Hassan Khan Pm

8/2/2019 Hassan Khan Pm

1/293

CHAPTER

6

Process Selectionand Facility Layout

McGraw-Hill/Irwin

Operations Management, Eighth Edition, by William J. StevensonCopyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.


2/293

Process selection Deciding on the way production of goods or

services will be organized

Major implications Capacity planning

Layout of facilities

Equipment

Design of work systems

Introduction


3/293

Forecasting

Product and

Service Design

Technological

Change

Capacity

Planning

ProcessSelection

Facilities and

Equipment

Layout

Work

Design

Figure 6.1

Process Selection and System Design


4/293

Key aspects of process strategy Capital intensive equipment/labor

Process flexibility

Adjust to changes

Design

Volume

technology

Process Strategy


5/293

Variety How much

Flexibility What degree

Volume

Expected output Job Shop

Batch

Repetitive

Continuous

Process Selection


6/293

Job shop Small scale

Batch

Moderate volume

Repetitive/assembly line

High volumes of standardized goods or services

Continuous Very high volumes of non-discrete goods

Process Types


7/293

Process Type

Job Shop Appliance repairEmergency

room

Notfeasible

Batch Commercial

bakeryClassroom

Lecture

Repetitive Automotiveassembly

Automaticcarwash

Continuous(flow)

Notfeasible

Oil refineryWater purification

Figure 6.2

Product Process Matrix


8/293

Dimension

Job variety Very High Moderate Low Very low

Processflexibility

Very High Moderate Low Very low

Unit cost Very High Moderate Low Very low

Volume ofoutput

Very High Low High Very low

Figure 6.2 (contd)

Product Process Matrix


9/293

Automation: Machinery that has sensing andcontrol devices that enables it to operate

Fixed automation

Programmable automation

Automation


10/293

Computer-aided design and manufacturingsystems (CAD/CAM)

Numerically controlled (NC) machines

Robot Manufacturing cell

Flexible manufacturing systems(FMS)

Computer-integrated manufacturing (CIM)

Automation


11/293

Layout: the configuration of departments,work centers, and equipment, with

particular emphasis on movement of work

(customers or materials) through the

system

Facilities Layout


12/293

Requires substantial investments of moneyand effort

Involves long-term commitments

Has significant impact on cost andefficiency of short-term operations

Importance of Layout Decisions


13/293

Inefficient operations

For Example:

High Cost

Bottlenecks

Changes in the design

of products or services

The introduction of new

products or services

Accidents

Safety hazards

The Need for Layout Decisions


14/293

Changes inenvironmental

or other legal

requirements

Changes in volume of

output or mix of

products

Changes in methods

and equipment

Morale problems

The Need for Layout Design (Contd)


15/293

Product layouts

Process layouts

Fixed-Position layout

Combination layouts

Basic Layout Types


16/293

Product layout Layout that uses standardized processing

operations to achieve smooth, rapid, high-volumeflow

Process layout Layout that can handle varied processing

requirements

Fixed Position layout Layout in which the product or project remains

stationary, and workers, materials, andequipment are moved as needed

Basic Layout Types


17/293

Raw

materials

or customer

Finished

itemStation

2

Station

3

Station

4

Material

and/or

labor

Station

1

Material

and/or

labor

Material

and/or

labor

Material

and/or

labor

Used for Repetitive or Continuous Processing

Figure 6.4

Product Layout


18/293

High rate of output Low unit cost

Labor specialization

Low material handling cost

High utilization of labor and equipment

Established routing and scheduling

Routing accounting and purchasing

Advantages of Product Layout


19/293

Creates dull, repetitive jobs Poorly skilled workers may not maintain

equipment or quality of output

Fairly inflexible to changes in volume

Highly susceptible to shutdowns

Needs preventive maintenance

Individual incentive plans are impractical

Disadvantages of Product Layout


20/293

1 2 3 4

5

6

78910

In

Out

Workers

Figure 6.6

A U-Shaped Production Line


21/293

Dept. A

Dept. B Dept. D

Dept. C

Dept. F

Dept. E

Used for Intermittent processing

Job Shop or Batch

Process Layout(functional)

Figure 6.7

Process Layout


22/293

Work

Station 1

Work

Station 2

Work

Station 3

Figure 6.7 (contd)

Product Layout(sequential)

Used for Repetitive Processing

Repetitive or Continuous

Product Layout


23/293

Can handle a variety of processingrequirements

Not particularly vulnerable to equipment

failures Equipment used is less costly

Possible to use individual incentive plans

Advantages of Process Layouts


24/293

In-process inventory costs can be high Challenging routing and scheduling

Equipment utilization rates are low

Material handling slow and inefficient Complexities often reduce span of supervision

Special attention for each product orcustomer

Accounting and purchasing are more involved

Disadvantages of Process Layouts


25/293

Cellular Production Layout in which machines are grouped into a

cell that can process items that have similar

processing requirements

Group Technology

The grouping into part families of items with

similar design or manufacturing characteristics

Cellular Layouts


26/293

Dimension Functional CellularNumber of moves

between departments

many few

Travel distances longer shorter

Travel paths variable fixed

Job waiting times greater shorter

Throughput time higher lower

Amount of work in

process

higher lower

Supervision difficulty higher lower

Scheduling complexity higher lower

Equipment utilization lower higher

Table 6.3

Functional vs. Cellular Layouts


27/293

Warehouse and storage layouts Retail layouts

Office layouts

Other Service Layouts


28/293

Line Balancing is the process of assigning

tasks to workstations in such a way that the

workstations have approximately

equal time requirements.

Design Product Layouts: Line Balancing


29/293

Cycle time is the maximum time

allowed at each workstation tocomplete its set of tasks on a unit.

Cycle Time


30/293

Output capacity =OT

CT

OT operating time per day

D = Desired output rate

CT = cycle time =OT

D

Determine Maximum Output

D i h Mi i N b


31/293

N =(D)( t)

OT

t = sum of task times

Determine the Minimum Numberof Workstations Required


32/293

Precedence diagram: Tool used in line balancing to displayelemental tasks and sequence requirements

A Simple Precedence

Diagrama b

c d e

0.1 min.

0.7 min.

1.0 min.

0.5 min. 0.2 min.

Figure 6.10

Precedence Diagram


33/293

Arrange tasks shown in Figure 6.10 intothree workstations.

Use a cycle time of 1.0 minute

Assign tasks in order of the most number of

followers

Example 1: Assembly Line Balancing


34/293

WorkstationTimeRemaining Eligible

AssignTask

RevisedTimeRemaining

StationIdle Time

1 1.0

0.9

0.2

a, c

c

none

a

c

-

0.9

0.2

0.22 1.0 b b 0.0 0.0

3 1.0

0.5

0.3

d

e

-

d

e

-

0.5

0.3 0.3

0.5

Example 1 Solution


35/293

Percent idle time =Idle time per cycle

(N)(CT)

Efficiency = 1 Percent idle time

Calculate Percent Idle Time


36/293

Assign tasks in order of most following

tasks.

Count the number of tasks that follow

Assign tasks in order of greatest positional

weight.

Positional weight is the sum of each tasks time

and the times of all following tasks.

Some Heuristic (intuitive) Rules:

Line Balancing Rules


37/293

c d

a b e

f g h

0.2 0.2 0.3

0.8 0.6

1.0 0.4 0.3

Example 2


38/293

Station 1 Station 2 Station 3 Station 4

a b e

f

d

g h

c

Solution to Example 2

ll l k


39/293

1 min.2 min.1 min.1 min. 30/hr. 30/hr. 30/hr. 30/hr.

1 min.

1 min.

1 min.1 min.60/hr.

30/hr. 30/hr.

60/hr.

1 min.

30/hr.

30/hr.

Bottleneck

Parallel Workstations

Parallel Workstations


40/293

Information Requirements:1. List of departments

2. Projection of work flows

3. Distance between locations4. Amount of money to be invested

5. List of special considerations

6. Location of key utilities

Designing Process Layouts

E ample 3 Interdepartmental Work Flo s


41/293

1 3 2

30

170 100

A B C

Figure 6.12

Example 3: Interdepartmental Work Flowsfor Assigned Departments


42/293

Authors note: The following three slides are not in the 8e,

but I like to use them for alternate examples.

P L


43/293

Process Layout - work travelsto dedicated process centers

Milling

Assembly

& TestGrinding

Drilling Plating

Process Layout

F i l L


44/293

Gear

cutting

Mill Drill

Lathes

Grind

Heat

treat

Assembly

111

333

222

444

222

111

444

111 3331111 2222

222

3333

111

444

111

Functional Layout

C ll l M f t i L t


45/293

-1111 -1111

222222222 - 2222

Assemb

ly

3333333333 - 3333

44444444444444 - 4444

Lathe

Lathe

Mill

Mill

Mill

Mill

Drill

Drill

Drill

Heattreat

Heat

treat

Heat

treat

Gearcut

Gear

cut

Grind

Grind

Cellular Manufacturing Layout


46/293


47/293

William J. Stevenson

Operations Management

8th edition


48/293

CHAPTER

8

Location Planningand Analysis

McGraw-Hill/Irwin


N d f L ti D i i


49/293

Need for Location Decisions

Marketing Strategy Cost of Doing Business

Growth

Depletion of Resources

Nature of Location Decisions


50/293

Nature of Location Decisions

Strategic Importance Long term commitment/costs Impact on investments, revenues, and operations Supply chains

Objectives Profit potential No single location may be better than others Identify several locations from which to choose

Options Expand existing facilities

Add new facilities Move


51/293

Making Location Decisions

Decide on the criteria Identify the important factors

Develop location alternatives

Evaluate the alternatives

Make selection

Location Decision Factors


52/293

Location Decision Factors

Regional Factors

Site-related

FactorsMultiple Plant

Strategies

Community

Considerations

Regional Factors


53/293

Location of raw materials Location of markets

Labor factors

Climate and taxes

Regional Factors

Community Considerations


54/293

Quality of life Services

Attitudes

Taxes

Environmental regulations

Utilities

Developer support

Community Considerations

Site Related Factors


55/293

Land Transportation

Environmental

Legal

Site Related Factors

Multiple Plant Strategies


56/293

Product plant strategy Market area plant strategy

Process plant strategy

Multiple Plant Strategies

Comparison of Service and


57/293

Comparison of Service andManufacturing Considerations

Manufacturing/Distribution Service/Retail

Cost Focus Revenue focus

Transportation modes/costs Demographics: age,income,etc

Energy availability, costs Population/drawing area

Labor cost/availability/skills Competition

Building/leasing costs Traffic volume/patterns

Customer access/parking

Table 8.2

Trends in Locations


58/293

Trends in Locations

Foreign producers locating in U.S.

Made in USA

Currency fluctuations

Just-in-time manufacturing techniques

Microfactories

Information Technology


59/293

ForeignGovernment a. Policies on foreign ownership of production facilitiesLocal ContentImport restrictionsCurrency restrictionsEnvironmental regulationsLocal product standards

b. Stability issuesCulturalDifferences

Living circumstances for foreign workers / dependentsReligious holidays/traditions

CustomerPreferences

Possible buy locally sentiment

Labor Level of training and education of workersWork practicesPossible regulations limiting number of foreign employeesLanguage differences

Resources Availability and quality of raw materials, energy,transportation

Table 8.3

Evaluating Locations


60/293


Cost-Profit-Volume Analysis Determine fixed and variable costs

Plot total costs

Determine lowest total costs


61/293

Location Cost-Volume Analysis

Assumptions Fixed costs are constant

Variable costs are linear

Output can be closely estimated

Only one product involved

Example 1: Cost-Volume Analysis


62/293

Example 1: Cost-Volume Analysis

Fixed and variable costs forfour potential locations

L o c a t i o n F i x e d

C o s t

V a r i a b l e

C o s tABCD

$ 2 5 0 , 0 0 01 0 0 , 0 0 01 5 0 , 0 0 02 0 0 , 0 0 0

$ 1 13 02 03 5

Example 1: Solution


63/293

Example 1: Solution

FixedCosts

VariableCosts

TotalCosts

ABCD

$250,000100,000150,000200,000

$11(10,000)30(10,000)20(10,000)35(10,000)

$360,000400,000350,000550,000

Example 1: Solution


64/293

Example 1: Solution

800

700

600

500

400

300

200

100

0

Annual Output (000)

$(000)

8 10 12 14 166420

A

B

C

B Superior

C Superior

A Superior

D



65/293


Transportation Model Decision based on movement costs of raw

materials or finished goods

Factor Rating

Decision based on quantitative and qualitative

inputs

Center of Gravity Method

Decision based on minimum distribution costs


66/293


67/293



8th edition


68/293

CHAPTER

9

Managementof Quality

McGraw-Hill/IrwinOperations Management, Eighth Edition, by William J. Stevenson

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Quality Management


69/293

Quality Management

What does the term qualitymean? Qualityis the ability of a product or service to

consistently meet or exceed customer

expectations.


70/293

Evolution of Quality Management 1924 - Statistical process control charts

1930 - Tables for acceptance sampling

1940s - Statistical sampling techniques

1950s - Quality assurance/TQC

1960s - Zero defects

1970s - Quality assurance in services

Quality Assurance vs Strategic Approach


71/293

Quality Assurance vs. Strategic Approach

Quality Assurance

Emphasis on finding and correcting defects

before reaching market

Strategic Approach

Proactive, focusing on preventing mistakes from

occurring

Greater emphasis on customer satisfaction


72/293

The Quality Gurus

Walter Shewhart Father of statistical quality control

W. Edwards Deming

Joseph M. Juran Armand Feignbaum

Philip B. Crosby

Kaoru Ishikawa Genichi Taguchi

Key Contributors to Quality Management


73/293

Key Contributors to Quality Management

ContributorDeming

Juran

Feignbaum

Crosby

Ishikawa

Taguchi

Known for14 points; special & common causes ofvariation

Quality is fitness for use; quality trilogy

Quality is a total field

Quality is free; zero defects

Cause-and effect diagrams; quality

circles

Taguchi loss function

Quality

Table 9.2

Dimensions of Quality


74/293

Dimensions of Quality

Performance - main characteristics of theproduct/service

Aesthetics - appearance, feel, smell, taste

Special Features - extra characteristics Conformance - how well product/service

conforms to customers expectations

Reliability- consistency of performance

Dimensions of Quality (Contd)


75/293

Dimensions of Quality (Cont d)

Durability- useful life of the product/service

Perceived Quality - indirect evaluation of

quality (e.g. reputation)

Serviceability - service after sale

Examples of Quality Dimensions


76/293

p Q y

Dimension

1. Performance

2. Aesthetics

3. Special features

(Product)Automobile

Everything works, fit &finishRide, handling, grade of

materials usedInterior design, soft touch

Gauge/control placementCellular phone, CD

player

(Service)Auto Repair

All work done, at agreedpriceFriendliness, courtesy,

Competency, quicknessClean work/waiting area

Location, call when readyComputer diagnostics

Examples of Quality Dimensions (Contd)


77/293

Examples of Quality Dimensions (Cont d)

Dimension

5. Reliability

6. Durability

7. Perceived

quality

8. Serviceability

(Product)Automobile

Infrequency of breakdowns

Useful life in miles, resistance

to rust & corrosion

Top-rated car

Handling ofcomplaints and/orrequests for information

(Service)Auto Repair

Work done correctly,

ready when promised

Work holds up over

time

Award-winning service

department

Handling of complaints

Service Quality


78/293

Service Quality

Tangibles

Convenience

Reliability

Responsiveness

Time

Assurance

Courtesy

Examples of Service Quality


79/293

Examples of Service Quality

Dimension Examples1. Tangibles Were the facilities clean, personnel neat?

2. Convenience Was the service center conveniently located?

3. Reliability Was the problem fixed?

4. Responsiveness Were customer service personnel willing and able

to answer questions?

5. Time How long did the customer wait?

6. Assurance Did the customer service personnel seemknowledgeable about the repair?

7. Courtesy Were customer service personnel and the

cashierfriendly and courteous?

Table 9.4

Determinants of Quality


80/293

Q y

Service

Ease of

use

Conforms

to design

Design

Determinants of Quality (contd)


81/293

Determinants of Quality (cont d)

Quality of design

Intension of designers to include or exclude

features in a product or service

Quality of conformance

The degree to which goods or services conform

to the intent of the designers

The Consequences of Poor Quality


82/293

q y

Loss of business

Liability

Productivity

Costs

Responsibility for Quality


83/293

Top management

Design

Procurement

Production/operations

Quality assurance

Packaging and shipping

Marketing and sales

Customer service

p y y

Costs of Quality


84/293

y

Failure Costs - costs incurred by defectiveparts/products or faulty services.

Internal Failure Costs

Costs incurred to fix problems that are detectedbefore the product/service is delivered to thecustomer.

External Failure Costs

All costs incurred to fix problems that aredetected after the product/service is deliveredto the customer.

Costs of Quality (continued)


85/293

y ( )

Appraisal Costs

Costs of activities designed to ensure quality oruncover defects

Prevention Costs

All TQ training, TQ planning, customerassessment, process control, and qualityimprovement costs to prevent defects fromoccurring

Ethics and Quality


86/293

Substandard work

Defective products

Substandard service

Poor designs

Shoddy workmanship

Substandard parts and materials

y

Having knowledge of this and failing to correct

and report it in a timely manner is unethical.

Quality Awards


87/293

Baldrige Award

Deming Prize

Malcolm Baldrige National Quality Award


88/293

g y

1.0 Leadership(125 points)

2.0 Strategic Planning (85 points)

3.0 Customer and Market Focus (85 points)

4.0 Information and Analysis (85 points)

5.0 Human Resource Focus (85 points)

6.0 Process Management (85 points)

7.0 Business Results (450 points)

B fit f B ld i C titi


89/293

Benefits of Baldrige Competition

Financial success

Winners share their knowledge

The process motivates employees

The process provides a well-designed qualitysystem

The process requires obtaining data

The process provides feedback

E Q lit A d


90/293

European Quality Award

Prizes intended to identify role models

Leadership

Customer focus

Corporate social responsibility

People development and involvement

Results orientation

The Deming Prize


91/293

Honoring W. Edwards Deming

Japans highly coveted award

Main focus on statistical quality

control

Quality Certification


92/293

Quality Certification ISO 9000

Set of international standards on quality

management and quality assurance, critical to

international business

ISO 14000 A set of international standards for assessing a

companys environmental performance

ISO 9000 Standards


93/293

Requirements

System requirements

Management

Resource

Realization

Remedial

ISO 9000 Quality Management


94/293

y g

Principles A systems approach to management

Continual improvement

Factual approach to decision making

Mutually beneficial supplier relationships

Customer focus

Leadership

People involvement

Process approach

ISO 14000


95/293

ISO 14000 - A set of international standards

for assessing a companys environmental

performance

Standards in three major areas

Management systems

Operations

Environmental systems

ISO 14000


96/293

Management systems

Systems development and integration ofenvironmental responsibilities into businessplanning

Operations Consumption of natural resources and energy

Environmental systems

Measuring, assessing and managing emissions,effluents, and other waste

Total Quality Management


97/293

Total Quality Management

A philosophy that involves everyone in an

organization in a continual effort to improve

quality and achieve customer satisfaction.

T Q M

The TQM Approach


98/293

1.Find out what the customer wants

2.Design a product or service that meets or

exceeds customer wants

3.Design processes that facilitates doing the

job right the first time

4.Keep track of results

5.Extend these concepts to suppliers

Elements of TQM


99/293

Continual improvement

Competitive benchmarking

Employee empowerment

Team approach

Decisions based on facts

Knowledge of tools

Supplier quality

Champion

Quality at the source

Suppliers

Continuous Improvement


100/293

Philosophy that seeks to make never-ending

improvements to the process of convertinginputs into outputs.

Kaizen: Japanese

word for continuousimprovement.

Quality at the Source


101/293

The philosophy of making

each worker responsible forthe quality of his or her work.

Six Sigma


102/293

Statistically

Having no more than 3.4 defects per million

Conceptually

Program designed to reduce defects

Requires the use of certain tools and techniques

Six Sigma Programs


103/293

Six Sigma programs

Improve quality

Save time

Cut costs

Employed in Design

Production

Service Inventory management

Delivery

Six Sigma Management


104/293

Providing strong leadership

Defining performance metris

Selecting projects likely to succeed

Selecting and training appropriate people

Six Sigma Technical


105/293

Improving process performance

Reducing variation

Utilizing statistical models

Designing a structured improvementstrategy

Six Sigma Team


106/293

Top management

Program champions

Master black belts

Black belts Green belts

Six Sigma Process


107/293

Define

Measure

Analyze

Improve Control

DMAIC

Obstacles to Implementing TQM


108/293

Lack of:

Company-wide definition of quality

Strategic plan for change

Customer focus

Real employee empowerment Strong strong motivation

Time to devote to quality initiatives

Leadership

Obstacles to Implementing TQM


109/293

Poor inter-organizational communication

View of quality as a quick fix

Emphasis on short-term financial results

Internal political and turf wars

Criticisms of TQM


110/293

Blind pursuit of TQM programs

Programs may not be linked to strategies

Quality-related decisions may not be tied to

market performance

Failure to carefully plan a program

Basic Steps in Problem Solving


111/293

1. Define the problem and establish an

improvement goal

2. Collect data

3. Analyze the problem

4. Generate potential solutions

5. Choose a solution

6. Implement the solution

7. Monitor the solution to see if it accomplishesthe goal

The PDSA Cycle


112/293

Plan

Do

Study

Act

Process Improvement


113/293

Process Improvement: A systematic

approach to improving a process

Process mapping

Analyze the process

Redesign the process

The Process Improvement Cycle


114/293

Implement the

Improved process

Select a

process

Study/document

Seek ways to

Improve it

Design an

Improved process

Evaluate

Document

Process Improvement and Tools


115/293

Process improvement - a systematic

approach to improving a process Process mapping

Analyze the process

Redesign the process

Tools

There are a number of tools that can be used

for problem solving and process improvement Tools aid in data collection and interpretation,

and provide the basis for decision making

Basic Quality Tools


116/293

Flowcharts

Check sheets

Histograms

Pareto Charts

Scatter diagrams

Control charts

Cause-and-effect diagrams

Run charts

Check Sheet


117/293

Billing Errors

Wrong Account

Wrong Amount

A/R Errors

Wrong Account

Wrong Amount

Monday

Pareto Analysis


118/293

80% of the

problems

may be

attributed to

20% of the

causes.

Smeared

print

Numberofd

efects

Off

center

Missing

label

Loose Other

Control ChartFi 9 11


119/293

970

980

990

1000

1010

1020

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

UCL

LCL

Figure 9.11

Cause-and-Effect DiagramFi 9 12


120/293

Figure 9.12

Effect

MaterialsMethods

EquipmentPeople

Environment

Cause

Cause

Cause

Cause

Cause

CauseCause

Cause

CauseCause

Cause

Cause

Run Chart


121/293

Time (Hours)

D

iameter

Tracking ImprovementsFigure 9 17


122/293

UCL

LCL

LCLLCL

UCLUCL

Process not centered

and not stable

Process centered

and stable

Additional improvements

made to the process

Figure 9-17

Methods for Generating Ideas


123/293

Brainstorming

Quality circles

Interviewing

Benchmarking

5W2H

Quality Circles


124/293

Team approach

List reduction

Balance sheet

Paired comparisons

Benchmarking Process


125/293

Identify a critical process that needs

improving

Identify an organization that excels in this

process

Contact that organization

Analyze the data

Improve the critical process


126/293


127/293



8th edition

CHAPTER


128/293

CHAPTER

10

Quality Control

McGraw-Hill/Irwin


Phases of Quality AssuranceFigure 10 1


129/293

Acceptancesampling

Processcontrol

Continuousimprovement

Inspection

before/after

production

Inspection and

corrective

action during

production

Quality built

into the

process

The leastprogressive

The mostprogressive

Figure 10.1

InspectionFigure 10 2


130/293

How Much/How Often

Where/When

Centralized vs. On-site

Inputs Transformation Outputs

Acceptancesampling

Processcontrol

Acceptancesampling

Figure 10.2

Inspection CostsFigure 10 3


131/293

Cost

Optimal

Amount of Inspection

Cost of

inspection

Cost of

passing

defectives

Total Cost

Figure 10.3

Where to Inspect in the Process


132/293

Raw materials and purchased parts

Finished products

Before a costly operation

Before an irreversible process

Before a covering process

Examples of Inspection PointsTable 10 1


133/293

Type ofbusiness

Inspectionpoints

Characteristics

Fast Food CashierCounter areaEating area

BuildingKitchen

AccuracyAppearance, productivityCleanliness

AppearanceHealth regulations

Hotel/motel Parking lotAccounting

BuildingMain desk

Safe, well lightedAccuracy, timeliness

Appearance, safetyWaiting times

Su ermarket CashiersDeliveries

Accuracy, courtesyQuality, quantity

Table 10.1


134/293

Statistical Process Control:

Statistical evaluation of the output of aprocess during production

Quality of Conformance:

A product or service conforms tospecifications

Control Chart


135/293

Control Chart

Purpose: to monitor process output to see if it

is random

A time ordered plot representative sample

statistics obtained from an on going process

(e.g. sample means)

Upper and lower control limits define the

range of acceptable variation

Control ChartFigure 10.4


136/293

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

UCL

LCL

Sample number

Mean

Out of

control

Normal variation

due to chance

Abnormal variation

due to assignable sources

Abnormal variation

due to assignable sources

Figure 10.4

Statistical Process Control


137/293

The essence of statistical process control is

to assure that the output of a process is

random so thatfuture outputwill be

random.



138/293

The Control Process

Define

Measure

Compare

Evaluate

Correct

Monitor results



139/293

Variations and Control

Random variation: Natural variations in the

output of a process, created by countless minor

factors

Assignable variation: A variation whose sourcecan be identified

Sampling DistributionFigure 10.5


140/293

Samplingdistribution

Process

distribution

Mean

g

Normal DistributionFigure 10.6


141/293

Mean

95.44%

99.74%

Standard deviation

g

Control LimitsFigure 10.7


142/293

Sampling

distribution

Process

distribution

Mean

Lower

controllimit

Upper

controllimit

g

SPC Errors


143/293

Type I error

Concluding a process is not in control when it

actually is.

Type II error

Concluding a process is in control when it isnot.

Type I ErrorFigure 10.8


144/293

Mean

LCL UCL

/2 /2

Probabilityof Type I error

Observations from Sample DistributionFigure 10.9


145/293

Sample number

UCL

LCL

1 2 3 4


146/293

Mean and Range ChartsFigure 10.10A


147/293

UCL

LCL

UCL

LCL

R-chart

x-Chart Detects shift

Does not

detect shift

(process mean isshifting upward)

Sampling

Distribution

Mean and Range ChartsFigure 10.10B


148/293

x-Chart

UCL

Does not

reveal increase

UCL

LCL

LCL

R-chart Reveals increase

(process variability is increasing)Sampling

Distribution

Control Chart for Attributes


149/293

p-Chart - Control chart used to monitor the

proportion of defectives in a process

c-Chart - Control chart used to monitor the

number of defects per unit

Attributes generate data that are counted.

Use of p-ChartsTable 10.3


150/293

When observations can be placed into two

categories.

Good or bad

Pass or fail

Operate or dont operate

When the data consists of multiple

samples of several observations each

Use of c-ChartsTable 10.3


151/293

Use only when the number of occurrences

per unit of measure can be counted; non-

occurrences cannot be counted.

Scratches, chips, dents, or errors per item

Cracks or faults per unit of distance

Breaks or Tears per unit of area

Bacteria or pollutants per unit of volume

Calls, complaints, failures per unit of time

Use of Control Charts


152/293

At what point in the process to use control

charts

What size samples to take

What type of control chart to use Variables

Attributes

Run Tests


153/293

Run test a test for randomness

Any sort of pattern in the data would

suggest a non-random process

All points are within the control limits - theprocess may not be random

Nonrandom Patterns in Control

chartsFigure 10.11


154/293

charts Trend

Cycles

Bias

Mean shift

Too much dispersion

Counting Runs


155/293

Counting Above/Below Median Runs (7 runs)

Counting Up/Down Runs (8 runs)

U U D U D U D U U D

B A A B A B B B A A B

Figure 10.12

Figure 10.13

Process Capability


156/293

Tolerances or specifications

Range of acceptable values established by

engineering design or customer requirements

Process variability

Natural variability in a process

Process capability

Process variability relative to specification

Process CapabilityFigure 10.15


157/293

Lower

SpecificationUpper

Specification

A. Process variability

matches specifications

Lower

Specification

Upper

Specification

B. Process variability

well within specificationsLower

Specification

Upper

Specification

C. Process variability

exceeds specifications

Process Capability Ratio


158/293

Process capability ratio, Cp =specification width

process width

Upper specificationlower specification6

Cp =

3 Sigma and 6 Sigma Quality


159/293

Process

mean

Lower

specification

Upper

specification

1350 ppm 1350 ppm

1.7 ppm 1.7 ppm

+/- 3 Sigma+/- 6 Sigma

Improving Process Capability


160/293

Simplify

Standardize

Mistake-proof

Upgrade equipment

Automate

Taguchi Loss FunctionFigure 10.17


161/293

Cost

TargetLowerspec

Upper

spec

Traditional

cost function

Taguchi

cost function

Limitations of Capability Indexesb bl


162/293

1. Process may not be stable

2. Process output may not be normally

distributed

3. Process not centered but Cp is used


163/293


164/293



8th edition

CHAPTER


165/293

11

InventoryManagement

McGraw-Hill/Irwin

Operations Management, Eighth Edition, by William J. Stevenson

Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

Independent DemandInventory: a stock or store of goods


166/293

A

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand

Independent demand is uncertain.

Dependent demand is certain.

y g

Types of Inventories

Raw materials & purchased parts


167/293

Raw materials & purchased parts

Partially completed goods calledwork in progress

Finished-goods inventories

(manufacturingfirms)or merchandise(retail stores)

Types of Inventories (Contd)

R l t t t l & li


168/293

Replacement parts, tools, & supplies

Goods-in-transit to warehouses or customers

Functions of Inventory

T t ti i t d d d


169/293

To meet anticipated demand

To smooth production requirements

To decouple operations

To protect against stock-outs

Functions of Inventory (Contd)

T t k d t f d l


170/293

To take advantage of order cycles

To help hedge against price increases

To permit operations

To take advantage of quantity discounts


171/293

A system to keep track of inventory

Effective Inventory Management


172/293

A system to keep track of inventory

A reliable forecast of demand

Knowledge of lead times

Reasonable estimates of Holding costs

Ordering costs

Shortage costs

A classification system

Inventory Counting Systems

i di


173/293

Periodic System

Physical count of items made at periodic

intervals

Perpetual Inventory System

System that keeps trackof removals from inventory

continuously, thus

monitoring

current levels of

each item

Inventory Counting Systems (Contd)

T Bi S t T t i f


174/293

Two-Bin System - Two containers of

inventory; reorder when the first is empty

Universal Bar Code - Bar code

printed on a label that has

information about the itemto which it is attached

0

214800 232087768

Lead time time interval between ordering

Key Inventory Terms


175/293

Lead time: time interval between ordering

and receiving the order

Holding (carrying) costs: cost to carry an

item in inventory for a length of time,

usually a year

Ordering costs: costs of ordering and

receiving inventory

Shortage costs: costs when demandexceeds supply

ABC Classification System

Classif ing in entor according to some

Figure 11.1


176/293

Classifying inventory according to some

measure of importance and allocating controlefforts accordingly.

A -very important

B- mod. important

C- least important Annual$ value

of items

A

B

C

High

Low

Few ManyNumber of Items


177/293

Economic order quantity model

Economic Order Quantity Models


178/293

Economic order quantity model

Economic production model

Quantity discount model

Only one product is involved

Assumptions of EOQ Model


179/293

Only one product is involved

Annual demand requirements known

Demand is even throughout the year

Lead time does not vary

Each order is received in a single delivery

There are no quantity discounts

The Inventory CycleFigure 11.2


180/293

Profile of Inventory Level Over Time

Quantity

on hand

Q

Receive

order

Place

orderReceive

orderPlace

order

Receive

order

Lead time

Reorder

point

Usage

rate

Time

Total Cost


181/293

Annualcarryingcost

Annualorderingcost

Total cost = +

Q2H D

QSTC = +

Cost Minimization GoalFigure 11.4C


182/293

Order Quantity (Q)

The Total-Cost Curve is U-Shaped

Ordering Costs

QO

Annu

alCost

(optimal order quantity)

TCQH

D

QS

2

Deriving the EOQ

Using calculus we take the derivative of the


183/293

Using calculus, we take the derivative of the

total cost function and set the derivative(slope) equal to zero and solve for Q.

Q =2DS

H=

2(Annual Demand )(Order or Setup Cost )

Annual Holding CostOPT

Minimum Total Cost

The total cost curve reaches its minimum


184/293

The total cost curve reaches its minimum

where the carrying and ordering costs areequal.

Q = 2DSH

= 2(Annual Demand )(Order or Setup Cost )Annual Holding Cost

OPT

Production done in batches or lots

Economic Production Quantity (EPQ)


185/293

Production done in batches or lots

Capacity to produce a part exceeds the

parts usage or demand rate

Assumptions of EPQ are similar to EOQ

except orders are received incrementallyduring production

Only one item is involved

Economic Production Quantity Assumptions


186/293

Only one item is involved

Annual demand is known

Usage rate is constant

Usage occurs continually

Production rate is constant

Lead time does not vary

No quantity discounts

Economic Run Size


187/293

QDS

H

p

p u

0

2

Total Costs with Purchasing Cost


188/293

Annualcarryingcost

PurchasingcostTC = +

Q2 H DQ STC = +

+Annualorderingcost

PD+

Total Costs with PD

t

Figure 11.7


189/293

Cost

EOQ

TC with PD

TC without PD

PD

0 Quantity

Adding Purchasing costdoesnt change EOQ

Total Cost with Constant Carrying CostsFigure 11.9


190/293

OC

EOQ Quantity

TotalCost

TCa

TCc

TCbDecreasing

Price

CC a,b,c


191/293

Determinants of the Reorder Point The rate of demand


192/293

The rate of demand

The lead time

Demand and/or lead time variability

Stockout risk (safety stock)

Safety StockFigure 11.12


193/293

LT Time

Expected demand

during lead time

Maximum probable demand

during lead time

ROP

Quantity

Safety stockSafety stock reduces risk of

stockout during lead time

Reorder PointFigure 11.13


194/293

ROP

Risk of

a stockout

Service level

Probability ofno stockout

Expected

demand Safety

stock0 z

Quantity

z-scale

The ROP based on a normal

Distribution of lead time demand


195/293

Tight control of inventory items

Fixed-Interval Benefits


196/293

g y

Items from same supplier may yield savingsin:

Ordering

Packing Shipping costs

May be practical when inventories cannotbe closely monitored

Requires a larger safety stock

Fixed-Interval Disadvantages


197/293

q g y

Increases carrying cost

Costs of periodic reviews

Single period model: model for ordering of

Single Period Model


198/293

g p g

perishables and other items with limiteduseful lives

Shortage cost: generally the unrealized

profits per unit Excess cost: difference between purchase

cost and salvage value of items left over at

the end of a period

Continuous stocking levels

Single Period Model


199/293

g

Identifies optimal stocking levels

Optimal stocking level balances unit shortage

and excess cost

Discrete stocking levels

Service levels are discrete rather than

continuous Desired service level is equaled or exceeded

Too much inventory

Operations Strategy


200/293

y

Tends to hide problems

Easier to live with problems than to eliminate

them

Costly to maintain Wise strategy

Reduce lot sizes

Reduce safety stock


201/293


202/293

CHAPTER

12


203/293

12

Aggregate Planning

McGraw-Hill/Irwin


Planning Horizon

Aggregate planning: Intermediate-range


204/293

gg g p g g

capacity planning, usually covering 2 to 12months.

Short

range

Intermediate

range

Long range

Now 2 months 1 Year

Short-range plans (Detailed plans)

Overview of Planning Levels


205/293

Machine loading

Job assignments

Intermediate plans (General levels)

Employment

Output

Long-range plans

Long term capacity

Location / layout

Planning SequenceFigure 12.1


206/293

Business Plan Establishes operationsand capacity strategies

Aggregate planEstablishes

operations capacity

Master schedule Establishes schedules

for specific products

Corporatestrategies

and policies

Economic,

competitive,

and political

conditions

Aggregatedemand

forecasts

Resources Costs

Aggregate Planning Inputs


207/293

Workforce

Facilities

Demand forecast

Policies

Subcontracting

Overtime

Inventory levels

Back orders

Inventory carrying

Back orders

Hiring/firing

Overtime

Inventory changes

subcontracting

Total cost of a plan

Aggregate Planning Outputs


208/293

Projected levels of inventory

Inventory

Output

Employment

Subcontracting

Backordering

Aggregate Planning Strategies

Proactive


209/293

Alter demand to match capacity

Reactive

Alter capacity to match demand

Mixed

Some of each

Pricing

Demand Options


210/293

Promotion

Back orders

New demand

Hire and layoff workers

Capacity Options


211/293

Overtime/slack time

Part-time workers

Inventories

Subcontracting


212/293

Basic Strategies

Level capacity strategy:


213/293

Maintaining a steady rate of regular-timeoutput while meeting variations in demand bya combination of options.

Chase demand strategy:

Matching capacity to demand; the plannedoutput for a period is set at the expected

demand for that period.

Chase Approach

Advantages


214/293

Investment in inventory is low

Labor utilization in high

Disadvantages The cost of adjusting output rates and/or

workforce levels

Level Approach

Advantages


215/293

Stable output rates and workforce

Disadvantages

Greater inventory costs

Increased overtime and idle time

Resource utilizations vary over time

1. Determine demand for each period

Techniques for Aggregate Planning


216/293

2. Determine capacities for each period

3. Identify policies that are pertinent

4. Determine units costs

5. Develop alternative plans and costs

6. Select the best plan that satisfies objectives.

Otherwise return to step 5.

Cumulative GraphFigure 12.3


217/293

1 2 3 4 5 6 7 8 9 10

Cumulative

production

Cumulative

demandCumulativeoutput/demand

Average Inventory


218/293

Average

inventoryBeginning Inventory + Ending Inventory

2=

Mathematical Techniques

Linear programming: Methods for obtaining


219/293

optimal solutions to problems involvingallocation of scarce resources in terms ofcost minimization.

Linear decision rule: Optimizing techniquethat seeks to minimize combined costs,using a set of cost-approximating functionsto obtain a single quadratic equation.


220/293

Services occur when they are rendered

Aggregate Planning in Services


221/293

Demand for service can be difficult to

predict

Capacity availability can be difficult topredict

Labor flexibility can be an advantage in

services

Aggregate Plan to Master Schedule

Aggregate

Figure 12.4


222/293

Aggregate

Planning

Disaggregation

MasterSchedule

Master schedule: The result of

Disaggregating the Aggregate Plan


223/293

disaggregating an aggregate plan; showsquantity and timing of specific end items for

a scheduled horizon.

Rough-cut capacity planning: Approximatebalancing of capacity and demand to test the

feasibility of a master schedule.

Master Scheduling

Master schedule


224/293

Determines quantities needed to meet demand Interfaces with

Marketing

Capacity planning

Production planning

Distribution planning

Master Scheduler

Evaluates impact of new orders


225/293

Provides delivery dates for orders

Deals with problems

Production delays

Revising master schedule

Insufficient capacity

Master Scheduling ProcessFigure 12.6


226/293

Master

Scheduling

Beginning inventory

Forecast

Customer orders

Inputs Outputs

Projected inventory

Master production schedule

Uncommitted inventory

Projected On-hand Inventory


227/293

Projected on-hand

inventory

Inventory from

previous week

Current weeks

requirements-=

Projected On-hand InventoryBeginning

Inventory

Figure 12.8


228/293

64 1 2 3 4 5 6 7 8

Forecast 30 30 30 30 40 40 40 40

Customer Orders

(committed) 33 20 10 4 2

Projected on-hand

inventory 31 1 -29

JUNE JULY

Customer orders arelarger than forecast in

week 1

Forecast is larger thanCustomer orders in week 2

Forecast is larger than

Customer orders in week 3

Time Fences in MPSPeriod

Figure 12.12


229/293

Period

frozen

(firm or

fixed)

slushy

somewhat

firm

liquid

(open)

1 2 3 4 5 6 7 8 9

Solved Problems: Problem 1


230/293


231/293


232/293



8th edition

CHAPTER

13


233/293

MRP and ERP

McGraw-Hill/Irwin


Material requirements planning (MRP):

MRP


234/293

Computer-based information system thattranslates master schedule requirements for

end items into time-phased requirements for

subassemblies, components, and rawmaterials.

Independent and Dependent DemandIndependent Demand


235/293

A

B(4) C(2)

D(2) E(1) D(3) F(2)

Dependent Demand

Independent demand is uncertain.

Dependent demand is certain.

Dependent demand: Demand for items

Dependant Demand


236/293

that are subassemblies or componentparts to be used in production of finished

goods.

Once the independent demand is known,the dependent demand can be

determined.

Dependent vs Independent DemandFigure 13.1


237/293

Time

Time Time

Time

Demand

Demand

Stable demandLumpy demand

Amoun

tonhand

Amountonhand

Safety stock

MRP Inputs MRP Processing MRP Outputs

Changes

Figure 13.2


238/293

Master

schedule

Bill of

materials

Inventory

records

MRP computer

programs

g

Order releases

Planned-order

schedules

Exception reports

Planning reports

Performance-

control

reports

Inventory

transaction

Primary

reports

Secondary

reports

Master Production Schedule

MPR Inputs


239/293

Time-phased plan specifying timing andquantity of production for each end item.

Material Requirement Planning Process

Master Schedule

Master schedule: One of three primary


240/293

inputs in MRP; states which end itemsare to be produced, when these areneeded, and in what quantities.

Cumulative lead time: The sum of the leadtimes that sequential phases of aprocess require, from ordering of partsor raw materials to completion of final

assembly.

Planning HorizonFigure 13.4


241/293

1 2 3 4 5 6 7 8 9 10

Procurement

Fabrication

Subassembly

Assembly


242/293

Product Structure Tree

ChairLevel

Figure 13.5


243/293

Seat

Legs (2)Cross

bar

Side

Rails (2)

Cross

bar

Back

Supports (3)

Leg

Assembly

Back

Assembly

0

1

2

3

Inventory Records

One of the three primary inputs in MRP


244/293

Includes information on the status of eachitem by time period

Gross requirements

Scheduled receipts

Amount on hand

Lead times

Lot sizes

And more

Assembly Time Chart

Procurement of

raw material D

Figure 13.7


245/293

1 2 3 4 5 6 7 8 9 10 11

Procurement of

raw material FProcurement of

part C

Procurement of

part H

Procurement of

raw material I

Fabrication

of part G

Fabricationof part E

Subassembly A

Subassembly B

Final assembly

and inspection

MRP Processing

Gross requirements


246/293

Schedule receipts

Projected on hand

Net requirements Planned-order receipts

Planned-order releases

MPR Processing Gross requirements

l d d d


247/293

Total expected demand

Scheduled receipts

Open orders scheduled to arrive

Planned on hand

Expected inventory on hand at the beginning

of each time period

MPR Processing

Net requirements

l d d h d


248/293

Actual amount needed in each time period

Planned-order receipts

Quantity expected to received at the beginning

of the period

Offset by lead time

Planned-order releases Planned amount to order in each time period

Updating the System

Regenerative system

U d MRP d i di ll


249/293

Updates MRP records periodically

Net-change system

Updates MPR records continuously

MRP Outputs

Planned orders - schedule indicating the

d i i f f d


250/293

amount and timing of future orders.

Order releases - Authorization for the

execution of planned orders.

Changes - revisions of due dates or order

quantities, or cancellations of orders.

MRP Secondary Reports

Performance-control reports

l i


251/293

Planning reports

Exception reports

Other Considerations

Safety Stock

L i i


252/293

Lot sizing Lot-for-lot ordering

Economic order quantity

Fixed-period ordering

Food catering service

E d it t d f d

MRP in Services


253/293

End item => catered food

Dependent demand => ingredients for eachrecipe, i.e. bill of materials

Hotel renovation

Activities and materials exploded intocomponent parts for cost estimation andscheduling

Benefits of MRP

Low levels of in-process inventories

Abilit t t k t i l i t


254/293

Ability to track material requirements

Ability to evaluate capacity requirements

Means of allocating production time

Requirements of MRP

Computer and necessary software

A t d t d t


255/293

Accurate and up-to-date Master schedules

Bills of materials

Inventory records

Integrity of data

Expanded MRP with emphasis placed

i t ti

MRP II


256/293

on integration Financial planning

Marketing

Engineering

Purchasing

Manufacturing

Market

DemandFinance Manufacturing

Master

production schedule

MRP IIFigure 13.14


257/293

Demand

Production

plan

Problems?

Rough-cut

capacity planning

Yes No YesNo

Finance

Marketing

Manufacturing

Adjust

production plan

production schedule

MRP

Capacity

planning

Problems?Requirements

schedules

Adjustmaster

schedule

Capacity Planning

Capacity requirements planning:The process

f d t i i h t it


258/293

of determining short-range capacityrequirements.

Load reports:Department or work center

reports that compare known and expectedfuture capacity requirements with projected

capacity availability.

Time fences: Series of time intervals duringwhich order changes are allowed or restricted.

Capacity Planning

Develop a tentative

master production

h d l

Use MRP to

simulate material

i t

Figure 13.15


259/293

schedule requirements

Convert material

requirements to

resource requirements

Firm up a portion

of the MPS

Is shop

capacity

adequate?

Can

capacity be

changed to meet

requirements

Revise tentative

master production

schedule

Change

capacity

Yes

No

Yes

No

Enterprise resource planning (ERP):

Next step in an evolution that began with MPR

ERP


260/293

Next step in an evolution that began with MPRand evolved into MRPII

Integration of financial, manufacturing, and

human resources on a single computer system.

ERP Strategy Considerations

High initial cost

High cost to maintain


261/293

High cost to maintain Future upgrades

Training


262/293

O ti M t


263/293



8th edition

CHAPTER

14


264/293

JIT and

Lean Operations

McGraw-Hill/Irwin


JIT/Lean Production

Just-in-time (JIT):A highly coordinated

processing system in which goods move


265/293

processing system in which goods movethrough the system, and services are

performed, just as they are needed,

JIT lean production

JIT pull (demand) system

JIT operates with very little fat

Goal of JIT

The ultimate goal of JIT is a balanced

system


266/293

system.

Achieves a smooth, rapid flow of materials

through the system

Summary JIT Goals and Building BlocksFigure 14.1

A

balanced

Ultimate

Goal


267/293

Product

Design

Process

Design

Personnel

Elements

Manufactur-

ing Planning

Eliminate disruptions

Make the system flexible Eliminate waste

balancedrapid flow

Goal

Supporting

Goals

Building

Blocks

Supporting Goals

Eliminate disruptions

Make system flexible


268/293


Eliminate waste, especially excess

inventory

Sources of Waste

Overproduction

Waiting time


269/293

Waiting time

Unnecessary transportation

Processing waste

Inefficient work methods

Product defects


270/293


271/293

Product Design

Standard parts

Modular design


272/293

Modular design

Highly capable production systems

Concurrentengineering

Process Design

Small lot sizes

Setup time reduction


273/293

Setup time reduction Manufacturing cells

Limited work in process

Quality improvement

Production flexibility

Little inventory storage

Benefits of Small Lot Sizes

Reduces inventory

Less rework


274/293

Less storage space

Less rework

Problems are more apparent

Increases product flexibility

Easier to balance operations

Production Flexibility

Reduce downtime by reducing

changeover time


275/293

changeover time Use preventive maintenance to reduce

breakdowns

Cross-train workers to help clearbottlenecks

Production Flexibility (contd)

Use many small units of capacity

Use off-line buffers


276/293

Use off line buffers Reserve capacity for important customers

Quality Improvement

Autonomation

Automatic detection of defects during


277/293

Automatic detection of defects duringproduction

Jidoka

Japanese term for autonomation

Personnel/Organizational Elements

Workers as assets

Cross-trained workers


278/293

Cross trained workers

Continuous

improvement

Cost accounting

Leadership/project

management

Manufacturing Planning and Control

Level loading

Pull systems


279/293

Pull systems

Visual systems

Close vendor relationships

Reduced transaction

processing

Preventive maintenance

Pull/Push Systems

Pull system: System for moving work where

a workstation pulls output from thedi i d d ( K b )


280/293

a workstation pulls output from thepreceding station as needed. (e.g. Kanban)

Push system: System for moving work where

output is pushed to the next station as it iscompleted

Kanban Production Control System

Kanban: Card or other device that

communicates demand for work ormaterials from the preceding station


281/293

communicates demand for work ormaterials from the preceding station

Kanban is the Japanese word meaningsignal or visible record

Paperless production control system

Authority to pull, or produce comes

from a downstream process.

Kanban Formula

N = DT(1+X)C


282/293

N DT(1 X)C

N = Total number of containers

D = Planned usage rate of using work center

T = Average waiting time for replenishment of parts

plus average production time for a

container of parts

X = Policy variable set by management

- possible inefficiency in the system

C = Capacity of a standard container

Traditional Supplier NetworkBuyer

Figure 14.4a


283/293

Buyer

SupplierSupplier Supplier Supplier

Supplier

Supplier

Supplier

Tiered Supplier NetworkFigure 14.4b

Buyer


284/293

Supplier

Supplier

Supplier

SupplierSupplier Supplier

SupplierFirst Tier Supplier

Second Tier Supplier

Third Tier Supplier

Comparison of JIT and Traditional

Factor Traditional JIT

Inventory Much to offset forecast Minimal necessary to operate

Table 14.3


285/293

Inventory Much to offset forecasterrors, late deliveries

Minimal necessary to operate

Deliveries Few, large Many, small

Lot sizes Large Small

Setup; runs Few, long runs Many, short runs

Vendors Long-term relationshipsare unusual

Partners

Workers Necessary to do thework

Assets

Transitioning to a JIT System

Get top management commitment

Decide which parts need most effort


286/293

Decide which parts need most effort

Obtain support of workers

Start by trying to reduce setup times

Gradually convert operations

Convert suppliers to JIT

Prepare for obstacles

Obstacles to Conversion

Management may not be committed

Workers/management may not be


287/293

Workers/management may not becooperative

Suppliers may

resist Why?

JIT in Services

The basic goal of the demand flow technology inthe service organization is to provide optimum

response to the customer with the highestl d l bl


288/293

p gquality service and lowest possible cost. Eliminate disruptions


Reduce setup and lead times Eliminate waste

Minimize WIP

Simplify the process

JIT II: a supplier representative works right

in the companys plant, making sure thereis an appropriate supply on hand

JIT II


289/293

p y p , gis an appropriate supply on hand.

Benefits of JIT Systems

Reduced inventory levels

High quality


290/293

g q y

Flexibility

Reduced lead times

Increased productivity

Benefits of JIT Systems (contd)

Increased equipment utilization

Reduced scrap and rework


291/293

p

Reduced space requirements

Pressure for good vendor relationships

Reduced need for indirect labor

Smooth flow of work (the ultimate goal)

Elimination of wasteC i i

Elements of JITTable 14.4


292/293

Continuous improvement

Eliminating anything that does not add

value Simple systems that are easy to manage

Use of product layouts to minimize movingmaterials and parts

Quality at the source

Poka-yoke fail safe tools and methods

Preventative maintenance

Elements of JIT (contd)Table 14.4


293/293

Good housekeeping

Set-up time reduction

Cross-trained employees

Hassan Khan Pm

Documents

Transcript of Hassan Khan Pm