Lecture-1-2 Intro & Process Analysis(1)
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Transcript of Lecture-1-2 Intro & Process Analysis(1)
© All Rights Reserved, G. Lu, 2014 2
Agenda
• Ice break• Review of Syllabus• Introduction to Operations Mgmt (OM) and
Supply Chain Mgmt (SCM)• Q&A
© All Rights Reserved, G. Lu, 2014 5
Two companies…COB & Co. (400 employees) Car TV
200 (5 people & 1 month / 1 car) 40
200 (2 people & 1 month / 1 TV) 100
OSU & Co. (400 employees) Car TV
200 (20 people & 1 month / 1 car) 10
200 (2.5 people & 1 month / 1 TV) 80
High Efficiency
Low Efficiency
© All Rights Reserved, G. Lu, 2014 6
Two companies…COB & Co. (400 employees) Car TV
200 (5 people & 1 month / 1 car) 40
200 (2 people & 1 month / 1 TV) 100
OSU & Co. (400 employees) Car TV
200 (20 people & 1 month / 1 car) 10
200 (2.5 people & 1 month / 1 TV) 80
COB & Co. (400 employees) Car TV
300 (5 people & 1 month / 1 car) 60
100 (2 people & 1 month / 1 TV) 50
OSU & Co. (400 employees) Car TV
0
400 (2.5 people & 1 month / 1 TV) 160
© All Rights Reserved, G. Lu, 2014 7
Two companies…TOTAL OUTCOME Before After
Car 50 60
TV 180 210
Both parties can be better off if they work together…
We call it cooperation (collaboration, integration, etc.).
A supply chain is formed by a number of firms that cooperate with each other in order to generate values.
© All Rights Reserved, G. Lu, 2014 9
A story about ice cream
• Ice cream infects my car!!– A well-educated family– A nice family tradition
© All Rights Reserved, G. Lu, 2014 10
Review of Syllabus
• Instructor / TAGuanyi Lu
309, Bexell Hall
Office hours: 12:15 PM – 1:45 PM, TR
Phone: 541-737-3995
Email: [email protected]. Emails should have “BA 554” in the subject line.
© All Rights Reserved, G. Lu, 2014 11
Tell me more about you
• I work for…• I like …• I hate…• I hope this course …
© All Rights Reserved, G. Lu, 2014 12
Review of Syllabus
• Grading
• MBA Exit Hurdle
• Course flow & Text book
© All Rights Reserved, G. Lu, 2014 13
Operations Management
• Operations and supply chain management: the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services– Functional field of business
• Concerned with the management of the entire system that produces a good or delivers a service
© All Rights Reserved, G. Lu, 2014 14
Operations Management
Inputs Outputsgoods,services
(raw material, customers)
TransformationProcess
Resources:labor & capital
A process view of OM
© All Rights Reserved, G. Lu, 2014 15
Operations Management
Organization Inputs Outputs_______________________________________________
Automobile sheet steel, cars factory engine parts
Restaurant hungry customers satisfied customers
College high school educated individuals graduates
© All Rights Reserved, G. Lu, 2014 17
Operations Management
• History of OM– Lean manufacturing, JIT, and TQC– Manufacturing strategy paradigm– Service quality and productivity– Total quality management (TQM) and quality certifications– Business process reengineering– Six-sigma quality– Supply chain management– Electronic commerce– Service science
© All Rights Reserved, G. Lu, 2014 18
Operations Management
• Matching supply with demand– Efficiency– Right balance– Push the envelop
© All Rights Reserved, G. Lu, 2014 19
Operations Management
low price
responsiveness
Eliminateinefficiency
A
B
C
Current frontier in the industry
high
low
high price
Efficiency
© All Rights Reserved, G. Lu, 2014 20
Operations Management
low price
responsiveness
Current frontier in the industryhigh
low
high price
RightBalance
© All Rights Reserved, G. Lu, 2014 21
Operations Management
Push theEnvelop
low price
responsiveness
Current frontier in the industry
high
low
high price
New frontier
© All Rights Reserved, G. Lu, 2014 22
Operations Management
• Trends in O&SCM– Supply chain integration– Manufacturing and service outsourcing– Increased co-production of goods and service– Sustainability and the triple bottom line– Managing customer touch point – enhance service experience– Raising senior management awareness of operations and supply chain
management as a significant competitive weapon
© All Rights Reserved, G. Lu, 2014 24
Learning Objectives
• Understand basic flowcharting of processes.• Recognize various types of processes.• Explain how to analyze processes using Little’s law.• Understand how to calculate process performance
measures.• Understand the role and impact of bottleneck.• Understand how to interpret and compute utilizations.
© All Rights Reserved, G. Lu, 2014 25
Process Analysis
• Process Flowcharting– Process flowcharting: the use of a diagram to present
the major elements of a process – Symbols:
© All Rights Reserved, G. Lu, 2014 26
Process Analysis
• Process: any part of an organization that takes inputs and transforms them into outputs
• Cycle time: the average successive time between completions of successive units
• Utilization: the ratio of the time that a resource is actually activated relative to the time that it is available for use
© All Rights Reserved, G. Lu, 2014 27
Process Analysis
• Single-stage vs. Multi-stage
Stage 1
Stage 1 Stage 2 Stage 3
Multi-stage process
Single-stage process
© All Rights Reserved, G. Lu, 2014 28
Process Analysis
• Various Multi-stage ProcessesSerial flow process
Alternative paths Different products
© All Rights Reserved, G. Lu, 2014 30
Process Analysis
• Buffering, Blocking, and Starving– Buffer: a storage area between stages where the
output of a stage is placed prior to being used in a downstream stage
– Blocking: occurs when the activities in a stage must stop because there is no place to deposit the item
Fast Slow
© All Rights Reserved, G. Lu, 2014 31
Process Analysis
• Buffering, Blocking, and Starving– Starving: occurs when the activities in a stage must
stop because there is no work
– Bottleneck: stage that limits the capacity of the process
– Can a stage be bottleneck if it is blocking or starving?
Slow Fast
© All Rights Reserved, G. Lu, 2014 32
Process Analysis
• Make-to-order– Only activated in response to an actual order– Both work-in-process and finished goods inventory kept to a
minimum
• Make-to-stock– Process activated to meet expected or forecast demand– Customer orders are served from target stocking level
• Hybrid– Combine the features of both make-to-order and make-to-
stock
© All Rights Reserved, G. Lu, 2014 33
Process Analysis
• Example: Making Hamburgers at McDonald's (old process)
© All Rights Reserved, G. Lu, 2014 34
Process Analysis
• Example: Making Hamburgers at McDonald's (current process)
© All Rights Reserved, G. Lu, 2014 35
Process Analysis
• Pacing– Pacing: Movement of items through a process is coordinated
through a timing mechanism.– Assembly lines are usually paced.
– Moving at a constant rate (demo)– e.g., moving to the right by 1 position every 30 seconds
© All Rights Reserved, G. Lu, 2014 36
Process Analysis
• Cycle time: The average time between completions of successive units– Often used in the context of a process– Can also be used in the context of a specific job or process
stage
• Throughput rate (a.k.a. Flow rate): The output rate that the process is expected to produce over a period of time
• Process capacity: The maximum rate with which the process can generate outputs
© All Rights Reserved, G. Lu, 2014 37
Process Analysis
• Example: The BBA Bagel Store
Spreadcream
cheese
Cut&
Toast
Customerplacesorder
Rawmaterials WIP
3 minutes/order 1 minute/order
2 minutes/order
Assuming1 bagel/order
If a customer arrives every 4 minutes, thencycle time = __________ minute(s) and throughput rate = __________ /hour
Process capacity = __________/hour
© All Rights Reserved, G. Lu, 2014 38
Process Analysis
• Example: The BBA Bagel Store0:00 1st customer arrives
0:02 The first order is taken and payment collected
0:05 The1st bagel is cut & toasted & the 2nd order has spent 1 minute with the order taker
0:06 The 1st order is completed & the 2nd order is taken & payment collected
0:09 The 2nd bagel is cut & toasted & the 3rd order has spent 1 minute with the order taker
0:10 The 2nd order is completed & the & 3rd order is taken & payment collected
0:13 The 3rd bagel is cut & toasted & the 4th order has spent 1 minute with the order taker
0:14 The 3rd order is completed & the 4th order is taken & payment collected
© All Rights Reserved, G. Lu, 2014 39
Process Analysis
• Flow time: The average time that it takes a unit to move through an entire process. – Includes the time that the unit spent actually being
worked on together with the time spent waiting in a queue
© All Rights Reserved, G. Lu, 2014 40
Process Analysis
Spreadcream
cheese
Cut&
Toast
Customerplacesorder
Rawmaterials WIP
3 minutes/order 1 minute/order
2 minutes/order
Assuming1 bagel/order
If a customer arrives every 4 minutes, thencycle time = __________ minute(s) and throughput rate = __________ /hour;
flow time = __________ minute(s).
Process capacity = __________/hour
© All Rights Reserved, G. Lu, 2014 42
Process Analysis
• Setup Time and Run Time Example
– Production plan: make 100 units of component A, then 100 units of component B, then 100 units of component A, then 100 units of component B, and so forth.
– What is the average hourly output?
Manufacturing Packing
setup time: 5 minutesrun time: 20 minutes/100 units
setup time: 10 minutesrun time: 10 minutes/100 units
run time:2 seconds/unitnegligible
© All Rights Reserved, G. Lu, 2014 43
Process Analysis
• Efficiency and Productivity
• Efficiency: A ratio of the actual output of a process relative to some standard.
– Efficiency can be measured by dividing the actual output by the designed output– Efficiency can indicate the loss or gain in a process
• Productivity = Outputs / inputs
• Both measures are related to throughput rate, which measures the actual output of a process.
© All Rights Reserved, G. Lu, 2014 45
Process Analysis
• Inventory
• Inventory: The number or value of all the flow units in a process.
• Total average value of inventory: The total average investment in raw material, work-in-process, and finished goods. This is valued at the cost to the firm, usually for accounting purposes.
© All Rights Reserved, G. Lu, 2014 46
Process Analysis
• Relevance of three Performance Measures
Performance Measure Impact
Inventory Use of working capital, reflected in the balance sheet
Throughput rate Rate of revenue generation, reflected in the income statement
Flow time Lead time, responsiveness
© All Rights Reserved, G. Lu, 2014 47
Process Analysis
• Conveyer
A conveyor moving at a constant rate Throughput rate: 2 / minute On average 6 pieces in the system Flow time ?
© All Rights Reserved, G. Lu, 2014 48
Process Analysis
• Little’s Law– Establishes a mathematical relationship between
Inventory, Throughput rate and Flow time– Inventory = Throughput rate x Flow time
Inventory, [units]
Throughput rate, [units/time unit]
... ......
Throughput time, [time units]
... ......
© All Rights Reserved, G. Lu, 2014 49
Process Analysis
• An intuitive example of Little’s Law: Student Flow– Consider a 4-year college. Every year 200 high
school graduates are admitted, on average. Every student admitted will graduate in 4 years, on average. On average, how many students are in the college at any given time?
© All Rights Reserved, G. Lu, 2014 50
Process Analysis
• Recall that Inventory is the number or value of all the flow units in a process
• Indirect measures– Days-of-supply: The (average) number of days until the firm
would run out of an item if not replenished» Days-of-supply is essentially flow time.
– Inventory turn: The cost of goods sold divided by the total average value of inventory» Inventory turn is also the inverse of days-of-supply
© All Rights Reserved, G. Lu, 2014 51
Process Analysis
• Raw Materials and WIP
12 hrs/car
Assembly(1 battery/car)
Rawmaterials
200 cars/8-hr shift
8,000 batteries are kept in Raw materials inventory, on average. Those batteries translate into _____ days of supply on average, assuming 8 hrs/day
The average number of batteries in Assembly = __________.
© All Rights Reserved, G. Lu, 2014 52
Process Analysis
• Inventory Turn
Inventory turn = 1 / flow time
Inventory turn = COGS / inventory
© All Rights Reserved, G. Lu, 2014 53
Process Analysis
• Inventory Turn: practicesK-Mart (01/29/02)
Inventory = $4,825 million COGS = $26,258 million
Inventory turn =
Wal-Mart (01/29/02)
Inventory = $22,749 millionCOGS = $171,562 million
Inventory Turn =
© All Rights Reserved, G. Lu, 2014 54
Process Analysis
• Material Flow: practice– Wendy’s processes an average of 5,000 lb. of hamburgers per
week. The typical inventory of raw meat is 2,500 lb. What is the average hamburger’s flow time and Wendy’s inventory turn?
© All Rights Reserved, G. Lu, 2014 55
Process Analysis
• Job Flow: practice– The Travelers Insurance Company processes 10,000 claims per
year. The average processing time is 3 weeks. Assuming 50 weeks in a year, what is the average number of claims “in process?”
© All Rights Reserved, G. Lu, 2014 56
Process Analysis
• Cash Flow: practice– Motorola sells $300 million worth of cellular equipment per year.
The average accounts receivable in the cellular group is $45 million. What is the average time between billing to revenue collection?
© All Rights Reserved, G. Lu, 2014 57
Process Analysis
• Decipher News ReportsThe following was reported in the Wall Street Journal:
“.. although GM and Toyota are operating with the same number of inventory turns, Toyota’s throughput rate is twice that of GM. The discrepancy could be due to much faster flow times and lower inventories by virtue of Toyota’s production system.”
Anything wrong with this statement?
© All Rights Reserved, G. Lu, 2014 59
Process Analysis
• The BBA Bagel Store Revisited
Spreadcream
cheese
Cut&
Toast
Customerplacesorder
Rawmaterials WIP
3 minutes/order 1 minute/order
2 minutes/order
Assuming1 bagel/order Process capacity = __________/hour
If a customer arrives every 2 minutes, thencycle time = __________ minute(s) and throughput rate = __________ /hour;flow time = __________ minute(s).
© All Rights Reserved, G. Lu, 2014 60
Process Analysis
Bottleneck refers to a resource that limits the capacity or maximum output of the process
© All Rights Reserved, G. Lu, 2014 61
Bottleneck and Inventory Buildup
60/hr 90/hr 120/hr 100/hr
120/hr 90/hr 60/hr 100/hr
120/hr 60/hr 90/hr 100/hr
90/hr 120/hr 60/hr 100/hr
© All Rights Reserved, G. Lu, 2014 62
Inventory Buildup Computation
Time
Demand
12pm 2pm 6pm10am
50
200
Time
200
Inventory
100
12pm 2pm 6pm10am
Process Capacity = 100 / hr.
© All Rights Reserved, G. Lu, 2014 63
Wet Cranberry Processing
Bins
Bad berries (disposed)
Sepa
rato
r Lin
es
Shipping of good berries
KiwaneeDumpers
Dechaffing
Dryers
Truck queue
© All Rights Reserved, G. Lu, 2014 64
Cranberry Processing Example
Bins
Bad berries (disposed)
Sepa
rato
r Lin
es
Shipping of good berries
KiwaneeDumpers
Dechaffing
Dryers
Truck queue
1,500 barrels/hr 1,250 barrels/hr 600 barrels/hr
2,400 barrels
800 barrels/hr
© All Rights Reserved, G. Lu, 2014 65
Demand and Capacity Information
• Demand: 6000 barrels over 12 hrs
• Kiwanee dumpers: Capacity = 1500 barrels/hr • Storage bins: Capacity = 2400 barrels• Dechaffers: Capacity = 1250 barrels/hr• Dryers: Capacity = 600 barrels/hr• Separators: Capacity = 800 barrels/hr
• Process Capacity = __________ barrels/hr
• Throughput Rate = __________ barrels/hr
© All Rights Reserved, G. Lu, 2014 66
Demand and Capacity Information
• Demand: 10800 barrels over 12 hrs
• Kiwanee dumpers: Capacity = 1500 barrels/hr • Storage bins: Capacity = 2400 barrels• Dechaffers: Capacity = 1250 barrels/hr• Dryers: Capacity = 600 barrels/hr• Separators: Capacity = 800 barrels/hr
• Process Capacity = __________ barrels/hr
• Throughput Rate = __________ barrels/hr
© All Rights Reserved, G. Lu, 2014 67
Inventory Buildup Diagram
Wetberries
Time7am 10am 1pm 4pm 7pm 1am10pm
© All Rights Reserved, G. Lu, 2014 68
Utilization
• Utilization of a resource is the ratio of the time that a resource is actually activated to the time that it is available for use.
• Utilization of a resource can also be expressed as throughput rate over resource capacity.
• Utilization never exceeds 100% (=1).
• When the utilization of a resource is 1, the resource may or may not be able to satisfy all the demand within its available time.
© All Rights Reserved, G. Lu, 2014 69
Cranberry Processing Example
Bins
Bad berries (disposed)
Sepa
rato
r Lin
es
Shipping of good berries
KiwaneeDumpers
Dechaffing
Dryers
Truck queue
1,500 barrels/hr 1,250 barrels/hr 600 barrels/hr
2,400 barrels
800 barrels/hr
© All Rights Reserved, G. Lu, 2014 70
Utilization Computations
• Resource utilizations: (time available = 12 hrs)
KiwaneeDumpers
Dechaffers Dryers Separators
Capacity 1,500/hr 1,250/hr 600/hr 800/hr
If demand = 500 barrels/hr
If demand = 900 barrels/hr
© All Rights Reserved, G. Lu, 2014 71
Demand Constrained Process
Excess capacity
Flow Rate
Demand
Input
Bottleneck(Capacity)
Throughput Rate
Throughput rate = demand for a demand constrained process
© All Rights Reserved, G. Lu, 2014 72
Supply Constrained Process
Demand
Bottleneck(Capacity)
Excess capacity
Flow Rate
Input
Throughput Rate
Throughput rate = process capacity for a supply constrained process
© All Rights Reserved, G. Lu, 2014 73
Two Types of Cranberries
Bins
Bad berries (disposed)
Sepa
rato
r Lin
es
Shipping of good berries
KiwaneeDumpers
Dechaffing
Dryers
Truck queueDestoningBins
drydry
dry
dry
wet wet wet wet
1,500 barrels/hr2,400 barrels
1,250 barrels/hr 600 barrels/hr
400 barrels/hr800 barrels
800 barrels/hr
© All Rights Reserved, G. Lu, 2014 74
Utilization Computations (II)
• Demand = _______ barrels of wet berries and _______ barrels of dry berries per hour (from 7am to 7pm)
• Resource utilizations:
KiwaneeDumpers
De-chaffers De-stoners Dryers Separators
© All Rights Reserved, G. Lu, 2014 75
Recall Bottleneck
Bottleneck: stage that limits the capacity of the process
© All Rights Reserved, G. Lu, 2014 77
Identify Bottleneck Time available = 480 minutes for each worker Utilizations:
Station A: time available = time activated = ____________________; util. = __________
Station B: time available = time activated = ____________________; util. = __________
Station C: time available = time activated = ____________________; util. = __________
Station D: time available = time activated = ____________________; util. = __________
Station E: time available = time activated = ____________________; util. = __________