Operations Management Slides

download Operations Management Slides

of 87

Transcript of Operations Management Slides

  • 7/29/2019 Operations Management Slides

    1/87

    Introduction to Operations

    Management

    University of Gloucestershire Business School

    MBA 401 Operations

    Management

  • 7/29/2019 Operations Management Slides

    2/87

    MBA 401 10-11 HP Intro v0.2 ppt 2

    Introduction to Module

    Look at Operations Management from aninternational perspective

    Emphasis is on operations from a global logisticsand supply chain management angle

    Underpinning knowledge of Operations theory and

    concepts is assumed

    Core text

  • 7/29/2019 Operations Management Slides

    3/87

    MBA 401 10-11 HP Intro v0.2 ppt 3

    What is Operations

    Management ?

    Operations Management is about the way

    organisations produce goods and services

    Source: Slack et al (2007)

  • 7/29/2019 Operations Management Slides

    4/87

    They are alloperations

    Back office operation ina bank

    Kitchen unitmanufacturing operation

    Retail operation

    Take-out / restaurantoperation

    Examples of Operations

    Source: Slack et al (2007) PearsonMBA 401 10-11 HP Intro v0.2 ppt 4

  • 7/29/2019 Operations Management Slides

    5/87

    The best way to start understanding the nature ofoperations is to look around you

    Everything you can see around you has beenprocessedby an operation

    Every service you consumed today (radio station,bus service, lecture, etc.) has also beenproduced

    by an operation

    Operations Managers create everything you buy, siton, wear, eat, and throw away

    Source: Slack et al (2007) PearsonMBA 401 10-11 HP Intro v0.2 ppt 5

    Concept of Operations

    Management

  • 7/29/2019 Operations Management Slides

    6/87

    Design a store layoutwhich gives smoothand effective flow

    Design elegantproducts which can beflat-packed efficiently

    Site stores of anappropriate size inthe most effectivelocations

    Maintain cleanlinessand safety ofstorage area

    Arrange for fastreplenishment ofproducts

    Monitor and enhancequality of service tocustomers

    Continually examineand improveoperations practice

    Ensure that the jobsof all staff encouragetheir contribution tobusiness success

    Operations Management

    at IKEA

    Source: Slack et al (2007) PearsonMBA 401 10-11 HP Intro v0.2 ppt 6

  • 7/29/2019 Operations Management Slides

    7/87MBA 401 10-11 HP Intro v0.2 ppt 7

    The Activities of

    Operations Management

    OUTPUTTransformationGOODS

    AND

    SERVICES

    INPUT

    INPUT

    TRANSFORMED

    RESOURCES

    MATERIALS

    INFORMATION CUSTOMERS

    FACILITIES

    STAFFINPUT

    TRANSFORMING

    RESOURCES

    Source : Slack et al Operations Mgmt Pearson 2001

  • 7/29/2019 Operations Management Slides

    8/87

    At Prt a Manger

    Served andsatisfied

    customers

    MBA 401 10-11 HP Intro v0.2 ppt 8

    Transformedresources

    IngredientsPackagingCustomers

    Inputresources

    Transforming

    resources

    EquipmentFittingsStaff

    Source: Slack et al (2007) Pearson

  • 7/29/2019 Operations Management Slides

    9/87MBA 401 10-11 HP Intro v0.2 ppt 9

    Operations

    Managements Remit

    Operations is not just concerned with whatgoes on at the point of production, but is

    also directly concerned with supplying thematerials, the location and layout of facilities,the programming of operations and themotivation of employees.

    CIPS Study Guide Pg 2

  • 7/29/2019 Operations Management Slides

    10/87

    Some interfunctional relationshipsbetween the operations function andother core and support functions

    Understanding of thecapabilities and

    constraints of theoperations process

    New product andservice ideas

    Understanding of thecapabilities and

    constraints of theoperations process

    Marketrequirements

    Recruitmentdevelopmentand training

    Understanding ofhuman resource needs

    Financial analysisfor performanceand decisions

    Provisionof relevant

    data

    Provision of systems fordesign, planning andcontrol, and

    improvement

    Understandingofinfrastructuraland system

    needs

    Analysis of newtechnology options

    Understanding ofprocess technology

    needs

    Engineering/technicalfunction

    Accountingand financefunction

    HumanResources

    function

    InformationTechnology(IT) function

    Marketingfunction

    Product/servicedevelopment

    function

    Operationsfunction

    Source: Slack et al (2007) PearsonMBA 401 10-11 HP Intro v0.2 ppt 10

  • 7/29/2019 Operations Management Slides

    11/87MBA 401 10-11 HP Intro v0.2 ppt 11

    Operations

    Management

    Restricted sense Planning organising and controlling production process and

    management of interface with support functions

    Broader sense Relevant to every sphere of organisational activity

    Operations Management regarded as one of keyfunctions of enterprise such as Finance, Marketing,HRM and sometimes Purchasing Management

  • 7/29/2019 Operations Management Slides

    12/87

    MBA 401 10-11 HP Intro v0.2 ppt 12

    The Five Competitive

    Objectives

    Responsiveness /Speed

    Flexibility

    Cost

    Dependability

    Quality Being RIGHT

    Being FAST

    Being ON TIME

    Being ABLE TO CHANGE

    Being PRODUCTIVE

    Source : Slack et al 2001

  • 7/29/2019 Operations Management Slides

    13/87

    13

    What is Logistics?

    Logistics involves gettingo the right product

    o in the right way

    o in the right quantity and

    o right quality

    o to the right place

    o at the right time

    o for the right customer

    o at the right cost

    Its not just trucks and sheds

    MBA 401 10-11 HP Intro v0.2 ppt 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

  • 7/29/2019 Operations Management Slides

    14/87

    BM 203 09-10 S Chain v 0.1ppt 14

    Retail Logistics

    Typical Physical Infrastructure

    Suppliers

    Customer

    Head Office

    Store

    Store

    Information Flows e.g. Orders, Forecasts, Sales

    Physical Flows e.g. Product, equipment, display material

    HomeDelivery

  • 7/29/2019 Operations Management Slides

    15/87

    BM 203 09-10 S Chain v 0.1ppt 15

    Meeting Essential

    Criteria

    Effectively managedistribution function

    Select most suitabletransport modes

    Plan routes and scheduledeliveries

    Control inventory

    Measure and controlperformance

    Use of InformationTechnology

    Examine, monitor and controldistribution costs

    Design efficient internal flows of

    goods within the warehouse

    Comply with complex legaltransport requirements withinand outside EU

    Waste disposal and recycling tomeet environmental standards

    Source : CIPS Store & Distn Study Guide p 5

  • 7/29/2019 Operations Management Slides

    16/87

    BM 203 09-10 S Chain v 0.1ppt 16

    Managing the Supply Chain

    Source : Slack et al, 2001 Ops Mgmt Chap 13

    First-tiersuppliers

    Theoperation

    Second-tiersuppliers

    First-tiercustomers

    Second-tiercustomers

    Purchasing and

    Supply Management

    Physical Distribution

    Management

    Materials

    Management

    Supply Chain Management

    Logistics

  • 7/29/2019 Operations Management Slides

    17/87

    17

    Applications to

    Manufacturing and Services

    Logistics and SCM can be used to generateboth cost savings and service enhancements e.g. after sales service and delivery add-ons

    Robust logistics strategies enable the entiresupply chain to compete e.g. Dell

    relatively cheap PCs, plus online sales and fast delivery

    e.g. Triage rapid assessment of patient needs, matching patients with

    the right care stream as early as possible

    MBA 401 10-11 HP Intro v0.2 ppt 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

  • 7/29/2019 Operations Management Slides

    18/87

    Determining an Operations

    Strategy

    University of Gloucestershire Business School

    MBA 401 Operations

    Management

  • 7/29/2019 Operations Management Slides

    19/87

    What is Strategy?

    Strategic decisionsmeans those decisions which

    Are widespread in their effect on the organisation towhich the strategy refers

    Define the position of the organisation relative to itsenvironment

    Move the organisation closer to its long-term goals.

    Source: Slack et al (2007) PearsonBMN 201 10-11 HP Wk 2 HP Strat v0.3 19

  • 7/29/2019 Operations Management Slides

    20/87

    What is the role of the

    operations function?

    Operationsas an Implementer

    Operationsas Supporter

    Operationsas Driver

    Ops

    Strategy

    Operationsimplements strategy

    Operationssupports strategy

    Operationsdrives strategy

    Strategy

    Ops

    Strategy

    Ops

    BMN 201 10-11 HP Wk 2 HP Strat v0.320

  • 7/29/2019 Operations Management Slides

    21/87

    Top-downperspective

    What the businesswants operations to

    do

    Operationsresources

    perspective

    What operationsresources can do

    What day-to-dayexperience suggestsoperations should do

    Bottom-upperspective

    Marketrequirementperspective

    What the marketposition requiresoperations to do

    Operationsstrategy

    The Four Perspectives on

    Operations Strategy

    Source: Slack et al (2007) PearsonBMN 201 10-11 HP Wk 2 HP Strat v0.3 21

  • 7/29/2019 Operations Management Slides

    22/87

    How Operations Strategies

    are put Together

    Identify what is wanted in the marketplace

    Establish how well the operation performs vs. its competitors

    Identify what the operation needs to do better

    Identify how the operation could do these things better

    Implement the strategy

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 22

  • 7/29/2019 Operations Management Slides

    23/87

    Ability tochange

    Frequent newproducts, maximumchoice

    The Benefits of Excelling

    Minimum cost,maximum value

    Minimum price, highest value

    Fastthroughput

    Quickdelivery

    Reliableoperation

    Dependabledelivery

    Error-free

    processes

    Error-freeproducts andservices

    Dependability

    Cost

    Speed

    Quality Flexibility

    Source: Slack et al (2007) PearsonBMN 201 10-11 HP Wk 2 HP Strat v0.3 23

    Ability to

    change

  • 7/29/2019 Operations Management Slides

    24/87

    Relative Importance of

    Performance Objectives

    The influence of theorganisationscustomers

    The influence of theorganisationscompetitors

    The relativeimportance of each

    performance objectiveto the operation

    The stage of the organisationsproducts and services in its lifecycle

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 24

  • 7/29/2019 Operations Management Slides

    25/87

    Order Winning and

    Order Qualifying Criteria

    Order Winners

    Offer features attractive to customers but not

    available from competition

    Secure orders in market place May become order qualifiers

    Order Qualifiers

    Feature necessary to enter a market Do not win orders

    May prevent loss of orders

    BMN 201 10-11 HP Wk 2 HP Strat v0.325

  • 7/29/2019 Operations Management Slides

    26/87

    BothOrder Winners and Qualifierscan become

    Order Losers,if:

    Quality Delivery

    Speed

    Reliability

    Any other factors that made customers look to you,

    suddenly become unacceptable

    Order Loser

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 26

  • 7/29/2019 Operations Management Slides

    27/87

    The four-stage model

    of Operations contribution

    Internallyneutral

    STAGE 1Correct worst

    problems

    Holding the

    organization backExternallyneutral

    As good as thecompetitors

    STAGE 2Adopt bestpractice

    Internallysupportive

    Clearly the best in

    the industry

    STAGE 3Link strategywith operations

    Externallysupportive

    Redefining industryexpectations

    STAGE 4Give anoperationsadvantage

    Incr

    easingstrategicim

    pact

    Increasing operations capabilities

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 27Source: Slack et al (2007) Pearson

    (Hayes and Wheelwright)

  • 7/29/2019 Operations Management Slides

    28/87

    How can the contribution of

    the operations function be assessed?

    Externally

    Objective is to minimisethe negative impact ofoperations.

    Internally

    Neutral Supportive

    Stage 1

    Stage 2 Stage 4

    Stage 3

    Objective is for operationsto help the businessmaintain parity with itscompetitors.

    Objective is for operationsto provide credible supportfor the business strategy.

    Objective is for operationsto provide a source ofcompetitive advantage.

    BMN 201 10-11 HP Wk 2 HP Strat v0.328

  • 7/29/2019 Operations Management Slides

    29/87

    Impact of CompetitorActivity

    Alternative Strategy 3

    Orderwinners

    Qualifiers

    Performanceobjectives

    Price

    Fast deliveryRange

    Cost

    Alternative Strategy 2

    Orderwinners

    Qualifiers

    Performanceobjectives

    Fasterdelivery

    Range, Price

    Speed

    Alternative Strategy 1

    Orderwinners

    Qualifiers

    Performanceobjectives

    Fast deliveryRange

    Price

    Speed andFlexibility

    Competitors Strategy

    Orderwinners

    Qualifiers

    Performanceobjectives

    Fast deliveryRange

    Price

    Speed andFlexibility

    Original Strategy

    Orderwinners

    Qualifiers

    Performanceobjectives

    Fast delivery

    Range, Price

    Speed

    Th Hill M th d l f

  • 7/29/2019 Operations Management Slides

    30/87

    The Hill Methodology of

    Strategy Formulation

    Step 1

    Corporateobjectives

    Growth

    Profit

    ROI

    Otherfinancialmeasures

    Step 2

    Marketingstrategy

    Step 3

    How doproducts

    or serviceswin orders?

    Step 4 Step 5

    Operations Strategy

    Process Infrastructurechoice

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 30

  • 7/29/2019 Operations Management Slides

    31/87

    The Hill Methodology of

    Strategy Formulation

    Step 1

    Corporateobjectives

    Growth

    Profit

    ROI

    Otherfinancialmeasures

    Step 2

    Marketingstrategy

    Step 3

    How doproducts

    or serviceswin orders?

    Step 4 Step 5

    Operations Strategy

    Process Infrastructurechoice

    Product/Servicemarkets &segments

    Range

    Mix

    Volumes

    Standardisationor customisation

    InnovationLeader orfollower

    PriceQualityDelivery speed

    Deliverydependability

    Product /servicerange

    Product /servicedesign

    Brand image

    Technical service

    Processtechnology

    Trade offsembodied inprocess

    Role ofinventory

    Capacity, size,timing, location.

    Functionalsupport

    Operationsplanning andcontrol systems

    Workstructuring

    Payment systems

    Organisationalstructure

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 31

  • 7/29/2019 Operations Management Slides

    32/87

    32

    Growth in

    international trade

    Considerable growth in recent decades in worldtrade; World exports grew from $62 billion in 1950 to $9,000

    billion by 2004

    Facilitated by reduction of trade barriers betweencountries and region

    Hence more freight is moving around world Logistics systems are thus having to play an increasingly

    important role in the global economy

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

    T t l W ld M h di

  • 7/29/2019 Operations Management Slides

    33/87

    33

    Total World Merchandise

    Exports 19502004 Figure 2.1

    BMN 201 10-11 HP Wk 2 HP Strat v0.3 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

    Gl b li ti

  • 7/29/2019 Operations Management Slides

    34/87

    34

    Globalisation

    The path towards globalisation

    Establish a presence in an overseas markets tobecome a multinational company

    Trade across many borders, with operations inmultiple countries to become a transnationalcorporation

    BMN 201 10-11 HP Wk 2 HP Strat v0.3

    Gl b li ti

  • 7/29/2019 Operations Management Slides

    35/87

    35

    Globalisation

    Ethnocentricity: a company when doing businessabroad thinks and acts as if they were still operatingin their home country

    Polycentricity: a company adopts the host countryperspective

    Geocentricity: a company acts completelyindependent of geography and adopts a globalperspective, and will tailor to the local environment asappropriate (i.e. glocalisation)

    BMN 201 10-11 HP Wk 2 HP Strat v0.3

    O Sit

  • 7/29/2019 Operations Management Slides

    36/87

    36

    Overseas Site

    Selection Factors

    Table 2.4 Site Selection Factors

    Labour costs Political stability

    Employment regulations Environmental regulations

    Available skills Taxation rates

    Land costs and availability ofsuitable sites

    Government supports

    Energy costs Currency stability

    Availability of suitable suppliers Benefits of being part of a cluster ofsimilar companies

    Transport and logistics costs Preferred locations of competitors

    Transport linkages Access to markets

    Communications infrastructureand costs

    Community issues and quality oflife

    BMN 201 10-11 HP Wk 2 HP Strat v0.3

    O t i

  • 7/29/2019 Operations Management Slides

    37/87

    37

    Outsourcing

    The transfer to a third party of themanagement and delivery of a processpreviously performed by the company itself

    To reduce costs

    To increase flexibility

    To focus on core competences

    To gain access to the latest technologies

    BMN 201 10-11 HP Wk 2 HP Strat v0.3

    Off h i

  • 7/29/2019 Operations Management Slides

    38/87

    38

    Offshoring

    The transfer of specific processes to lowercost locations in other countries

    Not the same as outsourcing

    Outsourcing involves handing process ownership over toa third party

    In offshoring, the company may still own and control the

    process itself in the lower cost location

    BMN 201 10-11 HP Wk 2 HP Strat v0.3

  • 7/29/2019 Operations Management Slides

    39/87

    Purchasing & Supply

    University of Gloucestershire Business School

    MBA 401 Operations

    Management

    Where does the Business get

  • 7/29/2019 Operations Management Slides

    40/87

    BMN 201 10-11 Wk 3 HP Design v0.2ppt

    40

    Where does the Business get

    its Competitive Advantage?

    The way it

    produces itsgoods andservices?

    The way it

    positions itselfin its market?

    The technologicalspecification of itsproduct / service?

    Product /Service

    Technology

    Marketing Operations

    Source : Slack et al Operations Mgmt Pearson 2001

  • 7/29/2019 Operations Management Slides

    41/87

    CIPS 10-11 Lev 4 P&S Relns Wk 3 v0.1.ppt

    41

    The Purchasing Cycle

    ContractAward

    Defining theSpecification

    DefiningContractualTerms

    SupplierAppraisal

    InvitingQuotes / Tenders

    Payment

    Identificationof Need

    Negotiating

    VFM

    AnalysingQuotes / Tenders

    Sourcingthe Market

    Vendor Rating /PerformanceReview

    Source : CIPS Study Guide P 113

    R f B i

  • 7/29/2019 Operations Management Slides

    42/87

    MBA 401 10-11 P&S v0.2 42

    Reasons for Buying

    Abroad

    Availability of products and raw materials

    Features & technical specifications

    Decline of manufacturing base

    High cost of Research & Development Domestic capacity cant meet demand

    Strategic reasons - secondary source

    Favourable prices due to:

    Exchange rates, low wage costs, higher productivity

    Reciprocal deal with foreign firm or government

    Source: CIPS T&O Guide 2003 p 160

    P ti f L d

  • 7/29/2019 Operations Management Slides

    43/87

    MBA 401 10-11 P&S v0.2 43

    Perceptions of Lead

    Time

    Origin of Need

    Requisition

    Order sent

    Order received

    Manufacture commenced

    Manufacture completed

    Despatch

    Receipt

    Available

    In users possession

    Use or consumptionTrueleadtime

    Usersvie

    wofleadtime

    P

    urchasingleadtime

    Sellerslead

    time

    Makerslea

    dtime

    Source Baily Farmer Jessop Jones 1998 CIPS P 43

    General Problems of

  • 7/29/2019 Operations Management Slides

    44/87

    MBA 401 10-11 P&S v0.2 44

    General Problems of

    Overseas Sourcing

    Longer and more variable lead times Greater buffer stocks

    Uncertainty reduced by improvements in Containerisation

    Information and Communications Technology (ICT)

    Real cost of airfreight

    Specifications Differences in international standards

    Differences in nomenclature (Standards of measurement)

    Source: CIPS T&O Guide 2003 p 171

  • 7/29/2019 Operations Management Slides

    45/87

    MBA 401 10-11 P&S v0.2 45

    Outsourcing

    A contractual relationship between an external vendor

    and an enterprise in which the vendor assumes

    responsibility for one or more business functions of the

    enterprise White & James 1993

    Outsource non core activities

    Focus on distinctive or core competences

    Source: CIPS T&O Guide 2003 p 67

  • 7/29/2019 Operations Management Slides

    46/87

    MBA 401 10-11 P&S v0.2 46

    Make In House

    Internal capacity: Is spare capacity available ?

    Cost: Is it cheaper to make internally?

    Quality: Will internal manufacture allow closer quality control?

    Timescale: Is continuous supply available as required?

    Confidentiality: Is it necessary to keep data and info secret?

    Source: CIPS T&O Guide 2003 p 75

    T d i th M f t i

  • 7/29/2019 Operations Management Slides

    47/87

    47

    Trends in the Manufacturing

    Sector emerging from Globalisation

    Global markets

    Global competition

    Competitors, partners and customers from around the world

    Global sourcing

    Global presence Global value chains resulting in increasing complexity and

    competition

    Global access to knowledge and new technologies

    High level of customer awareness and expectations

    Rapid pace of technological change Fast rate of product commoditisation

    SCM expertise and innovation are preconditions for businesssuccess

    MBA 401 10-11 P&S v0.2 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

    Relative Costs in a

  • 7/29/2019 Operations Management Slides

    48/87

    MBA 401 10-11 P&S v0.2 48

    opportunity

    In-source

    indirect

    direct

    coordination

    risk risk

    coordination

    market price

    supplier profit

    Out-source

    risk

    coordination

    allocated

    Buyer Costs

    Relative Costs in a

    Do vs Buy Decision

    Process for

  • 7/29/2019 Operations Management Slides

    49/87

    MBA 401 10-11 P&S v0.2 49

    Process for

    Outsourcing

    Strategic Analysis of current position

    Identify Core Business

    Identify Target areas for Outsourcing

    Define clear & unambiguous Specifications

    Selection of Supplier

    Implementation & Review

    Development of Relationship

    Source: Based on CIPS Slide Set (2006)

  • 7/29/2019 Operations Management Slides

    50/87

    MBA 401 10-11 P&S v0.2 50

    Outsourcing Matrix

    Outsource / Buy in Develop Contracting

    Collaboration In-house

    Low

    High

    LowCompetence of Contractors

    Core

    High

    Source: CIPS T&O Guide 2003 p 68

    Specification of

  • 7/29/2019 Operations Management Slides

    51/87

    MBA 401 10-11 P&S v0.2 51

    Specification of

    Requirement

    Be clear and unambiguous

    Include measurable performance criteria

    Recognise & highlight remaining problems

    Describe relationships sought

    Refer to confidentiality and security

    Identify licensing issues

    Consider terms and conditions of contract

    Include processes for change & development

    Source: CIPS Study Guide (2006: 233)

    The Service Cycle -

  • 7/29/2019 Operations Management Slides

    52/87

    MBA 401 10-11 P&S v0.2 52

    The Service Cycle -

    Continuous Improvement

    Selection

    Performance

    Improvement

    Specification

    Appraisal

    Source: CIPS T&O Guide 2003 p 70

  • 7/29/2019 Operations Management Slides

    53/87

    53

    Figure 5.1 Most frequently reportedProblems leading to failure in outsourcing (Pandit, 2005)

    MBA 401 10-11 P&S v0.2 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

    Regular Contact with

  • 7/29/2019 Operations Management Slides

    54/87

    MBA 401 10-11 P&S v0.2 54

    Regular Contact with

    Contractor to ensure...

    Terms of contract met

    Customer orders passed efficiently & correctly

    to contractor

    Deliveries are made as scheduled (on time)

    Adequate reports of incidents, delays,

    shortfalls etc..

    Costs and budgets regularly monitored

    Relevant statistical information feedback

    Source : CIPS Store & Distn Study Guide p 42

    Risk Minimisation for

  • 7/29/2019 Operations Management Slides

    55/87

    MBA 401 10-11 P&S v0.2 55

    Risk Minimisation for

    Outsourcing

    Retain some expertise in-house

    Partially outsource and measure results

    Measure effect on customer service & delivery quality

    Does 3rd party work for competitors and how prioritise work?

    Ensure Service Level Agreement covers range of needs

    Consider effect on total distribution costs

    Consider specialist company with sector expertise

    Source CIPS Study Guide P 170

    Classifying Logistics

  • 7/29/2019 Operations Management Slides

    56/87

    56

    Classifying Logistics

    Companies

    Own account transportation: when a companyprovides its own transport services

    Logistics service providers: Freight carriers: e.g. hauliers, trucking companies, train

    companies, airlines, shipping companies

    Freight forwarders: make transportation arrangements

    Couriers: immediate delivery of products

    Integrators: offer a seamless (i.e. integrated) end-to-endservice from consignor to consignee

    Agencies: companies combine buying power to gain reducedfreight transport rates

    MBA 401 10-11 P&S v0.2 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

    MBA 401 Operations

  • 7/29/2019 Operations Management Slides

    57/87

    Capacity and Demand Management

    MBA 401 Operations

    Management

    University of Gloucestershire Business

    School

    Capacity Planning and

  • 7/29/2019 Operations Management Slides

    58/87

    p y g

    Control

    Operationsstrategy

    Improvement

    Planning

    and control

    Operationsmanagement

    Capacity planning

    and control

    The operation supplies... the capacity to deliverproducts and services

    The market requires

    the availability ofproducts and services

    Design

    Source: Slack et al (2007) PearsonBMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 58

    Objective

  • 7/29/2019 Operations Management Slides

    59/87

    jTo provide an appropriate amount of

    capacity at any point in time

    The appropriateness of capacity planning in any part

    of the operation can be judged by its effect on

    Costs

    Revenue

    WorkingcapitalService

    levelSource: British

    Source: Slack et al (2007) PearsonBMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 59

    How is Capacity

  • 7/29/2019 Operations Management Slides

    60/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    How is Capacity

    Defined ?

    Capacity is the ability to hold, receive, store oraccommodate a certain volume (Van Looy , 1998 p 282)

    People Man Hours per shift

    Equipment Litres delivered per day

    Facilities Seats available per day

    60

    How Capacity and Demand

  • 7/29/2019 Operations Management Slides

    61/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    p y

    are Measured

    Designcapacity

    168 hoursper week

    Effectivecapacity

    109 hoursper week

    Plannedloss of 59hours

    Actualoutput -51 hoursper week

    Avoidableloss - 58hours perweek

    Actual outputEffective capacity

    Efficiency =

    Actual outputDesign capacity

    Utilisation =

    61

    The Nature of

  • 7/29/2019 Operations Management Slides

    62/87

    Aggregate Capacity

    rooms per nightignores the numbers of guests in each room

    tonnes per monthignores types of alloy, gauge andbatch variations

    Aggregate capacity of a hotel:

    Aggregate capacity of an aluminium producer:

    Source: Slack et al (2007) PearsonBMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 62

  • 7/29/2019 Operations Management Slides

    63/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    Finite Loading

    0

    20

    40

    60

    80

    100

    120

    140

    160

    180

    200

    1 2 3 4

    Capacity

    Work Centre

    LoadingB

    asisH

    ours,weightorthroughput

    64

  • 7/29/2019 Operations Management Slides

    64/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    Infinite Loading

    0

    50

    100

    150

    200

    250

    1 2 3 4

    Capacity

    Work Centre

    LoadingB

    asisH

    ours,weightorthroughput

    65

    Causes of Seasonality

  • 7/29/2019 Operations Management Slides

    65/87

    Causes of Seasonality

    Climatic Festive Behavioural

    Political

    Financial

    Social

    ConstructionmaterialsBeverages (beer,cola)Foods (ice-cream, Christmas

    cake)Clothing (swimwear, shoes)Gardening items (seeds,fertilizer)Fireworks

    Travel servicesHolidaysTax processing

    Doctors (influenza epidemic)Sports servicesEducation services

    Source: Alamy/Medical-on-li

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 66Source: Slack et al (2007) Pearson

    Demand Fluctuations in

  • 7/29/2019 Operations Management Slides

    66/87

    Four Operations

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 67Source: Slack et al (2007) Pearson

    Adjust output to match

  • 7/29/2019 Operations Management Slides

    67/87

    Adjust output to match

    demand

    Temporary labour

    Third-party work

    Hire Fire

    Lay-off

    Overtime

    Subcontract

    Short time

    Source: Corbis/Photocuisine

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 68Source: Slack et al (2007) Pearson

    Moving a peak in demand

  • 7/29/2019 Operations Management Slides

    68/87

    Moving a peak in demand

    can make capacity planning easier

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 69Source: Slack et al (2007) Pearson

    C i St t i

  • 7/29/2019 Operations Management Slides

    69/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    Part finished,

    Finished Goods, or

    Customer Inventory

    Queues

    Backlogs

    Absorb

    demand

    Keep outputlevel

    Make

    to

    stock

    Make

    customer

    wait

    Have

    excess

    capacity

    Coping Strategies

    70

    Capacity Decision

  • 7/29/2019 Operations Management Slides

    70/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    Capacity Decision

    Factors

    Do we need to do it ourselves?

    Size/scale of operations unit(s)

    Increment of capacity additions

    Cycle time of operation

    Location of capacity

    Flexibility/cost balance

    Skill and labour requirements

    71

    Flexing Demand

  • 7/29/2019 Operations Management Slides

    71/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    Flexing Demand

    Pricing by Time

    Pricing by Segment

    Advertising / Promotions

    Co-promotions with other products to shift

    demand

    Introduce reservation systems

    New location delivery points

    Sales Force incentives

    72

    Ways of Reconciling

  • 7/29/2019 Operations Management Slides

    72/87

    BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt

    Capacity and Demand

    Level capacity

    Capacity

    Demand

    Chase demand

    Demand

    C apacity

    D emandmanagement

    Demand

    Capacity

    73

    MBA 401 Operations

  • 7/29/2019 Operations Management Slides

    73/87

    Materials Management

    MBA 401 Operations

    Management

    University of Gloucestershire Business

    School

    Inventory is created tocompensate for differences in

  • 7/29/2019 Operations Management Slides

    74/87

    compensate for differences intiming between supply and demand

    Inputprocess

    Inventory

    Outputprocess

    Rate of supply frominput process

    Rate of demand fromoutput processInventory

    Source: Alamy/Van Hilversum

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 75Source: Slack et al (2007) Pearson

    Single-stage and two-stage

  • 7/29/2019 Operations Management Slides

    75/87

    e.g. Automotive partsdistributor

    e.g. Local retailstore

    Single-stageinventory system

    Suppliers Suppliers

    Stock Salesoperation

    Centraldepot

    Distribution Localdistribution

    point

    Salesoperation

    Two-stageinventory system

    inventory systems

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 76Source: Slack et al (2007) Pearson

    Inventory Management

  • 7/29/2019 Operations Management Slides

    76/87

    Inventory Management

    How much to order :

    Balance cost of holding stock and cost of

    purchasing items

    When to order:

    Balance early delivery / cost of stock holding

    and late delivery / cost of stock-out

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 77

  • 7/29/2019 Operations Management Slides

    77/87

    The Forrester or

  • 7/29/2019 Operations Management Slides

    78/87

    79

    Bullwhip Effect

    Source : CIPS Study Guide P 49MBA 401 Wk5 Mats Mgmt v 0.2.ppt

  • 7/29/2019 Operations Management Slides

    79/87

    The Throughflow

  • 7/29/2019 Operations Management Slides

    80/87

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 81

    g

    Warehouse

    The Crossflow

  • 7/29/2019 Operations Management Slides

    81/87

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 82

    Warehouse Flow

    Inverted T

  • 7/29/2019 Operations Management Slides

    82/87

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 83

    Warehouse Flow

    Storage Equipment

  • 7/29/2019 Operations Management Slides

    83/87

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 84

    Storage Equipment

    Using warehouses to add value

  • 7/29/2019 Operations Management Slides

    84/87

    85

    g(after Jessop & Morrison, 1994)

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt

    Figure 7.2

    2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/Mangan

    The Decoupling Point

  • 7/29/2019 Operations Management Slides

    85/87

    Lean Agile

    Forecast at generic level

    Economic Batch Quantities

    Maximise Efficiencies

    Demand Driven

    Localised Configuration

    Maximise Effectiveness

    StrategicInventory

    Source: Christopher, M. Logistics & SCM (2005:121)

    Martin Christopher

    BMN 201 10-11 HP Invent v 0.2.ppt 86

    Process Types in

    M f t i

  • 7/29/2019 Operations Management Slides

    86/87

    MBA 401 Wk5 Mats Mgmt v 0.2.ppt 87

    Manufacturing

    Varie

    ty

    High

    Low

    VolumeLow High

    Project

    Jobbing

    Batch

    Mass

    Continuous

    The Four Dimensions ofO ti

  • 7/29/2019 Operations Management Slides

    87/87

    Operations

    Low

    High

    High

    High

    High

    Low

    Low

    Low

    Volume

    Variety

    Variation (in Demand)

    Visibility

    Process

    Focus

    Repetitive

    Focus

    Product

    Focus