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Lecture 15

33:799:301 Lecture Notes - Lecture 15: Kaizen, Laundry Detergent, Six Sigma

Supply Chain Management
Course Code
James King

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Chapter 8 - Operations Management with LEAN and Six Sigma
Operations Management refers to the design, execution, and control of the operations that
convert resources into desired goods and services, aligned with the company’s business
- Goal is to convert materials and labor into goods and services as efficiently and
effectively as possible, while also controlling costs to maximize profits
- Nature of how OM is carried out varies by company and depends on nature of products
and/or services in the portfolio
Manufacturing Strategies - Companies develop a manufacturing strategy aligned to the
production strategy, the strategy is established to satisfy customer demand while balancing
manufacturing costs and inventory levels
- Satisfy demand
- Manage capacity efficiently
- Manage inventory levels
- Minimize cost - labor, materials, plant and equipment
Manufacturing strategies include
1. Make to stock (MTS)
2. Assemble to order (ATO)
3. Make to order (MTO)
4. Engineer to order (ETO)
MTS - making products for inventory
- Accuracy of forecasts is key o inventory management and controlling costs, accurate
demand forecast limits excess inventory and loss sales from stock outs
- Most equipment intensive manufacturing, commodities, and low value products are MTS
- A key issue of MTS is to balance inevntory and demand
- Data analytics and current market feedback are key strategies
ATO - make product core subassemblies, then inventory subassemblies and as orders come in,
put pieces together
- Fast turnaround
- ATO strategy requires that the main sub assemblies for the product be completed and
inventoried along with final assembly parts
- AKA “Postponement” Strategy
- Most high tech products with customization available (computers, audio systems), Quick
serve restaurants, and individualized products are ATO
MTO - produce the product based on the specs of the customer
- Raw materials are carried in inventory with a few common sub assemblies
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