1 Process Management and Strategy Introduction 1Ardavan Asef-Vaziri Sep-09 Process -1 Business...
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Transcript of 1 Process Management and Strategy Introduction 1Ardavan Asef-Vaziri Sep-09 Process -1 Business...
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Process Management and Strategy
Introduction 1Ardavan Asef-Vaziri Sep-09
Process -1
Business Process Management
Building block of Operations Management– System view– Process Chart
» A tool to describe the business process
– Evaluation and trade-offs» Make-to-order vs. Make-to-stock
– Risk-pooling » Multi-server queues, central ordering , central safety stock
– Dealing with variability
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Systems approach
“The whole is greater than the sum of the parts.”
Suboptimization
2 > 1+1
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Systems approach
Systems approach andSalesPurchasingProduction
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Systems
A set of parts with interrelationships between parts organized to achieve a goal
How systems grow up
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Process Chart. Ex. McDonald’s
(Prior to 1999)
RawMaterial
Cook
Finished GoodsAssemble Deliver
Customer places order
This is a make-to-stock system.Activity
Decision
Storage
Flow
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Trade-Off; Ex. Make to Stock vs. Make to Order
Will different companies intentionally choose different processes to accomplish the same goal? – in McDonald– in In & Out
Process Evaluation– Different processes lead to different advantages and
disadvantages.
Is there a simply better process, i.e., no trade-offs?
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Analysis of Tradeoffs
Tradeoffs
What are the pros and cons of models?
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Analysis of tradeoffs
Buying a new machine Additional Investment
Integration with existing system
Training
Having more inventoryHigher Carrying Costs
More Obsolescence
Higher Productivity
Better Quality
More Flexibility
Lower Ordering Cost
Purchasing Discount
Product Availability
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Processing Time, Waiting Time; Long Waiting Line
We are interested in the management of processes.Selling a ticket seems easy, but …
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More Servers + Specialization
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Polling: Lower Waiting Time, Longer Processing Time (Perhaps)
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Uncertainty: Potential Solution
Inventory– How many inventories?– If too many … opportunity cost, spoilage cost– If too few … loss of sales– It is costly to solve uncertainty using inventory.
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Potential Solutions: Transfer the inventory to the distributor
Example: In the early days of Amazon.com the company did not keep any inventory of books.– The supplier Ingram kept the books for Amazon.– Once Amazon received an order it was transmitted to
Ingram.– Ingram would ship the book directly to the consumer.
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Amazon.com: Delivering Books
Notice that:– It is not difficult to deliver books very fast– It is not difficult to deliver books at a very low cost– But, it is very difficult to deliver book fast and at a low cost
?
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Potential Solutions
How do we deal with uncertainty
Inventory
Transfer/Share the uncertainty
Eliminate the uncertainty
Transfer the inventory to a distributor
Print on demand
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Potential Solutions: Transfer the inventory to the distributor
Example: In the early days of Amazon.com the company did not keep any inventory of books.– The supplier Ingram kept the books for Amazon.– Once Amazon received an order it was transmitted to
Ingram.– Ingram would ship the book directly to the consumer.
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Potential Solutions: Transfer the inventory to the distributor
Ingram’s BookInventory
Ingram’sOrder
Ingram’s Post Order Process
Amazon’sOrder
Amazon’s Post Order Process
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Potential Solutions: Transfer the inventory to the distributor
What are the advantages for such an arrangement for Amazon and Ingram?– Risking pooling (less inventory is needed)
What are the disadvantages of this arrangement for Amazon and Ingram? – Allocation priority
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Pareto phenomenon (ABC analysis)
Classifying items, activities, or tasks according to some measure of importance and allocating efforts and resources accordingly
A vital few things are important for reaching an objective or solving a problem
80/20 rule – 80% of the problems are caused by 20% of the activities
How do we identify the vital few?
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Process -1Pareto phenomenon, ABC analysis, & Recognition of Priorities
Acknowledging the fact that certain aspects of any management situation are more important than others is called Recognition of Priorities.
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Models -Representations
A model is an abstraction of reality• Narrative• Tabular• Schematic (Some times Physical)• Mathematical
– Linear programming– Transportation model– Inventory models– Waiting line models – Statistical models
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Recent Trends
Global Competition
Operations Strategy
Flexibility
Cycle Time Reduction
Business Process Re-engineering
Supply Chain Management
Workers Involvement
Lean Manufacturing
Total Quality Management
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Recent Trends
Global Competition Global Market Global Suppliers
Operations Strategy Quality based Time based
Flexibility Variety of products High Volume as well as Low Volume
Cycle Time Reduction The less time RM (Raw Material), WIP (Work In Process),
FG (Finished Goods) spend in the Manufacturing and Logistics process, the less opportunity they have to absorb costs.
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Recent Trends
Business Process Re-engineering Value added and NVA activities
Supply Chain Management NOT from RM storage to FG warehouse, but from the
original suppliers to final consumers Under separate ownerships
Workers Involvement Workers are not costs, they are assets
Lean Manufacturing Inventory is waste Variability is evil
Total Quality Management
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Examples of Exam Questions
1. The following activities are all a part of system operations as opposed to system design
a) long term forecasting, product design, capacity planning, inventory management.
b) short term forecasting, product design, capacity planning, inventory management
c) short term forecasting, production planning, capacity planning, inventory management
d) short term forecasting, production planning, quality assurance, inventory management
e) none of the above
2. Pareto Phenomenon is the same as
a) ABC analysis
b) analysis of trade-off
c) systems analysis
d) quantitative approaches
e) none of the above
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Review Questions (cont.)
3. In ABC analysis
a) 25% of items form 25% of the measure of importance
b) 10% of items form 10% of the measure of importance
c) 90% of items form 90% of the measure of importance
d) 50% of items form 50% of the measure of importance
e) 15% of items form 75% of the measure of importance
4. Given: (I) Lean operations, (II) Operations strategy, (III) Business process re-engineering(A) Inventory is waste, (B) Time based operations, (C) High Volume as well as Low Volume, (D) Value-added and NVA activities
Which of the following selections is correct?
a) (I) matches with (D), (II) matches with (C), (III) matches with (B)b) (I) matches with (A), (II) matches with (B), (III) matches with (C)c) (I) matches with (A), (II) matches with (B), (III) matches with (D)d) (I) matches with (A), (II) matches with (D), (III) matches with (C)e) (I) matches with (C), (II) matches with (D), (III) matches with (B)
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Review Questions (cont.)
5. Given(I) supply chain management, (II) Flexibility, (III) Operations strategy(A) Quality based operations, (B) Workers are asset, (C) Value added and NVA activities, (D) from suppliers to consumers, (E) High Volume as well as low volume
Which of the following selections is correct?
a) (I) matches with (D), (II) matches with (E), (III) matches with (C)b) (I) matches with (D), (II) matches with (E), (III) matches with (A)c) (I) matches with (A), (II) matches with (E), (III) matches with (D)d) (I) matches with (C), (II) matches with (D), (III) matches with (E)e) (I) matches with (E), (II) matches with (B), (III) matches with (D)