Operations Management

Professor Dilip Chhajed

Course Materials

Ritzm and and Krajewski (2003) Foundations of Operations Management

Goldratt, E.M. (1992), The Goal: A Process of Ongoing Improvement, Second Edition, North River Press.

Cases/Reports- First Half

Michigan Manufacturing Dore Dore (Report)Manzana Insurance (Report)Toyota Motor Manufacturing

Grading

HW 1: Case Report (Dore-Dore) Sessions 6 (Jun 24)

HW 2: Case Report (Manzana) Sessions 9 (Jun 30)

HW 3: Problem Set Session 10 (Jul 1) HW 4: Problem Set Session 18 (Jul 15) HW 5: Problem Set Session 25 (Jul 28)

Introduction What is a Business Process? Products and Services Can I Design and Manage a Process? Processes Management and

Marketing Strategy

The Operations The Operations Management SystemManagement System

Outputs• Goods• Services

External environment

Customer or client participation

Operations and processes

Information on performance

5

1

2

3

4

Inputs• Workers• Managers• Equipment• Facilities• Materials• Services• Land• Energy

Figure 1.1Figure 1.1

Business Process

a collection of activities that takes one or more kinds of inputs and creates an output that is of value to the customer. (Hammer&Champy, 1993)

Examplesprocurement to shipment concept to prototypeorder to payment

-

Order Fulfillment Process

Order

ReceivedCredit

Check

Scheduling

Assembly

Order

Integration

and Packing

Order

Delivery

Sales Finance Production Warehouse Shipping

Importance of Processes

Focus of reengineering is Processes “It is not products but the processes

that create products that brings companies long-term success. Good products don’t make winners; winners make good products

(Hammer and Champy, “Reengineering the Corporation, HarperBusiness, 1993)

“E-Commerce has made process management obsolete.”

BALDRIGE AWARD CRITERIA FRAMEWORK

Customer and Market FocusedStrategy and Action Plans

5. Human Resource Development and Management

7. Business Results

6. Process Management

4. Information and Analysis

2. Strategic Planning

1. Leadership

3.Customer and Market Focus

Rules Keep working- you need to maximize

your productivity Move material in batches Do not change the process

Measures Work-in-Process – anything not on the

pad and not in a stack of four Finished units Start and Finish Times

Rules Keep working- you need to maximize

your productivity Move material in batches Do not change the process

Measures Work-in-Process – anything not on the

pad and not in a stack of four Finished units

Process 1

Batch size: 5 boats

Step 1

Step 2

Steps 3 & 4Steps 5 & 6

Process 2

Batch size: 4 boats

Step 1

Steps 3 & 4

Step 2Steps 5 & 6

Summarize three changes you made and what they accomplished?

How does the design of the process affects customer’s purchase decision?

Team Activity

Competitive Priorities

Cost

Time

Flexibility

Quality

More Questions

How long was the average flow time (time from start to finish in the process)?

How does it compare with the time it would take to make one boat in an empty shop?

What is the importance of flow time?How will you reduce the average flow

time?

Flow Strategies

Flexible Flow- low volume, high variety

Line Flow- high volume, low variety

Flow StrategiesFlow StrategiesFlexible flows at a Health Clinic

Physical exam

Broken arm

Flu

D

T

R P

B

D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)

Broken arm

Flu

Physical exam

Figure 2.3 (a)

Flow StrategiesFlow StrategiesLine flows at an Automobile Assembly Plant

A: Front-end body-to-chassis assembly

H: Hood attachmentF: Fluid fillingS: Start-up testing

Mid-sized

6 cylinder

Compact 4 cylinder

A SH F

Mid-sized 6 cylinder

Compact

4 cylinder

Figure 2.3 (b)

Capabilities

Flow Flow StrategyStrategy

Operations strategyOperations strategy

• Process decisions• Quality decisions• Capacity, location,

and layout decisions• Operating decisions

Flow strategy• Flexible flows• Intermediate flows• Line flows

Future directions

Competitive priorities

Corporate strategy

Product-Process Matrix

Capital Investment for bigchunk capacity,Technological Change,Vertical Integration

Product

ProcessFlexible Flow.Process segmentsloosely linked.

Disconnected LineFlow/Jumbled Flowbut a dominant flowexists.

JOB SHOP

(Commercial Printer)

BATCH

(Heavy Equipment)

LINE FLOWS

(Auto Assembly)

CONTINUOUS FLOW

(Oil Refinery)

Low volumeLow Standardization

One of a kind

Low volume

Many Products

Higher volume

Few Major Products

High volumeHigh StandardizationCommodity Products

Connected LineFlow (assembly line)

Continuous, automated,rigid line flow.Process segments tightlylinked.

Bidding, delivery,product design flexibility

Quality & Product Differentiation,output volume flexibility

Price

Scheduling,Materials Handling,Shifting Bottlenecks

Worker Motivation,Balance,Maintaining Flexibility

ManagerialChallenges

Opportunity

Costs

Out-of-pocket

Costs

Road MapProcess Design and Analysis

Types Capacity; Flow Time

Process Improvement Process Management

Inventory Lean Process Capacity

Supply Chain Management

Selected Flow Diagram Symbols

– Operation/activity

– Decision

Storage

Information flow

Flow

The way I see it process is the issue. But thenthe way I see it process is always the issue.