1. About the Lecturer uDr. Qing Lu (Henry) uGrew up in Shanghai, China uLived in Singapore from 1994 to 2014 uCame to IEU last September Contact information o Office: C-808, Tel: 448-8295 o e-mail: lu.qing@ieu.edu.tr o Course materials will be posted online every week Warning ahead No plagiarism (from other students or Internet) Keep classroom order Two-way communication vital, let me know whether you understand or not anything concerned

2. CHAPTER 1 Strategy & Competition McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

3. uManufacturing processes are combined to form a manufacturing system uManufacturing system takes inputs and produces products for the customer uProduction system includes people, money, equipment, materials and supplies, markets, management and the manufacturing system uFootball ~ manufacturing

4. Anology of football to manufacturing and production system terminology FootbalManufacturing Football playersManufacturing processes or machine tools Operations (run, pass, block, catch, etc.) Operations (drilling, boring, turning, etc.) Offensive and defensive playsManufacturing systems (job shop, flow shop, project shop, cont. processes, cellular) Designing the plays or formationsDesign or layout of manufacturing system Athletic department (coach, recruit, maintain field, sell tickets, print programs, training) Production system (design, personnel, accounting, sales, marketing, quality control, maintenance)

5. Product type vs. Manufacturing System Low-volume custom- differentiated products High-volume differentiated products Project shop Job shop Flow shop Dedicated flow shop Continuous process Aerospace Shipbuilding* Industrial machinery* Apparel* Machine tools* Drugs* Motorcycles* Speciality chemicals Electrical & electronic* AUtomobile* Tire&rubber Steel producs Major chemicals Paper Containers Oil Steel Forest Products Type of industry by product Type of manufacturing system

6. Typical plant layout

7. Job Shop

8. Flow Shop

9. Project Shop

10. Topic Areas in Operations Analysis uForecasting uAggregate Planning uInventory Control: Deterministic Environments uInventory Control: Stochastic Environments uSupply Chain Management uProduction Control Systems: MRP and JIT uOperations Scheduling uProject Scheduling uFacilities Planning uQuality and Assurance uMaintenance and Reliability 1-10

11. Operations Finance Marketing Functional Areas of the Firm 1-11

12. Time Horizons for Strategic Decisions 1. Long Term Decisions uLocating and Sizing New Facilities uFinding New Markets for Products uMission Statement: meeting quality objectives 2. Intermediate Term Decisions uForecasting Product Demand uDetermining Manpower Needs uSetting Channels of Distribution uEquipment Purchases and Maintenance 3. Short Term Decisions uPurchasing uShift Scheduling uInventory Control 1-12

13. The Elements of Strategy Time Horizon uShort Term uIntermediate uLong Term Evaluation uCost uQuality uProfitability uCustomer satisfaction Focus uProcess Technology uMarket Issues uVolume uQuality Tasks Consistency uProfessionalism uProliferation uChanges in the task uExplicit goals 1-13

14. The Elements of Production and Operations Strategy 1-14

15. History of POM uMajor Thrust of the Industrial Revolution 1850- 1890. uFactories tended to be small. Boss had total control. Little regard for workers safety or workers rights. uProduction Manager Position. 1890-1920. uFrederick Taylor champions the idea of “scientific management”. uAs complexity grows specializations take hold. uInventory Control Manager uPurchasing Manager uScheduling Supervisor uQuality Control Manager etc. uStart to move from specialization to integration 1-15

16. Global Competition Global competition is heating up to an unprecedented degree. 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 1-16

17. How Do Firms Differentiate Themselves from Competitors? uLow Cost Leaders: Some examples include uWalMart and Costco in Retailing uKorean automakers (Hyundai, Kia, etc.) uPersonal computers, Chinese high-tech firms uHigh Quality (and price) Leaders. Ex: uMercedes Benz automobiles uRolex Watches u(some firms do both: Chevrolet and Cadillac) 1-17

18. Along What Other Dimensions Do Firms Compete? uDelivery Speed, Delivery Reliability uFederal Express, United Parcel Service uFlexibility uSolectron: provides manufacturing services to many different companies. uService uNordstrom bases its reputation on providing a high quality of service to customers 1-18

19. The Product Life-Cycle Curve 1-19

20. Break-even Curves for the Make or Buy Problem Cost to Buy = c 1 x Cost to make=K+c 2 x K Break-even quantity 1-20

21. Capacity Strategy Fundamental issues: uAmount. When adding capacity, what is the optimal amount to add? uToo little means that more capacity will have to be added shortly afterwards. uToo much means that capital will be wasted. uTiming. What is the optimal time between adding new capacity? uType. Level of flexibility, automation, layout, process, level of customization, outsourcing, etc. 1-21

22. Three Approaches to Capacity Strategy uPolicy A: Try not to run short. Here capacity must lead demand, so on average there will be excess capacity. uPolicy B: Build to forecast. Capacity additions should be timed so that the firm has excess capacity half the time and is short half the time. uPolicy C: Maximize capacity utilization. Capacity additions lag demand, so that average demand is never met. 1-22

23. Capacity Leading and Lagging Demand 1-23

24. Determinants of Capacity Strategy uHighly competitive industries (commodities, large number of suppliers, limited functional difference in products, time sensitive customers) – here shortages are very costly. Use Type A Policy. uMonopolistic environment where manufacturer has power over the industry: Use Type C Policy. (Intel, Lockheed/Martin). uProducts that obsolete quickly, such as computer products. Want type C policy, but in competitive industry, such as computers, you will be gone if you cannot meet customer demand. Need best of both worlds: Dell Computer. 1-24

25. Textbook 2 Nahmias, S. 2007. Production and Operations Analysis. McGraw-Hill/Irwin, 6th (Sixth) Edition

26. Course Objectives and Overview Equip the students on  basic modelling skills  solving simple quantitative problems Four sections in this course  Forecasting (ch2)  Aggregate planning (Ch3)  Inventory management (Ch4 &5)  Scheduling and facility layout (Ch8 & 10)

27. Course Evaluation 10% attendance – Attend lectures as many as you can 10% homework – Submit homework on time and understand them 20% in-class quizzes – Understand lessons and review homework before the quiz 30% mid-exam at the middle of the course – Get familiar with the context during the lesson. Ask questions if you don’t understand. – It is too late for a student to contact lecturer after the exam! 30% final exam at the end of the course – The last chance for you to catch upo catch up