LESSON 6.Related OM Strategies.ok (1)

7/29/2019 LESSON 6.Related OM Strategies.ok (1)

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Welcome toLesson 6:

Process, Location &Layout Strategies;

and PLANNING.

6.0


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Process Strategy;Location Strategy;Layout Strategy.

6.1


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q Process Strategy is the approachthat an organisation takes to

transform its resources into goodsand services.

qIts importance occurs when there isa new product, or when there is atechnological change, or there is a

competitive pressure.

What is

Process Strategy?

6.2


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Process Focus processes of lowvolume, high variety of products.E.g. A bakery shop produces alltypes of breads & cakes, cookies &buns but in small quantities.E.g. Banking, spa & restaurantservices also adopt process focus

deliver to customer orders.

4 Types ofProcess Strategy

6.3


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Product Focus this is a massassembly line with high volume, lowvariety products. Facilities areorganized around product (families).They require high investment, withspecialized equipment high fixedcosts, but low variable costs. E.g.

Car and TV assembly lines.


6.4


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Repetitive Process Focus falls inbetween product & process focuses.This uses the modular approach.Modules are components that arepre-prepared in assembly lines. E.g.In a factory, there are various typesof sub-assembly lines all these will

feed into the final assembly line.


6.5


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Mass Customisation Focus thisproduces various types of productseconomically, and in quantities thecustomers want in a very short time.It is a combination of product,process and repetitive strategy good for make-to-order forecasts.

E.g. Toyota car production.


6.6


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Process Flow Diagram 6.7

CUSTOMER:

Order product

SALESPERSON:

Process order,

Print order,

Go to store.STORE CLERK:

Key in item,

Take item from

rack.SALESPERSON:

Pack item

CUSTOMER:

Pay cash,

Receive item.


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q Once a new product/service designhas been determined, a company has

to select a location for its businessor its outlet.

q Just observe the locations of KFC,

McDonald, commercial banks, foodrestaurants, etc. Locations affectbusiness performances and sales.

Why Location Strategy? 6.8


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q To maximise the benefits of being

near (accessible) to customers.

q To minimise the operational costs:

Cost of land, rental, living, etc; Distribution costs; Raw material costs; Labour costs.

Objectives ofLocation Strategy

6.9


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Tangible Factors:

q Land cost & size;q Raw material cost & availability;q Labor costs & availability;

q Distribution costs;q Utilities & services costs;q Foreign Exchange & Tax rates.

3 Factors InfluencingLocation Strategy

6.10


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Intangible Factors:

q Geographical site;q Climatic factors;q Political stability;q High purchasing power;q Safety & security;q

Cultural factors.


6.11


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Market Factors:q

Proximity to customers;q Proximity to suppliers;q Competition businesses have

tendencies to cluster, i.e. tolocate near to each other, evencompetitors, to create a

critical mass.


6.12


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q How to carry out a location study? First, form a team of at least 3

members. The team needs to do asite survey and collect data.

Quantitative Data: population, age,

gender, youths, family size, income,size of location, no.of shops, schools,bus terminals, hospitals; and others

through interviews as well.

A Location Study 6.13


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Qualitative Data: climate, security,environment, local governmentregulations, local communities,culture, market, competitions(through observations), networking,

chats & mingling with locals, etc.q From these groundworks, the team

is able to determine the tangibles,

the intangibles, & market factors.

A Location Study 6.14


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q To achieve high utilisation of space,equipment & people;

q To improve flow of people, materialand people;

q To increase employee morale;q To create a safer work condition;q To improve customer interactions;q To cater for flexibility (future).

Importance ofLayout Strategy

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q Fixed position layout for handlingprojects, like road construction;

q Process layout low volume high variety;for product differentiation strategy;

q Product layout high volume low variety;

q Group cell layout for modular design;q Retail layout to show out products;q Office layout good for service-based,

not for product-based organisations.

Types ofLayout Strategies

6.16


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Types of Planning;MRP; MRP 2; andERP.

6.17


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Aggregate Planning is part of alarger planning system. It requiresa good understanding of forecastingdemand in the market, and capacityplanning in the organisation.

Aggregate planning is done for theoverall products and the overallcapacity.

AGGREGATEPLANNING

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6.19Aggregate Planning(objective & goal)

The objective of A/P is to meetforecast demand in the market andto minimise operational cost overthe planning period through variousstrategies such as: Adjusting production rates; Managing the inventory levels; Working hours; etc


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6.20Aggregate Planning(objective & goal)

The goal of A/P is to produce aproduction plan MasterProduction Schedule (MPS) thatwill effectively utilise theorganisations resources tomatch expected forecast

demand.


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The Planning Process 6.21

Long Range Planning, or strategicplanning is the responsibility of theTop Management e.g. President,CEO, Board of Directors, etc. Medium Range Planning, or tacticalplanning will start after completion of

the strategic plan. This is whereAggregate Planning is done. Short Range Planning, or operationalplanning follows next.


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6.22Aggregate Planning(strategies)

A/P strategies involve manipulation ofinventory, production rates, labour

levels, capacity and other controllablevariables. Given forecast demand, facilitycapacity, the workforce size, and all

the above information, the planner hasto determine the rate of productionoutput for the organisation or a

facility over 6-12 months.


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6.23

Product

Dev. Decisions

Research,Design &

Technology

Aggregate Planning

ForecastDemand

Aggregate

Planning

Master

Prod. Schedule

Manpower

Planning

Sub-

Contracting

Operational

Costs

Market

Demand

Process Plan.

Capacity Dec.

Machine

Capacity

Raw Mater.

Planning Cap.

Vendor, Supp.

Capacity


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6.24Aggregate Planning(continue)

Aggregate

Planning

Master

Prod. Schedule

FinanceProduct.Engineer. Market. Procure.


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6.25

MRP is a production planning andinventory control system used tomanage manufacturing processes.

While it is possible to conduct MRP byhand, today, most MRP systems aresoftware-based.

Material RequirementPlanning (MRP)


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6.26Material RequirementPlanning (MRP)

MRP is a computerised informationsystem that incorporates a pool of

huge database on all requirementsneeded to plan, forecast, schedule,order, track and monitor themovements of items, components and

inventories for all production stages. It also includes the inventory stocklevels, and others, to help in planning

and making operational decisions.


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6.27

MRP has 3 simultaneous objectives:

To ensure raw materials are availablefor production, and products areavailable for delivery to customers; To maintain the lowest possible rawmaterial and product levels in store; To plan manufacturing activities,delivery schedules, and purchasing

activities.



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6.28

MRP begins with the Master ProductionSchedule (MPS) for finished goods to

be produced. MRP system requires 4 mainrequirements (inputs) as listed below: Master Production Schedule (MPS); Bill of Materials; Inventory Stock Level; Purchase Order Outstanding



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6.29

Too frequent changes in salesforecasts, entailing continualadjustments in production, as well asthe unsuitability of the parametersfixed by the system, led Material

Requirement Planning (MRP) to evolveinto a new concept: ManufacturingResource Planning (MRP 2).

Manufacturing ResourcePlanning (MRP-2)


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6.30

MRP-2 is defined as a method for theeffective planning of all resources of amanufacturing company. Ideally, itaddresses operational planning in units,

financial planning, and has a simulationcapability to answer "what-if" questionsand extension of closed-loop MRP.

ManufacturingResource Planning


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6.31

MRP-2 is not exclusively a softwarefunction, but a marriage of peopleskills, dedication to database accuracy,and computer resources.

It is a total company managementconcept for using human resources moreproductively.

ManufacturingResource Planning


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6.32

MRP and MRP-2 are predecessors ofEnterprise Resource Planning (ERP), abusiness information integration system.

The development of thesemanufacturing coordination andintegration methods and tools madetodays ERP systems possible.

Enterprise ResourcePlanning (ERP)


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6.33

Both MRP and MRP-2 are still widelyused, independently and as modules ofmore comprehensive ERP systems.

But the original vision of integratedinformation systems as we know themtoday began with the development ofMRP and MRP-2 in manufacturing.

Enterprise ResourcePlanning


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6.34

ERP systems integrate internal andexternal management of informationacross an entire organization embracing

finance & accounting, manufacturing,sales & services, CRM, etc.

ERP facilitates information flowbetween all business functions insidethe organization, and managesconnections to outside stakeholders.ERP software is a multi-billion dollar

industry.

Enterprise Res. Planning


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The

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LESSON 6.Related OM Strategies.ok (1)

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