1. IŞIK UNIVERSITY Department of Industrial Engineering Assoc. Prof. Gül T. Temur Chapter 1 Introduction to Production Planning and Control

2. Learning Objectives Remember following issues: Definition of operations management Production Types – Process Strategies Definition of Production Control Productivity Capacity Leveling Plant Location

3.  The best way to understand the nature of ‘operations’ is to look around us  Everything we can see around us has been processed by an operation  Every service we consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation  Operations Managers produce everything we buy, sit on, wear, eat, etc.

4. They are all operations Back office operation in a bank Kitchen unit manufacturing operation Retail operation Take-out / restaurant operation

5. Definition Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs. Operations management is a discipline that applies to restaurants like Hard Rock Cafe as well as the factories like Ford and Whirlpool. “Production is the creastion of goods and services.” So… What is manufacturing?

6. All operations are transformation processes … Transformation process Inputs that transform inputs … Outputs into outputs Value added transformation!!!

7. What is a Production System? A production system is defined a system that transfers inputs into some desired outputs.

8. Feedbackloop Feedback loop Outputs Goods and services Processes The Production SystemInputs Labor, capital, management Production Process-Conversion

9. Transformations Physical (in manufacturing) Locational (in transportation) Exchange (in retailing) Storage (in warehousing) Physiological (in health care) Informational (in telecommunications)

10. Production Systems Input Conversion process Outputs Managers Feedback Managers Conv.Process OutputInput Feedback

11. Production Systems Example

12. History of Production and Operations Management

13. Major Thrust of the Industrial Revolution 1850-1890 Factories tended to be small. Boss had total control. Little regard for workers safety or workers rights. Production Manager Position. 1890-1920 Frederick Taylor champions the idea of “scientific management”. As complexity grows specializations take hold Inventory Control Manager Purchasing Manager Scheduling Supervisor Quality Control Manager etc.

14. Definition Production control is the function of directing or regulating orderly movement of goods through the entire manufacturing cycle from the requisitioning of raw materials to the delivery of the finished products to meet the objectives of - customer service, - minimum inventory investment and - maximum manufacturing efficiency.

15. Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction

16. Characteristics of Service Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed

17. Goods Versus Services Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Attributes of Goods (Tangible Product) Attributes of Services (Intangible Product) Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service Provider, not product, is often transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from the intangible service

18. Development of the Service Economy

19. Global Competition It appears that several factors favor the success of some industries in some countries: For example:  Germany: printing presses, luxury cars, chemicals  Switzerland: pharmaceuticals, chocolate  Sweden: heavy trucks, mining equipment  United States: personal computers, software, entertainment  Japan: automobiles, consumer electronics  Turkey???

20. How Do Firms Differentiate Themselves from Competitors? Low Cost Leaders: Some examples include Wal-Mart and Costco in Retailing Korean automakers (Hyundai, Kia, etc.) e machines personal computers High Quality (and price) Leaders. Mercedes Benz automobiles Rolex Watches (some firms do both: Chevrolet and Cadillac)

21. Along What Other Dimensions Do Firms Compete? Delivery Speed, Delivery Reliability Federal Express, United Parcel Service Flexibility Solectron: provides manufacturing services to many different companies. Service Amazon bases its reputation on providing a high quality of service to customers

22. Process Strategies Four basic strategies  Process focus  Repetitive focus  Product focus  Mass customization

23. The vast majority of global production is devoted to making low-volume, high variety products in places called “job shops”. Such facilities are organized around processes. In a factory, these processes might be departments devoted to welding, grinding, and painting. In an office, these processes might be accountants payable, sales, and payroll. In a restaurant, they might be bar, grill, and bakery. Process Focus

24. These facilities have high variable costs with extremely low utilization of facilities as low as 5%. This is the case for many restaurants, hospitals, and machine shops. However some facilities now do somewhat better through the use of electronic equipments.

25. Facilities are organized around specific activities or processes. General purpose equipment and skilled personnel are required. High degree of product flexibility Typically high variable costs and low equipment utilization Product flows may vary considerably, so making planning and scheduling is a challenge.

26. Process Focus Many inputs Many variety of outputs Job Shop Many departments and many routings

27. High-volume, low variety processes are product focused. The facilities are organized around products. They are also called continuous processes, because they have very long, continuous production runs. Products such as glass, paper, tin sheets, light bulbs, beer, and bolts are made via continuous process. Some products such as light bulbs are discrete; others, such as rolls of paper, are non discrete. The specialized nature of the facility requires high fixed cost, but low variable costs reward high facility utilization. Product Focus

28. Facilities are organized by product High volume but low variety of products Typically high fixed cost but low variable cost Generally less skilled labor

29. Product Focus Few inputs Output variations in size, shape, and packaging Continuous Work Flow

30. A repetitive process falls between the product and process focus. Repetitive processes use modules. Modules are parts or components previously prepared, often in a continuous process. A repetitive process line is the classic assembly line. Widely used in the assembly of virtually all automobiles and household appliance. Repetitive Focus

31. A fast food firm is an example of a repetitive process using modules. For example, meat, cheese, sauce, tomatoes, onions, etc. which are assembled to get a quasi- custom product, a cheeseburger. Harley Davidson and Ford assembles modules which are product’s components and options.

32. Repetitive Focus Facilities are often organized as assembly lines Characterized by modules with parts and assemblies made previously. Modules may be combined for many output options. Less flexibility than process-focused facilities.

33. Repetitive Focus Raw materials and module inputs Modules combined for many output options Few modules Automobile Assembly Line

34. Mass Customization Mass customization is the rapid, low cost production of goods and services to satisfy increasingly unique customer desires. Combines the flexibility of a process focus with the efficiency of a product focus.

35. Mass customization is not just about variety; it is about making precisely what the customer wants and when the customer wants it economically. Mass customization brings the variety of products traditionally provided by a process focus, at the cost of standardized product-focus production. However, achieving mass customization is a challenge that requires sophisticated operational capabilities. Dell Computer, GM, Toyota.

36. Process, Volume, and Variety Process Focus projects, job shops (machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley-Davidson Product Focus (commercial baked goods, steel, glass) Nucor Steel High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only Mass Customization (difficult to achieve, but huge rewards) Dell Computer Poor Strategy (Both fixed and variable costs are high) Low Volume Repetitive Process High Volume Volume

37. Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Small quantity, large variety of products Long runs, standardized product made from modules Large quantity, small variety of products Large quantity, large variety of products General purpose equipment Special equipment aids in use of assembly line Special purpose equipment Rapid changeover on flexible equipment

38. Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Operators are broadly skilled Employees are modestly trained Operators are less broadly skilled Flexible operators are trained for the necessary customization Many job instructions as each job changes Repetition reduces training and changes in job instructions Few work orders and job instructions because jobs standardized Custom orders require many job instructions Table 7.2

39. Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Raw material inventories high JIT procurement techniques used Raw material inventories are low Work-in- process inventory is high JIT inventory techniques used Work-in- process inventory is low Work-in- process inventory driven down by JIT, lean production Table 7.2

40. Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Units move slowly through the plant Goods move swiftly Swift movement of unit through the facility is typical Goods move swiftly through the facility Finished goods made to order Finished goods made to frequent forecast Finished goods made to forecast and stored Finished goods often build-to-order (BTO) Table 7.2

41. Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Scheduling is complex, trade-offs between inventory, availability, customer service Scheduling based on building various models from a variety of modules to forecasts Relatively simple scheduling, establishing output rate to meet forecasts Sophisticated scheduling required to accommodate custom orders Table 7.2

42. Comparison of Processes Process Focus (Low volume, high variety) Repetitive Focus (Modular) Product Focus (High-volume, low-variety) Mass Customization (High-volume, high-variety) Fixed costs low, variable costs high Fixed costs dependent on flexibility of the facility Fixed costs high, variable costs low Fixed costs high, variable costs must be low Table 7.2

43. One-off, complex, large-scale ‘products’ with high work content Specially made, every one ‘customized’ Defined start and finish: time, quality and cost objectives Many different skills have to be coordinated Project processes

44. A project process

45. VolumeLow High Variety Low High Service process types Process tasks Process flow Diverse/ complex Repeated/ divided Intermittent Continuous Professional service Service shop Mass service

46. A professional service – Consultants planning how best to help their client

47. A service shop – This health club offers some variety within a standard set of facilities and processes

48. A mass service – This call centre can handle a very high volume of customer enquiries because it standardizes its process Source: Royal Bank of Scotland Group

49. Productivity Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve Productivity = Units produced Input Input used

50. Productivity Labor Productivity: Productivity = Units produced Labor-hours used

51. Multi-Factor Productivity Also known as total factor productivity Output and inputs are often expressed in dollarsOutput Labor + Material + Energy + Capital + Miscellaneous Productivity =

52. Capacity Strategy Fundamental issues: Amount. When adding capacity, what is the optimal amount to add? Timing. What is the optimal time between adding new capacity? Type. Level of flexibility, automation, layout, process, level of customization, outsourcing, etc.

53. Issues in Plant Location Size of the facility. Product lines. Process technology. Labor requirements. Utilities requirements Environmental issues. International considerations Tax Incentives.

54. Heizer, J. and Render, B., Operations Management, 9/E, Prentice Hall, 2009, ISBN-10: 0136073662 Chase, R.B., Aquilano, N. J. and Jacobs, F.R., Operations Management for Competitive Advantage, 11th ed., McGraw- Hill international ed., 2006, ISBN:0071115536 Slack, N., Chambers, S. and Johnston R. Operations Management, 5/E, Prentice Hall2007, ISBN-10: 140584700X http://www.emex.co.nz/machine.htm