Exams closed-book, with 2 pages of notes per exam –Make-up exams and Incompletes: Only for very serious reasons, which are officially documented. Course Textbook: “Production and Operations Analysis” (3rd Ed.) by Steven Nahmias, Irwin (plus material circulated in class)

Course Objectives (What this course is all about?) How to design and operate manufacturing and warehousing facilities (and more…) –The problem context and the key (conceptual) issues –A (hierarchical) decomposition framework –Quantitative analysis and techniques for addressing the arising sub- problems –Computational implementation of the presented techniques (e.g., Excel, LP solvers, etc.) –Emerging issues and needs from a globalized and internet-based economy

Organizational Operations Organization / Production System: A transformation process (physical, locational, physiological, intellectual, etc.) Organization InputsOutputs Materials Prod. Equip. Labor Manag. Res. Goods Services Supply or Value Chain / Network: Stage 5 Stage 4 Stage 3 Stage 2Stage 1 SuppliersCustomers

Operations Management (OM) The design and operation of organizations and production systems The three Basic Functions of a Contemporary Organization: Operations Marketing (Sales) Finance (Accounting)

OM Decision Areas (J. Heizer & B. Render, “Operations Management”, Prentice Hall)

OM Decision Areas (cont.) (J. Heizer & B. Render, “Operations Management”, Prentice Hall)

Corporate Mission: What (should) drive the OM decisions The mission of the organization –defines its purpose, i.e., what it contributes to society; –states the rationale for its existence; –provides boundaries and focus; –defines the concept(s) around which the company can rally; Functional areas and departments define their missions such that they support the overall corporate mission in a cooperative and synergistic manner.

Corporate Mission Examples (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Merck: The mission of Merck is to provide society with superior products and services-innovations and solutions that improve the quality of life and satisfy customer needs-to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return. FedEx: FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained utilizing real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional for each other, and the public. We will strive to have a completely satisfied customer at the end of each transaction.

Defining Functional and Departmental Missions Example (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Sample Company Mission: To manufacture and service a growing and profitable worldwide microwave communications business that exceeds our customers’ expectations. Sample OM Mission: To produce products consistent with the company’s mission as the worldwide low-cost manufacturer. Sample OM Department Missions: –Product design: To lead in research and engineering competencies in all areas of our primary business, designing and producing products and services with outstanding quality and inherent customer value. –Layout design: To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting high quality of work life. –Inventory: To achieve low investment in inventory consistent with high customer service levels and high facility utilization. –Scheduling: To achieve high levels of throughput and timely customer delivery through effective scheduling

Strategy How the organization will achieve its mission Differentiation (Better; e.g., Luxury cars, Fashion Industry, Brand Name Drugs) Cost Leadership (Cheaper; e.g., Wal-Mart, Southwest Airlines, Generic Drugs) Responsiveness (Reliably faster; Efficiently accommodating innovation and demand fluctuation; e.g., Dell, Overnight Delivery Services) Competitive Advantage through which the company market share is attracted

Implementing Corporate Strategy through OM In the OM context, corporate strategy is observed and facilitated by appropriately defined objectives and/or constraints in all relevant decision making; e.g., –cost and/or quality constraints during the product design –minimizing inventory operational costs while ensuring that customer demand is met successfully with certain probability –structuring and stuffing the company distribution network in order to ensure delivery times below a certain level, with minimal operational costs OM-based strategies enabling currently sought competitive advantages: –Product Design and Volume Flexibility –Broad Product Line and Product Customization –Low Price / Reduced Operational Costs –Fast Delivery –High Quality –After-Sales Service

Factors affecting Corporate Strategy External –Emerging strengths and weaknesses of competitors => new threats and opportunities, respectively –New industry entrants –Development of substitute products –Development of new technologies –Legal developments (e.g., environmental concerns and regulations) –Economic and political developments (e.g., new international agreements, political crises) Internal –Company politics and restructuring –Modified relationships with customers and suppliers –Product Life Cycle

Strategy and Issues during a Product’s Life (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Introduction GrowthMaturityDecline Time Sales Best period to increase market share R&D engineering critical Frequent product and process changes Short production runs High production costs Limited models Attention to quality Practical to change price or quality image Strengthen niche Forecasting critical Products and process reliability Increase capacity Shift towards product focus Enhance distribution Poor time to change image, price or quality Competitive costs become critical Defend market position Standardization - minor product changes Optimum capacity Process stability Long production runs Cost control critical Little product differentiation Overcapacity in the industry Reduce capacity and eventually prune line to eliminate items not returning good margin

Strategy Development Process (J. Heizer & B. Render, “Operations Management”, Prentice Hall) Environmental Analysis Understand the environment, customers, industry, and competitors Identify your strengths, weaknesses, opportunities and threats. Determine Corporate Mission State the reason for the firm’s existence and identify the value it wishes to create Form a Strategy Build and maintain a competitive advantage, such as low price, quick delivery or quality, by identifying and developing the critical success factors

Back to the course objectives... Strategic Planning Facility Design Production Planning & Control Warehouse Management Forecasting Production Planning Resource and Capacity Planning Materials Requirement Planning Production Control Warehouse Organization Storage Policies Picking Policies Replenishment Policies

Suggested Reading From your textbook: –Introduction: Sections 1, 2 –Chapter 1: