Basic Knowledge for POM Prof. Dr. Şevkinaz Gümüşoğlu.

Basic Knowledge for POM

Prof. Dr. Şevkinaz Gümüşoğlu

Production/Operations management (POM) is concerned with the production of goods, services and information. All business enterprises produce goods, services and information. They try to serve in the satisfaction of human need in one way. So production activities are the foundation of a nation’s economic system.

What Operations Managers Do?They plan, organize, staff, direct,

coordinate the production/ operations

• What is Operations Management?• design operations, and improvement of productive systems

• What is Operations?• a function or system that transforms inputs into outputs of greater

value

• What is a Transformation Process?• a series of activities along a value chain extending from supplier

to customer• activities that do not add value are superfluous and should be

eliminated1-3

WHAT IS PRODUCTION& OPERATIONS SYSTEM

• A production/operations system is a configuration of resources combined for the provision of goods or services.POS is the subsystem of the organization system.

• So a production/operations system is that part of the organization to generate and produce the organization products, i.e. goods or services.

• Famous scientist and corporate contributed Pos & POM• James Watt was the most important person especially

beginning the industrial revolution.

.

Adam Smith, 18. century

Division of Labor, 21. century

What is the labor of division?

• The division of labour is the specialisation of cooperating individuals who perform specific tasks and roles. Historically, an increasingly complex division of labour is associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialised processes. The concept and implementation of division of labour has been observed in ancient Sumerian

Job shop production was organized in Whitney’s gun factory as the method of manufacturing in batches.

Charles Babbage provided us too much contribution for management.

Frederic Taylor is the father of management science.

Henry Ford begun job flow production in manufacturing which are called serialized production systems.

http://www.youtube.com/swf/l.swf?video_id=S4KrIMZpwCY

• Harris gave us some important information about inventory control.

• Shewhart used the statistical theory for Quality Control (QC). Computer and Operations Research (OR) are used for business.

• Feginbaum,Deeming and Juran presented us Total Quality Management (TQM).

• Toyota used pull system instead of push system (Just-in-Time JIT).

• Motorola developed Six Sigma Method for Quality Manegement

• Boeing devoloped & the other firms World Class Manufacturing

• The production and operations management is also used to denote the wide scope of application. Production operations management or, more simply, operations management include the service industries as well.

Ch 1 - 2

The Operations Function & The Field of Operations management

• Operations as a transformation process• Operations as a basic function• Operations as the technical core OM is defined as the design, operation, & improvement of the

production systems that create the firm’s primary products or services.

OM is fuctional fields of business with clear line manegement responsibilities.

• This point is important because operations management is fruquently confused with Operations Research(OR) & Management Science(MS) and Industrial Engineering(IE). This sitiuation is need to support the application of QM to decision making in all fields.

Operations Function

• Operations• Marketing• Finance and

Accounting• Human

Resources• Outside

Suppliers

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• OM is related with other business function like Management, Finance, & Accounting and etc.

• Because;– Accountants need to understand the basic of Investment

Management, Capital Uti.&labor standarts to develop accurate cost data, perform audits & prepare financial reports. Cost Accountants in particular must be aware of how JIT and CIM work.

– Finance managers can use investment& capital. Concepts to judge the need for capital investment, to forecast cash flow, & to manage current assests. Make or buy,plant expansion etc.

– Marketing specialists need to understand what operations can do relative to meeting customer due dates, product customization,& new product introduction. So Marketing & Operations Management have overlapping interests.

– Human Resource Managers must know how jobs are designed, relationship between standart & incentive plans, & the types of production skills required of the direct workforce.

– Management Information System (MIS) specialist often install OI systems that they themselves design or that are developed as off-the-shelf software by computer companies. As a major business application of computers in POQC .

– Everybody know that entrepreneurs often fail because they run out of working capital due to poor production planning and inventory management.

Because of all these reason The firm’s Corporate Strategy is based on the corporate mission and in essence reflects how the firm will plans to use all its resources and functions to gain competitive advantage. The Operation Strategy specifies how the firm employ its production capabilities to support its corporate strategy.

Within the operations function, management decisions can be divided into three broad areas:

• Strategic (long term) decisions :• Tactical (intermediate decisions) ,• Operational planning control (short-term) decisions.

Operations as a Transformation Process

Copyright 2011 John Wiley & Sons, Inc.1-18

INPUT •Material

•Machines•Labor

•Management•Capital

TRANSFORMATIONPROCESS

OUTPUT •Goods

•Services

Feedback & Requirements

Therefore we shall take a physical view of PO systems and

concentrate on the physical resources used by the system which for convenience will be categorized as follows:

• Materials, i.e. the physical items consumed or converted by the system, e.g. raw materials, fuel, indirect materials.

• Capital, i.e. the physical items equipment and facilities, used by the system, e.g. plant, tools, vehicles, buildings.

• Human Resources, i.e. the people, workers and managers, who provide or contribute to the operation of the system, without which neither machine nor materials are effectively used.

Ch 1 - 4© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Transformation Processes

• Physical (manufacturing)• Locational (transport/storage)• Exchange (retail)• Physiological (healthcare)• Psychological (entertainment)• Informational (communications)

A change in management technology is necessary. Because traditional old approach do not provide appropriate support for new kind of manufacturing systems developed often The mid 1980, New manufacturing technology cannot be used without changes in management technology.

By the year 2020, about 85-90 percent of workforce will most likely be engaged in nonmanufacturing activities. Now about 70 percent of world workforce are engaged in service activities . High-technology system (e.g. electronic, fiber optics, laser) will play en major role.

• In the 1940s, nobody have guessed how much manufacturing technology would change by 1990. Using robots, in 1990 factories doubled output-with half as many blue-color workers-to match growth in consumer fueled by sharply lower costs and higher quality.

• We can say some new concepts: • Smart Customer• Smart factories • “Smart Customers interact with smart factories to help design the

goods and services that they want.”

Technology and telecommunication have been brighten some new approach for business.

Now we can write these two points as follows: 1) Changes in manufacturing technology- the use of information networks by people and computer driven equipment.2) Changes in management technology- the managing of manufacturing technology for example JIT and Kanban, reengineering etc.As in all of these waves of technological change, there are new tactical production concepts and new strategic concepts that must be understood for the strategic production planning.

Because of global changes in business there are five main elements that capture the changing in manufacturing that are taking place.1) There are fewer workers on the line.2) There are fewer supervisors for the line.3) More smart machines.4) More workers engaged in planning systems.5) More workers designing hardware and software.

Components of e-Manufacturing



GlobalizationWorldwide markets

Numerous individuals and operations and companies Supply chain management Electronic commerce

Agile production, reaction productionSimplicity& Complexity - google

For The 21. Century ; World Class Manufacturing Mass customization

Sutainability Green SCM Green Logistic Carbon Foot Print

World Class Manufacturing in Crysler Videohttp://www.youtube.com/watch?v=BNHT3kStYyM&feature=related


In this case we can define Competitiveness ;

The degree to which a nation, can, under demanding and rapidly changing market conditions, produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens.


Copyright 2006 John Wiley & Sons, Inc.Copyright 2006 John Wiley & Sons, Inc. 1-1-2929

Hourly Wage RatesHourly Wage Rates

Hourly Wage Rates for Selected CountriesSource: “International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003.

Germany: $26.18Germany: $26.18

USA: $21.33USA: $21.33

Taiwan: $5.41Taiwan: $5.41

Mexico: $2.38Mexico: $2.38

China: $0.50China: $0.50


Measures Of Competitiveness

• Gross domestic product (GDP)• Import/export ratio• Productivity = output / input


Productivity Increases When Firms

• Become more efficient• Downsize• Expand• Retrench • Achieve breakthroughs

PRODUCTIVITY MEASUREMENT

Productivity is a common measure of how well a country, industry, or business unit is using its resources ( or factor of production).

Productivity is defined as OUTPUTS / INPUTS. To increase productivity, we want to make this ratio of outputs to inputs as large as practical. Productivity is what we call a relative measure. It needs to be compared with something else. The company can compare itself with similiar operations within its industry. Another approach is to measure productivity over time within the same operation. Here we would

compare our productivity in one time period with that of the next. Goods and services have a higher value to consumers than the acquisition and processing costs of

the inputs have to the organization. For these reason transformation is too important. Managing the transformation process in an

efficient and effective manner is the task of operation manager in any type of organization. Productivity is a measure of the effectiveness of the use of resources to produce goods and

services.

In the factory a middle-level production department gained much of the control over manufacturing issues formerly handled by the president and foreman. Therefore the basis of scientific management is a focus on economic efficiency at the production core of the organization. Of central importance is the belief that rationality in the part of management will obtain economic efficiency. Economic Efficiency refers to the ratio of outputs to input. In other words, economic efficiency is getting the most output from the least amount of inputs. Organizational Efficiency typically is a ratio of product or service outputs to land, capital or labor inputs. Managers deal with scarce inputs – including resources such as people, money, and equipment- they’re concerned with the efficient use of those resources. Efficiency (%) = (Output/Input) * 100%

Example 1: The standard in a cafeteria is the preparation of 200 cheeseburgers per hour. If

labour input produces 150 cheeseburgers per hour, how efficient is the operation?

Solution:Labour Efficiency (%) = (Labour Output/Labour Input) * 100% = (150/200)

*100%= 75% Compared with the standard, this operation is 75% efficient in the preparation of

cheeseburgers.Collect data on each element of work and develop standardized procedures for

workers,(i.e. establish proper work methods and tools),Scientifically select, train, and develop workers instead of letting them train

themselves, (i.e. provide the proper training),Strive for a spirit of cooperation between management and the workers so that

high production at good pay is fostered,(i.e. establish legitimate incentives for work to be done, and to develop a hearty cooperation between management and the workers),

Divide the work between management and labour so that each group does the work for which it is best suited, (i.e. to match employees to the right job).

(Taylor’s Philosophy of Scientific Management)

• The creation of goods and services requires changing resources into goods and services. Productivity is used to indicate how good an operation is at converting inputs to outputs efficiently. The more efficiently we make this change the more productive we are.

• Productivity; is the ratio of outputs (goods and service) divided by one or more inputs ( such as labour, capital or management).The production/operations manager’s job is to enhance (improve) this ratio of outputs to inputs.

• Productivity is a measure of operational performance. Thus improving productivity means improving efficiency. This improvement can be achieved in two ways:– a reduction in inputs while output remains constant ,– an increase in output while inputs remain constant.

EXAMPLES OF PRODUCTIVE SYSTEMS

OPERATION BANK RESTAURANT HOSPITAL UNIVERSITYMANUFACTURING

PLANTAIRLINE

INPUT

Tellers, staff, computer equipment, facilities, and energy

Cooks, waitresses, food, equipment, facilities, and energy

Doctors, nurses, staff, equipment, facilities, and energy

Faculty, staff, equipment, facilities, energy, and knowledge

Equipment, facilities,labor, energy, raw materials

Planes, facilities, pilots,flight, attendants, maintenance people, labor, energy

OUTPUT

Financial Services (loan deposits, safekeeping).

Meals, entertainment,satisfied customers

Health services, health patients

Educated students, research, public service

Finished goods Transportation from or location to another.

Productivity measures can be based on a single input (Single-Factor Productivity or Partial Productivity) or on more than one input (Multi-Factor Productivity) or on all inputs. The choice depends on the purpose of the measurement.

Single-factor Productivity: Indicates the ratio of one resource (input) to the goods and services produced (outputs). For example, for labour productivity, the single input to the operation would be employee hours.

Productivity = {Output of a specific Product}/ {Input of a specific Resource}

Example 2.Three employees process 600 insurance policies in a week. They

work 8 hrs. per day, 5-days per week. Find labour productivity.Solution:Labour Productivity = [Policies Issued]/[Employee Hours]

Plabor = 600 policies/[(3 employees)(40 hrs/employee)] Plabor = 5 Policies/hr.

Productivity CalculationsProductivity Calculations

Productivity =Productivity =Units producedUnits produced

Labor-hours usedLabor-hours used

= = 4 units/labor-hour= = 4 units/labor-hour1,0001,000

250250

Labor ProductivityLabor Productivity

One resource input One resource input single-factor productivity single-factor productivity

Multi-Factor Productivity Multi-Factor Productivity

OutputOutput

Labor + Material + Energy + Labor + Material + Energy + Capital + MiscellaneousCapital + Miscellaneous

Productivity =Productivity =

Also known as total factor productivityAlso known as total factor productivity

Output and inputs are often expressed in Output and inputs are often expressed in dollarsdollars

Multiple resource inputs Multiple resource inputs multi-factor productivity multi-factor productivity

Productivity VariablesProductivity Variables

LaborLabor - contributes - contributes about 10% of the annual about 10% of the annual

increaseincrease

CapitalCapital - contributes - contributes about 38% of the annual about 38% of the annual

increaseincrease

ManagementManagement - - contributes about 52% contributes about 52% of the annual increaseof the annual increase

Multi-factor Productivity: Indicates the ratio of many or all resources (inputs) to the goods and services produced (outputs). When calculating multi-factor productivity, all inputs must be converted into a common unit of measure, typically cost.

Example 3.A team of workers make 400 units of a product, which is valued by its

standard cost of $10 each (before markups for other expenses and profit). The accounting department reports that for this job the actual costs are:$400 for labour,$1000 for materials and$300 for overhead.Calculate multi-factor productivity.

Solution:Multi-Factor Productivity = [Quantity at standard cost]/[Labour cost +

Materials cost + Overhead cost]Pmf = [400 Units x $10 ]/[$400+$1000+$300] = $4 000 / $1 700 Pmf = 2.35


JIT In Services• Competition on speed & quality• Multifunctional department store workers• Work cells at fast-food restaurants• Just-in-time publishing for textbooks• Construction firms receiving material just as

needed


What is JIT ?• Producing only what is needed, when it is

needed• A philosophy • An integrated management system.• JIT’s mandate: Eliminate all waste.


Basic Elements of JIT1. Flexible resources2. Cellular layouts3. Pull production system4. Kanban production control5. Small-lot production6. Quick setups7. Uniform production8. Quality at the source9. Total productive maintenance

10. Supplier networks


Examples of Waste• Watching a machine run• Waiting for parts• Counting parts• Overproduction• Moving parts over long distances• Storing inventory• Looking for tools• Machine breakdown• Rework

JIT Implementation• Use JIT to finely tune an operating system• Somewhat different in USA than Japan• JIT is still evolving• JIT isn’t for everyone

The Conversion Cycle

• The conversion cycle transforms input resources, raw materials, labor, and overhead into finished products or services for sale.

• The conversion cycle consists of two subsystems:– the production system – the cost accounting system

To CATCH HIGH PRODUCTİVE SYSTEM WE NEED New two

dimensions of TPM;5S + 2S= 7 S•Sort•Stabilize•Sustain•Standardize•Shine

+•Safety•Security

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• Planning new products and geting them to market quickly is the challenge facing manufacturers in industries .

• In our changing world today customers demand that a company’s offerings be individualized to meet particular meets, situations and lifestyles.

• They want product and services of superior quality available promptly. The firms requirements are innovation, flexibility, improvement, new practical competencies, design and redesign ways. They must orientate themselves to their customers in a new way.

• Management must developed and meet the customer’s need by using the available resources and the technological capabilities of the organization.

• New-product design is crucial to the survival of most firms. While a few firms experience little product change, most firms must continually revise their products. In fast-changing industries, new-product introduction is a way of life and highly sophisticated approaches have been developed to introduce new product.

• Product design is seldom the responsibility of operations functions but operations is greatly affected by new-product introduction. Sometime, new products are constrained by existing operations and technology.

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Therefore, it is extremely important to understand the new product design process and its interactions with operations. Product decisions affect each of the decision making areas of operations. Therefore they should be closely coordinated with operations to ensure the operation is integrated with production design.

There are three strategies for new-product introduction process:

• Market Driven• Technology Driven• Interfunctional view 5-53

Major functions of Product Planning

• Desingning for the customer; industrial design • Reducing Time-to-Market;speed• Improving Quality of Design;QFD• Product Development:generating new product ideas• Desing Process;linking desing and manufacturing, design for

manufacturability, process selection• Special Considerations in Service Design

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Production Design Simplification

– reducing number of parts, assemblies, or options in a product

Standardization– using commonly available and interchangeable parts

Modularity– combining standardized building blocks, or modules, to

create unique finished products

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Design SimplificationDesign Simplification

(b) Revised design(b) Revised design

One-piece base & One-piece base & elimination of elimination of fastenersfasteners

(c) Final design(c) Final design

Design for Design for push-and-snap push-and-snap assemblyassembly

(a) Original design(a) Original design

Assembly using Assembly using common fastenerscommon fasteners

Quality Function Deployment (QFD)

• Translates voice of customer into technical design requirements

• Displays requirements in matrix diagrams– first matrix called “house of quality”– series of connected houses

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Voice of the Customerthrough each stage of the product

development and production process, that is, through the product realization cycle.These requirements are the collection of customer needs, including all satisfiers,

exciters/delighters, and dissatisfiers.

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What Does QFD Do?

Better Designs in Half the Time!

QFD Is a Productivity EnhancerQFD Is a Productivity Enhancer

CUSTOMERCONCEPT

Plan Design Redesign Manufacture

Plan Design RedesignManufacture Benefits

“Traditional Timeline”

A Series of Connected QFD Houses

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Product characteristics

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Part characteristics

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Trade-off matrix

Design characteristics

Customer requirements

Target values

Relationship matrix

Competitive assessment

Imp

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Product Selection

Product is the structuring of competent parts or activities so that as a unit they can provide a specified value. Product specification is typically an engineering function. In service industries requirement. Design, production an marketing costs are reduced by standardizing and simplifying the product. After prototype units one designed and produced, the products are further analyzed and tested to see how well the quality, performance and costs conform to the design objectives. Simplification may take place to reduce unnecessary variety in the product line by discussing the number and variety of product produced.

Product selection are influenced by;1.The firm’s resource and technology base2.The market environment3.The firm’s motivation to use capabilities to meet the need of the market place.

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Product-Mix Decision

Within the product-line grouping, decision must be made to select which mix of products to in view of costs, capacity and other limitation. Linear programming is a useful technique for assisting in product-mix decisions.It applies to situations where there firm has a demand for whatever quantity of two or more products it can produce. Another typical application is for the selection of the least costly mix of raw materials .

Linear ProgrammingLP is a mathematical technique for maximizing or minimizing a linear objective function, subject to linear constraints. It has wide variety of applications. It assumes that cost and revenue values are known (certainty) profits from various activities are additive, resource quantity for various activities are additive (additivity) it doesn’t allow negative production values (non-negativity)

It has widespread application such as mix product decision, capacity planning capital budgeting, line balancing, agregate planning and scheduling.

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• Objective (Goal)Objective (Goal)– To maximize total profit

• Decision VariablesDecision Variables– What do we have to decide on? – What are the variables that we can control ?

• We have to decide on amounts of products to be produced.

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produced be to2-roductofnumberthe:x2 P

1-Graphical solution method: For the simple linear problems, the easiest procedure is the graphical method.Example1. A chemical firm produces automobile cleaner X and polisher Y and realizes $10 profit on each box of X and $30 on Y. Both products require processing through the same machines A and B, but X requires 4 hours in A 8 in B, where as Y requires 6 hours in A and 4 in B. During the forthcoming week machines A and B have 12 and 16 hours of available capacity, respectively Assuming that demands exists for both products, how many boxes of each should be produces to realize the optimal profit P?

First step: Formulate the problem in ten of linear objective function and linear const. X: No.of cleaner X to be produced.Y: No. of polisher Y to be produced.Objective function is:Maximize P = $10 x + $30yThe constraints are:

4x + 6y 128x + 4y 16Also x and y 0

in two dimensions.

We begin by constructing a graph that represents the LP

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Second step: Variables are X and Y. The constraint.Are plotted as equalities. We use a ruler to make a heavy horizontal line for the X axis and a heavy vertical line for the Y axis.To graph:A: if x=0 y=2

if y=0 x=3B: ifx=0 y=4

ify=0 x=2

Note that the graph established a feasible region bounded by the explicit capacity const of A and B and the implicit constraints that production of x>0 and production y>0

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Third step: The slope of the objective function.P =10x+30y

The standard slop intercept form of a linear equation is

Y= mX + bwhere m is the slope of the line 8that is, change in Y pen unit change in x) and b is there Y intercept.

Expressing our objectives in this form , we have.30 y = -10x +PY= (-1/3) x + P/30

The slope = -1/3; that is, the line decreases one unit in Y for every three positive units of X. This is plotted at any convenient spot within the feasible solution region. We could plot a similar line for any other value of Z. These profit lines are parallel.

Fourth step: The slope of the objective function is moved away from the origin until restrained by the furthermost intersection of A and the implicit constraint x>0. The optimal solution will always be at a corner in the feasible region. This corner will be the last point in the feasible solution region

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• Process selection decisions are related with products and services planning.

• If we want to select efficient process we need right process strategies.

• Thesee strategies effect our facilities layout decisions.

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Process Strategies

The objective of a process strategy is to build The objective of a process strategy is to build a production process that meets customer a production process that meets customer requirements and product specifications requirements and product specifications

within cost and other managerial constraintswithin cost and other managerial constraints

© 2011 Pearson E


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Process Flow Diagram

THE ASSEMBLY LINETESTING

28 tests

Oil tank work cell

Shocks and forks

Handlebars

Fender work cell

Air cleaners

Fluids and mufflers

Fuel tank work cell

Wheel work cell

Roller testing

Incoming parts

From Milwaukee on a JIT arrival

schedule

Engines and transmissions

Frame tube bending

Frame-building work cells

Frame machining

Hot-paint frame painting

Crating

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How CAN WE achieve these strategies?

• Determine some properties about product & services design

• Determine some inputs about these properties

• Determine some operations about these parts, material & work-in-process

• Apply all of these information for our process.• Design the best process for our objective

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Design Process

• Product design– defines appearance of product– sets standards for performance– specifies which materials are to

be used– determines dimensions and

tolerances

• Service design– specifies offering the

costumers; what physical items, sensual benefits, and psychological benefits from service

– defines environment in which service will take place

Design Process

• « Effective Design» can provide a competitive edge– matches product or service characteristics with customer

requirements– ensures that customer requirements are met in the simplest and

least costly manner– reduces time required to design a new product or service– minimizes revisions necessary to make a design workable


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Design Process

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Pilot product run and

final tests

New product or service launch

Final designFinal design& process plans& process plans

Ideageneration

Feasibilitystudy

Product or Product or service conceptservice concept

Performance Performance specificationsspecifications

Functionaldesign

Form design

Production design

Revising and testing Revising and testing prototypesprototypes

Design Design specificationsspecifications

Manufacturing Manufacturing or delivery or delivery specificationsspecifications

SuppliersSuppliersR&DR&D

CustomersCustomers

MarketingMarketing CompetitorsCompetitors

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Process, Volume, and Variety

Process Focusprojects, job shops

(machine, print, hospitals, restaurants)

Izmir Kent Hospital

Repetitive(autos, motorcycles,

home appliances)Harley-Davidson

Product Focus(commercial baked goods, steel, glass,

beer)Frito-Lay

High Varietyone or few units

per run,(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

VolumeFigure 7.1

Processes and technologyprocess selection refers to strategic decision and ıt can be categorized as follows:

Converting process: For examples iron core convert the metal sheet. Fabrication process: Changing raw materials into some specific form. For example, making sheet

metal into a car fender or foming gold into a crown for a tooth. Assembly process: assembling a fender to a car,putting toothpaste tubes into a box , or fastening a

dental crown in somebody’s mouth. Testing process: This is not strictly speaking a fundemental process, but it is so widely mentioned as

a standalone major activity for completeness. The process flow structure refers how the factory organizes material flow using one or more of process

tecnologies.Major process flow structures as; (Hayes & Wheelwright) Project production flow one-at-a-time production of a product to customer order Batch production flow (job shop)

systems process many different jobs at the same time in groups (or batches) Mass production flow (assembly line)

large volumes of a standard product for a mass market Continuous production flow

used for very high volume commodity products

TYPES OF PRODUCTION/OPERATIONS PROCESSES

Effective production/operations process is essential to the company’s continuing success. Not only there are numerous types of production, there are also many ways of classifying or grouping them for descriptive purposes. Classifying production/operations processes by their characteristics can provide valuable insights into how they should be managed.In general, the processes by which goods and services are produced can be categorised in two traditional ways. Firstly, we can identify continuous, repetitive, intermittent and job shop production process.

Job shop (jumbled flow ,Bath production). A wide variety of customized products are made by a highly skilled workforce using general-purpose equipment. These processes are referred to as jumbled-flow processes because there are many possible routings through the process. Examples: Home renovating firm, stereo repair shop, gourmet restaurant.

Intermittent (batch) flow. A mixture of general-purpose and special-purpose equipment is used to produce small to large batches of products.

Examples: clothing and book manufacturers, winery, caterer.

Repetitive flow (mass production). The product or products are processed in lots, each item of production passing through the same sequence of operations, i.e. several standardized products follow a predetermined flow through sequentially dependent work centers. Workers typically are assigned to a narrow range of tasks and work with highly specialised equipment. Examples: automobile and computer assembly lines, insurance home office.

Continuous flow (flow shop). Commodity like products flow continuously through a linear process. This type of process will theoretically run for 24 hrs/day, 7 days/week and 52 weeks/year and, whilst this is often the objective, it is rarely achieved.

Examples: chemical, oil, and sugar refineries, power and light utilities.These four categories represent points on continuum of process organisations.Processes that fall within a particular category share many characteristics that fundamentally influence

how a process should be managed.

The second and similar classification divides production processes into;Process,Jobbing Mass, Batch Production. Process Production. Processes that operate continually to produce a very high volume of a

standard product are termed “Processes”. This type of process involves the continuous production of a commodity , often by chemical rather than mechanical means, such as oil and gas. Extra examples of a continuous processes oil refinery, electricity production and steel making.

• Jobbing Production (Project Type Production). Processes that produce high-variety and low-volume products are termed “jobbing”.Although strictly consisting of the manufacture of different products in unit quantities (in practice corresponds to the intermittent process mentioned above). This type of production assumes a one-of-a-kind production output, such as a new building or developing a new software application. The equipment are typically designed for flexibility and often general purpose, meaning it can be used for many different production requirements

Mass Production. Is conceptually similar to process production, except that discrete items such as motorcars and domestic appliances are usually involved. A single or a very small range of similar items is produced in very large numbers. In other words, processes that produce high-volume and low-variety products are termed line or mass processes. Because of the high volumes of product it is cost-effective to use specialised labour and equipment.

Batch Production. Processes that produce products of medium variety and medium volume are termed “batch processes”. Occurs where the number of discrete items to be manufactured in a period is insufficient to enable mass production to be used. Similar items are manufactured together in batches. In other words, batch processes cover a relatively wide range of volume and variety combination. Products are grouped into batches .

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Mass Customization

Mass Customization

Effective scheduling techniques

Rapid throughput techniques

Repetitive FocusFlexible peopleand equipment

Process-FocusedHigh variety, low volume

Low utilization (5% to 25%)General-purpose equipment

Product-FocusedLow variety, high volume

High utilization (70% to 90%)Specialized equipment

Figure 7.3

Modular techniques

Accommodating Product and

Process DesignResponsive

Supply Chains

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Mass Customization

Table 7.1

Vehicle models 140 286Vehicle types 18 1,212Bicycle types 8 211,000Software titles 0 400,000Web sites 0 162,000,000Movie releases per year 267 765New book titles 40,530 300,000Houston TV channels 5 185Breakfast cereals 160 340Items in supermarket 14,000 150,000 LCD TVs 0 102

Number of Choices Item

1970s 21st Century

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Customization

Many parts and component inputs

Many output versions(custom PCs and notebooks)

Many modules

(chips, hard drives, software, cases)

(high-volume, high-variety)

Dell Computer

Product-Process Matrix

Source: Source: Adapted from Robert Hayes and Steven Wheelwright, Adapted from Robert Hayes and Steven Wheelwright, Restoring the Competitive Restoring the Competitive Edge: Competing Through Manufacturing Edge: Competing Through Manufacturing (New York: John Wiley & Sons, 1984), p. 209(New York: John Wiley & Sons, 1984), p. 209

Copyright 2006 John Wiley & Sons, Inc.

Mor

e Sta

ndar

dize

d –

Hig

her V

olum

e

Mor

e Sta

ndar

dize

d –

Hig

her V

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ProjectConstruction of the aircraft carrier was a huge project that took almost 10 years to complete. Spacecraft, bridge, barrage

Batch ProductionAt Guitars bindings on the guitar frame are installed by hand and are wrapped with a cloth webbing until glue is dried. Piano, Tom Ford, Haute-couture, Dior

Mass Production Here in a clean room a worker performs quality checks on a computer assembly line.

Continuous ProductionA paper manufacturer produces a continuous sheet paper from wood pulp slurry, which is mixed, pressed, dried, and wound onto reels.

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Crossover Charts

Fixed costs

Variable costs

$

High volume, low varietyProcess C

Fixed costs

Variable costs$

RepetitiveProcess B

Fixed costs

Variable costs$

Low volume, high varietyProcess A

Fixed cost Process A

Fixed cost Process B

Fixed cost Process C

Total

cost

Total cost

Total cost

V1(2,857) V2

(6,666)

400,000

300,000

200,000

Volume

$

Figure 7.4

Service Strategy:Processes and Technology

• Professional servicehighly customized and very labor intensive

• Service shopcustomized and labor intensive

• Mass serviceless customized and less labor intensive

• Service Factoryleast customized and least labor intensive


Service-Process MatrixC

opyright 2006 John Wiley &

Sons, Inc.

Source: Source: Adapted from Roger Schmenner, “How Can Service Businesses Adapted from Roger Schmenner, “How Can Service Businesses Survive and Prosper?” Survive and Prosper?” Sloan Management Review Sloan Management Review 27(3):2927(3):29

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Service Factory Service Shop

Degree of CustomizationLow High

Deg

ree

of L

abor

Low

High

Mass Service Professional Service

Service Process Matrix

Commercial banking

Private banking

General-purpose law firms

Law clinicsSpecialized hospitals

Hospitals

Full-service stockbroker

Limited-service stockbroker

Retailing

Boutiques

Warehouse and catalog stores

Fast-food restaurants

Fine-dining restaurants

Airlines

No-frills airlines

Figure 7.9

Digital orthodontics

Traditional orthodontics


Professional ServiceA doctor provides personal service to each patient based on extensive training in medicine. Dentist, Consultant, Advisor, etc.

Service ShopAlthough a lecture may be prepared in advance, its delivery is affected by students in each class. YUSEM, TSE, English Akademy, etc.

Mass ServiceA retail store provides a standard array of products from which customers may choose.

Service FactoryElectricity is a commodity available continuously to customers.

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Cus

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Less

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Service Design

Process


iley & S

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Performance SpecificationsPerformance Specifications

Service

Delivery SpecificationsDelivery Specifications

Physical Physical itemsitems

Sensual Sensual benefitsbenefits

Psychological Psychological benefitsbenefits

Design SpecificationsDesign Specifications Service Provider

Customer

Customer Customer requirementsrequirements

Customer Customer expectationsexpectations

ActivitiesActivities FacilityFacility Provider Provider skillsskills

Cost Cost and and time time estimatesestimates

ScheduleSchedule DeliverablesDeliverables LocationLocation

Service ConceptService Concept Service PackageService Package

Desired service Desired service experienceexperience

Targeted Targeted customercustomer

Idea Generation Sources

• Company’s own R&D department

• Customer complaints or suggestions

• Marketing research• Suppliers

• Salespersons in the field• Factory workers• New technological

developments• Competitors

Feasibility Study

• Market analysis• Economic analysis• Technical/strategic analysis• Performance specifications


iley & S

ons, Inc.

Final Design and Process Plans


• Final designdetailed drawings and specifications for new product or service

• Process plansworkable instructions

• necessary equipment and tooling

• component sourcing recommendations

• job descriptions and procedures

• computer programs for automated machines

• Stanford Design Thinking Process Video• http://www.youtube.com/watch?v=JZH70qhmEs

o

• Aircraft Manufacturing Process: • http://www.youtube.com/watch?v=puJx6aq5i_w

• Airplane Model Production Process:• http://www.youtube.com/watch?v=fmcfKl89DcA


iley & S

ons, Inc.

© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Capacity Planning• Establishes overall level of productive resources

• Affects leadtime responsiveness, cost & competitiveness

• Determines when and how much to increase capacity

CAPACITY UTILIZATION• Measures how much of the available capacity is

actually being used:

– Measures effectiveness– Use either effective or design capacity in denominator

5-100


iley & S

ons, Inc.

100%capacity

rateoutput actualnUtilizatio

Examples of Computing Capacity Utilization

1. Example:•A bakery’s design capacity is 30 custom cakes per day. Currently the bakery is producing 28 cakes per day. What is the bakery’s capacity utilization relative to both design and effective capacity?

• Design capacity:– Maximum output rate under ideal conditions– A bakery can make 30 custom cakes per day when

pushed at holiday time

• Effective capacity:– Maximum output rate under normal (realistic)

conditions– On the average this bakery can make 20 custom cakes

per day

Solution:

• The current utilization is only slightly below its design capacity and considerably above its effective capacity

• The bakery can only operate at this level for a short period of time

93%(100%)30

28(100%)

capacity design

output actual nUtilizatio

140%(100%)20

28(100%)

capacity effective

output actual nUtilizatio

design

effective

2. Example:

Your company has 4 machines which are staffed by 2 eight hours shifts 6 days a week. Lately information has shown that there are about 20 per week in which machines are not in use due to breakdowns. Calculate your companies machine utilization.

Solution:Capacity = (# of shifts) x (# of hours a day) x (# of

machines) x (# of days a week)

Utilization = Hours available – hours down x 100Hours available

Utilization = Hours worked x 100 Hours available

First step, the company’s machine hour capacity?Capacity = (# of shifts) x (# of hours a day) x (# of

machines) x (# of days a week)

Capacity = (2 shifts) x (8 hours a day) x (4 machines) x (6 days a week)

Capacity = 384 machine hours

Second Step:Utilization = Hours available – hours down x 100

Hours available

Utilization = (384 machine hours) – (20 hours down) x 100384 machine hours

Utilization = 364 machine hours x 100 = .9479 x 100

384 machine hours

Utilization = 94.79 %

3. Example:• During one week of production, a plant produced 83 units of

a product. Its historic highest or best utilization recorded was 120 units per week. What is this plant’s capacity utilization rate?

THANKS!!!

Basic Knowledge for POM Prof. Dr. Şevkinaz Gümüşoğlu.

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