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Introduction to Operations
Management
University of Gloucestershire Business School
MBA 401 Operations
Management
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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
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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)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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Determining an Operations
Strategy
University of Gloucestershire Business School
MBA 401 Operations
Management
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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
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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
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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
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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
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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
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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
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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
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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
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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)
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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.
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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
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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
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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
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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
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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
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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
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Gl b li ti
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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
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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
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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
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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
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Purchasing & Supply
University of Gloucestershire Business School
MBA 401 Operations
Management
Where does the Business get
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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 -
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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
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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
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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
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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
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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
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Capacity and Demand Management
MBA 401 Operations
Management
University of Gloucestershire Business
School
Capacity Planning and
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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
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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
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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
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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
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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
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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
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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
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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
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Four Operations
BMN 201 10-11 wk 4 HP Dem Cap v0.2.ppt 67Source: Slack et al (2007) Pearson
Adjust output to match
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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
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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
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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
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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
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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
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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
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Materials Management
MBA 401 Operations
Management
University of Gloucestershire Business
School
Inventory is created tocompensate for differences in
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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
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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
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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
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The Forrester or
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79
Bullwhip Effect
Source : CIPS Study Guide P 49MBA 401 Wk5 Mats Mgmt v 0.2.ppt
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The Throughflow
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MBA 401 Wk5 Mats Mgmt v 0.2.ppt 81
g
Warehouse
The Crossflow
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MBA 401 Wk5 Mats Mgmt v 0.2.ppt 82
Warehouse Flow
Inverted T
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MBA 401 Wk5 Mats Mgmt v 0.2.ppt 83
Warehouse Flow
Storage Equipment
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MBA 401 Wk5 Mats Mgmt v 0.2.ppt 84
Storage Equipment
Using warehouses to add value
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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
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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
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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
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Operations
Low
High
High
High
High
Low
Low
Low
Volume
Variety
Variation (in Demand)
Visibility
Process
Focus
Repetitive
Focus
Product
Focus